10-Q 1 v03348_10q.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended MARCH 31, 2004 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 0-23511 FIRST DELTAVISION, INC. (Exact name of small business issuer as specified in its charter) Nevada 87-0412182 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 695 Town Center Drive, Suite 260, Costa Mesa, California 92626 (Address of principal executive offices) (Zip Code) (714) 434-9191 (Issuer's telephone number, including area code) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 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 |_| As of May 10, 2004, there were outstanding 19,680,000 shares of the issuer's common stock, par value $0.0001 per share. Transitional Small Business Disclosure Format (Check one): Yes |_|; No |X| 1 FIRST DELTAVISION, INC. FORM 10-Q TABLE OF CONTENTS -------------------------------------------------------------------------------- Page Number PART I FINANCIAL INFORMATION..............................................3 Item 1. Financial Statements:..............................................3 Unaudited Condensed Consolidated Balance Sheet as of March 31, 2004 and December 31, 2003...............................3 Unaudited Condensed Consolidated Statement of Operations for the three months ended March 31, 2004 and 2003.................4 Unaudited Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2004 and 2003.................5 Notes to Unaudited Condensed Consolidated Financial Statements.........................................................6 Item 2. Management's Discussion and Analysis or Plan of Operation.........12 Item 3. Controls and Procedures...........................................13 PART II OTHER INFORMATION.................................................13 Item 1. Legal Proceedings.................................................13 Item 2. Changes in Securities.............................................13 Item 3. Defaults Upon Senior Securities...................................14 Item 4. Submission of Matters to a Vote of Security Holders...............14 Item 5. Other Information.................................................14 Item 6. Exhibits and Reports on Form 8-K..................................14 SIGNATURES....................................................................16 -------------------------------------------------------------------------------- 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. FIRST DELTAVISION, INC. (A DEVELOPMENT STAGE COMPANY) UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
March 31, December 31, 2004 2003 ----------- ----------- (Unaudited) ASSETS Current assets Cash and cash equivalents $ 111,070 $ 265,000 ----------- ----------- Total current assets 111,070 265,000 Property and equipment: Office equipment 35,162 26,537 Furniture and fixtures 27,347 21,095 ----------- ----------- 62,509 47,632 Accumulated depreciation (2,981) (651) ----------- ----------- 59,528 46,981 Intangible asset, net of accumulated amortization of $19,273 and $6,424 83,517 96,366 Due from shareholders 45,000 60,000 Deposits 7,794 -- ----------- ----------- Total assets $ 306,909 $ 468,347 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 16,900 $ 15,727 Accrued compensation and benefits 209,908 -- Notes payable to shareholders 60,000 -- Note payable -- 100,000 ----------- ----------- Total current liabilities 286,808 115,727 Commitments and contingencies -- -- Stockholders' equity: Common stock, $0.001 par value; 100,000,000 shares authorized; 19,690,000 and 19,380,000 shares issued and outstanding, respectively 19,580 19,380 Additional paid in capital 750,821 551,021 Deficit accumulated during the development stage (750,300) (217,781) ----------- ----------- Total stockholders' equity 20,101 352,620 ----------- ----------- Total liabilities and stockholders' equity $ 306,909 $ 468,347 =========== ===========
The accompanying condensed notes are an integral part of these condensed financial statements. 3 FIRST DELTAVISION, INC. (A DEVELOPMENT STAGE COMPANY) UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Cumulative from Three Months Ended inception (July 31, ------------------------------ 1984) through March 31, March 31, March 31, 2004 2004 2003 ------------ ------------ ------------ (Unaudited) (Unaudited) (Unaudited) Revenue $ -- $ -- $ -- General and administrative expenses 709,913 492,132 1,979 ------------ ------------ ------------ Loss from operations before provision for income taxes (709,913) (492,132) (1,979) Provision for income taxes -- -- -- ------------ ------------ ------------ Net loss $ (709,913) $ (492,132) $ (1,979) ============ ============ ============ Basic and diluted net loss per share ($ 0.03) ($ 0.00) Weighted average shares outstanding 19,582,667 1,342,000
The accompanying condensed notes are an integral part of these condensed financial statements. 4 FIRST DELTAVISION, INC. (A DEVELOPMENT STAGE ENTERPRISE) UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended Cumulative From -------------------------- Inception (July 31, 1984) Through March March 31, March 31, 31, 2004 2004 2003 ----------- ----------- ----------- (Unaudited) (Unaudited) (Unaudited) Cash flows from operating activities: Net loss $ (709,913) $ (492,132) $ (17,344) Adjustments to reconcile net loss to cash used in operating activities: Depreciation and amortization expense 22,254 15,179 -- Noncash expense 39,255 -- -- Stock issued for relief of debt 1,000 -- -- Increase (decrease) in accounts payable 6,900 (8,827) (1,230) Increase in accrued compensation and benefits 209,908 209,908 -- Increase in accounts payable - related party -- -- 18,574 ----------- ----------- ----------- Net cash used in operating activities (430,596) (275,872) -- ----------- ----------- ----------- Cash flows from investing activities: Purchase of property and equipment (62,509) (14,877) -- Acquistion, net of cash acquired 8,534 8,534 -- ----------- ----------- ----------- Net cash used in investing activities (53,975) (6,343) -- Cash flows from financing activities: Proceeds from issuance of stock 727,356 200,000 -- Repayment of promissory note (100,000) (100,000) -- Advances (to) from shareholders (31,715) 28,285 -- ----------- ----------- ----------- Net cash provided in financing activities 595,641 128,285 -- ----------- ----------- ----------- Net increase (decrease) in cash 111,070 (153,930) -- Cash and cash equivalents, beginning of period -- 265,000 -- ----------- ----------- ----------- Cash and cash equivalents, end of period $ 111,070 $ 111,070 $ -- =========== =========== =========== Supplemental Schedule of Noncash Financing Activities: Issuance of a promissory note in exchange for a letter of indemnification $ 100,000 $ -- $ -- Issuance of common stock in exchange for a letter of indemnification $ 2,790 $ -- $ -- Issuance of promissory notes for acquisition of Mogel Management Group, Inc. $ 60,000 $ 60,000 $ --
The accompanying condensed notes are an integral part of these condensed financial statements. 5 FIRST DELTAVISION, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization - First Deltavision, Inc. ("the Company") was organized under the laws of the State of Utah on July 31, 1984 under the name of Aquachlor Marketing. The Company never engaged in business activities and was suspended for failure to file annual reports and tax returns. In December 1988, all required reports and tax returns were filed and the Company was reinstated by the State of Utah. In December 1988, the Company merged with Aquachlor, Inc., a Nevada corporation incorporated on December 20, 1988. The Nevada corporation became the surviving entity and changed its name to Deltavision, Inc. In March 1997, the Company received a Certificate of Revival from the State of Nevada using the name First Deltavision, Inc. Effective March 4, 2004, the Company's board of directors changed the Company's name to "Integrated Healthcare Holdings, Inc." Company Operations - The Company has not engaged in any business activities that have produced revenues and, therefore, is considered a development stage company as defined in Statement of Financial Accounting Standards No. 7. The Company seeks to acquire, own, and operate hospitals and surgical services throughout the United States. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of obligations in the normal course of business. The Company generated losses from continuing operations of $492,132 and $709,913 during the three months ended March 31, 2004 and from inception (July 31, 1984) through March 31, 2004. In addition, the Company had negative working capital of $175,738 at March 31, 2004. These factors, among others, raise doubt about the Company's ability to continue as a going concern. The Company has raised a total of $565,000 through stock sales from December 2003 through March 2004. Management believes the Company has sufficient funds and the ability to raise additional capital to meet its continuing obligations for the foreseeable future. Basis of Presentation - In January 2004, the Company's board of directors changed the Company's fiscal year end from June 30 to December 31. The accompanying financial statements have been audited for the transitional six month period ended December 31, 2003. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at March 31, 2004 and for the three months period then ended have been made. Condensed Financial Statements - The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at March 31, 2004 and 2003 and for the periods then ended have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2003 audited financial statements. The results of operations for the periods ended March 31, 2004 and 2003 are not necessarily indicative of the operating results for the full year. 6 FIRST DELTAVISION, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 Cash and Cash Equivalents - The Company considers all highly liquid debt investments purchased with a maturity of three months or less to be cash equivalents. Accounting Estimates - The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America required management to make estimates and assumptions that effect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimated by management. Stock-Based Compensation - Statement of Financial Accounting Standards No. 123, Accounting for Stock Based Compensation, encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to account for stock-based compensation using the intrinsic value method prescribed in previously issued standards. Accordingly, compensation cost for stock options issued to employees is measured as the excess, if any, of the fair market value of the Company's stock at the date of grant over the amount an employee must pay to acquire the stock. Compensation is charged to expense over the shorter of the service or vesting period. Stock options issued to non-employees are recorded at the fair value of the services received or the fair value of the options issued, whichever is more reliably measurable, and charged to expense over the service period. Fair Value of Financial Instruments - The Company considers all liquid interest-earning investments with a maturity of three months or less at the date of purchase to be cash equivalents. Short-term investments generally mature between three months and six months from the purchase date. All cash and short-term investments are classified as available for sale and are recorded at market using the specific identification method; unrealized gains and losses are reflected in other comprehensive income. Cost approximates market for all classifications of cash and short-term investments. Net Loss per Common Share - Net loss per share is calculated in accordance with Statement of Financial Accounting Standards No. 128, Earnings Per Share. Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that options are included in the calculation of diluted earnings per share, except when their effect would be anti-dilutive. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Impairment of Long-Lived Assets - The Company continually monitors events or changes in circumstances that could indicate that the carrying amount of long-lived assets to be held and used, including intangible assets, may not be recoverable. The determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. When impairment is indicated for a long-lived asset, the amount of impairment loss is the excess of net book value over fair value. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. As of March 31, 2004, the Company has determined that no impairment of its long-lived assets exists. Goodwill and Intangible Assets - On July 20, 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards ("SFAS") 141, Business Combinations, and SFAS 142, Goodwill and Intangible Assets. Under these new standards, all acquisitions subsequent to June 30, 2001 must be accounted for using the purchase method of accounting. The cost of 7 FIRST DELTAVISION, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 intangible assets with indefinite lives and goodwill are no longer amortized, but are subject to an annual impairment test based upon its fair value. Goodwill and intangible assets principally result from business acquisitions. The Company accounts for business acquisitions by assigning the purchase price to tangible and intangible assets and liabilities. Assets acquired and liabilities assumed are recorded at their fair values; the excess of the purchase price over the net assets acquired is recorded as goodwill. Recently Enacted Accounting Standards - Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," No. 146, "Accounting for Costs Associated with Exit or Disposal Activities", SFAS No. 147, "Acquisitions of Certain Financial Institutions - an Amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9", SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - an Amendment of FASB Statement No. 123", SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities", and SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity", were recently issued. SFAS No. 144, 146, 147, 148, 149 and 150 have no current applicability to the Company or their effect on the financial statements would not have been significant. Restatement - The financial statements have been restated for all periods presented to reflect a 4-for-1 forward stock split on April 4, 2002, a 248.399-for-1 reverse stock split on April 23, 1997 and a 5-for-1 forward stock split on December 9, 1988. NOTE 2 - ACQUISITION AND RESCISSION OF ACQUISITION On April 9, 2002, the Company entered into a share exchange agreement with KyoMedix Corporation ("KyoMedix"). The agreement called for the Company to issue 15,166,550 shares of common stock to the shareholders of KyoMedix for all of the issued and outstanding shares of common stock of KyoMedix. The agreement also called for the repurchase and cancellation of 746,592 shares of common stock for a $250,000 note payable and effecting a 4-for-1 forward stock split. The $250,000 note payable was due 90 days from signing and was secured by 13,916,000 shares of common stock of the Company. Any unpaid portion of the note was to accrue interest at 10% per annum after the 90-day term. The agreement also called for the resignation of the Company's officers and directors, the adoption of the 2002 Stock Plan of KyoMedix, changing the name of the Company to KyoMedix, Inc. and the grant of similar options to replace the options previously granted by KyoMedix. The acquisition closed April 9, 2002; however, subsequently, former and current shareholders of the Company sued to rescind the merger claiming that certain conditions of the agreement were not satisfied. On November 11, 2002, the Company signed a Compromise and Settlement Agreement and the Company cancelled the 15,166,550 shares of common stock that had been issued to the shareholders of KyoMedix. As part of the rescission agreement, the Company reissued 746,592 shares of common stock to the previous shareholder and the $250,000 note payable was voided. As part of the rescission agreement, the Company's former officers and directors were re-appointed, the adoption of the 2002 Stock Plan of KyoMedix was voided and options granted to KyoMedix option holders were cancelled. The financial statements have been restated to reflect the acquisition as having been rescinded. On January 1, 2004, the Company entered into a Securities Purchase Agreement and Plan of Reorganization with Mogel Management Group, Inc. ("MMG"), an entity with certain common ownership with the Company, and the shareholders of MMG. The Company purchased all of the issued and outstanding stock of MMG, 48 million shares, in exchange for the issuance of three promissory notes with a total face 8 FIRST DELTAVISION, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 value of $60,000. The notes bear interest at 6% per annum and are due and payable on December 31, 2004. MMG was organized under the laws of the State of Nevada on October 2, 2003 and has not engaged in any business activities that have produced any revenues and, therefore, is considered a development stage company as defined in Statement of Financial Accounting Standards No. 7. NOTE 3 - COMMON STOCK The Company issued 91,452 shares of stock upon incorporation for $57,576. During the year ended June 30, 1989, the Company issued 96,640 shares of common stock for $1,200. During 1996, the Company issued 611,908 shares of common stock for consulting fees valued at $38,000 (or $.25 per share) resulting in a change in control of the Company. During the year ended June 30, 1998, the Company issued 142,000 shares of common stock for services rendered. Total proceeds amounted to $1,255 (or $.04 per share). The Company previously reported the issuance as 140,000 shares of common stock. The financial statements have been restated for the years ended June 30, 1999 and 1998 to reflect the issuance of an additional 2,000 shares of common stock related to services previously rendered. In January 2000, the board of directors approved a compensation agreement that included the issuance of a total of 400,000 shares of common stock to two shareholders, 200,000 to each, for services rendered which were valued at $1,000. The shares were issued in August 2000 for $.0025 per share. In November 2003, the board of directors approved the issuance of 16,128,000 shares of common stock to three individuals ("the Purchasers") for $100,000, pursuant to a certain Stock Purchase Agreement. In connection with this stock sale, the Company issued a promissory note for $100,000 to the former president and director of the Company and 450,000 shares of common stock to the former president and director of the Company, and a shareholder, in exchange for a certain letter of indemnification. The letter of indemnification holds the Company and the Purchasers harmless from and against any and all liabilities of any type or nature, whatsoever, of the Company that existed prior to the closing of the Stock Purchase Agreement, including fees of legal counsel for the Company in connection with the completion of the Stock Purchase Agreement and the promissory note due to the former president and director of the Company. In December 2003, the Company issued 1,460,000 shares of its common stock at $0.25 per share for cash proceeds of $365,000. In January 2004, the Company issued an additional 200,000 shares of its common stock at $0.25 per share for cash proceeds of $50,000. In January 2004, the Company issued 200,000 shares of its common stock at $0.25 per share for cash proceeds of $50,000. In February and March 2004, the Company issued 150,000 shares of its common stock at $1.00 per share for cash proceeds of $150,000. Stock Splits - On December 9, 1988, the Company effected a 5-for-1 forward stock split. On April 23, 1997, the Company effected a 248.399-for-1 reverse stock split. On April 4, 2002, the Company effected a 4-for-1 forward stock split. The financial statements for all periods presented have been restated to reflect these stock splits. 9 FIRST DELTAVISION, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 NOTE 4 - NOTE PAYABLE In connection with the Company's sale of 16,128,000 shares of its common stock in November 2003, the Company issued a promissory note to the former president and director of the Company in the amount of $100,000. The Company received a letter of indemnification which holds the Company and the Purchasers harmless from and against any and all liabilities of any type or nature, whatsoever, of the Company that existed prior to the closing of the Stock Purchase Agreement, including fees of legal counsel for the Company in connection with the completion of the Stock Purchase Agreement and the promissory note due to the former president and director of the Company. The promissory note dated November 18, 2003 has a term of 90 days and bears interest at 10% per annum. The Company repaid the promissory note in full on February 18, 2004. NOTE 5 - INTANGIBLE ASSET In connection with the Company's stock sale of 16,128,000 shares of its common stock in November 2003, the Company issued a promissory note of $100,000 and 450,000 shares of its common stock in exchange for a letter of indemnification from the Company's former President and shareholder. The 450,000 shares of common stock were valued by the Company at $0.0062 per share. The letter of indemnification holds the Company and the Purchasers harmless from and against any and all liabilities of any type or nature, whatsoever, of the Company that existed prior to the closing of the Stock Purchase Agreement, including fees of legal counsel for the Company in connection with the completion of the Stock Purchase Agreement and the promissory note due to the former president and director of the Company. The Company has recorded the letter of indemnification as an intangible asset of $102,790 based on the total fair market value of the promissory note and common stock issued. The Company is amortizing the intangible asset using the straight-line method over the enforceable life of the letter of indemnification of two years. During the three months ended March 31, 2004 and 2003, the Company incurred amortization expense of $12,849 and nil, respectively. NOTE 6 - INCOME TAXES The Company has not made a provision for income taxes because of its financial statement and tax losses since its inception on July 31, 1984. A valuation allowance has been used to offset the recognition of any deferred tax assets related to net operating loss carryforwards due to the uncertainty of future realization. The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" which requires the liability approach for the effect of income taxes. At March 31, 2004 and December 31, 2003, the Company had unused operating loss carryforwards of approximately $608,000 and $116,000, respectively, which may be applied against future taxable income in various years through 2023. If certain substantial changes in the Company's ownership should occur, there could be an annual limitation on the amount of net operating loss carryforwards which can be utilized. The amount of and ultimate realization of the benefits from the operating loss carryforwards for income tax purposes is dependent, in part, upon the tax laws in effect, the future earnings of the Company and other future events, the effects of which cannot be determined. Because of the uncertainty surrounding the realization of the loss carryforwards, the Company has established a valuation allowance equal to the tax effect of the loss carryforwards, therefore, no deferred tax asset has been recognized for the loss carryforwards. The net deferred tax assets were approximately $252,000 and $41,000 at March 31, 2004 and December 31, 2003, respectively, with an 10 FIRST DELTAVISION, INC. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 offsetting valuation allowance of the same amount resulting in a change in the valuation allowance of approximately $211,000 during the three months ended March 31, 2004. NOTE 7 - RELATED PARTY TRANSACTIONS Due to/from Shareholders and Officers - During the three months ended March 31, 2004 and 2003, the Company's President paid expenses on behalf of the Company totaling nil and $1,676, respectively. At March 31, 2004 and December 31, 2003, the total amount due to the Company's president was nil and $38,031, respectively. At March 31, 2004 and December 31, 2003, the total amount due from the Company's officers and majority shareholders was $45,000 and $60,000, respectively. The amounts due from shareholders and officers bear no interest and are due when funds are available. NOTE 8 - LOSS PER SHARE The following data show the amounts used in computing loss per share for the periods presented: Three Months Ended ------------------------------ March 31, March 31, 2004 2003 ------------ ------------- (Unaudited) (Unaudited) Loss from continuing operations available to common shareholders (numerator) $ (492,132) $ (1,979) Weighted average number of common shares used in loss per share during the period (denominator) 19,582,667 1,342,000 Dilutive loss per share was not presented, as the Company had no common equivalent shares for all periods presented that would effect the computation of diluted loss per share. NOTE 9 - COMMITMENTS AND CONTINGENCIES Contingencies - In the ordinary course of business, the Company is subject to legal proceedings and claims. The Company is not currently aware of any legal proceedings or claims that the Company believes are likely to have a material adverse effect on the Company's financial position and results of operations. 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. INTRODUCTION As used in this annual report, the terms "we", "us", "our", "the Company" or "First Deltavision" mean First Deltavision, Inc., unless otherwise indicated. In the first quarter of 2004, the Board of Directors and shareholders of the Company approved a change in the Company's name to "Integrated Healthcare Holdings, Inc." to better reflect the Company's planned new business operations. The name change will become effective on or after May 18, 2004. This Quarterly Report on Form 10-Q contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks discussed under the caption "Risk Factors" in our Transition Report on Form 10-K filed on April 15, 2004, that may cause our company's or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. PLAN OF OPERATION Our plan of operation over the next 12 months is to acquire hospitals and healthcare facilities by targeting hospitals that are financially distressed and underperforming and whose owners are seeking to sell or lease their operations. We intend to finance our acquisitions through a combination of cash raised through equity offerings and borrowings, and stock issued by the Company. Our strategy also includes the possibility of partnering with one or more external real estate investors to help fund the real estate component of acquisitions. Under such an arrangement, the real estate investor would acquire and manage the real estate assets which typically are acquired along with a facility. The investor may self-finance the real estate acquisition or bring in outside investors in a tax-advantaged structure such as a real estate investment trust or "REIT". Management feels that partnering with an external real estate investor may allow us to undertake acquisitions that we could not otherwise finance, and to focus on management's core skills in hospital and healthcare management. We have identified a number of hospitals and healthcare facilities as potential acquisition targets. We are currently exploring, among other things, the possible acquisition of one or more of the hospital assets that are being divested by Tenet Healthcare Corporation. As of the date of this report, we have no agreements relating to acquisitions. During the three months ended March 31, 2004, the Company earned no revenues. Over the next twelve months we will require additional cash financing, whether or not we complete an acquisition of a healthcare facility. The Company generated losses from continuing operations of $492,132 during the three months ended March 31, 2004. In addition, the Company had working capital of $175,737 at March 31, 2004. If we do not acquire a facility, we estimate that we can satisfy our cash requirements for approximately three months following the 12 date of this report, after which we will need to raise additional funds. If we acquire a facility, we expect to seek additional financing in connection with the acquisition. There are no assurances that we will be able to obtain funds required for our continued operations. In such event that we do not raise sufficient funds, we may be forced to scale down or cease our operations. Currently there are four full time employees of the Company. We do not expect any material changes in the number of employees over the next 12 months, unless we are successful in acquiring a healthcare facility, in which case our employment base will increase significantly. As of the March 31, 2004, the Company had no off-balance sheet arrangements, as defined by Securities and Exchange Commission Regulation S-B Item 303(c). ITEM 3. CONTROLS AND PROCEDURES. The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 15d-15(e). The Company's disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching the Company's desired disclosure control objectives. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company's certifying officers have concluded that the Company's disclosure controls and procedures are effective in reaching that level of assurance. As of the end of the period of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on the foregoing, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect the internal controls subsequent to the date the Company completed its evaluation. PART II. OTHER INFORMATION. ITEM 1. LEGAL PROCEEDINGS The Company is not a party to any legal proceedings. ITEM 2. CHANGES IN SECURITIES. In January 2004, the Company sold 200,000 shares of Common Stock at $0.25 per share, and in March 2004, the Company sold 150,000 shares of Common Stock at $1.00 per share, in private placement transactions without registration under the Securities Act of 1933, as amended. All of these offers and sales of stock were exempt from the registration requirements of Section 5 of the Securities Act of 1933, pursuant to Section 4(2) thereof and Rule 506 promulgated thereunder. 13 ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On March 4, 2004, stockholders holding a majority of the voting power of the Company's Common Stock took action by written consent for the purpose of amending our Amended and Restated Articles of Incorporation to change the name of the Company to "Integrated Healthcare Holdings, Inc." Approval of this matter required the majority vote of the holders of the outstanding shares of Common Stock. As of March 4, 2004, there were 17,920,000 shares of our Common Stock outstanding, and the Company received the written consent of holders of 16,128,000 shares of Common Stock to this action. On April 29, 2004, the Company filed an Information Statement on Form 14C reporting the taking of this action by written consent, which will become effective on or after May 18, 2004. ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. Exhibit Number Description ------ ----------- 10.1 Employment Agreement with Bruce Mogel, dated January 1, 2004, incorporated herein by reference from Exhibit 10.1 to the Company's Transition Report on Form 10-K filed with the Commission on April 15, 2004. 10.2 Employment Agreement with Larry B. Anderson, dated January 1, 2004, incorporated herein by reference from Exhibit 10.2 to the Company's Transition Report on Form 10-K filed with the Commission on April 15, 2004. 10.3 Employment Agreement with James T. Ligon, dated January 1, 2004, incorporated herein by reference from Exhibit 10.3 to the Company's Transition Report on Form 10-K filed with the Commission on April 15, 2004. 10.4 Securities Purchase Agreement by and among First Deltavision, Inc., Mogel Management Group, Inc., and the stockholders of Management Group, Inc., dated as of January 1, 2004, incorporated herein by reference from Exhibit Number 2.1 to the Company's Current Report on Form 8-K filed with the Commission on January 16, 2004. 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 14 (b) Reports on Form 8-K. On January 16, 2004, the Company filed with the Securities and Exchange Commission a current report on Form 8-K, dated January 1, 2004, and including: (i) a report under Item 2 disclosing the acquisition of Mogel Management Group, Inc.; (ii) a report under Item 5 disclosing a change in our principal executive offices and completion of a private placement; and (iii) a report under Item 8 disclosing a change in our fiscal year. This report was amended on March 16, 2004 to include financial statements reportable under Item 7, and amended again on March 24, 2004 for certain minor corrections. On March 8, 2004, the Company filed with the Securities and Exchange Commission a current report on Form 8-K, dated March 1, 2004, and including a report under Item 4 disclosing a change in our certifying accountant. This report was amended on March 15, 2004. On March 11, 2004, the Company filed with the Securities and Exchange Commission a current report on Form 8-K, dated March 10, 2004, and including a report under Item 5 disclosing a press release issued by the Company. 15 SIGNATURE In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIRST DELTAVISION, INC. Dated: May 14, 2004 By: /s/ James Ligon --------------------------------------- James Ligon Chief Financial Officer and Secretary (Principal Financial Officer) 16