UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

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 [ ]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date: 157,170,421

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CareDecision Corporation
(a Development Stage Company)

Table of Contents

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Part I - Financial Information

Item 1. Financial Statements

CareDecision Corporation

(a Development Stage Company)

Consolidated Balance Sheet

as of

March 31, 2004 (unaudited)

and

Consolidated Statements of Operations

for the Three Months Ended

March 31, 2004 (unaudited) and 2003 (unaudited),

and For the Period

July 6, 2000 (Inception) to March 31, 2004 (unaudited)

and

Consolidated Statements of Cash Flows

for the Three Months Ended

March 31, 2004 (unaudited) and 2003 (unaudited),

and For the Period

July 6, 2000 (Inception) to March 31, 2004 (unaudited)

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CareDecision Corporation

(a Development Stage Company)

Consolidated Balance Sheet

(unaudited)

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

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CareDecision Corporation

(a Development Stage Company)

Consolidated Statements of Operations

(unaudited)

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

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CareDecision Corporation

(a Development Stage Company)

Consolidated Statements of Cash Flows

(unaudited)

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

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CareDecision Corporation

(a Development Stage Company)

Notes

Note 1 – Basis of presentation

The consolidated interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein.  It is suggested that these consolidated interim financial statements be read in conjunction with the consolidated financial statements of the Company for the period ended December 31, 2003 and notes thereto included in the Company's Form 10-KSB.  The Company follows the same accounting policies in the preparation of consolidated interim reports.

Results of operations for the interim periods are not indicative of annual results.

Note 2 – Fixed assets

Depreciation expense totaled $33,315 and $36,377 for the three-month periods ended March 31, 2004 and 2003, respectively.

Note 3 – Notes payable

The Company determined during the nine months ending September 30, 2003 that it is appropriate to reclassify software acquired in 2002 from intellectual property to fixed assets.  The effect of the change in accounting principle requires a restatement of the December 31, 2002, and March 31, 2003 financial statements in order to properly reflect the asset reclassification and the related adjustment to depreciation expense.  The effect of this change was to decrease net income for the year ended December 31, 2002 and the three months ended March 31, 2003 by $119,988 and $63,409, respectively.  Retained earnings as of January 1, 2002 has been adjusted for the retroactive application of the change in accounting principle.

M and E Equities, LLC Renegotiated Note

Based on terms negotiated on March 4, 2002, and after a further documentation process that was completed on April 23, 2002, Medicius, Inc., the Company’s merger partner in its June 2002 merger, was loaned $475,000 from M and E Equities, LLC (M&E) (as previously discussed in Note 6).  A condition of the loan stipulated that Medicius, Inc. complete its merger with the Company and become a fully reporting public company.  As of December 31, 2003, after a partial payment of interest and principal and a settlement of a legal dispute that arose over this note and other issues, the remaining value of the note and accrued interest was $522,527.  On March 2, 2004, the Company renegotiated its debt with M&E.  The terms of the agreement are stipulated as follows:

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$320,000 is paid to M&E by Wells & Company, Inc., Lima Capital, Inc., JC Financial, Inc. and Corporate Architects, Inc. to satisfy a remaining principal amount of $400,000.

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M&E agreed to transfer 10,000,000 of the Class A Warrants, formerly issued by Medicius, Inc., with an expiration date of January 5, 2005 to Empyreon.net Corp. for $30,000, and 2,000,000 Class A Warrants to Mr. Moshe Mendlowitz for $20.00.  The Company incurred interest expense during the first quarter ended March 31, 2004 totaling $405,700, the deemed value of the Warrants on the transfer date based on the Black-Scholes Valuation Model.

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CareDecision Corporation

(a Development Stage Company)

Notes

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The outstanding note balance of $200,526 was recapitalized into 207,526 shares of the Company’s $0.001 par value Class A 2002 Convertible Preferred Stock and registered in M&E’s name.  Each share of Class A 2002 Convertible Preferred Stock is convertible into 18 shares (3,717,468 total) of the Company’s $0.001 par value common stock at $0.055556 per share.  M&E agrees to hold the Preferred Shares for a minimum of one year, pursuant to Rule 144, with no conversions allowed during that period of time.  After the one year, M&E may convert and sell only 500,000 shares of the Company’s $0.001 par value common stock every 60 days as permissible by Rule 144.

Pinnacle Investment Partners, LP Promissory Note

On March 24, 2004, the Company was loaned $700,000 from Pinnacle Investment Partners, LP (Pinnacle).  The Secured Convertible Promissory Note bears interest at the rate of 12% per annum, matures September 25, 2004, except if extended for an additional six months at the option of the company, and is secured by 14,000,000 shares of the Company’s $0.001 par value common stock.  Pinnacle may, at its option, at any time from time to time, elect to convert some or all of the then-outstanding principal of the Note into shares of the Company’s $0.001 par value common stock at a conversion price of $0.08 per share, unless such conversion would result in Pinnacle being deemed the “beneficial owner” of 4.99% or more of the then-outstanding Common Shares within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended.  In the event the Company fails to pay any installment or principal or interest when due, the interest rate will then accrue at a rate of 24% per annum on the unpaid balance until the payment default is cured.

The Company recorded interest expense totaling $9,051 and $10,823 for the three months ended March 31, 2004 and 2003.  The Company also recorded financing costs totaling $408,255 for the three months ended March 31, 2004.

Note 4 – Stockholder’s equity

The Company is authorized to issue 5,000,000 shares of $0.001 par value preferred stock and 290,000,000 shares of $0.001 par value common stock.

Preferred stock

The Company issued 207,526 of its $0.001 par value preferred shares for financing costs of $354,800.  Each preferred share is convertible into 18 shares of the Company’s $0.001 par value common stock at $1.00 per share.

Common stock

The Company issued 7,350,000 shares of its $0.001 par value common stock to various individuals to convert $522,000 in debt to equity during the three months ended March 31, 2004.

The Company issued 23,115,500 shares of its $0.001 par value common stock to various individuals and entities for consulting services, finders’ fees to two individuals who introduced the company to its proposed satellite e-broadcast partner, agent’s fees associated with the company’s proposed acquisition of MDU Services, Inc., agent’s fees for the introduction and fees associated with the company’s recent agreement with an e-business partner for its hotel sector product, documentation and initiation fees owing to the Pinnacle Note investment, collectively valued at $485,119 and professional fees valued at $162,000.

The Company issued 6,510,000 shares of its $0.001 par value common stock in order to settle the dispute with investors and agents, which arose over the M&E Note, and which allowed the M&E Note to be settled and converted.  The value of the shares was $317,136 and is recorded as a loss on debt settlement during the three months ended March 31, 2004.

There have been no other issuances of preferred or common stock.

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Item 2. Management's Discussion and Analysis or Plan of Operation

Forward-Looking Statements

This Quarterly Report contains forward-looking statements about our business, financial condition and prospects that reflect our assumptions and beliefs based on information currently available.  We can give no assurance that the expectations indicated by such forward-looking statements will be realized.  If any of our assumptions should prove incorrect, or if any of the risks and uncertainties underlying such expectations should materialize, our actual results may differ materially from those indicated by the forward-looking statements.

The key factors that are not within our control and that may have a direct bearing on operating results include, but are not limited to, acceptance of our services, our ability to expand our customer base, our ability to raise capital in the future, the retention of key employees and changes in the regulation of our industry.  There may be other risks and circumstances that we are unable to predict.  When used in this Quarterly Report, words such as,  "believes,"  "expects,"  "intends,"  "plans,"  "anticipates,"  "estimates" and similar expressions are intended to identify forward-looking statements, although there may be certain forward-looking statements not accompanied by such expressions.

General

Although we are still considered to be in the development stage, we have begun commercial delivery of our products and services.  In the quarter ended March 31, 2004 we booked the first revenues for our proprietary technologies and products directed toward the lodging sector, these revenues having resulted from commercial sales rather than a converted pre-commercial arrangement.  Additional commercial sales orders have been received for our lodging sector products and services and additional deliveries have subsequently occurred and are increasing.  In the current quarter we have expanded our services offered to the lodging sector by developing additional proprietary technology and executing a broad-based agreement with a large worldwide e-business reservation service.  Management believes that this expanded service delivery coupled with the agreement with the e-business reservation service will greatly increase the commercial usage and viability of our products and services directed toward the lodging sector.

We have come to terms with a second company for the provision of commercial development, field implementation, field management and field support of our e-health products and services.  This arrangement involves the delivery of our MD@Rx PDA-based products and services for electronic medication prescription fulfillment.  Commercial delivery of the MD@Rx products as well as on-going development of same to better service the Medicaid and uninsured patients markets have begun subsequent to March 31.  We have also executed an agreement with a nationwide medical IT services company to license and provide services related to our proprietary medical technologies in return for a significant equity stake.  This agreement also contemplates the integration of some of our proprietary technologies into the products and services of our new partner.

Our proprietary products and services directed toward the satellite re-broadcast sector remain in the pre-commercial stage although the company is in later-stage discussions with a major marketer of satellite re-broadcast services that conclude and thus lead to a commercial delivery or adoption of this third business line in the current quarter.

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