##### Table of Contents



U.S. SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-KSB/A
 Amendment No. 1
  ANNUAL REPORT PURSUANT TO
    SECTION 13 OR 15(d)
 OF THE SECURITIES EXCHANGE ACT
    OF 1934
  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005
  Commission File
    No. 001-16587
  ORION HEALTHCORP,
    INC.
 (NAME OF SMALL BUSINESS ISSUER
    IN ITS CHARTER)
  Delaware

58-1597246(STATE OR OTHER JURISDICTION
    OF
    INCORPORATION OR ORGANIZATION)

(IRS EMPLOYER
    IDENTIFICATION NO.)1805 Old Alabama Road
    Suite 350, Roswell GA(ADDRESS OF PRINCIPAL
    EXECUTIVE OFFICES)

30076(ZIP CODE)   ISSUERS TELEPHONE NUMBER:
 (678) 832-1800
  SECURITIES REGISTERED UNDER SECTION 12(b) OF THE ACT:
  Title of Each Class

Name of Each Exchange on Which RegisteredClass A Common Stock,
    $0.001 par value per share

The American Stock Exchange   o
  þ o
  Regulation S-B Form 10-KSB/A Form 10-KSB/A. o
  Rule 12b-2 o þ
        DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-KSB/A.
  o þ




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##### Table of Contents



ORION
    HEALTHCORP, INC.
    Annual Report on
    Form 10-KSB/A
    For the Fiscal Year Ended December 31, 2005
  EXPLANATORY
    NOTE
  Form 10-KSB/A Form 10-KSB




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##### Table of Contents



TABLE OF
    CONTENTS
  Item



PageNumber



NumberPART I1
.

Description of
    Business


12
.

Description of
    Property


113
.

Legal
    Proceedings


114
.

Submission of
    Matters to a Vote of Security Holders


12PART II5
.

Market for Common
    Equity and Related Stockholder Matters


126
.

Managements
    Discussion and Analysis or Plan of Operation


167
.

Financial
    Statements


368
.

Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


368
A.

Controls and
    Procedures


368
B.

Other
    Information


36PART III9
.

Directors,
    Executive Officers, Promoters and Control Persons; Compliance
    with Section 16(a) of the Exchange Act


3710
.

Executive
    Compensation


3811
.

Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


3812
.

Certain
    Relationships and Related Transactions


3813
.

Exhibits and
    Reports on
    Form 8-K


3814
.

Principal
    Accountant Fees and Services


41SIGNATURES


42CONSOLIDATED
    FINANCIAL STATEMENTS


F-1INDEX OF
    EXHIBITSEX-21EX-23EX-31.1EX-31.2EX-32.1EX-32.2    NOTE REGARDING
    FORWARD-LOOKING STATEMENTS
  Form 10-KSB/A




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##### Table of Contents



PART I  ITEM 1.
    DESCRIPTION
    OF BUSINESS  Overview
      one-for-ten
  Strategic
    Focus
    Integrated
    Physician Solutions
    day-to-day
  day-to-day
 1




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##### Table of Contents



Medical
    Billing Services
    Medical Practice Management Services.
  
    Accounting and bookkeeping services;
    Evaluation of staffing needs;
    Provision of temporary staff services;
    Quality assurance program development;
    Physician credentialing assistance;
    Fee schedule review, specific to locality;
    Formulation of scheduling systems; and
    Training and continuing education programs.  Billing and Collection Services.
  
    Current Procedural Terminology (CPT) and
    International Classification of Diseases (ICD-9)
    utilization reviews;
    Charge ticket (superbill) evaluations;
    Fee schedule analyses;
    Reimbursement audits; and
    Training seminars.  Managed Care Consulting Services.
  
    Establishing the actual ownership of the managed care
    organization and determining that the entity is financially
    sound;
    Negotiating the type of reimbursement offered;
    Assuring that there are no withholds beyond the
    discount agreed upon;
    Determining patient responsibility for non-covered services, as
    well as co-pays and deductibles;
    Tracking managed care payments to verify the correctness of the
    reimbursement rate; 2




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##### Table of Contents




    Evaluating the appeals process in case of disputes concerning
    payment issues, utilization review, and medical
    necessity; and
    Confirming the length of the contract, the renewal process, and
    the termination options.    Ambulatory
    Surgery Center Business
    AcquisitionName

Location

Date

OwnershipSurgiCare Memorial Village
    L.P.


Houston, Texas



Oct. 2000



49
%San Jacinto Surgery Center
    Ltd.


Baytown, Texas



Oct. 2000



10
%             Acquisitions
    and Restructuring Transactions
  Acquisition
    of IPS
   3




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##### Table of Contents



Issuance
    of Class B Common Stock
        Acquisition
    of DCPS and MBS
   4




---



##### Table of Contents



New
    Line of Credit and Debt Restructuring
      Post-Restructuring
    Loan Transactions
   5




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##### Table of Contents



6




---



##### Table of Contents



2005 IPS
    Transactions
        Certain
    Recent Developments
             7




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##### Table of Contents



Revenues
  Integrated
    Physician Solutions
    Medical
    Billing Services
    Surgery
    and Diagnostic Centers
       8




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##### Table of Contents



Competition
  Integrated
    Physician Solutions
    Medical
    Billing Services
    Government
    Regulation
  Administrative Simplification and Privacy
    Requirements.
   9




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##### Table of Contents



Integrated
    Physician Solutions
    Medical
    Billing Services
      Employees
     10




---



##### Table of Contents



ITEM 2.
    DESCRIPTION
    OF PROPERTY        ITEM 3.
    LEGAL
    PROCEEDINGS  No. 3-00-CV-0536-L. No. 3-01CV0877-L.
  nd
 11




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##### Table of Contents



No. 2004-55688.
  th 2005-44326.
    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   PART II  ITEM 5.
    MARKET
    FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS  Market
    Information
    one-for-ten
 12




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##### Table of Contents



one-for-ten
  Fiscal 2005

High


LowQuarter ended March 31, 2005

$
2.70


$
0.90Quarter ended June 30, 2005

$
1.40


$
0.62Quarter ended September 30,
    2005

$
0.88


$
0.37Quarter ended December 31,
    2005

$
0.49


$
0.25   Fiscal 2004

High


LowQuarter ended March 31, 2004

$
6.70


$
3.50Quarter ended June 30, 2004

$
5.20


$
3.10Quarter ended September 30,
    2004

$
4.30


$
2.60Quarter ended December 31,
    2004

$
4.30


$
2.70   Holders
    Dividends
      
    First, the holders of the shares of Class B Common Stock
    (other than shares concurrently being converted into
    Class A Common Stock), as a single and separate class, are
    entitled to receive all distributions until there has been paid
    with respect to each such share from amounts then and previously
    distributed an amount equal to $1.15 plus an amount equal to
    nine percent (9%) per annum on such amount, without compounding,
    from the date the Class B Common Stock was first issued.
    Second, the holders of the shares of Class C Common Stock
    (other than shares concurrently being converted into
    Class A Common Stock), as a single and separate class, are
    entitled to receive all distributions until there has been paid
    with respect to each such share from amounts then and previously
    distributed an amount equal to $3.30. After the full required
    distributions have been made to the holders of shares of
    Class C Common Stock (other than shares concurrently being
    converted into Class A Common Stock) as described in the
    previous sentence, each share of Class C Common Stock then
    outstanding will be retired and will not be reissued. 13




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##### Table of Contents




    Third, after the full distributions have been made to the
    holders of the shares of Class B Common Stock and
    Class C Common Stock as described above, all holders of the
    shares of Class A Common Stock and Class B Common
    Stock, as a single class, shall thereafter be entitled to
    receive all remaining distributions pro rata based on the number
    of outstanding shares of Class A Common Stock or
    Class B Common Stock held by each holder, provided that for
    purposes of such remaining distributions, each share of
    Class B Common Stock will be deemed to have been converted
    into one share of Class A Common Stock (subject to
    adjustment to account for stock splits, stock dividends,
    combinations or other similar events affecting the Class A
    Common Stock).  Recent
    Sales of Unregistered Securities
  Class B Common Stock Conversions.
    Number of Shares of


Number of Shares ofClass B Common


Class A CommonEffective Date of Issuance

Stock Converted


Stock Issued10/27/05


64,612



264,84511/4/05


86,149



391,82311/4/05


43,075



195,914     Class C Common Stock Conversions.
 14




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##### Table of Contents



Number of Shares of


Number of Shares ofClass C Common


Class A CommonEffective Date of Issuance

Stock Converted


Stock Issued11/13/05


4,114



33,93811/13/05


206



1,69711/13/05


206



1,69711/13/05


3,324



27,42211/13/05


41



33911/13/05


337



2,78311/25/05


5,454



51,42411/25/05


273



2,57111/25/05


273



2,57111/25/05


4,407



41,55111/25/05


55



51411/25/05


447



4,21711/25/05


2,706



25,52011/25/05


135



1,27611/25/05


135



1,27611/25/05


2,187



20,62011/25/05


27



25511/25/05


222



2,093  15




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##### Table of Contents



Equity
    Compensation Plan Information
    Number of SecuritiesNumber of Securities





Remaining Available forto be Issued Upon


Weighted-Average


Future Issuance UnderExercise of


Exercise Price of


Equity Compensation PlansOutstanding Options,


Outstanding Options,


(Excluding SecuritiesPlan Category

Warrants and Rights


Warrants and Rights


Reflected in
    1st Column)Equity compensation plans approved
    by security holders


2,197,786


$
1.48



1,402,214Equity compensation plans not
    approved by security holders










Total


2,197,786


$
1.48



1,402,214   ITEM 6.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OR PLAN OF OPERATION    Forward
    Looking Statements
     16




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##### Table of Contents



Overview
    Strategic
    Focus
      
    In March 2005, Orion closed Bellaire SurgiCare, one of the
    Companys ASCs in Houston, Texas, because of declining case
    load volume and unsatisfactory financial performance and
    combined the operations of Bellaire SurgiCare with Memorial
    Village;
    In June 2005, Orion sold IntegriMED, a wholly-owned subsidiary
    of IPS, to eClinicalWeb;
    In August 2005, the Company closed the SurgiCare corporate
    headquarters in Houston, Texas and transitioned all corporate
    functions to its offices in Roswell, Georgia;
    In October 2005, Orion sold its interests in TASC, TASC
    Anesthesia and TOM in Dover, Ohio to Union Hospital;
    In January 2006, the Company sold substantially all of the
    assets of Memorial Village in Houston, Texas to First Surgical
    Memorial Village, L.P.;
    In early 2006, the Company was notified by Union Hospital that
    it was exercising its option to terminate the TOM MSA and TASC
    MSA as of March 12, 2006 and April 3, 2006,
    respectively; and
    In March 2006, the Company sold substantially all of the assets
    of San Jacinto in Baytown, Texas to San Jacinto
    Methodist Hospital.   17




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##### Table of Contents



Financial
    Overview
    
    Significant changes in revenues, resulting from increased
    patient volume and rate increases in IPSs operations and
    from inclusion of a full year of revenues for MBS in 2005 as
    compared to two weeks of revenue in 2004;
    Inclusion of expenses in 2005 relating to the separation
    agreement for the Companys former president,
    Professional and consulting fees incurred in connection with the
    2004 Mergers and significant 2005 transactions,
    Inclusion of a full year of operating expenses for MBS in 2005
    as compared to two weeks of operating expenses in 2004; and
    Significant charges for impairment of intangible assets and
    goodwill in 2005 as a result of the significant 2005
    transactions.  Critical
    Accounting Policies and Estimates
  Page F-7
  Consolidation of Physician Practice Management
    Companies.
   18




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##### Table of Contents



EITF 97-2
  Revenue Recognition.
    Accounts Receivable and Allowance for Doubtful
    Accounts.
 19




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##### Table of Contents



Investment in Limited Partnerships.
    Goodwill and Other Intangible Assets. pooling-of-interest
  Recent
    Accounting Pronouncements
  (EITF 03-13). held-for-sale EITF 03-13
     20




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##### Table of Contents



Results
    of Operations
  page F-1.
    period-to-period
  Twelve Months EndedDecember 31,


December 31,2005


2004(Restated)


(Restated)Net operating revenues


100.0
%


100.0
%Total operating expenses


116.7
%


109.1
%Loss from continuing operations
    before other income (expenses)


(16.7
)%


(9.1
)%Total other income (expenses), net


(1.2
)%


8.2
%Loss from continuing operations


(17.9
)%


(0.9
)%Discontinued operationsLoss from operations of
    discontinued components, including net loss on disposal


(51.1
)%


(34.2
)%Net loss


(69.0
)%


(35.1
)%Preferred stock dividends


0.0
%


(3.4
)%Net loss attributable to common
    stockholders


(69.0
)%


(38.5
)%  21




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##### Table of Contents



Year
    Ended December 31, 2005 as Compared to Year Ended
    December 31, 2004
    For the Years EndedDecember 31,2005


2004(Restated)


(Restated)Net operating
    revenues

$
29,564,885


$
17,582,937Operating expensesSalaries and benefits


12,663,369



5,055,249Physician group distribution


8,314,975



6,939,081Facility rent and related costs


1,707,579



1,116,949Depreciation and amortization


2,818,042



651,731Professional and consulting fees


1,910,555



703,707Insurance


898,495



534,650Provision for doubtful accounts


1,176,405



1,065,137Other expenses


5,024,169



3,115,015Total operating expenses


34,513,589



19,181,519Loss from continuing operations
    before other income (expenses)


(4,948,704
)


(1,598,582
)Other income
    (expenses)Interest expense


(342,678
)


(969,047
)Gain on forgiveness of debt






2,427,938Other expense, net


(24,066
)


(21,978
)Total other income (expenses), net


(366,744
)


1,436,913Minority interest loss in
    partnership


(6,124
)


Loss from continuing
    operations


(5,321,572
)


(161,669
)Discontinued
    operationsLoss from operations of
    discontinued components


(15,117,929
)


(6,013,426
)Net loss


(20,439,501
)


(6,175,095
)Preferred stock dividends






(606,100
)Net loss attributable to common
    stockholders

$
(20,439,501
)

$
(6,781,195
)   Net Operating Revenues.
   22




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##### Table of Contents




    Increases in patient volume and
    productivity.  Three of IPSs four
    clinic-based affiliated pediatric groups experienced increases
    in patient volume in 2005, with total procedures and office
    visits for all clinic-based facilities increasing 24,423 and
    6,619, respectively, to 415,622 and 168,257 for the twelve
    months ended December 31, 2005. One medical group added two
    full-time equivalent (FTE) providers in July 2004
    that have been considerably more productive than the physicians
    they replaced. Additionally, the increased usage of electronic
    medical records software in 2005 has improved overall
    productivity in another affiliated medical group, primarily in
    the area of patient scheduling. These productivity increases
    contributed to an average increase of 255 procedures per
    provider in 2005, as compared to the same period in 2004.
    Rate increases.  In addition to increases in
    production, several of the clinic-based affiliated medical
    groups increased their rates in 2005 for core procedure and
    visit CPT codes. These rate increases were the result of an
    analysis of the medical groups 2004 rates as compared to
    the reimbursement rates of key insurers that showed that, in
    many cases, the insurers reimbursement rates were higher
    than the medical groups core charges.
    Increases in other sources of patient
    revenue.  In July 2005, physicians at one of
    IPSs affiliated medical groups began to provide services
    on a rotating basis to a clinic started by a local hospital for
    a flat fee of $14,000 per month.    Operating
    Expenses.
  Salaries and Benefits.
  Form 10-QSB
 23




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##### Table of Contents



Physician Group Distribution.
  Facility Rent and Related Costs.
    Depreciation and Amortization.
   24




---



##### Table of Contents



Professional and Consulting Fees.
    Insurance.
   25




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##### Table of Contents



Provision for Doubtful Accounts.
  Other Expenses.
      Other
    Income and Expenses.
  Interest Expense.
  
    Brantley Debt.  As part of the Investment
    Transaction, the Company used $6,037,111 of proceeds to repay
    debt and accrued interest owed to an affiliate of Brantley IV.
    Additionally, Brantley Capital and Brantley III each held
    debt of IPS and were party to the Amended and Restated Debt
    Exchange Agreement, dated February 9, 2004, as amended by
    the First Amendment to Debt Exchange Agreement dated
    July 16, 2004 (the Debt Exchange Agreement)
    under which Brantley Capital and Brantley III received
    Class A Common Stock in exchange for the contribution of an
    aggregate of approximately $4,375,000 in debt, including accrued
    interest as of the Closing, to Orion. Brantley Capital also
    received Class A Common Stock equal to the amount of
    approximately $593,000 in accrued dividends owed to it by IPS in
    exchange for such indebtedness. Interest expense related to the
    Brantley Capital, Brantley III and Brantley IV
    subsidiary debt totaled approximately $566,000 in 2004.   26




---



##### Table of Contents




    DVI Restructuring.  As described in
    Part I. Item 1. Description of
    Business  Acquisitions and Restructuring
    Transactions  New Line of Credit and Debt
    Restructuring, the Company restructured its
    previously-existing debt facilities, which resulted in a
    decrease in aggregate debt owed to DVI from approximately
    $10.1 million to a combined principal amount of
    approximately $6.5 million, of which approximately
    $2.0 million was paid at the Closing. Interest expense
    related to IPSs portion of the restructured debt totaled
    $207,428 in 2004.
    New Line of Credit.  As part of the
    restructuring transactions, the Company also entered into the
    Loan and Security Agreement with CIT, borrowing
    $1.6 million under this facility concurrently with the
    Closing. Interest expense related to this line of credit totaled
    $208,211 for the year ended December 31, 2005, an increase
    of $42,510 over the interest expense for 2004 related to the
    Companys previous revolving credit facility with DVI.  Gain on Forgiveness of Debt. 60-day
  Discontinued
    Operations.
  Heart Center.
 27




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##### Table of Contents



2004Income statement data:Net operating revenues

$
2,275,890Operating expenses


2,130,379Net income

$
145,511Balance sheet data:Current assets

$
Other assets


Total assets

$
Current liabilities

$
3,953Other liabilities


Total liabilities

$
3,953   Bellaire SurgiCare.
    2005


2004Income statement data:Net operating revenues

$
161,679


$
23,123Operating expenses


350,097



129,430Net loss

$
(188,418
)

$
(106,307
)Balance sheet data:Current assets

$



$
284,192Other assets






395,997Total assets

$



$
680,189Current liabilities

$



$
583,580Other liabilities






39,689Total liabilities

$



$
623,269   CARDC.
 28




---



##### Table of Contents



2005


2004Income statement data:Net operating revenues

$
848,373


$
3,210,158Operating expenses


809,673



3,056,258Net income

$
38,700


$
153,900Balance sheet data:Current assets

$



$
237,367Other assets






9,971Total assets

$



$
247,338Current liabilities

$



$
233,711Other liabilities






Total liabilities

$



$
233,711   IntegriMED.
    2005


2004Income statement data:Net operating revenues

$
191,771


$
258,673Operating expenses


899,667



1,710,891Net loss

$
(707,896
)

$
(1,452,218
)Balance sheet data:Current assets

$



$
443,120Other assets






62,575Total assets

$



$
505,695Current liabilities

$



$
571,766Other liabilities






Total liabilities

$



$
571,766  29




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##### Table of Contents



TASC and TOM.
    2005


2004Income statement data:Net operating revenues

$
2,408,156


$
177,761Operating expenses


2,458,234



123,551Net income (loss)

$
(50,078
)

$
54,210Balance sheet data:Current assets

$



$
772,035Other assets






1,632,949Total assets

$



$
2,404,984Current liabilities

$



$
779,684Other liabilities






724,563Total liabilities

$



$
1,504,247   Sutter.
 30




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##### Table of Contents



2005


2004Income statement data:Net operating revenues

$
356,351


$
434,063Operating expenses


347,643



421,352Net income

$
8,708


$
12,711Balance sheet data:Current assets

$



$
112,920Other assets






15,296Total assets

$



$
128,216Current liabilities

$



$
9,806Other liabilities






Total liabilities

$



$
9,806   Memorial Village.
 31




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##### Table of Contents



2005


2004Income statement data:Net operating revenues

$
1,490,799


$
112,994Operating expenses


2,966,860



90,966Net income (loss)

$
(1,476,061
)

$
22,028Balance sheet data:Other current assets

$
152,856


$
243,321Property and equipment, net


430,244



739,810Total assets held for sale

$
583,100


$
983,131Capital lease obligation


79,206



55,939Total liabilities held for sale

$
79,206


$
55,939   San Jacinto.
  Orion.
 32




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##### Table of Contents



2005


2004(Restated)


(Restated)Heart CenterNet income

$



$
145,511Loss on disposal






(12,366
)Bellaire SurgiCareNet loss


(188,418
)


(106,308
)Loss on disposal


(163,049
)


(4,090,555
)CARDCNet income


38,700



153,900Gain on disposal


268,292



(704,927
)IntegriMEDNet loss


(707,896
)


(1,452,218
)Loss on disposal


(47,101
)


TASC and TOMNet income (loss)


(50,079
)


54,210Loss on disposal


(2,575,363
)


SutterNet income


8,708



12,711Loss on disposal


(38,719
)


Memorial VillageNet income (loss)


(1,476,061
)


22,028Loss on disposal


(6,582,930
)


San JacintoLoss on disposal


(3,542,283
)


OrionNet loss


(61,730
)


(35,412
)Total loss from operations of
    discontinued components, including net loss on disposal

$
(15,117,929
)

$
(6,013,426
)   Preferred Stock Dividends. Series A-2 Series A-2
  Liquidity
    and Capital Resources
     33




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##### Table of Contents




    Net repayments of capital lease obligations totaled $492,819,
    including approximately $635,000 in repayments related to
    discontinued operations;
    Net borrowings on the CIT revolving credit facility totaled
    $386,340; and
    In March and April 2005, the Company borrowed an aggregate of
    $1,250,000 from Brantley IV. (See Part I.
    Item 1. Description of Business  Acquisitions
    and Restructuring Transactions  Post-Restructuring
    Loan Transactions.)      and/or
   34




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and/or
   35




---



##### Table of Contents



and/or
  ITEM 7.
    FINANCIAL
    STATEMENTS  page F-1.
  ITEM 8.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 8A.
    CONTROLS
    AND PROCEDURES  Evaluation of Disclosure Controls and
    Procedures. Rule 13a-15(c)
  Changes in Internal Controls.
  ITEM 8B.
    OTHER
    INFORMATION  and/or
 36




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##### Table of Contents



PART III  ITEM 9.
    DIRECTORS
    AND EXECUTIVE OFFICERS OF THE REGISTRANT    Compliance
    with Section 16(a) of the Exchange Act
      Grant Date

Name

Title

Transaction6/17/05


Terrence L. Bauer

Chief Executive Officer

Stock option grant 
    300,000 shares6/17/05


Dennis Cain

CEO, MBS

Stock option grant 
    150,000 shares6/17/05


David Crane

Director

Stock option grant 
    10,000 shares6/17/05


Michael Finn

Director

Stock option grant 
    17,000 shares6/17/05


Gerald McIntosh

Former Director

Stock option grant 
    10,000 shares6/17/05


Stephen H. Murdock

Chief Financial Officer

Stock option grant 
    200,000 shares6/17/05


Robert Pinkas

10% Beneficial Owner

Stock option grant 
    17,000 shares6/17/05


Tom Smith

President & COO, MBS

Stock option grant 
    150,000 shares6/17/05


Joseph Valley, Jr.

Director

Stock option grant 
    20,000 shares8/31/05


Terrence L. Bauer

Chief Executive Officer

Restricted stock unit
    grant  300,000 units8/31/05


Keith G. LeBlanc

Former President and Director

Restricted stock unit
    grant  250,000 units8/31/05


Stephen H. Murdock

Chief Financial Officer

Restricted stock unit
    grant  100,000 units  37




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##### Table of Contents



Code of
    Ethics
  www.orionhealthcorp.com Form 8-K, Form 8-K
  ITEM 10.
    EXECUTIVE
    COMPENSATION    ITEM 11.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    ITEM 12.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS    ITEM 13.
    EXHIBITS AND
    REPORTS ON
    FORM 8-K  Exhibit No.

DescriptionExhibit 2.1

Amended and Restated Agreement and
    Plan of Merger by and among SurgiCare, Inc., IPS Acquisition,
    Inc., and Integrated Physician Solutions, Inc., dated
    February 9, 2004 as amended by First Amendment to Agreement
    and Plan of Merged dated as of July 16, 2004 and Second
    Amendment to Agreement and Plan of Merger dated as of
    September 9, 2004. (Incorporated by reference to
    Exhibit 2.1 of the Companys Annual Report on
    Form 10-KSB
    for the year ended December 31, 2004 filed on
    April 28, 2005)*Exhibit 2.2

Amended and Restated Agreement and
    Plan of Merger dated February 9, 2004, by and among
    SurgiCare, Inc., DCPS/MBS Acquisition, Inc., Dennis Cain
    Physician Solutions, Ltd., Medical Billing Services, Inc. and
    the sellers party thereto as amended by First Amendment to
    Agreement and Plan of Merger dated as of September 9, 2004.
    (Incorporated by reference to Exhibit 2.2 of the
    Companys Annual Report on
    Form 10-KSB
    for the year ended December 31, 2004 filed on
    April 28, 2005)*Exhibit 2.3

Second Amendment to Agreement and
    Plan of Merger dated December 15, 2004 among SurgiCare,
    Inc., DCPS/MBS Acquisition Inc., Dennis Cain Physician
    Solutions, Ltd., Medical Billing Services, Inc., and the Sellers
    party thereto. (Incorporated by reference to Exhibit 2.1 of
    the Companys Current Report on
    Form 8-K
    filed on December 21, 2004)*Exhibit 2.4

Asset Purchase Agreement, dated as
    of June 6, 2005, by and among InPhySys, Inc. (f/k/a
    IntegriMED, Inc.) and eClinicalWeb, LLC (Incorporated by
    reference to Exhibit 2.1 of the Companys Current
    Report on
    Form 8-K
    filed on June 13, 2005)*Exhibit 2.5

Purchase Agreement, dated as of
    September 30, 2005, by and among Tuscarawas Ambulatory
    Surgery Center, L.L.C., Orion HealthCorp, Inc., each of the
    individuals holding a minority equity interest in Tuscarawas
    Ambulatory Surgery Center, L.L.C., and Union Hospital
    (Incorporated by reference to Exhibit 2.1 of the
    Companys Current Report on
    Form 8-K
    filed on October 7, 2005)* 38




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##### Table of Contents



Exhibit No.

DescriptionExhibit 2.6

Asset Purchase Agreement, dated as
    of September 30, 2005, by and between Union Hospital and
    TASC Anesthesia, L.L.C. (Incorporated by reference to
    Exhibit 2.2 of the Companys Current Report on
    Form 8-K
    filed on October 7, 2005)*Exhibit 2.7

Purchase Agreement, dated as of
    September 30, 2005, by and among Tuscarawas Open MRI, L.P.,
    Orion HealthCorp, Inc., each of the individuals holding a
    minority equity interest in Tuscarawas Open MRI, L.P., and Union
    Hospital (Incorporated by reference to Exhibit 2.3 of the
    Companys Current Report on
    Form 8-K
    filed on October 7, 2005)*Exhibit 3.1

Amended and Restated Certificate
    of Incorporation of Orion HealthCorp, Inc. (Incorporated by
    reference to Exhibit 1 of the Companys Registration
    Statement on
    Form 8-A
    filed on December 15, 2004)Exhibit 3.2

Amended and Restated By-Laws of
    Orion HealthCorp, Inc. (Incorporated by reference to
    Exhibit 3.2 of the Companys Current Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 4.1

Form of Certificate of
    Class A Common Stock of Orion HealthCorp, Inc.
    (Incorporated by reference to Exhibit 2 of the
    Companys Registration Statement on
    Form 8-A
    filed on December 15, 2004)Exhibit 10.1

Agreement dated as of
    June 23, 2004 by and between American International
    Industries, Inc., a Nevada corporation, and SurgiCare, Inc., a
    Delaware corporation (Incorporated by reference to
    Exhibit 10.1 of the Companys
    Form 10-QSB
    for the quarter ended September 30, 2004 filed on
    November 15, 2004)Exhibit 10.2

Amended and Restated Stock
    Subscription Agreement, dated February 9, 2004, among
    SurgiCare, Inc. and Brantley Venture Partners IV, L.P., as
    amended by the First Amendment to Stock Subscription Agreement
    dated July 16, 2004 (Incorporated by reference to
    Exhibit 10.3 of the Companys Annual Report on
    Form 10-KSB
    for the year ended December 31, 2004 filed on
    April 28, 2005)*Exhibit 10.3

Amended and Restated Debt Exchange
    Agreement, dated February 9, 2004, among SurgiCare, Inc.,
    Brantley Venture Partners III, L.P., and Brantley Capital
    Corporation as amended by the First Amendment to Debt Exchange
    Agreement dated July 16, 2004 (Incorporated by reference to
    Exhibit 10.4 of the Companys Annual Report on
    Form 10-KSB
    for the year ended December 31, 2004 filed on
    April 28, 2005)*Exhibit 10.4

Supplemental Stock Subscription
    Agreement, dated December 15, 2004, by and among SurgiCare,
    Inc., Brantley Partners IV, L.P., and each of the investors
    listed on Schedule I thereto (Incorporated by reference to
    Exhibit 10.1 of the Companys Current Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.5

Second Amendment and Supplement to
    Stock Subscription Agreement, dated December 15, 2004, by
    and among SurgiCare, Inc., Brantley Partners IV, L.P., and each
    of the investors listed on Schedule I thereto (Incorporated by
    reference to Exhibit 10.2 of the Companys Current
    Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.6

Loan and Security Agreement, dated
    December 15, 2004, by and among Orion HealthCorp, Inc.,
    certain affiliates and subsidiaries of Orion HealthCorp, Inc.,
    and CIT Healthcare, LLC (formerly known as Healthcare Business
    Credit Corporation) (Incorporated by reference to
    Exhibit 10.3 of the Companys Current Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.7

Guaranty Agreement, dated as of
    December 15, 2004, issued by Brantley Partners IV, L.P. to
    CIT Healthcare, LLC (formerly known as Healthcare Business
    Credit Corporation) (Incorporated by reference to
    Exhibit 10.4 of the Companys Current Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.8

Guaranty Agreement, dated
    December 15, 2004, issued to Brantley Capital Corporation
    to CIT Healthcare, LLC (formerly known as Healthcare
    Business Credit Corporation) (Incorporated by reference to
    Exhibit 10.5 of the Companys Current Report on
    Form 8-K
    filed on December 21, 2004) 39




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##### Table of Contents



Exhibit No.

DescriptionExhibit 10.9

Warrant, dated December 15,
    2004, issued to Brantley Partners IV, L.P. by Orion HealthCorp,
    Inc. (Incorporated by reference to Exhibit 10.6 of the
    Companys Current Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.10

Warrant, dated December 15,
    2004, issued to Brantley Capital Corporation by Orion
    HealthCorp, Inc. (Incorporated by reference to Exhibit 10.7
    of the Companys Current Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.11

Employment Agreement, dated
    December 15, 2004, between Orion HealthCorp, Inc. and
    Terrence L. Bauer (Incorporated by reference to
    Exhibit 10.8 of the Companys Current Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.12

Employment Agreement, dated
    December 15, 2004, between Orion HealthCorp, Inc. and
    Keith G. LeBlanc (Incorporated by reference to
    Exhibit 10.9 of the Companys Current Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.13

Employment Agreement, dated
    December 15, 2004, between Orion HealthCorp, Inc. and
    Stephen H. Murdock  (Incorporated by reference to
    Exhibit 10.10 of the Companys Current Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.14

Employment Agreement, dated
    December 15, 2004, between Orion HealthCorp, Inc., Medical
    Billing Services, Inc. and Dennis Cain (Incorporated by
    reference to Exhibit 10.11 of the Companys Current
    Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.15

Employment Agreement, dated
    December 15, 2004, between Orion HealthCorp, Inc., Medical
    Billing Services, Inc. and Tom M. Smith (Incorporated by
    reference to Exhibit 10.12 of the Companys Current
    Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.16

Registration Rights Agreement
    dated December 15, 2004, by and among Orion HealthCorp,
    Inc. and the investors set forth on Schedule I thereto
    (Incorporated by reference to Exhibit 10.13 of the
    Companys Current Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.17

Stockholders Agreement dated
    December 15, 2004, by and among Orion HealthCorp, Inc.,
    Brantley Venture Partners III, L.P., Brantley Venture
    Partners IV, L.P. and Brantley Capital Corporation (Incorporated
    by reference to Exhibit 10.14 of the Companys Current
    Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.18

Orion HealthCorp, Inc. 2004
    Incentive Plan (Incorporated by reference to Exhibit 10.19
    of the Companys Annual Report on
    Form 10-KSB
    for the year ended December 31, 2004 filed on
    April 28, 2005)Exhibit 10.19

First Amendment to Loan and
    Security Agreement, dated as of March 22, 2005, by and
    among Orion HealthCorp, Inc., certain affiliates and
    subsidiaries of Orion HealthCorp, Inc., and CIT Healthcare, LLC
    (formerly known as Healthcare Business Credit Corporation)
    (Incorporated by reference to Exhibit 10.1 of the Companys
    Form 10-QSB
    for the quarter ended March 31, 2005 filed on May 13,
    2005)Exhibit 10.20

Amended and Restated Guaranty
    Agreement, dated as of March 22, 2005, provided by Brantley
    Partners IV, L.P. to CIT Healthcare, LLC (formerly known as
    Healthcare Business Credit Corporation) (Incorporated by
    reference to Exhibit 10.2 of the Companys
    Form 10-QSB
    for the quarter ended March 31, 2005 filed on May 13,
    2005)Exhibit 10.21

Amended and Restated Guaranty
    Agreement, dated as of March 22, 2005, provided by Brantley
    Capital Corporation to CIT Healthcare, LLC (formerly known as
    Healthcare Business Credit Corporation) (Incorporated by
    reference to Exhibit 10.3 of the Companys
    Form 10-QSB
    for the quarter ended March 31, 2005 filed on May 13,
    2005)Exhibit 10.22

Convertible Subordinated
    Promissory Note, dated as of June 1, 2005, by and among
    Orion HealthCorp, Inc. and Brantley Partners IV, L.P.
    (Incorporated by reference to Exhibit 10.1 of the
    Companys Current Report on
    Form 8-K
    filed on June 7, 2005)Exhibit 10.23

Convertible Subordinated
    Promissory Note, dated as of June 1, 2005, by and among
    Orion HealthCorp, Inc. and Brantley Partners IV, L.P.
    (Incorporated by reference to Exhibit 10.2 of the
    Companys Current Report on
    Form 8-K
    filed on June 7, 2005) 40




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##### Table of Contents



Exhibit No.

DescriptionExhibit 10.24

Amendment No. 1 to Orion
    HealthCorp, Inc. 2004 Incentive Plan, dated as of June 1,
    2005 (Incorporated by reference to Exhibit 10.6 of the
    Companys
    Form 10-QSB
    for the quarter ended June 30, 2005 filed on
    August 12, 2005)Exhibit 10.25

Form of Orion HealthCorp, Inc.
    Stock Option Agreement (Incentive Stock Option), dated as of
    June 17, 2005 (Incorporated by reference to
    Exhibit 10.7 of the Companys
    Form 10-QSB
    for the quarter ended June 30, 2005 filed on
    August 12, 2005)Exhibit 10.26

Separation Agreement and General
    Release, dated as of November 8, 2005, by and between Orion
    HealthCorp, Inc. and Keith G. LeBlanc (Incorporated by reference
    to Exhibit 10.8 of the Companys
    Form 10-QSB
    for the quarter ended September 30, 2005 filed on
    November 14, 2005)Exhibit 10.27

Asset Purchase Agreement, dated as
    of February 8, 2006, between and among SurgiCare Memorial
    Village, L.P. and First Surgical Memorial Village, L.P., joined
    herein by Orion HealthCorp, Inc. (Incorporated by reference to
    Exhibit 2.1 of the Companys Current Report on
    Form 8-K
    filed on February 14, 2006)*Exhibit 10.28

Asset Purchase Agreement, dated as
    of March 1, 2006, by and between San Jacinto Methodist
    Hospital and San Jacinto Surgery Center, Ltd. (Incorporated
    by reference to Exhibit 2.1 of the Companys Current Report
    on
    Form 8-K
    filed on March 6, 2006)*Exhibit 21

List of Subsidiaries of Orion
    HealthCorp, Inc.Exhibit 23

Consent of UHY Mann Frankfort
    Stein & Lipp CPAs, LLPExhibit 31.1

Rule 13a-14(a)/15d-14(a)
    CertificationExhibit 31.2

Rule 13a-14(a)/15d-14(a)
    CertificationExhibit 32.1

Section 1350 CertificationExhibit 32.2

Section 1350 Certification     *
    
    Pursuant to Item 601(b)(2) of
    Regulation S-B,
    certain exhibits and schedules have been omitted from this
    filing. The Company agrees to furnish to the SEC on a
    supplemental basis a copy of any omitted exhibit or schedule.  ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   41




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##### Table of Contents



SIGNATURES      By:
    /s/  Terrence
    L. Bauer           By: /s/  Terrence
    L. Bauer       Terrence
    L. Bauer
    President, Chief Executive Officer and Director
    (Principal Executive Officer)

By: /s/  Michael J.
    Finn*       Michael
    J. Finn
    DirectorBy: /s/  Paul H.
    Cascio*       Paul
    H. Cascio
    Director and Non-Executive Chairman of the Board

By: /s/  Joseph M.
    Valley, Jr.*       Joseph
    M. Valley, Jr.
    DirectorBy: /s/  David
    Crane*       David
    Crane
    Director

By: /s/  Stephen H.
    Murdock       Stephen
    H. Murdock
    Chief Financial Officer (Principal Accounting and Financial
    Officer)  *By:
    /s/  Stephen
    H. Murdock    42




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##### Table of Contents



ORION
    HEALTHCORP, INC.
  INDEX
    TO CONSOLIDATED FINANCIAL STATEMENTS
  PageNumberReport of
    Independent Registered Public Accounting Firm


F-2Consolidated
    Balance Sheets as of December 31, 2005 and 2004


F-3Consolidated
    Statements of Operations for the Years Ended December 31,
    2005 and 2004


F-4Consolidated
    Statements of Stockholders Equity for the Years Ended
    December 31, 2005 and 2004


F-5Consolidated
    Statements of Cash Flows for the Years Ended December 31,
    2005 and 2004


F-6Notes to
    Consolidated Financial Statements


F-7  F-1




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm               
     F-2




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##### Table of Contents



Orion
    HealthCorp, Inc.
  Consolidated
    Balance Sheets
  December 31,


December 31,2005


2004Current assetsCash and cash equivalents

$
298,807


$
701,846Accounts receivable, net of
    contractual and doubtful accounts allowances of $2,407,935 and
    $5,494,295, respectively


2,798,304



4,469,240Inventory


206,342



519,509Prepaid expenses and other current
    assets


715,671



519,843Assets held for sale


975,839



Total current assets


4,994,963



6,210,438Property and equipment, net of
    accumulated depreciation of $1,838,983 and $5,827,438,
    respectively


741,966



3,370,928Other long-term assetsIntangible assets, excluding
    goodwill, net


13,797,714



26,876,995Goodwill


2,490,695



5,373,645Other assets, net


92,432



534,314Total other long-term assets


16,380,841



32,784,954Total assets

$
22,117,770


$
42,366,320Current liabilitiesAccounts payable and accrued
    expenses

$
6,738,278


$
6,784,950Other current liabilities


25,000



304,144Income taxes payable






116,943Current portion of capital lease
    obligations


92,334



258,478Current portion of long-term debt


4,231,674



2,762,334Liabilities held for sale


452,027



Total current liabilities


11,539,313



10,226,849Long-term liabilitiesCapital lease obligations, net of
    current portion


213,600



540,274Long-term debt, net of current
    portion


3,871,593



4,238,839Deferred tax liability






620,977Minority interest in partnership


35,000



169,500Total long-term liabilities


4,120,193



5,569,590Commitments and
    contingencies






Stockholders
    equityPreferred stock, par value $0.001;
    20,000,000 shares authorized; no shares issued and
    outstanding






Common Stock, Class A, par
    value $0.001; 70,000,000 shares authorized, 12,428,042 and
    8,602,149 shares issued and outstanding at
    December 31, 2005 and December 31, 2004, respectively


12,428



8,602Common Stock, Class B, par
    value $0.001; 25,000,000 shares authorized, 10,448,470 and
    11,482,261 shares issued and outstanding at
    December 31, 2005 and December 31, 2004, respectively


10,448



11,482Common Stock, Class C, par
    value $0.001; 2,000,000 shares authorized, 1,437,572 and
    1,575,760 shares issued and outstanding at
    December 31, 2005 and December 31, 2004, respectively


1,438



1,576Additional paid-in capital


56,928,016



56,602,786Accumulated deficit


(50,455,748
)


(30,016,247
)Treasury stock  at cost;
    9,140 shares


(38,318
)


(38,318
)Total stockholders equity


6,458,264



26,569,881Total liabilities and
    stockholders equity

$
22,117,770


$
42,366,320     F-3




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##### Table of Contents



Orion
    HealthCorp, Inc.
  Consolidated
    Statements of Operations
  For the Years Ended December 31,2005


2004(Restated)


(Restated)Net operating
    revenues

$
29,564,885


$
17,582,937Operating expensesSalaries and benefits


12,663,369



5,055,249Physician group distribution


8,314,975



6,939,081Facility rent and related costs


1,707,579



1,116,949Depreciation and amortization


2,818,042



651,731Professional and consulting fees


1,910,555



703,707Insurance


898,495



534,650Provision for doubtful accounts


1,176,405



1,065,137Other expenses


5,024,169



3,115,015Total operating expenses


34,513,589



19,181,519Loss from continuing operations
    before other income (expenses)


(4,948,704
)


(1,598,582
)Other income
    (expenses)Interest expense


(342,678
)


(969,047
)Gain on forgiveness of debt






2,427,938Other expense, net


(24,066
)


(21,978
)Total other income (expenses), net


(366,744
)


1,436,913Minority interest loss in
    partnership


(6,124
)


Loss from continuing
    operations


(5,321,572
)


(161,669
)Discontinued
    operationsLoss from operations of
    discontinued components, including net loss on disposal of
    $12,681,153 for the year ended December 31, 2005


(15,117,929
)


(6,013,426
)Net loss


(20,439,501
)


(6,175,095
)Preferred stock dividends






(606,100
)Net loss attributable to common
    stockholders

$
(20,439,501
)

$
(6,781,195
)Weighted average common shares
    outstandingBasic


10,440,539



8,602,149Diluted


10,440,539



8,602,149Loss per shareBasicNet loss per share from continuing
    operations

$
(0.51
)

$
(0.02
)Net loss per share from
    discontinued operations

$
(1.45
)

$
(0.70
)Net loss per share

$
(1.96
)

$
(0.72
)DilutedNet loss per share from continuing
    operations

$
(0.51
)

$
(0.02
)Net loss per share from
    discontinued operations

$
(1.45
)

$
(0.70
)Net loss per share

$
(1.96
)

$
(0.72
)     F-4




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##### Table of Contents



Orion
    HealthCorp, Inc.
  Consolidated
    Statements of Stockholders Equity
 For the
    Years Ended December 31, 2005 and 2004
  Common StockClass A


Class B


Class C


Additional Paid-in





Treasury Stock


StockholdersShares


Amount


Shares


Amount


Shares


Amount


Capital


Accumulated Deficit


Shares


Amount


Equity (Deficit)Balance, January 1,
    2004





$







$







$



$
9,392,506


$
(23,235,052
)


(111,817
)

$
(625,000
)

$
(14,464,725
)Acquisitions and restructuring
    transactions (Note 3)


8,602,149



8,602



11,482,261



11,482



1,575,760



1,576



47,210,280







102,677



586,682



47,815,801Dividends accrued and unpaid






























(606,100
)










(606,100
)Net loss






























(6,175,095
)










(6,175,095
)Balance, December 31,
    2004


8,602,149


$
8,602



11,482,261


$
11,482



1,575,760


$
1,576


$
56,602,786


$
(30,016,247
)


(9,140
)

$
(38,318
)

$
26,569,881Conversion of notes payable into
    Class A Common Stock


374,164



374



















335,848















336,222Conversion of Class B Common
    Stock into Class A Common Stock


2,875,726



2,876



(1,033,791
)


(1,034
)










(1,842
)














Conversion of Class C Common
    Stock into Class A Common Stock


660,536



661











(138,188
)


(138
)


(523
)














(0
)Other


(84,533
)


(85
)


















(8,253
)














(8,338
)Net loss






























(20,439,501
)










(20,439,501
)Balance, December 31,
    2005


12,428,042


$
12,428



10,448,470


$
10,448



1,437,572


$
1,438


$
56,928,016


$
(50,455,748
)


(9,140
)

$
(38,318
)

$
6,458,264    F-5




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##### Table of Contents



Orion
    HealthCorp, Inc.
  Consolidated
    Statements of Cash Flows
  For the Years Ended December 31,2005


2004Revised(Restated)


(Restated)Operating activitiesNet loss

$
(20,439,501
)

$
(6,175,095
)Adjustments to reconcile net loss
    to net cash used in operating activities:Provision for doubtful accounts


1,176,405



1,126,536Depreciation and amortization


2,818,042



735,738Gain on forgiveness of debt






(2,427,938
)Conversion of notes payable to
    common stock


57,885



Impact of discontinued operations


11,163,307



4,872,848Changes in operating assets and
    liabilities:Accounts receivable


1,649,987



(761,829
)Inventory


114,093



(59,519
)Prepaid expenses and other assets


(114
)


265,887Other assets


49,145



(19,268
)Accounts payable and accrued
    expenses


221,164



(519,608
)Other liabilities


(119,499
)


141,749Net cash used in operating
    activities


(3,309,086
)


(2,820,499
)Investing activitiesSale (purchase) of property and
    equipment


3,636,368



(282,422
)Impact of discontinued operations


(1,688,803
)


(91,547
)Net proceeds from merger
    transaction






2,090,677Net cash provided by investing
    activities


1,947,565



1,716,708Financing activitiesNet borrowings of capital lease
    obligations


142,525



19,017Net borrowings on line of credit


386,340



1,900,000Net borrowings of notes payable


3,356,833



Net repayments of notes payable


(3,976
)


Net repayments of other obligations


(44,008
)


(162,912
)Impact of discontinued operations


(2,879,232
)


Net cash provided by financing
    activities


958,482



1,756,105Net increase (decrease) in cash
    and cash equivalents


(403,039
)


652,314Cash and cash equivalents,
    beginning of year


701,846



49,532Cash and cash equivalents, end
    of year

$
298,807


$
701,846Supplemental cash flow
    informationCash paid during the year
    forIncome taxes

$



$
Interest

$
360,375


$
380,896      F-6




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes
    to Consolidated Financial Statements
 December 31,
    2005 and 2004
  Note 1.
    Organization
    and Accounting Policies    Description
    of Business
    one-for-ten
    Integrated
    Physician Solutions
    day-to-day
 F-7




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  day-to-day
        Medical
    Billing Services
     F-8




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Ambulatory
    Surgery Center Business
    AcquisitionName

Location

Date

OwnershipSurgiCare Memorial Village
    L.P.

Houston, Texas

Oct. 2000


49
%San Jacinto Surgery Center
    Ltd.

Baytown, Texas

Oct. 2000


10
%             Principles
    of Consolidation
   F-9




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##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Recent
    Accounting Pronouncements
  (EITF 03-13). held-for-sale EITF 03-13
        Cash and
    Cash Equivalents
    Revenue
    Recognition
   F-10




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
            Accounts
    Receivable and Allowance for Doubtful Accounts.
      Inventory
  first-in,
 F-11




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Property
    and Equipment
    Office furniture and equipment

5-7 yearsMedical and surgical equipment

5-7 yearsLeasehold improvements

3 years or remaining life of
    leaseComputer equipment and software

3-7 yearsTransportation equipment

5 years   Investment
    in Limited Partnerships
      Segments
    of an Enterprise and Related Information
    Goodwill
    and Intangible Assets
  pooling-of-interest
 F-12




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
        Income
    Taxes
  .
  Stock
    Based Compensation
         F-13




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    For the Years Ended December 31,2005


2004Net loss  as reported

$
(20,439,501
)

$
(6,175,095
)Deduct: Total stock-based employee
    compensation (expense determined under the fair value-based
    method for all awards), net of tax effect


(142,861
)


(155,245
)Net loss  pro forma

$
(20,582,362
)

$
(6,330,340
)Net loss per share:Basic  as reported

$
(1.96
)

$
(0.72
)Basic  pro forma

$
(1.97
)

$
(0.74
)Diluted  as reported

$
(1.96
)

$
(0.72
)Diluted  pro forma

$
(1.97
)

$
(0.74
)     Reclassifications
    Use of
    Estimates
    Note 2.
    Going
    Concern    and/or
 F-14




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
         F-15




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      and/or
 F-16




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    and/or
  Note 3.
    Acquisitions
    and Restructuring Transactions  Acquisition
    of IPS
       F-17




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Issuance
    of Class B Common Stock
        Acquisition
    of DCPS and MBS
     F-18




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      New
    Line of Credit and Debt Restructuring
      Note 4.
    Goodwill
    and Intangible Assets  pooling-of-interest
 F-19




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
                 F-20




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
        Balance, January 1, 2004

$
7,813,457Amortization expense


(496,469
)Merger transaction 
    Intangible assets  IPS Merger


15,700,764Merger transaction 
    Intangible assets  DCPS/MBS Merger


8,578,225Charge for impairment 
    Bellaire SurgiCare


(4,014,055
)Charge for impairment 
    CARDC


(704,927
)Balance, December 31, 2004

$
26,876,995Amortization expense


(2,566,891
)Charge for impairment 
    TASC


(1,069,776
)Charge for impairment 
    TOM


(1,999,666
)Charge for impairment 
    Memorial Village


(4,501,047
)Charge for impairment 
    San Jacinto


(2,761,084
)Charge for impairment 
    Sutter


(38,440
)Charge for impairment 
    Orion


(142,377
)Balance, December 31, 2005

$
13,797,714  F-21




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Balance, January 1, 2004

$
Merger transaction 
    Goodwill  IPS Merger


3,889,459Merger transaction 
    Goodwill  DCPS/MBS Merger


939,709Charge for impairment 
    Bellaire SurgiCare


(76,500
)Goodwill  Deferred tax
    liability


620,977Balance, December 31, 2004

$
5,373,645Charge for impairment 
    TASC


(74,460
)Charge for impairment 
    Memorial Village


(76,500
)Charge for impairment 
    San Jacinto


(86,700
)Charge for impairment 
    Orion


(276,420
)Purchase price
    adjustment  IPS Merger


900,876Purchase price
    adjustment  DCPS/MBS Merger


840,286Goodwill  Deferred tax
    benefit


(620,977
)Goodwill  write-down
    related to discontinued operations


(3,489,055
)Balance, December 31, 2005

$
2,490,695     Fiscal Year Ending

Amount2006

$
1,406,9382007


1,406,9382008


1,406,9382009


1,389,9152010


998,397$
6,609,126  F-22




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Note 5.
    Earnings
    per Share    For the Years Ended December 31,2005


2004Net loss

$
(20,439,501
)

$
(6,175,095
)Weighted average number of shares
    of Class A Common Stock outstanding for basic net loss per
    share


10,440,539



8,602,149Dilutive stock options, warrants
    and restricted stock units



(a)



(a)Convertible notes payable



(b)



(b)Class B Common Stock



(c)



(c)Class C Common Stock



(d)



(d)Weighted average number of shares
    of Class A Common Stock outstanding for diluted net loss
    per share


10,440,539



8,602,149Net loss per share 
    Basic

$
(1.96
)

$
(0.72
)Net loss per share 
    Diluted

$
(1.96
)

$
(0.72
)               
    First, the holders of the shares of Class B Common Stock
    (other than shares concurrently being converted into
    Class A Common Stock), as a single and separate class, are
    entitled to receive all distributions until there has been paid
    with respect to each such share from amounts then and previously
    distributed an amount equal to $1.15 plus an amount equal to
    nine percent (9%) per annum on such amount, without compounding,
    from the date the Class B Common Stock was first issued. F-23




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   
    Second, the holders of the shares of Class C Common Stock
    (other than shares concurrently being converted into
    Class A Common Stock), as a single and separate class, are
    entitled to receive all distributions until there has been paid
    with respect to each such share from amounts then and previously
    distributed an amount equal to $3.30. After the full required
    distributions have been made to the holders of shares of
    Class C Common Stock (other than shares concurrently being
    converted into Class A Common Stock) as described in the
    previous sentence, each share of Class C Common Stock then
    outstanding will be retired and will not be reissued.
    Third, after the full distributions have been made to the
    holders of the shares of Class B Common Stock and
    Class C Common Stock as described above, all holders of the
    shares of Class A Common Stock and Class B Common
    Stock, as a single class, shall thereafter be entitled to
    receive all remaining distributions pro rata based on the number
    of outstanding shares of Class A Common Stock or
    Class B Common Stock held by each holder, provided that for
    purposes of such remaining distributions, each share of
    Class B Common Stock will be deemed to have been converted
    into one share of Class A Common Stock (subject to
    adjustment to account for stock splits, stock dividends,
    combinations or other similar events affecting the Class A
    Common Stock).  Note 6.
    Long-Term
    Debt    As of December 31,2005


2004Promissory note due to sellers of
    MBS, bearing interest at 8%, interest payable monthly or on
    demand, matures December 15, 2007

$
1,000,000


$
1,000,000Working capital due to sellers of
    MBS, due on demand


199,697



383,112Term loan with a financial
    institution, non-interest bearing, matures November 15,
    2010(1), net of discount of $641,467 and $614,291, respectively


3,108,677



3,135,853Revolving line of credit with a
    financial institution, bearing interest at 6.5%, interest
    payable monthly or on demand(2)


778,006



787,650$2,300,000 revolving line of
    credit, bearing interest at prime (7.25% at December 31,
    2005) plus 6%, interest payable monthly, matures
    December 14, 2006(3)


1,703,277



1,316,937Convertible notes, bearing
    interest at 18%, interest payable monthly, convertible on demand


50,000



320,000Note payable due to a related
    party, bearing interest at 6%, interest payable monthly, due on
    demand


13,610



50,000Insurance financing note payable,
    bearing interest at 5.25%, interest payable monthly






7,621Convertible promissory notes due
    to a related party, bearing interest at 9%, mature
    April 19, 2006


1,250,000



Total long-term debt


8,103,267



7,001,173Less: current portion of long-term
    debt


(4,231,674
)


(2,762,334
)Long-term debt, net of current
    portion

$
3,871,593


$
4,238,839     (1)
    
    This note was affected by the acquisition and restructuring
    transactions consummated on December 15, 2004, which are
    described in greater detail in Note 3 under the caption
    New Line of Credit and Debt Restructuring. F-24




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (2)
    
    This note was affected by the acquisition and restructuring
    transactions consummated on December 15, 2004, which are
    described in greater detail in Note 3 under the caption
    New Line of Credit and Debt Restructuring.
    Additionally, as of March 13, 2006, these notes were paid
    in full at a significant discount. (See Note 18. Subsequent
    Events).(3)
    
    As part of the Loan and Security Agreement, the Company is
    required to comply with certain financial covenants, measured on
    a quarterly basis. The financial covenants include maintaining a
    required debt service coverage ratio and meeting a minimum
    operating income level for the surgery and diagnostic centers
    before corporate overhead allocations. At December 31,
    2005, the Company was out of compliance with both of these
    financial covenants and has notified the lender as such. Under
    the terms of the Loan and Security Agreement, failure to meet
    the required financial covenants constitutes an event of
    default. Under an event of default, the lender may
    (i) accelerate and declare the obligations under the credit
    facility to be immediately due and payable; (ii) withhold
    or cease to make advances under the credit facility;
    (iii) terminate the credit facility; (iv) take
    possession of the collateral pledged as part of the Loan and
    Security Agreement; (v) reduce or modify the revolving loan
    commitment;
    and/or
    (vi) take necessary action under the Guaranties. The full
    amount of the loan as of December 31, 2005 is recorded as a
    current liability. In December 2005, the Company received
    notification from CIT stating that (i) certain events of
    default under the Loan and Security Agreement had occurred as a
    result of the Company being out of compliance with two financial
    covenants relating to its debt service coverage ratio and its
    minimum operating income level, (ii) as a result of the
    events of default, CIT raised the interest rate for monies
    borrowed under the Loan and Security Agreement to the provided
    Default Rate of prime rate plus 6%, (iii) the
    amount available under the revolving credit facility was reduced
    to $2,300,000 and (iv) CIT reserved all additional rights
    and remedies available to it as a result of these events of
    default. The Company is currently in negotiations with CIT to
    obtain, among other provisions, a waiver of the events of
    default. In the event CIT declares the obligations under the
    Loan and Security Agreement to be immediately due and payable or
    exercises its other rights described above, the Company would
    not be able to meet its obligations to CIT or its other
    creditors. As a result, such action would have a material
    adverse effect on the Companys ability to continue as a
    going concern. Future aggregate annual maturities of long-term
    debt are as follows:  Fiscal Year Ending

Amount2006

$
4,231,6742007


457,3602008


1,457,3602009


457,3602010


1,499,513Total long-term debt


8,103,267Less: current portion of long-term
    debt


(4,231,674
)Long-term debt, net of current
    portion

$
3,871,593   Note 7.
    Capital
    Lease Obligations   F-25




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Fiscal Year Ending

Amount2006

$
152,7942007


145,4402008


115,5812009


26,4902010


Total future minimum lease payments


440,305Less: Amounts representing interest


(55,166
)Present value of future minimum
    lease payments


385,139Less: Liabilities held for sale


(79,205
)Less: Current portion of capital
    lease obligations


(92,334
)Capital lease obligations, net of
    current portion

$
213,600   Note 8.
    Operating
    Leases      Fiscal Year Ending

Amount2006

$
1,295,6902007


907,4612008


621,6872009


531,1632010


374,493Thereafter


160,238Total future annual base rental
    payments(1)

$
3,890,732     (1)
    
    This total includes base rental payments in the amount of
    $49,884 related to Memorial Village, which was sold effective
    January 31, 2006. (See Note 18. Subsequent Events).  Note 9.
    Related
    Party Transactions  one-for-ten
 F-26




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
                 F-27




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
               F-28




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Series A-2
    and/or Form S-1 Form S-3, and/or Form S-3
  and/or Form S-8 Form S-4
   F-29




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
         F-30




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Note 10.
    Income
    Taxes   2005


2004Current:Federal






State






Deferred:Federal






(201,594
)State






(419,383
)Total income tax provision






(620,977
)     Years ended December 31,2005


2004Deferred tax liabilities:Intangibles

$
(2,839,193
)

$
(7,606,686
)Accrual to cash conversion






(221,582
)Depreciation


22,400



28,847Total deferred tax liabilities


(2,816,793
)


(7,799,421
)Deferred tax assets:Net operating loss 
    Federal and State


10,842,488



8,791,320Allowance for bad debts


344,869



357,810Impairment of intangibles






267,872Other


8,174



8,772Total deferred tax assets


11,195,531



9,425,774Total net deferred tax assets


8,378,738



1,626,353Valuation allowance


(8,378,738
)


(2,247,330
)Net deferred tax assets

$



$
(620,977
)      2005


2004Federal benefit at statutory rate

$
(6,791,387
)

$
(2,144,801
)State income tax benefit, net of
    Federal benefit at statutory rate


(938,502
)


(236,201
)Nondeductible writeoffs and
    amortization of intangible assets


1,199,120



175,402Other


21,203



(41,730
)Change in valuation allowance


6,509,566



2,247,330Tax expense (Benefit)

$



$
  F-31




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Note 11.
    Preferred
    Stock        Note 12.
    Segment
    Reporting    2005IPS


MBS


TotalNet operating revenues

$
19,189,962


$
9,979,232


$
29,169,194Income from continuing operations


1,064,659



548,571



1,613,230Depreciation and amortization


463,068



1,148,173



1,611,241Total assets


8,955,214



10,532,449



19,487,663   2004IPS


MBS


TotalNet operating revenues

$
16,928,348


$
426,359


$
17,354,707Income (loss) from continuing
    operations


888,354



(32,021
)


856,333Depreciation and amortization


445,325



45,946



491,271Total assets


9,794,461



10,678,982



20,473,443  F-32




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2005


2004(Restated)


(Restated)Net operating
    revenues:Total net operating revenues for
    reportable segments

$
29,169,194


$
17,354,707Corporate revenues


395,691



228,230Total consolidated net operating
    revenues

$
29,564,885


$
17,582,937Loss from continuing
    operations:Total loss from continuing
    operations for reportable segments

$
1,613,230


$
856,333Extraordinary gain






2,427,938Corporate overhead


(6,934,802
)


(3,445,940
)Total consolidated loss from
    continuing operations

$
(5,321,572
)

$
(161,669
)Depreciation and
    amortization:Total depreciation and
    amortization for reportable segments

$
1,611,241


$
491,271Corporate depreciation and
    amortization


1,206,801



160,460Total consolidated depreciation
    and amortization

$
2,818,042


$
651,731Total assets:Total assets for reportable
    segments

$
19,487,663


$
20,473,443Corporate assets


1,654,269



1,996,223Assets held for sale or related to
    discontinued operations(1)


975,839



19,896,654Total consolidated assets

$
22,117,770


$
42,366,320     (1)
    The balance at December 31, 2004 includes $14,477,085 of
    intangible assets and goodwill that were impaired or written off
    in 2005.  Note 13.
    Discontinued
    Operations  Heart Center.
 F-33




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2004Income statement data:Net operating revenues

$
2,275,890Operating expenses


2,130,379Net income

$
145,511Balance sheet data:Current assets

$
Other assets


Total assets

$
Current liabilities

$
3,953Other liabilities


Total liabilities

$
3,953   Bellaire SurgiCare.
    2005


2004Income statement data:Net operating revenues

$
161,679


$
23,123Operating expenses


350,097



129,430Net loss

$
(188,418
)

$
(106,307
)Balance sheet data:Current assets

$



$
284,192Other assets






395,997Total assets

$



$
680,189Current liabilities

$



$
583,580Other liabilities






39,689Total liabilities

$



$
623,269  F-34




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  CARDC.
    2005


2004Income statement data:Net operating revenues

$
848,373


$
3,210,158Operating expenses


809,673



3,056,258Net income

$
38,700


$
153,900Balance sheet data:Current assets

$



$
237,367Other assets






9,971Total assets

$



$
247,338Current liabilities

$



$
233,711Other liabilities






Total liabilities

$



$
233,711   IntegriMED.
 F-35




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2005


2004Income statement data:Net operating revenues

$
191,771


$
258,673Operating expenses


899,667



1,710,891Net loss

$
(707,896
)

$
(1,452,218
)Balance sheet data:Current assets

$



$
443,120Other assets






62,575Total assets

$



$
505,695Current liabilities

$



$
571,766Other liabilities






Total liabilities

$



$
571,766   TASC and TOM.
 F-36




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2005


2004Income statement data:Net operating revenues

$
2,408,156


$
177,761Operating expenses


2,458,234



123,551Net income (loss)

$
(50,078
)

$
54,210Balance sheet data:Current assets

$



$
772,035Other assets






1,632,949Total assets

$



$
2,404,984Current liabilities

$



$
779,684Other liabilities






724,563Total liabilities

$



$
1,504,247   Sutter.
    2005


2004Income statement data:Net operating revenues

$
356,351


$
434,063Operating expenses


347,643



421,352Net income

$
8,708


$
12,711Balance sheet data:Current assets

$



$
112,920Other assets






15,296Total assets

$



$
128,216Current liabilities

$



$
9,806Other liabilities






Total liabilities

$



$
9,806  F-37




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Memorial Village.
    2005


2004Income statement data:Net operating revenues

$
1,490,799


$
112,994Operating expenses


2,966,860



90,966Net income (loss)

$
(1,476,061
)

$
22,028Balance sheet data:Other current assets

$
152,856


$
243,321Property and equipment, net


430,244



739,810Total assets held for sale

$
583,100


$
983,131Capital lease obligation


79,206



55,939Total liabilities held for sale

$
79,206


$
55,939   San Jacinto.
 F-38




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Orion.
    2005


2004(Restated)


(Restated)Heart CenterNet income

$



$
145,511Loss on disposal






(12,366
)Bellaire SurgiCareNet loss


(188,418
)


(106,308
)Loss on disposal


(163,049
)


(4,090,555
)CARDCNet income


38,700



153,900Gain (loss) on disposal


268,292



(704,927
)IntegriMEDNet loss


(707,896
)


(1,452,218
)Loss on disposal


(47,101
)


TASC and TOMNet income (loss)


(50,079
)


54,210Loss on disposal


(2,575,363
)


SutterNet income


8,708



12,711Loss on disposal


(38,719
)


Memorial VillageNet income (loss)


(1,476,061
)


22,028Loss on disposal


(6,582,930
)


San JacintoLoss on disposal


(3,542,283
)


OrionNet loss


(61,730
)


(35,412
)Total loss from operations of
    discontinued components, including net loss on disposal

$
(15,117,929
)

$
(6,013,426
)  F-39




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##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Note 14.
    Warrants
    and Options  Transactions
    with Other Than Employees
        Number of

Exercise

Expiration

In connectionShares

Price

Date

With25,000


$
0.01


December 15, 2009


Merger100,000


$
2.80


December 15, 2009


Merger     2005


2004Warrants


Price per Share


Warrants


Price per ShareOutstanding on January 1


314,055


$
0.01 - 10.00



273,568


$0.10 - 30.00Issued










125,000


$0.01 - $2.80Exercised










(5,214
)

$3.50Cancelled










(79,299
)

$3.50 - 30.00Outstanding on December 31


314,055


$
0.01 - 10.00



314,055


$0.01 - 10.00Weighted average exercise price

$
4.43






$
4.43Weighted average fair value of
    warrants granted during the year









$
1.68Weighted average remaining life of
    warrants at December 31


2.27 years







2.97 years     2005


2004Risk-free interest rate


N/A


3.00%Expected life


N/A


5.0 yearsExpected dividends


N/A


NoneExpected volatility


N/A


50%   Transactions
    with Employees and Directors
     F-40




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
           F-41




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2005


2004Options and





Options andRestricted Stock





Restricted StockUnits


Price per Share


Units


Price per ShareOutstanding on January 1


575,786


$
3.20 - 20.05



691,858


$
3.20 - 20.05Issued


2,007,000


$
0.84 - 20.05



Exercised










Forfeited


(386,494
)

$
0.84 - 20.05



(116,072
)

$
3.20 - 20.05Outstanding on December 31


2,196,292


$
0.84 - 20.05



575,786


$
3.20 - 20.05Exercisable on December 31


574,292







501,433Weighted average exercise priceOutstanding

$
1.48






$
4.39Exercisable

$
4.23






$
4.57Weighted average remaining life at
    December 31Outstanding


5.93 years







7.65 yearsExercisable


6.66 years







7.62 years   Note 15.
    401(k)
    Plan  location-by-location 1 3 2 3
     F-42




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Note 16.
    Litigation  No. 3-00-CV-0536-L. No. 3-01CV0877-L.
  No. 2004-55688.
  No. 2005-44326.
 F-43




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Note 17.
    Commitments      Note 18.
    Subsequent
    Events        and/or
 F-44




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
                             F-45




---



##### Table of Contents



Orion
    HealthCorp, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Note 19.
    Restatement of Financial Statements
   F-46




---



##### Table of Contents



Exhibit Index  Exhibit No.

DescriptionExhibit 2.1

Amended and Restated Agreement and
    Plan of Merger by and among SurgiCare, Inc., IPS Acquisition,
    Inc., and Integrated Physician Solutions, Inc., dated
    February 9, 2004 as amended by First Amendment to Agreement
    and Plan of Merged dated as of July 16, 2004 and Second
    Amendment to Agreement and Plan of Merger dated as of
    September 9, 2004. (Incorporated by reference to
    Exhibit 2.1 of the Companys Annual Report on
    Form 10-KSB
    for the year ended December 31, 2004 filed on
    April 28, 2005)*Exhibit 2.2

Amended and Restated Agreement and
    Plan of Merger dated February 9, 2004, by and among
    SurgiCare, Inc., DCPS/MBS Acquisition, Inc., Dennis Cain
    Physician Solutions, Ltd., Medical Billing Services, Inc. and
    the sellers party thereto as amended by First Amendment to
    Agreement and Plan of Merger dated as of September 9, 2004.
    (Incorporated by reference to Exhibit 2.2 of the
    Companys Annual Report on
    Form 10-KSB
    for the year ended December 31, 2004 filed on
    April 28, 2005)*Exhibit 2.3

Second Amendment to Agreement and
    Plan of Merger dated December 15, 2004 among SurgiCare,
    Inc., DCPS/MBS Acquisition Inc., Dennis Cain Physician
    Solutions, Ltd., Medical Billing Services, Inc., and the Sellers
    party thereto. (Incorporated by reference to Exhibit 2.1 of
    the Companys Current Report on
    Form 8-K
    filed on December 21, 2004)*Exhibit 2.4

Asset Purchase Agreement, dated as
    of June 6, 2005, by and among InPhySys, Inc. (f/k/a
    IntegriMED, Inc.) and eClinicalWeb, LLC (Incorporated by
    reference to Exhibit 2.1 of the Companys Current
    Report on
    Form 8-K
    filed on June 13, 2005)*Exhibit 2.5

Purchase Agreement, dated as of
    September 30, 2005, by and among Tuscarawas Ambulatory
    Surgery Center, L.L.C., Orion HealthCorp, Inc., each of the
    individuals holding a minority equity interest in Tuscarawas
    Ambulatory Surgery Center, L.L.C., and Union Hospital
    (Incorporated by reference to Exhibit 2.1 of the
    Companys Current Report on
    Form 8-K
    filed on October 7, 2005)*Exhibit 2.6

Asset Purchase Agreement, dated as
    of September 30, 2005, by and between Union Hospital and
    TASC Anesthesia, L.L.C. (Incorporated by reference to
    Exhibit 2.2 of the Companys Current Report on
    Form 8-K
    filed on October 7, 2005)*Exhibit 2.7

Purchase Agreement, dated as of
    September 30, 2005, by and among Tuscarawas Open MRI, L.P.,
    Orion HealthCorp, Inc., each of the individuals holding a
    minority equity interest in Tuscarawas Open MRI, L.P., and Union
    Hospital (Incorporated by reference to Exhibit 2.3 of the
    Companys Current Report on
    Form 8-K
    filed on October 7, 2005)*Exhibit 3.1

Amended and Restated Certificate
    of Incorporation of Orion HealthCorp, Inc. (Incorporated by
    reference to Exhibit 1 of the Companys Registration
    Statement on
    Form 8-A
    filed on December 15, 2004)Exhibit 3.2

Amended and Restated By-Laws of
    Orion HealthCorp, Inc. (Incorporated by reference to
    Exhibit 3.2 of the Companys Current Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 4.1

Form of Certificate of
    Class A Common Stock of Orion HealthCorp, Inc.
    (Incorporated by reference to Exhibit 2 of the
    Companys Registration Statement on
    Form 8-A
    filed on December 15, 2004)Exhibit 10.1

Agreement dated as of
    June 23, 2004 by and between American International
    Industries, Inc., a Nevada corporation, and SurgiCare, Inc., a
    Delaware corporation (Incorporated by reference to
    Exhibit 10.1 of the Companys
    Form 10-QSB
    for the quarter ended September 30, 2004 filed on
    November 15, 2004)Exhibit 10.2

Amended and Restated Stock
    Subscription Agreement, dated February 9, 2004, among
    SurgiCare, Inc. and Brantley Venture Partners IV, L.P., as
    amended by the First Amendment to Stock Subscription Agreement
    dated July 16, 2004 (Incorporated by reference to
    Exhibit 10.3 of the Companys Annual Report on
    Form 10-KSB
    for the year ended December 31, 2004 filed on
    April 28, 2005)*Exhibit 10.3

Amended and Restated Debt Exchange
    Agreement, dated February 9, 2004, among SurgiCare, Inc.,
    Brantley Venture Partners III, L.P., and Brantley Capital
    Corporation as amended by the First Amendment to Debt Exchange
    Agreement dated July 16, 2004 (Incorporated by reference to
    Exhibit 10.4 of the Companys Annual Report on
    Form 10-KSB
    for the year ended December 31, 2004 filed on
    April 28, 2005)*




---



##### Table of Contents



Exhibit No.

DescriptionExhibit 10.4

Supplemental Stock Subscription
    Agreement, dated December 15, 2004, by and among SurgiCare,
    Inc., Brantley Partners IV, L.P., and each of the investors
    listed on Schedule I thereto (Incorporated by reference to
    Exhibit 10.1 of the Companys Current Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.5

Second Amendment and Supplement to
    Stock Subscription Agreement, dated December 15, 2004, by
    and among SurgiCare, Inc., Brantley Partners IV, L.P., and each
    of the investors listed on Schedule I thereto (Incorporated by
    reference to Exhibit 10.2 of the Companys Current
    Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.6

Loan and Security Agreement, dated
    December 15, 2004, by and among Orion HealthCorp, Inc.,
    certain affiliates and subsidiaries of Orion HealthCorp, Inc.,
    and CIT Healthcare, LLC (formerly known as Healthcare Business
    Credit Corporation) (Incorporated by reference to
    Exhibit 10.3 of the Companys Current Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.7

Guaranty Agreement, dated as of
    December 15, 2004, issued by Brantley Partners IV, L.P. to
    CIT Healthcare, LLC (formerly known as Healthcare Business
    Credit Corporation) (Incorporated by reference to
    Exhibit 10.4 of the Companys Current Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.8

Guaranty Agreement, dated
    December 15, 2004, issued to Brantley Capital Corporation
    to CIT Healthcare, LLC (formerly known as Healthcare Business
    Credit Corporation) (Incorporated by reference to
    Exhibit 10.5 of the Companys Current Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.9

Warrant, dated December 15,
    2004, issued to Brantley Partners IV, L.P. by Orion HealthCorp,
    Inc. (Incorporated by reference to Exhibit 10.6 of the
    Companys Current Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.10

Warrant, dated December 15,
    2004, issued to Brantley Capital Corporation by Orion
    HealthCorp, Inc. (Incorporated by reference to Exhibit 10.7
    of the Companys Current Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.11

Employment Agreement, dated
    December 15, 2004, between Orion HealthCorp, Inc. and
    Terrence L. Bauer (Incorporated by reference to
    Exhibit 10.8 of the Companys Current Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.12

Employment Agreement, dated
    December 15, 2004, between Orion HealthCorp, Inc. and Keith
    G. LeBlanc (Incorporated by reference to Exhibit 10.9 of
    the Companys Current Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.13

Employment Agreement, dated
    December 15, 2004, between Orion HealthCorp, Inc. and
    Stephen H. Murdock  (Incorporated by reference to
    Exhibit 10.10 of the Companys Current Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.14

Employment Agreement, dated
    December 15, 2004, between Orion HealthCorp, Inc., Medical
    Billing Services, Inc. and Dennis Cain (Incorporated by
    reference to Exhibit 10.11 of the Companys Current
    Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.15

Employment Agreement, dated
    December 15, 2004, between Orion HealthCorp, Inc., Medical
    Billing Services, Inc. and Tom M. Smith (Incorporated by
    reference to Exhibit 10.12 of the Companys Current
    Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.16

Registration Rights Agreement
    dated December 15, 2004, by and among Orion HealthCorp,
    Inc. and the investors set forth on Schedule I thereto
    (Incorporated by reference to Exhibit 10.13 of the
    Companys Current Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.17

Stockholders Agreement dated
    December 15, 2004, by and among Orion HealthCorp, Inc.,
    Brantley Venture Partners III, L.P., Brantley Venture
    Partners IV, L.P. and Brantley Capital Corporation (Incorporated
    by reference to Exhibit 10.14 of the Companys Current
    Report on
    Form 8-K
    filed on December 21, 2004)Exhibit 10.18

Orion HealthCorp, Inc. 2004
    Incentive Plan (Incorporated by reference to Exhibit 10.19
    of the Companys Annual Report on
    Form 10-KSB
    for the year ended December 31, 2004 filed on
    April 28, 2005)




---



##### Table of Contents



Exhibit No.

DescriptionExhibit 10.19

First Amendment to Loan and
    Security Agreement, dated as of March 22, 2005, by and
    among Orion HealthCorp, Inc., certain affiliates and
    subsidiaries of Orion HealthCorp, Inc., and CIT Healthcare, LLC
    (formerly known as Healthcare Business Credit Corporation)
    (Incorporated by reference to Exhibit 10.1 of the Companys
    Form 10-QSB
    for the quarter ended March 31, 2005 filed on May 13,
    2005)Exhibit 10.20

Amended and Restated Guaranty
    Agreement, dated as of March 22, 2005, provided by Brantley
    Partners IV, L.P. to CIT Healthcare, LLC (formerly known as
    Healthcare Business Credit Corporation) (Incorporated by
    reference to Exhibit 10.2 of the Companys
    Form 10-QSB
    for the quarter ended March 31, 2005 filed on May 13,
    2005)Exhibit 10.21

Amended and Restated Guaranty
    Agreement, dated as of March 22, 2005, provided by Brantley
    Capital Corporation to CIT Healthcare, LLC (formerly known as
    Healthcare Business Credit Corporation) (Incorporated by
    reference to Exhibit 10.3 of the Companys
    Form 10-QSB
    for the quarter ended March 31, 2005 filed on May 13,
    2005)Exhibit 10.22

Convertible Subordinated
    Promissory Note, dated as of June 1, 2005, by and among
    Orion HealthCorp, Inc. and Brantley Partners IV, L.P.
    (Incorporated by reference to Exhibit 10.1 of the
    Companys Current Report on
    Form 8-K
    filed on June 7, 2005)Exhibit 10.23

Convertible Subordinated
    Promissory Note, dated as of June 1, 2005, by and among
    Orion HealthCorp, Inc. and Brantley Partners IV, L.P.
    (Incorporated by reference to Exhibit 10.2 of the
    Companys Current Report on
    Form 8-K
    filed on June 7, 2005)Exhibit 10.24

Amendment No. 1 to Orion
    HealthCorp, Inc. 2004 Incentive Plan, dated as of June 1,
    2005 (Incorporated by reference to Exhibit 10.6 of the
    Companys
    Form 10-QSB
    for the quarter ended June 30, 2005 filed on
    August 12, 2005)Exhibit 10.25

Form of Orion HealthCorp, Inc.
    Stock Option Agreement (Incentive Stock Option), dated as of
    June 17, 2005 (Incorporated by reference to
    Exhibit 10.7 of the Companys
    Form 10-QSB
    for the quarter ended June 30, 2005 filed on
    August 12, 2005)Exhibit 10.26

Separation Agreement and General
    Release, dated as of November 8, 2005, by and between Orion
    HealthCorp, Inc. and Keith G. LeBlanc (Incorporated by reference
    to Exhibit 10.8 of the Companys
    Form 10-QSB
    for the quarter ended September 30, 2005 filed on
    November 14, 2005)Exhibit 10.27

Asset Purchase Agreement, dated as
    of February 8, 2006, between and among SurgiCare Memorial
    Village, L.P. and First Surgical Memorial Village, L.P., joined
    herein by Orion HealthCorp, Inc. (Incorporated by reference to
    Exhibit 2.1 of the Companys Current Report on
    Form 8-K
    filed on February 14, 2006)*Exhibit 10.28

Asset Purchase Agreement, dated as
    of March 1, 2006, by and between San Jacinto Methodist
    Hospital and San Jacinto Surgery Center, Ltd. (Incorporated
    by reference to Exhibit 2.1 of the Companys Current Report
    on
    Form 8-K
    filed on March 6, 2006)*Exhibit 21

List of Subsidiaries of Orion
    HealthCorp, Inc.Exhibit 23

Consent of UHY Mann Frankfort
    Stein & Lipp CPAs, LLPExhibit 31.1

Rule 13a-14(a)/15d-14(a)
    CertificationExhibit 31.2

Rule 13a-14(a)/15d-14(a)
    CertificationExhibit 32.1

Section 1350 CertificationExhibit 32.2

Section 1350 Certification     *
    
    Pursuant to Item 601(b)(2) of
    Regulation S-B,
    certain exhibits and schedules have been omitted from this
    filing. The Company agrees to furnish to the SEC on a
    supplemental basis a copy of any omitted exhibit or schedule.