<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                FORM 10-KSB/A-1


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

                     For the fiscal year ended June 30, 2004

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

        For the transition period from: ______________ to ______________

                         Commission file number: 0-27513

                                U.S. MEDSYS CORP.
--------------------------------------------------------------------------------
           (Name of small business issuer as specified in its charter)

              Colorado                                         84-1308436
----------------------------------                      ------------------------
 (State or other jurisdiction of                             (IRS Employer
 incorporation or organization)                            Identification No.)


 1401 - 17th Street, Suite 1150, Denver, Colorado                    80202
--------------------------------------------------              ----------------
     (Address of principal executive offices)                      (Zip Code)

Issuer's telephone number: (303) 296-2690

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

Securities registered under Section 12(g) of the Exchange Act: Common Stock

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

      Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

      State issuer's revenues for its most recent fiscal year. $201,820.

      As of September 30, 2004, the aggregate market value of the voting stock
held by non-affiliates, approximately 20,086,309 shares of Common Stock, was
approximately $50.6 million based on an average of the bid and ask prices of
approximately $2.52 per share of Common Stock on such date.

      The number of shares outstanding of the issuer's Common Stock, $.001 par
value, as of September 30, 2004 was 28,738,546 shares.

      DOCUMENTS INCORPORATED BY REFERENCE:      None.

      Transitional Small Business Disclosure Format (check one):

      Yes  [ ];  No  [X]

<PAGE>

EXPLANATORY NOTE: The annual report is being re-filed in its entirety on this
Form 10-KSB/A-1. The sole purpose of this filing is to reflect a correction in
the presentation of the Consolidated Statement of Shareholders' Equity (Deficit)
on page F-4.


                                     PART I

               CAUTIONARY STATEMENT IDENTIFYING IMPORTANT FACTORS
                THAT COULD CAUSE THE COMPANY'S ACTUAL RESULTS TO
            DIFFER FROM THOSE PROJECTED IN FORWARD LOOKING STATEMENTS

      Readers of this document and any document incorporated by reference
herein, are advised that this document and documents incorporated by reference
into this document contain both statements of historical facts and forward
looking statements. Forward looking statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially for those
indicated by the forward looking statements. Examples of forward looking
statements include, but are not limited to (i) projections of revenues, income
or loss, earning or loss per share, capital expenditures, dividends, capital
structure and other financial items, (ii) statements of the plans and objectives
of the Company or its management or Board of Directors, including the
introduction of new products, or estimates or predictions of actions by
customers, suppliers, competitors or regulatory authorities, (iii) statements of
future economic performance, and (iv) statements of assumptions underlying other
statements and statements about the Company or its business.

      This document and any documents incorporated by reference herein also
identify important factors which could cause actual results to differ materially
from those indicated by forward looking statements. These risks and
uncertainties include price competition, the decisions of customers, the actions
of competitors, the effects of government regulation, possible delays in the
introduction of new products and services, customer acceptance of products and
services, the Company's ability to secure debt and/or equity financing on
reasonable terms, and other factors which are described herein and/or in
documents incorporated by reference herein.

      The cautionary statements made above and elsewhere by the Company should
not be construed as exhaustive or as any admission regarding the adequacy of
disclosures made by the Company. Forward looking statements are beyond the
ability of the Company to control and in many cases the Company cannot predict
what factors would cause results to differ materially from those indicated by
the forward looking statements.

ITEM 1. DESCRIPTION OF BUSINESS.

HISTORY

U.S. MedSys Corp. was incorporated in Colorado on May 1, 1995 as Prime Rate
Income & Dividend Enterprises, Inc. We changed our name to U.S. MedSys Corp. on
March 29, 2004.

On November 12, 2002, we acquired 100% of the issued and outstanding common
stock of U.S. MedSys Technologies, Inc. (formerly known as U.S. Medical Systems,
Inc.) ("USMS") from the sole shareholder of USMS, Rangeley Corporation
("Rangeley"). As a result, USMS became a wholly-owned subsidiary of the Company,
our former officers and directors resigned, and members of USMS's management
team were appointed as new officers and directors, to serve until their
successors are duly elected at the next annual shareholders' meeting of the
Company.

As part of the reorganization, ownership of our former subsidiary, Pride, Inc.,
which operated a real estate investment business, was transferred to Michael L.
Schumacher, a former officer and director of the Company. Mr. Schumacher agreed
to assume independent responsibility for the completion of registration
statement by Pride, Inc. for a "spin-off" distribution of shares of Pride, Inc.
to the shareholders of record at November 27, 2002 (excluding Rangeley).

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<PAGE>

CURRENT BUSINESS PLAN

Our objective is to become a network marketing and distribution organization
which provides medical technology and support services to the healthcare
industry. In addition, we are focusing on network development and marketing in
areas that are synergistic such as disease management (diabetes) and podiatry.

DESCRIPTION OF MARKETS

      Medical Clinic Network

We are initially focusing our efforts in the placement of high resolution
imaging systems in medical care facilities through existing networks.

One such network is managed by Practice Management Corporation ("PMC"),
headquartered in Hasbrouck Heights, New Jersey. PMC is a third party
administrator and consultant to labor unions, and has been in business since
1986. PMC represents national healthcare networks; national labor owned
insurance companies and national worker compensation carriers.

A second network is New York Home Health Care Equipment, a provider of
comprehensive services at competitive costs to hospitals, long-term care
facilities, and home care patients in the greater New York area and New Jersey.

We are continuously pursuing other network opportunities.

      Podiatric Network

In May 2004 we executed an operating agreement for the formation of PMC/Foot
Care Network, LLC, to establish the country's largest podiatric network, based
in Hasbrouck Heights, New Jersey. Under the terms of the agreement, we invested
$400,000 in PMC/Foot Care Network, in return for a 51% ownership position. PMC
is a 25% equity member in the LLC and is the manager of the network.

PMC/Foot Care Network is a national network of board-certified podiatric
surgeons offering clients the opportunity to receive professional podiatric
services within a cost contained managed care program. PMC/Foot Care expertise
includes, network development and administration, credentialing, utilization
management and claims administration. As the cost of healthcare in our country
rises at an alarming rate, healthcare organizations, insurance companies and
individuals nationwide are seeking means of controlling their healthcare
expenses. Over the past ten years, podiatric healthcare has emerged as a force
in the healthcare industry. The existing demand for podiatric therapies is
already placing a great strain on Medicare due in part to the aging of the "Baby
Boomer" population and the reinsurance market creating the need for streamlined
management of health and workers compensation benefits. In response to this
demand PMC/Foot Care Network offers a cost-effective solution, maintaining the
highest standards of excellence for the management of alternative care benefits,
and believes it is properly positioned to capture a significant portion of this
developing market.

PMC/Foot Care Network, created and managed by a diverse group of healthcare
executives and Board Certified practicing podiatrists, has created a select
group of geographically distributed podiatrists in 2,600 offices throughout New
Jersey, New York, Pennsylvania, Connecticut, Delaware, Florida, Maryland,
Virginia, Georgia, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont
and Washington D.C., with the ability to expand as needed. PMC/Foot Care Network
providers are all board certified and recognized by the American Podiatric
Medical Association. The company offers other services including managing and
processing claims adjudication, fraud and abuse, grievance and appeal and member
services. We are dedicated to a cost containing quality podiatric healthcare
delivery system. Customers include unions, workers compensation benefit plans,
ERISA plans, self-funded plans, no-fault carriers, and other alternative care
networks.

The administrative board of PMC/Foot Care Network is comprised of practicing
podiatrists. They have a combined 75 years of clinical experience in podiatric
medicine. These administrators are boarded by The American Board of Quality
Assurance and Utilization Review Physicians, The American Board of Podiatric
Surgery, and are Fellows of

                                        2
<PAGE>

the American College of Foot and Ankle Surgeons. As a professional consortium,
the Board serves the Network's members as intermediaries whose primary
responsibilities include managing a high-quality podiatric care delivery system
within a cost-effective fee structure. They administer the claim review system
and maintain quality control program standards. In addition, the administrative
board negotiates network member contractual arrangements and new provider
contractual arrangements, manage record keeping, claims submission, direct peer
review and grievance procedures.

Data from a Johns Hopkins University study indicates that procedures provided by
orthopedists are more than twice as expensive on average as those provided by
Doctors of Podiatric Medicine. The Hopkins data also noted that podiatrists are
four times less likely to use a hospital for comparable surgery. As a result of
such cost savings and the quality of podiatric care, podiatrists now manage over
60% of the foot surgery in the United States.

According to the American Podiatric Medical Association, in the U.S. there are
over 13,000 doctors of podiatric medicine in active practice, and they receive
more than 60,000,000 visits per year. Podiatric physicians provide three times
more foot care services than orthopedic physicians, and more than all other
kinds of physicians combined.

As the 51% owner of PMC/Foot Care Network, we anticipate that we will earn
revenues from our share of profits earned by the network for any referral fees
paid to the network by its members. We also plan to sell or lease equipment to
members of the network. In the future we anticipate providing network services
to insurance companies, union healthcare plans and other healthcare networks
through the PMC/Foot Care Network.

      Disease Management Network

In July 2004, we executed an agreement establishing GMD, LLC, to establish a
nation wide provider of direct-to-consumer diabetes and respiratory supplies.
Under the terms of the agreement, we invested $450,000 in GMD, in return for a
75% ownership position.

GMD, through a wholly-owned subsidiary, Global Medical, Inc., is a Medicare
approved DME (Durable Medical Equipment) Provider, and does business as "Global
Medical Direct."

GMD provides diabetes products, disease management and educational services to
help patients lead healthier and more productive lives. GMD provides an
easy-to-use, cost effective and convenient way for patients to obtain diabetes
supplies and medications through their health plan, employer and government
payers such as Medicare/Medicaid. Products include blood glucose meters, test
strips and ancillary supplies, insulin pumps and supplies, therapeutic shoes and
orthopedic inserts and diabetes maintenance medications.

According to the American Diabetes Association, there are 18.2 million people in
the United States with diabetes. 1.3 million people are diagnosed with diabetes
each year. The incidence of people with diabetes over the age of 65 exceeds 20%.

Global Medical Direct is moving into a new facility in Lenexa, Kansas in October
2004. The new location incorporates over 22,000 square feet of call center,
closed-door pharmacy and warehouse and shipping. This fully integrated, central
facility provides diabetes products directly to the patient in two to three days
within the United States. GMD is planning to employ approximately 35 people
between now and the end of the year. Eighty percent of the people will be
assisting patients and providers over the phone.

GMD has a unique value proposition for health plans and third party
administrators integrating a diabetes disease management program with the
Company's diabetes supply offering. Patients whose health plans participate will
receive semiannual diabetes assessments that evaluate 35 different clinical,
physical and mental health related risk factors associated with diabetes. From
the assessment, Global Medical generates a 12 page patient specific, customized
report that graphically shows the patient's areas of risk and provides
suggestions for mitigating those risk factors and a care plan to be reviewed
with the patient's physician. GMD's Diabetes Profile reports are excellent tools
for patients and their physicians, enabling them to track the progress of the
plan of care. This report also tracks key clinical measures as recommended by
the ADA.

                                        3
<PAGE>

Another critical component of the GMD's Diabetes Profile Program is its
integration with supplies and an extensive ADA approved education materials.
Approximately every three months a GMD Coordinator talks with the patient to
evaluate the patient's utilization of supplies and evaluates their current
product utilization compared to prescribed recommendations by their physician. A
new order is set up for shipment and educational information is provided.

Global Medical employs a regionalized strategy to obtain direct to consumer
referrals. GMD initiated its direct to consumer marketing campaign in October of
2004 where it will use direct mail marketing to target 10,000 Medicare
beneficiaries. The Company is conducting targeted advertising to reach major
Midwest Medicare markets. Global Medical Direct is a participating Medicare and
Railroad Retirement provider and accepts Medicare assignment.

GMD entered into a marketing agreement with PMC in August 2004. PMC will market
the GMD product line to union health benefit plans, employer health benefit
plans, and comercial health benefit plans such as HMO's, PPO's, indemnity plans
and similar programs that provide health benefit plans. GMD agreed to pay PMC an
aggregate of $300,000 for PMC's services for one year, commencing September 1,
2004.

      Other Markets

We believe that there are numerous potential markets for our products. As
examples, these would include oncologists, dermatologists, breast pathologists,
podiatrists, veterinarians, plastic surgeons and a host of other practitioners.
When resources permit, we intend to pursue these types of markets.

THE PRODUCTS

      Ultrasound Scanner.

During the year ended June 30, 2004, we reached an agreement with Longport, Inc.
of Swarthmore, Pennsylvania, a manufacturer of a unique, portable, high
resolution ultrasound imaging device which is patented and has FDA marketing
clearance. This medical device makes ultrasound biomicroscopy; the use of
ultrasound to image living tissue at the microscopic level, a clinical reality.
The device allows the first 3 centimeters (1 and 1/2 inches) of soft tissue to
be imaged non-invasively and with clarity not presently available with other
commercial technology. The applications for the technology include pressure
ulcer (bed sore) prevention, chronic wounds, burns, dermatology, and product
testing and superficial tendon and ligament pathology. New system architecture
has been developed that not only allows linear array probes of up to 40 MHz
frequency to be integrated, but deeper imaging phased probes to be utilized.
This will enable us to address markets such as breast imaging, large organ
assessment, musculoskeletel (including sports medicine), vascular imaging and
obstetrics and gynecology.

The ultrasound scanner is a portable high-frequency (20 MHz) device which
captures and reproduces images of soft tissue at high resolution (up to three
centimeters below the skin). The images can be stored electronically and
e-mailed to an off site diagnostic center for interpretation. Included in the
imaging process is the ability to annotate images, make linear and area
measurements and produce a fractal analysis of any portion of the imaged tissue
for objective interpretation. Scans can be compared in a tile format with up to
8 scans viewed at one time.

The scanner has applications in wound detection and assessment-burn treatment,
product testing, muscle and skeletal imaging, dermatology and women's health
issues. For instance, in the case of wound detection and treatment, clinicians
can check the status of a wound and the surrounding tissue without having to
incise the patient or put a probing device in the fragile wound bed. When used
with a coupling gel, the scanner can penetrate certain types of wound dressings
and produce an image, thus avoiding risks of infection and protecting the wound
surface during the scanning process.

Ultrasound has been used for medical images for many years and has proven to be
a safe and effective imaging device. Using sound waves emitted at frequencies
well above the normal human ear response, echoed signals are converted into
graphic images and displayed on a monitor. Computer programs that support
ultrasound imaging use algorithms to document dimensions of areas being scanned.
These measurements provide a baseline that the clinician can use to compare to
other scans.

                                        4
<PAGE>

The scanner shares those characteristics, which are common to all ultrasound
imaging equipment, but uses high frequency ultrasound at 20 MHz to provide high
resolution images at depths of up to three centimeters. This compares to 4 to 7
MHz ultrasound frequency used to scan fetal images, and up to 10 MHz used by
conventional ultrasound equipment. Traditional low-frequency ultrasound
equipment is generally unable to image thin structures like skin. We believe
that the scanner's ability to produce high-resolution images of thin structures,
such as skin, subcutaneous tissue and superficial tendons, is unique and the
device is significantly less expensive.

The depth used by the scanner to produce a useable image depends on the area
being scanned and the clinical application. For instance, wounds on the ankle
require an image depth of only 2 to 4 millimeters, an area generally too small
to resolve using conventional imaging technology, but ideally suited to the use
of the scanner. The scanner provides a clinician with a clear picture, at 65 by
200 microns, of the entire wound area. Consequently, the clinician need not
disturb the wound with invasive procedures that can cause additional damage.
Since wounds begin to heal from the inside, underneath the skin surface, the
ability to observe the entire wound, up to three centimeters deep, gives
clinicians a much better understanding of the patient's tissue. The ability to
observe minute changes just below the skin's surface during the early stages of
treatment gives clinicians a picture of the wound's status and allows them to
evaluate the treatment's success faster than current methods permit. The scanner
uses a proprietary software program to allow clinicians to objectively measure
changes in the wound. The ability to track the healing process becomes critical
during the early stages of a treatment program. Using the scanner, clinicians
can identify the status of healing within days of starting treatment, instead of
waiting up to a month for changes to appear on the wound surface. This helps
clinicians quickly determine whether treatment changes are required, helping to
decrease the healing time. The scanner's manufacturer has been assigned patents
in the United States, Australia and South Africa, along with copyright protected
software. The scanner has received FDA marketing clearance, patents, copyrights,
UL and European marks.

      Other Products

We are regularly assessing other products to introduce into our networks.

EMPLOYEES

As of September 30, 2004, we had ten full-time employees and two part time
employees. We also retain the services of independent consultants from time to
time, as management deems necessary.

ITEM 2. DESCRIPTION OF PROPERTY.

We do not own any real property. Our headquarters are in Denver, Colorado. We
pay rent on a month-to-month basis at the rate of $3,530 per month for office
space at 1401 Seventeenth St., Suite 1150, Denver Colorado 80202. In addition to
office space, this rate includes storage space, use of a phone system, and
high-speed internet access. We pay rent to Futro & Associates, P.C., a law firm
which serves as our legal counsel. Peter G. Futro, our CEO, is a member of Futro
& Associates, P.C.

We also opened an office in Hasbrouck Heights, New Jersey, in September 2004,
and signed a five year lease; the lease payment for the first year is
approximately $2,500 per month.

Our subsidiary, PMC/Foot Care Network, LLC, opened an office in May, 2004 in
Hasbrouck Heights, New Jersey, and signed a five year lease; the lease payment
for the first year is approximately $3,500 per month.

Our subsidiary, GMD, LLC, opened an office in Lenexa, Kansas, in October 2004,
and signed a five year lease; the lease payment for the first year is
approximately $15,000 per month.

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ITEM 3. LEGAL PROCEEDINGS.

We are not involved in any legal proceedings.

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

      No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended June 30, 2004.

                                        6
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                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Market Information

There is a limited public market for the our common stock. Our common stock has
been quoted on the OTC Bulletin Board under the symbol "UMSY" since March 29,
2004. Prior to that date, the symbol was "PIDV."

The following table sets forth the range of high and low bid quotations for our
common stock on the OTC Bulletin Board for each quarter of the fiscal years
ended June 30, 2002 and 2003

<TABLE>
<CAPTION>
Quarter Ended                       Low Bid          High Bid
-------------                       -------          --------
<S>                                 <C>              <C>
September 30, 2002                  $1.10             $1.50
December 31, 2002                   $0.75             $2.50
March 31, 2003                      $0.40             $1.05
June 30, 2003                       $0.06             $0.40

September 30, 2003                  $0.06             $0.66
December 31, 2003                   $0.16             $2.75
March 31, 2004                      $2.37             $3.70
June 30, 2004                       $2.40             $7.20
</TABLE>

The source of this information is the OTC Bulletin Board and other quotation
services. The quotations reflect inter-dealer prices, without retail markup,
markdown or commission and may not represent actual transactions.

Holders

      As of September 30, 2004 there were approximately 436 holders of record of
the Company's common stock (this number does not include beneficial owners who
hold shares at broker/dealers in "street-name").

Dividends

To date, the Company has not paid any dividends on its common stock and does not
expect to declare or pay any dividends on such common stock in the foreseeable
future. Payment of any dividends will be dependent upon future earnings, if any,
the financial condition of the Company, and other factors as deemed relevant by
the Company's Board of Directors.

Recent Sales of Unregistered Securities

Set forth below is information regarding the issuance and sales of securities of
the Company without registration within the past three fiscal years.

(a) In November 2002, the Company issued an aggregate of 25,000 shares of its
common stock to three people in consideration of past services. The transaction
did not involve any public offering, no sales commissions were paid and a
restrictive legend was placed on each certificate evidencing the shares. The
Company believes that the transaction was exempt from registration pursuant to
Section 4(2) and Section 4(6) of the Securities Act and/or Rule 506 of
Regulation D.

(b) In November 2002, pursuant to an Agreement and Plan of Reorganization
between the Company and U.S. Medical Systems, Inc. ("USMS") (the "Reorganization
Agreement"), the Company acquired 100% of the issued and outstanding common
stock of USMS from the sole shareholder of USMS in exchange for an aggregate of
15,000,000 shares of the Company's common stock. Also pursuant to the
Reorganization Agreement, the Company issued 1,650,000 shares of the Company's
common stock to Pride, Inc., a former subsidiary of the Company. The

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<PAGE>

transaction did not involve any public offering, no sales commissions were paid
and a restrictive legend was placed on each certificate evidencing the shares.
The Company believes that the transaction was exempt from registration pursuant
to Section 4(2) and Section 4(6) of the Securities Act and/or Rule 506 of
Regulation D.

(c) In November 2002, the Company sold 148,000 shares of its common stock at
$.50 per share to one investor. Aggregate proceeds from the sale of the common
stock was $74,000. In connection with the offering, the Company agreed to use
its best efforts to file a registration statement to register the shares of
common stock for resale by the investors within 180 days after the close of the
offering. The transaction did not involve any public offering, no sales
commissions were paid and a restrictive legend was placed on each certificate
evidencing the shares. The Company believes that the transaction was exempt from
registration pursuant to Section 4(2) and Section 4(6) of the Securities Act
and/or Rule 506 of Regulation D.

(d) In April 2003, the Company issued 10,000 shares of it common stock to one
person to provide investment banking services to the Company on a non-exclusive
basis for a period of one year. The transaction did not involve any public
offering, no sales commissions were paid and a restrictive legend was placed on
each certificate evidencing the shares. The Company believes that the
transaction was exempt from registration pursuant to Section 4(2) and Section
4(6) of the Securities Act and/or Rule 506 of Regulation D.

(e) In July 2003 the Company sold 3,200,000 shares of its common stock at $.05
per share to six investors. Aggregate proceeds from the sale of the common stock
was $160,000. In connection with the offering, the Company agreed to use its
best efforts to file a registration statement to register the shares of common
stock for resale by the investors. The transaction did not involve any public
offering, no sales commissions were paid and a restrictive legend was placed on
each certificate evidencing the shares. The Company believes that the
transaction was exempt from registration pursuant to Section 4(2) and Section
4(6) of the Securities Act and/or Rule 506 of Regulation D.

(f) Between August and October 2003, the Company sold 90,000 shares of its
common stock at $.10 per share to three investors. Aggregate proceeds from the
sale of the common stock was $9,000. In connection with the offering, the
Company agreed to use its best efforts to file a registration statement to
register the shares of common stock for resale by the investors. The transaction
did not involve any public offering, no sales commissions were paid and a
restrictive legend was placed on each certificate evidencing the shares. The
Company believes that the transaction was exempt from registration pursuant to
Section 4(2) and Section 4(6) of the Securities Act and/or Rule 506 of
Regulation D.

(g) On November 3, 2003, the Company issued an aggregate of 2,620,000 shares of
its common stock, valued at $.25 per share for accounting purposes, pursuant to
agreements with five consultants, in exchange for consulting services. The
transactions did not involve any public offering, no sales commissions were paid
and a restrictive legend was placed on each certificate evidencing the shares.
The Company believes that the transactions were exempt from registration
pursuant to Section 4(2) and Section 4(6) of the Securities Act and/or Rule 506
of Regulation D.

(h) On November 3, 2003, the Company issued 560,000 shares of its common stock,
valued at $.25 per share for accounting purposes, to Peter G. Futro, the
Company's CEO, as payment in full of $140,000 in accrued salary the Company owed
to Mr. Futro. The transaction did not involve any public offering, no sales
commissions were paid and a restrictive legend was placed on each certificate
evidencing the shares. The Company believes that the transaction was exempt from
registration pursuant to Section 4(2) and Section 4(6) of the Securities Act
and/or Rule 506 of Regulation D.

(i) On November 3, 2003, the Company issued 270,000 shares of its common stock,
valued at $.25 per share for accounting purposes, to Futro & Associates, P.C.,
as payment in full of outstanding invoices totaling $67,552 for legal services
the Company owed to Futro & Associates, P.C. The Company's CEO, Peter G. Futro,
is a principal of Futro & Associates, P.C. However, Mr. Futro does not bill the
Company for any of his time for legal work performed, and other attorneys at
Futro & Associates, P.C., bills the Company at rates substantially below their
normal hourly rates. The transaction did not involve any public offering, no
sales commissions were paid and a restrictive legend was placed on each
certificate evidencing the shares. The

                                        8
<PAGE>

Company believes that the transaction was exempt from registration pursuant to
Section 4(2) and Section 4(6) of the Securities Act and/or Rule 506 of
Regulation D.

(j) On November 21, 2003, the Company issued 20,000 shares to a holder of a
$10,000 debenture that the holder had purchased from the Company's wholly-owned
subsidiary, U.S. Medical Systems, Inc. ("USMS") in June 2002. USMS had agreed to
issue the holder 20,000 shares as additional consideration for purchasing the
debenture, but the shares were never issued. When the Company acquired USMS in
November 2002, the Company assumed these obligations. The holder also elected to
convert the debenture ($12,638 in principal and accrued interest) into common
stock of the Company, and the Company issued 19,747 shares of common stock in
settlement of the debenture. The transaction did not involve any public
offering, no sales commissions were paid and a restrictive legend was placed on
each certificate evidencing the shares. The Company believes that the
transaction was exempt from registration pursuant to Section 4(2) and Section
4(6) of the Securities Act and/or Rule 506 of Regulation D.

(k) On November 21, 2003, the Company issued 25,000 shares to a holder of a
$25,000 debenture that the holder had purchased from the Company's wholly-owned
subsidiary, U.S. Medical Systems, Inc. ("USMS") in October 2002. USMS had agreed
to issue the holder 25,000 shares as additional consideration for purchasing the
debenture, but the shares were never issued. When the Company acquired USMS in
November 2002, the Company assumed these obligations. The transaction did not
involve any public offering, no sales commissions were paid and a restrictive
legend was placed on each certificate evidencing the shares. The Company
believes that the transaction was exempt from registration pursuant to Section
4(2) and Section 4(6) of the Securities Act and/or Rule 506 of Regulation D.

(l) Between January 20 and March 16, 2004, the Company sold 2,152,799 shares of
its common stock at $1.75 per share to 45 accredited investors. Aggregate
proceeds from the sale of the common stock was $3,767,399. In connection with
the offering, the Company agreed to use its best efforts to file a registration
statement to register the shares of common stock for resale by the investors.
The transaction did not involve any public offering, no sales commissions were
paid and a restrictive legend was placed on each certificate evidencing the
shares. The Company paid to Summit Financial Partners LLC a finder's fee equal
to 7% of the gross proceeds. The Company believes that the transactions were
exempt from registration pursuant to Section 4(2) and Section 4(6) of the
Securities Act and/or Rule 506 of Regulation D.

(m) In August 2004, the Company sold 473,000 shares of its common stock at $3.00
per share to 12 accredited investors. Aggregate proceeds from the sale of the
common stock was $1,419,000. In connection with the offering, the Company agreed
to use its best efforts to file a registration statement to register the shares
of common stock for resale by the investors. The transaction did not involve any
public offering, no sales commissions were paid and a restrictive legend was
placed on each certificate evidencing the shares. The Company paid to Summit
Financial Partners LLC a finder's fee equal to 7% of the gross proceeds. The
Company believes that the transactions were exempt from registration pursuant to
Section 4(2) and Section 4(6) of the Securities Act and/or Rule 506 of
Regulation D.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.

The following discussion should be read in conjunction with the Company's
financial statements and notes thereto included elsewhere in this Form 10-KSB.
Except for the historical information contained herein, the discussion in this
Form 10-KSB contains certain forward looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Form 10-KSB
should be read as being applicable to all related forward-looking statements
wherever they appear herein. The Company's actual results could differ
materially from those discussed here.

FINANCIAL CONDITION

In prior fiscal years, we were considered a development stage company. This is
no longer the case because we generated revenues of $201,820 for the first time
during the fourth quarter of our fiscal year ended June 30, 2004. The revenue
was in the form of usage fees for five ultrasound scanners placed in the PMC
network.

                                        9
<PAGE>
As of June 30, 2004, we had approximately $3 million in total assets,
approximately $1.4 million in cash on hand, approximately $130,000 in total
liabilities and approximately $2.9 million in stockholders equity. Our net loss
for the year was approximately $1.9 million. We have accrued an accumulated
deficit of approximately $2.6 million.

BUSINESS PROGRESS

During the year we made substantial progress in pursuit of our business plan. We
are a marketing and distribution organization which provides medical devices and
support services to the healthcare industry. We plan to focus on sales and
marketing and outsource other functions such as manufacturing and related
engineering and product development. In most cases, products will be sold or
leased to medical clinics. Product support services will be provided directly by
the product manufacturers.

Our initial product is the Episcan I-200 Ultrasound Scanner, which is produced
by Longport, Inc. of Swarthmore, Pennsylvania. Longport is a medical technology
company that specializes in high resolution ultrasound imaging.

In February 2004, we entered into a distribution agreement with Longport. We
will distribute the scanner to physicians within networks of medical clinics
and, when resources permit, nursing homes. The contract calls for a total of
1,900 scanner units to be purchased over three years with 300 systems to be
purchased in year one, 600 systems to be purchased in year two and 1,000 systems
to be purchased in year three. As a condition of the contract, we placed a
$500,000 deposit towards the purchase of the initial 100 scanner units.

We also paid $525,000 to Longport for the right to be the "Exclusive
Distributor" of the scanner in the "wound care market" in the United States. The
"wound care market" is defined as nursing homes, assisted care living
facilities, rehabilitation centers and operating wound care centers.

In January 2004, we entered into a distribution agreement with Practice
Management Corporation ("PMC") of Hasbrouck Heights, New Jersey, for the
distribution of up to 200 ultrasound scanners per year, for a three year period,
in the PMC network of health care clinics. PMC is a third-party administrator
and represents national healthcare networks, national labor owned insurance
companies and national worker compensation carriers. Under the terms of the
Agreement with PMC, we agreed to pay $100,000 to PMC, plus a $5,000 placement
fee for each scanner sold in PMC's network. Subject to agreements being
negotiated with individual clinics, PMC shall be reimbursed for administrative
fees, and we will be paid a usage fee for each scanner.

Our schedule for the placement of additional ultrasound scanners in the PMC
network has been revised due to delays in obtaining new "CPT" billing codes. As
a result, in the first quarter of the current fiscal year, we entered into an
agreement to place up to 300 scanners over the next 18 months with New York Home
Health Care Equipment, a provider of comprehensive services at competitive costs
to hospitals, long-term care facilities, and home care patients in the greater
New York area and New Jersey. We will also receive monthly service fees.

Recent Developments

In May 2004 we executed an operating agreement for the formation of PMC/Foot
Care Network, LLC, to establish the country's largest podiatric network, based
in Hasbrouck Heights, New Jersey. Under the terms of the agreement, we invested
$400,000 in PMC/Foot Care Network, in return for its 51% ownership position. The
network currently has over 3,000 podiatrist members with a target of 6,000
members within the next twelve months. PMC is an equity member in the LLC and is
the manager of the network.

In July 2004, we executed an agreement establishing GMD, LLC, to establish a
nation wide provider of direct-to-consumer diabetes and respiratory supplies.
Under the terms of the agreement, we invested $450,000 in GMD, in return for a
75% ownership position.

                                       10
<PAGE>

Sources of Funds

We began generating revenue for the first time during the last quarter of the
fiscal year ended June 30, 2004, and we anticipate earning revenue on an ongoing
basis. However, it is too early for us to provide reliable revenue projections
or determine when we will be able to show a profit from operations.

To date, we have relied on management's ability to raise capital through equity
private placement financings to fund our operations.

During the quarter ended March 31, 2004, we completed a private placement of our
common stock. The Company sold 2,152,799 shares of its common stock at $1.75 per
share to 45 accredited investors. Aggregate proceeds from the sale of the common
stock was $3,767,399. We paid to Summit Financial Partners LLC a finder's fee
equal to 7% of the gross proceeds. In connection with the offering, we filed a
registration statement to register the shares of common stock for resale by the
investors.

In August 2004, we sold 473,000 shares of common stock at $3.00 per share to 12
accredited investors. Aggregate proceeds from the sale of the common stock was
$1,419,000. We agreed to pay to Summit Financial Partners LLC a finder's fee
equal to 7% of the gross proceeds. In connection with the offering, we agreed to
use its best efforts to file a registration statement to register the shares of
common stock for resale by the investors.

As a result of the private placement financings that were completed, we were
able to implement the podiatric network and the disease management network.

We believe we will have adequate funds available to fund our operations over the
next twelve months.

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The information required by Item 7 and an index thereto commences on the index
to the financial statements, which follows this page.


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

None.

ITEM 8A. CONTROLS AND PROCEDURES.

Based on their most recent evaluation, which was completed as of the end of the
period covered by this annual report on Form 10-KSB, the Company's Chief
Executive Officer and Chief Financial Officer believe the Company's disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) are
effective to ensure that information required to be disclosed by the Company in
this report is accumulated and communicated to the Company's management,
including its principal executive officer and principal financial officer, as
appropriate, to allow timely decisions regarding required disclosure. During the
last fiscal quarter to which this report relates, there were no significant
changes in the Company's internal controls or other factors that could
significantly affect these controls subsequent to the date of their evaluation
and there were no corrective actions with regard to significant deficiencies and
material weaknesses.


                                       11
<PAGE>


                                U.S. MEDSYS CORP.


                        CONSOLDATED FINANCIAL STATEMENTS

                                      WITH

            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

                             JUNE 30, 2004 AND 2003

<Table>
<Caption>
                                                                            Page

<S>                                                                         <C>
Report of Independent Registered Public Accounting Firm                      F-1

Financial Statements:

          Consolidated Balance Sheets                                        F-2

          Consolidated Statements of Operations                              F-3

          Consolidated Statements of Stockholders' Equity (Defict)           F-4

          Consolidated Statements of Cash Flows                              F-5

          Notes to Consolidated Financial Statements                         F-6
</Table>


<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Board of Directors
US Medsys Corp.

We have audited the accompanying balance sheets of US Medsys Corp. as of June
30, 2004 and 2003, and the related statements of operations, stockholders'
equity, and cash flows for years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

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

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of US Medsys Corp. as
of June 30, 2004 and 2003, and the related statements of operations,
stockholders' equity, and cash flows for years then ended, in conformity with
accounting principles generally accepted in the United States of America.


MILLER AND MCCOLLOM
Certified Public Accountants
4350 Wadsworth Boulevard, Suite 300
Wheat Ridge, Colorado 80033
October 19, 2004


                                      F-1
<PAGE>


                                U.S. MEDSYS CORP.

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<Table>
<Caption>
                                                                     June 30,        June 30,
                                                                       2004            2003
                                                                   -----------      -----------
<S>                                                                <C>              <C>
CURRENT ASSETS
        Cash                                                       $ 1,356,883      $       136
        Related parties accounts receivable                            293,870             --
        Prepaid costs and deposits                                     609,250           58,500
                                                                   -----------      -----------
        Total current assets                                         2,260,003           58,636
                                                                   -----------      -----------
        Intangible assets, net of $82,500 accumulated
                         amortization                                  542,500             --
        Office equipment, net of $ 3,451 allowance for
                         depreciation                                   73,837             --
        Equipment, net of $8,300 allowance for
                         depreciation                                  141,700           20,000
                                                                   -----------      -----------
        Total assets                                               $ 3,018,040      $    78,636
                                                                   ===========      ===========

                       LIABILITIES AND STOCKHOLDERS EQUITY

CURRENT LIABILITIES
        Accounts payable and accrued expenses                      $    29,093      $   278,522
        Related parties accounts payable                               104,080             --
        Debentures payable and accrued interest                           --             38,800
        Current portion of notes payable                                  --            190,000
                                                                   -----------      -----------
        Total current liabilities                                      133,173          507,322
        Note payable and accrued interest,
                         net of current portion                           --            180,800
                                                                   -----------      -----------
                         Total liabilities                             133,173          688,122
                                                                   -----------      -----------

Commitments and contingencies
STOCKHOLDERS' EQUITY (DEFICIT)
         Preferred Stock, $10 par value; 10,000,000 shares
           authorized, no shares issued and outstanding                   --               --
         Common stock, no par value; 200,000,000 shares
           authorized, 28,115,546 and 18,285,000 shares
            issued and outstanding                                   5,469,848          176,000
         Common stock warrants                                          56,000             --
         Accumulated Deficit                                        (2,640,981)        (749,486)
         Less stock receivable                                            --            (36,000)
                                                                   -----------      -----------
                          Total stockholders' equity (deficit)       2,884,867         (609,486)
                                                                   -----------      -----------
         Total liabilities and stockholders' equity (deficit)      $ 3,018,040      $    78,636
                                                                   ===========      ===========
</Table>

The accompanying notes are an integral part of the financial statements


                                      F-2
<PAGE>


                                U.S. MEDSYS CORP.


                      CONSOLIDATED STATEMENTS OF OPERATIONS


<Table>
<Caption>
                                                            YEAR              YEAR
                                                           ENDING            ENDING
                                                           JUNE 30,         JUNE 30,
                                                            2004              2003
                                                        ------------      ------------
<S>                                                     <C>               <C>
REVENUES                                                $    201,820      $        --
                                                        ------------      ------------
General and administrative expenses:
              Consulting fees paid by issuing stock          461,000            38,250
              Consulting fees                                485,863            58,400
              Professional fees                              149,658            73,108
              Salaries                                       460,447           150,000
              Administrative expenses                        246,992            32,313
              Obsolete equipment                              67,650              --
              Fee for public reporting                          --             360,000
              Depreciation expense                            11,751              --
              License fees                                   144,925              --
                                                        ------------      ------------
Total general and administrative expenses                  2,028,285           712,071
                                                        ------------      ------------
(Loss) from operations                                    (1,826,465)         (712,071)

Interest expense                                             (65,030)           (6,676)
                                                        ------------      ------------
Net (loss) before taxes                                   (1,891,495)         (718,747)

Provision for income taxes                                      --                --
                                                        ------------      ------------
Net (loss)                                              $ (1,891,495)     $   (718,747)
                                                        ============      ============
Net (loss) per common share                             $      (0.08)     $      (0.04)
                                                        ============      ============
Weighted average common shares outstanding                24,662,936        16,964,385
                                                        ============      ============
</Table>

The accompanying notes are an integral part of the financial statements


                                      F-3
<PAGE>


                                U.S. MEDSYS CORP.

            CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)



<Table>
<Caption>
                                            COMMON STOCK (NO PAR)                           ACCUMULATED
                                          SHARES            AMOUNT         WARRANTS           DEFICIT          TOTAL
                                        ----------       -----------      -----------      -------------    ------------
<S>                                     <C>              <C>              <C>              <C>              <C>
BALANCE JUNE 30, 2002                   15,000,000       $    15,000      $      --        $     (22,815)   $     (7,815)
                                        ----------       -----------      -----------      -------------    ------------
Recapitalization in connection with
   plan of reorganization (Note 4)       3,000,000

Common stock issued
   for cash                                148,000            74,000                                              74,000

Common stock issued for
   consulting services                     120,000            36,000                                              36,000

Stock options issued                                          38,250                                              38,250

Stock options exercised                     17,000            12,750                                              12,750

Net (loss) for the year
   ending June 30, 2003                                                                         (726,671)       (726,671)

Less stock receivable                                        (36,000)                                            (36,000)
                                        ----------       -----------      -----------      -------------    ------------
BALANCE JUNE 30, 2003                   18,285,000       $   140,000      $      --        $    (749,486)   $   (609,486)
                                        ----------       -----------      -----------      -------------    ------------
Common stock issued
  for cash                               5,442,799         3,640,181                                           3,640,181

Common stock issued
  consulting services                    3,320,000           766,074                                             766,074

Common stock issued
  debt                                   1,067,747           656,393                                             656,393

Net (loss) for the year
ending June 30, 2004                                                                           (1,891,495)    (1,891,495)

Stock options granted to employees                           267,200                                             267,200

Warrants issued                                                                56,000                             56,000
                                        ----------       -----------      -----------      --------------   ------------
BALANCE JUNE 30, 2004                   28,115,546       $ 5,469,848      $    56,000      $   (2,640,981)  $  2,884,867
                                        ==========       ===========      ===========      ==============   ============
</Table>


The accompanying notes are an integral part of the financial statements


                                      F-4
<PAGE>


                                U.S. MEDSYS CORP.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                  YEAR             YEAR
                                                                 ENDING           ENDING
                                                                JUNE 30,         JUNE 30,
                                                                  2004             2003
<S>                                                           <C>              <C>
Cash flows from operating activities:
              Net loss                                        $(1,891,495)     $  (726,671)
              Reconciling adjustments:                               --               --
                 Amortization                                      82,525             --
                 Depreciation                                      11,751             --
                 Common stock issued for services                 766,074           38,250
                 Options issued for services                         --               --
                 Interest added to notes payable                     --             14,600
                 Note issued for public reporting expense            --            360,000
              Change in operating assets and liabilities:            --               --
                 Accounts Receivable                             (293,870)
                 Prepaid expenses                                (550,750)         (58,500)
                 Accounts payable and accrued activities          146,444          270,707
                                                              -----------      -----------
Cash (used for) operating activities                           (1,729,322)        (101,614)
                                                              -----------      -----------
Cash flows from investing activities:                                --               --
              Purchase of equipment                              (207,287)         (20,000)
              Purchase of intangible assets                      (625,025)            --
                                                              -----------      -----------
Cash (used for) investing activities                             (832,312)         (20,000)
                                                              -----------      -----------
Cash flows from financing activities                                 --               --
              Warrants                                             56,000
              Stock options issued to employees                   267,200
              Proceeds from debenture                                --             25,000
              Proceeds from sale of stock                       3,640,181           86,750
              Repayment of note payable                           (45,000)            --
                                                              -----------      -----------
Cash provided by financing activities                           3,918,381          111,750

Net change in cash                                              1,356,747           (9,864)
Beginning cash balance                                                136           10,000
                                                              -----------      -----------
Ending cash balance                                           $ 1,356,883      $       136
                                                              ===========      ===========
Supplemental Cash Flow Information:
              Interest paid in cash                                  --               --
              Taxes paid in cash                                     --               --
Non cash financing and investing transactions:
              Accounts payable settled by issuing stock           287,730             --
              Notes payable settled by issuing stock              368,663             --
</Table>

The accompanying notes are an integral part of the financial statements

                                      F-5
<PAGE>

                                U.S. MEDSYS CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of U.S. MEDSYS CORP. ("Company")
is presented to assist in understanding the Company's financial statements. The
financial statements and notes are representations of the Company's management
who is responsible for their integrity and objectivity. These accounting
policies conform to generally accepted accounting principles in the United
States of America and have been consistently applied in the preparation of the
financial statements. The financial statements are stated in United States of
America dollars.

ORGANIZATION AND DESCRIPTION OF BUSINESS

The Company was incorporated in the State of Colorado on May 1, 1995 as Prime
Rate Income and Dividend Enterprises, Inc. In March 2004, the Company changed
its name to U.S. MedSys Corp.

The Company is a network marketing and distribution organization, which provides
medical technology and support services to the healthcare industry.


PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the Company and its
wholly owned subsidiary, U.S. MedSys Technologies, Inc. ("USMT") and its
fifty-one percent owned subsidiary, PMC/Foot Care Network, LLC. All
inter-company accounts have been eliminated in the consolidation.


REVENUE RECOGNITION

It is the Company's policy that revenues are recognized in accordance with SEC
Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements". Under SAB 101, product revenues (or service revenues) are
recognized when persuasive evidence of an arrangement exists, delivery has
occurred (or service has been performed), the sales price is fixed and
determinable and collectibility is reasonably assured.

The Company currently has revenue from test site users of its medical equipment
on a shared-revenue basis. Revenue is recognized when the patient is billed for
the service, less an allowance for the estimated uncollectible amount due to
disallowed insurance carrier billing.

USE OF ESTIMATES

The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in these financial statements
and accompanying notes. Actual results could differ from those estimates.


                                      F-6
<PAGE>


                               U.S. MEDSYS CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


EARNINGS (LOSS) PER SHARE

Earnings (loss) per share of common stock is computed by dividing the net
earnings (loss) by the weighted average number of common shares outstanding
during the period. The company does not show diluted earnings per share because
it would be anti-dilutive.

ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of accounts receivable, accounts payable, and other financial
instruments reflected in the financial statement approximates fair value due to
the short-term maturity of the instruments.

COMPREHENSIVE INCOME

The Company has adopted Statement of Financial Accounting Standards (SFAS) No.
130, "Reporting Comprehensive Income". SFAS 130 requires that the components and
total amounts of comprehensive income be displayed in the financial statements
beginning in 1998. Comprehensive income includes net income and all changes in
equity during a period that arises from non-owner sources, such as foreign
currency items and unrealized gains and losses on certain investments in equity
securities. The company currently has no components of comprehensive income
other than net loss.

INCOME TAXES

The Company records deferred taxes in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." The
statement requires recognition of deferred tax assets and liabilities for
temporary differences between the tax bases of assets and liabilities and the
amounts at which they are carried in the financial statements, based upon the
enacted tax rates in effect for the year in which the differences are expected
to reverse. A valuation allowance is established when necessary to reduce
deferred tax assets to the amount expected to be realized.

VALUATION OF LONG-LIVED ASSETS

The Company periodically analyzes its long-lived assets for potential
impairment, assessing the appropriateness of lives and recoverability of
unamortized balances through measurement of undiscounted operation cash flows on
a basis consistent with accounting principles generally accepted in the United
States of America.

OTHER

The Company's fiscal year end is June 30.

The Company paid no dividends during the periods presented.

All of the Company's assets are located in the United States.

The Company has no cash equivalents.

The Company has credit risk from approximately $1,254,000 on deposit in
financial institutions in excess of FDIC limits.

In prior reporting periods, the Company reported its results as a development
stage company. Because the Company now has operating revenues, it is no longer a
development stage enterprise.


                                      F-7
<PAGE>


                               U.S. MEDSYS CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 - ACQUISITION OF U.S. MEDICAL SYSTEMS, INC. (NOW KNOWN AS U.S. MEDSYS
TECHNOLOGIES, INC.)

In November of 2002, the Company entered into an agreement and plan of
reorganization with U.S. Medical Systems, Inc., a Nevada corporation (U.S.
Medical Systems, Inc. changed its name to U.S. MedSys Technologies, Inc. in
March 2004) ("USMT") whereby the Company acquired USMT.

The acquisition is accounted for as a reverse acquisition, which is a capital
transaction and not a business combination. Accordingly, the financial
statements of the acquired company (USMT) are presented for historical
comparative purposes.

NOTE 3 - STOCK-BASED COMPENSATION

The Company's 2003 Stock Plan allowed the Company to award stock options, up to
1,000,000 shares, to directors, officers, and consultants of the Company and its
affiliates. The plan is administered by the Company's Board of Directors, or its
assigned committee, who has discretion as to the awards and terms of options to
be issued.

The Company records costs for stock-based compensation under Statement of
Financial Accounting Standards (SFAS) no. 123. As permitted by SFAS 123, the
Company applies the methods of APB 25 and related interpretations in accounting
for stock options issued to employees. Options issued to non-employees are
recorded at fair value.

The following is a table of outstanding options and changes during 2004 and
2003:

<Table>
<Caption>
                                                                                                     Weighted
                                                                                    Non-              Average
                                                              Employee            Employee           Exercise
                                                               Options             Options             Price
                                                           ----------------    ----------------   ----------------
<S>                                                        <C>                 <C>                <C>
OPTIONS OUTSTANDING, June 30, 2002
    Options granted:
         Employees
         Non-employees                                                 --              17,000                 .75
    Options expired
    Options exercised                                                  --             (17,000)                .75

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

OPTIONS OUTSTANDING, June 30, 2003                                     --                  --                  --
                                                           ================    ================   ================
    Options granted:
         Employees                                              1,670,000                  --                 .25
         Non-employees                                                 --                  --                  --
    Options expired                                                    --                  --                  --
    Options exercised                                                  --                  --                  --
                                                           ----------------    ----------------   ----------------

OPTIONS OUTSTANDING, June 30, 2004                              1,670,000                  --                 .25
                                                           ================    ================   ================
</Table>


                                      F-8
<PAGE>


                               U.S. MEDSYS CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


<Table>
<Caption>
                                                   Weighted Average
   Year and Exercise price relative to fair          Fair Value at       Weighted Average
          value of underlying stock                   Grant Date          Exercise Price
-----------------------------------------------    ------------------    ------------------
<S>                                                <C>                   <C>
Year ending June 30, 2003:
   Exercise price equals fair value                      1.36                   .75
Year ending June 30, 2004:
   Exercise price less than fair value                   1.35                   .25
</Table>

The fair value of each option granted was computed by the Black-Scholes method
using the following weighted-average assumptions:

<Table>
<Caption>
                                          Year Ended                Year Ended
                                         June 30, 2004             June 30, 2003
                                    ------------------------  ------------------------
<S>                                 <C>                       <C>
Expected Volatility:                         225%                      225%
Risk-free interest rate:                     .93%                      1.69%
Expected Dividends:                           --                        --
Expected Term in Years:                        1                         1
</Table>

As permitted by FASB Statement No. 123, the company applies the methods of APB
25 and related interpretations in accounting for stock options issued to
employees. Accordingly, compensation cost was recognized for the quoted market
price of the stock less the exercise price of the options. If compensation cost
had been determined based on the estimated fair value (using methods consistent
with FASB Statement No. 123) of the options at grant date, the Company's net
income and earnings per share would have been replaced with the following
amounts:

<Table>
<Caption>
                                          Year Ended                              Year Ended
                                         June 30, 2004                           June 30, 2003
                               As Reported           Pro forma          As Reported          Pro forma
                             -----------------   ------------------  ------------------   -----------------
<S>                          <C>                 <C>                 <C>                  <C>
Net loss:                      (1,891,495)          (3,878,795)          (718,747)           (718,747)
Net loss per share:               (.07)                (.07)               (.04)               (.04)
</Table>

NOTE 4 - RELATED PARTY TRANSACTIONS

During the year ending June 30, 2004, the Company incurred legal fees in the
amount of $96,155 to a law firm in which an officer of the Company is a partner.
$11,291 was outstanding at June 30, 2004.


                                      F-9
<PAGE>


                               U.S. MEDSYS CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5 - INCOME TAXES

As of June 30, 2004, the Company had approximately $ 2,496,495 of net operating
loss carryforward that expires as follows: $ 605,000 in 2023 and $1,891,495 in
2024. The Company had an estimated deferred tax asset of $374,475 related to the
net operating loss carryforward, which represents $91,000 for year end June 30,
2003 and $283,475 for year end June 30, 2004. A valuation allowance has been
provided for the total amount of the deferred tax asset, since the amounts, if
any, of future revenues necessary to be able to utilize the carryover, are
uncertain.

Income taxes at the statutory rate are reconciled to the Company's actual income
taxes as follows:

<Table>
<S>                                                                       <C>
   Income tax benefit at statutory rate resulting from net operating
     loss carryforward                                                        (15%)
   Deferred income tax allowance                                               15%
                                                                          ------------
                                                                                0%
                                                                          ============
</Table>

NOTE 6 - STOCK TRANSACTIONS

During July, 2003, the Company issued 700,000 shares of common stock to
consultants in payment of services. The shares were recorded at estimated fair
value of $46,200 ($.07 per share).

During November, 2003, the Company issued 2,620,000 shares of common stock to
consultants in payment of services. The shares were recorded at estimated fair
value of $655,000 (weighted average $.25 per share).

During November, 2003, the Company exchanged one of its outstanding debentures,
including accrued interest, for 44,747 shares of common stock valued at $12,638.

During November, 2003, the Company issued 1,023,000 shares of common stock in
settlement of accounts payable of $316,604 to related parties.

During the six months ending December 31, 2003 the Company sold 3,290,000 shares
of common stock for $169,000, which was an average of $.05 per share.

During March, 2004, the Company sold 2,152,799 shares of common stock for
$3,767,399 less offering costs of $296,218 for a net increase in the Capital
account of $3,471,121, which was $1.61 per share.

During January 2004, the Company issued a debenture for $200,000, at 10%
interest (per annum), to one investor. Attached to the debenture was a two-year
warrant to purchase 40,000 shares of restricted stock at $1.50 per share. The
proceeds from the debenture were allocated between the debenture payable and
warrants based on the fair market values of each. Prior to the end of the year
the debenture was paid in full.


                                      F-10
<PAGE>


                               U.S. MEDSYS CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Pursuant to an agreement dated January 26, 2004 among the Company, Pride, Inc.
(a former subsidiary of the Company) and a third party investor, the Company
agreed to assign to the third party investor the Company's option to reacquire
1,650,000 shares of the Company owned by Pride, Inc. (which was given as part of
the acquisition of USMT), the investor agreed to assume responsibility for the
repayment of the $360,000 promissory note that the Company owed to Pride, Inc.,
and Pride, Inc. agreed to accept payment of the note from the investor. In March
2004, the third-party investor completed the purchase of the 1,650,000 shares
from Pride, Inc., and the $360,000 promissory note was cancelled. The Company
recorded the cancellation of the outstanding balance of the note and accrued
interest in the amount of $356,025 as a contribution to capital.

NOTE 7 - INTANGIBLE ASSETS

During the year ended June 30, 2004, the Company, through its wholly owned
subsidiary, USMT, entered into a distribution agreement with Longport, Inc., a
medical technology company that specializes in high resolution ultrasound
imaging. USMT will distribute the Longport Model LDS-1 ultrasound skin scanner
to physicians within networks of medical clinics. The Company paid $525,000 to
Longport for the right to be the "Exclusive Distributor of the scanner in the
United States. The cost of this "License Agreement" will be amortized over the
three year contract period. Amortization for current year was $73,000.

During the year ended June 30, 2004, USMT entered into a distribution agreement
with Practice Management Corporation ("PMC") for the distribution of up to 200
ultrasound scanners per year, for a three year period. The Company agreed to pay
$100,000 to PMC for the distribution agreement and the cost will be amortized
over the three year contract period. Amortization for the current year was
$9,500.

NOTE 8 - PROPERTY AND EQUIPMENT

The Company depreciates property and equipment in amounts sufficient to recover
asset costs over their estimated useful lives.

Medical devices and office equipment of $227,287 at June 30, 2004 are
depreciated over their estimated useful life.

<Table>
<Caption>
                           Cost             Accum. Depr.        Net Value       Depr. Method/LF
<S>                        <C>               <C>                <C>             <C>
Office Equipment           $  77,287         $   3,451          $  73,836       SL/3 YRS
Equipment                  $ 150,000         $   8,300          $ 141,700       SL/3 YRS
Total Fixed Assets         $ 227,287         $  11,751          $ 215,536
</Table>

NOTE 9 - COMMITMENTS

Under the terms of the agreement with Longport, USMT agreed to purchase 1,900
scanner units over three years, with 300 systems to be purchased in year one,
600 systems to be purchased in year two and 1,000 systems to be purchased in
year three. As a condition of the contract, USMT placed a $500,000 deposit
towards the purchase of the initial 100 scanner units.


                                      F-11
<PAGE>


                               U.S. MEDSYS CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Under the terms of the agreement with PMC, USMT agreed to pay $100,000 to PMC,
payable at the rate of $10,000 per month for ten months, plus a $5,000 placement
fee for each scanner sold in PMC's network.

Under the terms of the agreement with Visionary Medical Consulting Corp, USMT
agreed to pay $10,000 per month through October 2005. to research and market
various medical equipment and devices.

Under the terms of the agreement with Porter, LeVay & Rose, Inc., the Company
agreed to pay $8,500 per month through April 30, 2005 for public relations
counsel.

Under the terms of a lease, PMC/Foot Care Network, LLC is obligated to pay the
following minimum lease payments:

Year 2005                  $41,300
Year 2006                  $47,200
Year 2007                  $50,150
Year 2008                  $53,100
Year 2009                  $54,083


NOTE 10 - INVESTMENT IN PMC/FOOT CARE NETWORK, LLC

In May 2004, the Company, through its wholly owned subsidiary, USMT, executed an
operating agreement for the formation of PMC/Foot Care Network, LLC, to
establish a podiatric network, based in Hasbrook Heights, New Jersey. Under the
terms of the agreement, $400,000 was invested in PMC/Foot Care Network in return
for a 51% ownership position.


NOTE 11 - SUBSEQUENT EVENTS

In July 2004, the Company, through its wholly owned subsidiary, USMT, executed
an agreement establishing GMD, LLC, to establish a nation wide provider of
direct-to-consumer diabetes and respiratory supplies. Under the terms of the
agreement, $450,000 was invested in GMD, in return for a 75% ownership position.


                                      F-12



<PAGE>


                                    PART III

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

The Company has a Board of Directors which is currently comprised of three
members. Each director holds office until the next annual meeting of
shareholders or until a successor is elected or appointed. The members of our
Board of Directors and our executive officers and their respective age and
position are as follows:

<TABLE>
<CAPTION>
                                                                             Director of
       Name             Age           Position with Registrant            Registrant Since
------------------------------------------------------------------------------------------
<S>                     <C>   <C>                                         <C>
Peter G. Futro          61    CEO, CFO, President, Treasurer & Director     November 2002

George E. Anagnost      54    Vice-President, Secretary and Director        November 2002

Kenton D. Sieckman      43    Director                                      November 2002
</TABLE>

PETER G. FUTRO, age 61, Chief Executive Officer, Chief Financial Officer,
President, Treasurer and Director. Mr. Futro is a practicing attorney and a
member of the law firm of Futro & Associates, P.C., Denver, Colorado, which
represents public and private companies in transactional areas of law including
corporate, securities, mergers and acquisitions and commercial transactions. Mr.
Futro graduated with a Ph.B. in Philosophy in 1966 from Wayne State University
and a J.D. in 1971 from the University of Denver.

GEORGE ANAGNOST, age 54, Vice-President, Secretary and Director. Mr. Anagnost
has over twenty years of experience in corporate finance, including serving as
the syndicate manager and a member of the corporate finance department of RAF
Financial Corporation. Mr. Anagnost also was the vice-president of advertising
and public relations at Novan Energy Inc. Mr. Anagnost was also a member of the
board of directors of Novan's AHS division. Novan Energy was the largest
manufacturer and distributor of renewable energy and solar energy systems in
Colorado, with over 50 distributors and 500 dealers nationwide. Novan Energy
merged with US filter (former Ashland Oil Division) and in 2000 was acquired by
Vivendi Universal. Mr. Anagnost was a managing director of Mikorp LLC, a private
hedge fund. Mr. Anagnost graduated with a B.A. in History from the University of
Rhode Island in 1974, and participated in the M.S. program at Boston
University's School of Public Communications, 1975 through 1978.

KENTON D. SIECKMAN, age 43, Director. Mr. Sieckman is currently the Vice
President of Worldwide Technical Services at Wily Technology, Inc. During the
previous year, Sieckman held the position of Area Vice President, North America
Technology Business Unit for Oracle Corporation. From 1996 to 1999, he was a
systems engineer at BEA Systems, Inc., and served as the Vice-President of
Systems Engineering from 1999 to April 2003. Mr. Sieckman has executive-level
management experience in overseeing sales, marketing and business planning
functions for international software applications companies. Mr. Sieckman
graduated with a B.A. in Mathematics and Computer Science from the University of
Colorado in 1983.

AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT DISCLOSURE

The Company does not have a separately-designated standing audit committee at
this time because it is not required to do so. Accordingly, the Company does not
have an audit committee financial expert.

CODE OF ETHICS

      On September 30, 2004, the Board of Directors established a written code
of ethics that applies to the Company's senior executive and financial officers.
A copy of the code of ethics is included as an exhibit to this annual report.

                                       12
<PAGE>

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC"). Officers,
directors, and greater than 10% shareholders are required by SEC regulation to
furnish us with copies of all Section 16(a) forms they file. Based solely on its
review of copies of such reports received or written representations from
certain reporting persons known to us, we believe that, during the year ended
June 30, 2004, none of the Section 16(a) filing requirements applicable to its
current officers, directors and ten percent shareholders were complied with by
such persons.

ITEM 10. EXECUTIVE COMPENSATION.

(a)   General

      The following information discloses all plan and non-plan compensation
awarded to, earned by, or paid to the executive officers of the Company, and
other individuals for whom disclosure is required, for all services rendered in
all capacities to the Company and its subsidiaries.

(b)   Summary Compensation Table

      The following table sets forth all compensation, including bonuses, stock
option awards and other payments, paid or accrued by the Company and/or its
subsidiaries, to or for the Company's Chief Executive Officer and each other
person who earned in excess of $100,000, during the fiscal years ended June 30,
2004, 2003 and 2002.

<TABLE>
<CAPTION>
                                                               Annual Compensation
                                               ------------------------------------------------
           (a)                                                                          (e)
          Name                       (b)                                               Other
           And                      Year            (c)              (d)              Annual
        Principal                   Ended         Salary            Bonus          Compensation
        Position                   June 30          ($)              ($)                ($)
        --------                   -------     ------------         -----          ------------
<S>                                <C>         <C>                  <C>            <C>
Peter G. Futro, Director,           2004       $109,105 (n1)         -0-                -0-
CEO, President and                  2003       $ 90,000 (n2)         -0-                -0-
Treasurer                           2002            N/A             N./A                N/A
</TABLE>

<TABLE>
<CAPTION>
                                                                Long Term Compensation
                                                     --------------------------------------------
                                                                Awards                   Payouts
                                                     --------------------------------------------
           (a)                                           (f)
           Name                        (b)           Restricted             (g)              (h)               (i)
           And                        Year              Stock             Shares            LTIP           All Other
        Principal                     Ended           Award(s)          Underlying        Payouts         Compensation
         Position                    June 30             ($)             Options            ($)               ($)
         --------                    -------         ----------         ----------        -------         ------------
<S>                                  <C>             <C>                <C>               <C>             <C>
Peter G. Futro, Director,             2004               -0-               -0-               -0-               -0-
CEO, President and                    2003               -0-               -0-               -0-               -0-
Treasurer                             2002               N/A               N/A               N/A               N/A
</TABLE>

                                       13
<PAGE>

      (n1)  Of the $109,105 in salary for the year ended June 30, 2004, Mr.
            Futro agreed to accept 200,000 shares of restricted common stock
            (valued at $.25 per share) in payment of $50,000. The balance of
            $59,105 was paid in cash.

      (n2)  As of June 30, 2003, of the $90,000 salary earned for the year then
            ended, the Company owed Mr. Futro the full amount as accrued but
            unpaid salary for the year then ended. Mr. Futro was not paid any of
            this amount during the year ended June 30, 2003. During the year
            ended June 30, 2004, Mr. Futro agreed to accept 360,000 shares of
            restricted common stock (valued at $.25 per share) in payment of the
            $90,000 in accrued salary.

(c)   Option/SAR Grants in Last Fiscal Year

This table has been omitted, as no executive officers named in the Summary
Compensation Table above received any awards of stock options or stock
appreciation rights during the fiscal year ended June 30, 2004.

(d)   Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
      Option/SAR Values

This table has been omitted, as no executive officers named in the Summary
Compensation Table held any options or exercised any options during the fiscal
year ended June 30, 2004.

(e)   Long-Term Incentive Plans ("LTIP") - Awards in Last Fiscal Year

This table has been omitted, as no executive officers named in the Summary
Compensation Table above received any awards pursuant to any LTIP during the
fiscal year ended June 30, 2004.

(f)   Compensation of Directors

No compensation was paid by the Company to its Directors for any service
provided as a Director during the fiscal year ended June 30, 2004. There are no
other formal or informal understandings or arrangements relating to
compensation; however, Directors may be reimbursed for all reasonable expenses
incurred by them in conducting the Company's business. These expenses would
include out-of-pocket expenses for such items as travel, telephone, and postage.

(g)   Employment Contracts and Termination of Employment and Change-in-Control
      Arrangements

The Company does not have any written employment agreements with any of its
executive officers.

The Company's Board of Directors has complete discretion as to the
appropriateness of (a) key-man life insurance, (b) obtaining officer and
director liability insurance, (c) employment contracts with and compensation of
executive officers and directors, (d) indemnification contracts, and (e)
incentive plan to award executive officers and key employees.

The Company's Board of Directors is responsible for reviewing and determining
the annual salary and other compensation of the executive officers and key
employees of the Company. The goals of the Company are to align compensation
with business objectives and performance and to enable the Company to attract,
retain and reward executive officers and other key employees who contribute to
the long-term success of the Company. The Company intends to provide base
salaries to its executive officers and key employees sufficient to provide
motivation to achieve certain operating goals. Although salaries are not
specifically tied into performance, incentive bonuses may be available to
certain executive officers and key employees. In the future, executive
compensation may include without limitation cash bonuses, stock option grants
and stock reward grants.

                                       14
<PAGE>

Employee Benefit and Consulting Services Compensation Plan

As of June 30, 2004, the Company did not have a formal Employee Benefit and
Consulting Services Compensation Plan in effect.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

The following table sets forth, as of September 30, 2004, the stock ownership of
each person known by us to be the beneficial owner of five percent or more of
our common stock, each Officer and Director individually and all Directors and
Officers as a group. Each person is believed to have sole voting and investment
power over the shares except as noted.

<TABLE>
<CAPTION>
Name and Address of                                Amount and Nature of Beneficial
Beneficial Owner (n1)                                     Ownership(n1)(n2)             Percent of Class (n3)
-------------------------------------------------------------------------------------------------------------
<S>                                                <C>                                  <C>
Peter G. Futro (n4) (n8)                                        560,000                         2.0%
George Anagnost (n5)                                            250,000                            *
Kenton Sieckman (n6)                                            250,000                            *
Thomas H. King (n7)                                           2,013,000                         6.8%
Rangeley Corporation (n8)                                     7,942,237                        27.8%
                                                              =========                        ====
All executive officers and directors of the
Company as a group (3 persons) (n9)                           9,002,237                        30.9%
                                                              =========                        ====
</TABLE>

* Represents less than one percent.

(n1)  Unless otherwise indicated, all shares are directly beneficially owned and
      investing power is held by the persons named. The address for each person
      is c/o U.S. MedSys Corp., 1401 17th Street, Suite 1150, Denver, Colorado
      80202.

(n2)  Includes the amount of shares each person or group has the right to
      acquire within 60 days pursuant to options, warrants, conversion
      privileges or other rights, if any.

(n3)  Based upon 28,588,546 shares issued and outstanding at September 30, 2004,
      plus the amount of shares each person or group has the right to acquire
      within 60 days pursuant to options, warrants, conversion privileges or
      other rights.

(n4)  Peter G. Futro is an executive officer and a director of the Company.

(n5)  George Anagnost is an executive officer and a director of the Company.
      Included in the chart are options to acquire 250,000 shares of common
      stock, at an exercise price of $.25 per share, expiring November 3, 2006.
      The options were granted on November 3, 2003.

(n6)  Kenton Sieckman is a director of the Company. Included in the chart are
      options to acquire 250,000 shares of common stock, at an exercise price of
      $.25 per share, expiring November 3, 2006. The options were granted on
      November 3, 2003.

(n7)  Thomas H. King is director of marketing for the Company. Included in the
      chart are options to acquire 920,000 shares of common stock, at an
      exercise price of $.25 per share, expiring November 3, 2005. The options
      were granted on November 3, 2003.

                                       15
<PAGE>

(n8)  Rangeley Corporation is the largest shareholder of the Company. Peter G.
      Futro, an executive officer and director of the Company, is a control
      person of Rangeley Corporation, and therefore Mr. Futro is deemed to be
      the beneficial owner of the shares of common stock owned by Rangeley. For
      purposes of this table, Rangeley Corporation's ownership of the Company is
      listed separately.

(n9)  This total includes ownership by the officer and directors: Peter G.
      Futro, George Anagnost and Kenton Sieckman. Also included is ownership of
      common stock by Rangeley Corporation, which is listed separately in the
      table but is deemed beneficially owned by Peter G. Futro.

EQUITY COMPENSATION PLAN INFORMATION

The following information concerning our equity compensation plan is as of the
end of the fiscal year ended June 30, 2004:

<TABLE>
<CAPTION>
                                                                                            Number of securities
                                Number of securities to be       Weighted-average       available for future issuance
                                  issued upon exercise of        exercise price of        under equity compensation
                                   outstanding options,              options,            plans (excluding securities
                                    warrants and rights         warrants and rights     reflected in column (a)) (n1)
        Plan category                       (a)                         (b)                          (c)
---------------------------------------------------------------------------------------------------------------------
<S>                             <C>                             <C>                     <C>
Equity compensation plans
approved by security
holders                                     N/A                         N/A                          N/A

Equity compensation plans
not approved by security
holders                                     -0-                         N/A                          -0-
                                            ---                         ---                          ---
Total                                       -0-                         N/A                          -0-
                                            ---                         ---                          ---
</TABLE>

On February 10, 2003, we adopted an employee benefit and consulting services
compensation plan entitled the 2003 Stock Plan (the "2003 Plan"). The 2003 Plan
covered up to 1,000,000 shares of common stock. The 2003 Plan has not previously
been approved by security holders. Under the 2003 Plan, we issued common stock
and/or options to purchase common stock to certain officers, directors and
employees and consultants of the U.S. MedSys Corp. and its subsidiaries. The
purpose of the 2003 Plan was to promote the best interests of the company and
its shareholders by providing a means of non-cash remuneration to eligible
participants who contribute to our operating progress and earning power. The
2003 Plan was administered by our Board of Directors, which had the discretion
to determine from time to time the eligible participants to receive an award;
the number of shares of stock issuable directly or to be granted pursuant to
option; the price at which the option may be exercised or the price per share in
cash or cancellation of fees or other payment which we may be liable if a direct
issue of stock, and all other terms on which each option shall be granted. All
1,000,000 shares that were covered by the 2003 Plan have been issued as of June
30, 2004.

As of June 30, 2004, the Company did not have a formal Employee Benefit and
Consulting Services Compensation Plan in effect. However, during the fiscal year
ended June 30, 2004, we also granted options to acquire shares of restricted
common stock that were not pursuant to a formal equity compensation plan, as
follows:

A. On November 3, 2003, the Company granted a three-year option to purchase
shares of restricted common stock at $.25 per share as follows: George Anagnost
(director and Secretary) was granted 250,000 options; Kenton Sieckman (director)
was granted 250,000 options; and Jacob Futro (an officer of the Company's
subsidiary, USMS) was granted 250,000 options. Jacob Futro is the son of the
Company's CEO, Peter Futro.

                                       16
<PAGE>


B. On November 3, 2003, the Company revised its agreement with Thomas H. King.
Pursuant to the agreement, Mr. King was issued 920,000 shares of restricted
common stock as compensation for his services for the next 12 months. In
addition, Mr. King was granted a two year option to acquire 920,000 shares of
restricted common stock at an exercise price of $.25 per share.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

During the last two fiscal years, the Company entered into the following
transactions in which its officers, directors and beneficial owners identified
in response to Item 11 (above) had a material interest:

1. On November 12, 2002, the Company acquired 100% of the issued and outstanding
common stock of U.S. MedSys Technologies, Inc. ("USMS") from the sole
shareholder of USMS, Rangeley Corporation ("Rangeley"), in exchange for an
aggregate of 15,000,000 shares of the Company's common stock pursuant to an
Agreement and Plan of Reorganization dated November 12, 2002. As a result, USMS
became a wholly-owned subsidiary of the Company. Peter G. Futro, the beneficial
owner of Rangeley, became an officer and director of the Company.

As part of the reorganization, ownership of our former subsidiary, Pride, Inc.,
which operated a real estate investment business, was transferred to Michael L.
Schumacher, a former officer and director of the Company. Mr. Schumacher agreed
to assume independent responsibility for the completion of registration
statement by Pride, Inc. for a "spin-off" distribution of shares of Pride, Inc.
to the shareholders of record at November 27, 2002 (excluding Rangeley).

Also pursuant to the reorganization, the Company issued 1,650,000 shares of the
Company's common stock to Pride, Inc.

Pursuant to the Reorganization Agreement, the Company executed a three-year,
$360,000 promissory note in favor of Pride, Inc. The note was subsequently paid
in full.

2. Peter G. Futro, an officer and director of the Company, is a member of a law
firm that provides legal services to the Company. Mr. Futro does not bill the
Company for any of his time, and the time billed by other attorneys at the firm
is billed at rates substantially below their normal hourly rates and below
market rates for comparable services.

3. Peter G. Futro, an officer and director of the Company, is a member of a law
firm that provides legal services to the Company. The law firm provides office
space to the Company for $3,530 per month. The Company believes that the rate is
below market rates for comparable office space.

4. On November 3, 2003, Futro & Associates, P.C., a law firm that provides legal
services to the Company, was issued 270,000 shares of common stock as payment in
full for $67,552.38 in accrued legal fees as of October 31, 2003. Peter G.
Futro, who is a member of the law firm, is also an executive officer and
director of the Company.

5. On November 3, 2003, Peter G. Futro, an officer and director of the Company,
was issued 560,000 shares of common stock as payment in full of $140,000 (which
equals $.25 per share) in accrued but unpaid salary.

6. On November 3, 2003, the company entered into a revised agreement with Thomas
H. King, pursuant to which Mr. King was issued 920,000 shares of common stock
(valued at $.25 per share) and was granted an option to acquire an additional
920,000 shares of restricted common stock for two years an exercise price of
$.25 per share. Mr. King was also issued 173,000 shares of common stock
registered in Form S-8 (valued at $.46 per share) as payment in full of accrued
but unpaid consulting fees in the amount of $79,750, as of October 31, 2003.

                                       17
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

(a) List of Exhibits.

<TABLE>
<CAPTION>
Exhibit No.                              Description
-----------                              -----------
<S>           <C>
2.2           Agreement and Plan of Reorganization dated November 12, 2002 by
              and among the Registrant, U.S. Medical Systems, Inc. ("USMS") and
              certain shareholders of USMS (Incorporated by reference to Exhibit
              2.2 of the Company's current report on Form 8-K, filed November
              22, 2002).

3.3           The Company's Articles of Incorporation, as currently in effect.
              (Incorporated by reference to Exhibit 3.3 of the Company's
              quarterly report on Form 10-QSB for the period ended March 31,
              2004.)

3.4           The Company's Bylaws, as currently in effect. (Incorporated by
              reference to Exhibit 3.3 of the Company's quarterly report on Form
              10-QSB for the period ended March 31, 2004.)

10.1          The Company's 2003 Stock Plan. (Incorporated by reference to
              Exhibit 10.1 of the Company's Registration Statement on Form S-8,
              SEC File No. 103255.)

10.4          Distribution Agreement between the Company's subsidiary, U.S.
              MedSys Technologies, Inc., and Longport, Inc. dated February 11,
              2004. (Incorporated by reference to Exhibit 10.4 of the Company's
              quarterly report on Form 10-QSB for the period ended March 31,
              2004.)

14.1          Code of Ethics adopted September 30, 2004. (Filed herewith.)

21.1          List of Subsidiaries. (Filed herewith.)

31.1          Section 302 Certification by the Corporation's Chief Executive
              Officer. (Filed herewith).

31.2          Section 302 Certification by the Corporation's Chief Financial
              Officer. (Filed herewith).

32.1          Section 906 Certification by the Corporation's Chief Executive
              Officer. (Filed herewith).

32.2          Section 906 Certification by the Corporation's Chief Financial
              Officer. (Filed herewith).
</TABLE>

(b) Reports on Form 8-K.

On June 22, 2004, the Company field a current report on Form 8-K to report that
the Company updated the information on its website, located on the internet at:
www.usmedsyscorp.com. The website includes a Microsoft PowerPoint presentation
which provides a summary outline of the business of the company. A text version
of the presentation was filed as an exhibit to the Form 8-K.

                                       18
<PAGE>

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The Company's board of directors reviews and approves audit and permissible
non-audit services performed by Miller & McCollom, CPA's ("M&M"), as well as the
fees charged by M&M for such services. In its review of non-audit service fees
and its appointment of M&M as the Company's independent accountants, the board
of directors considered whether the provision of such services is compatible
with maintaining M&M's independence. All of the services provided and fees
charged by M&M in the fiscal year ended June 30, 2004 were pre-approved by the
board of directors.

AUDIT FEES

The aggregate fees billed for professional services rendered by M&M for the
audit of our annual financial statements and the reviews of the financial
statements included in our quarterly reports on Form 10-QSB for fiscal years
ended June 30, 2004 and 2003 were $19,200 and $14,550, respectively.

AUDIT-RELATED FEES

There were no other fees billed by M&M during the last two fiscal years for
assurance and related services that were reasonably related to the performance
of the audit or review of the Company's financial statements and not reported
under "Audit Fees" above.

TAX FEES

There were no fees billed for professional services rendered by M&M for tax
compliance services in fiscal years ended June 30, 2004 and 2003.

ALL OTHER FEES

There were no other fees billed by M&M during the last two fiscal years for
products and services provided by M&M.

                                       19
<PAGE>

                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended, the Registrant caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                    U.S. MEDSYS CORP.


Dated: November 1, 2004             /s/ Peter G. Futro

                                    ------------------------------------------
                                    Peter G. Futro, Chief Executive Officer
                                    And Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.


<TABLE>
<CAPTION>
         Name                       Title                         Date
         ----                       -----                         ----
<S>                                <C>                       <C>
/s/ Peter G. Futro                 Director                  November 1, 2004
---------------------------
Peter G. Futro

/s/ George Anagnost                Director                  November 1, 2004
---------------------------
George Anagnost
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                                       20
<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit No.                              Description
-----------                              -----------
<S>           <C>
2.2           Agreement and Plan of Reorganization dated November 12, 2002 by
              and among the Registrant, U.S. Medical Systems, Inc. ("USMS") and
              certain shareholders of USMS (Incorporated by reference to Exhibit
              2.2 of the Company's current report on Form 8-K, filed November
              22, 2002).

3.3           The Company's Articles of Incorporation, as currently in effect.
              (Incorporated by reference to Exhibit 3.3 of the Company's
              quarterly report on Form 10-QSB for the period ended March 31,
              2004.)

3.4           The Company's Bylaws, as currently in effect. (Incorporated by
              reference to Exhibit 3.3 of the Company's quarterly report on Form
              10-QSB for the period ended March 31, 2004.)

10.1          The Company's 2003 Stock Plan. (Incorporated by reference to
              Exhibit 10.1 of the Company's Registration Statement on Form S-8,
              SEC File No. 103255.)

10.4          Distribution Agreement between the Company's subsidiary, U.S.
              MedSys Technologies, Inc., and Longport, Inc. dated February 11,
              2004. (Incorporated by reference to Exhibit 10.4 of the Company's
              quarterly report on Form 10-QSB for the period ended March 31,
              2004.)

14.1          Code of Ethics adopted September 30, 2004. (Filed herewith.)

21.1          List of Subsidiaries. (Filed herewith.)

31.1          Section 302 Certification by the Corporation's Chief Executive
              Officer. (Filed herewith).

31.2          Section 302 Certification by the Corporation's Chief Financial
              Officer. (Filed herewith).

32.1          Section 906 Certification by the Corporation's Chief Executive
              Officer. (Filed herewith).

32.2          Section 906 Certification by the Corporation's Chief Financial
              Officer. (Filed herewith).
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