- Quarterly Report (10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2010


o		TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 000-30326

FIRST PHYSICIANS CAPITAL GROUP, INC.

(Exact Name of Registrant as Specified in Its Charter)


DELAWARE		77-0557617
(State or Other Jurisdiction		(I.R.S. Employer
of Incorporation or Organization)		Identification No.)

433 North Camden Drive #810
Beverly Hills, California		90210
(Address of principal executive offices)		(Zip Code)

(310) 860-2501

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

þ Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes þ No


Number of shares of common stock outstanding as of February 17, 2011		15,143,001

TABLE OF CONTENTS


	Page

PART I		1

FINANCIAL INFORMATION		1

Item 1. FINANCIAL STATEMENTS		1

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		17

RESULTS OF OPERATIONS		22

MATERIAL CHANGES IN RESULTS OF OPERATIONS		22

MATERIAL CHANGES IN FINANCIAL CONDITION — AT DECEMBER 31, 2010, COMPARED TO SEPTEMBER 30, 2010:		23

LIQUIDITY AND CAPITAL RESOURCES		24

OFF-BALANCE SHEET ARRANGEMENTS		25

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		25

Item 4. CONTROLS AND PROCEDURES		25

PART II OTHER INFORMATION		26

Item 1. LEGAL PROCEEDINGS		26

Item 1A. RISK FACTORS		26

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		26

Item 3. DEFAULTS UPON SENIOR SECURITIES		26

Item 4. [REMOVED AND RESERVED]		26

Item 5. OTHER INFORMATION		26

Item 6. EXHIBITS		26

SIGNATURES		34

EXHIBIT INDEX		35

Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PART I

FINANCIAL INFORMATION


Item 1.		FINANCIAL STATEMENTS

FIRST PHYSICIANS CAPITAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except shares and per share data)


	December 31,		September 30,
	2010		2010
	(Unaudited)

ASSETS
Current assets:
Cash and cash equivalents	$	807	$	1,662
Accounts receivable, net of allowance for uncollectible accounts		3,473		3,641
Prepaid expenses		374		122
Other current assets		1,008		892
Assets held for sale		1,974		1,980

Total current assets		7,636		8,297

Property and equipment, net		15,540		15,862
Goodwill		759		759
Other assets		678		812

Total assets	$	24,613	$	25,730


LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	4,944	$	4,062
Accrued expenses		3,164		3,268
Current maturities of long-term debt		2,131		2,220
Liabilities of operations held for sale		1,910		1,828

Total current liabilities		12,149		11,378

Long-term debt, net of current portion		15,112		15,520
Deferred gain		1,683		1,705


Total liabilities		28,944		28,603

FIRST PHYSICIANS CAPITAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except shares and per share data)


	December 31,			September 30,
	2010			2010
	(Unaudited)
Commitments and contingencies
Non-redeemable preferred stock:

Preferred stock Series 1-A ($0.01 par value, 2,802,000 shares authorized; 67,600 shares issued and outstanding as of December 31, 2010 and September 30, 2010)		166			166

Preferred stock Series 2-A ($0.01 par value, 1,672,328 shares authorized; 3,900 shares issued and outstanding as of December 31, 2010 and September 30, 2010)		25			25


Total non-redeemable preferred stock		191			191

Redeemable preferred stock:
Preferred stock Series 5-A ($0.01 par value, 5,000,000 shares authorized; 9,000 shares issued and outstanding as of December 31, 2010 and September 30, 2010 )		7,832			7,832

Preferred stock Series 6-A ($0.01 par value, 5,000 shares authorized; 4,875 shares issued and outstanding as of December 31, 2010 and September 30, 2010)		4,381			4,381


Total redeemable preferred stock		12,213			12,213

Common stock ($0.01 par value, 100,000,000 shares authorized; 15,049,507 shares issued and outstanding as of December 31, 2010 and September 30, 2010)		153			153
Additional paid-in capital		79,493			79,235
Accumulated deficit		(97,339	)		(95,666	)
Treasury stock, at cost (149,744 shares as of December 31, 2010 and September 30, 2010)		(104	)		(104	)


Total First Physicians Capital Group stockholders’ deficit		(17,797	)		(16,382	)

Non-controlling interests		1,062			1,105
Total stockholders’ deficit		(16,735	)		(15,277	)

Total liabilities, preferred stock and stockholders’ deficit	$	24,613		$	25,730

The accompanying notes are an integral part of these condensed consolidated financial statements. Quarterly comparative financial information is based on unaudited financial reports, prepared by management, based on previous quarterly filings.

FIRST PHYSICIANS CAPITAL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except share and per share data)

(Unaudited)


	Three months ended
	December 31,			December 31,
	2010			2009

Revenue from services	$	7,861		$	9,402

Costs and expenses:
Selling, general and administrative expenses		7,354			8,743
Provision for doubtful accounts		1,002			1,506
Amortization of stock-based compensation		258			278
Depreciation and amortization		322			290

Total costs and expenses		8,936			10,817

Operating loss		(1,075	)		(1,415	)

Other income		19			436
Interest expense		(355	)		(684	)


Net loss from continuing operations before taxation, non-controlling interests and non-cash beneficial conversion feature		(1,411	)		(1,663	)

Taxation		—			—


Net loss from continuing operations		(1,411	)		(1,663	)

Net income attributable to non-controlling interests		(120	)		(180	)


Net loss from continuing operations attributable to First Physicians Capital Group		(1,531	)		(1,843	)

Non-cash beneficial conversion feature preferred dividend		—			(47	)


Net loss from continuing operations attributable to First Physicians Capital Group common stockholders		(1,531	)		(1,890	)

Discontinued operations		(142	)		(274	)


Net loss attributable to First Physicians Capital Group common stockholders	$	(1,673	)	$	(2,164	)

Net loss per common share:

Basic:

Net loss from continuing operations	$	(0.10	)	$	(0.13	)

Discontinued operations		(0.01	)		(0.02	)


Net loss	$	(0.11	)	$	(0.15	)


Diluted		N/A			N/A

FIRST PHYSICIANS CAPITAL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Three months ended
	December 31,			December, 31
	2010			2009
Cash flows from operating activities:

Net loss	$	(1,673	)	$	(2,117	)

Adjustments to reconcile net loss to net cash used in operating activities:

Non-controlling interest		120			180
Depreciation and amortization		322			290
Amortization of stock based compensation		258			278
Amortization of debt discount		—			359
Amortization of deferred gain on sale of assets		(22	)		—
Bad debt provision		1,002			1,506
Changes in working capital components:
Accounts receivable		(835	)		(1,115	)
Accounts payable and accrued expenses		778			(371	)
Other		(382	)		7
Discontinued operations		97			114

Net cash used in operating activities		(335	)		(869	)


Cash flows from investing activities:
Purchase of property and equipment		—			(46	)
Increase in restricted cash		—			(1	)
Discontinued operations		—			(33	)

Net cash used in investing activities		—			(80	)


Cash flows from financing activities:
Repayment of long-term debt		(347	)		(354	)
Distributions to non-controlling interests		(163	)		(112	)
Proceeds from exercise of stock warrants		—			389
Issuance of common stock		—			100
Issuance of preferred stock Series 5-A, net of costs		—			13
Issuance of preferred stock Series 6-A, net of costs		—			43
Proceeds from long-term debt		—			129
Discontinued operations		(10	)		(9	)

Net cash provided by (used in) financing activities		(520	)		199


Net decrease in cash and cash equivalents		(855	)		(750	)


Cash and cash equivalents at beginning of period		1,662			2,305

Cash and cash equivalents at end of period	$	807		$	1,555

Cash paid for interest	$	312		$	334

During the fiscal quarter-ended December 31, 2009, the fair value of warrants issued in conjunction with the extension of the convertible notes which were issued in connection with the Bridge Financing amounted to $283,000.

During the fiscal quarter-ended December 31, 2010, there was a non-cash transaction which involved the elimination of a $150,000 note payable to the physician group from which the Chandler Clinic was originally purchased related to the sale of the Chandler Clinic operation.

FIRST PHYSICIANS CAPITAL GROUP, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of First Physicians Capital Group, Inc., f/k/a Tri-Isthmus Group, Inc., a Delaware corporation (the “ Company ,” “ we ,” “ us ,” or “ our ,” depending on the context), as of December 31, 2010 and September 30, 2010 and for the three-month periods ended December 31, 2010 and December 31, 2009, respectively, have been prepared on substantially the same basis as our annual consolidated financial statements and should be read in conjunction with our Annual Report on Form 10-K (the “ Form 10-K ”), filed with the United States Securities and Exchange Commission (the “ SEC ”) on February 14, 2011, and any amendments thereto, for the Fiscal Year Ended September 30, 2010 (the “ Fiscal Year Ended September 30, 2010 ”). In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments of a normal recurring nature considered necessary to present fairly the financial information included herein.

The consolidated financial statements include our accounts and the accounts of our subsidiaries. All significant inter-company balances and transactions have been eliminated.

The results as of September 30, 2010 have been derived from our audited consolidated financial statements for the fiscal year ended as of such date.

The unaudited consolidated results for interim periods are not necessarily indicative of expected results for the full fiscal year.

Future Funding

We have sustained operating losses since inception and had an accumulated deficit of approximately $97.3 million as of December 31, 2010. This deficit has been funded primarily through preferred stock and common stock, promissory notes and cash generated from operations.

At December 31, 2010, we had current liabilities of $12.1 million and current assets of $7.6 million.

Our recurring losses from operations and anticipated future losses raise substantial doubt about our ability to continue as a going concern. Our plan of operations, even if successful, may not result in cash flow sufficient to finance our business. Realization of our assets is dependent upon our continued operations, which in turn is dependent upon meeting financing requirements and the success of future operations.

Our ability to continue as a going concern is dependent on improving profitability and cash flow and securing additional financing. While we believe in the viability of our strategy to raise additional funds and that the actions presently being taken provide the opportunity to continue as a going concern, there can be no assurances to that effect. These financial statements do not include any adjustments related to the recoverability and classification of asset amounts or the amounts and classification of liabilities that might be necessary if we are unable to continue as a going concern.

Reclassifications

Certain reclassifications have been made to the prior period amounts in order to conform to the current period presentation.

Critical Accounting Policies

For critical accounting policies affecting us, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the Fiscal Year Ended September 30, 2010. Critical accounting policies affecting us have not changed materially since September 30, 2010.

Recent Accounting Pronouncements

In January 2010, new guidance was issued regarding improving disclosures about fair value measurements. This standard amends the disclosure guidance with respect to fair value measurements for both interim and annual reporting periods. Specifically, this standard requires new disclosures for significant transfers of assets or liabilities between Level 1 and Level 2 in the fair value hierarchy; separate disclosures for purchases, sales, issuance and settlements of Level 3 fair value items on a gross rather than net, basis; and more robust disclosure of the valuation techniques and inputs used to measure Level 2 and Level 3 assets and liabilities. Except for the detailed disclosures of changes in Level 3 items, which will be effective as of October 1, 2011, the remaining new disclosure requirements are effective as of October 1, 2010. The adoption of this standard did not have a material impact on our financial condition or results of operations.

Fair Value of Financial Instruments

Carrying amounts of certain of our financial instruments, including cash equivalents, accounts receivable and accounts payable approximate fair value due to their short maturities. Carrying value of notes payable and long-term debt approximate fair values as they bear market rates of interest. None of our financial instruments are held for trading purposes.

2. Discontinued Operations

On January 10, 2011, the Company completed the sale of its operations in Tishomingo, Oklahoma. As of December 31, 2010, the assets of the Tishomingo operation were recorded as assets held for sale and the liabilities as liabilities of operations held for sale (See Footnote 13 — Subsequent Events). The Company has reclassified to discontinued operations, for all periods presented, the results of operations from the Tishomingo operation.

The results of discontinued operations for the Tishomingo, Oklahoma operation for the three months ended December 31, 2010 and 2009 are as follows (in thousands):


	Three Months ended
	December 31,			December 31,
	2010			2009

Revenue from services	$	886		$	926

Costs and expenses:
Selling, general and administrative expenses		826			972
Provision for doubtful accounts		152			177
Depreciation and amortization		29			29

Total costs and expenses		1,007			1,178

Operating loss		(121	)		(252	)

Interest expense		(21	)		(22	)


Loss before income taxes		(142	)		(274	)

Taxation		—			—


Total discontinued operations	$	(142	)	$	(274	)

A summary of the assets and liabilities of the Tishomingo, Oklahoma operation as of December 31, 2010 and 2009 is as follows (in thousands):


	December 31,		December 31,
	2010		2009

Current assets	$	251	$	228
Non-current assets		1,723		1,752

Total assets		1,974		1,980


Current liabilities		803		711
Non-current liabilities		1,107		1,117

Total liabilities		1,910		1,828


	$	64	$	152

3. Net Loss Per Share


	Three Months ended
	(in thousands)
	December 31,			December 31,
	2010			2009

Numerator for basic and diluted loss per share:
Net loss attributable to common stockholders	$	(1,673	)	$	(2,164	)

Denominator for basic loss per share — weighted average shares		15,049,507			14,182,308
Effect of dilutive shares:
Employee stock options		N/A			N/A
Preferred stock		N/A			N/A
Warrants		N/A			N/A

Net loss per common share:
Basic and diluted	$	(0.11	)	$	(0.15	)

Since we had a net loss for both the three months ended December 31, 2010 and December, 31 2009, potential shares of common stock equivalents outstanding are excluded from the computation of diluted net loss per share, as their effect is anti-dilutive.

4. Accounts Receivable

Accounts receivable consisted of the following (in thousands):


	December 31,			September 30,
	2010			2010
Gross patient accounts receivable	$	24,931		$	23,365
Reserves for bad debt		(7,960	)		(5,049	)
Reserves for contractual allowances		(13,498	)		(14,675	)

Patient accounts receivable, net	$	3,473		$	3,641

5. Other Current Assets

Other current assets consisted of the following (in thousands):


	December 31,		September 30,
	2010		2010
Deposits	$	235	$	105
Medical supplies		455		452
Other receivables		318		335


Total other current assets	$	1,008	$	892

6. Property and Equipment

Property and equipment consisted of the following (in thousands):


	December 31,			September 30,
	2010			2010
Computer hardware	$	79		$	79
Furniture, fixtures and medical equipment		4,270			4,270
Land		929			929
Buildings		13,329			13,329
Leasehold improvements		920			920
Accumulated depreciation		(3,987	)		(3,665	)


Property and equipment, net	$	15,540		$	15,862

7. Bridge Financing and Unregistered Sales of Equity Securities

During the fiscal year ended September 30, 2009, we entered into a bridge financing transaction (the “ Bridge Financing ”) which was consummated in three separate closings. On February 11, 2009, we completed the first closing of the Bridge Financing, a transaction in which we entered into the following two promissory notes, each dated as of February 6, 2009: (i) a convertible promissory note with SMP Investments I, LLC, a Michigan limited liability company (“ SMP ”), in the principal amount of $500,000 and (ii) a convertible promissory note with Anthony J. Ciabattoni, Trustee of the Ciabattoni Living Trust, dated August 17, 2000 (“ Ciabattoni ”), in the principal amount of $1,000,000 (collectively, the “ Bridge Notes ”). SMP and Ciabattoni are each a “ Bridge Lender ” and are collectively referred to herein as the “ Bridge Lenders .”

On February 11, 2009, in addition to the issuance of the Bridge Notes, we issued four warrants to purchase our common stock, par value $0.01 per share (the “ Common Stock ”), to the Bridge Lenders as follows: (i) a warrant issued to SMP for the purchase of up to 375,000 shares of Common Stock at an initial exercise price of $0.50 per share and exercisable for a period of three years from the date of issuance; (ii) a warrant issued to SMP for the purchase of up to 250,000 shares of Common Stock at an initial exercise price of $0.75 per share and exercisable for a period of three years from the date of issuance; (iii) a warrant issued to Ciabattoni for the purchase of up to 750,000 shares of Common Stock at an initial exercise price of $0.50 per share and exercisable for a period of three years from the date of issuance; and (iv) a warrant issued to Ciabattoni for the purchase of up to 500,000 shares of Common Stock at an initial exercise price of $0.75 per share and exercisable for a period of three years from the date of issuance.

Each Bridge Note originally became due and payable on November 6, 2009; we extended these notes under the terms of an extension option contained in the Bridge Notes. Pursuant to the terms of the extension option, we are required to issue warrants to the Bridge Lenders to purchase shares of Common Stock in the following amounts: (i) to SMP, 125,000 shares at a price of $0.50 per share, and 83,333 shares at a price of $0.75 per share and (ii) to Ciabattoni, 250,000 shares at a price of $0.50 per share, and 166,667 shares at a price of $0.75 per share. The new due date of the Bridge Notes pursuant to the extension option was February 6, 2010; we were to repay the unpaid principal of each Bridge Note on this date, together with accrued and unpaid interest of 16% per annum.

The Bridge Lenders have agreed to extensions as follows: the maturity date of the promissory note held by SMP, in the principal amount of $500,000, is extended to August 6, 2011; the maturity date of the promissory note held by Ciabattoni, in the principal amount of $1,000,000, is extended to February 6, 2013. Effective February 1, 2010, the interest rate was changed from 16% to 10% per annum for the Bridge Notes.

The Bridge Notes include a conversion feature allowing each Bridge Lender to convert all or any portion of the entire unpaid principal and any unpaid accrued interest at the date upon which the conversion is to be effected into a number of shares of Common Stock, determined by dividing the sum of the unpaid principal and unpaid accrued interest at the conversion date by the conversion price in effect at the conversion date. The initial conversion price is $0.625, which price is adjustable as set forth in the Bridge Notes. As of December 31, 2010, none of the Bridge Lenders has effected such a conversion.

The Bridge Notes include a provision granting the Bridge Lenders, to the extent that the Bridge Lenders holding notes representing a majority of the aggregate outstanding principal amount of the Bridge Notes agree, demand registration rights with respect to the resale of the shares of Common Stock that would be issuable upon conversion of the Bridge Notes, which rights vest thirty-six (36) months after the date of issuance of the Bridge Notes. The registration statement would be prepared by us at our expense and filed on Form S-1 or other appropriate form and, once declared effective, allow the registered securities to be sold on a continuous basis. In such circumstances, we would keep the registration statement continuously effective until certain conditions are met which would allow us to stop maintaining its effectiveness.

On March 3, 2009, we completed the second closing of the Bridge Financing, a transaction in which we entered into nine promissory notes, each dated as of March 3, 2009, in the aggregate principal amount of $500,000 (the “ Second Bridge Notes ”), with various investors (each, a “ Second Bridge Lender ” and together, the “ Second Bridge Lenders ”).

Each Second Bridge Note originally became due and payable on December 3, 2009, unless the maturity date is extended pursuant to the terms of an extension option. The Second Bridge Notes include a conversion feature allowing each Second Bridge Lender to convert all or any portion of the entire unpaid principal and any unpaid accrued interest at the date upon which the conversion is to be effected into a number of shares of Common Stock, determined by dividing the sum of the unpaid principal and unpaid accrued interest at the conversion date by the conversion price in effect at the conversion date. The initial conversion price is $0.625, which price is adjustable as set forth in the Second Bridge Notes. As of June 30, 2010, none of the Second Bridge Lenders has effected such a conversion.

We extended the Second Bridge Notes for an additional three months under the terms of the extension option contained in the Second Bridge Notes. Upon exercising this option, we were required to issue warrants to the Second Bridge Lenders to purchase an aggregate of 208,333 shares of our Common Stock, 125,000 shares of which will be issued at an exercise price of $0.50 per share and 83,333 shares of which will be issued at an exercise price of $0.75 per share. The new due date for the Second Bridge Notes pursuant to the extension option was March 3, 2010. The Second Bridge Lenders have agreed to an additional extension period for the Second Bridge Notes ranging from eighteen to thirty-six months from the March 3, 2010 due date and also agreed to a reduction in the annual interest rate from 16% to 10%.

The Second Bridge Notes also include a provision granting the Second Bridge Lenders, to the extent holders of a majority of the aggregate outstanding principal amount of the Bridge Notes and Second Bridge Notes agree, demand registration rights with respect to the resale of the shares of Common Stock that would be issuable upon conversion of the Second Bridge Notes, which rights vest thirty-six (36) months after the date of issuance of the Second Bridge Notes. The registration statement would be prepared by us at our expense and filed on Form S-1 or other appropriate form and, once declared effective, allow the registered securities to be sold on a continuous basis and we will keep the registration statement continuously effective until certain conditions are met which would allow us to stop maintaining its effectiveness.

On April 14, 2009, we completed the third closing of the Bridge Financing, a transaction in which we entered into the following three promissory notes: (i) a convertible promissory note, dated as of March 31, 2009, with Frank Darras, Trustee of the Darras Family Trust (“ Darras ”), in the principal amount of $100,000 (the “ Darras Note ”); (ii) a convertible promissory note, dated as of March 31, 2009, with SFV, Inc., a California corporation (“ SFV ”), in the principal amount of $50,000 (the “ SFV Note ”) and (iii) a convertible promissory note, dated as of April 14, 2009, with NFS LLC/FMTC Rol IRA FBO Neal Katz (“ Katz ”), in the principal amount of $50,000 (the “ Katz Note ”) (collectively, the “ Third Bridge Notes ”). Darras, SFV and Katz are each a “ Third Bridge Lender ” and are collectively referred to herein as the “ Third Bridge Lenders .”

The Darras Note and the SFV Note originally became due and payable on December 31, 2009, and the Katz Note originally became due and payable on January 14, 2010. The terms of each of the Third Bridge Notes contained an extension option to extend such notes for an additional three months at our discretion. We extended the Darras Note and the SFV Note under the terms of the respective options, and therefore are obligated to issue warrants to Darras and SFV as follows: (i) to Darras, 25,000 shares at an exercise price of $0.50 per share, and 16,667 shares at an exercise price of $0.75 per share; and (ii) to SFV, 12,500 shares at an exercise price of $0.50 per share, and 8,333 shares at an exercise price of $0.75 per share. We extended the Katz Note under the terms of an extension option contained in the Katz Note. By exercising this option, we are required to issue warrants to Katz to purchase an aggregate of 20,833 shares, 12,500 shares of which will be issued at an exercise price of $0.50 per share and 8,333 shares of which will be issued at an exercise price of $0.75 per share. The new due dates for the Third Bridge Notes, pursuant to the extension option, were March 31, 2010 for each of the Darras Note and the SFV Note and April 14, 2010 for the Katz Note. The Third Bridge Lenders have agreed to an additional extension period for the Third Bridge Notes ranging from eighteen to thirty-six months from the March 31, 2010 and April 14, 2010 due dates and also agreed to a reduction in the annual interest rate from 16% to 10%.

The Third Bridge Notes include a conversion feature allowing each Third Bridge Lender to convert all or any portion of the entire unpaid principal and any unpaid accrued interest at the date upon which the conversion is to be effected into a number of shares of Common Stock, determined by dividing the sum of the unpaid principal and unpaid accrued interest at the conversion date by the conversion price in effect at the conversion date. The initial conversion price is $0.625, which price is adjustable as set forth in the Third Bridge Notes.

The Third Bridge Notes include a provision granting the Third Bridge Lenders, to the extent the holders of a majority of the aggregate outstanding principal amount of the notes issued in the Bridge Financing agree, demand registration rights with respect to the resale of the shares of Common Stock that would be issuable upon conversion of the Third Bridge Notes, which rights vest thirty-six (36) months after the date of issuance of the Third Bridge Notes. The registration statement would be prepared by us at our expense and filed on Form S-1 or other appropriate form and, once declared effective, allow the registered securities to be sold on a continuous basis and we will keep the registration statement continuously effective until certain conditions are met which would allow us to stop maintaining its effectiveness.

The fair value of the warrants issued in conjunction with the convertible notes issued under the Bridge Financing amounted to $932,000, and the fair value of the warrants issued in conjunction with the extension of the Bridge Notes, the Second Bridge Notes, the Darras Note, the SFV Note and the Katz Note amounted to $291,000. The beneficial conversion feature associated with the convertible notes issued in conjunction with the Bridge Financing totaled $253,000. Both the fair value of the warrants issued under the Bridge Financing and the subsequent extension of the Bridge Notes, the Second Bridge Notes, the Darras Note, the SFV Note and the Katz Note, as well as the beneficial conversion feature, will be amortized over the term of the loans. Amortization for the fiscal quarter ended December 31, 2010 and December 31, 2009 was $0 and $359,000, respectively.

Unregistered Sales of Equity Securities

None.

8. Long-term Debt

Long-term debt consists of the following (in thousands):


	December 31,			September 30,
	2010			2010
Note payable, secured by equipment, $4,558 payable monthly, including interest equal to the Wall Street Journal Prime Rate through September 2011	$	23		$	36

8% Notes payable to prior stockholders for stock repurchases, five notes outstanding at December 31, 2010, unsecured, maturity dates ranging from 2013 through 2018		212			220

Note payable, secured by real estate, $36,736 payable monthly, including interest based on Wall Street Journal prime plus 2% adjusted quarterly, floor of 7%, rate is currently 7%, matures January 2030		4,599			4,628

Note payable secured by real estate, $27,513 payable monthly, including interest based on Wall Street Journal prime plus 2% adjusted quarterly, floor of 7%, rate is currently 7%, matures November 2028		3,341			3,365

Note payable secured by real estate, $34,144 payable monthly, including interest based on Wall Street Journal prime plus 2% adjusted quarterly, floor of 7%, rate is currently 7%, matures November 2024		3,305			3,348

Note payable, 5% interest payable quarterly, unsecured, matures on or before December 11, 2011		1,500			1,500

Capitalized lease obligations — ten (10) leases for buildings and medical equipment with imputed interest rates ranging from 4% to 17.2%, maturing at various dates through 2015		293			341

Note payable, secured by equipment, $7,530 payable monthly, including 6.75% interest through June 15, 2013		204			223

10% notes payable, unsecured, maturing on or before April 2013	$	2,200		$	2,200

Note payable, unsecured, non-interest bearing purchase obligation		—			150

Note payable, unsecured, 11.25% interest, matures September 2012 through June 2013		1,522			1,681

Note payable, secured by equipment, $1,567 payable monthly, including 6.75% interest through July 2013		44			48


Total		17,243			17,740

Less current maturities of long-term debt		(2,131	)		(2,220	)


Total long-term debt	$	15,112		$	15,520

The following chart shows scheduled principal payments due on long-term debt for the next five years and thereafter:


December 31,
2011	$	2,131
2012		2,883
2013		2,142
2014		530
2015		556
Thereafter		9,001

Total	$	17,243

9. Non-controlling Interests

Non-controlling interest attributable to equity interests not held by us in the Del Mar Ambulatory Surgical Center (“ Del Mar ”) and Southern Plains Associates, LLC, an Oklahoma limited liability company, during the three months ended December 31, 2010 amounted to $120,000, compared to $180,000 for the three months ended December 31, 2009.

Non-controlling interests at Del Mar totaled 65% at both December 31, 2009 and 2010; however, we have a 3:2 voting majority on the board of managers which gives us control of the management decisions of Del Mar, making it subject to inclusion in our consolidated financial statements.

10. Warrants

Outstanding exercisable warrants consisted of the following as of December 31, 2010:


	Remaining	Exercise
Description	Life	Price		Warrants
September 30, 2007 Preferred Stock Series 5-A warrants issued to investor	1.5 years	$	0.45		50,000
September 30, 2008 Preferred Stock Series 5-A warrants issued to placement agent	2.3 years		0.50		436,250
February 6, 2009 warrants issued in connection with notes payable	1.1 years		0.50		1,125,000
February 6, 2009 warrants issued in connection with notes payable	1.1 years		0.75		750,000
March 3, 2009 warrants issued in connection with notes payable	1.2 years		0.50		375,000
March 3, 2009 warrants issued in connection with notes payable	1.2 years		0.75		250,000
March 16, 2009 warrants issued to advisory board	1.2 years		0.63		83,334
March 31, 2009 warrants issued in connection with notes payable	1.3 years		0.50		112,500
March 31, 2009 warrants issued in connection with notes payable	1.3 years		0.75		75,000
April 14, 2009 warrants issued in connection with notes payable	1.3 years		0.50		37,500
April 14, 2009 warrants issued in connection with notes payable	1.3 years		0.75		25,000
June 8, 2009 Preferred Stock Series 6-A warrants issued to investor	5 months		0.50		210,000
June 10, 2009 warrants issued to Medical Advisory Board	1.4 years		0.63		150,000
October 19, 2009 Preferred Stock Series 5-A warrants issued to investor	10 months		0.50		25,800
October 19, 2009 Preferred Stock Series 6-A warrants issued to investor	10 months		0.50		4,200
November 6, 2009 warrants issued in connection with notes payable	1.1 years		0.50		375,000
November 6, 2009 warrants issued in connection with notes payable	1.1 years		0.75		250,000
December 3, 2009 warrants issued in connection with notes payable	1.2 years		0.50		125,000
December 3, 2009 warrants issued in connection with notes payable	1.2 years		0.75		83,331
December 2, 2009 warrants issued in connection with issuance of common stock	11 months		0.50		60,000
December 14, 2009 Preferred Stock Series 6-A warrants issued to investor	11 months		0.50		3,600
December 31, 2009 warrants issued in connection with notes payable	1.3 years		0.50		37,500
December 31, 2009 warrants issued in connection with notes payable	1.3 years		0.75		24,999
January 14, 2010 warrants issued in connection with notes payable	1.0 years		0.50		12,500
January 14, 2010 warrants issued in connection with notes payable	1.0 years		0.75		8,333


					4,689,847

A summary of our stock warrant activity and related information at December 31, 2010 and September 30, 2010 is as follows:


							Weighted-Average
	Number of Shares of Common Stock						Exercise Price Per Share
	Three months						Three months
	ended			Year ended			ended		Year ended
	December 31,			September 30,			December 31,		September 30,
	2010			2010			2010		2010
Warrants outstanding at beginning of the period		7,949,013			14,459,635		$	0.51	$	0.49
Issued		—			1,010,263			—		0.59
Exercised		—			(1,105,685	)		—		0.46
Cancelled or expired		(3,217,500	)		(6,415,200	)		0.38		0.50


Warrants outstanding at end of the period		4,731,513			7,949,013		$	0.58	$	0.51

All warrants have a two-year to five-year expiration. The warrant fair value was determined by using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include (i) risk-free interest rate between 1.1% and 4.5%; (ii) expected warrant life equal to the actual remaining life of the warrants as of the period end; (iii) expected volatility between 52% and 212%; and (iv) zero expected dividends.

11. Stock Options

The following summarizes activities under the stock option plans:


							Weighted-Average
	Number of Options						Exercise Price Per Share
	December 31,			September 30,			December 31,		September 30,
	2010			2010			2010		2010
Options outstanding at beginning of the period		8,659,082			8,249,002		$	0.62	$	0.59
Granted
— at above fair market value		—			650,000			—		0.63
— at fair market value		—			—			—		—
— at below fair market value					—			—		—
Exercised		—			—			—		—
Cancelled		—			—			—		—
Forfeited		(42,898	)		(239,920	)		0.63		0.65

Options outstanding at end of the period		8,616,184			8,659,082		$	0.62	$	0.62


Options vested/exercisable at end of the period		3,668,092			3,689,541		$	0.60	$	0.60

12. Sale of the Chandler Clinic

In December 2010, Rural Hospital Acquisition, LLC, our subsidiary and an Oklahoma limited liability company, sold its Chandler Clinic to the physician group from which it was originally purchased. We have no further obligations or interests in this facility. The buyer assumed the liabilities and leases related to this facility in the transaction. We did not receive any additional consideration at closing.

13. Subsequent Events

On January 10, 2011, RHA Tishomingo, LLC, an Oklahoma limited liability company and an indirect subsidiary of ours, entered into an Asset Purchase Agreement to sell the hospital operations of Johnson Memorial Hospital in Tishomingo, Oklahoma to Mercy Tishomingo Hospital Corporation, an Oklahoma not-for-profit corporation. Also on January 10, 2011, we entered into an Agreement for Purchase and Sale of Real Property to sell the real estate and equipment of Johnson Memorial Hospital to RSE Enterprises, Inc., an Oklahoma corporation (together with the sale to Mercy Tishomingo Hospital Corporation, the “ Tishomingo Transaction ”). As part of the Tishomingo Transaction, the $1.13 million in USDA mortgage debt related to the facility was retired. In connection with the Tishomingo Transaction, RHA Tishomingo, LLC entered into an escrow agreement, pursuant to which RHA Tishomingo, LLC will hold in an escrow account approximately $500,000 in net sale proceeds after bank debt repayment. The escrowed funds will remain in the escrow account until such time as all representations, warranties and indemnifications under the Asset Purchase Agreement are fully satisfied. The gross proceeds in the transaction were $1.687 million in cash, plus retention of net accounts receivable of approximately $143,000. As part of the transaction, we expect to transition a significant portion of our back office operations in cooperation with the new owner. We may continue this co-back office arrangement temporarily or indefinitely, or we may opt to completely outsource these functions. We expect a wind-down of our corporate back office and revenue cycle management operations in Oklahoma City, Oklahoma in the Fiscal Year Ended September 30, 2011 in favor of another solution.

In January 2011, First Physicians Realty Group, LLC, our subsidiary, established a line of credit of up to $1.5 million. We received a $350,000 initial draw on the line of credit with additional borrowings subject to final terms and conditions.


Item 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q (this “ Form 10-Q ”).

FORWARD LOOKING STATEMENTS

Depending on the market for our stock and other conditional tests, a specific safe harbor under the Private Securities Litigation Reform Act of 1995 may be available. The discussion in this Form 10-Q contains forward-looking statements made pursuant to such safe harbor provisions, and such statements should not be unduly relied upon. Forward-looking statements can be identified by the use of words such as “may,” “will,” “could,” “should,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans” and variations thereof or of similar expressions. All forward-looking statements included in this Form 10-Q are based on information available to us on the date hereof. We assume no obligation to update any such forward-looking statements. Our actual results in future periods could differ materially from those indicated in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: possession of significant voting control over us by the holders of our Series 5-A Preferred Stock, par value $0.01 per share, and Series 6-A Convertible Preferred Stock, par value $0.01 per share; our limited cash resources; our ability to redirect and finance our business; our significant corporate expenses and expenses related to filings with and compliance with the rules and regulations of the United States Securities and Exchange Commission (the “ SEC ”) and limited revenue to offset these expenses; the availability of appropriate prospective acquisitions or investment opportunities; litigation; other risks discussed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2010 (the “ Fiscal Year Ended September 30, 2010 ”) under the heading “Risk Factors”; and the risks discussed in our other SEC filings, which are publicly available on EDGAR.

OVERVIEW

References to “we,” “us,” “our,” “Tri-Isthmus Group,” “FPCG” or the “Company” refer to First Physicians Capital Group, Inc. and its subsidiaries. We maintain our executive offices at 433 North Camden Drive, #810, Beverly Hills, California 90210. Our telephone number is +1 (310) 860-2501, and our website is at www.firstphysicianscapitalgroup.com .

We invest in and provide financial and managerial services to healthcare facilities in non-urban markets. We promote quality medical care by offering improved access and breadth of services. We unlock the value of our investments by developing strong, long-term and mutually-beneficial relationships with our physicians and the communities they serve.

This Form 10-Q report covers the fiscal period ended December 31, 2010.

Information in this Form 10-Q is current as of February 15, 2011, unless otherwise specified.

CURRENT OPERATIONS

We focus on the delivery of financial and managerial services to healthcare facilities in non-urban markets, as described more fully in the section entitled “Strategy” in this Form 10-Q.

Our support staff at hospitals owned by Rural Hospital Acquisition, LLC, our subsidiary and an Oklahoma limited liability company (“ RHA ”), and our Del Mar, California ambulatory surgical center (the “ Del Mar Ambulatory Surgical Center ”) consists of registered nurses, operating room technicians, an administrator who supervises day-to-day activities and a small number of office staff. Each operating unit also has appointed a medical director, who is responsible for and supervises the quality of medical care provided at the operating center. Use of our surgery centers is limited to licensed physicians. Our business depends upon the efforts and success of these employee and non-employee physicians who provide medical services at our facilities. Our business could be adversely affected by the loss of our relationship with, or a reduction in use of our facilities by, a key physician or group of physicians.

STRATEGY

During the Fiscal Year ended September 30, 2010, we shifted our strategy in response to economic conditions and changes in health care law. As more fully described in the paragraphs below, we have continued this revised strategic focus into the first quarter of our fiscal year ended September 30, 2011 (the “ Fiscal Year Ended September 30, 2011 ”).

Our initial strategy, in place prior to our shift during the Fiscal Year Ended September 30, 2010, was to identify and invest in “platform” companies in the business services and healthcare industries that provided essential core offerings, which could be expanded over time. As we focused our efforts in the healthcare industry, two particular segments—ambulatory surgical centers and rural hospitals—stood out in terms of potentially favorable economics, positive regulatory trends, inherent cost advantages, improving demographics and, for non-urban healthcare opportunities, a large, chronically under-served market. We determined that the top-down trends and attractive cash flows of ambulatory surgical centers made this an area of particular interest. We determined that focusing on rural healthcare could represent a significant long-term opportunity for us.

Our portfolio was expected to consist of (i) majority interests in healthcare platforms or facilities, such as RHA, our ambulatory surgical center in San Diego, California and Southern Plains Medical Center, Inc., an Oklahoma corporation (“ SPMC ”) and (ii) equity positions in a diversified portfolio of minority interests in ambulatory surgical centers with a history of positive cash flows. In addition, we expect to selectively invest in business solutions providing financial and processing services to healthcare providers and physicians and in support of new treatment solutions.

In line with our strategy, we re-branded our activities. The operations in non-urban markets previously known as RHA were re-branded “Southern Plains Medical Group” to leverage the old and well-established recognition that SPMC has in the regional markets. In addition, effective September 29, 2009, we changed our name to “First Physicians Capital Group, Inc.” to reflect our focus on the healthcare industry.

In response to local market economic conditions including the expected impact of changes in healthcare law, during the Fiscal Year Ended September 30, 2010 we shifted our strategy and embarked upon initiatives to reorganize our operations. Our strategy transitioned away from majority ownership in healthcare delivery companies to a focus on healthcare management services and the financing of equipment and real estate used by healthcare entities. We will maintain or acquire minority ownership in selected healthcare delivery companies that complement our management services and financing activities. We will also invest in, acquire or partner with other companies that provide similar services in our markets.

In pursuit of this reorganization, we are divesting underperforming facilities and reducing or outsourcing administrative functions to better align cost structures and business volume. We have entered into a letter of intent to sell the Southern Plains Medical Clinic to a consortium of local healthcare services providers in Oklahoma, and we have also signed letters of intent with potential buyers for our other facilities in Oklahoma. Although we anticipate successful completion of these sales, there is no guarantee that these transactions will be completed. We continue to receive both solicited and unsolicited proposals from time to time for sales, joint-ventures, partnerships or combinations of approaches. We are always open to transactions that make good business sense relative to our strategic plan, provide an appropriate buyer or partners for the community in which the facility in question is located and creates a good opportunity for the employees working at those facilities.

RECENT DEVELOPMENTS

Johnson Memorial Hospital in Tishomingo, Oklahoma—Sale

Local Management Changes in Oklahoma

On February 14, 2011, Tom Rice’s employment as President and Chief Operating Officer at Southern Plains Medical Group was terminated by mutual agreement. While Mr. Rice had an employment agreement and severance agreement, by mutual consent he accepted three months’ severance plus vesting of his stock options per the Company stock option plan terms. His resulting severance payments will begin once certain asset sales and the reorganization of the Oklahoma operations are completed.

Bridge Financing

During the fiscal year ended September 30, 2009 (the “ Fiscal Year Ended September 30, 2009 ”), we entered into a bridge financing transaction (the “ Bridge Financing ”) which was consummated in three separate closings. On February 11, 2009, we completed the first closing of the Bridge Financing, a transaction in which we entered into the following two promissory notes, each dated as of February 6, 2009: (i) a convertible promissory note with SMP Investments I, LLC, a Michigan limited liability company (“ SMP ”), in the principal amount of $500,000 and (ii) a convertible promissory note with Anthony J. Ciabattoni, Trustee of the Ciabattoni Living Trust, dated August 17, 2000 (“ Ciabattoni ”), in the principal amount of $1,000,000 (collectively, the “ Bridge Notes ”). SMP and Ciabattoni are each a “ Bridge Lender ” and are collectively referred to herein as the “ Bridge Lenders .”

RESULTS OF OPERATIONS

MATERIAL CHANGES IN RESULTS OF OPERATIONS

DISCONTINUED OPERATIONS

On January 10, 2011 we completed the Tishomingo Transaction. As of December 31, 2010, the assets of the Tishomingo operation have been recorded as assets held for sale and the liabilities as liabilities of operations held for sale. We have reclassified to discontinued operations, for all periods presented, the results of operations from the Tishomingo operation.

REVENUE

Revenue from services was $7.9 million for the three-month period ended December 31, 2010, compared to $9.4 million for the three-month period ended December 31, 2009, representing a decrease of $1.5 million, or (16.0%). This decrease is driven by a $0.8 million (47%) decrease in revenue at our Del Mar Ambulatory Surgical Center, which is the result of a 43% decrease in surgical cases. Patient days decreased 7% at our critical access hospitals, which contributed to a revenue decrease of $0.7 million for the three-month period ended December 31, 2010 as compared to the three-month period ended December 31, 2009.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses decreased by $1.3 million, from $8.7 million in the three-month period ended December 31, 2009 to $7.4 million in the three-month period ended December 31, 2010, representing a 15% decrease. This decrease is driven by a $0.8 million decrease in personnel costs at RHA related to staff reductions, elimination of certain employee benefits and the divestiture of the Chandler Clinic (the “ Chandler Clinic ”). Our outside services expenses decreased $0.3 million as the result of reduced usage of outside attorneys and other consultants. Expenses at our Del Mar Ambulatory Surgical Center decreased $0.2 million as a result of lower personnel and medical supply expenses resulting from lower surgical case volumes.

PROVISION FOR DOUBTFUL ACCOUNTS

Provision for doubtful accounts decreased to $1.0 million in the three-month period ended December 31, 2010 from $1.5 million in the three-month period ended December 31, 2009, representing a decrease of $0.5 million, or 33%. The decrease is primarily the result of reduced surgical case volume at our Del Mar Ambulatory Surgical Center.

OTHER INCOME

Other income was $19,000 for the three-month period ended December 31, 2010 and $436,000 for the three-month period ended December 31, 2009. This decrease is primarily due to $429,000 of insurance proceeds received for damages to one of our facilities in the three-month period ended December 31, 2009, while a corresponding amount was not received in the three-month period ended December 31, 2010. The insurance proceeds were a reimbursement for tornado damage at one of our critical access hospitals.

INTEREST EXPENSE

Interest expense decreased to $355,000 for the three-month period ended December 31, 2010, as compared to $684,000 for the three-month period ended December 31, 2009. This represents a decrease of $329,000, or 48%. The three-month period ended December 31, 2009 included expenses of $359,000 related to the amortization of points, debt discount and the beneficial conversion feature of the Bridge Financing. For the three-month period ended December 31, 2010, there was $0 expense related to the amortization of Bridge Financing points, discount or beneficial conversion feature.

BASIC WEIGHTED-AVERAGE NUMBER OF COMMON STOCK OUTSTANDING

The weighted average number of shares of Common Stock outstanding was 15,049,507 and 14,182,308 for the three-month periods ended December 31, 2010 and December 31, 2009, respectively. The weighted average number of shares increased as a result of the sale of additional Common Stock and the exercise of warrants to purchase shares of Common Stock.

MATERIAL CHANGES IN FINANCIAL CONDITION — AT DECEMBER 31, 2010, COMPARED TO SEPTEMBER 30, 2010:

CASH AND CASH EQUIVALENTS

As of December 31, 2010, cash and cash equivalents totaled $807,000, a decrease of $855,000 when compared with the $1,662,000 on hand at September 30, 2010. This represents a decrease of 51%. This decrease in cash and cash equivalents was a result of $355,000 net cash used in operating activities and $347,000 of repayment of notes payable.

ACCOUNTS RECEIVABLES

As of December 31, 2010, accounts receivables, net of allowances for contractual discounts and uncollectible accounts totaled $3.5 million, a decrease of $0.1 million from $3.6 million at September 30, 2010. This represents a change of 3%, which reflects normal billing and collection activity.

PREPAID EXPENSES

As of December 31, 2010, prepaid expenses totaled $374,000, an increase of $252,000 from $122,000 at September 30, 2010. This represents a change of 207% and arose primarily from the prepayment of insurance premiums for the Fiscal Year ended September 30, 2011.

OTHER CURRENT ASSETS

As of December 31, 2010, other current assets totaled $1.0 million, an increase of $0.1 million from $0.9 million at September 30, 2010. This represents an increase of 11.1% and arose primarily from a $0.1 million deposit placed by our Del Mar Ambulatory Surgery Center.

ACCOUNTS PAYABLE

As of December 31, 2010, accounts payable totaled $4.9 million, compared to $4.1 million at September 30, 2010. This represents an increase of $0.8 million, or 19.5%. This increase is the result of cash conservation initiatives.

ACCRUED EXPENSES

As of December 31, 2010, accrued expenses totaled $3.2 million, compared to $3.3 million at September 30, 2010. This represents a decrease of $0.1 million, or 3.0%. This decrease is primarily attributable to a decrease in the liability for employee benefits expenses RHA.

LONG-TERM DEBT

Long-term debt decreased $0.5 million from $17.7 million at September 30, 2010 to $17.2 million at December 31, 2010. This decrease reflects amortization from scheduled note payments and the extinguishment of a $150,000 note resulting from the sale of the Chandler Clinic.

INFLATION

In the Fiscal Year Ended September 30, 2010 and the Fiscal Year Ended September 30, 2009, inflation and changing prices have had a net neutral impact on our revenues, expenses and income from continuing operations. We expect future payment contracts from third parties and future supplies and cost of operations to increase or decrease proportionally in the future.

OTHER EVENTS

We are not aware of any trends, events or uncertainties that will result in a material change in our results of operations.

LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents totaled $0.8 million as of December 31, 2010, compared to $1.7 million at September 30, 2010, a decrease of $0.9 million. This decrease is primarily due to operating deficits that required the use of cash. As of December 31, 2010 we had a working capital deficit of $4.5 million compared with a working capital deficit of $3.1 million at September 30, 2010. The working capital decrease was primarily a result of operating losses during the three-month period ended December 31, 2010 and the usage of cash to make scheduled payments on notes payable. As of December 31, 2010, we had a stockholders’ deficit of $16.7 million, as compared to a stockholders’ deficit of $15.3 million as of September 30, 2010. The increase in stockholders’ deficit arose from operating losses.

During the three-month period ended December 31, 2010 there was $0 cash provided by (used in) investing activities as compared with net cash used of $0.1 million in the three-month period ended December 31, 2009 primarily for the purchase of property, plant and equipment.

Cash used in financing activities totaled $0.5 million in the three-month period ended December 31, 2010, as compared with $0.2 million generated in the three-month period ended December 31, 2009. During the three-month period ended December 31, 2010, cash was used primarily toward the repayment of notes payable. During the three month period ended December 31, 2009, net notes payable repayment was more than offset by cash generated from the exercise of warrants to purchase Common Stock and the sale of Common Stock.

We have sustained operating losses since our inception and had an accumulated deficit of approximately $97.3 million as of December 31, 2010, as compared with an accumulated deficit of $95.7 million as of September 30, 2010. These losses have been funded principally through the issuance of preferred and common stock, the issuance of promissory notes and cash generated from operations.

We are not aware of any trends, demands, events or uncertainties that will result in a material change in our liquidity or capital resources, nor do we expect any changes in the cost of our capital resources or the mix and relative cost of our capital resources.

OFF-BALANCE SHEET ARRANGEMENTS

None.


Item 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.


Item 4.		CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures : As of the end of the period covered by this report an evaluation was carried out by our management, including our Chief Executive Officer and Principal Accounting Officer, of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended. Based on this evaluation, our Chief Executive Officer and Principal Accounting Officer concluded that our controls and procedures were effective as of the end of the fiscal quarter ended December 31, 2010.

(b) Changes in Internal Control Over Financial Reporting : There have been no changes in our internal control over financial reporting during the fiscal quarter ended December 31, 2010 that have a material effect on our internal control over financial reporting.

PART II
OTHER INFORMATION


Item 1.		LEGAL PROCEEDINGS

None.


Item 1A.		RISK FACTORS

In addition to the other information set forth in this Form 10-Q, you should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the Fiscal Year Ended September 30, 2010, which could materially affect our business, financial condition or future results. We are currently unaware of any material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the Fiscal Year Ended September 30, 2010; however, additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.


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

None.


Item 3.		DEFAULTS UPON SENIOR SECURITIES

None.


Item 4.		[REMOVED AND RESERVED]

None.


Item 5.		OTHER INFORMATION

None.


Item 6.		EXHIBITS

The following documents are filed as exhibits to this Form 10-Q (exhibits marked with an asterisk (*) have been previously filed with the SEC as indicated and are incorporated herein by reference):


Exhibit No.			Description

	2.1	*	Membership Interest Purchase Agreement (filed as Exhibit 2.1 to the Form 8-K, as filed with the SEC on November 5, 2007)

	3.1	*	Certificate of Incorporation (filed as Exhibit 3.1 to the Form 8-K, as filed with the SEC on November 14, 2000)

	3.2	*	Amended and Restated Bylaws dated October 25, 2002 (filed as Exhibit 3.2 to the Form 8-K, as filed with the SEC on October 28, 2002)

	3.3	*	Certificate of Designation of Rights and Preferences of Series 2-A Convertible Preferred Stock filed November 8, 2000 (filed as Exhibit 4.1 to the Form 8-K, as filed with the SEC on November 14, 2000)


Exhibit No.			Description
	3.4	*	Certificate of Merger filed November 8, 2000, merging Vsource, Inc. (a Nevada corporation) with and into the Vsource, Inc. (a Delaware corporation) (filed as Exhibit 4.2 to the Form 8-K, as filed with the SEC on November 14, 2000)

	3.5	*	Agreement and Plan of Merger dated as of December 14, 2000, among the Registrant, OTT Acquisition Corp., Online Transaction Technologies, Inc. and its Shareholders (filed as Exhibit 10.11 to the Form 10-Q, as filed with the SEC on December 15, 2000)

	3.6	*	Certificate of Designation of Rights and Preferences of Series 3-A Convertible Preferred Stock filed June 20, 2001 (filed as Exhibit 4.1 to the Form 8-K, as filed with the SEC on July 2, 2001)

	3.7	*	Amendment to Certificate of Incorporation, dated January 16, 2002 (filed as Exhibit 3.3 to the Form 8-K, as filed with the SEC on January 23, 2002)

	3.8	*	Certificate of Designation of Rights and Preferences of Series 4-A Convertible Preferred Stock (filed as Exhibit 3.1 to the Form 8-K, as filed with the SEC on October 28, 2002)

	3.9	*	Amendment to Certificate of Incorporation, dated November 20, 2002 (filed as Exhibit 3.1 to the Form 10-Q for the period ending October 31, 2002, as filed with the SEC on December 5, 2002)

	3.10	*	Certificate of Designation of Rights and Preferences of Series 5-A Convertible Preferred Stock (filed as Exhibit 3.1 to the Form 8-K, as filed with the SEC on July 21, 2005)

	3.11	*	Amendment to Certificate of Incorporation, dated December 16, 2005 (filed as Exhibit 3.5 to the Form 10-Q for the period ending October 31, 2005, as filed with the SEC on December 20, 2005)

	3.12	*	Certificate of Amendment to the Certificate of Designation of Rights and Preferences Series 5-A Convertible Preferred Stock filed January 10, 2008 (filed as Exhibit B to the Form of Series 5-A Preferred Stock and Warrant Purchase Agreement, filed as Exhibit 10.52 herein)

	3.13	*	Certificate of Designation of Rights and Preferences of Series 6-A Convertible Preferred Stock filed April 2, 2008 (filed as Exhibit 3.1 to the Form 8-K, as filed with the SEC on April 3, 2008)

	3.14	*	Certificate of Amendment to the Certificate of Designation of Rights and Preferences of Series 5-A Convertible Preferred Stock filed May 15, 2008 (filed as Exhibit 4.2 to the Form 10-Q, as filed with the SEC on May 20, 2008)

	3.15	*	Certificate of Amendment to the Certificate of Designation of Rights and Preferences of Series 6-A Convertible Preferred Stock filed May 15, 2008 (filed as Exhibit B to the Form of Series 6-A Preferred Stock and Warrant Purchase Agreement, filed as Exhibit 10.54 herein)

	3.16	*	Amendment to Certificate of Incorporation, dated September 29, 2009 (filed as Exhibit 3.1 to the Form 8-K, as filed with the SEC on October 1, 2009)


Exhibit No.			Description
	3.17	*	Certificate of Decrease of Shares Designated as Series 7-A Convertible Preferred Stock, dated and filed January 22, 2010 (filed as Exhibit 3.1 to the Form 8-K, as filed with the SEC on January 28, 2010)

	4.1	*	Certificate of Decrease of Shares Designated as Series 1-A Convertible Preferred Stock (filed as Exhibit 4.1 to the Form 8-K, as filed with the SEC on July 13, 2005)

	4.2	*	Certificate of Decrease of Shares Designated as Series 2-A Convertible Preferred Stock (filed as Exhibit 4.2 to the Form 8-K, as filed with the SEC on July 13, 2005)

	4.3	*	Certificate of Decrease of Shares Designated as Series 3-A Convertible Preferred Stock (filed as Exhibit 4.3 to the Form 8-K, as filed with the SEC on July 13, 2005)

	4.4	*	Certificate of Decrease of Shares Designated as Series 4-A Convertible Preferred Stock (filed as Exhibit 4.4 to the Form 8-K, as filed with the SEC on July 13, 2005)

	4.5	*	Series 5-A Preferred Stock and Warrant Purchase Agreement, dated as of July 7, 2005, by and among Vsource, Inc. and the investors listed therein (filed as Exhibit 4.1 to the Form 8-K, as filed with the SEC on July 21, 2005)

	4.6	*	Form of Warrant (filed as Exhibit 4.2 to Form 8-K, filed with the SEC on July 21, 2005)

	4.7	*	Form of Warrant (filed as Exhibit 4.2 to Form 8-K, filed with the SEC on August 23, 2005)

	4.8	*	Series 5-A Preferred Stock and Warrant Purchase Agreement, dated as of September, 18, 2006, by and among First Physicians Capital Group, Inc. and certain Series 5-A Preferred Stock Investors (filed as Exhibit 4.1 to the Form 8-K, as filed with the SEC on September 22, 2006)

	4.9	*	Form of Warrant (filed as Exhibit 4.2 to Form 8-K, filed with the SEC on September 22, 2006)

	4.10	*	Amended and Restated Articles of Organization of Rural Hospital Acquisition LLC (filed as Exhibit 4.1 to the Form 8-K, as filed with the SEC on November 5, 2007)

	4.11	*	Amended and Restated Operating Agreement Rural Hospital Acquisition LLC (filed as Exhibit 4.2 to the Form 8-K, as filed with the SEC on November 5, 2007)

	4.12	*	Form of Extension of Warrant, dated July 18, 2007 (filed as Exhibit 4.1 to Form 8-K as filed with the SEC on December 18, 2008)

	10.1	*	Form of First Group Notes (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on November 2, 2007)

	10.2	*	Form of Second Group Notes (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on November 2, 2007)

	10.3	*	Form of First Group Warrants (filed as Exhibit 10.3 to the Form 8-K, as filed with the SEC on November 2, 2007)


Exhibit No.			Description
	10.4	*	Form of Second Group Warrants (filed as Exhibit 10.4 to the Form 8-K, as filed with the SEC on November 2, 2007)

	10.5	*	Form of Limited Guaranty by Tri-Isthmus Group, Inc. (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on November 5, 2007)

	10.6	*	Employment Agreement of Dennis M. Smith, dated effective as of October 10, 2007 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on December 21, 2007)

	10.7	*	Option Agreement of Dennis M. Smith, dated effective as of October 10, 2007 (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on December 21, 2007)

	10.8	*	Series 5-A Preferred Stock and Warrant Purchase Agreement, dated January 14, 2008 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on January 22, 2008)

	10.9	*	Form of Investor Warrant (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on January 22, 2008)

	10.10	*	Form of Warrant issued to SMP Investments I, LLC (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on March 26, 2008)

	10.11	*	Series 6-A Preferred Stock and Warrant Purchase Agreement, dated March 31, 2008 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on April 3, 2008)

	10.12	*	Form of Investor Warrant (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on April 3, 2008)

	10.13	*	Form of Waveland Warrant (filed as Exhibit 10.3 to the Form 8-K, as filed with the SEC on April 3, 2008)

	10.14	*	Agreement and Plan of Merger, dated April 24, 2008 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on April 30, 2008)

	10.15	*	Form of Series 5-A Preferred Stock and Warrant Purchase Agreement (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on May 7, 2008)

	10.16	*	Form of Warrant issued to each of SMP Investments I, LLC and Ciabattoni Living Trust dated August 17, 2000 (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on May 7, 2008)

	10.17	*	Form of Letter Agreement for the issuance of shares of Series 6-A Convertible Preferred Stock in complete satisfaction of that certain convertible promissory note dated as of October 29, 2007 between Tri-Isthmus Group, Inc., Surgical Center Acquisition Holdings, Inc., Del Mar Acquisition, Inc., Del Mar GenPar, Inc., Point Loma Acquisition, Inc., and Point Loma GenPar, Inc. (filed as Exhibit 10.3 to the Form 8-K, as filed with the SEC on May 7, 2008)

	10.18	*	Series 6-A Preferred Stock and Warrant Purchase Agreement, dated May 29, 2008 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on June 4, 2008)


Exhibit No.			Description
	10.19	*	Form of Investor Warrant (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on June 4, 2008)

	10.20	*	Employment Agreement of David Hirschhorn, dated as of July 1, 2008 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on July 7, 2008)

	10.21	*	Form of Option Grant Agreement of David Hirschhorn, dated as of July 1, 2008 (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on July 7, 2008)

	10.22	*	Series 6-A Preferred Stock and Warrant Purchase Agreement, dated September 8, 2008 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on September 12, 2008)

	10.23	*	Form of Investor Warrant (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on September 12, 2008)

	10.24	*	Employment Agreement of Thomas Rice, dated effective as of November 10, 2008 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on November 14, 2008)

	10.25	*	Option Grant Agreement of Thomas Rice, dated effective as of November 10, 2008 (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on November 14, 2008)

	10.26	*	Form of Loan Agreement, effective November 6, 2008, among RHA Anadarko, LLC, Tri-Isthmus Group, Inc., Rural Hospital Acquisition, LLC, First Physicians Community Healthcare Services, Inc., RHA Stroud, LLC, RHA Tishomingo, LLC, TSG Physicians Group, LLC, and Canadian State Bank (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on December 17, 2008)

	10.27	*	Form of Loan Agreement, effective November 6, 2008, among RHA Stroud, LLC, Tri-Isthmus Group, Inc., Rural Hospital Acquisition, LLC, First Physicians Community Healthcare Services, Inc., RHA Anadarko, LLC, RHA Tishomingo, LLC, TSG Physicians Group, LLC, and Valliance Bank (filed as Exhibit 10.3 to the Form 8-K, as filed with the SEC on December 17, 2008)

	10.28	*	Form of Loan Agreement, effective November 6, 2008, among RHA Tishomingo, LLC, Tri-Isthmus Group, Inc., Rural Hospital Acquisition, LLC, First Physicians Community Healthcare Services, Inc., RHA Stroud, LLC, RHA Anadarko, LLC, TSG Physicians Group, LLC, and Canadian State Bank (filed as Exhibit 10.4 to the Form 8-K, as filed with the SEC on December 17, 2008)

	10.29	*	Form of Promissory Note, effective November 6, 2008, by RHA Anadarko, LLC, in favor of Canadian State Bank (filed as Exhibit 10.5 to the Form 8-K, as filed with the SEC on December 17, 2008)

	10.30	*	Form of Promissory Note, effective November 6, 2008, by RHA Stroud, LLC, in favor of Valliance Bank (filed as Exhibit 10.6 to the Form 8-K, as filed with the SEC on December 17, 2008)

	10.31	*	Form of Promissory Note, effective November 6, 2008, by RHA Tishomingo, LLC, in favor of Canadian State Bank (filed as Exhibit 10.7 to the Form 8-K, as filed with the SEC on December 17, 2008)


Exhibit No.			Description
	10.32	*	USDA Guaranty Agreement, effective November 6, 2008, by RHA Anadarko, LLC, in favor of Canadian State Bank (filed as Exhibit 10.8 to the Form 8-K, as filed with the SEC on December 17, 2008)

	10.33	*	USDA Guaranty Agreement, effective November 6, 2008, by RHA Stroud, LLC, in favor of Valliance Bank (filed as Exhibit 10.9 to the Form 8-K, as filed with the SEC on December 17, 2008)

	10.34	*	USDA Guaranty Agreement, effective November 6, 2008, by RHA Anadarko, LLC, in favor of Canadian State Bank (filed as Exhibit 10.10 to the Form 8-K, as filed with the SEC on December 17, 2008)

	10.35	*†	Form of Promissory Note, dated December 11, 2008, by Rural Hospital Acquisition, LLC, in favor of Carol Schuster (filed as Exhibit 10.11 to the Form 8-K, as filed with the SEC on December 17, 2008)

	10.36	*	Form of Guaranty of Tri-Isthmus Group, Inc., dated December 11, 2008, in favor of Carol Schuster (filed as Exhibit 10.12 to the Form 8-K, as filed with the SEC on December 17, 2008)

	10.37	*	Form of Convertible Promissory Note Issued in Favor of SMP Investments I, LLC (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on February 13, 2009)

	10.38	*	Form of Convertible Promissory Note Issued in Favor of Anthony J. Ciabattoni, Trustee of the Ciabattoni Living Trust dated August 17, 2000 (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on February 13, 2009)

	10.39	*	Form of Warrant No. 108 (filed as Exhibit 10.3 to the Form 8-K, as filed with the SEC on February 13, 2009)

	10.40	*	Form of Warrant No. 109 (filed as Exhibit 10.4 to the Form 8-K, as filed with the SEC on February 13, 2009)

	10.41	*	Form of Warrant No. 110 (filed as Exhibit 10.5 to the Form 8-K, as filed with the SEC on February 13, 2009)

	10.42	*	Form of Warrant No. 111 (filed as Exhibit 10.6 to the Form 8-K, as filed with the SEC on February 13, 2009)

	10.43	*	Form of Convertible Promissory Note (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on March 5, 2009)

	10.44	*	Form of Warrant (exercisable at $0.50 per share) issued to each of Michael Ciabattoni, Scott Casey, Jean Heaton, Stephanie Heaton, Jennifer Heaton, Cobea Associates, LLC, William Wallace, Trustee of the Wallace Family Revocable Trust dated April 23, 2001, Otto J. Claricurzio, and Phillip J. Ciabattoni (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on March 5, 2009)


Exhibit No.			Description
	10.45	*	Form of Warrant (exercisable at $0.75 per share) issued to each of Michael Ciabattoni, Scott Casey, Jean Heaton, Stephanie Heaton, Jennifer Heaton, Cobea Associates, LLC, William Wallace, Trustee of the Wallace Family Revocable Trust dated April 23, 2001, Otto J. Claricurzio, and Phillip J. Ciabatton (filed as Exhibit 10.3 to the Form 8-K, as filed with the SEC on March 5, 2009)

	10.46	*	Form of Convertible Promissory Note issued to each of Frank Darras, Trustee of the Darras Family Trust, SFV, Incorporated, NFS LLC/FMTC Rol IRA FBO Neal Katz A/C LMG-001902 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on April 20, 2009)

	10.47	*	Form of Warrant (exercisable at $0.50 per share) Frank Darras, Trustee of the Darras Family Trust, SFV, Incorporated, NFS LLC/FMTC Rol IRA FBO Neal Katz A/C LMG-001902 (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on April 20, 2009)

	10.48	*	Form of Warrant (exercisable at $0.75 per share) Frank Darras, Trustee of the Darras Family Trust, SFV, Incorporated, NFS LLC/FMTC Rol IRA FBO Neal Katz A/C LMG-001902 (filed as Exhibit 10.3 to the Form 8-K, as filed with the SEC on April 20, 2009)

	10.49	*	Form of Series 6-A Preferred Stock and Warrant Purchase Agreement (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on June 12, 2009)

	10.50	*	Form of Investor Warrant (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on June 12, 2009)

	10.51	*	Form of Medical Advisory Board Warrant (filed as Exhibit 10.3 to the Form 8-K, as filed with the SEC on June 12, 2009)

	10.52	*	Form of Series 5-A Preferred Stock and Warrant Purchase Agreement, dated October 19, 2009 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on October 23, 2009)

	10.53	*	Form of Warrant issued in connection with 5-A (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on October 23, 2009)

	10.54	*	Form of Series 6-A Preferred Stock and Warrant Purchase Agreement, dated October 19, 2009 (filed as Exhibit 10.3 to the Form 8-K, as filed with the SEC on October 23, 2009)

	10.55	*	Form of Warrant issued in connection with 6-A (filed as Exhibit 10.4 to the Form 8-K, as filed with the SEC on October 23, 2009)

	10.56	*	Form Subscription Agreement, dated December 3, 2009 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on December 14, 2009)

	10.57	*	Form of Warrant (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on December 14, 2009)

	10.58	*	Real Property Purchase and Sale Agreement, by and between Southern Plains Associates, LLC and Southern Plains Medical Center, Inc., dated December 16, 2009 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on January 20, 2010)


Exhibit No.			Description
	10.59	*	Form of USDA Loan Guaranty (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on January 20, 2010)

	10.60	*	USDA Loan Agreement, by and among FB S. Plains Financing, LLC, James B. Swickey, David W. Durrett, Capital Investors of Oklahoma, LLC, First Physicians Realty Group, LLC, Rural Hospital Acquisition, LLC, Southern Plains Associates, L.L.C. and First Liberty Bank, dated January 13, 2010 (filed as Exhibit 10.3 to the Form 8-K, as filed with the SEC on January 20, 2010)

	10.61	*	First Amended and Restated Promissory Note, by and between FB S. Plains Financing, LLC and First Liberty Bank, dated January 13, 2010 (filed as Exhibit 10.4 to the Form 8-K, as filed with the SEC on January 20, 2010)

	14.1	*	Corporate Code of Business Conduct and Ethics for Directors, Executive Officers, and Employees, dated effective as of April 22, 2008 (filed as Exhibit 14.1 to the Form 10-K, as filed with the SEC on January 13, 2009)

	21.1	*	Subsidiaries of First Physicians Capital Group, Inc. (f/k/a Tri-Isthmus Group, Inc.)

	31.1		Certification Pursuant to Rule 13a-14(d) promulgated under the Securities Exchange Act of 1934

	31.2		Certification Pursuant to Rule 13a-14(d) promulgated under the Securities Exchange Act of 1934

	32.1		Certification Pursuant to 18 U.S.C. 1350

	32.2		Certification Pursuant to 18 U.S.C. 1350


*		Previously filed with the SEC as indicated, and hereby incorporated herein by reference.

†		Certain portions of these documents have been omitted based on a request for confidential treatment submitted to the SEC. The non-public information that has been omitted from these documents has been separately filed with the SEC. Each redacted portion of these documents is indicated by a “[*]” and is subject to the request for confidential treatment submitted to the SEC. The redacted information is confidential information of the Registrant.

SIGNATURES

Pursuant to the requirements 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.


	First Physicians Capital Group, Inc. (Registrant)
Date: February 22, 2011	By:	/s/ David Hirschhorn
		David Hirschhorn
		Chief Executive Officer (Principal Executive Officer)

Date: February 22, 2011		/s/ Sean Kirrane
		Sean Kirrane
		Principal Accounting Officer

EXHIBIT INDEX


Exhibit No.			Description

	2.1	*	Membership Interest Purchase Agreement (filed as Exhibit 2.1 to the Form 8-K, as filed with the SEC on November 5, 2007)

	3.1	*	Certificate of Incorporation (filed as Exhibit 3.1 to the Form 8-K, as filed with the SEC on November 14, 2000)

	3.2	*	Amended and Restated Bylaws dated October 25, 2002 (filed as Exhibit 3.2 to the Form 8-K, as filed with the SEC on October 28, 2002)

	3.3	*	Certificate of Designation of Rights and Preferences of Series 2-A Convertible Preferred Stock filed November 8, 2000 (filed as Exhibit 4.1 to the Form 8-K, as filed with the SEC on November 14, 2000)

	3.4	*	Certificate of Merger filed November 8, 2000, merging Vsource, Inc. (a Nevada corporation) with and into the Vsource, Inc. (a Delaware corporation) (filed as Exhibit 4.2 to the Form 8-K, as filed with the SEC on November 14, 2000)

	3.5	*	Agreement and Plan of Merger dated as of December 14, 2000, among the Registrant, OTT Acquisition Corp., Online Transaction Technologies, Inc. and its Shareholders (filed as Exhibit 10.11 to the Form 10-Q, as filed with the SEC on December 15, 2000)

	3.6	*	Certificate of Designation of Rights and Preferences of Series 3-A Convertible Preferred Stock filed June 20, 2001 (filed as Exhibit 4.1 to the Form 8-K, as filed with the SEC on July 2, 2001)

	3.7	*	Amendment to Certificate of Incorporation, dated January 16, 2002 (filed as Exhibit 3.3 to the Form 8-K, as filed with the SEC on January 23, 2002)

	3.8	*	Certificate of Designation of Rights and Preferences of Series 4-A Convertible Preferred Stock (filed as Exhibit 3.1 to the Form 8-K, as filed with the SEC on October 28, 2002)

	3.9	*	Amendment to Certificate of Incorporation, dated November 20, 2002 (filed as Exhibit 3.1 to the Form 10-Q for the period ending October 31, 2002, as filed with the SEC on December 5, 2002)

	3.10	*	Certificate of Designation of Rights and Preferences of Series 5-A Convertible Preferred Stock (filed as Exhibit 3.1 to the Form 8-K, as filed with the SEC on July 21, 2005)

	3.11	*	Amendment to Certificate of Incorporation, dated December 16, 2005 (filed as Exhibit 3.5 to the Form 10-Q for the period ending October 31, 2005, as filed with the SEC on December 20, 2005)

	3.12	*	Certificate of Amendment to the Certificate of Designation of Rights and Preferences Series 5-A Convertible Preferred Stock filed January 10, 2008 (filed as Exhibit B to the Form of Series 5-A Preferred Stock and Warrant Purchase Agreement, filed as Exhibit 10.52 herein)


Exhibit No.			Description
	3.13	*	Certificate of Designation of Rights and Preferences of Series 6-A Convertible Preferred Stock filed April 2, 2008 (filed as Exhibit 3.1 to the Form 8-K, as filed with the SEC on April 3, 2008)

	3.14	*	Certificate of Amendment to the Certificate of Designation of Rights and Preferences of Series 5-A Convertible Preferred Stock filed May 15, 2008 (filed as Exhibit 4.2 to the Form 10-Q, as filed with the SEC on May 20, 2008)

	3.15	*	Certificate of Amendment to the Certificate of Designation of Rights and Preferences of Series 6-A Convertible Preferred Stock filed May 15, 2008 (filed as Exhibit B to the Form of Series 6-A Preferred Stock and Warrant Purchase Agreement, filed as Exhibit 10.54 herein)

	3.16	*	Amendment to Certificate of Incorporation, dated September 29, 2009 (filed as Exhibit 3.1 to the Form 8-K, as filed with the SEC on October 1, 2009)

	3.17	*	Certificate of Decrease of Shares Designated as Series 7-A Convertible Preferred Stock, dated and filed January 22, 2010 (filed as Exhibit 3.1 to the Form 8-K, as filed with the SEC on January 28, 2010)

	4.1	*	Certificate of Decrease of Shares Designated as Series 1-A Convertible Preferred Stock (filed as Exhibit 4.1 to the Form 8-K, as filed with the SEC on July 13, 2005)

	4.2	*	Certificate of Decrease of Shares Designated as Series 2-A Convertible Preferred Stock (filed as Exhibit 4.2 to the Form 8-K, as filed with the SEC on July 13, 2005)

	4.3	*	Certificate of Decrease of Shares Designated as Series 3-A Convertible Preferred Stock (filed as Exhibit 4.3 to the Form 8-K, as filed with the SEC on July 13, 2005)

	4.4	*	Certificate of Decrease of Shares Designated as Series 4-A Convertible Preferred Stock (filed as Exhibit 4.4 to the Form 8-K, as filed with the SEC on July 13, 2005)

	4.5	*	Series 5-A Preferred Stock and Warrant Purchase Agreement, dated as of July 7, 2005, by and among Vsource, Inc. and the investors listed therein (filed as Exhibit 4.1 to the Form 8-K, as filed with the SEC on July 21, 2005)

	4.6	*	Form of Warrant (filed as Exhibit 4.2 to Form 8-K, filed with the SEC on July 21, 2005)

	4.7	*	Form of Warrant (filed as Exhibit 4.2 to Form 8-K, filed with the SEC on August 23, 2005)

	4.8	*	Series 5-A Preferred Stock and Warrant Purchase Agreement, dated as of September, 18, 2006, by and among First Physicians Capital Group, Inc. and certain Series 5-A Preferred Stock Investors (filed as Exhibit 4.1 to the Form 8-K, as filed with the SEC on September 22, 2006)

	4.9	*	Form of Warrant (filed as Exhibit 4.2 to Form 8-K, filed with the SEC on September 22, 2006)

	4.10	*	Amended and Restated Articles of Organization of Rural Hospital Acquisition LLC (filed as Exhibit 4.1 to the Form 8-K, as filed with the SEC on November 5, 2007)


Exhibit No.			Description
	4.11	*	Amended and Restated Operating Agreement Rural Hospital Acquisition LLC (filed as Exhibit 4.2 to the Form 8-K, as filed with the SEC on November 5, 2007)

	4.12	*	Form of Extension of Warrant, dated July 18, 2007 (filed as Exhibit 4.1 to Form 8-K as filed with the SEC on December 18, 2008)

	10.1	*	Form of First Group Notes (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on November 2, 2007)

	10.2	*	Form of Second Group Notes (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on November 2, 2007)

	10.3	*	Form of First Group Warrants (filed as Exhibit 10.3 to the Form 8-K, as filed with the SEC on November 2, 2007)

	10.4	*	Form of Second Group Warrants (filed as Exhibit 10.4 to the Form 8-K, as filed with the SEC on November 2, 2007)

	10.5	*	Form of Limited Guaranty by Tri-Isthmus Group, Inc. (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on November 5, 2007)

	10.6	*	Employment Agreement of Dennis M. Smith, dated effective as of October 10, 2007 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on December 21, 2007)

	10.7	*	Option Agreement of Dennis M. Smith, dated effective as of October 10, 2007 (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on December 21, 2007)

	10.8	*	Series 5-A Preferred Stock and Warrant Purchase Agreement, dated January 14, 2008 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on January 22, 2008)

	10.9	*	Form of Investor Warrant (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on January 22, 2008)

	10.10	*	Form of Warrant issued to SMP Investments I, LLC (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on March 26, 2008)

	10.11	*	Series 6-A Preferred Stock and Warrant Purchase Agreement, dated March 31, 2008 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on April 3, 2008)

	10.12	*	Form of Investor Warrant (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on April 3, 2008)

	10.13	*	Form of Waveland Warrant (filed as Exhibit 10.3 to the Form 8-K, as filed with the SEC on April 3, 2008)

	10.14	*	Agreement and Plan of Merger, dated April 24, 2008 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on April 30, 2008)

	10.15	*	Form of Series 5-A Preferred Stock and Warrant Purchase Agreement (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on May 7, 2008)


Exhibit No.			Description
	10.16	*	Form of Warrant issued to each of SMP Investments I, LLC and Ciabattoni Living Trust dated August 17, 2000 (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on May 7, 2008)

	10.17	*	Form of Letter Agreement for the issuance of shares of Series 6-A Convertible Preferred Stock in complete satisfaction of that certain convertible promissory note dated as of October 29, 2007 between Tri-Isthmus Group, Inc., Surgical Center Acquisition Holdings, Inc., Del Mar Acquisition, Inc., Del Mar GenPar, Inc., Point Loma Acquisition, Inc., and Point Loma GenPar, Inc. (filed as Exhibit 10.3 to the Form 8-K, as filed with the SEC on May 7, 2008)

	10.18	*	Series 6-A Preferred Stock and Warrant Purchase Agreement, dated May 29, 2008 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on June 4, 2008)

	10.19	*	Form of Investor Warrant (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on June 4, 2008)

	10.20	*	Employment Agreement of David Hirschhorn, dated as of July 1, 2008 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on July 7, 2008)

	10.21	*	Form of Option Grant Agreement of David Hirschhorn, dated as of July 1, 2008 (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on July 7, 2008)

	10.22	*	Series 6-A Preferred Stock and Warrant Purchase Agreement, dated September 8, 2008 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on September 12, 2008)

	10.23	*	Form of Investor Warrant (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on September 12, 2008)

	10.24	*	Employment Agreement of Thomas Rice, dated effective as of November 10, 2008 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on November 14, 2008)

	10.25	*	Option Grant Agreement of Thomas Rice, dated effective as of November 10, 2008 (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on November 14, 2008)

	10.26	*	Form of Loan Agreement, effective November 6, 2008, among RHA Anadarko, LLC, Tri-Isthmus Group, Inc., Rural Hospital Acquisition, LLC, First Physicians Community Healthcare Services, Inc., RHA Stroud, LLC, RHA Tishomingo, LLC, TSG Physicians Group, LLC, and Canadian State Bank (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on December 17, 2008)

	10.27	*	Form of Loan Agreement, effective November 6, 2008, among RHA Stroud, LLC, Tri-Isthmus Group, Inc., Rural Hospital Acquisition, LLC, First Physicians Community Healthcare Services, Inc., RHA Anadarko, LLC, RHA Tishomingo, LLC, TSG Physicians Group, LLC, and Valliance Bank (filed as Exhibit 10.3 to the Form 8-K, as filed with the SEC on December 17, 2008)

	10.28	*	Form of Loan Agreement, effective November 6, 2008, among RHA Tishomingo, LLC, Tri-Isthmus Group, Inc., Rural Hospital Acquisition, LLC, First Physicians Community Healthcare Services, Inc., RHA Stroud, LLC, RHA Anadarko, LLC, TSG Physicians Group, LLC, and Canadian State Bank (filed as Exhibit 10.4 to the Form 8-K, as filed with the SEC on December 17, 2008)


Exhibit No.			Description
	10.29	*	Form of Promissory Note, effective November 6, 2008, by RHA Anadarko, LLC, in favor of Canadian State Bank (filed as Exhibit 10.5 to the Form 8-K, as filed with the SEC on December 17, 2008)

	10.30	*	Form of Promissory Note, effective November 6, 2008, by RHA Stroud, LLC, in favor of Valliance Bank (filed as Exhibit 10.6 to the Form 8-K, as filed with the SEC on December 17, 2008)

	10.31	*	Form of Promissory Note, effective November 6, 2008, by RHA Tishomingo, LLC, in favor of Canadian State Bank (filed as Exhibit 10.7 to the Form 8-K, as filed with the SEC on December 17, 2008)

	10.32	*	USDA Guaranty Agreement, effective November 6, 2008, by RHA Anadarko, LLC, in favor of Canadian State Bank (filed as Exhibit 10.8 to the Form 8-K, as filed with the SEC on December 17, 2008)

	10.33	*	USDA Guaranty Agreement, effective November 6, 2008, by RHA Stroud, LLC, in favor of Valliance Bank (filed as Exhibit 10.9 to the Form 8-K, as filed with the SEC on December 17, 2008)

	10.34	*	USDA Guaranty Agreement, effective November 6, 2008, by RHA Anadarko, LLC, in favor of Canadian State Bank (filed as Exhibit 10.10 to the Form 8-K, as filed with the SEC on December 17, 2008)

	10.35	*†	Form of Promissory Note, dated December 11, 2008, by Rural Hospital Acquisition, LLC, in favor of Carol Schuster (filed as Exhibit 10.11 to the Form 8-K, as filed with the SEC on December 17, 2008)

	10.36	*	Form of Guaranty of Tri-Isthmus Group, Inc., dated December 11, 2008, in favor of Carol Schuster (filed as Exhibit 10.12 to the Form 8-K, as filed with the SEC on December 17, 2008)

	10.37	*	Form of Convertible Promissory Note Issued in Favor of SMP Investments I, LLC (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on February 13, 2009)

	10.38	*	Form of Convertible Promissory Note Issued in Favor of Anthony J. Ciabattoni, Trustee of the Ciabattoni Living Trust dated August 17, 2000 (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on February 13, 2009)

	10.39	*	Form of Warrant No. 108 (filed as Exhibit 10.3 to the Form 8-K, as filed with the SEC on February 13, 2009)

	10.40	*	Form of Warrant No. 109 (filed as Exhibit 10.4 to the Form 8-K, as filed with the SEC on February 13, 2009)

	10.41	*	Form of Warrant No. 110 (filed as Exhibit 10.5 to the Form 8-K, as filed with the SEC on February 13, 2009)

	10.42	*	Form of Warrant No. 111 (filed as Exhibit 10.6 to the Form 8-K, as filed with the SEC on February 13, 2009)


Exhibit No.			Description
	10.43	*	Form of Convertible Promissory Note (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on March 5, 2009)

	10.44	*	Form of Warrant (exercisable at $0.50 per share) issued to each of Michael Ciabattoni, Scott Casey, Jean Heaton, Stephanie Heaton, Jennifer Heaton, Cobea Associates, LLC, William Wallace, Trustee of the Wallace Family Revocable Trust dated April 23, 2001, Otto J. Claricurzio, and Phillip J. Ciabattoni (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on March 5, 2009)

	10.45	*	Form of Warrant (exercisable at $0.75 per share) issued to each of Michael Ciabattoni, Scott Casey, Jean Heaton, Stephanie Heaton, Jennifer Heaton, Cobea Associates, LLC, William Wallace, Trustee of the Wallace Family Revocable Trust dated April 23, 2001, Otto J. Claricurzio, and Phillip J. Ciabatton (filed as Exhibit 10.3 to the Form 8-K, as filed with the SEC on March 5, 2009)

	10.46	*	Form of Convertible Promissory Note issued to each of Frank Darras, Trustee of the Darras Family Trust, SFV, Incorporated, NFS LLC/FMTC Rol IRA FBO Neal Katz A/C LMG-001902 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on April 20, 2009)

	10.47	*	Form of Warrant (exercisable at $0.50 per share) Frank Darras, Trustee of the Darras Family Trust, SFV, Incorporated, NFS LLC/FMTC Rol IRA FBO Neal Katz A/C LMG-001902 (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on April 20, 2009)

	10.48	*	Form of Warrant (exercisable at $0.75 per share) Frank Darras, Trustee of the Darras Family Trust, SFV, Incorporated, NFS LLC/FMTC Rol IRA FBO Neal Katz A/C LMG-001902 (filed as Exhibit 10.3 to the Form 8-K, as filed with the SEC on April 20, 2009)

	10.49	*	Form of Series 6-A Preferred Stock and Warrant Purchase Agreement (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on June 12, 2009)

	10.50	*	Form of Investor Warrant (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on June 12, 2009)

	10.51	*	Form of Medical Advisory Board Warrant (filed as Exhibit 10.3 to the Form 8-K, as filed with the SEC on June 12, 2009)

	10.52	*	Form of Series 5-A Preferred Stock and Warrant Purchase Agreement, dated October 19, 2009 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on October 23, 2009)

	10.53	*	Form of Warrant issued in connection with 5-A (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on October 23, 2009)

	10.54	*	Form of Series 6-A Preferred Stock and Warrant Purchase Agreement, dated October 19, 2009 (filed as Exhibit 10.3 to the Form 8-K, as filed with the SEC on October 23, 2009)

	10.55	*	Form of Warrant issued in connection with 6-A (filed as Exhibit 10.4 to the Form 8-K, as filed with the SEC on October 23, 2009)


Exhibit No.			Description
	10.56	*	Form Subscription Agreement, dated December 3, 2009 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on December 14, 2009)

	10.57	*	Form of Warrant (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on December 14, 2009)

	10.58	*	Real Property Purchase and Sale Agreement, by and between Southern Plains Associates, LLC and Southern Plains Medical Center, Inc., dated December 16, 2009 (filed as Exhibit 10.1 to the Form 8-K, as filed with the SEC on January 20, 2010)

	10.59	*	Form of USDA Loan Guaranty (filed as Exhibit 10.2 to the Form 8-K, as filed with the SEC on January 20, 2010)

	10.60	*	USDA Loan Agreement, by and among FB S. Plains Financing, LLC, James B. Swickey, David W. Durrett, Capital Investors of Oklahoma, LLC, First Physicians Realty Group, LLC, Rural Hospital Acquisition, LLC, Southern Plains Associates, L.L.C. and First Liberty Bank, dated January 13, 2010 (filed as Exhibit 10.3 to the Form 8-K, as filed with the SEC on January 20, 2010)

	10.61	*	First Amended and Restated Promissory Note, by and between FB S. Plains Financing, LLC and First Liberty Bank, dated January 13, 2010 (filed as Exhibit 10.4 to the Form 8-K, as filed with the SEC on January 20, 2010)

	14.1	*	Corporate Code of Business Conduct and Ethics for Directors, Executive Officers, and Employees, dated effective as of April 22, 2008 (filed as Exhibit 14.1 to the Form 10-K, as filed with the SEC on January 13, 2009)

	21.1	*	Subsidiaries of First Physicians Capital Group, Inc. (f/k/a Tri-Isthmus Group, Inc.)

	31.1		Certification Pursuant to Rule 13a-14(d) promulgated under the Securities Exchange Act of 1934

	31.2		Certification Pursuant to Rule 13a-14(d) promulgated under the Securities Exchange Act of 1934

	32.1		Certification Pursuant to 18 U.S.C. 1350

	32.2		Certification Pursuant to 18 U.S.C. 1350


*		Previously filed with the SEC as indicated, and hereby incorporated herein by reference.

†		Certain portions of these documents have been omitted based on a request for confidential treatment submitted to the SEC. The non-public information that has been omitted from these documents has been separately filed with the SEC. Each redacted portion of these documents is indicated by a “[*]” and is subject to the request for confidential treatment submitted to the SEC. The redacted information is confidential information of the Registrant.