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

                                   FORM 10-KSB

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

                For the fiscal year ended June 30, 2003

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

                For the transition period from: ______________ to ______________

                Commission file number: 0-27513
                                        -------

                PRIME RATE INCOME AND DIVIDEND ENTERPRISES, INC.
--------------------------------------------------------------------------------
           (Name of small business issuer as specified in its charter)

<Table>
<S>                                                                           <C>
                           Colorado                                                      84-1308436
--------------------------------------------------------------                ---------------------------------
(State or other jurisdiction of incorporation or organization)                (IRS Employer Identification No.)

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

Issuer's telephone number: (303) 295-0206
                           --------------

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. $-0-.
                                                                   ---

         As of October 8, 2003, the aggregate market value of the voting stock
held by non-affiliates, approximately 7,935,000 shares of Common Stock, was
approximately $1.6 million based on an average of the bid and ask prices of
approximately $0.20 per share of Common Stock on such date.

         The number of shares outstanding of the issuer's Common Stock, $.001
par value, as of October 8, 2003 was 22,185,000 shares.

         DOCUMENTS INCORPORATED BY REFERENCE: None.

         Transitional Small Business Disclosure Format (check one):

         Yes [ ]; No [X]


<PAGE>
                                     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.

Prime Rate Income & Dividend Enterprises, Inc. (the "Company") was incorporated
in Colorado on May 1, 1995. Until November 2002, the Company, operating through
its wholly-owned subsidiary, Pride, Inc., was in the real estate investment
business.

REORGANIZATION

On November 12, 2002, the Company acquired 100% of the issued and outstanding
common stock of U.S. Medical Systems, 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 (the "Reorganization Agreement").
As a result, USMS became a wholly-owned subsidiary of the Company.

Simultaneously with the execution of the Reorganization Agreement, and effective
November 12, 2002, the officers and directors of the Company resigned, and
members of USMS's management team were appointed as officers and directors of
the Company and will serve until their successors are duly elected at the next
annual shareholders' meeting of the Company. New management plans to immediately
focus on executing USMS's medical device marketing and distribution business
plan.

As part of the reorganization, Pride, Inc., formerly a wholly-owned subsidiary
of the Company, which operates a real estate investment business, will be
spun-off to the Company's shareholders of record at November 27, 2002, but
excluding shareholders who acquired the Company's shares by virtue of the
reorganization. Each of the Company's shareholders will receive one share of
common stock of Pride, Inc. for each share of common stock of the Company held
as of the record date. The spin-off share distribution will occur following
effectiveness of an appropriate



                                       1
<PAGE>
registration statement by Pride, Inc. Pursuant to the Reorganization Agreement,
the Company issued 1,650,000 shares of the Company's common stock to Pride, Inc.
Also pursuant to the Reorganization Agreement, Michael L. Schumacher, a former
officer and director of the Company, took delivery of the certificates
representing all outstanding shares of Pride, Inc., and assumed independent
responsibility for the completion of the spin-off.

Pursuant to the Reorganization Agreement, the Company executed a $360,000
promissory note in favor of Pride, Inc. The note requires $10,000 monthly
payments, accrues interest at 4.25% per annum, simple, payable monthly in
arrears, with the remaining balance due November 12, 2005. Rangeley pledged to
Pride, Inc. 7,500,000 shares of the Company which were issued to Rangeley as
part of the reorganization as collateral.

CURRENT BUSINESS PLAN

The Company operates through its wholly-owned subsidiary, U.S. Medical Systems,
Inc. ("USMS"), and is a development stage company. The Company's objective is to
become a marketing and distribution organization that provides medical devices
and support services to medical markets in the United States by marketing and
distributing state-of-the-art products and clinical protocols. The Company will
focus on sales and marketing and will not be involved with other functions such
as manufacturing and related engineering and product development.

The Company plans to introduce a series of new medical devices to existing
markets in the medical industry. Initially, these markets include medical
clinics, nursing homes and specialty medical centers. The Company is also in the
process of negotiating a marketing and product placement agreement with a third
party administrator that is a facility manager for over 300 medical clinics.

The Company is in the process of negotiating an agreement with a manufacturer of
an ultrasound scanner product. If and when completed, the Company anticipates
devoting substantially all of its resources over the next year to the marketing
and distribution of this product.

Initially, the Company plans to generate revenues for the sale and/or leasing of
medical equipment. In the future, the Company may also be able to generate
revenue from other sources, such as licensing and royalty fees from the
licensing of technologies, and fees for providing equipment service and
maintenance.

The Company's two officers are the only employees of the Company, both of whom
currently devote work part-time to the business of the Company.

ITEM 2. DESCRIPTION OF PROPERTY.

         Neither the Company nor its subsidiaries own any real property. The
Company and its subsidiary sublease office space from the Company's CEO at a
rate of $950 per month.

ITEM 3. LEGAL PROCEEDINGS.

         The Company is 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, 2003.




                                       2
<PAGE>
                                     PART II

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

Market Information

         There is a limited public market for the common stock of the Company.
The Company's common stock is quoted on the NASD OTC Bulletin Board under the
symbol "PIDV."

         The following table sets forth the range of high and low bid quotations
for the Company's 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, 2001                  $1.15             $1.90
                  December 31, 2001                   $1.01             $1.18
                  March 31, 2002                      $0.75             $1.18
                  June 30, 2002                       $0.60             $1.50

                  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
</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 25, 2003 there were approximately 411 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



                                       3
<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) In August 2003 the Company sold 40,000 shares of its common stock at $.10
per share to one investor. Aggregate proceeds from the sale of the common stock
was $4,000. 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.

ITEM 2. PLAN OF OPERATION.

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.

REORGANIZATION

On November 12, 2002, the Company acquired 100% of the issued and outstanding
common stock of U.S. Medical Systems, 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 (the "Reorganization Agreement").
As a result, USMS became a wholly-owned subsidiary of the Company.

Simultaneously with the execution of the Reorganization Agreement, and effective
November 12, 2002, the officers and directors of the Company resigned, and
members of USMS's management team were appointed as officers and directors of
the Company and will serve until their successors are duly elected at the next
annual shareholders' meeting of the Company. New management plans to immediately
focus on executing USMS's medical device marketing and distribution business
plan.



                                       4

<PAGE>
As part of the reorganization, Pride, Inc., formerly a wholly-owned subsidiary
of the Company, which operates a real estate investment business, will be
spun-off to the Company's shareholders of record at November 27, 2002, but
excluding shareholders who acquired the Company's shares by virtue of the
reorganization. Each of the Company's shareholders will receive one share of
common stock of Pride, Inc. for each share of common stock of the Company held
as of the record date. The spin-off share distribution will occur following
effectiveness of an appropriate registration statement by Pride, Inc. Pursuant
to the Reorganization Agreement, the Company issued 1,650,000 shares of the
Company's common stock to Pride, Inc. Also pursuant to the Reorganization
Agreement, Michael L. Schumacher, a former officer and director of the Company,
took delivery of the certificates representing all outstanding shares of Pride,
Inc., and assumed independent responsibility for the completion of the spin-off.

Pursuant to the Reorganization Agreement, the Company executed a $360,000
promissory note in favor of Pride, Inc. The note requires $10,000 monthly
payments, accrues interest at 4.25% per annum, simple, payable monthly in
arrears, with the remaining balance due November 12, 2005. Rangeley pledged to
Pride, Inc. 7,500,000 shares of the Company which were issued to Rangeley as
part of the reorganization as collateral.

FINANCIAL CONDITION

The Company is a development stage company and has generated no revenues in the
cumulative period from inception through June 30, 2003, and has accrued an
accumulated deficit of approximately $750,000.

The Company has experienced difficulties and delays in completing transactions
and implementing its business plan to provide medical devices and support
services to the healthcare industry. However, the Company believes that its
current business plan remains viable, and management continues to pursue it.

In July and August 2003 the Company completed a private placement of 3,240,000
shares of its common stock. Aggregate proceeds from the sale of the common stock
was $164,000. 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 purpose of the offering was to
provide working capital for the Company.

There can be no assurance that the Company will be able to continue as a going
concern or achieve material revenues or profitable operations. The Company does
not currently have adequate funds available to fund its operations over the next
twelve months. If the Company does not earn adequate revenues to sufficiently
fund operations during this time period, the Company will attempt to raise
capital through the sale of its securities. There can be no assurance, however,
that market conditions will permit the Company to raise sufficient funds or that
additional financing will be available when needed or on terms acceptable to the
Company.

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 page follows this page.

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

         None.



                                       5
<PAGE>

                 PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                        CONSOLIDATED FINANCIAL STATEMENTS

                                      With

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

<Table>
<Caption>
                                                                           PAGE
<S>                                                                        <C>
Report of Independent Certified Public Accountants                          F-2

Financial Statements:

         Consolidated Balance Sheets                                        F-3

         Consolidated Statements of Operations                              F-4

         Consolidated Statement of Stockholders' Equity (Deficit)           F-5

         Consolidated Statements of Cash Flows                              F-6

         Notes to Consolidated Financial Statements                         F-7
</Table>

                                      F-1

<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


The Board of Directors
Prime Rate Income & Dividend Enterprises, Inc.

We have audited the accompanying consolidated balance sheets of Prime Rate
Income & Dividend Enterprises, Inc. (A Development Stage Company) as of June 30,
2003 and 2002 and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the year ended June 30, 2002
and the periods from May 28, 2002 (inception) through June 30, 2002 and 2003.
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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits 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 presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements, referred to above, present fairly, in
all material respects, the financial position of Prime Rate Income & Dividend
Enterprises, Inc. as of June 30, 2003 and 2002 and the results of its
operations, changes in its stockholders' equity and its cash flows for the year
ended June 30, 2002 and the periods from May 28, 2002 (inception) through June
30, 2002 and 2003, in conformity with accounting principles generally accepted
in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 2, the Company
has minimal working capital and no business operations, which raise substantial
doubts about its ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

/s/ Miller and McCollom

MILLER AND MCCOLLOM
Certified Public Accountants
4350 Wadsworth Boulevard, Suite 300
Wheat Ridge, Colorado 80033
September 26, 2003

                                      F-2
<PAGE>

                 PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                           CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                     ASSETS
                                                               June 30,       June 30,
                                                                 2003           2002
                                                              ----------     ----------
<S>                                                           <C>            <C>
CURRENT ASSETS
    Cash                                                      $      136     $   10,000
    Deferred costs                                                58,500             --
                                                              ----------     ----------
      Total current assets                                        58,636         10,000

    Equipment                                                     20,000             --
                                                              ----------     ----------

           Total assets                                       $   78,636     $   10,000
                                                              ==========     ==========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable and accrued expenses                     $  278,522     $    7,815
    Debentures payable and accrued interest                       38,800         10,000
    Current portion of notes payable                             190,000             --
                                                              ----------     ----------
      Total current liabilities                                  507,322         17,815

Note payable and accrued interest, net of current portion        180,800             --
                                                              ----------     ----------

      Total liabilities                                          688,122         17,815

Commitments and contingencies

STOCKHOLDERS' (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, 18,285,000 and 15,000,000 shares issued
      and outstanding                                            176,000         15,000
    Deficit accumulated during the development period           (749,486)       (22,815)
    Less stock receivable                                        (36,000)            --
                                                              ----------     ----------
      Total stockholders' (deficit)                             (609,486)        (7,815)
                                                              ----------     ----------

           Total liabilities and stockholders' (deficit)      $   78,636     $   10,000
                                                              ==========     ==========
</Table>

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


                                       F-3
<PAGE>

                 PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
                         (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                                              May 28, 2002             May 28, 2002
                                                                              (Inception)               (Inception)
                                                   Year ending                  Through                   Through
                                                  June 30, 2003              June 30, 2002              June 30, 2003
                                              ----------------------     ----------------------     ----------------------
<S>                                           <C>                        <C>                        <C>
Revenues                                      $                   --     $                   --     $                   --

General and administrative expenses:
      Stock-based compensation                                38,250                     15,000                     53,250
      Consulting fees                                         58,400                         --                     58,400
      Professional fees                                       73,108                      7,815                     80,923
      Salaries                                               150,000                         --                    150,000
      Administrative expenses                                 32,313                         --                     32,313
      Fee for public reporting                               360,000                         --                    360,000
                                              ----------------------     ----------------------     ----------------------
Total general and administrative expenses                    712,071                     22,815                    734,886
                                              ----------------------     ----------------------     ----------------------

(Loss) from operations                                      (712,071)                   (22,815)                  (734,886)

Interest expense                                             (14,600)                        --                    (14,600)
                                              ----------------------     ----------------------     ----------------------

Net (loss) before income taxes                              (726,671)                   (22,815)                  (749,486)

Provision for income taxes                                        --                         --                         --
                                              ----------------------     ----------------------     ----------------------

Net (loss)                                    $             (726,671)    $              (22,815)    $             (749,486)
                                              ======================     ======================     ======================

Net (Loss) per common share                                     (.04)    $                  nil     $                 (.04)

Weighted average common shares outstanding                16,982,846                 15,000,000                 16,841,214
</Table>

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


                                       F-4
<PAGE>

                 PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                CONSOLIDATED STATEMENT OF SHAREHOLDERS' (DEFICIT)

<Table>
<Caption>
                                                                      Deficit
                                                                     Accumulated
                                        Common Stock                 during the
                                          (No par)                   Development
                                 Shares             Amount              Period              Total
                             ---------------    ---------------    ---------------     ---------------
<S>                          <C>                <C>                <C>                 <C>
Common stock issued
  May 28, 2002 for
  services                        15,000,000    $        15,000    $            --     $        15,000

Net (loss) for the period
  from inception
  (May 28, 2002)
  through
  June 30, 2002                           --                 --            (22,815)            (22,815)
                             ---------------    ---------------    ---------------     ---------------

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)
                             ---------------    ---------------    ---------------     ---------------

Balance,
  June 30, 2003                   18,285,000    $       176,000    $      (749,486)    $      (609,486)
                             ===============    ===============    ===============     ===============
</Table>

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


                                       F-5
<PAGE>

                 PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                           May 28, 2002       May 28, 2002
                                                                           (Inception)         (Inception)
                                                       Year Ending          Through              Through
                                                      June 30, 2003       June 30, 2002       June 30, 2003
                                                     ---------------     ---------------     ---------------
<S>                                                  <C>                 <C>                 <C>
Cash flows from operating activities:
    Net loss                                         $      (726,671)    $       (22,815)           (749,486)
    Reconciling adjustments:
      Common stock issued for services                            --              15,000              15,000
      Options issued for services                             38,250                  --              38,250
      Interest added to notes payable                         14,600                  --              14,600
      Note issued for public reporting expense               360,000                  --             360,000
    Change in operating assets and liabilities:
      Prepaid expenses                                       (58,500)                 --             (58,500)
      Accounts payable and accrued expenses                  270,707               7,815             278,522
                                                     ---------------     ---------------     ---------------
Net cash (used for) operating activities                    (101,614)                 --            (101,614)

Cash flows from investing activities:
    Purchase of equipment                                    (20,000)                 --             (20,000)
                                                     ---------------     ---------------     ---------------
Cash provided by investing activities                        (20,000)                 --             (20,000)

Cash flows from financing activities:
    Proceeds from debenture                                   25,000              10,000              35,000
    Proceeds from sale of stock                               86,750                  --              86,750
                                                     ---------------     ---------------     ---------------
Cash provided by financing activities                        111,750              10,000             121,750

Net change in cash                                            (9,864)             10,000                 136
Beginning cash balance                                        10,000                  --                  --
                                                     ---------------     ---------------     ---------------
Ending cash balance                                  $           136              10,000     $           136
                                                     ===============     ===============     ===============

Supplemental disclosure of cash flow information:
    Cash paid during the period for -
      Interest                                       $            --     $            --     $            --
      Income taxes                                   $            --     $            --     $            --
</Table>

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


                                      F-6
<PAGE>

                 PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of Prime Rate Income & Dividend
Enterprises, Inc. ("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.

The Company is a development-stage marketing and distribution company, which
plans to provide medical devices 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. Medical Systems, Inc. ("Medical"). All
inter-company accounts have been eliminated in the consolidation.

Revenue Recognition

The company does not yet have any revenues. It is the company's policy that
revenues will be 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.

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.

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.

                                      F-7
<PAGE>

                 PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Estimated Fair Value of Financial Instruments

The carrying value of accounts payable, and other financial instruments
reflected in the financial statement approximates fair value due to the
short-term maturity of the instruments. The fair value of its debentures and
notes payable cannot be determined because there is no market for similar
investments.

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.

Property and Equipment

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

Equipment of $20,000 at June 30, 2003 is not yet in service, and therefore is
not being depreciated.

                                      F-8
<PAGE>

                 PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other

The Company's fiscal year end is June 30.

The Company paid no dividends during the periods presented.

The Company consists of one reportable business segment.

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

NOTE 2 - BASIS OF PRESENTATION - GOING CONCERN

The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles in the United States of America, which
contemplates continuation of the Company as a going concern. However, the
Company has minimal working capital and no business operations. This fact raises
substantial doubt about the Company's ability to continue as a going concern.
Management plans to raise additional capital in accordance with its business
plan.

NOTE 3 - DEVELOPMENT STAGE COMPANY

Based upon the Company's business plan, it is a development stage enterprise.
Accordingly, the Company presents its financial statements in conformity with
the accounting principles generally accepted in the United States of America
that apply in establishing operating enterprises. As a development stage
enterprise, the Company discloses the deficit accumulated during the development
stage and the cumulative statements of operations and cash flows from inception
to the current balance sheet date.

NOTE 4 - ACQUISITION OF U.S. MEDICAL SYSTEMS, INC. AND PLAN OF REORGANIZATION

In November of 2002, the Company entered into an agreement and plan of
reorganization with U.S. Medical Systems, Inc. ("Medical") where the Company
agreed to acquire Medical. In the agreement, all the outstanding shares of
Medical were exchanged for 15 million shares of the Company. Additionally, the
agreement called for the spin-off of Pride, Inc., the previous operating
subsidiary of the Company, to the prior existing shareholders of the Company,
and for a note to be executed by the Company to Pride, Inc. in the amount of
$360,000, bearing 4.25% interest, payable in monthly installments of $10,000.
The note is secured by 7.5 million shares of the 15 million shares of PRIDE
common stock issued to the shareholders of Medical. As of the date of this
report, the current monthly installments are due and not paid.

The agreement further provides for the issuance of 1,650,000 shares of the
Company's stock to Pride, Inc. and to reserve three million shares of its common
stock for future issuance in connection with capital raising activities and for
a future employee stock plan. The issuance of the above total shares, when
combined with the common stock then outstanding of 1,350,000,


                                      F-9
<PAGE>


                 PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

would total 18 million shares. After the transaction, the prior shareholders of
Medical own 83% of the Company. The Company agrees to issue no more shares for
two years except in connection with capital raising activities. Certain
restrictions apply to the transferability of the common stock issuable to Pride,
Inc. and the Company will have the first right to repurchase such shares and an
18 month option to buy up to 1 million shares at $1.00 per share.

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 (Medical) are presented for historical
comparative purposes. Because Medical did not exist before May 28, 2002, prior
year comparative figures are not presented.

NOTE 5 - CONVERTIBLE DEBENTURES PAYABLE

During June, 2002, the Company's subsidiary issued a convertible debenture,
unsecured, due in one year, in the amount of $10,000 with an interest rate of
18% per annum. The debenture is convertible at any time into common stock of the
company at a price equal to 50% of the market price, but not less than $.50. In
the event that there is no market for the stock, the price will be $.50. As of
the date of this report, the note is past-due.

During September, 2002 the Company's subsidiary issued a convertible debenture,
unsecured, due September 30, 2003, in the amount of $25,000 with an interest
rate of 12% per annum. The debenture is convertible at any time into common
stock of the company at a price equal to 50% of the market price, but not less
than $.50. In the event that there is no market for the stock, the price will be
$.50.

NOTE 6 - STOCKHOLDERS' EQUITY

In November, 2002, the Company sold 148,000 shares of common stock for cash in a
private placement for $74,000, which was an average price of $0.50 per share.

In April, 2003, the Company issued 120,000 shares, recorded at estimated fair
value of $36,000 ($.30 per share), for consulting services. In June of 2003, the
Company and the consultants voided the contracts by mutual agreement and no
services were performed. The consultants agreed to return the shares issued but
as of the date of this report have not done so. The shares issued are included
in the outstanding stock in the accompanying financials statements and a
deduction from equity has been shown for the stock receivable. As a non-cash
transaction, the stock issued is not shown in the statement of cash flows.

NOTE 7 - STOCK-BASED COMPENSATION

The Prime Rate Income & Dividend Enterprises, Inc. 2003 Stock Plan allows 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.

                                      F-10
<PAGE>

                 PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 2003 and
2002:

<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           --           --            --
                                      =========    =========     =========
</Table>

Options granted during 2003:

<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
</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, 2003             June 30, 2002
                                    ------------------------  ------------------------
<S>                                 <C>                       <C>
Expected Volatility:                          225%                      --
Risk-free interest rate:                     1.69%                      --
Expected Dividends:                            --                       --
Expected Term in Years:                         1                       --
</Table>

                                      F-11
<PAGE>

                 PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - RELATED PARTY TRANSACTIONS

During the year ending June 30, 2003, the Company incurred legal fees in the
amount of $62,801 to a law firm in which an officer of the Company is a partner.
$52,116 was outstanding at June 30, 2002.

NOTE 9 - INCOME TAXES

As of June 30, 2003, the Company had approximately $605,000 of net operating
loss carryforward that expires in 2023. The Company had an estimated deferred
tax asset of $91,000 related to the net operating loss carryforward, which is an
increase for the period of the same amount. 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 10 - RISKS AND UNCERTAINTIES

The Company is subject to substantial business risks and uncertainties inherent
in starting a new business. There is no assurance that the Company will be able
to generate sufficient revenues or obtain sufficient funds necessary for
launching a new business venture.

NOTE 11 - COMMITMENTS

In July of 2002, the Company entered into an agreement with a consultant to
assist the Company with its business plan and to assist in possible
merger/buyout opportunities. The agreement calls for monthly payments of $10,000
per month for 12 month. The Company has accrued the payments due under this
agreement, but the consultant has agreed to defer payment until the company
obtains adequate funding as determined by the Company.

In October and December 2002, the Company entered into various contracts to
purchase medical equipment for placement with customers or resale. The total
commitment under these contracts is $317,000.

                                      F-12
<PAGE>

                 PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - SUBSEQUENT EVENTS

During July of 2003, the Company sold 3,200,000 shares of common stock for
$160,000, which was an average price of $.05 per share.

During July of 2003, the Company agreed to issue 700,000 shares of common stock
to consultants under the Prime Rate Income & Dividend Enterprises, Inc. 2003
Stock Plan.

                                      F-13
<PAGE>
                                    PART III

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

Directors and Executive Officers of Registrant. The Company has a Board of
Directors which is currently comprised of two members. Each director holds
office until the next annual meeting of shareholders or until a successor is
elected or appointed. The members of the Board and the executive officers of the
Company 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              60         CEO, President, Treasurer and Director            November 2002

George Anagnost             53         Vice-President, Secretary and Director            November 2002

Kenton D. Sieckman          42         Director                                          November 2002
</Table>


                 DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

         PETER G. FUTRO, age 60, Chief Executive Officer, President, Treasurer
and Director - Mr. Futro is a practicing attorney and a member of the law firm
of Futro & Trauernicht LLC, Denver, Colorado, which represents public and
private companies in transactional areas of law including corporate, securities,
mergers 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. Futro & Trauernicht LLC is legal counsel for U.S. Medical
Systems, Inc. and will provide counsel to the Registrant.

         GEORGE ANAGNOST, age 53, 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 department of RAF
Financial Corporation. Mr. Anagnost also was the vice-president of advertising
and public relations at Novan Energy Inc., a NASDAQ-listed company. 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 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 42, Director - Mr. Sieckman is currently the
Area Vice President, North America Technology Business Unit for Oracle
Corporation (since April 2003). 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.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's 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 the Company with copies of all Section 16(a) forms




                                       6
<PAGE>
they file. Based solely on its review of copies of such reports received or
written representations from certain reporting persons, the Company believes
that, during the year ended June 30, 2003, all Section 16(a) filing requirements
applicable to its current officers, directors and ten percent shareholders were
complied with by such persons, except as follows: None of the current officers
and directors, who became such as a result of the reorganization in November
2002, have filed their Initial Statement of Beneficial Ownership of Securities
on Form 3, and Rangeley Corporation, which became a majority shareholder at the
time of the reorganization, has not yet filed its Form 3. The Company does not
have adequate information to determine whether the former officers and
directors, who resigned in connection with the reorganization in November 2002,
fully complied with the applicable filing requirements, but the Company is aware
that no filings were made 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,
2003, 2002 and 2001.

<Table>
<Caption>
                                                              Annual Compensation
                                                  ---------------------------------------------
              (a)                    (b)            (c)              (d)                (e)
             Name                                                                      Other
              And                   Year                                              Annual
           Principal                Ended         Salary            Bonus          Compensation
           Position                June 30          ($)              ($)                ($)
--------------------------         -------        ------            -----          ------------
<S>                                <C>            <C>               <C>            <C>
Peter G. Futro, Director,           2003          $90,000            -0-                -0-
CEO, President and                  2002            N/A              N/A                N/A
Treasurer (n1)                      2001            N/A              N/A                N/A
</Table>

<Table>
<Caption>
                                                                 Long Term Compensation
                                                     --------------------------------------------
                                                                Awards                    Payouts
                                                     -----------------------------        -------

              (a)                       (b)              (f)               (g)              (h)               (i)
              Name                                   Restricted
              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,             2003               -0-               -0-               -0-               -0-
CEO, President and                    2002               N/A               N/A               N/A               N/A
Treasurer (n1)                        2001               N/A               N/A               N/A               N/A
</Table>



                                       7
<PAGE>
         (n1)     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.

(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, 2003.

(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, 2003.

(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, 2003.

(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, 2003. 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.

Employee Benefit and Consulting Services Compensation Plan

         As of June 30, 2003, the Company had one Employee Benefit and
Consulting Services Compensation Plan in effect.

         On February 10, 2003, the Company adopted an employee benefit and
consulting services compensation plan entitled the Company Technologies, Inc.
2003 Stock Plan (the "2003 Plan"). The 2003 Plan covers up to 1,000,000 shares
of common stock. The 2003 Plan has not previously been approved by security
holders. Under the



                                       8
<PAGE>
2003 Plan, the Company may issue common stock and/or options to purchase common
stock to certain officers, directors and employees and consultants of the
Company and its subsidiaries. The purpose of the 2003 Plan is 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 operating
progress and earning power of the Company. The 2003 Plan is administered by the
Company's Board of Directors or a committee thereof which has 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 the Company or its subsidiaries is
liable if a direct issue of stock and all other terms on which each option shall
be granted.

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

         The following table sets forth, as of September 30, 2003 the stock
ownership of each person known by the Company to be the beneficial owner of five
percent or more of the Company's common stock, each Officer and Director
individually and all Directors and Officers of the Company 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(1)                                       Ownership(n1)(n2)             Percent of Class(n3)
-----------------------------------------          -------------------------------      --------------------
<S>                                                <C>                                  <C>
Peter G. Futro(n4)(n5)                                           -0-                            -0-%
George Anagnost(n4)                                              -0-                            -0-%
Kenton Sieckman(n4)                                              -0-                            -0-%
Rangeley Corporation(n5)(n6)                                 12,600,000                        56.8%
Pride, Inc.(n7)                                               1,650,000                         7.4%
                                                             ----------                     -------
All officers and directors of the Company
as a group (3 persons)(n5)                                       -0-                            -0-%
                                                             ==========                     =======
</Table>

(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 Prime Rate Income & Dividend Enterprises, Inc., 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 22,185,000 shares issued and outstanding at September 30,
         2003, 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)     This person is an officer and/or director of the Company.

(n5)     Peter G. Futro does not personally own any shares of the Company.
         However, he is the beneficial owner of Rangeley Corporation, with is
         the controlling shareholder of the Company. For purposes of this table,
         Rangeley Corporation's ownership of the Company is listed separately.




                                       9
<PAGE>
(n6)     Rangeley Corporation is the controlling shareholder of the Company.
         Peter G. Futro, an officer and director of the Company, is the
         beneficial owner of Rangeley. For purposes of this table, Rangeley
         Corporation's ownership of the Company is listed separately.

(n7)     The address for Pride, Inc. is: 2525 15th Street, Suite 311, Denver, CO
         80211.

EQUITY COMPENSATION PLAN INFORMATION

         The following information concerning the Company's equity compensation
plan is as of the end of the fiscal year ended June 30, 2003:

<Table>
<Caption>
                                                                                            Number of securities
                                                                                            available for future
                                Number of securities to be       Weighted-average           issuance under equity
                                  issued upon exercise of        exercise price of           compensation plans
                                   outstanding options,        options, warrants and        (excluding securities
                                    warrants and rights               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                        873,000

Total                                       -0-                          N/A                        873,000
</Table>

         On February 10, 2003, the Company adopted an employee benefit and
consulting services compensation plan entitled the Company Technologies, Inc.
2003 Stock Plan (the "2003 Plan"). The 2003 Plan covers up to 1,000,000 shares
of common stock. The 2003 Plan has not previously been approved by security
holders. Under the 2003 Plan, the Company may issue common stock and/or options
to purchase common stock to certain officers, directors and employees and
consultants of the Company and its subsidiaries. The purpose of the 2003 Plan is
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
operating progress and earning power of the Company. The 2003 Plan is
administered by the Company's Board of Directors or a committee thereof which
has 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 the
Company or its subsidiaries is liable if a direct issue of stock and all other
terms on which each option shall be granted.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         During the last two fiscal years, the Company entered into the
following transactions in which its officers and directors had a material
interest:

1. On November 12, 2002, the Company acquired 100% of the issued and outstanding
common stock of U.S. Medical Systems, 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 (the "Reorganization Agreement").
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.




                                       10
<PAGE>
As part of the reorganization, Pride, Inc., formerly a wholly-owned subsidiary
of the Company, which operates a real estate investment business, will be
spun-off to the Company's shareholders of record at November 27, 2002, but
excluding shareholders who acquired the Company's shares by virtue of the
reorganization. Each of the Company's shareholders will receive one share of
common stock of Pride, Inc. for each share of common stock of the Company held
as of the record date. The spin-off share distribution will occur following
effectiveness of an appropriate registration statement by Pride, Inc. Pursuant
to the Reorganization Agreement, the Company issued 1,650,000 shares of the
Company's common stock to Pride, Inc. Also pursuant to the Reorganization
Agreement, Michael L. Schumacher, a former officer and director of the Company,
took delivery of the certificates representing all outstanding shares of Pride,
Inc., and assumed independent responsibility for the completion of the spin-off.

Pursuant to the Reorganization Agreement, the Company executed a $360,000
promissory note in favor of Pride, Inc. The note requires $10,000 monthly
payments, accrues interest at 4.25% per annum, simple, payable monthly in
arrears, with the remaining balance due November 12, 2005. Rangeley pledged to
Pride, Inc. 7,500,000 shares of the Company which were issued to Rangeley as
part of the reorganization as collateral.

2. Peter G. Futro, an officer and director of the Company, is a member of the a
law firm that provides legal services to the Company. As of June 30, 2003, the
Company was indebted to law firm in the amount of $52,116. 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 $85.00 per hour, which is substantially below their normal
hourly rate and below market rates for comparable services.

3. Peter G. Futro, an officer and director of the Company, is a member of the a
law firm that provides legal services to the Company. The law firm provides
office space to the Company for $950.00 per month. As of June 30, 2003, the
Company was indebted to law firm for rent in the amount of $5,700. The monthly
rate is substantially below market rates for comparable office space.

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

(a)      List of Exhibits.

Exhibit No.    Description

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).

3.1            The Company's Articles of Incorporation, as currently in
               effect. (Incorporated by reference to Exhibit 99.10 (A) of the
               Company's Registration Statement on Form 10-SB, filed January 3,
               2000).

3.2            The Company's Bylaws, as currently in effect. (Incorporated by
               reference to Exhibit 99.3 (I) of the Company's Registration
               Statement on Form 10-SB, filed January 3, 2000).

10.1           Prime Rate Income & Dividend Enterprises, Inc. 2003 Stock Plan
               (Incorporate by reference to Exhibit 10.1 of the Company's
               Registration Statement on Form S-8, SEC File No. 103255).

10.3           Promissory Note dated November 12, 2002 (Incorporated by
               reference to Exhibit 10.3 of the Company's current report on
               Form 8-K, filed November 22, 2002).

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).



                                       11
<PAGE>
32.2          Section 906 Certification by the Corporation's Chief Financial
              Officer. (Filed herewith).

(b)      Reports on Form 8-K.

         No current reports on Form 8-K were filed during the last quarter of
the fiscal year ended June 30, 2003.

ITEM 14. CONTROLS AND PROCEDURES

Based on their most recent evaluation, which was completed as of the end of the
period covered by this periodic 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.




                                       12
<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.

                                    PRIME RATE INCOME AND DIVIDEND ENTERPRISES,
                                    INC.


Dated: October 14, 2003             /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                      October 14, 2003
----------------------------------
Peter G. Futro

/s/ George Anagnost                      Director                      October 14, 2003
----------------------------------
George Anagnost
</Table>



                                       13
<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).

3.1             The Company's Articles of Incorporation, as currently in
                effect. (Incorporated by reference to Exhibit 99.10 (A) of the
                Company's Registration Statement on Form 10-SB, filed January 3,
                2000).

3.2             The Company's Bylaws, as currently in effect. (Incorporated by
                reference to Exhibit 99.3 (I) of the Company's Registration
                Statement on Form 10-SB, filed January 3, 2000).

10.1            Prime Rate Income & Dividend Enterprises, Inc. 2003 Stock Plan
                (Incorporate by reference to Exhibit 10.1 of the Company's
                Registration Statement on Form S-8, SEC File No. 103255).

10.3            Promissory Note dated November 12, 2002 (Incorporated by
                reference to Exhibit 10.3 of the Company's current report on
                Form 8-K, filed November 22, 2002).

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>