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, 2005

                                       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

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


                      Integrated Healthcare Holdings, 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,             92626
                California                              (Zip Code)
(Address of principal executive offices)


                                 (714) 434-9191
              (Registrant's telephone number, including area code)


              (Former name, former address and former fiscal year,
                         if changed since last report)

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 |_|

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |X| No |_|
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                                    FORM 10-Q

                                TABLE OF CONTENTS

                                                                           Page
                                                                          Number

PART I   FINANCIAL INFORMATION

Item 1.  Financial Statements:

         Unaudited Consolidated Balance Sheet as of March 31, 2005 and
         December 31, 2004                                                  2

         Unaudited Consolidated Statement of Operations for the three
         months ended March 31, 2005 and March 31, 2004                     3

         Unaudited Consolidated Statement of Stockholders' Equity as of
         March 31, 2005 and December 31, 2004                               4

         Unaudited Consolidated Statement of Cash Flows for the three
         months ended March 31, 2005 and March 31, 2004                     5

         Condensed Notes to Unaudited Consolidated Financial Statements     6

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations                                             25

Item 3.  Quantitative and Qualitative Disclosures About Market Risk        32

Item 4.  Controls and Procedures                                           32

PART II  OTHER INFORMATION

Item 1.  Legal Proceedings                                                 33

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds       34

Item 3.  Defaults Upon Senior Securities                                   36

Item 4.  Submission of Matters to a Vote of Security Holders

Item 5.  Other Information

Item 6.  Exhibits                                                          42

SIGNATURES                                                                 45
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.


                                       1
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                      UNAUDITED CONSOLIDATED BALANCE SHEET

                                     ASSETS
<TABLE>
<CAPTION>
                                                                             MARCH 31,     DECEMBER 31,
                                                                               2005            2004
                                                                           ----------------------------
<S>                                                                        <C>             <C>
Current assets:                                                             (Unaudited)
       Cash and cash equivalents                                           $  6,414,122    $     69,454
       Accounts receivable, net of allowance for doubtful
         accounts of $3,141,406 at March 31, 2005                            16,968,328              --
       Inventories of supplies, at cost                                       5,947,127              --
       Prepaid expenses and other assets                                      3,854,474          18,519
                                                                           ----------------------------
                                                                             33,184,051          87,973

Property and equipment, net                                                  59,321,425          57,423
Investment in hospital asset purchase                                                --      11,142,145
Deferred loan fees, net of accumulated amortization of $62,355                1,870,645              --
Intangible asset, net of accumulated amortization of $70,668 and $57,819         32,122          44,970
                                                                           ----------------------------
       Total assets                                                        $ 94,408,243    $ 11,332,511
                                                                           ============================
                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
       Secured line of credit note                                         $ 13,200,000    $         --
       Secured acquisition note                                              50,000,000      11,264,013
       Income taxes payable                                                   1,472,000              --
       Accounts payable                                                       5,145,396         156,142
       Accrued compensation and benefits                                      1,063,677         800,313
       Accrued contract labor costs                                           6,810,000              --
       Other current liabilities                                              1,643,292              --
                                                                           ----------------------------
         Total current liabilities                                           79,334,365      12,220,468

Capital lease obligations, net of current of $204,141                         3,440,858              --
Commitments and contingencies                                                        --              --
Minority interest in variable interest entity                                 4,991,095              --

Stockholders' equity:
       Common stock, $0.001 par value; 250,000,000 shares
         authorized; 118,039,000 and 20,780,000 shares
         issued and outstanding, respectively                                   124,539          20,780
       Common stock warrants; 41,291,892 outstanding                         27,987,100              --
       Additional paid in capital                                            11,785,363       1,189,621
       Deferred warrant expense                                             (11,552,927)             --
       Accumulated deficit                                                  (21,702,150)     (2,098,358)
                                                                           ----------------------------
         Total stockholders' equity                                           6,641,925        (887,957)
                                                                           ----------------------------
Total liabilities and stockholders' equity                                 $ 94,408,243    $ 11,332,511
                                                                           ============================
</TABLE>

            The accompanying condensed notes are an integral part of
          these unaudited condensed consolidated financial statements


                                       2
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                 UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED
                                                     -------------------------------
                                                     MARCH 31, 2005   MARCH 31, 2004
                                                     --------------   --------------
                                                       (Unaudited)      (Unaudited)
<S>                                                   <C>             <C>
Net operating revenues                                $ 21,747,029    $         --

Operating expenses:
      Salaries and benefits                             12,450,604         296,829
      Supplies                                           3,033,815              --
      Provision for doubtful accounts                    3,141,406              --
      Other operating expenses                           3,900,220         180,124
      Depreciation and amortization                        262,212          15,179
      Common stock warrant expense                      16,434,173              --
                                                      ------------    ------------
                                                        39,222,430         492,132

Operating loss                                         (17,475,401)       (492,132)
      Interest expense                                     665,296              --
                                                      ------------    ------------

Loss including minority interest and
      before provision for income taxes                (18,140,697)       (492,132)

      Provision for income taxes                         1,472,000              --
      Minority interest in variable interest entity         (8,905)             --
                                                      ------------    ------------

Net loss                                              $(19,603,792)   $   (492,132)
                                                      ============    ============
Per Share Data:
      Basic and fully diluted
          Loss per common share                       $      (0.22)   $      (0.03)

      Weighted average shares outstanding               88,493,611      19,582,667
</TABLE>


                                       3
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
            UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                      Common Stock          Common Stock Warrants      Additional     Deferred
                               -------------------------   ------------------------     Paid-in        Warrant      Accumulated
                                  Shares         Amount      Shares       Amount        Capital        Expense        Deficit
                               -----------   -----------   ----------   -----------   -----------   ------------    ------------
<S>                             <C>          <C>             <C>          <C>         <C>           <C>             <C>
Balance, December 31, 2003      19,380,000   $    19,380           --   $        --   $   551,021   $         --    $   (217,781)

Issuance of debt for the
 acquisition of MMG, Inc.               --            --           --            --            --             --         (40,386)

Issuance of common stock for
  cash at $0.25 per share          200,000           200           --            --        49,800             --              --

Issuance of common stock for
  cash at $0.50 per share        1,200,000         1,200           --            --       588,800             --              --

Net loss                                --            --           --            --            --             --      (1,840,191)

                               -----------   -----------   ----------   -----------   -----------   ------------    ------------
Balance, December 31, 2004      20,780,000   $    20,780           --   $        --   $ 1,189,621   $         --    $ (2,098,358)
                               ===========   ===========   ==========   ===========   ===========   ============    ============

Issuance of common stock for
  cash at $0.50 per share        1,159,000         1,159           --            --       598,342             --              --

Issuance of common stock for
  cash to OCPIN                102,600,000       102,600           --            --     9,997,400             --              --

Issuance of common stock
  warrants                              --            --   41,291,892    27,987,100            --    (27,987,100)             --

Common stock warrants
  expensed at March 31, 2005                                                                          16,434,173

Net loss                                --            --           --            --            --             --     (19,603,792)

                               -----------   -----------   ----------   -----------   -----------   ------------    ------------
Balance, March 31, 2005        124,539,000   $   124,539   41,291,892   $27,987,100   $11,785,363   $(11,552,927)   $(21,702,150)
                               ===========   ===========   ==========   ===========   ===========   ============    ============

<CAPTION>
                                     Total
                                ------------
<S>                             <C>
Balance, December 31, 2003      $    352,620

Issuance of debt for the
 acquisition of MMG, Inc.            (40,386)

Issuance of common stock for
  cash at $0.25 per share             50,000

Issuance of common stock for
  cash at $0.50 per share            590,000

Net loss                          (1,840,191)

                                ------------
Balance, December 31, 2004      $   (887,957)
                                ============

Issuance of common stock for
  cash at $0.50 per share            599,501

Issuance of common stock for
  cash to OCPIN                   10,100,000

Issuance of common stock
  warrants                                --

Common stock warrants
  expensed at March 31, 2005      16,434,173

Net loss                         (19,603,792)

                                ------------
Balance, March 31, 2005         $  6,641,925
                                ============
</TABLE>


                                       4
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                 UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                               Three           Three
                                                                            Months Ended    Months Ended
                                                                           March 31, 2005  March 31, 2004
                                                                           --------------  --------------
<S>                                                                         <C>            <C>
Cash flows from operating activities:
Net loss                                                                    $(19,603,792)  $   (492,132)
Adjustments to reconcile net loss to cash used in operating activities:
      Depreciation and amortization expense                                      324,566         15,179
      Common stock warrant expense                                            16,434,173             --
      Increase in prepaid expense and other assets                            (1,497,101)            --
      Increase in  net accounts receivable                                   (16,968,328)        (8,827)
      Increase in income taxes payable                                         1,472,000             --
      Increase in accounts payable                                             4,989,254        209,908
      Increase in accrued compensation and benefits                              385,384             --
      Increase in accrued contract labor costs                                 6,810,000             --
      Increase in other accrued liabilities                                    1,439,151             --
      Decrease in inventories of supplies                                         71,868             --
                                                                            ------------   ------------
        Net cash used in operating activities                                 (6,142,825)      (275,872)
                                                                            ------------   ------------
Cash flows from investing activities:
      Acquisition of hospital assets, net                                    (63,214,995)            --
      Proceeds from sale of property                                          (5,000,000)            --
      Purchase of property and equipment                                              --        (14,877)
      Acquisition of MMG, Inc., net of cash acquired                                  --          8,534
                                                                            ------------   ------------
        Net cash used in investing activities                                (58,214,995)        (6,343)
Cash flows from financing activities:
      Issuance of secured promissory notes, net of costs                      48,067,000        (71,715)
      Proceeds from line of credit                                            13,200,000             --
      Proceeds from issuance of stock                                         10,699,501        200,000
      Repayment of secured notes                                              (1,264,013)            --
                                                                            ------------   ------------
        Net cash provided by financing activities                             70,702,488        128,285
                                                                            ------------   ------------
Net increase (decrease) in cash                                                6,344,668       (153,930)
                                                                            ------------   ------------
Cash and cash equivalents, beginning of period                                    69,454        265,000
                                                                            ------------   ------------
Cash and cash equivalents, end of period                                    $  6,414,122   $    111,070
                                                                            ============   ============

Supplemmental disclosure of noncash transactions:
    Issuance of promissory notes for Acquisition                            $ 53,000,000   $         --
    Consolidation of variable interest entity                               $ 54,758,312   $         --
    Expense of common stock warrants                                        $ 16,434,173   $         --
    Rescinded secured promissory note for the
       return of initial deposit on hospital assets                         $ 10,000,000   $         --
  Interest paid                                                             $  1,629,000   $         --
  Income taxes paid                                                         $         --   $         --

</TABLE>

            The accompanying condensed notes are an integral part of
           these unaudited condensed consolidated financial statements


                                       5
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
         CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2005

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Acquisition - On March 8, 2005, the Company completed its acquisition (the
"Acquisition") of four Orange County,  California  hospitals and associated real
estate,  including:  (i) 282-bed  Western  Medical  Center--Santa  Ana, CA; (ii)
188-bed Western Medical  Center--Anaheim,  CA; (iii) 178-bed Coastal Communities
Hospital in Santa Ana, CA; and (iv) 114-bed Chapman Medical Center in Orange, CA
(collectively, the "Hospitals") from Tenet Healthcare Corporation ("Tenet"). The
Hospitals were assigned to four  wholly-owned  subsidiaries  of the Company (the
"Subsidiaries")  formed for the purpose of completing the Hospital  Acquisition.
The  Company  also  acquired  the  following  real  estate,  leases  and  assets
associated with the Hospitals:  (i) a fee interest in the Western Medical Center
at 1001  North  Tustin  Avenue,  Santa  Ana,  CA 92705,  a fee  interest  in the
administration  building  at 1301 North  Tustin  Avenue,  Santa  Ana,  CA 92705,
certain  rights to acquire  condominium  suites  located in the  medical  office
building at 999 North Tustin  Avenue,  Santa Ana, CA, and the business  known as
the West Coast Breast Cancer Center;  (ii) a fee interest in the Western Medical
Center at 1025 South Anaheim Blvd.,  Anaheim,  CA 92805; (iii) a fee interest in
the Coastal  Communities  Hospital at 2701 South Bristol  Street,  Santa Ana, CA
92704,  and a fee interest in the medical office  building at 1901 North College
Avenue,  Santa Ana, CA; (iv) a lease for the Chapman Medical Center at 2601 East
Chapman Avenue, Orange, CA 92869, and a lease for the medical office building at
2617 East  Chapman  Avenue,  Orange,  CA; and (v) the  furniture,  fixtures  and
contract rights associated with the Hospitals.

      The results of operations of the acquired assets from the acquisition date
(March 8, 2005) have been  included in the Company's  consolidated  statement of
operations  for the  three  months  ended  March  31,  2005.  As a result of the
Acquisition  the Company has  commenced  its planned  principal  operations  and
accordingly is no longer considered a development stage enterprise.

      As  discussed  further  in  Note  7,  concurrent  with  the  close  of the
Acquisition the Company entered into a sale-leaseback transaction with a Pacific
Coast  Holdings  Investment,  LLC  ("PCHI"),  a then  wholly  owned  subsidiary,
involving  all the real  property  acquired  in the  Acquisition.  PCHI was then
immediately  sold to  certain  major  equity  holders  in the  Company.  In this
transaction the Company received consideration of $5 million in cash plus PCHI's
guaranty of the Company's acquisition note of $50 million.  Because, among other
reasons,  the  Company  remains  primarily  liable  under the $50  million  debt
notwithstanding  its  guaranty by PCHI,  this  transaction  does not qualify for
sale-leaseback  accounting and the $50 million in debt has not been removed from
the Company's  consolidated  balance sheet at March 31, 2005.  However,  because
PCHI now holds title to the real  property,  the Company's  interest in the real
estate was  converted  to a lease  interest  pursuant to the lease  entered into
between  PCHI,  as  lessor,   and  the  Company,   as  lessee  as  part  of  the
sale-leaseback   transaction.   Additionally,   as   further   discussed   under
Consolidation  below,  Company management has determined that generally accepted
accounting  principles  require that the  financial  statements  of PCHI must be
included in the consolidated financial statements of the Company under generally
accepted accounting principles.

      Consolidation - The consolidated financial statements include the accounts
of Integrated  Healthcare  Holdings,  Inc. ("the  Company") and its wholly owned
subsidiaries,  Mogel  Management  Group,  Inc.  ("MMG")  and its  four  hospital
subsidiaries   located  in  Orange   County,   California   (collectively,   the
"Hospitals"):

         Western Medical Center - Anaheim       Anaheim, CA       188 beds
         Western Medical Center - Santa Ana     Santa Ana, CA     282 beds
         Coastal Communities Hospital           Santa Ana, CA     178 beds
         Chapman Medical Center                 Orange, CA        114 beds


                                       6
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
         CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2005


      Additionally, generally accepted accounting principles require that a
company  consolidate  the  financial  statements  of any  entity  that  cannot
finance its activities without additional  subordinated financial support, and
for which one company  provides  the majority of that  support  through  means
other  than  ownership.  As  discussed  further  in Note 9,  the  Company  has
determined  that it provides to the entity that purchased the Hospitals'  real
estate  the  majority  of  its  financial   support  through  various  sources
including lease payments,  cross-collateralization  of the Company's assets to
secure the transferred  debt, and the use of the Company's  equity  financing.
Accordingly,  the accompanying  consolidated  financial statements include the
accounts of this entity from the date of the real estate sale.

      All  significant   intercompany   accounts  and  transactions   have  been
eliminated in combination.

      Company  Operations  - The Company  through  the  Hospitals  is  primarily
engaged in the operation of general hospitals and related healthcare facilities.
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 $19,603,792  (inclusive of warrant expenses incurred in
connection  with the  Hospital  acquisitions  of  $16,434,173)  during the three
months ended March 31, 2005 and has negative  working  capital of $46,150,314 at
March 31, 2005. In addition,  on or around May 9, 2005,  the Company  received a
notice of default  from  Medical  Provider  Financial  Corporation  II ("Medical
Provider"), which is the lender under the $50 million acquisition loan and under
a  working  capital  line of credit  that has an  outstanding  balance  of $13.2
million as of March 31, 2005. The default has caused the acquisition  loan to be
classified as a current  liability as of March 31, 2005.  These  factors,  among
others,  indicate a need for the Company to take action to resolve its financing
issues and operate its business on a profitable basis.

      Management is working to  restructure  the debt with Medical  Provider and
believes that the Company's existing cash flow from operations and the Company's
ability to raise  additional  capital will be sufficient to meet its  continuing
obligations for the foreseeable  future.  The Company has requested and PCHI has
agreed to permit the Company to use the  Hospitals'  real property as collateral
for the  purposes of joint  financing  of Company's  business  operation  for an
initial period of time.

      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 its  consolidated  financial  position at March 31, 2005, and its
consolidated  results of  operations  and cash flows for the three  months ended
March 31, 2005 and 2004 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, 2004 audited consolidated  financial  statements.  The results of operations
for the periods ended March 31, 2005 and 2004 are not necessarily  indicative of
the operating results for the full year.

      Organization - Integrated  Healthcare  Holdings,  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. In March 2004, the Company  changed its
name to Integrated Healthcare Holdings, Inc.


                                       7
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
         CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2005


      Use of Estimates - The accounting and reporting  policies of the Hospitals
conform to  accounting  principles  generally  accepted  in the United  State of
American  and  prevailing  practices  for  investor-owned  entities  within  the
healthcare industry.  The preparation of financial statements in conformity with
accounting  principles  generally  accepted  in the  United  States of  American
requires  management to make estimates and  assumptions  that affect the amounts
reported  in  the  financial  statements  and  accompanying  notes.   Management
regularly  evaluates the  accounting  policies and  estimates  that are used. In
general,  management  bases  the  estimates  on  historical  experience  and  on
assumptions that it believes to be reasonable given the particular circumstances
in which the Hospitals operate.  Although  management  believes that adjustments
considered  necessary for fair presentation  have been included,  actual results
may vary from those estimates.

      Net Patient Service Revenue - Net patient service revenue is recognized in
the period in which  services are performed and is recorded based on established
billing  rates  (gross   charges)  less  estimated   discounts  for  contractual
allowances, principally for patients covered by Medicate, Medicaid, managed care
and other health plans.

      Gross charges are retail charges. They are not the same as actual pricing,
and they  generally  do not  reflect  what a  hospital  is  ultimately  paid and
therefore are not displayed in the combined statements of operations and changes
in ownership  equity.  Hospitals are typically  paid amounts that are negotiated
with insurance companies or are set by the government. Gross charges are used to
calculate Medicare outlier payments and to determine certain elements of payment
under managed care  contracts  (such as stop-loss  payments).  Because  Medicare
requires  that  a  hospital's  gross  charges  be  the  same  for  all  patients
(regardless of payer category), gross charges are also what hospitals charge all
other patients prior to the application of discounts and allowances.

      Percentages  of net  patient  service  revenue,  by  payer  type,  for the
Hospitals for the quarter ended March 31, 2005 were as follows:

                                           QUARTER ENDED
                                           MARCH 31, 2005
                                           --------------
               Medicare                          22%
               Medicaid                          14%
               Managed care                      43%
               Indemnity, self-pay and other     21%


      Revenues under the traditional fee-for-service Medicare and the California
Medi-Cal  ("Medicaid")  programs  are based  primarily  on  prospective  payment
systems.  Discounts for  retrospectively  cost-based  revenues,  which were more
prevalent in earlier periods, and certain other payments, which are based on the
hospitals'  cost reports,  are  estimated  using  historical  trends and current
factors.  Cost report settlements for retrospectively  cost-based revenues under
these  programs are subject to audit and  administrative  and  judicial  review,
which  can take  several  years  until  final  settlement  of such  matters  are
determined and completely resolved. Because the laws, regulations,  instructions
and rule  interpretations  governing  Medicare  and Medicaid  reimbursement  are
complex and change  frequently,  the estimates  recorded by the Hospitals  could
change by material amounts.

      Outlier  payments,  which  were  established  by  Congress  as part of the
diagnosis-related  groups  (DRG)  prospective  payment  system,  are  additional
payments  made to hospitals for treating  Medicare  patients who are costlier to
treat than the average patient in the same DRG. To qualify as a cost outlier,  a
hospital's billed (or gross) charges,  adjusted to cost, must exceed the payment
rate for the DRG by a fixed  threshold  established  annually by the Centers for
Medicare and  Medicaid  Services of the United  State  Department  of Health and
Human Services (CMS). The Medicare fiscal intermediary  calculates the cost of a
claim by  multiplying  the billed charges by the  cost-to-charge  ratio from the
hospital's  most recent filed cost report.  If the computed cost exceeds the sum
of the DRG payment plus the fixed  threshold,  the hospital  receives 80% of the
difference as an outlier payment.


                                       8
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
         CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2005


      Under  Sections  1886(d) and 1886(g) of the Social  Security Act, CMS must
project  aggregate  annual outlier  payments to all  prospective  payment system
hospitals to be not less than 5% or more than 6% of total DRG payments  (Outlier
Percentage).  The Outlier  Percentage is  determined  by dividing  total outlier
payments by the sum of DRG and outlier payments.  CMS annually adjusts the fixed
threshold to bring expected outlier payments within the mandated limit. A change
to the fixed threshold affects total outlier payments by changing (1) the number
of cases that qualify for outlier payments,  and (2) the dollar amount hospitals
receive for those cases that still  qualify.  The most recent change to the cost
outlier  threshold that became  effective on October 1, 2004 was a decrease from
$31,000 to $25,800,  which CMS projects will result in an Outlier  Percentage of
5.1%.

      Revenues  under  managed care plans are based  primarily on payment  terms
involving   predetermined  rates  per  diagnosis,   per-diem  rates,  discounted
fee-for-service  rates  and/or other  similar  contractual  arrangements.  These
revenues are also subject to review and possible audit by the payers. The payers
are billed for patient  services on an individual  patient basis.  An individual
patient's  bill is subject to  adjustment on a  patient-by-patient  basis in the
ordinary   course  of  business  by  the  payers   following  their  review  and
adjudication of each particular  bill. The Hospitals  estimate the discounts for
contractual allowances utilizing billing data on an individual patient basis. At
the end of the month, the Hospitals estimate expected  reimbursement for patient
of managed care plans based on the applicable  contract  terms.  These estimates
are  continuously  reviewed  for  accuracy  by taking into  consideration  known
contract  terms  as well as  payment  history.  Although  the  Hospitals  do not
separately  accumulate  and disclose the aggregate  amount of adjustments to the
estimated  reimbursements  for  every  patient  bill,  management  believes  the
estimation  and review  process  allows for timely  identification  of instances
where such estimates need to be revised.  Management does not believe there were
any  adjustments to estimates of individual  patient bills that were material to
its net patient service revenue.

      Management  is not aware of any material  claims,  disputes,  or unsettled
matters with any payers that would affect revenues that have not been adequately
provided for in the accompanying consolidated financial statements.

      The Hospitals provide charity care to patients whose income level is below
200% of the Federal Poverty Level with only a co-payment charged to the patient.
The  Hospitals'  policy is to not pursue  collection  of amounts  determined  to
qualify  as charity  care;  and  accordingly,  the  Hospitals  do not report the
amounts  in net  patient  service  revenue  or in  the  provision  for  doubtful
accounts.  Patients  whose  income level is between 200% and 300% of the Federal
Poverty  Level may also be  considered  under a  catastrophic  provision  of the
charity  care policy.  Patients  without  insurance  who do not meet the Federal
Poverty  Level  guidelines  are offered  assistance in applying for Medicaid and
other  programs they may be eligible for, such as state  disability,  Victims of
Crime,  or county  indigent  programs.  Patient  advocates  from the  Hospitals'
Medical  Eligibility Program (MEP) screen patients in the hospital and determine
potential  linkage to  financial  assistance  programs.  They also  expedite the
process of applying for these government  programs.  The amount of gross charges
foregone under the charity  policy,  including  indigent care accounts,  for the
three months ended March 31, 2005 was approximately $1,007,878.


                                       9
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
         CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2005


      Receivables  from patients who are  potentially  eligible for Medicaid are
classified  as Medicaid  pending,  under the MEP, with  appropriate  contractual
allowances  recorded.  If  the  patient  does  not  quality  for  Medicaid,  the
receivables  are  reclassified  to charity  care and  written  off,  or they are
reclassified to self-pay and adjusted to their net realizable  value through the
provision of doubtful accounts.  Reclassifications  of Medicaid pending accounts
to self-pay do not typically have a material impact on the results of operations
as the estimated  Medicaid  contractual  allowances  initially  recorded are not
materially different than the estimated provision for doubtful accounts recorded
when the accounts are reclassified.  All accounts classified as pending Medicaid
are fully reserved when they reach 180 days old.

      Provision  for  Doubtful  Accounts-  The  Hospitals  provide for  accounts
receivable  that could  become  uncollectible  by  establishing  an allowance to
reduce the carrying value of such  receivables to their estimated net realizable
value.  The  Hospitals  estimate  this  allowance  based  on the  aging of their
accounts receivable,  historical  collections  experience for each type of payer
and other  relevant  factors.  There are  various  factors  that can  impact the
collection trends, such as changes in the economy,  which in turn have an impact
on  unemployment  rates and the number of uninsured and  underinsured  patients,
volume of patients  through the emergency  department,  the increased  burden of
co-payments to be made by patients with insurance and business practices related
to collection efforts.  These factors continuously change and can have an impact
on collection trends and the estimation process.

      The Hospitals'  policy is to attempt to collect amounts due from patients,
including  co-payments and deductibles due from patients with insurance,  at the
time of service while complying with all federal and state laws and regulations,
including,  but not limited to, the  Emergency  Medical  Treatment and Labor Act
(EMTALA). Generally, as required by EMTALA, patients may not be denied emergency
treatment due to inability to pay. Therefore, until the legally required medical
screening  examination is complete and  stabilization  of the patient has begun,
services are performed prior to the verification of the patient's insurance,  if
any. In non-emergency  circumstances or for elective procedures and services, it
is the Hospitals'  policy,  when  appropriate,  to verify  insurance  prior to a
patient being treated.

      During the three  months  ended March 31,  2005,  the  Hospitals  recorded
provisions for doubtful accounts of $3,141,406.

      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.

      Property and Equipment - Property and  equipment are stated at cost,  less
accumulated  depreciation and any impairment  write-downs related to assets held
and used.  Additions and  improvements to property and equipment are capitalized
at cost.  Expenditures  for  maintenance  and  repairs are charged to expense as
incurred.  Capital  leases are  recorded at the  beginning  of the lease term as
assets and  liabilities.  The value  recorded is the lower of either the present
value of the minimum lease payments or the fair value of the asset. Such assets,
including improvements,  are amortized over the shorter of either the lease term
or their estimated useful life.

      The Company use the  straight-line  method of depreciation  for buildings,
building  improvements,  and  equipment  over their  estimated  useful  lives as
follows:

            Buildings and improvements          4 to 25 years
            Equipment                           3 to 15 years

      The Company  evaluates  its  long-lived  assets for possible  impairment
whenever  circumstances  indicate  that the carrying  amount of the asset,  or
related group of assets,  may not be recoverable  from  estimated  future cash
flows.  However,  there is an  evaluation  performed at least  annually.  Fair
value estimates are derived from independent  appraisals,  established  market
values of comparable  assets or


                                       10
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
         CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2005


internal  calculations  of  estimated  future net cash flows.  The  estimates of
future net cash  flows are based on  assumptions  and  projections  believed  by
management to be reasonable and supportable. These assumptions take into account
patient  volumes,  changes in payer mix,  revenue,  and expense growth rates and
changes in legislation and other payer payment  patterns.  The Company  believes
there has been no impairment in the carrying value of its property and equipment
at March 31, 2005.

      Medical Claims Incurred but not Reported - The Company record estimates of
claims  incurred but not reported  (IBNR) to the Hospitals  for its  obligations
under  agreements  with  various  HMOs.  Claims  incurred  but not  reported are
estimated using historical claims patterns,  current enrollment trends, hospital
pre-authorizations,   member   utilization   patterns,   timeliness   of  claims
submissions,  and other factors.  These estimates are periodically  reviewed and
any adjustments are reflected prospectively in operations.

      The Company  believes  that IBNR claims  reserves  are adequate to satisfy
ultimate claims liabilities;  however, establishment of IBNR claims estimates is
an  inherently   uncertain   process  and  actual  experience  could  result  in
prospective  revisions to these estimated reserves.

      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 and  warrants 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,  2005,  the  Company  has
determined that no impairment of its long-lived assets exists.


                                       11
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
         CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2005


      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  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 - On October 13, 2004, the Financial
Accounting  Standards Board issued Statement 123R,  Share-Based  Payment,  which
requires  all  companies  to  measure  compensation  cost  for  all  share-based
payments,  including  employee  stock options,  at fair value.  The statement is
effective for the Company as of the fiscal year commencing  January 1, 2006. The
statement  generally  requires that such  transactions  be accounted for using a
fair-value-based   method  and  recognized  as  expenses  in  the   consolidated
statements  of  operations.  This  standard  also  requires  that  the  modified
prospective  transition  method be used,  under which the Company will recognize
compensation  cost for (1) the fair value of new  awards  granted,  modified  or
settled after the effective date of the SFAS 123R; and (2) a portion of the fair
value of each option and stock grant made to employees or directors prior to the
implementation  date that represents the unvested  portion of these  share-based
awards as of such date..  The measurement of  compensation  cost for awards that
are not fully vested as of the effective date of the SFAS 123R would be based on
the same  estimate  that the Company used to  previously  value its grants under
SFAS 123.

      As a result of SFAS 123R, the Company will be required to expense the fair
value of its  stock  option  grants  rather  than  disclose  the  impact  on its
consolidated  statement of  operations  within the  Company's  footnotes,  as is
current practice.  Additionally, if it chooses to do so, SFAS 123(R) permits the
Company  to  adopt  the new  share-based  award  accounting  by  retrospectively
restating  results  for all periods  presented  to  facilitate  period-to-period
comparison.  The Company has not yet made a determination  as to whether it will
adopt SFAS 123(R)  retrospectively  and is  currently  assessing  the  potential
impact of the new  standard  on its  consolidated  financial  statements  and is
evaluating alternative equity compensation arrangements.

      In January 2003, the Financial  Accounting  Standards Board issued FIN 46,
"Consolidation of Variable Interest  Entities," which requires  consolidation of
certain entities in which equity investors do not have the  characteristics of a
controlling  financial interest or do not have sufficient equity at risk for the
entity to finance  its  activities  without  additional  subordinated  financial
support  from other  parties.  Paragraph  1 of ARB 51 states  that  consolidated
financial  statements are usually  necessary for a fair presentation when one of
the companies in the group  directly or indirectly  has a controlling  financial
interest in the other  companies.  Paragraph 2 states that "the usual  condition
for  a  controlling  financial  interest  is  ownership  of  a  majority  voting
interest..." However, application of the majority voting interest requirement in
ARB  51 to  certain  types  of  entities  may  not  identify  the  party  with a
controlling financial interest because the controlling financial interest may be
achieved through arrangements that do not involve voting interests.  Application
of Interpretation 46 or Interpretation 46(R) is required in financial statements
of  public  entities  that have  interests  in  variable  interest  entities  or
potential  variable interest  entities  commonly referred to as  special-purpose
entities for periods  ending after  December 15, 2003.  See Note 8 regarding the
Company's implementation of FIN 46(R).


                                       12
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
         CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2005


NOTE 2 - ACQUISITION

The purchase  price,  after all purchase price  adjustments,  of the Acquisition
amounted to  $69,784,202.  The fair value of the  tangible  assets  acquired and
liabilities assumed consisted of the following:

        Property and equipment                           $  59,493,353
        Inventories of supplies                              6,018,995
        Prepaid expenses and other current assets            2,338,854
        Debt issuance costs                                  1,933,000

                                                         -------------
                                                           $69,784,202
                                                         =============

The Company  financed the asset purchase by obtaining a $50 million  acquisition
debt,  drawing $3 million on a working  capital line of credit,  the sale of the
Company's common stock for $10,100,000, and $5 million in proceeds from the sale
of the real property of the acquired Hospitals.

Supplemental pro forma information  disclosing the results of operations for the
current  interim  period and the  corresponding  period in the preceding year as
though the  Acquisition had been completed as of the beginning of each period is
not  presently   available.   The  Company  anticipates  it  will  furnish  such
information in its condensed  consolidated  financial  statements for the period
ended June 30, 2005.

      As of December 31, 2004, the Company  recorded its initial  deposit of $10
million  on the Tenet  Hospital  Acquisition  and  direct  acquisition  costs of
$1,142,145,  consisting  primarily of legal fees,  as an  Investment in hospital
asset purchase in the accompanying consolidated balance sheet.

NOTE 3 - PROPERTY AND EQUIPMENT

      Property and equipment consist of the following as of March 31, 2005:

        Land                                    $28,839,098
        Buildings and improvements               19,270,104
        Equipment                                 7,808,774
        Leasehold                                 3,659,401
                                                -----------
                                                 59,577,377

        Less accumulated depreciation              (255,952)

                                                -----------
          Property and equipment, net           $59,321,425
                                                ===========

      The  Hospitals  are affected by State of  California  Senate Bill 1953 (SB
1953),  which requires certain seismic safety building  standards for acute care
hospital  facilities.   The  Hospitals  are  currently  reviewing  the  SB  1953
compliance  requirements and developing multiple plans of action to achieve such
compliance,  the estimated time frame for complying with such requirements,  and
the cost of performing necessary  remediation of certain of the properties.  The
Hospitals  cannot  currently  estimate with reasonable  accuracy the remediation
costs  that  will  need to be  incurred  in  order  to make  the  facilities  SB
1953-compliant, but such remediation costs could be significant.


                                       13
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
         CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2005


NOTE 4 - COMMON STOCK

      2005 Stock Transactions

      Stock  Purchase  Agreement  with OC-PIN - On January 28, 2005, the Company
entered into a Stock Purchase  Agreement (the "Stock Purchase  Agreement")  with
Orange County Physicians  Investment Network, LLC ("OC-PIN"),  a company founded
by Dr.  Anil V.  Shah and  owned by a number  of  physicians  practicing  at the
acquired hospitals,  pursuant to which OC-PIN committed to invest $30,000,000 in
the Company for an  aggregate  of  108,000,000  shares of the  Company's  common
stock. In addition, a prior Purchase Option Agreement,  dated November 16, 2004,
between the Company and Dr. Anil V. Shah was terminated.

      During the three  months  ended March 31,  2005,  the Company  issued 96.1
million shares of its common stock in consideration of $10.1 million from OC-PIN
under the Stock  Purchase  Agreement.  The Company used the  proceeds  from this
stock  sale  as part  of the  consideration  paid  to  Tenet  for  the  Hospital
acquisition.

      Under the Stock Purchase Agreement, no later than six calendar days before
the  closing of  Acquisition,  OC-PIN was to deliver to the  Company  additional
financing totaling $20,000,000. Upon receipt of the $20,000,000, the Company was
to issue an  additional  5.4 million  shares of its common stock to OC-PIN.  The
Company extended OC-PIN's  additional $20 million financing  commitment to March
31,  2005,  but as of May 22,  2005,  OC-PIN has not made any  additional  stock
purchases.  See "Note 12 - Subsequent  Events" for  information  concerning  the
current status of this matter.

      During the three months ended March 31, 2005, the Company issued 1,179,000
shares of its common stock at $0.50 per share for cash proceeds of $589,500.

NOTE 5 - COMMON STOCK WARRANTS

      In connection with the Company's Rescission,  Restructuring and Assignment
Agreement  entered  into on January 27,  2005,  the  Company  issued to Dr. Kali
Chaudhuri  ("Chaudhuri")  and  Mr.  William  Thomas  ("Thomas")  stock  purchase
warrants to purchase up to 74,700,000  shares of the Company's Common Stock (but
not  to  exceed  24.9%  of  the  Company's  fully-diluted  capital  stock)  (the
"Warrants").  The Company's financing agreements entered into with Dr. Chaudhuri
in 2004,  which  provided  Dr.  Chaudhuri  and Thomas  with a  $500,000  secured
convertible  promissory note, a $10 million secured  promissory note and a stock
option  agreement,  were  rescinded  and  cancelled.  The  $500,000  convertible
promissory  note was  originally  convertible  into  approximately  88.8% of the
Company's  issued and  outstanding  common stock on a  fully-diluted  basis.  In
addition,  the Company  released its initial deposit of $10 million plus accrued
interest for the Tenet hospital  acquisition back to Dr. Chaudhuri.  The Company
issued to Dr.  Chaudhuri and Thomas  non-convertible  secured  promissory  notes
totaling $1,264,013 and the Warrants.

      The warrants  are  exercisable  beginning  January 27, 2007 and expire 3.5
years from the date of  issuance.  The  exercise  price for the first 43 million
shares  purchasable  under the Warrants is $0.003125 per share, and the exercise
price for the  remaining  31.7  million  shares is $0.078 per share if exercised
between January 27, 2007 and July 26, 2007, $0.11 per share if exercised between
July 27, 2007 and January 26, 2008, and $0.15 thereafter.


                                       14
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
         CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2005


      Based  upon a  valuation  obtained  by the  Company  from  an  independent
valuation  firm,  the  Company  assigned a value to the  74,700,000  warrants of
$27,987,100 at the date of grant.  As of March 31, 2005, the Company  recognized
an expense of $16,434,173  related to the issuance of the Warrants.  The Company
computed the expense of the Warrants  based on the fair value of the Warrants at
the date of grant and the maximum  number of shares  exercisable as of March 31,
2005 of  41,291,892  (which  constitutes  24.9% of the fully  diluted stock that
would have been  outstanding  as of March 31,  2005  assuming  maximum  possible
exercise of the Warrants).  The Company recorded the fair value of the remaining
unexercisable  Warrants as of March 31, 2005 of $11,552,927 as deferred  warrant
expense in the accompanying consolidated balance sheet as of March 31, 2005. The
Company will recognize  additional  Warrant expense in subsequent  quarters over
the term of the  Warrants  of 3.5 years  based on any  future  increases  in the
number of outstanding shares of the Company's fully diluted common stock.

      The  Company  computed  the  fair  value  of  the  Warrants  based  on the
Black-Scholes option pricing model with the following assumptions:

        Risk-free interest rate                    3.2%, 3.33%
        Expected volatility                       33.6%, 35.7%
        Dividend yield                              --
        Expected life (years)                        2,    2.5
        Fair value of Warrants (fully diluted)  $0.343, $0.398

      Due to fact that the Company emerged from the development stage during the
three months ended March 31, 2005,  the Company  computed the  volatility of its
stock based on an average of comparable public companies that own hospitals.

NOTE 6 - DEBT

      The current  portion of the Company's debt consists of the following notes
as of March 31, 2005:

                Secured line of credit note     $  13,200,000

                Second aquisition note             50,000,000
                                                -------------

                                                $  63,200,000
                                                =============

      Acquisition  Loan  and  Line of  Credit - In  connection  with  the  Tenet
Hospital  Acquisition,  the Company obtained borrowings to complete the Hospital
Acquisition  from  affiliates of Medical  Capital  Corporation  of Anaheim,  CA.
Effective March 3, 2005, the Company and its Subsidiaries  collectively  entered
into a Credit Agreement (the "Credit Agreement") with Medical Provider Financial
Corporation  II  ("the  Lender"),  whereby  the  Company  has  obtained  initial
financing  in the form of a loan with  interest  at the rate of 14% per annum in
the amount of $80,000,000 of which $30,000,000 is in the form of a non-revolving
Line of Credit (the "Line of Credit") and  $50,000,000  is in the form of a real
estate loan (the "Acquisition  Loan")  (collectively,  the  "Obligations").  The
Company used the proceeds from the $50 million  Acquisition  Loan and $3 million
from the Line of Credit to  complete  the  Acquisition  (See Notes 1 and 2). The
Line of Credit is to be used for the purpose of providing:  (a) working  capital
financing  for the Company  and its  Subsidiaries,  (b) funds for other  general
corporate purposes of the Company and its Subsidiaries,  and (c) other permitted
purposes.


                                       15
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
         CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2005


      Interest  payments are due on the Obligations on the first business day of
each calendar month to occur while any Obligation is outstanding at the interest
rate of 14% per annum.  The Obligations  mature at the first to occur of (i) the
Commitment  Termination Date for the Line of Credit Loan, (ii) March 2, 2007, or
(iii) the occurrence or existence of a continuing  Event of Default under any of
the  Obligations.  The  Commitment  Termination  Date means the  earliest of (a)
thirty  calendar  days prior to March 2, 2007;  (b) the date of  termination  of
Lender's  obligations  to make Advances  under the Line of Credit Note or permit
existing  Obligations to remain outstanding  pursuant to Section 8.2(b), (c) the
date  of  prepayment  in  full  by  the  Company  and  its  Subsidiaries  of the
Obligations and the permanent reduction of all Commitments to zero dollars;  (d)
March 2, 2007. Per the Credit Agreement, all future capital contributions to the
Company by OC-PIN shall be used by the Company as mandatory  prepayments  of the
Line of Credit.

      The  Acquisition  Loan  and  Line  of  Credit  are  secured  by a lien  on
substantially all of the assets of the Company and its  Subsidiaries,  including
without  limitation,  a pledge of the capital stock by the Company in its wholly
owned  subsidiaries.  In addition,  (i) PCHI (see Note 7) has agreed to guaranty
the payment and performance of the Obligations, (ii) West Coast and Ganesha (see
Note 7) have  each  agreed  to  pledge  their  membership  interests  in PCHI as
security for repayment of the Obligations,  (iii) the members of West Coast have
agreed to pledge their membership interests in PCHI as security for repayment of
the Obligations, and (iv) OC-PIN (see Note 4) has agreed to guaranty the payment
and performance of all the Obligations.

      Credit  Agreement Fees -  Concurrently  with the execution and delivery of
the Credit Agreement and as a condition to the funding of the Acquisition  Loan,
Company and its  Subsidiaries  agreed to pay to the Lender an origination fee in
an amount equal to 2% of the Credit Line  Commitment or $600,000,  and 2% of the
Acquisition  Loan  or  $1,000,000,   to  be  payable  out  of  Company  and  its
Subsidiaries own funds, which fee shall be deemed earned in full upon receipt by
Lender.  Upon the  completion of the  Acquisition  on March 8, 2005, the Company
paid the lender a total of $1,600,000 in origination  fees and paid the Lender's
legal fees of  approximately  $333,000.  The Company is amortizing  the deferred
loan fees over the two year term of the  Obligations.  During  the three  months
ended March 31, 2005, the Company recognized $62,355 of amortization expense and
has unamortized deferred loan fees of $1,870,645 as of March 31, 2005.

      Former  Secured  Promissory  Note - In t an effort to obtain  financing to
permit thehe Acquisition to occur, the Company entered into a Secured Promissory
Note with Dr.  Chaudhuri,  effective  September  29, 2004.  The Company used the
proceeds  of $10  million  as its good  faith  deposit  in  connection  with the
Acquisition.  The terms of the Secured Note included interest at 7.25% per annum
payable on the first business day of each calendar quarter  beginning January 2,
2005. In connection with the Restructuring and Payment  Agreements  discussed in
Note 5, the $10 million initial deposit and accrued interest was returned to Dr.
Chaudhuri  during  the  three  months  ended  March 31,  2005 and Dr.  Chaudhuri
rescinded  and  cancelled  the $10  million  secured  promissory  note  with the
Company.

      Former Secured Convertible Promissory Note - The Company also entered into
a Secured  Convertible  Note Purchase  Agreement,  dated  September 29, 2004 and
amended November 16, 2004, with Dr.  Chaudhuri.  The original face amount of the
Secured  Convertible  Note was  $500,000  and Dr.  Chaudhuri  was to assist  the
Company with the payment of necessary transactional costs incurred in connection
with the Acquisition, including fees necessary to secure financing in connection
with the Acquisition,  which  transaction  costs and fees could not otherwise be
paid by the Company. In connection with the Restructuring Agreement noted above,
the Company  entered into the following new  promissory  notes dated January 31,
2005, which replaced the Secured Convertible  Promissory Note dated September 29
, 2004 and amended November 16, 2004:


                                       16
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
         CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2005


      o     Secured  Promissory  Note in the amount of  $963,186  payable to Dr.
            Chaudhuri
      o     Unsecured  Promissory  Note in the amount of $60,031  payable to Dr.
            Chaudhuri
      o     Secured Promissory Note in the amount of $240,797 payable to William
            E. Thomas

      Concurrent  with the  completion of the  Acquisition,  in March 2005,  the
Company repaid these three promissory notes plus accrued interest.

      Accounts  Receivable  Purchase  Agreement - In March 2005,  the subsidiary
hospitals  of the Company  entered  into an Accounts  Purchase  Agreement  [that
allows or requires?  the sale of] their accounts  receivable to Medical Provider
Financial  Corp as they become  billable  to third  parties.  The  Company  will
continue to provide billing and collection  services and the proceeds  collected
from the accounts  receivable are applied to reduce amounts  advanced under this
agreement.  As of March  31,  2005,  there  were no  advances  made  under  this
agreement. This agreement has a term of two years.

NOTE 7 - SALE OF REAL ESTATE AND VARIABLE INTEREST ENTITY

      Concurrent  with  the  close  on the  acquisition  of the  Hospitals,  Dr.
Chaudhuri  and Dr.  Shah  exercised  their  option to  purchase  all of the real
property of the Hospitals  pursuant to an Option  agreement  dated September 28,
2004, as amended and restated on November 16, 2004 ("LLC Option Agreement"). The
option was exercised by the option  holders  purchasing  from the Company all of
the equity  interests  in PCHI,  which  holds  title to the real  property.  The
Company received $5 million and PCHI guranteed the Company's acquisition debt of
$50 million.

      The Company  remains  primarily  liable under the $50 million  acquisition
note    notwithstanding   its   assumption   by   PCHI,   and   this   note   is
cross-collateralized by substantially all of the Company's assets and all of the
real property of the Hospitals.  All of the Company's  operating  activities are
directly  affected  by the real  property  that was  sold to PCHI.  Given  these
factors, it appears that the Company has indirectly  guaranteed the indebtedness
of  PCHI.  In  substance,  the  Company  is  standing  ready to  perform  on the
acquisition  debt  should  PCHI  not be able to  perform  and has  undertaken  a
contingent  obligation  to make future  payments if those  triggering  events or
conditions occur.

      In connection  with the sale of all of the real property of the Hospitals,
the Company  entered  into a triple net lease with PCHI to  leaseback  this real
property  for an initial term of 25 years.  Per the triple net lease,  PCHI will
receive  rent that covers the cost of the  underlying  debt,  plus a  guaranteed
spread up to 2.5%. Additionally, the Company has a right to renew the leases for
periods up to an additional 25 years.

      PCHI is a related party entity that is affiliated with the Company through
common ownership and control.  It is owned 51% by West Coast Holdings,  LLC (Dr.
Shah and investors - see Note 4) and 49% by Ganesha Realty,  LLC (Dr.  Chaudhuri
and  William  Thomas - see Note 5).  Generally  accepted  accounting  principles
require that a company  consolidate the financial  statements of any entity that
cannot finance its activities without additional subordinated financial support,
and for which one company  provides the majority of that support  through  means
other than ownership.  Effective  March 8, 2005, the Company  determined that it
provided  the  majority of financial  support to PCHI  through  various  sources
including lease payments, remaining primarily liable under the $50 million debt,
and  cross-collateralization  of the Company's  non-real estate assets to secure
the $50 million debt. Accordingly, during the three months ended March 31, 2005,
the Company included in its consolidated financial statements, the net assets of
PCHI, net of consolidation adjustments.

      Selected information of PCHI's balance sheet as of March 31, 2005, and its
results  of  operations  for the period  March 8, 2005 to March 31,  2005 are as
follows:


                                       17
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
         CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2005


      Total assets            $  56,063,376
      Total liabilites        $  51,072,281
      Member's equity         $   4,991,095
      Net revenues            $     617,564
      Net loss                $      (8,905)

      Consolidation  adjustments to reflect the effects of the following matters
are included in the accompanying consolidated financial statements:

      o     The Company's  lease  interest in the hospitals has been  eliminated
            leaving PCHI's  ownership of the land and buildings  being presented
            in the accompanying consolidated financial statements. Additionally,
            a deferred gain of  $12,157,808  arising from the Company's  sale of
            PCHI has been  eliminated  to state  the land and  buildings  at the
            Company's cost.

      o     Because the Company remains  primarily  liable under the $50 million
            debt  notwithstanding  its  assumption by PCHI,  generally  accepted
            accounting  principles  do not allow  the  Company  to  remove  this
            liability  from its balance  sheet.  Therefore,  it is  necessary to
            eliminate the same item from PCHI's balance sheet in consolidation.

      o     PCHI's equity accounts have been classified as minority  interest in
            variable  interest entity in the accompanying  consolidated  balance
            sheet.

      o     The  Company's  rent expense to the extent of debt  servicing on the
            underlying  debt has been  eliminated  against PCHI's rental income.
            Amounts  payable by the Company to PCHI as rent  expense that are in
            excess of debt servicing on the underlying debt are accounted for as
            an element of minority interest in variable interest entity expense
            in  the   accompanying   consolidated   statement   of   operations.
            Additionally,  amounts  assigned to land and  buildings  under lease
            from  PCHI are  being  depreciated  and  amortized  over the 25 year
            initial term of the lease.

NOTE 8 - INCOME TAXES

      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.  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's  provision for income taxes is composed of the following for
the three months ended March 31:

                                                    2005            2004
                                                ------------    ------------
        Current income tax expense:

                U.S. Federal and State          $  1,472,000    $         --

        Deferred income taxes:

                U.S. Federal and State          $         --    $         --
                                                ------------    ------------

                Total                           $  1,472,000    $         --
                                                ============    ============


                                       18
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
         CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2005


      The  provision  for  income  taxes  differs  from the  federal  and  state
statutory tax expense as follows for the three months ended March 31, 2005:

        Estimated tax benefit at federal and state statutory
         rates on an annualized basis                          $ (2,759,000)
        Common stock warrant expense                              1,636,000
        Gain on sale of assets                                    1,151,000
        Change in valuation allowance                             1,435,000
        Other                                                         9,000

                                                                -----------
                                                                $ 1,472,000
                                                                ===========

      Deferred income tax assets and  liabilities  consist of the tax effects of
temporary differences related to the following at March 31:

                                                       2005            2004
                                                  ------------    ------------
        Current deferred tax assets:
                Allowance for doubtful accounts   $  5,263,440    $         --
                Accured vacation                       770,011              --
                Other accruals                         484,048              --
                Net operating losses                        --         252,000
                                                  ------------    ------------
                Deferred tax assets                  6,517,499         252,000

        Valuation allowance                         (6,517,499)       (252,000)
                                                  ------------    ------------

                Net deferred tax assets           $         --    $         --
                                                  ============    ============

      A valuation allowance of $6.5 million was recorded in the first quarter of
2005 based on an assessment  of the  realization  of the Company's  deferred tax
assets.  The Company  assesses  the  realization  of its  deferred tax assets to
determine  whether an income tax valuation  allowance is required.  Based on all
available evidence,  both positive and negative, and the weight of that evidence
to the extent such  evidence can be  objectively  verified,  Company  management
determines  whether  it is more  likely  than not that all or a  portion  of the
deferred tax assets will be realized.  The main factors taken into consideration
include:

      o cumulative losses in recent years;
      o income/losses expected in future years;
      o unsettled  circumstances that, if unfavorably resolved,  would adversely
      affect future operations and profit levels;
      o the  availability,  or lack there,  of taxable income in prior carryback
      periods that would limit realization of tax benefits;
      o the  carryforward  period  associated  with the  deferred tax assets and
      liabilities; and
      o prudent and feasible tax-planning strategies.


                                       19
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
         CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2005


      As of March 31, 2005, Company management concluded that it was more likely
than not that the deferred  tax assets were not  realizable.  Therefore,  it was
appropriate to record a 100% valuation  allowance after considering and weighing
all evidence in the first quarter of 2005. The Company established the valuation
allowance as a result of assessing  the  realization  of the deferred tax assets
based on the above facts.

      Tenet  Hospital  Acquisition  - The  Acquisition  was  an  asset  purchase
transaction  and the Company will not benefit from the net  operating  losses of
the acquired Hospitals. In connection with the Company's completion of the Tenet
Hospital  Acquisition  in March 2005, the Company sold all of the real estate of
the acquired  hospitals to its majority  shareholders.  For income tax purposes,
the sale of the real estate of the acquired  hospitals could require the Company
to report dividend and/or interest income.  If the Company is required to report
dividend and/or interest income in connection with this transaction, the Company
would be required to withhold 28% on any deemed dividend or interest income.

      The March 8, 2005  contribution  of the real estate acquired in the Tenant
Hospital  Acquisition to Pacific Coast Holdings Investment LLC ("PCHI"),  a 100%
owned  subsidiary of the Company,  was intended to be a non-taxable  event.  The
Company's sale of 100% of the  membership  interest in PCHI on March 8, 2005, to
West Coast  Holdings LLC and Ganesha Realty LLC in  consideration  of $5 million
plus the  assumption  of the $50 million  Acquisition  Loan on the real property
debt is a taxable event to the Company.  The Company is currently  assessing the
potential impact of this taxable event in 2005.

      PCHI Tax Status - PCHI is a limited liability  corporation.  PCHI's owners
plan to make tax  elections  for it be treated as a  disregarded  entity for tax
reporting,  whereby similar to a partnership  PCHI's taxable income or loss will
flow through to its owners and be their  separate  responsibility.  Accordingly,
the accompanying  consolidated  financial  statements do not include any amounts
for the income tax expense or benefit of PCHI's income or loss.

NOTE 9 - RELATED PARTY TRANSACTIONS

      PCHI - The Company  leases all of the real property of the acquired  Tenet
Hospitals from PCHI. PCHI is owned by two LLC's,  which are owned and co-managed
by Dr. Shah, Dr. Chaudhuri,  and Mr. William Thomas. Dr. Shah is the chairman of
the Company  and is also the  co-manager  an  investor  in OC-PIN,  which is the
majority  shareholder  of the  Company.  Dr.  Chaudhuri  and Mr.  Thomas are the
holders of the Warrants to purchase up to 24.9% of the  Company's  fully diluted
capital stock. The Company has consolidated the financial statements of PCHI for
the period March 8, 2005 through  March 31, 2005 in  accordance  with FIN 46(R).
See Note 8.

      Due to/from  Shareholders  and Officers -As of the quarter ended March 31,
2003, the Company had advanced $60,000 to the officers and majority shareholders
of the  Company.  The amounts  due to/from  shareholders  and  officers  bore no
interest and were subsequently forgiven during the year ended 12/31/04.

      Management  Compensation - Effective  January 1, 2004, the Company entered
into  employment  agreements  with each of its  three  executive  officers.  The
employment  agreements  provide among other terms, each officer a base salary of
$250,000 per year, a bonus of $50,000 per year,  and an employment  term of five
years.  During the year ended  December 31,  2004,  the Company  incurred  total
compensation expense of $1,205,640 related to these three employment  agreements
and the Company  had accrued  compensation  of  $913,388 at December  31,  2004.
During  the  year  ended  December  31,  2003,  the  Company  did  not  pay  any
compensation to its officers and directors.


                                       20
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
         CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2005


      In December 2004,  February 2005, and March 2005, the Company entered into
seven employment  agreements with its executive officers.  Among other terms the
three year  employment  agreements  in  aggregate  provide  for annual  salaries
totaling  $2,290,000,  total stock option grants to purchase 6,650,000 shares of
the  Company's  common stock at an exercise  price equal to the mean average per
share for the ten days  following  the date of issuance  with vesting at 33% per
year, and an annual bonus to be determined by the Board of Directors.

NOTE 10 - LOSS PER SHARE

      The following  data show the amounts used in computing  loss per share for
the periods presented:

                                                    Three Months Ended March 31,
                                                    ----------------------------
                                                        2005              2004
                                                    ----------------------------
        Loss from continuing operations available
         to common shareholders (numerator)         $(19,603,792)  $   (492,132)

        Weighted average number of common
         shares used in loss per share during
         the period (denominator)                   $ 88,493,611   $ 19,582,667

      The Company's  weighted  average common stock  equivalents  related to the
Warrants  (Note 5) were  38,892,161  for the three  months ended March 31, 2005.
These common stock  equivalents  have been excluded from the Company's  weighted
average number of common shares  outstanding due to their  anti-dilutive  effect
for the three months ended March 31, 2005.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

      Capital  Leases - The  Hospitals  have  long-term  lease  obligations  for
certain  equipment.  For  financial  reporting  purposes,  the leases  have been
classified  as  capital  leases;  accordingly,  assets  with a net book value of
approximately   $3,659,401  are  included  in  property  and  equipment  in  the
accompanying  consolidated  balance sheet. The following is a schedule of future
minimum lease  payments under  capitalized  equipment  leases  together with the
present value of the net minimum lease payments as of March 31, 2005:


                                       21
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
         CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2005


        Year ending March 31:

        2005                                    $   686,292
        2006                                        686,292
        2007                                        686,292
        2008                                        686,292
        2009                                        686,292
     Thereafter                                   2,745,168
                                                -----------
                Total minimum lease payments    $ 6,176,628

        Less amount representing interest         2,517,227
                                                -----------

                Present value of net minimum
                 lease payments                   3,659,401

        Less current portion                        204,141
                                                -----------

                Long-term portion               $ 3,455,260
                                                ===========

      Concurrent  with the closing of the  Acquisition  as of March 7, 2005, the
Company  entered  into a sale  leaseback  type  agreement  with a related  party
entity,  PCHI (the "Related  Party  Lease").  The Company leases all of the real
estate of the acquired  Hospitals  properties  (the "Hospital  Properties")  and
medical office buildings and a long term acute care facility  (collectively  the
"MOB Properties")  from PCHI. The term of the Lease for the Hospital  Properties
shall be for approximately 25 years,  commencing March 8, 2005 and terminates on
February 28, 2030.  The Company has the option to extend the term of this triple
net lease for an additional term of twenty-five  years.  The Related Party Lease
is  required  to be  capitalized  in  accordance  with  Statement  of  Financial
Accounting  Standard No. 13 ("SFAS 13").  This related  party  capital lease has
been eliminated upon consolidation with PCHI.

      Operating  Leases - In connection  with the  acquisition of the Hospitals,
the Company also assumed the operating  leases for the Chapman  facility,  which
include buildings, land, and other equipment. The following is a schedule of the
Company's future minimum operating lease payments that have initial or remaining
noncancelable lease terms in excess of one year as of December 31, 2004:

                                Unrelated Third     Related
Year Ended December 31,             Parties       Party (PCHI)           Total
-----------------------         ------------------------------------------------
        2005                    $  2,038,365      $ 10,642,672        12,681,037
        2006                       2,008,102        13,153,611        15,161,713
        2007                       1,660,807        13,233,219        14,894,026
        2008                       1,162,675        13,315,216        14,477,891
        2009                         844,267        13,315,216        14,159,483
     Thereafter                    8,569,793       278,706,133       287,275,926
                                ------------------------------------------------
                                $ 16,284,009      $342,366,067      $358,650,076
                                ================================================


                                       22
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
         CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2005


      The Company's related party lease  transactions  related to the Triple Net
Hospital  and Medical  Office  Building  Lease are  eliminated  with PCHI in the
accompanying consolidated financial statements.

      The Company and its subsidiaries are involved in various legal proceedings
most of which relate to routine  matters  incidental to the Company's  business.
The  Company  does not believe  that the outcome of these  matters are likely to
have a material adverse effect on the Company.

NOTE 12 - SUBSEQUENT EVENTS

      Default Notice - On or about May 9, 2005, the Company received a notice of
default from its lender,  Medical  Provider  Financial  Corporation II ("Medical
Provider").  Medical Provider is the lender for the secured  acquisition note of
$50 million,  which was assumed by PCHI and the Company's secured line of credit
note of up to $30  million,  each of  which  was  issued  pursuant  to a  Credit
Agreement dated as of March 3, 2005. In addition,  each of OC-PIN, PCHI, Ganesha
Realty,  LLC,  and West Coast  Holdings,  LLC,  which are  parties to the Credit
Agreement, has received a notice of default under the Credit Agreement.

      The  notice of  default  asserts  that (i) the  Company  failed to provide
satisfactory evidence that the Company has received capital contributions of not
less than $15,000,000,  as required under the Credit Agreement, (ii) the Company
failed to prepay  $5,000,000 by the Mandatory  Prepay Date as required under the
Credit  Agreement,  and (iii) a Material  Adverse  Effect has occurred under the
Credit  Agreement for reasons  relating  primarily to OC-PIN's  failure to fully
fund its obligations  under its Stock Purchase  Agreement with the Company dated
January 28, 2005.

      Medical  Provider has  indicated  that,  as a  consequence  of the alleged
events of default and for so long as such events are  continuing,  the  interest
rates  applicable to the  outstanding  loans under the Credit  Agreement will be
increased to the Default  Rate of 19%, the line of credit  facility is suspended
as to additional  advances (with any additional  advances made at its discretion
at the  Default  Rate of 19%),  and all  Obligations  (as  defined in the Credit
Agreement),  will be forthwith due and payable. The total principal and interest
due and payable under the loans made under the Credit Agreement currently amount
to  approximately  $63,937,333 as of the date of the default letter,  which does
not include possible  additional  amounts claimed by Medical Provider for unpaid
interest at the Default Rate,  attorneys'  fees and costs,  costs of collection,
trustee's fees and costs, and other fees,  charges and expenses paid or incurred
by Medical Provide.

      The  Company  has  recorded  the  acquisition  note  of  $50  million  and
outstanding draws on the line of credit of $13.2 million as current  liabilities
in the accompanying consolidated financial statements.

      First  Amendment to stock  Purchase  Agreement - As of May 18,  2005,  the
Company  entered into the First  Amendment to Stock  Purchase  Agreement,  which
amends the Stock  Purchase  Agreement  dated  January  28,  2005,  with  OC-PIN.
Concurrent with the execution of this amendment,  the Company and OC-PIN entered
into an Escrow  Agreement as of May 17, 2005  ("Escrow").  Significant  terms of
this Stock Purchase Agreement Amendment include:


                                       23
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
         CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2005


o     OC-PIN shall submit  57,250,000  shares of the  Company's  common stock to
      Escrow (the  "Escrowed  Shares").  Following  this  deposit of shares into
      Escrow,  the  Company  will not  interfere  or  challenge  in any  manner,
      OC-PIN's or Hari Lal's  ownership of an aggregate of 45,350,000  shares of
      the Company's common stock.
o     The Company may sell or cancel the Escrowed  Shares.  OC-PIN will have the
      right of first  refusal to  purchase  the  Escrowed  Shares if the Company
      decides to sell the Escrowed  Shares within 12 months from the date of the
      amendment, May 18, 2005.
o     OC-PIN  agrees to  purchase  up to 5.4  million  additional  shares of the
      Company's  common stock for payments  totaling $15 million plus  financing
      costs.  On or before  June 17,  2005,  OC-PIN  shall  make a payment of $5
      million, less $190,981, to the Company. On or before July 18, 2005, OC-PIN
      shall deliver $5 million to the Company. On or before August 17, 2005, the
      OC-PIN shall deliver $5 million to the Company.  OC-PIN also agrees to pay
      the Company's direct and indirect  financing costs incurred as a result of
      OC-PIN's  failure  to  timely  fund  the  balance  of the  Stock  Purchase
      Agreement dated January 28, 2005.
o     During the 45 days  subsequent  to May 18, 2005,  the Company will work in
      good faith with  Capital  Source  Finance LLC to  refinance  the debt with
      Medical Providers.
o     If within 45 days from May 18,  2005,  the Company is able to complete its
      refinancing  with Capital  Source Finance LLC, the Company will reduce the
      third payment due from OC-PIN from $5 million to $2.5 million.
o     Upon the Company's receipt of $5 million from OC-PIN pursuant to the Stock
      Purchase  Agreement  dated January 28, 2005 and the Company's  purchase of
      certain real property referred to as the 999 Medical Office Building,  the
      Company  shall  transfer  such  real  property  to  PCHI  for  no  further
      compensation.
o     The employment  agreements for the Company's CEO, CFO, and President shall
      be amended to provide for 3 year severance payments, payable in a lump sum
      at employees  request,  if any of them are terminated  without cause or if
      they  resign  for  good  cause.   The  severance   shall  be  three  years
      compensation  from the date of this  amendment and shall be reduced by one
      month for each month employed, not to be reduced less than one year.


                                       24
<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

      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 Annual Report on Form
10-KSB filed on March 31, 2005,  that may cause our company's or our  industry's
actual results, levels of activity, performance or achievements to be materially
different from those 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 may be required by applicable
law, we do not intend to update any of the forward-looking statements to conform
these statements to actual results.

      As used in this  report,  the terms  "we",  "us",  "our",  "the  Company",
"Integrated  Healthcare Holdings" or "IHHI" mean Integrated Healthcare Holdings,
Inc., unless otherwise indicated.

OVERVIEW

      Prior to March 8, 2005, we were primarily a development stage company with
no material  operations and no revenues from operations.  On September 29, 2004,
the Company  entered into a definitive  agreement to acquire four hospitals from
subsidiaries  of Tenet  Healthcare  Corporation  ("Tenet"),  and the transaction
closed in March 2005.  Effective  March 8, 2005, we acquired and began operating
the following four hospital facilities in Orange County, California (referred to
in this report as our "Hospitals"):

      o     282-bed Western Medical Center in Santa Ana;
      o     188-bed Western Medical Center in Anaheim;
      o     178-bed Coastal Communities Hospital in Santa Ana; and
      o     114-bed Chapman Medical Center in Orange.

      Our results of operations  discussed in this report primarily  reflect the
last 24 days of the  quarter  ended  March 31,  2005  during  which we owned the
Hospitals, and so are not indicative of an entire quarter of operations.

      We entered into agreements with third-party payers,  including  government
programs  and  managed  care  health  plans,  under  which  rates are based upon
established  charges,  the cost of providing  services,  predetermined rates per
diagnosis,  fixed per diem rates or discounts from established  charges.  During
the 24 days ended March 31, 2005,  substantially all of Tenet's  negotiated rate
agreements  were assigned to our Hospitals.  Our own Medicare  provider  numbers
were received in April.  California  State Medicaid Program provider numbers are
outstanding, but we believe that these will be received shortly.


                                       25
<PAGE>

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

      COMMON STOCK WARRANTS

      In connection with the Company's Rescission,  Restructuring and Assignment
Agreement  entered  into on January 27,  2005,  the  Company  issued to Dr. Kali
Chaudhuri  ("Chaudhuri")  and  Mr.  William  Thomas  ("Thomas")  stock  purchase
warrants to purchase up to 74,700,000  shares of the Company's Common Stock (but
not  to  exceed  24.9%  of  the  Company's  fully-diluted  capital  stock)  (the
"Warrants").  The Company's financing agreements entered into with Dr. Chaudhuri
in 2004,  which  provided  Dr.  Chaudhuri  and Thomas  with a  $500,000  secured
convertible  promissory note, a $10 million secured  promissory note and a stock
option  agreement,  were  rescinded  and  cancelled.  The  $500,000  convertible
promissory  note was  originally  convertible  into  approximately  88.8% of the
Company's  issued and  outstanding  common stock on a  fully-diluted  basis.  In
addition,  the Company  released its initial deposit of $10 million plus accrued
interest for the Tenet hospital  acquisition back to Dr. Chaudhuri.  The Company
issued to Dr.  Chaudhuri and Thomas  non-convertible  secured  promissory  notes
totaling $1,264,013 and the Warrants.

      The warrants  are  exercisable  beginning  January 27, 2007 and expire 3.5
years from the date of  issuance.  The  exercise  price for the first 43 million
shares  purchasable  under the Warrants is $0.003125 per share, and the exercise
price for the  remaining  31.7  million  shares is $0.078 per share if exercised
between January 27, 2007 and July 26, 2007, $0.11 per share if exercised between
July 27, 2007 and January 26, 2008, and $0.15 thereafter.

      As of March 31, 2005,  the Company  recognized an expense of $16.4 million
related to the issuance of the Warrants. The Company computed the expense of the
Warrants  based on the fair value of the  Warrants  at the date of grant and the
maximum number of shares  exercisable as of March 31, 2005 of 41,291,892  (24.9%
of the fully  diluted  stock  outstanding  as of March 31,  2005).  The  Company
recorded the fair value of the remaining  unexercisable Warrants as of March 31,
2005  of  $11.5  million  as  deferred   warrant  expense  in  the  accompanying
consolidated  balance  sheet.  The Company will  amortize  the deferred  warrant
expense in subsequent  quarters over the term of the Warrants of 3.5 years based
on any future  increases in the number of  outstanding  shares of the  Company's
fully diluted common stock.

      The  Company  computed  the  fair  value  of  the  Warrants  based  on the
Black-Scholes option pricing model with the following assumptions:

        Risk-free interest rate                    3.2%,  3.33%
        Expected volatility                       33.6%,  35.7%
        Dividend yield                             --
        Expected life (years)                        2,    2.5
        Fair value of Warrants (fully diluted)  $0.343, $0.398

      Due to fact that the Company emerged from the development stage during the
three months ended March 31, 2005,  the Company  computed the  volatility of its
stock based on an average of comparable public companies that own hospitals.

      SALE OF REAL ESTATE AND VARIABLE INTEREST ENTITY

      Concurrent  with the close of the Company's  acquisition of the Hospitals,
Dr.  Chaudhuri  and Dr.  Anil Shah  exercised  their  options  to  purchase  the
Company's  interest in a limited  liability  company  holding the real  property
underlying the Hospitals  pursuant to an option  agreement  dated  September 28,
2004, as amended and restated on November 16, 2004 (the "LLC Option Agreement").
The option  holders  purchased all of the  Company's  interests in Pacific Coast
Holdings Investment LLC ("PCHI"), which acquired title to the real property. The
Company  received $5 million and PCHI guaranteed the Company's  acquisition debt
of $50 million.


                                       26
<PAGE>

      The Company  remains  primarily  liable under the $50 million  acquisition
note notwithstanding its guaranty by PCHI, and this note is cross-collateralized
by substantially all of the Company's assets and all of the real property of the
Hospitals.  All of the Company's  operating  activities are directly affected by
the real property that was sold to PCHI.  Given these  factors,  it appears that
the Company has indirectly  guaranteed the  indebtedness  of PCHI. In substance,
the Company is standing ready to perform on the acquisition debt should PCHI not
be able to perform and has  undertaken  a contingent  obligation  to make future
payments if those triggering events or conditions occur.

      In connection  with the sale of all of the real property of the Hospitals,
the Company  entered  into a triple net lease with PCHI to  leaseback  this real
property  for an initial term of 25 years.  Per the triple net lease,  PCHI will
receive  rent that covers the cost of the  underlying  debt,  plus a  guaranteed
spread up to 2.5%. Additionally, the Company has a right to renew the leases for
periods up to an additional 25 years.

      PCHI is a related party entity that is affiliated with the Company through
common ownership and control.  It is owned 51% by West Coast Holdings,  LLC (Dr.
Shah and investors),  and 49% by Ganesha Realty,  LLC (Dr. Chaudhuri and William
Thomas).  Generally  accepted  accounting  principles  require  that  a  company
consolidate  the  financial  statements  of any entity that  cannot  finance its
activities without additional  subordinated financial support, and for which one
company  provides  the  majority  of  that  support  through  means  other  than
ownership.  Effective March 8, 2005, the Company determined that it provided the
majority of financial  support to PCHI through various  sources  including lease
payments,   remaining   primarily   liable  under  the  $50  million  debt,  and
cross-collateralization  of the Company's  non-real  estate assets to secure the
$50 million debt. Accordingly, during the three months ended March 31, 2005, the
Company included in its  consolidated  financial  statements,  the net assets of
PCHI, net of consolidation adjustments.

RESULTS OF OPERATIONS

      The following  table  summarizes our results of operations from continuing
operations  for the three  months  ended March 31,  2005 and 2004.  For the 2005
period, these results reflect only 24 days of operations from the Hospitals.


                                       27
<PAGE>

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED
                                                        --------------------------------
                                                        MARCH 31, 2005    MARCH 31, 2004
                                                        --------------    --------------
                                                          (Unaudited)       (Unaudited)

<S>                                                      <C>              <C>
Net operating revenues                                   $ 21,747,029     $         --

Operating expenses:
        Salaries and benefits                              12,450,604          296,829
        Supplies                                            3,033,815               --
        Provision for doubtful accounts                     3,141,406               --
        Other operating expenses                            3,900,220          180,124
        Depreciation and amortization                         262,212           15,179
        Common stock warrant expense                       16,434,173               --
                                                         ------------     ------------
                                                           39,222,430          492,132

Operating loss:                                           (17,145,401)        (492,132)
        Interest expense                                      665,296               --
                                                         ------------     ------------

Loss including minority interest and
        before provision for income taxes                 (18,140,697)        (492,132)

        Provision for income taxes                          1,472,000
        Minority interest in variable interest entity          (8,905)              --
                                                         -----------------------------

Net loss                                                 $(19,603,792)    $   (492,132)
                                                         ============     ============

Per Share Data:
        Basic and fully diluted
               Loss per common share                     $      (0.22)    $      (0.03)

        Weighted average shares outstanding                88,493,611       19,582,667

</TABLE>

      THREE MONTHS ENDED MARCH 31, 2005 AND 2004

      Losses from continuing operations, before interest, taxes and common stock
warrant expense,  increased to $1.0 million for the three months ended March 31,
2005 from $492,000 for the three months ended March 31, 2004.  Substantially all
of the 2005 loss reflects the operational losses from 24 days of operations from
the newly acquired hospitals.

      For the three  months ended March 31, 2005,  we  recognized  an expense of
$16.4 million relating to the issuance of common stock Warrants to Chaudhuri and
Thomas. We computed the expense of the Warrants based on their fair value at the
date of grant and the maximum number of shares  exercisable as of March 31, 2005
of 39,136,766 (24.9% of fully diluted shares  outstanding as of March 31, 2005).
We recorded the fair value of the remaining  unexercisable Warrants at March 31,
2005 of $11.6 million as deferred compensation in the accompanying  consolidated
balance sheet. We will amortize the deferred compensation in subsequent quarters
over the term of the Warrants of 3.5 years, based on any future increases in the
number of outstanding shares of our fully diluted common stock.


                                       28
<PAGE>

      We  computed  the fair value of the  Warrants  based on the  Black-Scholes
option pricing model with the following assumptions:

        Risk-free interest rate                     3.2% - 3.33%
        Expected volatility                        33.6% - 35.7%
        Dividend yield                                   --
        Expected life (years)                         2 and 2.5
        Fair value of Warrants (fully diluted)    $0.343 - $0.398

      Income tax provision was $1.5 million for the three months ended March 31,
2005,  which was  primarily  the result of the deferred gain on sale of property
(see  financial  statement  notes),  which we  believe  may be a  taxable  gain,
offsetting the remaining loss from operations.

      PROVISION FOR DOUBTFUL ACCOUNTS

      We provide for  accounts  receivable  that could become  uncollectible  by
establishing  an allowance to reduce the carrying  value of such  receivables to
their  estimated net realizable  value.  We estimate this allowance based on the
aging of accounts receivable, historical collections experience for each type of
payer and other relevant factors. Various factors that can impact our collection
trends,  including  changes  in the  economy,  which in turn  have an  impact on
unemployment rates and the number of uninsured and underinsured patients, volume
of  patients  through  the  emergency   department,   the  increased  burden  of
co-payments to be made by patients with insurance and business practices related
to collection efforts.  These factors continuously change and can have an impact
on collection trends and the estimation process.

      Our Hospitals'  policy is to attempt to collect amounts due from patients,
including  co-payments and deductibles due from patients with insurance,  at the
time of service while complying with all federal and state laws and regulations,
including,  but not limited to, the  Emergency  Medical  Treatment and Labor Act
(EMTALA). Generally, as required by EMTALA, patients may not be denied emergency
treatment due to inability to pay. Therefore, until the legally required medical
screening  examination is complete and  stabilization  of the patient has begun,
services are performed prior to the verification of the patient's insurance,  if
any. In non-emergency  circumstances or for elective procedures and services, it
is our Hospitals'  policy,  when  appropriate,  to verify  insurance  prior to a
patient being treated.

      During the three months ended March 31, 2005, we recorded  provisions  for
doubtful accounts of $3.1 million.

      The breakdown of our billed hospital  receivables (which is a component of
total receivables) at March 31, 2005 is summarized in the table below.  Included
in insured  receivables  are  accounts  that are pending  provider  numbers from
Medicaid. These receivables totaled approximately 38.9% of our billable hospital
receivables at March 31, 2005.

                                                    MARCH 31, 2005
                                                    --------------
                Insured receivables                      84.4%
                Uninsured receivables                    15.6%
                                                    --------------
                Total                                   100.0%
                                                    ==============


                                       29
<PAGE>

      Our allowance for doubtful  accounts and the  approximate  percentages  of
allowance  for doubtful  accounts to accounts  receivable  at March 31, 2005 are
summarized as follows (dollars in thousands):

                                                       MARCH 31, 2005
                                                       --------------
         Allowance for doubtful accounts                   $ 3,141
         Percentage of accounts receivables                   15.6%

      Our reported  accounts  receivable  as of March 31, 2005 were all under 30
days  outstanding,  due to the fact that our acquisition of Hospital assets from
Tenet in March 2005 did not include patient accounts.

LIQUIDITY AND CAPITAL RESOURCES

      Cash used by  operating  activities  was $6.1  million in the three months
ended March 31, 2005. Net accounts receivable increased to $17.0 million from 24
days of hospital operation.  Prepaid expenses and other assets increased to $1.5
million.  Accounts  payable  increased  to  $5.0  million  and  payroll  related
accruals,  including  contract  labor,  increased to $7.2 million.  Income taxes
payable of $1.5 million were accrued.

      Cash used in investing  activities  was $58.2  million in the three months
ended March 31, 2005 to acquire the hospitals from Tenet.

      Cash  provided  by  financing  activities  was $70.7  million in the three
months ended March 31, 2005.

      At March 31, 2005,  our  indebtedness  consisted of a $50 million,  2-year
term loan for the purchase of hospitals  and a $13.2 million  drawn-down  from a
$30 million line of credit (also 2-year  term),  both of which bear  interest at
14%. Payments are interest only for the 2-year term. In addition, in March 2005,
our subsidiary  hospitals entered into a 2-year Accounts  Purchase  Agreement to
sell Accounts  Receivable to a lending  institution  as they become  billable to
third parties.  We will continue to provide billing and collection  services and
the proceeds collected thereby are applied to reduce amounts advanced under this
agreement. As of March 31, 2005 there were no advances made to purchase Accounts
Receivable.

RECENT ACCOUNTING PRONOUNCEMENTS

      On October 13,  2004,  the  Financial  Accounting  Standards  Board issued
Statement  123R,  Share-Based  Payment,  which requires all companies to measure
compensation  cost  for  all  share-based  payments,  including  employee  stock
options,  at fair value. The statement is effective for all public companies for
interim or annual  periods  after June 15, 2005.  The statement  eliminates  the
ability to account for share-based  compensation  transactions using APB No. 25,
and  generally  requires  that  such  transactions  be  accounted  for  using  a
fair-value-based   method  and  recognized  as  expenses  in  our   consolidated
statements  of  operations.   The  standard  also  requires  that  the  modified
prospective  transition  method be used, which would  necessitate the Company to
recognize  compensation cost for the fair value of new awards granted,  modified
or  settled  after  the  effective  date of the  SFAS  123R.  In  addition,  the
measurement of compensation  cost for awards that are not fully vested as of the
effective  date of the SFAS 123R  would be based on the same  estimate  that the
Company used to previously value its grants under SFAS 123.


                                       30
<PAGE>

      As a result of SFAS 123R, the Company will be required to expense the fair
value of any stock  option  grants that it may make in the  future,  rather than
disclose  the impact on its  consolidated  statement  of  operations  within the
Company's footnotes.

      In January 2003, the Financial  Accounting  Standards Board issued FIN 46,
"Consolidation of Variable Interest  Entities," which requires  consolidation of
certain entities in which equity investors do not have the  characteristics of a
controlling  financial interest or do not have sufficient equity at risk for the
entity to finance  its  activities  without  additional  subordinated  financial
support  from other  parties.  Paragraph  1 of ARB 51 states  that  consolidated
financial  statements are usually  necessary for a fair presentation when one of
the companies in the group  directly or indirectly  has a controlling  financial
interest in the other  companies.  Paragraph 2 states that "the usual  condition
for  a  controlling  financial  interest  is  ownership  of  a  majority  voting
interest..." However, application of the majority voting interest requirement in
ARB  51 to  certain  types  of  entities  may  not  identify  the  party  with a
controlling financial interest because the controlling financial interest may be
achieved through arrangements that do not involve voting interests.  Application
of Interpretation 46 or Interpretation 46(R) is required in financial statements
of  public  entities  that have  interests  in  variable  interest  entities  or
potential  variable interest  entities  commonly referred to as  special-purpose
entities for periods  ending after  December 15, 2003.  See Note 7 regarding the
Company's implementation of FIN 46 (R).

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

      At  March  31,  2005,  we did not have any  investment  in or  outstanding
liabilities  under  market  rate  sensitive  instruments.  We do not enter  into
hedging or derivative  instrument  arrangements.  We have no  off-balance  sheet
arrangements.

ITEM 4. 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.


                                       31
<PAGE>

      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 and its subsidiaries are involved in various legal proceedings
most of which relate to routine  matters  incidental to the Company's  business.
The  Company  does not believe  that the outcome of these  matters are likely to
have a material adverse effect on the Company.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

      During the quarter ended March 31, 2005, the Company issued (i) to Kali P.
Chaudhuri,  M.D.  and William E.  Thomas  warrants to acquire up to 24.9% of the
common stock of the Company  exercisable  for a period of 18 months  beginning 2
years after issuance of the warrants, a general pre-emptive right to participate
in future sales of equity  securities by the Company up to 24.9% and a tag-along
right  relating  to future  issuances  of stock to Dr.  Shah or OC-PIN;  (ii) to
Orange County  Physicians  Investment  Network,  LLC 96,100,000 shares of common
stock; and (iii) to Hari S. Lal 6,500,000 shares of common stock.

      The aforementioned  common stock,  warrants and rights were issued without
registration  under the  Securities  Act in reliance upon the exemption from the
registration  requirements of the Securities Act of 1933, as amended,  set forth
in Section 4(2) of the Securities Act, and Regulation D promulgated thereunder.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

      On or about May 9, 2005,  the  Company  received a notice of default  from
Medical Provider Financial Corporation II ("Medical Provider"). Medical Provider
is the lender to the Company under a $50 million acquisition loan, and a working
capital  non-revolving  line of credit of up to $30  million,  each of which has
been issued pursuant to a Credit Agreement,  dated as of March 3, 2005, to which
the Company and Medical Provider are parties (the "Credit Agreement").

      In addition,  each of Orange County  Physicians  Investment  Network,  LLC
("OCPIN"), Pacific Coast Holdings Investment, LLC, Ganesha Realty, LLC, and West
Coast Holdings,  LLC, which are parties to the Credit Agreement,  has received a
notice of default under the Credit Agreement.

      The  notice of  default  asserts  that (i) the  Company  failed to provide
satisfactory evidence that the Company has received capital contributions of not
less than  $15,000,000,  as required by Section 2.1(s) of the Credit  Agreement,
(ii) the Company  failed to prepay  $5,000,000 by the  Mandatory  Prepay Date as
required under Section 1.2(b)(ii) of the Credit Agreement,  and (iii) a Material
Adverse  Effect has occurred  under the Credit  Agreement  for reasons  relating
primarily  to  OCPIN's  failure to fully  fund its  obligations  under its Stock
Purchase Agreement with the Company dated January 28, 2005 (as discussed further
below in Item 8.01).

      Medical  Provider has  indicated  that,  as a  consequence  of the alleged
events of default and for so long as such events are  continuing,  the  interest
rates  applicable to the  outstanding  loans under the Credit  Agreement will be
increased to the Default Rate (as defined in the Credit Agreement),  the line of


                                       32
<PAGE>

credit  facility is suspended as to  additional  advances  (with any  additional
advances made at its discretion at the Default Rate),  and all  Obligations  (as
defined in the Credit Agreement),  will be forthwith due and payable.  The total
principal  and  interest  due and payable  under the loans made under the Credit
Agreement currently amount to approximately $63,937,333,  which does not include
possible  additional  amounts claimed by Medical Provider for unpaid interest at
the Default Rate, attorneys' fees and costs, costs of collection, trustee's fees
and costs,  and other  fees,  charges and  expenses  paid or incurred by Medical
Provider.

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

      None.

ITEM 5. OTHER INFORMATION.

      In January 2005 the Company  entered into a Stock Purchase  Agreement (the
"SPA") with Orange County Physicians  Investment Network, LLC ("OCPIN") pursuant
to which OCPIN  agreed to invest  $30,000,000  in the  Company in  exchange  for
108,000,000  shares of common stock of the Company.  OCPIN has, to date,  funded
only  $10,100,000  of this  obligation  under the SPA. The Company has, to date,
issued 102,600,000 shares of common stock to OCPIN or others on its behalf.

      The Company has been  negotiating  with OCPIN to reach an agreement  under
which OCPIN's remaining obligations under the SPA will be paid; however, to date
no such  agreement has been reached.  In the event that no settlement is reached
with OCPIN,  the Company  anticipates  that it will initiate  litigation  and/or
arbitration  against  OCPIN to seek  recovery  of all amounts due to the Company
under the SPA, return of shares,  and other remedies.  In addition,  the Company
may pursue actions  available under Nevada and other  applicable law,  including
but not limited to possible sale at public auction  and/or  forfeiture of shares
already issued to OCPIN.

ITEM 6. EXHIBITS.

Exhibit
Number      Description
------      -----------

2.1         First Amendment to Asset Sale Agreement,  dated January 28, 2005, by
            and  among  the  Registrant  and  certain   subsidiaries   of  Tenet
            Healthcare  Corporation   (incorporated  herein  by  reference  from
            Exhibit 99.4 to the  Registrant's  Current  Report on Form 8-K filed
            with the Commission on February 2, 2005).

2.2         Second Amendment to Asset Sale Agreement, effective as of January 1,
            2005, by and among the Registrant and certain  subsidiaries of Tenet
            Healthcare  Corporation   (incorporated  herein  by  reference  from
            Exhibit 99.1 to the  Registrant's  Current  Report on Form 8-K filed
            with the Commission on March 14, 2005).

2.3         Third  Amendment to Asset Sale  Agreement,  effective as of March 8,
            2005, by and among the Registrant and certain  subsidiaries of Tenet
            Healthcare  Corporation   (incorporated  herein  by  reference  from
            Exhibit 99.2 to the  Registrant's  Current  Report on Form 8-K filed
            with the Commission on March 14, 2005).

2.4         Letter  Agreement,  dated  January  28,  2005,  by and  between  the
            Registrant and certain subsidiaries of Tenet Healthcare  Corporation
            (incorporated   herein  by  reference   from  Exhibit  99.3  to  the
            Registrant's Current Report on Form 8-K filed with the Commission on
            February 2, 2005).


                                       33
<PAGE>

10.1        Rescission,  Restructuring and Assignment  Agreement,  dated January
            27, 2005,  by and among the  Registrant,  Kali P.  Chaudhuri,  M.D.,
            William E. Thomas,  Anil V. Shah, M.D., and Orange County Physicians
            Investment  Network,  LLC  (incorporated  herein by  reference  from
            Exhibit 99.1 to the  Registrant's  Current  Report on Form 8-K filed
            with the Commission on February 2, 2005).

10.2        Stock Purchase Agreement, dated January 28, 2005, by and between the
            Registrant  and Orange County  Physicians  Investment  Network,  LLC
            (incorporated   herein  by  reference   from  Exhibit  99.2  to  the
            Registrant's Current Report on Form 8-K filed with the Commission on
            February 2, 2005).

10.3        Guaranty  Agreement,  dated as of March 3,  2005,  by Orange  County
            Physicians  Investment  Network,  LLC in favor of  Medical  Provider
            Financial  Corporation  II  (incorporated  herein by reference  from
            Exhibit 99.3 to the  Registrant's  Current  Report on Form 8-K filed
            with the Commission on March 14, 2005).

10.4        Guaranty  Agreement,  dated as of March 3, 2005,  by  Pacific  Coast
            Holdings  Investments,  LLC in favor of Medical  Provider  Financial
            Corporation II  (incorporated  herein by reference from Exhibit 99.4
            to the  Registrant's  Current  Report  on Form  8-K  filed  with the
            Commission on March 14, 2005).

10.5        Subordination Agreement, dated as of March 3, 2005, by and among the
            Registrant and its subsidiaries, Pacific Coast Holdings Investments,
            LLC, and Medical  Provider  Financial  Corporation II  (incorporated
            herein by reference  from Exhibit 99.5 to the  Registrant's  Current
            Report on Form 8-K filed with the Commission on March 14, 2005).

10.6        Credit  Agreement,  dated as of  March 3,  2005,  by and  among  the
            Registrant and its subsidiaries, Pacific Coast Holdings Investments,
            LLC and its members,  and Medical Provider Financial  Corporation II
            (incorporated   herein  by  reference   from  Exhibit  99.6  to  the
            Registrant's Current Report on Form 8-K filed with the Commission on
            March 14, 2005).

10.7        Form  of $50  million  acquisition  note by the  Registrant  and its
            subsidiaries  (incorporated herein by reference from Exhibit 99.7 to
            the  Registrant's   Current  Report  on  Form  8-K  filed  with  the
            Commission on March 14, 2005).

10.8        Form of $30 million  line of credit note by the  Registrant  and its
            subsidiaries  (incorporated herein by reference from Exhibit 99.8 to
            the  Registrant's   Current  Report  on  Form  8-K  filed  with  the
            Commission on March 14, 2005).

10.9        Triple Net Hospital and Medical Office Building Lease dated March 7,
            2005,  as amended by  Amendment  No. 1 To Triple  Net  Hospital  and
            Medical Office Building Lease (incorporated herein by reference from
            Exhibit 99.9 to the  Registrant's  Current  Report on Form 8-K filed
            with the Commission on March 14, 2005).

10.10       Employment  Agreement  with Bruce  Mogel,  dated  February  25, 2005
            (incorporated   herein  by  reference  from  Exhibit  10.16  to  the
            Registrant's  Annual Report on Form 10-KSB filed with the Commission
            on March 31, 2005).

10.11       Employment Agreement with Larry B. Anderson, dated February 25, 2005
            (incorporated   herein  by  reference  from  Exhibit  10.17  to  the
            Registrant's  Annual Report on Form 10-KSB filed with the Commission
            on March 31, 2005).

10.12       Employment  Agreement  with James T. Ligon,  dated February 25, 2005
            (incorporated   herein  by  reference  from  Exhibit  10.18  to  the
            Registrant's  Annual Report on Form 10-KSB filed with the Commission
            on March 31, 2005).


                                       34
<PAGE>

10.13       Employment  Agreement  with Milan  Mehta,  dated  February  25, 2005
            (incorporated   herein  by  reference  from  Exhibit  10.19  to  the
            Registrant's  Annual Report on Form 10-KSB filed with the Commission
            on March 31, 2005).

10.14       Employment  Agreement  with Hari S. Lal,  dated  February  25,  2004
            (incorporated   herein  by  reference  from  Exhibit  10.20  to  the
            Registrant's  Annual Report on Form 10-KSB filed with the Commission
            on March 31, 2005).

10.15       Employment  Agreement  with Daniel J.  Brothman,  dated December 31,
            2004  (incorporated  herein by reference  from Exhibit  10.21 to the
            Registrant's  Annual Report on Form 10-KSB filed with the Commission
            on March 31, 2005).

10.16       Employment   Agreement  with  Steve  Blake,  dated  March  21,  2005
            (incorporated   herein  by  reference  from  Exhibit  10.22  to  the
            Registrant's  Annual Report on Form 10-KSB filed with the Commission
            on March 31, 2005).

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.


                                       35
<PAGE>

                                    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.

                                    INTEGRATED HEALTHCARE HOLDINGS, INC.


Dated: May 23, 2005                 By: /s/ James T. Ligon
                                        ----------------------------------------
                                        James T. Ligon
                                        Chief Financial Officer and Secretary
                                        (Principal Financial Officer)


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