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.
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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.
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(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.
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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)
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