10-Q/A: Quarterly report pursuant to Section 13 or 15(d)
Published on December 11, 2009
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q/A
RESTATED
(Mark
One)
x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR
THE QUARTERLY PERIOD ENDED October 31, 2008
OR
o TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
Commission
File No. 000-25809
Apollo
Medical Holdings, Inc.
(Exact
name of registrant as specified in its charter)
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Delaware
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20-8046599
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(State
or other jurisdiction of
incorporation
or organization)
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IRS
Employer Identification No.
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1010
N. Central Avenue, Suite 201
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Glendale,
California 91202
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(Address
of principal executive offices)
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(818)
507-4617
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(Issuer’s
telephone number)
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_____________________________________________
(Former
Name or Former Address, if Changed Since Last Report)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days: Yes ý 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 during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes 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.
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Large
accelerated filer
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Accelerated
filer
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Non-accelerated
filer
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Smaller reporting company
ý
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act): Yes No ý
As of
December 10, 2008, there were 25,859,109 shares of the registrant’s common
stock, $0.001 par value per share, issued and outstanding.
EXPLANATION
During
the preparation of the Company's Form 10-Q for the period ended October 31,
2009, it was determined that $126,110 of costs reported as General and
Administrative costs should have been classified and reported as Cost of
Services in this Form 10-Q, previously filed on December 22, 2008 for the period
ended October 31, 2008. This amendment is to reflect such.
Non-controlling
interest was reclassed to reflect the AMH ownership interest in the accompanying
financial statements as of three and nine months ended October 31, 2008 at
$41,712 income.
This
Amendment includes all of the information contained in the Original Report, and
we have made no attempt in this Amendment to modify or update the disclosures
presented in the Original Report, except as identified above.
The
disclosures in this Amendment continue to speak as of the date of the Original
Report, and do not reflect events occurring after the filing of the Original
Report. Accordingly, this Amendment should be read in conjunction
with our other filings made with the Securities and Exchange Commission
subsequent to the filing of the Original Report, including any amendments to
those filings. The filing of this Amendment shall not be deemed to be
an admission that the Original Report, when made, included any untrue statement
of a material fact or omitted to state a material fact necessary to make a
statement not misleading.
APOLLO
MEDICAL HOLDINGS, INC.
INDEX
TO FORM 10-Q FILING
FOR
THE THREE AND SIX MONTHS ENDED OCTOBER 31, 2008 AND 2007
TABLE
OF CONTENTS
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PAGE
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PART
I
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FINANCIAL
INFORMATION
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Item 1.
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Financial
Statements - Unaudited
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Condensed
Consolidated Balance Sheets As of October 31, 2008 and January 31,
2008
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3
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Condensed
Consolidated Statements of Operations For the Three and Nine months ended
October 31, 2008 and 2007(Restated)
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4
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|
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Condensed
Consolidated Statements of Cash Flows For the Nine months ended October
31, 2008 and 2007
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5
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|
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Notes
to Unaudited Restated Condensed Consolidated Financial
Statements
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6 -
13
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Item
2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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14
- 16
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Item
3.
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Quantitative
and Qualitative Disclosures about Market Risk
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17
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Item
4.
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Control
and Procedures
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17
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PART
II
OTHER
INFORMATION
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||
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Item
1.
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Legal
Proceedings
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18
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Item
2.
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Unregistered
Sales of Equity Securities and the Use of Proceeds
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18
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Item
3.
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Defaults
upon Senior Securities
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18
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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18
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Item
5.
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Other
Information
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18
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Item
6.
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Exhibits
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18
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- 2
- -
PART 1 -
FINANCIAL INFORMATION
ITEM 1 -
FINANCIAL STATEMENTS
APOLLO
MEDICAL HOLDINGS, INC.
(FORMERLY,
SICLONE INDUSTRIES, INC.)
CONSOLIDATED
BALANCE SHEETS
(UNAUDITED)
|
October
31,
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January
31,
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|||||||
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2008
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2008
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|||||||
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ASSETS
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||||||||
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CURRENT
ASSETS
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||||||||
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Cash
and cash equivalents
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$
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148,099
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$
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44,352
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||||
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Accounts
receivable, net
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150,943
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—
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||||||
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Due
from affiliate
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2,050
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—
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||||||
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Prepaid
expenses
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25,333
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15,719
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||||||
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Total
current assets
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326,425
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60,071
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||||||
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Property
and equipment - net
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59,514
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—
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||||||
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Due
from officers, net
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9,940
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—
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||||||
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TOTAL
ASSETS
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$
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395,879
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$
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60,071
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||||
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LIABILITIES
AND STOCKHOLDERS' EQUITY(DEFICIT):
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||||||||
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CURRENT
LIABILITIES:
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||||||||
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Accounts
payable and accrued liabilities
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$
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51,275
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$
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13,300
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||||
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Due
to related party
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—
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17,907
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||||||
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Notes
payable-affiliate
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70,000
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—
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||||||
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Line
of credit
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198,000
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—
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||||||
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Total
current liabilities
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319,275
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31,207
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||||||
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Non-controlling interest
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161,512
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—
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||||||
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STOCKHOLDERS'
EQUITY (DEFICIT):
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||||||||
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Preferred
stock, par value $.001 and $0.0001 per share; 5,000,000
and
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||||||||
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25,000,000
shares authorized, respectively; none issued
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—
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—
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||||||
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Common
Stock, par value $.001 and $0.0001, 100,000,000 shares
authorized,
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||||||||
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25,859,109
shares issued and outstanding, and 11,064,000 shares issued, 10,364,100
shares outstanding as of October 31,2008 and January 31, 2008,
respectively
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25,859
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1,036
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||||||
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Additional
paid-in-capital
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557,562
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180,964
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||||||
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Shares
to be issued
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237,500
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—
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||||||
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Accumulated
deficit
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(905,829
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)
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(153,136
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)
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||||
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Total
stockholders' equity (deficit)
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(84,908
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)
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28,864
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|||||
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TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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$
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395,879
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$
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60,071
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||||
The
accompanying notes are an integral part of these unaudited consolidated
financial statements
- 3
- -
APOLLO
MEDICAL HOLDINGS, INC.
(FORMERLY,
SICLONE INDUSTRIES, INC.)
CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR
THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 31, 2008 AND
2007
(UNAUDITED)
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For
the Three months ended
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For
the Nine months ended
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|||||||||||||||
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October 31,
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October 31,
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|||||||||||||||
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2008
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2007
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2008
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2007
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|||||||||||||
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Restated
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Restated
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|||||||||||||||
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NET
REVENUES
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$ | 479,808 | $ | 10,000 | $ | 499,603 | $ | 100,500 | ||||||||
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Operating
expenses:
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||||||||||||||||
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Cost
of services - physician practice salaries, benefits and
other
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488,605 | 15,806 | 531,411 | 54,062 | ||||||||||||
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General
and administrative
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278,854 | 20,360 | 681,233 | 141,953 | ||||||||||||
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Depreciation
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9,996 | - | 9,996 | - | ||||||||||||
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Total
operating expenses
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777,455 | 36,166 | 1,222,640 | 196,015 | ||||||||||||
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LOSS
FROM OPERATIONS
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(297,647 | ) | (26,166 | ) | (723,037 | ) | (95,515 | ) | ||||||||
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OTHER EXPENSES:
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||||||||||||||||
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Interest
expense
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5,356 | - | 5,356 | - | ||||||||||||
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Financing
cost
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23,500 | 23,500 | ||||||||||||||
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NET
LOSS BEFORE INCOME TAXES
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(326,503 | ) | (26,166 | ) | (751,893 | ) | (95,515 | ) | ||||||||
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Provision
for Income Tax
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- | - | 800 | - | ||||||||||||
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NET
LOSS
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(326,503 | ) | (26,166 | ) | (752,693 | ) | (95,515 | ) | ||||||||
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Net
income attributable to noncontrolling interest
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(41,712 | ) | - | (41,712 | ) | - | ||||||||||
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Net
loss attributable to Apollo Medical Holdings, Inc.
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$ | (284,791 | ) | $ | (26,166 | ) | $ | (710,981 | ) | $ | (95,515 | ) | ||||
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WEIGHTED
AVERAGE SHARES OF COMMON STOCK OUTSTANDING, BASIC AND
DILUTED
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25,734,174 | 20,933,490 | 20,063,728 | 20,933,490 | ||||||||||||
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*BASIC
AND DILUTED NET LOSS PER SHARE
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$ | (0.01 | ) | $ | (0.00 | ) | $ | (0.04 | ) | $ | (0.00 | ) | ||||
*Weighted
average number of shares used to compute basic and diluted loss per share is the
same since the effect of dilutive securities is anti-dilutive.
The
accompanying notes are an integral part of these consolidated financial
statements
- 4
- -
APOLLO
MEDICAL HOLDINGS, INC.
(FORMERLY,
SICLONE INDUSTRIES, INC.)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE NINE MONTH PERIOD ENDED OCTOBER 31, 2008 AND 2007
(Unaudited)
|
Nine Months Ended October
31,
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||||||||
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2008
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2007
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|||||||
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CASH
FLOWS FROM OPERATING ACTIVITIES:
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||||||||
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Adjustments
to reconcile net loss to net cash
|
||||||||
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(used
in) operating activities:
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||||||||
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Net
loss
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$
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(752,693
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)
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$
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(95,515
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)
|
||
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Depreciation
|
9,996
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—
|
||||||
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Bad
debt expense
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23,514
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—
|
||||||
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Non-controlling
interest
|
161,512
|
—
|
||||||
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Issuance
of shares for services
|
72,545
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—
|
||||||
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Issuance
of shares as financing cost
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13,500
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—
|
||||||
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Shares
to be issued for consulting fee
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67,500
|
—
|
||||||
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Exercise
of notes payable conversion
|
170,375
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—
|
||||||
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Changes
in assets and liabilities:
|
||||||||
|
Accounts
receivable
|
(174,457
|
)
|
—
|
|||||
|
Prepaid
expenses
|
(9,614
|
)
|
—
|
|||||
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Due
from related party
|
(29,897
|
)
|
—
|
|||||
|
Accounts
payable and accrued liabilities
|
17,975
|
(191
|
)
|
|||||
|
Net
cash used in operating activities
|
(429,743
|
)
|
(95,706
|
)
|
||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
|
Property
and Equipment
|
(69,510
|
)
|
—
|
|||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
|
Proceeds
from notes payable-affiliate
|
70,000
|
—
|
||||||
|
Proceeds
from line of credit
|
198,000
|
—
|
||||||
|
Proceeds
from issuance of common stock for cash
|
335,000
|
182,000
|
||||||
|
Net
cash provided by financing activities
|
603,000
|
182,000
|
||||||
|
NET
INCREASE IN CASH & CASH EQUIVALENTS
|
103,747
|
86,294
|
||||||
|
CASH
& CASH EQUIVALENTS, BEGINNING BALANCE
|
44,352
|
2,184
|
||||||
|
CASH
& CASH EQUIVALENTS, ENDING BALANCE
|
$
|
148,099
|
$
|
88,478
|
||||
|
SUPPLEMENTARY
DISCLOSURES OF CASH FLOW INFORMATION
|
||||||||
|
Interest
paid during the year
|
$
|
3,452
|
$
|
—
|
||||
|
Taxes
paid during the year
|
$
|
—
|
$
|
—
|
||||
The
accompanying notes are an integral part of these unaudited consolidated
financial statements
- 5
- -
APOLLO
MEDICAL HOLDINGS, INC.
(FORMERLY
SICLONE INDUSTRIES, INC.)
NOTES TO
UNAUDITED RESTATED CONSOLIDATED FINANCIAL STATEMENTS
1. Description of
Business
On June
13, 2008, Siclone Industries, Inc. (the “Company”), Apollo Acquisition Co.,
Inc., a wholly-owned subsidiary of the Company (“Acquisition”), Apollo Medical
Management, Inc. (“Apollo Medical”) and the shareholders of Apollo Medical
entered into an agreement and Plan of Merger (the “Merger Agreement”). Pursuant
to the terms of the Merger Agreement, Apollo Medical merged with and into
Acquisition. The former shareholders of Apollo Medical received 20,933,490
shares of the Company’s common stock in exchange for all the issued and
outstanding shares of Apollo Medical.
The
acquisition of Apollo Medical is accounted for as a reverse acquisition under
the purchase method of accounting since the shareholders of Apollo Medical
obtained control of the consolidated entity. Accordingly, the reorganization of
the two companies is recorded as a recapitalization of Apollo Medical, with
Apollo Medical being treated as the continuing operating entity. The historical
financial statements presented herein will be those of Apollo Medical. The
continuing entity retained January 31 as its fiscal year end. The financial
statements of the legal acquirer are not significant; therefore, no pro forma
financial information is submitted.
On July
1, 2008, “Acquisition” changed its name to Apollo Medical Management, Inc.
(AMM). On July 3, 2008, the Company changed its name from Siclone Industries,
Inc. to Apollo Medical Holdings, Inc. (“Apollo or the Company”). Following the
merger, the Company is headquartered in Glendale, California.
The
Company is a medical management holding company that focuses on managing the
provision of hospital-based medicine through a management company, Apollo
Medical Management, Inc. (“AMM”). Through AMM, the Company manages affiliated
medical groups, which presently consist of ApolloMed Hospitalists (“AMH”) and
Apollo Medical Associates (“AMA”).
AMM
operates as a Physician Practice Management Company (PPM) and is in the business
of providing management services to Physician Practice Companies (PPC) under
Management Service Agreements. The Company’s goal is to become a leading
provider of management services to medical groups that provide comprehensive
inpatient care services such as hospitalists, emergency room physicians, and
other hospital-based specialists.
On August
1, 2008, AMM completed negotiations and executed a formal management agreement
with AMH, under which AMM will provide management services to AMH. The Agreement
is effective as of August 1, 2008 and will allow AMM, which operates as a
Physician Practice Management Company, to consolidate AMH, which operates as a
Physician Practice, in accordance with EITF 97-2, Application of FASB Statement
No. 94 and APB Opinion No. 16 to Physician Management Entities and Certain Other
Entities with Contractual Management Agreements. AMH is owned by an officer,
director and major shareholder of the Company,
- 6
- -
2. Summary of Significant Accounting
Policies
Basis
of Consolidation
The
accompanying unaudited condensed consolidated financial statements have been
prepared by Apollo in accordance with U.S. generally accepted accounting
principles for interim financial statements. The statements consist solely of
the management company, Apollo Medical Holdings, Inc. prior to August 1, 2008.
Commencing with the Company’s third quarter on August 1, 2008, and concurrent
with the execution of the Management Services Agreement, the statements reflect
the consolidation of AMM and AMH, in accordance with EITF 97-2, Application of
FASB Statement No. 94 and APB Opinion No. 16 to Physician Management Entities
and Certain Other Entities with Contractual Management Agreements. The
statements do not include all of the information and disclosures required by
generally accepted accounting principles for complete financial statements. In
management’s opinion, all adjustments, consisting of normal recurring
adjustments necessary for the fair presentation of the results of the interim
periods are reflected herein. Operating results for the nine month period ended
October 31, 2008 are not necessarily indicative of future financial
results.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period.
Fair
Value of Financial Instruments
Statement
of financial accounting standard No. 107, Disclosures about fair value of
financial instruments, requires that the Company disclose estimated fair values
of financial instruments. The carrying amounts reported in the statements of
financial position for assets and liabilities qualifying as financial
instruments are a reasonable estimate of fair value.
Credit
and Supply Risk
During
the nine month period ended October 31, 2008 the Company has three major
customers which contributed 17%, 19% and 26% of revenue. As of October 31, 2008
the total amount receivable from these customers amounted to $26,850, $0 and
$25,056, respectively,
Recently
Issued Accounting Pronouncements
In
December 2007, FASB issued FASB Statement No. 160, Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51. This Statement
applies to all entities that prepare consolidated financial statements, except
not-for-profit organizations, but will affect only those entities that have an
outstanding non-controlling interest in one or more subsidiaries or that
deconsolidate a subsidiary. Not-for-profit organizations should continue to
apply the guidance in Accounting Research Bulletin No. 51, Consolidated
Financial Statements, before the amendments made by this Statement, and any
other applicable standards, until the Board issues interpretative guidance. This
Statement is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008 (that is, January 1, 2009, for
entities with calendar year-ends). Earlier adoption is prohibited. The effective
date of this Statement is the same as that of the related Statement 141(R). This
Statement shall be applied prospectively as of the beginning of the fiscal year
in which this Statement is initially applied, except for the presentation and
disclosure requirements. The presentation and disclosure requirements shall be
applied retrospectively for all periods presented. This statement has no effect
on the financial statements as the Company does not have any outstanding
non-controlling interest.
- 7
- -
In March,
2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities”. The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The new standard also improves transparency about the location and
amounts of derivative instruments in an entity’s financial statements; how
derivative instruments and related hedged items are accounted for under
Statement 133; and how derivative instruments and related hedged items affect
its financial position, financial performance, and cash flows. FASB Statement
No. 161 achieves these improvements by requiring disclosure of the fair values
of derivative instruments and their gains and losses in a tabular format. It
also provides more information about an entity’s liquidity by requiring
disclosure of derivative features that are credit risk-related. Finally, it
requires cross-referencing within footnotes to enable financial statement users
to locate important. Based on current conditions, the Company does not expect
the adoption of SFAS 161 to have a significant impact on its results of
operations or financial position.
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations.” This statement replaces FASB Statement No. 141, “Business
Combinations.” This statement retains the fundamental requirements in SFAS 141
that the acquisition method of accounting (which SFAS 141 called the purchase
method) be used for all business combinations and for an acquirer to be
identified for each business combination. This statement defines the acquirer as
the entity that obtains control of one or more businesses in the business
combination and establishes the acquisition date as the date that the acquirer
achieves control. This statement requires an acquirer to recognize the assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, measured at their fair values as of that date,
with limited exceptions specified in the statement. This statement applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The Company does not expect the adoption of SFAS 160 to have
a significant impact on its results of operations or financial
position.
In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles.” This Statement identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States (the GAAP hierarchy). This Statement will not have an impact
on the Company’s financial statements.
In May
2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts, an interpretation of FASB Statement No. 60.” The scope of
this Statement is limited to financial guarantee insurance (and reinsurance)
contracts, as described in this Statement, issued by enterprises included within
the scope of Statement 60. Accordingly, this Statement does not apply to
financial guarantee contracts issued by enterprises excluded from the scope of
Statement 60 or to some insurance contracts that seem similar to financial
guarantee insurance contracts issued by insurance enterprises (such as mortgage
guaranty insurance or credit insurance on trade receivables). This Statement
also does not apply to financial guarantee insurance contracts that are
derivative instruments included within the scope of FASB Statement No. 133,
“Accounting for Derivative Instruments and Hedging Activities.” This Statement
will not have an impact on the Company’s financial statements.
Stock-based
compensation
On
October 17, 2006 the Company adopted SFAS No. 123R, “Share-Based Payment, an
Amendment of FASB Statement No. 123.” As of the date of this report the Company
has no stock based incentive plan in effect.
- 8
- -
Basic
and Diluted Earnings Per Share
Earnings
per share is calculated in accordance with the Statement of financial accounting
standards No. 128 (SFAS No. 128), “Earnings per share”. SFAS No. 128 superseded
Accounting Principles Board Opinion No.15 (APB 15). Net income (loss) per share
for all periods presented has been restated to reflect the adoption of SFAS No.
128. Basic net income per share is based upon the weighted average number of
common shares outstanding. Diluted net income (loss) per share is based on the
assumption that all dilutive convertible shares and stock options were converted
or exercised. Dilution is computed by applying the treasury stock method. Under
this method, options and warrants are assumed to be exercised at the beginning
of the period (or at the time of issuance, if later), and as if funds obtained
thereby were used to purchase common stock at the average market price during
the period.
Cash
and Cash Equivalents
Cash and
cash equivalents include cash in bank representing Company’s current operating
account
Income
Taxes
The
Company utilizes SFAS No. 109, “Accounting for Income Taxes,” which requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each period end based on
enacted tax laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
Revenue
Recognition
The
Company recognizes revenue when persuasive evidence of an arrangement exists,
service has rendered, the sales price is fixed or determinable, and collection
is reasonable assured.
Siclone
Transaction
The
Agreement and Plan of Merger with Siclone Industries, Inc. obligated the Company
to pay a total of $500,000, of which $250,000 was paid, and expensed, at the
completion of the merger in June 2008. Payment of the remaining
balance of $250,000 is tied to the completion of a significant funding
event.
3. Uncertainty of ability to continue as
a going concern
The
Company's financial statements are prepared using the generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has accumulated deficit of $905,829 as of October
31, 2008. Cash Flows used in Operating Activities for the nine months
ended October 31, 2008 was $429,743.
The
financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern.
The
Company’s need for working capital is a key issue for management and necessary
for the Company to meet its goals and objectives. The Company is actively
pursuing additional capitalization opportunities. Management believes that the
above actions will allow the Company to continue operations through the next
fiscal year.
- 9
- -
4. Accounts
Receivable
Accounts
Receivable totals $150,943, net of allowance for bad debt expense of $23,415,
and represent invoiced amounts due the Company as of October 31, 2008 on amounts
billed by AMH. The Company recorded a bad debt reserve of $23,415 in the third
quarter against unpaid Medicare and private insurance billings. Accounts
receivable was $0 as of January 31, 2008.
5. Due from
affiliate
Due from
affiliate totals $2,050 and represents amounts due from AMA, an unconsolidated
Affiliate of the Company. None was due from affiliate as of January 31,
2008.
6. Prepaid expenses
Prepaid
expenses of $25,333 and $15,719 as of October 31, 2008 and January 31, 2008,
respectively, are amounts prepaid for medical malpractice insurance and
Director’s and Officer’s insurance.
7. Property and
Equipment
Property
and Equipment consists of the following as of October 31, 2008:
|
October 31, 2008
|
January 31,
2008
|
|||||||
|
Computers
|
$
|
13,912
|
$
|
—
|
||||
|
Furniture
and fixtures
|
16,626
|
—
|
||||||
|
Software
|
138,443
|
—
|
||||||
|
Machinery
and equipment
|
50,815
|
—
|
||||||
|
Gross
Property and Equipment
|
219,796
|
—
|
||||||
|
less
accumulated depreciation
|
(160,282
|
)
|
—
|
|||||
|
Net
Property and Equipment
|
$
|
59,514
|
$
|
—
|
||||
Depreciation
expense were $9,996 and $0 for the nine month periods ended October 31, 2008 and
2007, respectively.
8. Due from Officers
A net
amount of $9,940 was due from officers of the Company as of October
31, 2008. None was due from officers at of January 31, 2008.
9. Accounts Payable and
Accrued Expenses
Accounts
payable and accrued expenses consist of the following:
|
October 31,
2008
|
January 31,
2008
|
|||||||
|
Accounts
Payable
|
$
|
25,313
|
||||||
|
Accrued
Professional Fees
|
11,987
|
12,443
|
||||||
|
Accrued
Payroll and Income taxes
|
13,975
|
857
|
||||||
|
Total
|
$
|
51,275
|
$
|
13,300
|
||||
- 10
- -
10. Convertible Notes
Payable
During
the three months period ended October 31, 2008, the Company received $170,000
proceeds from the issuance of convertible notes payable. The convertible notes
bear interest at 10% and are due twelve months from the date of issuance. In
connection with the convertible notes, the Company issued 113,333 warrants to
the note holders with an exercise price of $1.50.
On the
date of issuance of note, the Company received the notice to exercise the
conversion of note into shares from the note holders. The Company used the
conversion rate to determine the number of shares to be issued and recorded
226,667 shares as shares to be issued as at October 31, 2008.
The
Company recorded value of warrants using the Black Scholes pricing model using
the following assumptions: Stock price $0.27, Expected life of 3 years, Risk
free bond rate of 1.69% to 2.00% and volatility of 46%. Based on the assumptions
used the Company recorded the weighted average fair value of warrants amounting
to $375 which was fully amortized as interest expense during the nine month
period ended October 31, 2008.
11. Related Party
Transactions
During
the nine months ended October 31, 2008 and 2007, the Company generated revenue
of $19,795 and $100,500 , respectively, by providing management services to
ApolloMed Hospitalists (AMH), an affiliated company with common ownership
interest. Commencing August 1, 2008, the management services fee income reported
by AMM was eliminated in consolidation against similar costs recorded at
AMH.
The
Company borrowed $70,000 on a short-term promissory note in the quarter ended
July 2008 from a related party of the Chief Executive officer of the
Company. The note is unsecured, non-interest bearing and in
default.
12. Notes payable
The
Company had borrowed a total of $195,000 on short-term promissory notes in the
quarter ended July 2008. Dr. Mohammad Hosseinion, the father of Dr.
Warren Hosseinion, the Company’s CEO, loaned $70,000 to the Company and Progene,
Inc., a corporation owned by another physician, loaned the Company
$125,000.
The
$70,000 note carries no interest rate, and the Company is obligated to pay an
origination fee of $5,000 at the time of payoff. This note was default as of
October 31, 2008.
The
Company borrowed $125,000 on June 13, 2008. The note also bears no
interest rate and was due and payable in full on July 2, 2008. The
note was paid off as of October 31, 2008. The Company recorded a
penalty of $6,250 during the nine months ended October 31, 2008 due to late
payment.
Also,
during the third quarter, the Company borrowed $125,000 on September 24, 2008
under a note. This note bore an interest rate of 15 percent and was due and
payable in full on October 22, 2008. The note obligated the Company
for an origination fee of $10,000 and reimbursement of legal fees totaling
$1,500 and issuance of 50,000 shares of the Company’s common stock.The note,
along with the origination fee and legal reimbursement, was paid off in full on
October 20, 2008.
- 11
- -
13. Line of credit
The
Company, through AMH, has a SBA line of credit with Wells Fargo Bank. The loan
was established on January 5, 2006 and provided a total available credit of
$200,000. The interest rate is the banks prime rate plus 2 points. As
of October 31, 2008, Apollo had drawn $198,000 against this
facility.
An
interest expense of $3,542 was recorded during the quarters ended October 31,
2008
14. Minority Interest
The
Company recorded AMH ownership interest in the accompanied financial statements
as Minority Interest amounting to $162,512.
15. Stockholder’s
Equity
During
the period from February 1, 2007 to July 31, 2007, Apollo Medical issued 364,000
shares to investors for a total cash value $182,000. As part of issuance of
shares for cash the Company granted 91,000 stock warrants to investors. During
the period from February 1, 2008 to July 31, 2008, Apollo Medical issued 670,000
shares to investors for a total cash value $335,000. As part of issuance of
shares for cash the Company granted 167,500 stock warrants to
investors.
As the
result of the merger on June 13, 2008, the former shareholders of Apollo Medical
received 20,933,490 shares of the Company’s common stock in exchange for all the
issued and outstanding shares of Apollo Medical. Certain former shareholders of
Apollo Medical received 470,470 warrants in exchange for warrants granted to
them in previous fund raising.
During
the three month period ended October 31, 2008, the Company issued 268,687 shares
for legal, accounting and investment advisory services provided to the Company.
The Company also issued 50,000 shares as financing fee on a note
payable.
During
the three months period ended October 31, 2008, the Company received $170,000
proceeds from the issuance of convertible notes payable. The convertible notes
bear interest at 10% and are due twelve months from the date of issuance. In
connection with the convertible notes, the Company issued 113,333 warrants to
the note holders with an exercise price of $1.50. On the same date of issuance,
the Company received notice to convert the notes into common stock from the note
holders. These notes payable were to be converted to 226,667 shares of the
Company common stock, which were recorded as shares to be issued as of October
31, 2008.
During
the three months ended October 31, 2008, the Company entered into an Employment
Agreement pursuant to which the Company employed the Chief Financial Officer. As
per the agreement, the CFO shall receive 250,000 shares of the Company’s common
stock. These shares have been recorded as shares to be issued as of October 31,
2008.
- 12
- -
Warrants
outstanding:
|
Aggregate
intrinsic value
|
Number of
warrants
|
|||||||
|
Outstanding
at January 31, 2008
|
$
|
—
|
165,620
|
|||||
|
Granted
|
418,183
|
|||||||
|
Exercised
|
—
|
—
|
||||||
|
Cancelled
|
—
|
—
|
||||||
|
Outstanding
at October 31, 2008
|
$
|
—
|
583,803
|
|||||
|
Exercise
Price
|
Warrants
outstanding
|
Weighted
average
remaining
contractual life
|
Warrants
exercisable
|
Weighted
average
exercise
price
|
||||||||||||
|
$1.10
|
470,470
|
1.65
|
470,470
|
$
|
0.89
|
|||||||||||
|
$1.50
|
113,333
|
0.57
|
113,333
|
$
|
0.29
|
|||||||||||
|
583,803
|
2.22
|
583,803
|
$
|
1.18
|
||||||||||||
The grant
date fair value of warrants amounting $7,709 which was calculated using the
Black-Scholes Option Pricing Model.
16.
Commitments
On
September 4, 2008, Apollo Medical Management, Inc. executed an employment
agreement with Jilbert Issai, M.D., to provide services as Vice
President of Business Development. The agreement is for an
initial one-year term with provision for successive one-year
periods. Under the agreement, Doctor Issai is entitled to a nominal
salary and was granted options to purchase an aggregate of 300,000 shares of the
Company’s common stock at an exercise price of $.10 per share at the Company’s
adoption of stock compensation plan.
The
Company entered into an Advisory Agreement with Stonecreek Associates, Inc. on
October 27, 2008, under which Stonecreek will provide investment advisory
services to the Company. Apollo is obligated to pay a fee to
Stonecreek on completion of any debt or equity financing. The
agreement terminates on March 31, 2009.
On
October 27, 2008, the Company entered into a Board of Director’s Agreement with
Suresh Nihalani. The Company will issue a stock award of 400,000
shares to Mr. Nihalani, under the terms of the Director’s Agreement, which
shares will be issued ratably over a thirty-six month period commencing December
2008. The shares will be released to Mr. Nihalani on a monthly basis
during his tenure as a Director. The distribution of shares will
continue as long as Mr. Nihalani serves on the Board, but
will cease when Mr. Nihalani is no longer is a Director.
17.
Restatement
Subsequent
to the filing of financial statements for the period ended October 31, 2008, the
management of the Company determined that the financial statements as of and for
the period ended October 31, 2008 contained errors and should be restated.
Specifically, it was determined that $126,110 of costs reported as General and
Administrative costs should have been classified and reported as Cost of
Services in this previously filed financial statements for the period ended
October 31, 2008. This amendment is to reflect such.
Non-controlling
interest was reclassed to reflect the AMH ownership interest in the accompanying
financial statements as of three and nine months ended October 31, 2008 at
$41,712 income. Following is the effect of the restatements:
|
As Previous
Stated
|
Officers’
Salaries
|
Non controlling
interest
|
As
Restated
|
|||||||||||||
|
Statement
of Operations ( For the three months ended October 31,
2008)
|
||||||||||||||||
|
Cost
of services - physician practice salaries, benefits and
other
|
362,495 | 126,110 | 488,605 | |||||||||||||
|
General
and administrative
|
404,964 | (126,110 | ) | 278,854 | ||||||||||||
|
Total
operating expenses
|
777,455 | 777,455 | ||||||||||||||
|
Statement
of Operations ( For the nine months ended October 31,
2008)
|
||||||||||||||||
|
Cost
of services - physician practice salaries, benefits and
other
|
405,301 | 126,110 | 531,411 | |||||||||||||
|
General
and administrative
|
807,343 | (126,110 | ) | 681,233 | ||||||||||||
|
Total
operating expenses
|
1,222,640 | 1,222,640 | ||||||||||||||
|
NET
INCOME (LOSS) ( For the three months ended October 31,
2008)
|
$ | (326,503 | ) | $ | (326,503 | ) | ||||||||||
|
Net
income attributable to noncontrolling interest
|
(41,712 | ) | (41,712 | ) | ||||||||||||
|
Net
income(loss) attributable to Apollo Medical Holdings, Inc.
|
$ | (326,503 | ) | $ | (284,791 | ) | ||||||||||
|
NET
INCOME (LOSS) ( For the nine months ended October 31,
2008)
|
$ | (752,693 | ) | $ | (752,693 | ) | ||||||||||
|
Net
income attributable to noncontrolling interest
|
(41,712 | ) | (41,712 | ) | ||||||||||||
|
Net
income(loss) attributable to Apollo Medical Holdings, Inc.
|
$ | (752,693 | ) | $ | (710,981 | ) | ||||||||||
- 13
- -
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Three
Months Ended October 31, 2008 vs. Three Months Ended October 31,
2007
Revenues
Apollo
reported revenues of $479,808 for the quarter ended October 2008, compared to
revenues of $10,000 in the comparable quarter ended October
2007. Prior to the Management Services Agreement executed on August
1, 2008, the Company could only report the management fees charged to its
affiliate, AMH. Subsequent to August 1, 2008, revenues represent the billings by
AMH under the various fee structures from health plans, medical groups/IPA’s and
hospitals. Management fee revenues have been eliminated subsequent to August 1,
2008.
Cost
of Services-Restated
Cost of
Services totaled $488,605 for the three months ended October 2008 versus cost of
services of $15,806 for the three months ended October 2007. Cost of Services
includes compensation paid to the doctors under contract with AMH, costs for
medical malpractice insurance for these physicians, professional privileges and
telephone and uniform cleaning expenses. Cost of Services for the quarter ended
October 2008 included $431,028 of compensation to physicians on the
consolidation required by the Management Agreement. Cost of Goods in
the third quarter of 2007 did not include compensation costs.
General
and Administrative-Restated
General
and Administrative expenses totaled $278,854 for the three months ended October
2008, up $258,494 from general and administrative expenses of $20,360
reported in the third quarter of 2007. General and Administrative costs in 2008
include the overhead costs of supporting the operations of AMH, compared to a
smaller cost base supporting the operations of AMM in all prior
quarters.
In
addition, Apollo initiated steps to access the public markets in early 2008
which culminated with a merger into an already public Company. In support of
this merger and its efforts to seek additional investor financing, the Company
has incurred higher legal and consulting fees. Legal fees totaled
$65,825 in the third quarter of 2008, compared to $801 in the comparable quarter
of 2007.
Operating
expenses in 2008 also includes $86,045 of costs related to the issuance of
common shares for legal, accountant, investment services and financing cost, and
$67,500 for shares to be issued to the Company’s Chief Financial
Officer.
- 14
- -
Depreciation
Depreciation
totaled $9,996 in the quarter just ended versus no depreciation expense in the
third quarter of 2007. Depreciation at AMH includes the costs for
software development, computers and office equipment.
Loss
from Operations
The
Company reported a loss from operations of $297,647 for the three months
ended October 31, 2008, compared to a loss from operations of
$26,166 recorded in the same period of 2007.
Interest
and Financing Costs
Interest
expense and financing costs totaled $28,856 for the three months ended
October 31, 2008. No interest and financing costs were
incurred in the quarter ended October 31, 2007. Interest expense in
2008 represents interest expense on the loan with Wells Fargo Bank. Financing
cost in the third quarter of 2008 included $13,500 of shares issued as financing
cost and $10,000 for an origination fee.
Net
Loss
Net Loss
was $326,503 for the three months ended October 31, 2008, compared to
a net loss of $26,166 for the three months endedOctober 31,
2007, The reduction in the net loss was the result of the factors
discussed above.
Nine
Months Ended October 31, 2008 vs. Nine Months Ended October 31,
2007
Revenues
The
Company reported revenues of $499,603 for the nine months ended October 2008, up
$399,103 from revenues of $100,500 reported for the nine months ended one year
earlier on October 31, 2007. The increase in revenues results from the
consolidation of AMM and AMH, subsequent to August 1, 2008, which requires the
recognition of the revenues generated by AMH under its contracts with providers.
Revenues in the nine months ended October 2007 were solely management fee income
charged by AMM to its affiliates.
Cost
of Services-Restated
Cost of
Services was
$531,411 in the nine months ended October 2008. Cost of Goods Sold
was $54,062 in the nine months ended October 2007. Cost of Goods includes the
costs for the physicians under contract by AMH, all medical malpractice
insurance, physician privileges, and telephone costs
General
and Administrative-Restated
General
and Administrative expenses were $681,233 for the nine months ended October
2008, compared to General and Administrative expenses of $141,953 reported in
the comparable nine month period of 2007. In 2008, the $250,000 initial payment
for the Siclone Merger was expensed in General and Administrative Expenses,
along with legal costs of $28,348 incurred in this transaction. General and
Administrative costs in 2008 also included the recognition of $86,045 of costs
related to the issuance of stock to advisors, accountants and lawyers. Lastly,
the consolidation of AMM and AMH, commencing on August 1, 2008, resulted in the
recognition of overhead costs at AMH not included in the 2007
results.
Depreciation
Depreciation
totaled $9,996 in the nine month period versus no depreciation expense for the
nine months ended October 2007. Depreciation at AMH includes the
costs for software development, computers and office equipment.
- 15
- -
Loss
from Operations
The
Company reported a loss from operations of $723,037 for the nine months
ended October 31, 2008, compared to a loss from operations of
$95,515 recorded in the same period of 2007.
Interest
and Financing Costs
Interest
expense and financing costs totaled $28,856 for the nine months ended
October 31, 2008. No interest and financing costs were incurred in the nine
months ended October 31, 2007. Interest expense in 2008 represents
interest expense on the loan with Wells Fargo Bank. Financing
cost was comprised of $13,500 of shares issued as financing cost and
$10,000 for an origination fee.
Net
Loss
A net
loss of $752,693 was reported for the nine months ended October 2008 versus a
net loss of $95,515 for the initial nine months of 2007. The increased loss of
$657,178 was primarily due to the costs incurred for the Siclone Merger of
$250,000, and the related legal costs of $28,348, physicians’ compensation, as
well as the compensation costs incurred with the issuance of stock to advisors,
consultants and an officer.
Liquidity
and Capital Resources
At
October 31, 2008, the Apollo had cash and cash equivalents of $148,099, compared
to cash and cash equivalents of $44,352 at the beginning of the fiscal
year. Short-term borrowings totaled $268,000 at October 31, 2008,
compared to no short-term borrowings at January 31, 2008 and October 31,
2007.
Net cash
used in operating activities totaled a negative $429,743 for the nine months
ended October 2008, compared to a negative $95,706 for the comparable nine
months ended October 31, 2007. The $250,000 paid and expensed on the
Siclone Merger, along with related legal costs and compensation costs was
primarily responsible for the increase in the negative operating cash
flow.
The
Company had borrowed a total of $195,000 on short-term promissory notes in the
quarter ended July 2008. The father of the Company’s CEO, loaned
$70,000 to the Company and a corporation owned by another physician, loaned the
Company $125,000.
The
$70,000 note carries no interest rate, and the Company is obligated to pay an
origination fee of $5,000 at the time of payoff. This note was default as of
October 31, 2008.
The
Company borrowed $125,000 on June 13, 2008. The note also bears no
interest rate and was due and payable in full on July 2, 2008. The
note was paid off as of October 31, 2008. The Company recorded a
penalty of $6,250 during the nine months ended October 31, 2008 due to late
payment.
Also,
during the third quarter, the Company borrowed $125,000 on September 24, 2008
under a note. This note bore an interest rate of 15 percent and was due and
payable in full on October 22, 2008. The note obligated the Company
for an origination fee of $10,000 and reimbursement of legal fees totaling
$1,500 and issuance of 50,000 shares of the Company’s common
stock The note, along with the origination fee and legal
reimbursement, was paid off in full on October 20, 2008.
Commencing
October 14, 2008 through October 27, 2008, the Company executed Convertible
Notes totaling $170,000 with six independent investors. The conversion feature
of these notes allowed conversion into .75 shares of common
stock. All of the note holders exercised their conversion rights
concurrent with the execution of the notes, resulting in an additional 226,667
shares of Common stock.
These
shares had not been issued as of October 31, 2008.
During
the six month period ended July 2008, the Company also financed its operations
with the private placement of Company stock to accredited investors totaling
$335,000. These stock sales and the proceeds occurred prior to the completion of
the Siclone Merger. The Company has not sold any common stock subsequent to the
Merger in mid June 2008. During the initial six months of 2007, the
Company received $182,000 from the sale of its Common stock.
- 16
- -
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The
Company does not hold any derivative instruments and does not engage in any
hedging activities.
ITEM
4. CONTROLS AND PROCEDURES
|
a.
|
Evaluation
of Disclosure Controls and
Procedures.
|
We
carried out an evaluation, under the supervision and with the participation of
our management, including our Chief Executive Officer and Principal Financial
and 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 of the end of the period covered by this
report. Based on that evaluation, our Chief Executive Officer and
Principal Financial and Accounting Officer have concluded that our disclosure
controls and procedures as of April 31, 2008, July 31, 2008, and October 31,
2008 were effective such that the information required to be disclosed in
reports due the Securities and Exchange Act of 1934 is
|
(i)
|
Recorded,
processed, summarized within the time periods specified in the SEC’s rules
and forms and
|
|
(ii)
|
Accumulated
and communicated to the Chief Executive Officer and Chief Financial
Officer as appropriate to allow for timely review and decisions regarding
disclosure.
|
The
Company’s Chief Executive Officer and Chief Financial Officer are responsible
for establishing and maintaining adequate internal control over financial
reporting (as defined in Rule 13a-15(f) under the Exchange
Act). Because of its inherent limitations, internal control over
financial reporting may not prevent or detect
misstatements. Therefore, even those systems determined to be
effective can only provide reasonable assurance of achieving their control
objectives.
|
b.
|
Changes
in Internal Controls over Financial
Reporting
|
There
have been no material changes in our internal controls over financial reporting
or in other factors that could materially effect, or reasonably likely to
affect, our internal controls over financial reporting during the quarter ended
April 30, 2008,the six months ended July 31, 2008 and the none months ended
October 31, 2008 (as such term is defined in Rule 13a-15(f) under the
Exchange Act) that have materially affected, or are reasonably likely to
materially affect, our internal control over financial
reporting.
- 17
- -
The
Company was not a party to any legal proceedings as of October 31, 2008 and is
not aware of any pending legal actions.
The
Company did not sell any Equity Securities during the periods covered by this
filing.
There
were no defaults upon senior securities during the period ended October 31,
2008.
There
were no matters submitted to the vote of securities holders during the period
ended October 31, 2008.
None
|
Exhibit
Number
|
Description
|
|
|
10.1
|
Employment
Agreement with A. Noel DeWinter, the Chief Financial Officer, filed on
Form 8-K on September 11, 2008.
|
|
|
10.2
|
Management
Services Agreement dated on August 1, 2008, between Apollo Medical
Management and Apollo MedHospitalists.
|
|
|
31.1
|
Certification
by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a)
of the Exchange Act.
|
|
|
31.2
|
Certification
by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a)
of the Exchange Act.
|
|
|
32.1
|
Certification
by Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b)
of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the
United States Code.
|
|
|
32.2
|
Certification
by Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b)
of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the
United States Code.
|
- 18
- -
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
APOLLO
MEDICAL HOLDINGS, INC.
|
||
|
Dated:
December 11, 2009
|
By:
|
/s/
Warren Hosseinion
|
|
Warren
Hosseinion
|
||
|
Chief
Executive Officer and Director
|
||
|
Dated:
December 11, 2009
|
By:
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/s/
A. Noel DeWinter
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A.
Noel DeWinter
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Chief
Financial Officer and Principal Accounting
Officer
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