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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   Form 10-KSB


(Mark One)
      [X]   ANNUAL  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
            EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2004; or
      [ ]   TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934


                         Commission File Number 0-23511
                                ----------------

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                 (Name of Small Business Issuer in its Charter)

           Nevada                                      87-0412182
  (State of incorporation)                (I.R.S. Employer Identification No.)

695 Town Center Drive, Suite 260, Costa Mesa, California          92626
   (Address of principal executive offices)                     (Zip Code)

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

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:

                         Common Stock, $.0001 par value
                                (Title of Class)
                                ----------------

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

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

State issuer's revenues for its most recent fiscal year. $0

The aggregate market value of all stock held by non-affiliates of the registrant
was $5,139,200 as of March 18, 2005 (computed by reference to the last sale
price of a share of the registrant's common stock on that date as reported by
the Over the Counter Bulletin Board). For purposes of this computation, it has
been assumed that the shares beneficially held by directors and officers of
registrant were "held by affiliates"; this assumption is not to be deemed to be
an admission by such persons that they are affiliates of registrant.

    State the number of shares outstanding of each of the issuer's classes of
          common equity, as of the latest practicable date: 118,059,000

                      DOCUMENTS INCORPORATED BY REFERENCE:

No portions of other documents are incorporated by reference into this Report.

Transitional Small Business Disclosure Format (Check one): Yes[_] No [X]

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<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.

                                   Form 10-KSB

               Annual Report for the Year ended December 31, 2004

                                TABLE OF CONTENTS


                                                                            Page
                                                                            ----
           Part I
Item 1.    Description of Business...........................................1
Item 2.    Description of Property...........................................8
Item 3.    Legal Proceedings.................................................9
Item 4.    Submission of Matters to a Vote of Security Holders...............9
           Part II
Item 5.    Market for Equity and Related Stockholder Matters.................10
Item 6.    Management's Discussion and Analysis or Plan of Operation.........10
Item 7.    Financial Statements..............................................11
Item 8.    Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure..............................................11
Item 8A.   Controls and Procedures...........................................11
Item 8B.   Other Information.................................................12
           Part III
Item 9.    Directors, Executive Officers, Promoters and Control Persons;
           Compliance with Section 16(a) of the Exchange
           Act...............................................................12
Item 10.   Executive Compensation............................................13
Item 11.   Security Ownership of Certain Beneficial Owners and Management
           and Related Stockholder
           Matters...........................................................14

Item 12.   Certain Relationships and Related Transactions....................15
Item 13.   Exhibits..........................................................15
Item 14.   Principal Accountant Fees and Services............................16

           Signatures........................................................17
           Financial Statements..............................................F-1
           Exhibits


<PAGE>

                                     PART I

      This annual report 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 in the
section entitled "Risk Factors", that may cause our company's or our industry's
actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.

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

ITEM 1.  BUSINESS

Background

      Integrated Healthcare Holdings, Inc. is a predominantly physician-owned
management company that, on March 8, 2005, acquired and began operating the
following four hospital facilities in Orange County, California (referred to as
the "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.

      Together we believe that the Hospitals represent approximately 12.1% of
all hospital beds in Orange County, California.

      Prior to March 8, 2005, including during the fiscal year ended December
31, 2004 covered by this Report, we were primarily a development stage company
with no material operations. On November 18, 2003, our current executive
management team, Bruce Mogel, Larry B. Anderson, and James T. Ligon, purchased a
controlling interest in the Company and redirected its focus towards acquiring
and managing hospitals and healthcare facilities that are financially distressed
and/or underperforming. On September 29, 2004, the Company entered into a
definitive agreement to acquire the four Hospitals from subsidiaries of Tenet
Healthcare Corporation, and the transaction closed in March 2005.

      Western Medical Center - Santa Ana. Western Medical Center - Santa Ana,
located at 1001 N. Tustin Avenue, Santa Ana, CA 92705, is Orange County's first
hospital, founded over 100 years ago. The hospital has 282 beds and is one of
only three designated trauma centers in Orange County, offering Neurosurgical
emergency care round the clock. Located within the hospital is the renowned
Grossman Burn Center. The hospital also maintains Intensive Care Units for
adults and pediatrics, and a Neonatal Intensive Care Unit in a family-centered
environment. The hospital has 800 active physicians and 1,200 nurses and
hospital staff.

      Western Medical Center - Anaheim. Western Medical Center - Santa Ana,
located at 1025 South Anaheim Blvd., Anaheim, CA 92805, offers a full range of
health care and wellness services. The hospital is actively involved in the
community through numerous outreach programs to educate and promote wellness.
The hospital offers special expertise in The Heart and Vascular Institute,
Behavioral Health Services, Women and Children Health Services, and 24-hour
Emergency Services. The medical team responds to each patient as a unique


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individual, with sensitivity to cultural diversity and language needs. The
hospital has 325 active physicians and 525 nurses and hospital staff.

      Coastal Communities Hospital. Coastal Communities Hospital, located in the
heart of Santa Ana at 2701 S. Bristol St., Santa Ana, CA 92704, has served the
community for more than 30 years, providing comprehensive medical and surgical
services in a caring and compassionate environment. The hospital has tailored
its services to meet the changing needs of the community. The hospital's staff
reflects the cultural diversity of the community and is particularly responsive
and sensitive to diverse health care needs. While services continue to expand,
the 178-bed facility is small enough to retain the family atmosphere associated
with a community hospital. Coastal Communities Hospital is accredited by the
Joint Commission on the Accreditation of Healthcare Organizations, the nation's
oldest and largest hospital accreditation agency. The hospital has 300 active
physicians and 600 nurses and hospital staff.

      Chapman Medical Center. Founded in 1969, Chapman Medical Center is a
114-bed acute care facility located at 2601 East Chapman Ave., Orange, CA 92869.
The hospital provides high technology tertiary services, and boasts pleasant
surroundings designed to promote comfort and a sense of well-being. The
hospital's advanced capabilities position the facility as a leader in specialty
niche programs, including the following centers: Chapman Center for Obesity
(surgical weightloss program); Center for Heartburn and Swallowing; Chapman Lung
Center; Chapman Family Health Center; Doheny Eye Center; House Ear Clinic;
Center for Senior Mental Health; and Positive Action Center (Adult and
Adolescent Chemical Dependency Program). The hospital has 300 active physicians
and 450 nurses and hospital staff.

Our Strategy

      Our goal is to provide high-quality health care services in a community
setting that are responsive to the needs of the communities that we serve. To
accomplish our mission in the complex and competitive health care industry, our
operating strategies are to (1) improve the quality of care provided at our
hospitals by identifying best practices and implementing those best practices,
(2) improve operating efficiencies and reduce operating costs while maintaining
or improving the quality of care provided, (3) improve patient, physician and
employee satisfaction, and (4) improve recruitment and retention of nurses and
other employees. We intend to integrate and efficiently operate the four
Hospitals in order to achieve profitability from operations. We may also seek
additional acquisitions of hospitals or health facilities in the future when
opportunities for profitable growth arise.

Transition of Hospital Administration and Management

      On March 8, 2005, we assumed management responsibility and control over
the Hospitals. Prior to closing, our management team had been working with the
individual management staffs of the Hospitals on a transition plan, so the
transition occurred seamlessly. We believe that all primary systems and controls
have been successfully transitioned to our Company for the effective management
of the Hospitals. To date we have achieved a number of key milestones in
transitioning the Hospitals to our management, including the following:

      o     We have executed long term employment agreements with all key
            members of the Hospital administrative staffs;
      o     We have augmented our management capabilities in the areas of legal
            compliance and managed care contracting;
      o     Employee benefits packages have been negotiated and are in roll-out
            phase with Hospital staffs, which we believe maintain costs at
            approximately 2004 levels through May 2006;
      o     A full portfolio of insurances are in place at costs which we
            believe are a substantial discount from prior rates;
      o     Corporate administration and overhead has been established and will
            be maintained at levels that are substantially less costly than
            prior levels;
      o     Billing and collection activities have been centralized and are now
            resident at IHHI;
      o     Daily financial and accountability reporting systems have been
            established which allow the Company to track financial and operating
            performance in real time; and


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<PAGE>

      o     Payor, vendor and physician contracts have been reviewed and
            assigned and/or renewed where appropriate.

      Over the next sixty days, we plan to transition to our own payroll and
time and attendance systems, which will allow us to terminate our Employee
Leasing Agreements with Tenet effective May 22, 2005. Additionally, we plan to
pursue various cost control and revenue enhancement strategies going forward,
including renegotiating agreements with primary payors and expanding service
offerings where appropriate.

Health Care Regulation And Licensing

      Certain Background Information. Health care, as one of the largest
industries in the United States, continues to attract much legislative interest
and public attention. Changes in the Medicare and Medicaid programs and other
government health care programs, hospital cost-containment initiatives by public
and private payers, proposals to limit payments and health care spending, and
industry-wide competitive factors greatly impact the health care industry. The
industry is also subject to extensive federal, state and local regulation
relating to licensure, conduct of operations, ownership of facilities, physician
relationships, addition of facilities and services, and charges and effective
reimbursement rates for services. The laws, rules and regulations governing the
health care industry are extremely complex, and the industry often has little or
no regulatory or judicial interpretation for guidance. Compliance with such
regulatory requirements, as interpreted and amended from time to time, can
increase operating costs and thereby adversely affect the financial viability of
our business. Failure to comply with current or future regulatory requirements
could also result in the imposition of various remedies including fines,
restrictions on admission, denial of payment for all or new admissions, the
revocation of licensure, decertification, imposition of temporary management or
the closure of a facility.

      Medicare and Medicaid. The Health Insurance for Aged and Disabled Act
(Title XVIII of the Social Security Act), known as "Medicare," has made
available to nearly every United States citizen 65 years of age and older a
broad program of health insurance designed to help the nation's elderly meet
hospital and other healthcare costs. The Medicare program consists of four
parts: (i) Medicare Part A, which covers, among other things, inpatient
hospital, skilled long-term care, home healthcare and certain other types of
healthcare services; (ii) Medicare Part B, which covers physicians' services,
outpatient services and certain items and services provided by medical
suppliers; (iii) a managed care option for beneficiaries who are entitled to
Medicare Part A and enrolled in Medicare Part B, known as Medicare Advantage or
Medicare Part C and (iv) a new Medicare Part D benefit that becomes effective in
2006 covering prescription drugs. Under Medicare Part B, we are entitled to
payment for medically necessary therapy services and products that replace a
bodily function, home medical equipment and supplies and a limited number of
specifically designated prescription drugs. The Medicare program is administered
by the Centers for Medicare and Medicaid Services (referred to as "CMS").

      Medicaid (Title XIX of the Social Security Act) is a federal-state
matching program, whereby the federal government, under a need based formula,
matches funds provided by the participating states for medical assistance to
"medically indigent" persons. The programs are administered by the applicable
state welfare or social service agencies under federal rules. Medicaid programs
vary from state to state. Although traditionally they have provided for the
payment of certain expenses up to established limits at rates determined in
accordance with each state's regulations, more recently payment is made on a
prospective basis or in accordance with fee schedules. For skilled nursing
centers, most states pay prospective rates, and have some form of acuity
adjustment. In addition to facility based services, most states cover an array
of medical ancillary services. Payment methodologies for these services vary
based upon state preferences and practices permitted under federal rules.

      We receive revenues from Medicare and Medicaid, as well as from private
insurance, self-pay residents and other third-party payors. Medicare and
Medicaid are subject to statutory and regulatory changes, retroactive rate
adjustments, administrative rulings and government funding restrictions, all of
which may materially affect the timing and/or levels of payments to us for our
services.

      We are subject to periodic audits by the Medicare and Medicaid programs,
which have various rights and remedies against us if they assert that we have
overcharged the programs or failed to comply with program requirements. These
rights and remedies may include requiring the repayment of any amounts alleged
to be overpayments or in violation of program requirements, or making deductions
from future amounts due to us. Such programs may also impose fines, criminal


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<PAGE>

penalties and/or program exclusions. Other third-party payor sources also
reserve rights to conduct audits and make monetary adjustments in connection
with or inclusive of auditing activities.

      In addition, there are from time to time proposed legislative changes, new
interpretations or administration of legislation and other governmental
initiatives, which may have an effect on our business. There can be no assurance
that the impact of any future healthcare legislation or regulation will not
further adversely affect our business, or that payments under governmental and
private third-party payor programs will be timely, will remain at levels similar
to present levels or will, in the future, be sufficient to cover the costs
allocable to patients eligible for reimbursement pursuant to such programs. Our
financial condition and results of operations are affected by the reimbursement
process, which is complex and can involve lengthy delays between the time that
revenue is recognized and the time that reimbursement amounts are settled.

      Anti-Kickback and Self-Referral Regulations. Medicare and Medicaid
anti-kickback and anti-fraud and abuse amendments codified under Section
1128B(b) of the Social Security Act (the "Anti-kickback Amendments") prohibit
certain business practices and relationships that might affect the provision and
cost of health care services payable under the Medicare and Medicaid programs
and other government programs, including the payment or receipt of remuneration
for the referral of patients whose care will be paid for by such programs.
Sanctions for violating the Anti-kickback Amendments include criminal penalties
and civil sanctions, as well as fines and possible exclusion from government
programs, such as Medicare and Medicaid. Many states have statutes similar to
the federal Anti-kickback Amendments, except that the state statutes usually
apply to referrals for services reimbursed by all third-party payers, not just
federal programs. In addition, it is a violation of the federal Civil Monetary
Penalties Law to offer or transfer anything of value to Medicare or Medicaid
beneficiaries that is likely to influence their decision to obtain covered goods
or services from one provider or service over another.

      Section 1877 of the Social Security Act (commonly referred to as the
"Stark" law) generally restricts referrals by physicians of Medicare or Medicaid
patients to entities with which the physician or an immediate family member has
a financial relationship, unless one of several exceptions applies. The referral
prohibition applies to a number of statutorily defined "designated health
services," such as clinical laboratory, physical therapy, radiology services and
hospital services. The exceptions to the referral prohibition cover a broad
range of common financial relationships. These statutory, and the subsequent
regulatory, exceptions are available to protect certain permitted employment
relationships, leases, group practice arrangements, medical directorships,
hospital ownerships, and other common relationships between physicians and
providers of designated health services, such as hospitals. A violation of the
Stark law may result in a denial of payment, required refunds to patients and
the Medicare program, civil monetary penalties of up to $15,000 for each
violation, civil monetary penalties of up to $100,000 for "sham" arrangements,
civil monetary penalties of up to $10,000 for each day that an entity fails to
report required information, and exclusion from participation in the Medicare
and Medicaid programs and other federal programs. Many states have adopted or
are considering similar self-referral statutes, some of which extend beyond the
Medicaid program to prohibit the payment or receipt of remuneration for the
referral of patients and physician self-referrals regardless of the source of
the payment for the care.

      Health Insurance Portability and Accountability Act. The Health Insurance
Portability and Accountability Act, or HIPAA, mandates the adoption of industry
standards for the exchange of health information in an effort to encourage
overall administrative simplification and enhance the effectiveness and
efficiency of the health care industry. HIPAA requires that health providers and
other "covered entities," such as insurance companies and other third-party
payers, adopt uniform standards for the electronic transmission of medical
records, billing statements and insurance claims forms. HIPAA also establishes
new federal rules protecting the privacy and security of personal health
information. The privacy and security regulations address the use and disclosure
of individual health care information and the rights of patients to understand
and control how such information is used and disclosed. The law provides both
criminal and civil fines and penalties for covered entities that fail to comply
with HIPAA.

      HHS regulations include deadlines for compliance with the various
provisions of HIPAA. In 2001, in response to concerns by many health care
providers about their ability to comply with impending HIPAA deadlines, Congress
extended until October 2003 the original deadline for compliance with the
electronic data transmission (transaction and code set) standards that health
care providers must use when transmitting certain health care information


                                       4
<PAGE>

electronically. In October 2003, under authority given by HHS, CMS implemented a
plan that allows providers and other electronic billers to continue to submit
pre-HIPAA format electronic claims for periods after October 16, 2003, provided
they can show good faith efforts to become HIPAA compliant. All covered entities
were required to comply with the privacy requirements of HIPAA by April 14,
2003. The HIPAA security regulations require health care providers to implement
administrative, physical and technical safeguards to protect the
confidentiality, integrity and availability of patient information.

      Health Care Facility Licensing Requirements. In order to maintain their
operating licenses, health care facilities must comply with strict governmental
standards concerning medical care, equipment and hygiene. Various licenses and
permits also are required in order to dispense narcotics, operate pharmacies,
handle radioactive materials and operate certain equipment. Our health care
facilities hold all required governmental approvals, licenses and permits
material to the operation of our business.

      Utilization Review Compliance and Hospital Governance. In addition to
certain statutory coverage limits and exclusions, federal laws and regulations,
specifically the Medicare Conditions of Participation, generally require health
care providers, including hospitals that furnish or order health care services
that may be paid for under the Medicare program or state health care programs,
to assure that claims for reimbursement are for services or items that are (1)
provided economically and only when, and to the extent, they are medically
reasonable and necessary, (2) of a quality that meets professionally recognized
standards of health care, and (3) supported by appropriate evidence of medical
necessity and quality. CMS administers the Quality Improvement Organization
("QIO") program through a network of QIOs that work with consumers, physicians,
hospitals and other caregivers to refine care delivery systems to assure
patients receive the appropriate care at the appropriate time, particularly
among underserved populations. The QIO program also safeguards the integrity of
the Medicare trust fund by reviewing Medicare patient admissions, treatments and
discharges, and ensuring payment is made only for medically necessary services,
and investigates beneficiary complaints about quality of care. The QIOs have the
authority to deny payment for services provided and recommend to HHS that a
provider that is in substantial noncompliance with certain standards be excluded
from participating in the Medicare program.

      Environmental Regulations. Our health care operations generate medical
waste that must be disposed of in compliance with federal, state and local
environmental laws, rules and regulations. Our operations, as well as our
purchases and sales of facilities, also are subject to compliance with various
other environmental laws, rules and regulations.

Corporate History

      The Company was originally incorporated under the laws of the State of
Utah on July 31, 1984 under the name "Aquachlor Marketing Inc." On December 23,
1988, the Company reincorporated in the State of Nevada. From 1989 until 2003,
the Company pursued a number of potential business opportunities but was mostly
dormant and had no material assets, revenues or business operations.

      On November 18, 2003, Bruce Mogel, Larry B. Anderson, and James T. Ligon
purchased a controlling interest in First Deltavision with the objective of
transforming the Company into a leading provider of high-quality, cost-effective
healthcare through the acquisition and management of financially distressed
and/or under performing hospitals and other healthcare facilities.

      In the first quarter of 2004, the Company changed its fiscal year end from
June 30 to December 31, and changed the Company's name to "Integrated Healthcare
Holdings, Inc."

      Our principal executive offices are located at 695 Town Center Drive,
Suite 260, Costa Mesa, California 92626, and our telephone number is (714)
434-9191.

Employees

      At December 31, 2004, we had six employees. At March 25, 2005, we had on a
consolidated basis 2,050 full-time employees and 263 part-time employees. Some
of our employees are represented by labor unions and covered by collective
bargaining agreements. We believe that our relations with our employees are
good.


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<PAGE>

      Our hospitals are staffed by licensed physicians who have been admitted to
the medical staff of individual hospitals. Members of the medical staffs of our
hospitals also often serve on the medical staffs of hospitals not owned by us.
Members of our medical staffs are free to terminate their affiliation with our
hospitals or admit their patients to competing hospitals at any time. Most of
the physicians who practice at our hospitals are not our employees. Nurses,
therapists, lab technicians, facility maintenance staff and the administrative
staff of hospitals, however, normally are our employees.

Risk Factors Relating to Our Business and Stock

      An investment in our common stock involves a high degree of risk. You
should consider carefully the following information about these risks, together
with the other information contained in this report, before you decide to buy
our common stock. The risks and uncertainties described below are not the only
ones we face. Additional risks and uncertainties not presently known to us or
that we currently deem immaterial may also impair our operations. If any of the
following risks actually occur, our business would likely suffer and our results
could differ materially from those expressed in any forward-looking statements
contained in this report. In such case, the trading price of our common stock
could decline, and you may lose all or part of the money you paid to buy our
common stock.

      We may face difficulties integrating our acquisition of the Hospitals.

      Our acquisition of the Hospitals involves numerous potential risks,
including:

            o     potential loss of key employees and management of acquired
                  companies;
            o     difficulties integrating acquired personnel and distinct
                  cultures;
            o     difficulties integrating acquired companies into our proposed
                  operating, financial planning and financial reporting systems;
            o     diversion of management attention; and
            o     assumption of liabilities and potentially unforeseen
                  liabilities, including liabilities for past failure to comply
                  with healthcare regulations.

      Our acquisition also involves significant cash expenditures, debt
incurrence and integration expenses that could seriously strain our financial
condition. If we are required to issue equity securities to raise additional
capital, existing stockholders will likely be diluted, which could affect the
market price of our stock.

      Healthcare-related legislation and regulations may negatively affect our
      financial condition and results of operations.

      Our Hospitals receive a substantial portion of their revenues from
Medicare and Medicaid. The healthcare industry is experiencing a strong trend
toward cost containment, as the government seeks to impose lower reimbursement
and resource utilization group rates, limit the scope of covered services and
negotiate reduced payment schedules with providers. These cost containment
measures generally have resulted in a reduced rate of growth in the
reimbursement for the services that we provide relative to the increase in our
cost to provide such services.

      Changes to Medicare and Medicaid reimbursement programs have limited, and
are expected to continue to limit, payment increases under these programs. Also,
the timing of payments made under the Medicare and Medicaid programs is subject
to regulatory action and governmental budgetary constraints resulting in a risk
that the time period between submission of claims and payment could increase.
Further, within the statutory framework of the Medicare and Medicaid programs, a
substantial number of areas are subject to administrative rulings and
interpretations which may further affect payments.

      We conduct business in a heavily regulated industry, and changes in
      regulations and violations of regulations may result in increased costs or
      sanctions, including loss of licensure and decertification.


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<PAGE>

      Our business is subject to extensive federal, state and, in some cases,
local regulation with respect to, among other things, participation in the
Medicare and Medicaid programs, licensure and certification of facilities, and
reimbursement. These regulations relate, among other things, to the adequacy of
physical plant and equipment, qualifications of personnel, standards of care,
government reimbursement and operational requirements. Compliance with these
regulatory requirements, as interpreted and amended from time to time, can
increase operating costs and thereby adversely affect the financial viability of
our business. Because these regulations are amended from time to time and are
subject to interpretation, we cannot predict when and to what extent liability
may arise. Failure to comply with current or future regulatory requirements
could also result in the imposition of various remedies including (with respect
to inpatient care) fines, restrictions on admission, denial of payment for all
or new admissions, the revocation of licensure, decertification, imposition of
temporary management or the closure of a facility or site of service.

      We are subject to periodic audits by the Medicare and Medicaid programs,
which have various rights and remedies against us if they assert that we have
overcharged the programs or failed to comply with program requirements. Rights
and remedies available to these programs include repayment of any amounts
alleged to be overpayments or in violation of program requirements, or making
deductions from future amounts due to us. These programs may also impose fines,
criminal penalties or program exclusions. Other third-party payor sources also
reserve rights to conduct audits and make monetary adjustments in connection
with or exclusive of audit activities.

      We face intense competition in our business.

      The healthcare industry is highly competitive. We compete with a variety
of other organizations in providing medical services, many of which have greater
financial and other resources and may be more established in their respective
communities than we are. Competing companies may offer newer or different
centers or services than we do and may thereby attract patients or customers who
are presently patients, customers or are otherwise receiving our services.

      An increase in insurance costs may adversely affect our operating cash
      flow, and we may be liable for losses not covered by or in excess of our
      insurance.

      An increasing trend in malpractice litigation claims, rising costs of
malpractice litigation, losses associated with these malpractice lawsuits and a
constriction of insurers have caused many insurance carriers to raise the cost
of insurance premiums or refuse to write insurance policies for hospital
facilities. Also, a tightening of the reinsurance market has affected property,
auto and excess liability insurance carriers. Accordingly, the costs of all
insurance premiums have increased.

      A significant portion of our business is concentrated in certain markets
      and the respective economic conditions or changes in the laws affecting
      our business in those markets could have a material adverse effect on our
      operating results.

      We receive all of our inpatient services revenue from operations in Orange
County, California. The economic condition of this market could affect the
ability of our patients and third-party payors to reimburse us for our services,
through its effect on disposable household income and the tax base used to
generate state funding for Medicaid programs. An economic downturn, or changes
in the laws affecting our business in our market and in surrounding markets,
could have a material adverse effect on our financial position, results of
operations and cash flows.

      There is a lack of an active public market for our common stock.

      Our common stock is listed for trading on the Over-the-Counter Bulletin
Board. There can be no assurance that a market will develop or continue for our
common stock. Our common stock may be thinly traded, if traded at all, and is
likely to experience significance price fluctuations. In addition, our stock is
defined as a "penny stock" under Rule 3a51-1 adopted by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended. In
general, a "penny stock" includes securities of companies which are not listed
on the principal stock exchanges or the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or National Market System ("NASDAQ
NMS") and have a bid price in the market of less than $5.00. "Penny stocks" are


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subject to Rule 15g-9, which imposes additional sales practice requirements on
broker-dealers that sell such securities to persons other than established
customers and "accredited investors" (generally, individuals with net worth in
excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together
with their spouses, or individuals who are officers or directors of the issuer
of the securities). For transactions covered by Rule 15g-9, a broker-dealer must
make a special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. Consequently, this
rule may adversely affect the ability of broker-dealers to sell our common
stock, and therefore, may adversely affect the ability of our stockholders to
sell common stock in the public market.

ITEM 2.   PROPERTIES

      The Company uses approximately 3,400 square feet of office space within an
office facility that is leased to Mogel Management, LLC, a company owned by its
senior executive officers, Bruce Mogel, Larry B. Anderson and James T. Ligon.
The Company reimburses Mogel Management, LLC for its use of space in the amount
of $5,717 per month.

      In March 2005, the Company completed the acquisition of the Hospitals. At
the closing of the acquisition, the Company transferred all of the fee interests
in the real estate acquired from Tenet (the "Hospital Properties") to Pacific
Coast Holdings Investments, LLC ("PCHI"). The Company entered into a Triple Net
Lease, dated March 7, 2005 (the "Triple Net Lease"), under which it leased back
from PCHI all of the real estate that it transferred to PCHI. The Triple Net
Lease covers the properties listed on the table below.


                                       8
<PAGE>

<TABLE>
<CAPTION>
                                           Approximate Aggregate Square                       Initial Lease
           Name of Property                           Footage                Lease Rate        Expiration
-----------------------------------------------------------------------------------------------------------
<S>                                         <C>                             <C>               <C>
Western Medical Center-Santa Ana                      360,000                                 Feb. 28, 2030
1001 North Tustin Ave.                                                      See note 1.
Santa Ana, CA 92705

Administrative Building at                             40,000                                 Feb. 28, 2030
1301 N. Tustin Ave.                                                         See note 1.
Santa Ana, CA

Western Medical Center-Anaheim                        132,000                                 Feb. 28, 2030
1025 South Anaheim Blvd.                                                    See note 1.
Anaheim, CA 92805

Parking lot at                                         56,000                                 Feb. 28, 2030
979 South Anaheim Blvd.                                                     See note 1.
Anaheim, CA 92805

Coastal Communities Hospital                          115,000                                 Feb. 28, 2030
2701 South Bristol St.                                                      See note 1.
Santa Ana, CA 92704

Doctor's    Hospital   Medical   Office                37,000                                March 30, 2009
Building                                                                    See note 2.
1901/1905 N. College Ave.
Santa Ana, CA 92706

(If  acquired  by the  Company  or PCHI     25,000 (aggregate)                               March 30, 2009
during 2005:)                                                               See note 2.

22 Condominium Units
Hospital Department (WMCSA)
999 North Tustin Ave.
Santa Ana, CA 92705
</TABLE>
      ----------------------------
      (1) Initial monthly lease rate for all five properties equals one-twelfth
      of (a) the amount obtained by multiplying $50 million by the sum of the
      average annual interest rate charged on the loan secured by the first lien
      deed of trust on the Hospital Properties for the preceding month (the
      "Real Estate Loan") plus the "landlord's spread" (for the first year, the
      difference between 12% and the annual interest rate on the Real Estate
      Loan up to 2.5%, and then 2.5% thereafter), plus (b) beginning on the
      earlier of the refinancing of the Hospital Properties or March 8, 2007,
      $2.5 million.

      (2) Initial monthly lease rate for all of the medical office properties
      equals the rent received from the tenants of these properties less the
      actual monthly costs to operate the properties, including insurance and
      real property taxes.


ITEM 3.  LEGAL PROCEEDINGS

      We are not a party to any legal proceedings.

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

      There was no matter submitted to a vote of our security holders during the
fourth quarter of our fiscal year ending December 31, 2004.


                                       9
<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS


      There is no organized or established trading market for our Company Stock.
The Company's common stock is listed for trading on the OTC Bulletin Board under
the symbol "IHCH.BB". There currently is a very limited public market for the
Company's common stock and no assurance can be given that a large public market
will develop in the future. The trading market for the Common Stock is extremely
thin. In view of the lack of an organized or established trading market for the
Common Stock and the extreme thinness of whatever trading market may exist, the
prices reflected on the chart as reported on the Bulletin Board may not be
indicative of the price at which any prior or future transactions were or may be
effected in the Common Stock. Stockholders are cautioned against drawing any
conclusions from the data contained herein, as past results are not necessarily
indicative of future stock performance.

      The following table sets forth the high and low bid price for the
Company's Common Stock for each quarter for the period from January 1, 2003
through December 31, 2004, as quoted on the Over-the-Counter Bulletin Board.
Such Over-the-Counter market quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission, and may not necessarily represent
actual transactions.

      YEAR            PERIOD          HIGH         LOW
      ----            ------          ----         ---
      2003       First Quarter       $0.51        $0.40
                 Second Quarter      $1.50        $0.40
                 Third Quarter       $1.50        $0.40
                 Fourth Quarter*     $2.00        $0.51
      2004       First Quarter       $3.15        $0.65
                 Second Quarter      $1.00        $0.65
                 Third Quarter       $0.70        $0.15
                 Fourth Quarter      $0.62        $0.25

      -----------------------
      *     Note: Messrs. Mogel, Anderson and Ligon acquired control of the
            Company on November 18, 2003. Prior to that date the Company was not
            engaged in any material operations.

      As of the date of this report, there were approximately 237 record holders
of the Company's common stock; this number does not include an indeterminate
number of stockholders whose shares may be held by brokers in street name. The
Company has not paid and does not expect to pay any dividends on its shares of
common stock for the foreseeable future, as any earnings will be retained for
use in the business.

      The Company currently has no compensation plans under which equity
securities of the Company are authorized for issuance.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

      During the fiscal year ended December 31, 2004 covered by this Report, we
were primarily a development stage company with no material operations and no
revenue from operations. On September 29, 2004, the Company entered into a
definitive agreement to acquire four hospitals from subsidiaries of Tenet
Healthcare Corporation, 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 (the "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.


                                       10
<PAGE>

      Our plan of operation over the next 12 months is to integrate and
efficiently operate the four Hospitals in order to achieve profitability from
operations. We may also seek additional acquisitions of hospitals or health care
facilities in the future when opportunities for profitable growth arise. In
addition, we plan in the future to seek other sources of long-term financing to
replace our current outstanding debt at lower interest rates.

      We believe that we can satisfy our cash requirements over the next 12
months through internal sources. However there can be no assurance that we will
not require additional cash financing over the next 12 months, or that such
capital will be available to us at all or on terms that are acceptable to us.
Our failure to obtain the necessary amount of working capital to fund our
operations as currently anticipated could have a material, adverse effect upon
our capacity to grow or continue our operations. In addition, if we need to
raise additional equity financing, the sale of our equity securities may be
issued at a price per share significantly below the then trading prices listed
for our common stock on the OTC Bulletin Board and thus may be dilutive to our
current stockholders.

      During the year ended December 31, 2004, the Company earned no revenues.
At December 31, 2004, the Company had no off-balance sheet arrangements, as
defined by Securities and Exchange Commission Regulation S-B Item 303(c).

ITEM 7. FINANCIAL STATEMENTS

The following financial statements are filed as a part of this report beginning
on page F-1:

      Page   Description

      F-2    Auditors Report of Ramirez International dated March 30, 2005.

      F-3    Consolidated Balance Sheet as of December 31, 2004 and 2003.

      F-4    Consolidated Statement of Operations
             for years ended December 31, 2004 and 2003, and cumulative
             from inception, July 31, 1984, through December 31, 2004.

      F-5    Consolidated Statement of Shareholders' Equity from Inception,
             July 31, 1984, through December 31, 2004.

      F-6    Consolidated Statement of Cash Flow for years ended December 31,
             2004 and 2003, and from Inception, July 31, 1984, through
             December 31, 2004.

      F-7    Notes to Consolidated Financial Statements.


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

      None.

ITEM 8A.  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


                                       11
<PAGE>

Company's Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective.

      There have been no significant changes in the Company's internal controls
or in other factors that could significantly affect the internal controls
subsequent to the date the Company completed its evaluation.

ITEM 8B. OTHER INFORMATION

      None.

                                    PART III

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

      The following table contains certain information concerning our directors
and executive officers:

<TABLE>
<CAPTION>
             Name                    Age       Positions with the Company         Date Became Director
-----------------------------        ---       --------------------------         --------------------
<S>                                 <C>     <C>                                     <C>
Anil V. Shah, M.D.                   55     Executive Chairman of the Board         January 31, 2005

Bruce  Mogel.................        47     Director, Chief Executive Officer       November 18, 2003

Larry B. Anderson ...........        56     Director, President                     November 18, 2003

James T. Ligon...............        63     Director, Chief Financial Officer       November 18, 2003

Daniel J. Brothman...........        50     Senior Vice President, Operations              N/A
</TABLE>

      Dr. Anil V. Shah is Executive Chairman of the Board of Directors of the
Company. He is also the manager of Orange County Physicians Investment Network,
LLC. Dr. Shah is a Board certified cardiologist active in practice for the last
23 years. He is an interventional and nuclear cardiologist and also performs
cutting edge imaging techniques including CT angiography of the heart. Dr. Shah
was a fellow in cardiology and subsequently a research fellow in nuclear
cardiology at the VA Hospital Wadsworth and UCLA School of Medicine. He has held
several positions at hospitals where he practices and has been an active speaker
at various forums in his field.

      Bruce Mogel, who is Chief Executive Officer and director of the Company,
has over 25 years of experience in operational management and has held several
lead executive roles in the healthcare field. Most recently, from 1999-2002, Mr.
Mogel served as Executive Vice President of Operations for Doctors' Community
Healthcare Corp, where he was responsible for the operations and profitability
of five acute care hospitals and one psychiatric hospital, and managed a team of
six hospital CEOs and other senior management members. Mr. Mogel earned his
Bachelor's degree from The State University of New York at Buffalo with a degree
in English.

      Larry B. Anderson, who is President and director of the Company, has over
20 years of senior level executive experience in an enterprise with over $65
billion per year in sales. A California licensed attorney since 1975, Mr.
Anderson specializes in employment and business law matters, including
collective bargaining, arbitrations, unfair labor practices and court cases as
well as transactional work in contracts and due diligence. From 2002-2003, as
the Executive Vice President, Human Resources and General Counsel, Litigation,
Mr. Anderson managed all litigation for a seven hospital chain in Southern
California. Mr. Anderson earned his Bachelor of Arts degree in Political Science
from California State University, Long Beach, and his law degree from Loyola
University.

      James T. Ligon, who is Chief Financial Officer and director of the
Company, launched and operated several successful businesses, including JAMAR
Associates, a California healthcare consulting company. He also has over 30
years of hospital experience in California, having been in charge of the Finance
and Accounting functions at Robert F. Kennedy Medical Center, Brotman Medical
Center and Bellflower Hospitals, among others. Mr. Ligon has substantial
experience in, and knowledge of, hospital finance, accounting and
administration. Mr. Ligon has a BBA degree in Accounting and an MBA Degree.

      Daniel J. Brothman, who is Senior Vice President, Operations, of the
Company and Chief Executive Officer of Western Medical Center Santa Ana, is an
experienced single and multi-hospital operations executive. He has spent the
last five years building the Western Medical Center in Santa Ana for Tenet
Healthcare, and improved its performance with increasing EBITDA each successive
year from 1999-2002. Mr. Brothman also ran Columbia Healthcare's Utah Division
from 1996-1998. Mr. Brothman has in excess of 30 years experience in hospital
administration. Mr. Brothman earned his Bachelor of Arts degree from Washington
University at St. Louis, and his Master's in Health Care Administration from the
University of Colorado at Denver.


                                       12
<PAGE>

      The Company does not currently have an Audit Committee of the Board of
Directors or a Nominating Committee. The entire Board of Directors performs the
functions of those committees. None of the members of the Board of Directors are
considered "independent" under the description of independence used for
Nasdaq-listed companies. The Board of Directors has determined that James Ligon
is an "audit committee financial expert" as defined in the SEC rules.

Code of Ethics

      We have  adopted a Code of Business  Conduct and Ethics that  applies to
our employees  (including our principal  executive  officer,  chief  financial
officer  and  controller)  and  directors.  Our Code of  Business  Conduct and
Ethics can be  obtained  free of charge by sending a request to our  Corporate
Secretary to the following  address:  Integrated  Healthcare  Holdings,  Inc.,
Attn:  James  T.  Ligon,  695  Town  Center  Drive,  Suite  260,  Costa  Mesa,
California 92626.

Section 16(a) Beneficial Ownership Reporting Compliance

      Section 16(a) of the Securities Exchange Act of 1934 requires our officers
and directors, and persons who own more than 10% of a registered class of our
equity securities, to file reports of ownership and changes in ownership with
the SEC. Officers, directors and greater than 10% stockholders are required by
SEC regulation to furnish us with copies of all Section 16(a) reports they file.

      Based solely upon the copies of Section 16(a) reports which we received
from such persons or written representations from them regarding their
transactions in our common stock, we believe that, during the year ended
December 31, 2004, all Section 16(a) filing requirements applicable to our
officers, directors and greater than 10% beneficial owners were met in a timely
manner.

ITEM 10. EXECUTIVE COMPENSATION

      The following table sets forth compensation information during 2004 and
2003 for services rendered to us by each of our executive officers as of
December 31, 2004 in all capacities, other than as directors.

<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE

                                                 Annual Compensation          Long-Term Compensation
                                                ---------------------   ----------------------------------
                                                                                 Awards            Payouts
                                                                        -----------------------    -------
                                                                        Restricted   Securities
                                                         Other Annual   Stock        Underlying     LTIP      All Other
                                     Salary     Bonus    Compensation     Awards    Option/SARs    Payouts   Compensation
   Name and Position       Year         $         $           $             $       and Warrants      $            $
   -----------------       ----      ------     -----    ------------   ----------  ------------   -------   ------------
<S>                       <C>        <C>          <C>         <C>           <C>          <C>          <C>           <C>
Bruce Mogel               2004       111,500    12,500        0             0            0            0             0
Chief Executive Officer   2003          0         0           0             0            0            0             0

Larry B. Anderson         2004       101,500    12,500        0             0            0            0             0
President                 2003          0         0           0             0            0            0             0

James T. Ligon            2004       116,500    12,500        0             0            0            0             0
Chief Financial Officer   2003          0         0           0             0            0            0             0
</TABLE>
      ----------------------------

      During the periods covered by this table, none of the Company's executive
officers were granted any stock option or stock appreciation right; accordingly,
no tables relating to such items have been included within this Item. There are
no standard arrangements pursuant to which the Company's directors are
compensated for any services provided as director. No additional amounts are
payable to the Company's directors for committee participation or special
assignments.


                                       13
<PAGE>

Employment Contracts, Severance Agreements and Change of Control Arrangements

      In February 2005, we entered into three-year employment agreements with
Messrs. Mogel, Anderson and Ligon, with each agreement on the following terms:

            o     Base salary of $360,000 per year;
            o     Bonus as determined by the Board of Directors;
            o     Stock options for 1,000,000 shares, vesting annually in three
                  equal installments;
            o     Standard medical and dental insurance;
            o     Up to four weeks vacation annually;
            o     Monthly auto allowance of $1,000, and use of cellular
                  telephone; and
            o     Twelve months severance pay upon termination without cause or
                  resignation for cause.

      The Company also intends to enter into an employment agreement with Dr.
Shah, on terms to be determined.


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

      The following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of March 25, 2005, unless otherwise
noted, by:

o     each shareholder known to us to own beneficially more than 5% of our
      common stock;
o     each of our directors and each of our executive officers at December 31,
      2004; and
o     all of our current directors and executive officers as a group.

      Except as otherwise noted below, the address of each person or entity
listed on the table is 695 Town Center Drive, Suite 260, Costa Mesa, California
92626.

<TABLE>
<CAPTION>
                                                                                Amount and
                                                                                Nature of
                                                                                Beneficial    Percentage
                                             Name                              Ownership(1)    of Total
                                             ----                              ------------   ----------
<S>                       <C>                                                 <C>               <C>
   DIRECTORS AND EXECUTIVE OFFICERS
          Dr. Anil V. Shah(1)..................................................96,100,000(2)    77.9%(2)
          Bruce Mogel.......................................................... 5,376,000        4.6%
          Larry B. Anderson.................................................... 5,376,000        4.6%
          James T. Ligon....................................................... 5,376,000        4.6%
   All current directors and executive officers as a group (5 persons)........112,228,000       95.1%
   PRINCIPAL SHAREHOLDERS (other than those named above)
          Orange County Physicians Investment Network, LLC ("OCPIN") 1.........96,100,000(2)    77.9%(2)
</TABLE>


      ----------------------------
      (1) Dr. Shah is the managing member and part owner of OCPIN. Dr. Shah and
      OCPIN may be deemed to be a "group" for purposes of Section 13(d)(3) of
      the Securities Exchange Act of 1934. Dr. Shah disclaims beneficial
      ownership of all shares held by OCPIN except to the extent of his
      pecuniary interest therein.

      (2) Includes 5,400,000 shares that may be acquired within 60 days under
      the terms of a Stock Purchase Agreement with the Company dated as of
      January 28, 2005.

      The Company currently has no compensation plans under which equity
securities of the Company are authorized for issuance.


                                       14
<PAGE>

      ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The following is a summary of certain transactions occurring in the last
two years between the Company and its directors, officers and 5% or greater
shareholders (other than compensatory arrangements which are discussed above):

      In January 2004, the Company began reimbursing Mogel Management, LLC for
leased office space. This transaction is described above under Item 2.
Properties.

      On January 1, 2004, the Company acquired Mogel Management Group, Inc., an
operating company owned by Messrs. Mogel, Anderson and Ligon, for promissory
notes with an aggregate principal amount of $60,000. The notes are due on
December 31, 2004 and bear interest at the rate of six percent per year.

      On January 1, 2004, Messrs. Mogel, Ligon and Anderson executed Employment
Agreements with the Company, which are described above under Item 10. Executive
Compensation, and also filed as Exhibits 10.1, 10.2 and 10.3 to this Report.

      On November 16, 2004, the Company entered into a Purchase Option Agreement
(the "Purchase Option Agreement") with Dr. Anil V. Shah or his assignee, OCPIN,
granting to OCPIN an option (the "Purchase Option") to (i) purchase up to
50,000,000 shares of common stock of the Company for an aggregate of $15,000,000
and (ii) invest $2,500,000 for a 49% membership interest in a new limited
liability company (the "Real Estate LLC") to be formed for the purpose of
holding real estate which the Company agreed to acquire from subsidiaries of
Tenet Healthcare Corporation. The Company also granted a stock option to Dr.
Anil V. Shah individually providing that, if the Purchase Option is exercised in
full by OCPIN, the Company will provide Dr. Shah with an additional right to
purchase 10,000,000 shares of common stock of the Company for $0.25 per share.

      On January 28, 2005, the Company entered into a Stock Purchase Agreement
with OCPIN, under which (i) the Purchase Option Agreement was terminated, and
(ii) OCPIN agreed to invest $30,000,000 in the Company for an aggregate of
108,000,000 shares of common stock of the Company.

      Also, on January 27, 2005, the Company entered into a Rescission,
Restructuring and Assignment Agreement (the "Restructuring Agreement") with Kali
P. Chaudhuri, M.D., William E. Thomas, Anil V. Shah, M.D. The Restructuring
Agreement amended and canceled certain portions of an agreement under which Dr.
Chaudhui agreed to acquire stock in the Company. Also under the Restructuring
Agreement, (i) OCPIN agreed to pay or cause to be paid to Dr. Chaudhuri his
escrow deposit of $10,000,000 plus accrued interest, and (ii) OC-PIN and Dr.
Chaudhuri agreed to form a new real estate holding company to own and operate
the Real Estate LLC, with Dr. Chaudhuri to own no more than 49% of the Real
Estate LLC.

      On March 7, 2005, upon acquisition of the Hospitals, the Company
transferred its right to all of the fee interests in the Hospital Properties to
Pacific Coast Holdings Investments, LLC ("PCHI"). PCHI is 51% owned by West
Coast Holdings, LLC (owned in part by Dr. Anil Shah) and 49% by Ganesha Realty
LLC (owned in part by Dr. Kali Chaudhuri). The Company entered into a Triple Net
Lease under which it leased back from PCHI all of the Hospital Properties.

ITEM 13. EXHIBITS

      Exhibits required to be filed are listed below and except where
incorporated by reference, immediately follow the Financial Statements. Each
management or compensation plan is marked with an asterisk (*). Each document
filed with this report is marked with two asterisks (**).

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

2.1         Asset Sale Agreement, dated September 29, 2004, by and among the
            Registrant and certain subsidiaries of Tenet Healthcare Corporation
            (AHM CGH, Inc., Health Resources Corporation of America -
            California, SHL/O Corp., and UWMC Hospital Corporation)
            (incorporated herein by reference from Exhibit 10.2 to the
            Registrant's Current Report on Form 8-K filed with the Commission on
            November 22, 2004).

2.2         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).

2.3         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).

2.4         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).

2.5         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).

3.1         Articles of Incorporation of the Registrant (incorporated herein by
            reference from Exhibits 3.3, 3.4 and 3.6 to Form 10-SB filed by the
            Registrant on December 16, 1997).

3.2         Certificate of Amendment to Articles of Incorporation of the
            Registrant (incorporated by reference to Appendix A to Registrant's
            Definitive Information Statement on Schedule 14C filed by the
            Registrant on October 20, 2004).

3.3         Bylaws of the Registrant. **

10.1        Employment Agreement with Bruce Mogel, dated January 1, 2004*
            (incorporated herein by reference from Exhibit 10.1 to the
            Registrant's Transitional Report on Form 10-K filed with the
            Commission on April 15, 2004).

10.2        Employment Agreement with Larry B. Anderson, dated January 1, 2004*
            (incorporated herein by reference from Exhibit 10.2 to the
            Registrant's Transitional Report on Form 10-K filed with the
            Commission on April 15, 2004).

10.3        Employment Agreement with James T. Ligon, dated January 1, 2004*
            (incorporated herein by reference from Exhibit 10.3 to the
            Registrant's Transitional Report on Form 10-K filed with the
            Commission on April 15, 2004).

10.4        Secured Convertible Note Purchase Agreement, dated as of September
            28, 2004, by and between the Registrant and Kali P. Chaudhuri, M.D.
            (incorporated herein by reference from Exhibit 10.1 to the
            Registrant's Current Report on Form 8-K filed with the Commission on
            October 5, 2004).

10.5        First Amendment to Secured Convertible Note Purchase Agreement,
            dated as of November 16, 2004, by and between the Registrant and
            Kali P. Chaudhuri, M.D. (incorporated herein by reference from
            Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed
            with the Commission on November 22, 2004).

10.6        Purchase Option Agreement, dated as of November 16, 2004, by and
            between the Registrant and Anil V. Shah, M.D. (incorporated herein
            by reference from Exhibit 10.2 to the Registrant's Current Report on
            Form 8-K filed with the Commission on November 22, 2004).

10.7        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).

10.8        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).

10.9        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).

10.10       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).

10.11       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).

10.12       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).

10.13       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).

10.14       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).

10.15       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).

10.16       Employment Agreement with Bruce Mogel, dated February 25, 2005. * **

10.17       Employment Agreement with Larry B. Anderson, dated February 25,
            2005. * **

10.18       Employment Agreement with James T. Ligon, dated February 25, 2005. *
            **

10.19       Employment Agreement with Milan Mehta, dated February 25, 2005. * **

10.20       Employment Agreement with Hari S. Lal, dated February 25, 2004. * **

10.21       Employment Agreement with Daniel J. Brothman, dated December 31,
            2004. * **

10.22       Employment Agreement with Steve Blake, dated March 21, 2005. * **

21.1        The subsidiaries of the Registrant are WMC-SA, Inc., a California
            corporation, WMC-A, Inc., a California corporation, Chapman Medical
            Center, Inc., a California corporation, Coastal Communities
            Hospital, Inc., a California corporation, and Mogel Management,
            Inc., a Nevada corporation.

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 **


                                       15
<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

      The following table sets forth the aggregate fees that we incurred for
audit and non-audit services provided by Ramirez International, which acted as
independent auditors for the year ended December 31, 2004 and performed audit
services for us during this period. The audit fees include only fees that are
customary under generally accepted auditing standards and are the aggregate fees
that we incurred for professional services rendered for the audit of our
financial statements for the year ended December 31, 2004.

          Nature of fees            December 31, 2004
          --------------            -----------------
      Audit Fees (Financial)                $24,330
      Audit Related Fees                         $0
      Tax Fees                                   $0
      Other Fees                                 $0

      The full Board of Directors pre-approves all audit and permissible
non-audit services to be performed by the independent auditors.


                                       16
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.


                                    INTEGRATED HEALTHCARE HOLDINGS, INC.

  Dated: March 31, 2005             By:  /s/ Bruce Mogel
                                         -------------------------
                                         Bruce Mogel
                                         Chief Executive Officer
                                         (Principal Executive Officer)

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

  Dated: March 31, 2005             By:  /s/ Bruce Mogel
                                         -------------------------
                                         Bruce Mogel
                                         Director and Chief Executive  Officer
                                         (Principal Executive Officer)

  Dated: March 31, 2005             By:  /s/ Larry B. Anderson
                                         -------------------------
                                         Larry B. Anderson
                                         Director

  Dated: March 31, 2005             By:  /s/ James T. Ligon
                                         -------------------------
                                         James T. Ligon
                                         Director and Chief Financial  Officer
                                         (Principal Financial Officer)

  Dated: March 31, 2005             By:  /s/ Anil V. Shah, M.D.
                                         -------------------------
                                         Anil V. Shah, M.D.
                                         Director


                                       17
<PAGE>

                                  EXHIBIT INDEX

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

2.1         Asset Sale Agreement, dated September 29, 2004, by and among the
            Registrant and certain subsidiaries of Tenet Healthcare Corporation
            (AHM CGH, Inc., Health Resources Corporation of America -
            California, SHL/O Corp., and UWMC Hospital Corporation)
            (incorporated herein by reference from Exhibit 10.2 to the
            Registrant's Current Report on Form 8-K filed with the Commission on
            November 22, 2004).

2.2         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).

2.3         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).

2.4         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).

2.5         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).

3.1         Articles of Incorporation of the Registrant (incorporated herein by
            reference from Exhibits 3.3, 3.4 and 3.6 to Form 10-SB filed by the
            Registrant on December 16, 1997).

3.2         Certificate of Amendment to Articles of Incorporation of the
            Registrant (incorporated by reference to Appendix A to Registrant's
            Definitive Information Statement on Schedule 14C filed by the
            Registrant on October 20, 2004).

3.3         Bylaws of the Registrant. **

10.1        Employment Agreement with Bruce Mogel, dated January 1, 2004*
            (incorporated herein by reference from Exhibit 10.1 to the
            Registrant's Transitional Report on Form 10-K filed with the
            Commission on April 15, 2004).

10.2        Employment Agreement with Larry B. Anderson, dated January 1, 2004*
            (incorporated herein by reference from Exhibit 10.2 to the
            Registrant's Transitional Report on Form 10-K filed with the
            Commission on April 15, 2004).

10.3        Employment Agreement with James T. Ligon, dated January 1, 2004*
            (incorporated herein by reference from Exhibit 10.3 to the
            Registrant's Transitional Report on Form 10-K filed with the
            Commission on April 15, 2004).

10.4        Secured Convertible Note Purchase Agreement, dated as of September
            28, 2004, by and between the Registrant and Kali P. Chaudhuri, M.D.
            (incorporated herein by reference from Exhibit 10.1 to the
            Registrant's Current Report on Form 8-K filed with the Commission on
            October 5, 2004).

10.5        First Amendment to Secured Convertible Note Purchase Agreement,
            dated as of November 16, 2004, by and between the Registrant and
            Kali P. Chaudhuri, M.D. (incorporated herein by reference from
            Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed
            with the Commission on November 22, 2004).

10.6        Purchase Option Agreement, dated as of November 16, 2004, by and
            between the Registrant and Anil V. Shah, M.D. (incorporated herein
            by reference from Exhibit 10.2 to the Registrant's Current Report on
            Form 8-K filed with the Commission on November 22, 2004).

10.7        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).

10.8        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).

10.9        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).

10.10       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).

10.11       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).

10.12       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).

10.13       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).

10.14       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).

10.15       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).

10.16       Employment Agreement with Bruce Mogel, dated February 25, 2005. * **

10.17       Employment Agreement with Larry B. Anderson, dated February 25,
            2005. * **

10.18       Employment Agreement with James T. Ligon, dated February 25, 2005. *
            **

10.19       Employment Agreement with Milan Mehta, dated February 25, 2005. * **

10.20       Employment Agreement with Hari S. Lal, dated February 25, 2004. * **

10.21       Employment Agreement with Daniel J. Brothman, dated December 31,
            2004. * **

10.22       Employment Agreement with Steve Blake, dated March 21, 2005. * **

21.1        The subsidiaries of the Registrant are WMC-SA, Inc., a California
            corporation, WMC-A, Inc., a California corporation, Chapman Medical
            Center, Inc., a California corporation, Coastal Communities
            Hospital, Inc., a California corporation, and Mogel Management,
            Inc., a Nevada corporation.

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 **

<PAGE>


                       Financial Statements and Report of
                    Independent Certified Public Accountants

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)

                           December 31, 2004 and 2003


                                Table of Contents


Report of Independent Registered Public Accounting Firm..................... F-2

Consolidated Financial Statements

         Consolidated Balance Sheet......................................... F-3

         Consolidated Statement of Operations............................... F-4

         Consolidated Statement of Stockholders' Equity..................... F-5

         Consolidated Statement of Cash Flows............................... F-6

         Notes to Consolidated Financial Statements......................... F-7


                                      F-1
<PAGE>

             Report of Independent Registered Public Accounting Firm


The Board of Directors of
Integrated Healthcare Holdings, Inc.:

We have  audited  the  accompanying  consolidated  balance  sheet of  Integrated
Healthcare  Holdings,  Inc. and subsidiary (a Development Stage Enterprise) (the
"Company")  as of  December  31,  2004  and 2003  and the  related  consolidated
statements of  operations,  stockholders'  equity and cash flows for each of the
years then ended and the period from inception (July 31, 1984) through  December
31, 2004. These consolidated  financial statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
statements based on our audit. The Company's financial statements as of June 30,
2003 and for the period July 31, 1984 (date of inception)  through June 30, 2003
were audited by other auditors whose report,  dated September 8, 2003, expressed
an  unqualified  opinion with an explanatory  paragraph  regarding the Company's
ability to  continue as a going  concern.  The other  auditors'  report has been
furnished to us, and our opinion,  insofar as it relates to the amounts included
for such period, is based solely on the report of such other auditors.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material  respects,   the  financial  position  of  Integrated
Healthcare  Holdings,  Inc. and  subsidiary as of December 31, 2004 and 2003 and
the  results  of their  operations  and cash  flows for each of the years  ended
December  31,  2004 and 2003,  and for the  period  from July 31,  1984 (date of
inception) to December 31, 2004 in conformity with generally accepted accounting
principles in the United States of America.

RAMIREZ INTERNATIONAL
Financial & Accounting Services, Inc.

March 30, 2005
Irvine, CA


                                      F-2
<PAGE>


                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                           Consolidated Balance Sheet
                                  December 31,

        ASSETS
                                                       2004          2003
                                                   ------------  ------------
Current assets
       Cash and cash equivalents                   $     69,454  $    265,000
       Prepaid expenses and other assets                 18,519            --
                                                   ------------  ------------
                                                         87,973       265,000

Property and equipment:
       Office equipment                                  41,445        26,537
       Furniture and fixtures                            27,347        21,095
                                                   ------------  ------------
                                                         68,792        47,632
       Accumulated depreciation                         (11,369)         (651)
                                                   ------------  ------------
                                                         57,423        46,981

Investment in hospital asset purchase                11,142,145            --
Intangible asset, net of accumulated
       amortization of $57,819 and $6,424                44,970        96,366
Due from shareholders                                        --        60,000
                                                   ------------  ------------
       Total assets                                $ 11,332,511  $    468,347
                                                   ============  ============


         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
       Accounts payable                            $    156,142  $     15,727
       Accrued compensation and benefits                800,313            --
       Secured notes payable                         11,264,013       100,000
                                                   ------------  ------------
         Total current liabilities                   12,220,468       115,727

Commitments and contingencies                                --            --

Stockholders' equity:
       Common stock, $0.001 par value; 250,000,000
        shares authorized; 20,780,000 and
        19,380,000 shares issued and
        outstanding, respectively                        20,780        19,380
       Additional paid in capital                     1,199,621       551,021
       Stock subscription receivable                    (10,000)           --
       Deficit accumulated during
        the development stage                        (2,098,358)     (217,781)
                                                   ------------  ------------
         Total stockholders' equity                    (887,957)      352,620

                                                   ------------  ------------
Total liabilities and stockholders' equity         $ 11,332,511  $    468,347
                                                   ============  ============


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


                                      F-3
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                      Consolidated Statement of Operations

<TABLE>
<CAPTION>

                                                                                 Year Ended
                                                                     ------------------------------------
                                              Cumulative from
                                                 inception
                                             (July 31, 1984)
                                                 through
                                             December 31, 2004      December 31,2004       December 31, 2003
                                               ------------           ------------           ------------
<S>                                            <C>                    <C>                    <C>
Revenue                                        $         --           $         --           $         --

General and administrative expenses               2,057,972              1,840,191                 28,132
                                               ------------           ------------           ------------
Loss from operations before provision
  for income taxes                               (2,057,972)            (1,840,191)               (28,132)

Provision for income taxes                               --                     --                     --
                                               ------------           ------------           ------------
Net loss                                       $ (2,057,972)          $ (1,840,191)          $    (28,132)
                                               ============           ============           ============

Basic and diluted net loss per share                                  $      (0.09)          $      (0.01)

Weighted average shares outstanding                                     19,986,750              3,470,589
</TABLE>

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


                                      F-4
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                 Consolidated Statement of Stockholder's Equity

<TABLE>
<CAPTION>
                                                                                          Deficit
                                                                                        Accumulated
                                       Common Stock          Additional      Stock       During the
                                --------------------------    Paid-in     Subscription  Development
                                    Shares       Amount       Capital     Receivable       Stage          Total
                                ------------- ------------ ------------- ------------  ------------   -----------
<S>                                <C>            <C>         <C>          <C>          <C>            <C>
Balance, December 31, 2002          1,342,000      $ 1,342     $ 101,269    $     --     $ (189,649)    $ (87,038)

Issuance of common stock for
   relief of debt at $0.0062       16,128,000       16,128        83,872          --             --       100,000

Issuance of common stock for
  letter of indemnification at
  $0.0062 per share                   450,000          450         2,340          --             --         2,790

Issuance of common stock for
  cash at $0.25 per share           1,460,000        1,460       363,540          --             --       365,000

Net loss                                   --           --            --          --        (28,132)      (28,132)
                                ------------- ------------ ------------- ------------  ------------   -----------
Balance, December 31, 2003         19,380,000     $ 19,380     $ 551,021    $     --     $ (217,781)    $ 352,620

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

Issuance of common stock for
  cash at $0.25 per share             200,000          200        49,800          --             --        50,000

Issuance of common stock for
  cash at $0.50 per share           1,180,000        1,180       588,820          --             --       590,000

Issuance of common stock for
  cash at $0.50 per share              20,000           20         9,980     (10,000)            --            --

Net loss                                   --           --            --          --     (1,840,191)   (1,840,191)
                                ------------- ------------ ------------- ------------  ------------   ------------
Balance, December 31, 2004         20,780,000     $ 20,780    $1,199,621    $ (10,000) $ (2,098,358)   $ (887,957)
                                ============= ============ ============= ============  ============   ===========
</TABLE>

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


                                      F-5
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                      Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
                                                                Cumulative
                                                                   From
                                                                Inception
                                                               (July 31, 1984)
                                                                  Through                Year Ended           Year Ended
                                                              December 31, 2004       December 31, 2004    December 31, 2003
                                                                ------------           ------------           ------------
<S>                                                             <C>                    <C>                    <C>
Cash flows from operating activities:
Net loss                                                        $ (2,057,972)          $ (1,840,191)          $    (28,132)
Adjustments to reconcile net loss to cash
  used in operating activities:
    Depreciation and amortization expense                             69,189                 62,114                  7,075
    Noncash forgiveness of debt                                      (19,745)               (60,000)                    --
    Increase in prepaids                                             (10,725)               (10,725)                    --
    Increase in accounts payable                                     146,142                130,415                 15,727
    Increase in accrued compensation and benefits                    800,313                800,313                     --
    Decrease in accounts payable - related party                          --                     --                  8,607
    Decrease in due to officers                                           --                     --                  4,355
                                                                ------------           ------------           ------------
      Net cash (used in) provided by operating activities         (1,072,798)              (918,074)                 7,632
                                                                ------------           ------------           ------------

Cash flows from investing activities:
    Purchase of property and equipment                               (68,792)               (21,160)               (47,632)
    Acquisition of MMG, Inc., net of cash acquired                     8,535                  8,535                     --
                                                                ------------           ------------           ------------
      Net cash used in investing activities                          (60,257)               (12,625)               (47,632)

Cash flows from financing activities:
    Proceeds from issuance of stock                                1,167,356                640,000                365,000
    Issuance of notes payable                                        121,868                121,868                     --
    Repayment of prommisory note                                    (100,000)              (100,000)                    --
    Advances from (to) shareholders                                   13,285                 73,285                (60,000)
                                                                ------------           ------------           ------------
      Net cash provided by financing activities                    1,202,509                735,153                305,000
                                                                ------------           ------------           ------------

Net increase (decrease) in cash                                       69,454               (195,546)               265,000
                                                                ------------           ------------           ------------

Cash and cash equivalents, beginning of period                            --                265,000                     --
                                                                ------------           ------------           ------------
Cash and cash equivalents, end of period                        $     69,454           $     69,454           $    265,000
                                                                ============           ============           ============


Supplemental Schedule of Noncash Financing Activities:
 Issuance of promissory notes for the initial
   investment in the Tenet Hospital Acquisition                 $ 11,142,145           $ 11,142,145           $         --

 Issuance of a promissory note in exchange
   for a letter of indemnification                              $    100,000           $         --           $    100,000

 Issuance of common stock for the
   relief of debt                                               $    100,000           $         --           $    100,000
</TABLE>

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


                                      F-6
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                   Notes to Consolidated Financial Statements
                           December 31, 2004 and 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

Consolidation - The consolidated  financial  statements  include the accounts of
Integrated  Healthcare  Holdings,  Inc.  ("the  Company")  and its wholly  owned
subsidiary,  Mogel Management Group, Inc. ("MMG"). All intercompany transactions
and balances have been eliminated in consolidation.

Company Operations - The Company has not engaged in any business activities that
have produced revenues and, therefore, is considered a development stage company
as defined in  Statement of Financial  Accounting  Standards  No. 7. The Company
seeks to acquire,  own, and operate hospitals and surgical  services  throughout
the United States.

The  accompanying  financial  statements  have been  prepared on a going concern
basis,   which   contemplates  the  realization  of  assets  and  settlement  of
obligations in the normal course of business.  The Company generated losses from
continuing  operations of $1,840,191 and $28,132 during the years ended December
31, 2004 and 2003,  respectively.  In addition, the Company had negative working
capital of $12,132,495 at December 31, 2004. These factors,  among others, raise
doubt about the Company's ability to continue as a going concern. In March 2005,
the Company completed its purchase of certain hospitals and has secured a credit
agreement  that  consists  of a $50 million  Acquisition  Loan and a $30 million
working  line of credit with a lender.  In  addition in March 2005,  the Company
converted its $10 million Secured Promissory Note to equity. Management believes
the Company has sufficient  access to funds and the ability to raise  additional
capital to meet its continuing obligations for the foreseeable future.

Cash and Cash  Equivalents  - The  Company  considers  all  highly  liquid  debt
investments  purchased  with a  maturity  of  three  months  or  less to be cash
equivalents.

Accounting  Estimates - The  preparation  of financial  statements in conformity
with generally  accepted  accounting  principles in the United States of America
required  management to make estimates and assumptions  that effect the reported
amounts of assets and  liabilities,  the  disclosures  of contingent  assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting  period.  Actual results could differ
from those estimated by management.

Stock-Based  Compensation - Statement of Financial Accounting Standards No. 123,
Accounting  for Stock  Based  Compensation,  encourages,  but does not  require,
companies to record  compensation  cost for  stock-based  employee  compensation
plans  at fair  value.  The  Company  has  chosen  to  account  for  stock-based
compensation  using the intrinsic value method  prescribed in previously  issued
standards. Accordingly,  compensation cost for stock options issued to employees
is  measured as the excess,  if any, of the fair market  value of the  Company's
stock at the date of grant over the amount an  employee  must pay to acquire the
stock.  Compensation  is charged to expense  over the  shorter of the service or
vesting period.  Stock options issued to non-employees  are recorded at the fair
value  of the  services  received  or the  fair  value  of the  options  issued,
whichever is more reliably  measurable,  and charged to expense over the service
period.  As of December 31, 2004,  the Company did not have any stock options or
warrants outstanding.


                                      F-7
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                   Notes to Consolidated Financial Statements
                           December 31, 2004 and 2003

Fair  Value  of  Financial  Instruments  -  The  Company  considers  all  liquid
interest-earning investments with a maturity of three months or less at the date
of purchase to be cash  equivalents.  Short-term  investments  generally  mature
between  three  months  and six  months  from the  purchase  date.  All cash and
short-term  investments are classified as available for sale and are recorded at
market using the specific identification method; unrealized gains and losses are
reflected  in other  comprehensive  income.  Cost  approximates  market  for all
classifications of cash and short-term investments.

Net Loss per Common Share - Net loss per share is calculated in accordance  with
Statement of Financial  Accounting  Standards No. 128, Earnings Per Share. Basic
net loss per share is based upon the weighted  average  number of common  shares
outstanding.  Diluted net loss per share is based on the assumption that options
are included in the calculation of diluted earnings per share, except when their
effect  would be  anti-dilutive.  Dilution is computed by applying  the treasury
stock  method.  Under  this  method,  options  and  warrants  are  assumed to be
exercised at the beginning of the period (or at the time of issuance, if later),
and as if funds  obtained  thereby  were used to  purchase  common  stock at the
average market price during the period.

Impairment of Long-Lived  Assets - The Company  continually  monitors  events or
changes  in  circumstances  that  could  indicate  that the  carrying  amount of
long-lived assets to be held and used,  including  intangible assets, may not be
recoverable.  The  determination  of  recoverability  is based on an estimate of
undiscounted  future  cash  flows  resulting  from the use of the  asset and its
eventual  disposition.  When impairment is indicated for a long-lived asset, the
amount of  impairment  loss is the  excess of net book  value  over fair  value.
Long-lived assets to be disposed of are reported at the lower of carrying amount
or fair value less costs to sell.  As of  December  31,  2004,  the  Company has
determined that no impairment of its long-lived assets exists.

Goodwill and  Intangible  Assets - On July 20, 2001,  the  Financial  Accounting
Standards  Board  (FASB)  issued  Statement of  Financial  Accounting  Standards
("SFAS")  141,  Business  Combinations,  and SFAS 142,  Goodwill and  Intangible
Assets. Under these new standards,  all acquisitions subsequent to June 30, 2001
must be  accounted  for using the  purchase  method of  accounting.  The cost of
intangible  assets with indefinite  lives and goodwill are no longer  amortized,
but are subject to an annual impairment test based upon its fair value.

Goodwill and intangible assets  principally  result from business  acquisitions.
The Company  accounts for business  acquisitions by assigning the purchase price
to  tangible  and  intangible  assets  and  liabilities.   Assets  acquired  and
liabilities  assumed  are  recorded  at their  fair  values;  the  excess of the
purchase price over the net assets acquired is recorded as goodwill.

Recently  Enacted  Accounting  Standards -  Statement  of  Financial  Accounting
Standards  ("SFAS")  No.  144,  "Accounting  for the  Impairment  or Disposal of
Long-Lived  Assets,"  No. 146,  "Accounting  for Costs  Associated  with Exit or
Disposal   Activities,"  SFAS  No.  147,   "Acquisitions  of  Certain  Financial
Institutions  - an  Amendment  of  FASB  Statements  No.  72 and  144  and  FASB
Interpretation No. 9," SFAS No. 148, "Accounting for Stock-Based  Compensation -
Transition  and  Disclosure - an Amendment of FASB  Statement No. 123," SFAS No.
149,  "Amendment  of  Statement  133  on  Derivative   Instruments  and  Hedging
Activities,"  and SFAS No. 150,  "Accounting for Certain  Financial  Instruments
with Characteristics of both Liabilities and Equity," were recently issued. SFAS
No. 144, 146, 147, 148, 149 and 150 have no current applicability to the Company
or their effect on the financial statements would not have been significant.


                                      F-8
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                   Notes to Consolidated Financial Statements
                           December 31, 2004 and 2003

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.

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.
The Company 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.  The Company is currently
assessing the potential impact of the new standard on its consolidated financial
statements  in connection  with the  Company's  sale  leaseback  transaction  in
connection  with the Tenet  Hospital  Acquisition in March 2005, as mentioned in
Notes 2, 5 and 6.

Restatement  - The  financial  statements  have been  restated  for all  periods
presented  to  reflect  a  4-for-1  forward  stock  split on April  4,  2002,  a
248.399-for-1  reverse stock split on April 23, 1997 and a 5-for-1 forward stock
split on December 9, 1988.

NOTE 2 - ACQUISITIONS

Tenet  Healthcare  Acquisition - On September 29, 2004 and amended as of January
1, 2005,  January 28, 2005, and February 28, 2005,  the Company  entered into an
Asset Sale Agreement  with Tenet  Healthcare  Corporation  ("Tenet") to purchase
four  hospitals  located  in  Orange  County,  California.  On  March  8,  2005,
Integrated Healthcare Holdings, Inc. (the "Company") announced the completion of
its $70-million  acquisition (the "Hospital Acquisition") of four Orange County,
California  hospitals and associated real estate from subsidiaries of Tenet. The
four hospitals that were acquired are: (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").  The Hospitals were assigned to
four wholly-owned  subsidiaries of the Company (the  "Subsidiaries")  formed for
the purpose of completing the Hospital Acquisition.


                                      F-9
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                   Notes to Consolidated Financial Statements
                           December 31, 2004 and 2003

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.

As part  of the  Company's  previously  announced  agreement  to  obtain  equity
financing  and  financing  commitments  of up to $30 million from Orange  County
Physicians  Investment Network,  LLC ("OC-PIN"),  at the closing of the Hospital
Acquisition  the Company  transferred  all of the fee  interests  in real estate
described in the preceding  paragraph (the "Transferred  Properties") to Pacific
Coast  Holdings  Investments,  LLC  ("PCHI").  PCHI is 51%  owned by West  Coast
Holdings,  LLC (owned in part by Dr.  Anil  Shah) and 49% by Ganesha  Realty LLC
(owned in part by Dr. Kali  Chaudhuri).  The Company  then entered into a triple
net lease  under  which it leased  back from PCHI all of the real estate that it
transferred to PCHI.

OC-PIN became the majority  shareholder of the Company in 2005 and is managed by
Dr.  Anil V.  Shah.  OC-PIN  is owned by Dr.  Shah  and a number  of  physicians
practicing at the Hospitals.

The  aggregate  purchase  price paid by the  Company  to Tenet for the  Hospital
Acquisition was (a) $70,000,000 (the "Purchase Price"),  minus (b) the amount of
Seller's capital lease  obligations with respect to the Hospitals on the Closing
Date,  if any,  that are assumed by the Company  pursuant to Section 1.11 of the
Third Amendment to the Asset Sale Agreement,  minus (c) the net present value on
the  Closing  Date  of  the  Employee  Loan  Liabilities,  minus  (d)  $750,000,
reflecting the credit made  available to the Company  hereunder for assuming the
Sick Pay  Amount at  Closing;  minus  (e)  $500,000,  the  appraised  value,  as
determined  by the  appraisal by FMV  Opinions,  Inc.,  of Seller's  partnership
interest in the Santa Ana Radiology Center partnership (the "Santa Ana Radiology
Center  Amount"),  which  amount  is the  price at which  Seller  will sell such
partnership  interest to the Santa Ana radiology Center partnership,  reflecting
the  treatment of such Santa Ana  Radiology  Center  partnership  interest as an
Excluded  Asset,  as  reflected  on  Schedule  1.10(y);  minus  (f)  $5,000,000,
reflecting  the  treatment  of the twenty two (22)  condominium  units  owned by
Seller located at 999 N. Tustin Ave., Santa Ana, CA (the "Condominium Units") as
Excluded Assets, as reflected on Schedule 1.10(y); and (g) the Accrued Paid Time
Off Amount on the Closing Date.

Upon the close of the Tenet Hospital  Requisition  on March 8,2005,  among other
purchase  price  adjustments,  there were current assets of  approximately  $8.1
million  added to the purchase  price and  liabilities  of  approximately  $16.6
million subtracted from the purchase price.

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.


                                      F-10
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                   Notes to Consolidated Financial Statements
                           December 31, 2004 and 2003

Rescission, Restructuring and Assignment Agreement - As of January 27, 2005, the
Company  entered a  Rescission,  Restructuring  and  Assignment  Agreement  (the
"Restructuring  Agreement")  with Kali P.  Chaudhuri,  M.D.  ("Dr.  Chaudhuri"),
William E. Thomas ("Thomas"), Anil V. Shah, M.D. ("Dr. Shah"), and Orange County
Physicians   Investment  Network,   LLC,  a  Nevada  limited  liability  company
("OC-PIN").

The Company and Dr. Chaudhuri are parties to a Secured Convertible Note Purchase
Agreement dated as of September 28, 2004, which was amended by a First Amendment
to Secured  Convertible  Note Purchase  Agreement  dated as of November 16, 2004
(collectively,  the "Purchase  Agreement"),  pursuant to which Dr. Chaudhuri was
issued a $500,000 Secured  Convertible  Promissory Note ("Convertible  Note"), a
$10,000,000  Secured  Promissory  Note  ("Secured  Note"),  and a  Stock  Option
Agreement dated November 16, 2004 ("Stock Option Agreement"). The Company was in
default of its  obligation to repay the  Convertible  Note by December 31, 2004.
The Company  desires that OC-PIN  invest in the Company.  Dr.  Chaudhuri and Dr.
Shah, an  authorized  representative  and affiliate of OC-PIN,  are parties to a
Non-Circumvention   Agreement   dated  November  11,  2004   ("Non-Circumvention
Agreement").  As a  condition  to  investment,  OC-PIN  has  requested  that the
Convertible  Note,  the Secured  Note,  the Stock Option  Agreement  and certain
provisions  of the  Agreement  be  rescinded  and  canceled,  and Dr.  Chaudhuri
restructure his financial  arrangements with the Company,  and that he terminate
the Non-Circumvention  Agreement. The parties acknowledge that Dr. Chaudhuri had
the right to acquire a majority  interest  in the  Company,  which  right he has
agreed  (subject to the conditions  herein) to rescind,  and accept in its place
stock purchase  warrants in favor of Dr. Chaudhuri and Thomas to acquire only up
to (and not to exceed) 24.9% of the Company's capital stock,  which warrants are
not  exercisable  for two years from the date of  issuance,  and the Company and
OC-PIN are willing to consent to this arrangement.

Pursuant to the Restructuring  Agreement,  the Purchase  Agreement was rescinded
and canceled, except for certain provisions which will remain in effect.

The  Company  has  agreed to issue to Dr.  Chaudhuri  (i) a new  non-convertible
secured  promissory  note  reflecting  amounts  loaned  to  the  Company  by Dr.
Chaudhuri as well as expenditures  made by Dr. Chaudhuri on the Company's behalf
or for the  Company's  benefit,  plus accrued  interest to date,  and (ii) a new
stock purchase warrant  reflecting the right to purchase shares of the Company's
Common Stock.  Dr.  Chaudhuri has assigned to Thomas  certain of his rights with
respect thereto,  to which assignments the Company and OC-PIN hereby consent. As
a result of the assignment,  the parties  acknowledge and agree that,  within 48
hours after the execution of this  Agreement,  but dated and effective as of the
date  of this  Agreement,  the  Company  shall  issue  to (A)  Dr.  Chaudhuri  a
non-convertible  secured promissory note, and in a principal amount equal to 80%
of the sum of all  amounts  loaned  by Dr.  Chaudhuri  to the  Company  or paid,
advanced  or  incurred  by Dr.  Chaudhuri  on behalf or for the  benefit  of the
Company, or in connection with the Purchase Agreement and related documents,  or
in connection with the Tenet  Transaction  (collectively,  the "Advances"),  (B)
Thomas a non-convertible  secured  promissory note, in substantially the form of
Exhibit  A-2,  and  in  a  principal   amount  equal  to  20%  of  the  Advances
(collectively,  the "New Notes"),  (C) Dr.  Chaudhuri a stock  purchase  warrant
reflecting the right to purchase up to 60,000,000 shares of the Company's Common
Stock (but not to exceed 20% of the Company's  Fully-Diluted  capital  stock) in
substantially  the form of Exhibit B-l and (D) Thomas a stock  purchase  warrant
reflecting the right to purchase up to 14,700,000 shares of the Company's Common
Stock (but not to exceed  4.9% of the  Company's  Fully-Diluted  capital  stock)
(collectively,  the "New  Warrants").  The New Notes and accrued  interest  were
repaid in full in connection with the close of the Tenet Hospital Acquisition on
March 8, 2005.


                                      F-11
<PAGE>
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                   Notes to Consolidated Financial Statements
                           December 31, 2004 and 2003

Provided that Dr.  Chaudhuri  and William E. Thomas  ("Thomas")  have  exercised
their Stock Purchase  Warrants dated January 17, 2005, the Company hereby grants
to Dr.  Chaudhuri  and Thomas a right of first  refusal  with  respect to future
sales by the Company of its equity securities or securities  convertible into or
exercisable  for equity  securities,  where issuance of those  securities  would
result in dilution of Dr.  Chaudhuri's and Thomas's  combined equity position to
less than 24.9% of the Common  Stock of the  Company on a  Fully-Diluted  basis.
Each time the Company proposes to offer any shares of, or securities convertible
into or  exercisable  for any  shares  of,  any  class of the  Company's  equity
securities  which would  reduce Dr.  Chaudhuri's  and Thomas's  combined  equity
position to below  24.9% (the "New  Shares"),  the  Company  shall first make an
offer to Dr.  Chaudhuri and Thomas of such portion of the New Shares which would
maintain Dr.  Chaudhuri's and Thomas's  combined equity position at a minimum of
24.9%  (the "Pro Rata  Share").  The  closing  of the sale of the Pro Rata Share
shall occur  simultaneously  with the sale of the New Shares to other investors,
and the Pro Rata Share shall be priced  equal to the lowest price paid by any of
the other investors, including any who may be purchasing New Shares by virtue of
similar pre-emptive or other purchase rights.

The Company  hereby  grants to Dr.  Chaudhuri  and Thomas a purchase  right with
respect to future  issuances by the Company of any of its  securities to Anil V.
Shah,  M.D. or Orange County  Physicians  Investment  Network,  or affiliates of
either  of them  (collectively,  "OC-PIN  Group"),  where the  issuance  of such
additional  shares of Common  Stock would result in the OC-PIN Group having been
issued, in the aggregate,  more than 187,240,000  shares of the Company's Common
Stock on a  Fully-Diluted  basis (as adjusted for any stock  splits,  dividends,
combinations or the like). Upon satisfaction of these conditions,  Dr. Chaudhuri
and Thomas  shall have the right to acquire,  for a period of 90 days  following
notification  by the Company to Dr.  Chaudhuri  and Thomas that the  pre-emptive
right is triggered  (which notice shall be given within 10 business days of such
trigger),  the same  securities,  and at the same  price,  as the  member of the
OC-PIN Group purchasing the Company's  securities,  in an amount that represents
the same  proportion as Dr.  Chaudhuri's and Thomas's  combined  holdings of the
Company's  Common  Stock on a  Fully-Diluted  basis bears to the OC-PIN  Group's
combined  holdings  of the  Company's  Common  Stock  on a  Fully-Diluted  basis
immediately  prior to the issuance in  question.  The  pre-emptive  rights shall
terminate  and cease to have  effect  upon the  earlier of (i) the closing of an
acquisition  of the Company to an  unrelated  third party or (ii) the later of 3
1/2 years from the date of the Restructuring Agreement or the termination of any
similar pre-emptive rights granted to OC-PIN or its affiliates."

On the date of approval of this Agreement by Tenet as contemplated by Section 9,
OC-PIN  shall  pay,  or shall  cause the  Company to pay,  or shall  cause to be
released  from the Escrow  Fund,  $10,000,000  plus the accrued  interest in the
Escrow Fund to Dr. Chaudhuri,  in immediately  available funds.  Nothing in this
Agreement or any of the  exhibits  hereto shall be effective or of any force and
effect until Dr. Chaudhuri has received this payment of $10,000,000 plus accrued
interest.  Any  agreements or  arrangements  between OC-PIN and the Company with
respect to this payment of $10,000,000  plus accrued  interest shall be pursuant
to  a  separate  agreement  between  them,  and  Dr.  Chaudhuri  shall  have  no
involvement therewith or responsibility  therefore. The Company and OC-PIN agree
to  indemnify,  defend and hold Dr.  Chaudhuri  harmless  from and  against  any
claims,  liabilities  or  losses  incurred  by either of them as a result of the
financial or other arrangements between them.

The parties have agreed as follows with respect to the Tenet Transaction and the
proposed $80,000,000 credit facility ("Facility") from Company's current Lender,
or other lender agreeable to the parties ("Lender") related thereto:

      (a)The  Company  and the LLC shall be  co-borrowers  with  respect  to the
Facility,  with the Company and the LLC each fully liable for the entire  amount
borrowed  thereunder,  (b)The  Company  and the LLC will  enter  into a mutually
acceptable inter-borrower and cross-indemnity agreement, (c) If requested by the
Lender,  the Lender will have a security  interest not only in all of the assets
of the Company and the LLC, but also in all LLC membership  interests and in the
master lease from the LLC to the Company.


                                      F-12
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                   Notes to Consolidated Financial Statements
                           December 31, 2004 and 2003

This  Restructuring  Agreement,  and specifically  Dr.  Chaudhuri's and Thomas's
obligations hereunder,  are expressly conditioned upon Tenet's acceptance of the
restructuring  and other terms set forth herein,  and,  because Dr. Chaudhuri is
rescinding  his right to receive  any  interest  in the  Chapman  Hospital  real
estate,  upon Tenet's release of Dr.  Chaudhuri's  guarantee in Tenet's favor of
the  tenant's  obligations  under the  Chapman  Hospital  lease.  Dr. Shah shall
provide his personal  guarantee of the tenant's  obligations in place of that of
Dr.  Chaudhuri,  in a form  substantially  identical  to the  form  of  guaranty
provided  by Dr.  Chaudhuri  to  Tenet.  The  provisions  of  the  Restructuring
Agreement,  including  the exhibits  hereto,  shall only be  effective  upon (i)
receipt by Dr. Chaudhuri of written evidence reasonably satisfactory to him, and
executed by Tenet,  setting  forth Tenet's  acceptance  and release as described
above,  (ii) receipt by Dr. Chaudhuri of the payment of $10,000,000 plus accrued
interest  referred to in Section 6, (iii) receipt by Dr. Chaudhuri and Thomas of
fully executed  originals of the New Notes and New Warrants,  and (iv) execution
and delivery of a mutually agreeable Operating Agreement for the LLC pursuant to
Section 7 above.

Post-Closing Condominium Units Purchase.  Pursuant to the Third Amendment to the
Asset Sale  Agreement  dated as of February 28,  2005,  Tenet has been unable to
obtain a waiver of the Condominium Association's rights under the right of first
refusal  contained  in the  Condominium  Association  Bylaws with respect to the
Condominium  Units  (located at 999 North  Tustin  Avenue,  Santa Ana, CA) on or
before the  Closing  Date.  The  Company  acknowledges  and  agrees  that it has
submitted to Tenet its bona fide and binding  offer (the "Offer") to acquire the
Condominium  Units  for  a  purchase  price  of  $5,000,000,   for  purposes  of
presentation of such offer to the Condominium  Association pursuant to the right
of first refusal process.  Seller  acknowledges and agrees that it has forwarded
the  Offer to the  Condominium  Association  as  required  by the right of first
refusal  process.  If, as of March 24, 2005 the Condominium  Association has not
exercised its first right as addressed  below,  Tenet shall sell and the Company
shall  purchase the  Condominium  Units on the terms and conditions set forth in
the Offer. If the Condominium  Association  exercises its rights under the right
of first  refusal,  Tenet shall sell the  Condominium  Units to the  Condominium
Association  on the terms and  conditions  set forth in the Offer.  In the event
that, following exercise by the Condominium  Association of its rights under the
right of first refusal,  the  Condominium  Association is unable or unwilling to
consummate such sale in accordance with the terms of the Offer, Tenet shall sell
and the Company shall purchase the Condominium Units on the terms and conditions
set forth in the offer as soon as reasonably  practicable  following the failure
of the  Condominium  Association to consummate  the purchase of the  Condominium
Units.  In the event the  Condominium  Units are ultimately  sold to the Company
following  completion of the foregoing  process,  the Condominium Units shall be
treated  as part of the  Assets  sold to the  Company  under the  Agreement  for
purposes of all of Tenet's and the Company's  respective  rights and obligations
with respect to such sale. In addition,  if the Condominium Units are ultimately
sold to the Company,  they will be treated as other medical office  buildings or
"MOB  Properties" and leased back to the Company in accordance with the Lease as
mentioned in Note 5.

The Company has currently not completed its purchase of the Condominium Units.

Mogel  Management  Group,  Inc.  Acquisition  - On January 1, 2004,  the Company
entered into a Securities  Purchase  Agreement and Plan of  Reorganization  with
Mogel Management Group,  Inc.  ("MMG"),  an entity with certain common ownership
with the Company,  and the shareholders of MMG. The Company purchased all of the
issued and  outstanding  stock of MMG, 48 million  shares,  in exchange  for the
issuance of three  promissory notes to the stockholders of MMG with a total face
value of $60,000. The stockholders of MMG are also the officers and directors of


                                      F-13
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                   Notes to Consolidated Financial Statements
                           December 31, 2004 and 2003

the  Company.  The fair  value of the  tangible  assets  acquired  in  excess of
liabilities assumed amounted to $15,000,  which resulted in goodwill of $45,000.
During the year ended  December 31,  2004,  the Company  recorded an  impairment
charge of $45,000 related to the goodwill from the MMG acquisition. In 2004, the
stockholders of MMG forgave the promissory notes totaling  $60,000.  The Company
has  recorded  this  forgiveness  of  debt as a  reduction  in its  general  and
administrative  costs for the year ended  December 31, 2004.  MMG was  organized
under the laws of the State of Nevada on October 2, 2003 and has not  engaged in
any business  activities  that have  produced any revenues  and,  therefore,  is
considered  a  development  stage  company as defined in  Statement of Financial
Accounting Standards No. 7.

KyoMedix  Corporation  - On April 9,  2002,  the  Company  entered  into a share
exchange agreement with KyoMedix Corporation ("KyoMedix").  The agreement called
for the Company to issue  15,166,550  shares of common stock to the shareholders
of  KyoMedix  for all of the issued and  outstanding  shares of common  stock of
KyoMedix.  The agreement  also called for the  repurchase  and  cancellation  of
746,592  shares of common  stock for a $250,000  note  payable  and  effecting a
4-for-1  forward  stock split.  The  $250,000  note payable was due 90 days from
signing and was secured by 13,916,000 shares of common stock of the Company. Any
unpaid  portion of the note was to accrue  interest  at 10% per annum  after the
90-day term.  The  agreement  also called for the  resignation  of the Company's
officers  and  directors,  the  adoption  of the 2002  Stock  Plan of  KyoMedix,
changing  the name of the  Company to  KyoMedix,  Inc.  and the grant of similar
options to replace the options previously  granted by KyoMedix.  The acquisition
closed April 9, 2002; however, subsequently,  former and current shareholders of
the Company sued to rescind the merger  claiming that certain  conditions of the
agreement  were not  satisfied.  On November  11,  2002,  the  Company  signed a
Compromise  and  Settlement  Agreement and the Company  cancelled the 15,166,550
shares of common stock that had been issued to the shareholders of KyoMedix.  As
part of the rescission agreement,  the Company reissued 746,592 shares of common
stock to the previous  shareholder and the $250,000 note payable was voided.  As
part of the rescission  agreement,  the Company's  former officers and directors
were  re-appointed,  the  adoption of the 2002 Stock Plan of KyoMedix was voided
and options  granted to KyoMedix  option holders were  cancelled.  The financial
statements  have been  restated  to  reflect  the  acquisition  as  having  been
rescinded.

NOTE 3 - COMMON STOCK AND WARRANTS

2005 Stock Transactions

Stock Purchase  Agreement with OC-PIN - On January 28, 2005, the Company entered
into a Stock  Purchase  Agreement  (the "Stock  PurchaseAgreement")  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 will invest  $30,000,000 in the Company for
an aggregate of 108,000,000  shares of common stock of the Company (a portion of
which  shares will be acquired by an  affiliate  of OC-PIN).  In  addition,  the
Purchase Option Agreement,  dated November 16, 2004, between the Company and Dr.
Anil V. Shah has been terminated.

The Company  shall issue and sell to OC-PIN,  and OC-PIN agrees to purchase from
the Company,  an aggregate of 108,000,000  shares of the Company's  common stock
for a total  of  $30,000,000  and  other  consideration  pursuant  to the  Stock
Purchase  Agreement.  Payments for the Company's  stock  issuance shall occur as
follow:

      (a) On or prior to  February 4, 2005,  OC-PIN  shall pay an  aggregate  of
$10,000,000  on behalf of the  Company by  depositing  such amount with Tenet on
behalf of the Company in connection with the Tenet Hospital  Acquisition  and/or
by  reimbursing  Dr.  Chaudhuri for his  $10,000,000 on deposit with Tenet (upon
which Dr.  Chaudhuri  will  assign to OC-PIN or the  Company  his  rights to the
deposit).


                                      F-14
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                   Notes to Consolidated Financial Statements
                           December 31, 2004 and 2003

      (b) OC-PIN made a  $5,000,000  deposit to the Tenet  Hospital  Acquisition
escrow  under the  Purchase  Option  Agreement;  and OC-PIN  made an  additional
deposit of $5,000,000 to the Tenet Hospital  Acquisition escrow according to the
terms of the Company's  escrow  commitment  with Tenet, by February 4, 2005. The
Company  issued a total of  96,100,000  shares of its Common  Stock to OC-PIN in
exchange for the  financing of the $10 million  deposit in  connection  with the
Tenet  Hospital  Acquisition.  According to the Stock  Purchase  Agreement,  the
Company  shall issue an additional  6,500,000 to Hari S. Lal,  legal counsel for
OC-PIN,  related to the $10  million in  deposits  received  from OC-PIN and the
Company  receiving  its  acute  care  licenses  from the  Department  of  Health
Services.

      (c) No later than six calendar days before the closing of the transactions
under the Tenet  Agreement,  OC-PIN  shall  deliver  to the  Company  additional
financing  totaling  $20,000,000.  Upon receipt of the $20,000,000,  the Company
shall issue to OC-PIN a certificate  for an additional  5,400,000  shares of its
common stock (as adjusted for any stock splits,  dividends,  combinations or the
like).  The Company  has  extended  OC-PIN's  additional  $20 million  financing
committment to the Company to March 31,2005.

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.

Stock  Warrants - OC-PIN will provide most of the financing  that was originally
agreed to be provided by Dr. Kali Chaudhuri.  The financing  agreements with Dr.
Chaudhuri  were  rescinded,  and Chaudhuri and his  associates  will now receive
stock warrants from the Company. In connection with the Company's  Restructuring
Agreement  entered  into on January  27, 2005  mentioned  in Note 2, the Company
issued Dr. Chaudhuri a stock purchase  warrant  reflecting the right to purchase
up to 60,000,000  shares of the Company's Common Stock (but not to exceed 20% of
the Company's  Fully-Diluted  capital  stock) and issued  William Thomas a stock
purchase warrant reflecting the right to purchase up to 14,700,000 shares of the
Company's  Common Stock (but not to exceed 4.9% of the  Company's  Fully-Diluted
capital stock). The warrants are exercisable  beginning January 27, 2007 and the
warrants expire in three and one-half years from the date of the issuance of the
warrants, January 27, 2005.

The exercise or purchase price for the first  34,538,153  shares  purchased upon
exercise  of Dr.  Chaudhuri's  warrant  shall be  $0.003125  per share,  and the
exercise or purchase  price for the  remainder of the shares shall be $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,
all subject to adjustment as provided in Section 2 of the warrant agreement.

The exercise or purchase  price for the first  8,461,847  shares  purchased upon
exercise of Thomas's  warrant shall be $0.003125 per share,  and the exercise or
purchase  price for the  remainder  of the  Shares  shall be $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,  all
subject to adjustment as provided in Section 2 of the warrant agreement.

Among other terms,  the  exercise  price in effect at any time and the number of
Shares  purchasable  upon  the  exercise  of this  Option  shall be  subject  to
adjustment from time to time upon the happening of any of the following events:


                                      F-15
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                   Notes to Consolidated Financial Statements
                           December 31, 2004 and 2003

      (a) If at any time the Company subdivides its outstanding shares of Common
Stock into a greater number of shares,  the Exercise Price in effect immediately
prior to such subdivision shall be proportionately  reduced.  If at any time the
outstanding  shares of Common Stock of the Company are  combined  into a smaller
number  of  shares,  the  exercise  price in  effect  immediately  prior to such
combination shall be proportionately increased.

      (b) Whenever the Exercise  Price  payable upon exercise of this warrant is
adjusted  pursuant  to this  Section  2, the number of shares  purchasable  upon
exercise  hereof  simultaneously  shall be adjusted by multiplying the number of
Shares  issuable  immediately  prior to such adjustment by the exercise price in
effect immediately prior to such adjustment and dividing the product so obtained
by the exercise price, as adjusted.

2004 Stock Transactions

During the year ended  December 31, 2004,  the Company  issued 200,000 shares of
common   stock  at  $0.25  per  share  for  total  cash   proceeds  of  $50,000.
Additionally,  during the year ended  December  31,  2004,  the  Company  issued
1,180,000  shares of common stock at $0.50 per share for total cash  proceeds of
$590,000.  During the year ended  December 31, 2004,  the Company  issued 20,000
shares of common stock at $0.50 per share in exchange  for a stock  subscription
agreement.  The Company received total proceeds of $10,000 related to this stock
subscription agreement in 2005.

2003 Stock Transactions

In December  2003 the Company  issued  1,460,000  shares of its common  stock at
$0.25 per share for cash proceeds of $365,000.

In November  2003,  the board of directors  approved the issuance of  16,128,000
shares of the Company's common stock to three individuals ("the Purchasers") for
$100,000,  pursuant to a certain Stock Purchase  Agreement.  In connection  with
this stock sale, the Company issued a promissory note for $100,000 to the former
president and director of the Company and 450,000  shares of common stock to the
former president and director of the Company, and a shareholder, in exchange for
a certain letter of  indemnification.  The letter of  indemnification  holds the
Company and the Purchasers  harmless from and against any and all liabilities of
any type or nature, whatsoever, of the Company that existed prior to the closing
of the Stock Purchase Agreement, including fees of legal counsel for the Company
in  connection  with the  completion  of the Stock  Purchase  Agreement  and the
promissory note due to the former president and director of the Company.

2000 & Other Stock Transactions

In January 2000, the board of directors  approved a compensation  agreement that
included  the  issuance  of a total of  400,000  shares of  common  stock to two
shareholders,  200,000 to each,  for  services  rendered  which  were  valued at
$1,000. The shares were issued in August 2000 for $.0025 per share.

During the year ended June 30, 1998, the Company issued 142,000 shares of common
stock for  services  rendered.  Total  proceeds  amounted to $1,255 (or $.04 per
share). The Company previously reported the issuance as 140,000 shares of common
stock. The financial  statements have been restated for the years ended June 30,
1999 and 1998 to reflect the  issuance of an  additional  2,000 shares of common
stock related to services previously rendered.


                                      F-16
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                   Notes to Consolidated Financial Statements
                           December 31, 2004 and 2003

During 1996,  the Company  issued  611,908 shares of common stock for consulting
fees valued at $38,000 (or $.25 per share)  resulting  in a change in control of
the Company.

During the year ended June 30, 1989,  the Company issued 96,640 shares of common
stock for $1,200.

The Company issued 91,452 shares of stock upon incorporation for $57,576.

Stock Splits - On December 9, 1988, the Company effected a 5-for-1 forward stock
split.  On April 23, 1997, the Company  effected a  248.399-for-1  reverse stock
split. On April 4, 2002, the Company effected a 4-for-1 forward stock split. The
financial  statements  for all periods  presented  have been restated to reflect
these stock splits.


NOTE 4 - NOTES PAYABLE

On September 28, 2004 and amended on November 16, 2004, the Company entered into
a Secured  Convertible  Note Purchase  Agreement  with Dr. Kali P.  Chaudhuri to
finance the Tenet Hospital Acquisition mentioned in Note 2. This credit facility
consists of a $500,000  Secured  Convertible  Promissory  Note and a $10 million
Secured Promissory Note.

Secured  Promissory Note - In connection with the Hospital  Acquisition noted in
Note 2, 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 Hospital Acquisition.  The Secured
Note bears interest at 7.25% per annum and interest only shall be payable on the
first  business  day of each  calendar  quarter  beginning  January 2, 2005.  In
connection  with the  Restructuring  and  Payment  Agreements,  the $10  million
Secured  Promissory Note was transferred to OC-PIN and the note was converted to
equity as mentioned in Note 3.

Secured   Convertible   Promissory  Note  -  In  connection  with  the  Hospital
Acquisition noted in Note 2, the Company 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 may assist the Company with the payment of necessary
transactional  costs  incurred  in  connection  with  the  Hospital  Acquisition
including  fees  necessary to secure  financing in connection  with the Hospital
Acquisition,  which  transaction  costs and fees cannot be otherwise 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
replace the Secured  Convertible  Promissory  Note dated  September 28, 2004 and
amended November 16, 2004:

      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

The total balance  outstanding on these new promissory  notes as of December 31,
2004 was $1,264,014.  The Secured Promissory Notes in the amount of $963,186 and
$240,797  and the  Unsecured  Promissory  Note in the  amount  of  $60,031  were
recorded in the Company's  consolidated  balance sheet as current notes payable.
Concurrent with the completion of the Tenet Hospital  Acquisition in March 2005,
the Company repaid these three promissory notes plus accrued interest.


                                      F-17
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                   Notes to Consolidated Financial Statements
                           December 31, 2004 and 2003

Payment Agreement - Effective as of January 31, 2005, the Company entered into a
Payment Agreement with Dr. Kali Chaudhuri,  William E. Thomas, Dr. Anil V. Shah,
and Orange County Physicians Investment Network, LLC, a Nevada limited liability
company ("OC-PIN").  The parties are parties to a Rescission,  Restructuring and
Assignment   Agreement  dated  as  of  January  27,  2005  (the   "Restructuring
Agreement"),  pursuant to which OC-PIN is obligated to pay, or cause the payment
of,  $10,000,000  plus accrued interest to Dr.  Chaudhuri,  and Dr. Chaudhuri is
obligated  to pay  $2,450,000  to the Company for a 49% interest in the LLC upon
the closing of the Tenet Transaction. Pursuant to this Payment Agreement, OC-PIN
will pay, or cause the payment of, $7,500,000 in immediately  available funds to
Dr.  Chaudhuri  at this  time.  Dr.  Chaudhuri  has  agreed  to  accept  certain
promissory  notes  for the  balance,  provided  that  Dr.  Shah,  an  authorized
representative and affiliate of OC-PIN, provides a personal guarantee thereof.

OC-PIN'S  obligation  under Section 6 of the  Restructuring  Agreement  shall be
modified  so that  OC-PIN  shall be  required  to pay,  or cause the payment of,
$7,500,000 in immediately  available funds to Dr. Chaudhuri,  and deliver to Dr.
Chaudhuri two promissory notes,  (the "OC-PIN Notes"),  on the terms and subject
to the  conditions  otherwise  set  forth  in the  Restructuring  Agreement.  In
addition,  the Company shall deliver to Dr.  Chaudhuri its promissory note, (the
"Interest  Note"),  in a  principal  amount  of  $60,031,  equal to the  accrued
interest referred to in Section 6 of the Restructuring  Agreement.  Repayment of
the OC-PIN Notes and the Interest  Note shall be guaranteed by Dr. Shah pursuant
to a General  Continuing  Guaranty  substantially  in the form of  Exhibit B. In
addition,  Dr. Shah shall become a  co-guarantor  (jointly and  severally)  with
OC-PIN of these new notes pursuant to the same General Continuing Guaranty.

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  will  be in the  form of a
non-revolving  Line of Credit (the "Line of Credit") and $50,000,000  will be 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  its  purchase  of the
Tenet Hospital Acquisition mentioned in Note 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) funds for other purposes permitted hereunder.

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.

In  connection  with  the  Credit   Agreement,   AHM  CGH,  Inc.,  a  California
corporation,  has agreed to sell its ownership  interest in certain  condominium
units  located  at  999  North  Tustin  Avenue,   Santa  Ana,   California  (the
"Condominium  Units")  to the  Company,  and upon  such  acquisition  using  the
Company's own funds, the parties intend that the Liens granted in Leasehold Deed
of Trust  shall be  expanded  and  spread  to  encumber  such  interests  in the
Condominium  Units. The Company intends to immediately  transfer the Condominium
Units to PCHI, to which transfer Lender hereby consents.


                                      F-18
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                   Notes to Consolidated Financial Statements
                           December 31, 2004 and 2003

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 the other Borrowers.
In addition,  (i) PCHI has agreed to guaranty the payment and performance of all
obligations of the Obligations,  (ii) West Coast and Ganesha 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)  Orange  County  Physicians  Investment  Network,  LLC,  a  Nevada  limited
liability company and a significant shareholder of IHHI ("OC-PIN") 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 shall pay to 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  (together  the  "Origination  Fee"),  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 Tenet Hospital 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.

Mandatory Prepayments.  Immediately upon receipt by any Credit Party of any cash
proceeds of any sale or other disposition of any Collateral, the Company and its
Subsidiaries  shall  prepay  the  Obligations  in an  amount  equal  to all such
proceeds,  net of (A) commissions and other reasonable and customary transaction
costs, fees and expenses  properly  attributable to such transaction and payable
by the Company and its Subsidiaries in connection  therewith (in each case, paid
to non-Affiliates), (B) transfer taxes, (C) amounts payable to holders of senior
Liens on such asset (to the extent such Liens constitute Permitted  Encumbrances
hereunder),  if  any,  and  (D) an  appropriate  reserve  for  income  taxes  in
accordance  with GAAP in  connection  therewith.  Any such  prepayment  shall be
applied in accordance with Section 1.2(c). The following shall not be subject to
mandatory  prepayment under this subsection:  (1) proceeds of sales of Inventory
in the ordinary  course of business;  (2) proceeds of  collection of Accounts in
the ordinary  course of business;  (3) proceeds of sales of equipment  and other
personal  property in the ordinary  course of business so long as such equipment
and other personal property is replaced (if necessary in the exercise of prudent
business  judgment) by equipment and other personal property of equal or greater
value or utility for a Borrower's  business;  and (4) transfers of equipment and
other personal property between the Company and its Subsidiaries in the ordinary
course of business.

In addition to the foregoing,  if by the date which is thirty (30) calendar days
from the Closing Date, March 7, 2005 (the "Mandatory Prepay Date"),  the Company
and its Subsidiaries for any reason fail to acquire all of the Condominium Units
from Sellers as provided in the Asset Sale Agreement with capital contributed to
the Company by its shareholders,  then the Company and its Subsidiaries agree to
and shall on the Mandatory  Prepay Date prepay the amount of $5,000,000  against
outstanding  principal balance of the Obligations.  Said $5,000,000 must consist
of capital  contributed  to Company by its  shareholders  and may not constitute
funds borrowed from any source.  Said mandatory  $5,000,000  prepayment shall be
applied to the principal  balance of the  Acquisition  Loan  outstanding  to the
Company and its Subsidiaries.

2003  Purchase  Promissory  Note - In  connection  with  the  Company's  sale of
16,128,000  shares of its common stock in November  2003,  the Company  issued a
promissory  note to the former  president  and  director  of the  Company in the
amount of $100,000. The Company received a letter of indemnification which holds
the Company and the Purchasers harmless from and against any and all liabilities
of any type or nature,  whatsoever,  of the Company  that  existed  prior to the
closing of the Stock Purchase Agreement, including fees of legal counsel for the
Company in connection  with the completion of the Stock  Purchase  Agreement and
the promissory note due to the former president and director of the Company. The
promissory note dated November 18, 2004 has a term of 90 days and bears interest
at 10% per annum. The Company repaid the promissory note in full on February 18,
2004.


                                      F-19
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                   Notes to Consolidated Financial Statements
                           December 31, 2004 and 2003

NOTE 5 - REAL ESTATE SALE

Hospital  Real Estate Sale - In order to induce Dr.  Chaudhuri to enter into the
Secured Convertible Note Purchase Agreement to provide the financial support for
the Company's Tenet Hospital  Acquisition,  the Company granted an option to Dr.
Chaudhuri  (or his assignee or designee) to acquire all of the real estate which
the Company will  acquire in the  Hospital  Acquisition  (i.e.  Western  Medical
Center - Santa Ana,  Western  Medical  Center - Anaheim  and  Coastal  Community
Hospital) for the price of $5,000,000 and the assumption of the Acquisition Loan
of $50 million.  The Company  agrees to deliver  title to the property  free and
clear of all liens of all liens and encumbrances except only those exceptions to
title agreed to in the Hospital Acquisition and the real estate loan the Company
will incur in  connection  with the  closing of the  Hospital  Acquisition.  The
Company and Dr.  Chaudhuri agree to cooperate in negotiating  with the Company's
lenders to organize the  financing in a manner  which  permits Dr.  Chaudhuri to
exercise  the option and  acquire the real  property  subject to the real estate
loan while the Company will remain liable for the working capital loan.

On November 16, 2004, the Company  entered into a Purchase LLC Option  Agreement
(the "LLC  Option  Agreement")  with Dr. Anil V. Shah (or his  assignee,  Orange
County  Physicians  Investment  Network,  LLC, a  California  limited  liability
company)  (collectively,  "Shah").  Pursuant  to the LLC Option  Agreement,  the
Company intends to contribute substantially all of the real property acquired in
the Tenet Hospital  Acquisition to a limited  liability  company to be formed by
the Company  (the "LLC") in which Dr. Kali P.  Chaudhuri  has certain  rights to
become a member pursuant to that certain LLC Option Agreement, dated on or about
the date hereof, between Chaudhuri and the Company.

Amendment and Exercise or Real Estate Purchase Option - Pursuant to Section 3 of
the Option  agreement  dated  September  28,  2004,  as amended and  restated on
November 16, 2004 ("LLC  Option  Agreement"),  Dr.  Chaudhuri  currently  has an
option to purchase  100% of the  membership  interests of the LLC (as defined in
the LLC Option  Agreement) for $5,000,000.  The LLC Option Agreement was amended
to  provide  that  Dr.  Chaudhuri's  option  shall  be to  purchase  49%  of the
membership  interests  of the LLC for  $2,450,000,  and may be  assigned  to and
exercised by an affiliate of Dr. Chaudhuri.  Dr. Chaudhuri hereby exercises that
option,  as so amended,  such exercise to be conditioned upon, and effective at,
the Closing of the Tenet Transaction.  The exercise is also conditioned upon (a)
receipt by Dr. Chaudhuri of receipt of evidence  satisfactory to him that OC-PIN
has acquired the remaining 51% of the LLC  membership  interests  simultaneously
with  Dr.  Chaudhuri's  acquisition  of the 49%  interest,  (b)  receipt  by Dr.
Chaudhuri of receipt of evidence  satisfactory  to him that the LLC has acquired
the real estate (owned in fee) in the Tenet  Transaction  (i.e.  Western Medical
Center - Santa Ana,  Western  Medical  Center - Anaheim  and  Coastal  Community
Hospital and the medical office  buildings,  but not the leased Chapman Hospital
and medical office  building),  (c) execution by Dr.  Chaudhuri,  OC-PIN and Dr.
Shah,  and by the  Company  if  initially  required,  of a  customary  Operating
Agreement for a California  manager-managed limited liability company reasonably
satisfactory to Dr. Chaudhuri and OC-PIN in which (i) Dr. Chaudhuri and Dr. Shah
have equal rights of management of the LLC, and (ii) Dr. Chaudhuri may not sell,
syndicate or otherwise  transfer any of his management rights in the LLC without
the  consent of the  holder(s)  of a majority  of the LLC  membership  interests
(although it is expressly understood that Dr. Chaudhuri may hold title to the


                                      F-20
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                   Notes to Consolidated Financial Statements
                           December 31, 2004 and 2003

LLC  membership  interests  through  an  affiliate),  and (d)  execution  by the
Company,  as tenant, of a lease with the LLC, as landlord,  in substantially the
form of Exhibit D. The  exercise  price shall be placed into escrow and released
against delivery of certificates or other  satisfactory  evidence of transfer to
Dr. Chaudhuri or an affiliate of 49% of the membership interests of the LLC. The
Company and OC-PIN  agree to comply with all of the  aforesaid  covenants  which
may,  at Dr.  Chaudhuri's  election,  be  specifically  enforced  as provided in
Section 11.6.

Payment Agreement - Effective as of January 31, 2005, the Company entered into a
Payment Agreement with Dr. Kali Chaudhuri,  William E. Thomas, Dr. Anil V. Shah,
and Orange County Physicians Investment Network, LLC, a Nevada limited liability
company  ("OC-PIN").  In  connection  with  the  close  of  the  Tenet  Hospital
Acquisition  in March  2005,  OC-PIN and Dr.  Chaudhuri  paid the Company the $5
million Real Estate Option  purchase  price.  The Company used the proceeds from
this real estate sale to complete the Tenet Hospital Acquisition.

NOTE 6 - REAL ESTATE LEASE

Triple Net Hospital and Medical Office Building Lease - As of March 7, 2005, the
Company  entered into a Triple Net Hospital and Medical  Office  Building  Lease
(the "Lease") with Pacific Coast Holdings Investment,  LLC, a California limited
liability  company  ("Landlord").  Concurrent  with  the  closing  of the  Tenet
Hospital  Acquisition,  the  Company  transferred  all of the real estate of the
acquired  Hospitals (the "Hospital  Properties")  to the Landlord  whereupon the
Landlord  shall lease back the Hospital  Properties  to the Company on the terms
and  conditions  set forth in the Lease.  Upon the closing of the Tenet Hospital
Acquisition,  Landlord shall be the owner of the property consisting of hospital
properties (the "Hospital  Properties")  and medical office buildings and a long
term acute care  facility  (collectively  "MOB  Properties")  together  with the
buildings,  improvements and fixtures  (hereinafter  collectively referred to as
the "Property").

The term of the Lease for the Hospital  Properties shall be for approximately 25
years,  commencing  March 8,  2005 (the  "Commencement  Date")  and which  shall
terminate on February 28, 2030. The Company has the option to extend the term of
this Lease for the Hospital Properties (the "Option") for one additional term of
twenty-five  (25) years  commencing  when the initial  term expires (the "Option
Period") upon each and all of the following terms and conditions:

      (a) This lease  shall  automatically  renew for the Option  Period  unless
Tenant gives to Landlord,  and Landlord actually receives, on a date which is at
least  six and not more  than nine  months  prior to the date  that such  Option
Period would commence (if exercised),  a written notice that Tenant has declined
to  exercise  the  Option to extend  this  Lease.  If said  notification  of the
exercise  of  the  Option  is  not so  given  and  received,  the  Option  shall
automatically  renew as herein  provided.  (b) Tenant  shall not be in breach of
this Lease at the time of exercise of each of the Options.  (c) All of the terms
and  conditions of the Lease except where  specifically  modified by this Option
shall apply.

The term of this Lease for the defined MOB Properties shall be for approximately
one year,  commencing  March 8, 2005 (the  "Commencement  Date") and which shall
terminate on February 28, 2006.


                                      F-21
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                   Notes to Consolidated Financial Statements
                           December 31, 2004 and 2003

The Company has  requested  and Landlord has agreed to permit the Company to use
the Property as collateral  for the purposes of joint  financing of the Property
and the Company's  business operation for an initial period of time and, subject
to the terms  herein,  the  operations  of the  Company  and the  Property.  The
Company's  obligation  for base  rent  ("Base  Rent")  payments  shall be set in
relationship  to  said  financing.  The  Company  has  arranged  for an  initial
financing ("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  will be in
the form of an operating loan ("Operating  Loan") and $50,000,000 will be in the
form of a real estate loan ("Real Estate  Loan").  In addition,  the Company may
borrow  additional funds against  accounts  receivable  ("A/R  Financing").  The
Operating  Loan,  the Real Estate Loan and the A/R Financing  will be secured by
both the Property and the Company's operations.

The Company and the Landlord agree that the Initial Financing should be replaced
as soon as practical but in any event within two years of the Commencement  Date
of the  Lease  term  the  Company  and  Landlord  covenant  and  agree  to  work
cooperatively to secure said refinancing meeting the following criteria: (a) The
refinancing  shall be  provided  by an  institutional  lender in an arms  length
transaction. (b) The refinancing shall not exceed $100 million of which not more
than $50 million will be a Real Estate Loan.  (c) The terms of said  refinancing
shall not impair the financial  viability of either the Company or the Landlord.
(d) Neither the  Landlord,  nor any of  Landlord's  members shall be required to
assume any  personal  liability or  obligation  for said  refinancing.  The sole
recourse of the lender shall be to the Property and the  Company's  assets.  (e)
The loan  shall  be at  commercially  reasonable  rates  and  upon  commercially
reasonable terms including  reasonable  amortization of principal.  (f) The loan
will not include any contingent  interest  provisions or any payments other than
interest upon a principal sum. (g) The loan shall not limit the sale or transfer
of all or portions  of the  Property or of  interests  in Landlord  for a period
greater than five years.

So long as the Real Estate Loan,  Operating  Loan and/or A/R Financing are cross
collateralized, the Company shall have an obligation and duty to Landlord to pay
when due all sums coming due under the  Operating  Loan and A/R Financing and to
otherwise  fully comply with all terms and  conditions of the Operating Loan and
A/R Financing and Landlord  shall have an obligation  and duty to the Company to
pay when due all sums  coming due under the Real  Estate  Loan and to  otherwise
fully comply with all terms and  conditions of the Real Estate Loan.  Five years
after the  Commencement  Date,  Landlord  shall have the right to terminate  the
cross  collateralization  of the Operating  Loan and A/R Financing with the Real
Estate Loan and to refinance the Real Estate Loan as provided in Section 2.13 of
the Lease.

Base Rent  (Hospital  Properties) - The monthly  Hospital  Properties  Base Rent
shall  equal  the  Principal  Sum  multiplied  by the  sum of  the  Cost  of the
Landlord's  Principal Sum plus the Landlord's  Spread the product of which shall
be added to the Landlord's  Amortization  Expense,  then divided by twelve.  Set
forth as a formula this calculation is as follows:

Monthly  Base  Rent  =  [Principal  Sum x  (Cost  of  Landlord's  Principal  Sum
+Landlord's Spread)] + Amortization Expense

The  definitions  of the  Monthly  Base  Rent  are  (a) The  "Principal  Sum" is
$50,000,000.  (b) The "Cost of Landlord's  Principal  Sum" is the average annual
interest  rate  charged  on loan  secured  by the  first  lien Deed of Trust (or
Mortgage)  on the Property for the  preceding  month,  as the same may vary from
time to time.  (c) The  "Landlord's  Spread" for the first one year of the lease
term is the difference between 12% per annum and the annual interest rate (which
may vary  monthly) of the Real Estate Loan but in no event more than 2 1/2 % per
annum,  thereafter  "Landlord's  Spread"  is 2 1/2% over the Cost of  Landlord's
Principal Sum. (d) Commencing on the earlier of (i) the refinancing contemplated
by Section 2.3 of the Lease or (ii) two years following the  Commencement  Date,
the "amortization Expense" shall be the annual sum of $2,500,000 until such time
as a total  Amortization  Expense of  $50,000,000  has been paid.  (e) "Consumer
Price Index" or "CPI" shall refer to the "Consumer Price Index, Los Angeles-Long
Beach-Anaheim  Average,  All Items  (1982-1984=100)"  as published by the United
States Department of Labor, Bureau of Labor Statistics ("Bureau").  In the event
that the Bureau  shall cease to publish  said  Consumer  Price  Index,  then the
national  index shall apply and if the  national  index is no longer  published,
then the  successor or most nearly  comparable  index  thereto  shall be used as
determined by Landlord.


                                      F-22
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                   Notes to Consolidated Financial Statements
                           December 31, 2004 and 2003

On each five year  anniversary of the  Commencement  Date the Hospital Base Rent
shall be increased  (but not  decreased)  to an amount equal to the then current
fair market  rental  rate,  but in no event  increased  by more than 5% over the
preceding  month's  Hospital Base Rent  (provided  however that such time as the
Amortization  Payment is no longer being made the 5%  limitation  shall cease to
apply).  Commencing not less than ninety days prior to each fifth anniversary of
the  Commencement  Date,  Landlord and the Company shall attempt to agree on the
fair market rental rate for the Hospital Properties. If Landlord and the Company
are not able to agree  to the  fair  market  rental  rate  within  thirty  days,
Landlord and the Company shall each choose an independent,  licensed real estate
broker,  with not less than five years experience in leasing  healthcare related
facilities including  hospitals.  The two real estate brokers so appointed shall
appoint a third real estate  broker,  similarly  qualified.  Each  broker  shall
independently  determine  the  fair  market  rental  rate.  The  three  rates so
determined will be averaged. The rate determined by the brokers which varies the
most from the average shall be discarded  and the two  remaining  values and the
average  value shall be averaged and said second  average shall  constitute  the
fair  market  rental  rate.  Each party  shall bear the costs of the real estate
broker appointed by that party and the parties shall equally divide the costs of
the third real estate  broker.  Notwithstanding  the  provisions of this Section
2.10,  if at any time the monthly  Hospital  Base Rent  determined in accordance
with Section 2.9 hereof would exceed the monthly  Hospital Base Rent  determined
in accordance  with this Section 2.10, then this Section 2.10 of the Lease shall
be  discarded  and the  monthly  Hospital  Base  Rent  shall  be  determined  in
accordance with Section 2.9 of the Lease.

Base Rent ( MOB  Properties) - The monthly MOB Properties  Base Rent shall equal
the rent received from tenants of the MOB  Properties,  less the actual  monthly
costs to  operate  said MOB  Properties,  and also  less a  monthly  charge  for
insurance and real property taxes equal to one-twelfth the estimated annual cost
thereof.  In the event the  estimated  monthly  charge  for  insurance  and real
property  taxes is in error at the end of the lease term,  then Landlord and the
Company shall make an  appropriate  adjustment so that the sum deducted in order
to calculate the MOB Properties Base Rent is correct.

NOTE 7 - INTANGIBLE ASSET

In connection with the Company's  stock sale of 16,128,000  shares of its common
stock in November  2004,  the Company  issued a promissory  note of $100,000 and
450,000  shares of its common stock in exchange for a letter of  indemnification
from the Company's  former  President  and  shareholder.  The 450,000  shares of
common  stock were  valued by the  Company at $0.0062  per share.  The letter of
indemnification  holds the Company and the Purchasers  harmless from and against
any and all liabilities of any type or nature,  whatsoever,  of the Company that
existed prior to the closing of the Stock Purchase Agreement,  including fees of
legal  counsel for the Company in  connection  with the  completion of the Stock
Purchase  Agreement  and the  promissory  note due to the former  president  and
director of the Company.  The Company has recorded the letter of indemnification
as an intangible  asset of $102,790  based on the total fair market value of the
promissory  note  and  common  stock  issued.  The  Company  is  amortizing  the
intangible asset using the straight-line method over the enforceable life of the
letter of indemnification of two years.  During the year ended December 31, 2004
and 2003, the Company incurred amortization expense of $51,395 and $6,424.


                                      F-23
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                   Notes to Consolidated Financial Statements
                           December 31, 2004 and 2003

NOTE 8 - INCOME TAXES

The Company has not made a provision  for income taxes  because of its financial
statement  and tax losses  since its  inception  on July 31,  1984.  A valuation
allowance  has been used to offset the  recognition  of any  deferred tax assets
related to net operating  loss  carryforwards  due to the  uncertainty of future
realization.  The Company accounts for income taxes in accordance with Statement
of Financial  Accounting  Standards No. 109  "Accounting for Income Taxes" which
requires the liability approach for the effect of income taxes.

At  December  31,  2004  and  2003,  the  Company  had  unused   operating  loss
carryforwards of approximately $1,849,000 and $116,000,  respectively, which may
be applied  against  future  taxable  income in various  years  through 2024. If
certain substantial changes in the Company's ownership should occur, there could
be an annual limitation on the amount of net operating loss carryforwards  which
can be utilized. The amount of and ultimate realization of the benefits from the
operating loss carryforwards for income tax purposes is dependent, in part, upon
the tax laws in effect,  the future  earnings of the  Company  and other  future
events,  the effects of which cannot be determined.  Because of the  uncertainty
surrounding  the  realization  of  the  loss  carryforwards,   the  Company  has
established  a  valuation  allowance  equal  to  the  tax  effect  of  the  loss
carryforwards, therefore, no deferred tax asset has been recognized for the loss
carryforwards.  The deferred tax assets were approximately  $800,000 and $41,000
at  December  31,  2004 and 2003,  respectively,  with an  offsetting  valuation
allowance of the same amount resulting in a change in the valuation allowance of
approximately  $759,000 and $14,000 during the years ended December 31, 2004 and
2003, respectively.

Tenet  Hospital  Acquisition  - The  Tenet  Hospital  Acquisition  was an  asset
purchase  transaction  and the Company  will have  limited  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
100% of its  interest  in PCHI to its  majority  shareholders.  For  income  tax
purposes,  the sale of 100% of its interest in PCHI 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% backup  witholding  on any deemed  dividend or
interest income.

The  March 3,  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 3, 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.

NOTE 9 - RELATED PARTY TRANSACTIONS

Due to/from  Shareholders and Officers - During the year ended December 31, 2004
and 2003,  the  Company's  President  paid  expenses  on  behalf of the  Company
totaling nil and $4,355, respectively.  During the years ended December 31, 2004
and 2003, the Company  advanced nil and $60,000,  respectively,  to the officers
and majority  shareholders  of the Company.  At December 31, 2004 and 2003,  the
total amount due from the Company's  officers and majority  shareholders was nil
and $60,000,  respectively.  The amounts due to/from  shareholders  and officers
bear no interest and are due when funds are available.


                                      F-24
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                   Notes to Consolidated Financial Statements
                           December 31, 2004 and 2003

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,  including
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.

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
$2,540,000,  total  stock  option  grants to  purchase  7,500,000  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 Driectors.

Office  Lease - The  Company's  office  facility  is leased by Mogel  Management
Group,  LLC ("MMG LLC"),  a company  owned by the  officers of the Company.  The
Company  reimbursed  MMG LLC for the use of the  office  space in the  amount of
$68,044 and $0 for the years ended December 31, 2004 and 2003, respectively.


NOTE 10 - LOSS PER SHARE

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


                                                        Year Ended
                                           -----------------------------------
                                           December 31, 2004 December 31, 2003
                                           ----------------- -----------------

Loss from continuing operations available
 to common shareholders (numerator)             $(1,840,191)      $ (28,132)

Weighted average number of common
 shares used in loss per share during
 the period (denominator)                        19,986,750       3,470,589


Dilutive  loss per  share was not  presented,  as the  Company  did not have any
common  equivalent  shares  for all  periods  presented  that  would  effect the
computation of diluted loss per share.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

Commitments  -  Pursuant  to the new Lease  entered  into as of March 7, 2005 as
mentioned in Note 6, the Company's  future minimum lease payments related to the
acquired  Tenet  Hospitals  and other  medical  facilities  are as follows as of
December 31:


                                      F-25
<PAGE>

                      INTEGRATED HEALTHCARE HOLDINGS, INC.
                        (A Development Stage Enterprise)
                   Notes to Consolidated Financial Statements
                           December 31, 2004 and 2003

                      Year Ending December 31,
                      ------------------------
                       2005                                   $ 10,642,672
                       2006                                     13,153,611
                       2007                                     13,233,219
                       2008                                     13,315,216
                       2009                                     13,315,216
               Thereafter (2010-2029)                          278,706,133
                                                             -------------
                                                             $ 342,366,067
                                                             =============

Contingencies  - In the ordinary  course of business,  the Company is subject to
legal  proceedings  and claims.  The Company is not currently aware of any legal
proceedings  or claims that the Company  believes  are likely to have a material
adverse effect on the Company's financial position and results of operations.