Stockholders' Equity

12 Months Ended

Mar. 31, 2016

Stockholders' Equity Note [Abstract]

Stockholders’ Equity

9. Stockholders’ Equity

Reverse Stock Split

On April 24, 2015, the Company filed an amendment to its articles of incorporation to effect a 1-for-10 reverse stock split of its common stock, effective April 27, 2015. All share and per share amounts relating to the common stock, stock options and warrants to purchase common stock, including the respective exercise prices of each such option and warrant, and the conversion ratio of the Notes included in the financial statements and footnotes have been retroactively adjusted to reflect the reduced number of shares resulting from this action. The par value and the number of authorized, but unissued, shares were not adjusted as a result of the reverse stock split. No fractional shares will be issued following the reverse stock split and the Company has paid cash in lieu of any fractional shares resulting from the reverse stock split.

Preferred Stock – Series A

On October 14, 2015, Company entered into an agreement (the “Agreement”) with NMM pursuant to which the Company sold to NMM, and NMM purchased from the Company, in a private offering of securities, 1,111,111 units, each unit consisting of one share of the Company’s Preferred Stock (the “Series A”) and a stock purchase warrant to purchase one share of the Company’s common stock at an exercise price of $9.00 per share. NMM paid the Company an aggregate $10,000,000 for the units, the proceeds of which were used by the Company primarily to repay certain outstanding indebtedness owed by the Company to NNA and the balance for working capital.

 

The Series A has a liquidation preference in the amount of $9.00 per share plus any declared and unpaid dividends. The Preferred Stock can be voted for the number of shares of Common Stock into which the Series A could then be converted, which initially is one-for-one. The Series A is convertible into Common Stock, at the option of NMM, at any time after issuance at an initial conversion rate of one-for-one, subject to adjustment in the event of stock dividends, stock splits and certain other similar transactions.

At any time prior to conversion and through the Redemption Expiration Date (as described below), the Series A may be redeemed at the option of NMM, on one occasion, in the event that the Company’s net revenues for the four quarters ending September 30, 2016, as reported in its periodic filings under the Securities Exchange Act of 1934, as amended, are less than $60,000,000. In such event, the Company shall have up to one year from the date of the notice of redemption by NMM to redeem the Series A, the warrants and any shares of Common Stock issued in connection with the exercise of any warrants theretofore (collectively the “Redeemed Securities”), for the aggregate price paid therefor by NMM, together with interest at a rate of 10% per annum from the date of the notice of redemption until the closing of the redemption. Any mandatory conversion described previously shall not take place until such time as it is determined that that conditions for the redemption of the Redeemed Securities have not been satisfied or, if such conditions exist, NMM has decided not to have such securities redeemed. As the redemption feature is not solely within the control of the Company, the Series A does not qualify as permanent equity and has been classified as mezzanine or temporary equity.

The common stock warrants may be exercised at any time after issuance and through October 14, 2020, for $9.00 per share, subject to adjustment in the event of stock dividends and stock splits. The warrants are not separately transferable from the Preferred Stock. The warrants are subject to redemption in the event the Preferred Stock is redeemed by NMM, as described above. Accordingly, the Company has accounted for such warrants as liabilities and has marked such liability to its fair value at March 31, 2016. The Company determined the fair value of the warrant liability to be $2,922,222 at inception which was estimated using the Monte Carlo valuation model (see Note 2) with the value of the Series A being the residual value of $7,077,778.

Without the written consent of NMM, between the Closing Date and the nine-month anniversary of the Closing Date, the Company shall not acquire, sell all or substantially all of its assets to, effect a change of control, or merge, combine or consolidate with, any other Person engaged in the business of being a MSO, ACO or IPA, or enter into any agreement with respect to any of the foregoing.

Preferred Stock – Series B

On March 30, 2016, Company entered into an agreement with NMM pursuant to which the Company sold to NMM, and NMM purchased from the Company, in a private offering of securities, 555,555 units, each Unit consisting of one share of the Company’s Series B Preferred Stock (“Series B”) and a warrant to purchase one share of the Company’s common stock at an exercise price of $10.00 per share. NMM paid the Company an aggregate $4,999,995 for the units. The proceeds were allocated to each Series B units and Series B warrants based upon their relative fair values as each class of securities met the requirements for permanent equity classification. The estimated fair value of the units was estimated using a Black-Scholes equity allocation option pricing method. The Company used a comparable company lookback volatility rate of 65.8%, and a risk-free rate of 1.2% - commensurate with the expected term of 5-years. In valuing the Series B warrants, the Company used a comparable company lookback volatility rate of 65.8%, and a risk-free rate of 1.2% - commensurate with the expected term of 5-years.

The Preferred Stock has a liquidation preference in the amount of $9.00 per share plus any declared and unpaid dividends. The Series B can be voted for the number of shares of Common Stock into which the Preferred Stock could then be converted, which initially is one-for-one. The Preferred Stock is convertible into Common Stock, at the option of NMM or mandatorily at any time prior to and including March 30, 2021, if the Company receives aggregate gross proceeds of not less than $5,000,000 in one or more transactions (other than transactions with NMM), at an initial conversion rate of one-for-one, subject to adjustment in the event of stock dividends, stock splits and certain other similar transactions.

The warrants may be exercised at any time after issuance and through March 30, 2021, for $10.00 per share, subject to adjustment in the event of stock dividends and stock splits

Repurchase of Common Stock

On October 23, 2014, the Company entered into a Settlement Agreement with Raouf Khalil (“Khalil”) whereby the Company reconveyed to Khalil all of the shares of Aligned Healthcare, Inc. (“AHI”) common stock that the Company acquired from Khalil under the Stock Purchase Agreement, dated as of February 15, 2011 (the “Purchase Agreement”). In addition, in consideration of a $10,000 cash payment, Khalil reconveyed to the Company 50,000 shares of the Company’s common stock, constituting all of the remaining shares that he still owned that were issued to him under the Purchase Agreement. Following these reconveyances, the Company no longer owns any of the outstanding shares of AHI’s capital stock, and neither Khalil nor any of the other Aligned Affiliates own any shares of the Company’s capital stock.

Equity Incentive Plans

The Company’s amended 2010 Equity Incentive Plan (the “2010 Plan”) allowed the Board to grant up to 1,200,000 shares of the Company’s common stock, and provided for awards including incentive stock options, non-qualified options, restricted common stock, and stock appreciation rights. As of March 31, 2016, there were no shares available for grant.

On April 29, 2013 the Company’s Board of Directors approved the Company’s 2013 Equity Incentive Plan (the “2013 Plan”), pursuant to which 500,000 shares of the Company’s common stock were reserved for issuance thereunder. The Company received approval of the 2013 Plan from the Company’s stockholders on May 19, 2013. The Company issues new shares to satisfy stock option and warrant exercises under the 2013 Plan. As of March 31, 2016 there were no shares available for future grants under the 2013 Plan.

 

On December 15, 2015, the Company’s Board of Directors approved the Company’s 2015 Equity Incentive Plan (the “2015 Plan”), pursuant to which 1,500,000 shares of the Company’s common stock were reserved for issuance thereunder and provides for awards, including incentive stock options, non-qualified options, restricted common stock, and stock appreciation rights. The Company will seek approval of the 2015 Plan from its stockholders at the next meeting of stockholders and must receive such approval prior to December 15, 2016 or the 2015 Plan will be null and void and any grants made under the 2015 Plan will be canceled. As the Company’s board of directors controls approximately 62% of the ownership interest in the Company, stockholder approval of the 2015 Plan is considered perfunctory and accordingly the options were deemed to be granted as of the date of the board approval. As of March 31, 2016, there were approximately 1,126,000 shares available for future grants under the 2015 Plan.

Share Issuances

A summary of the Company’s restricted stock issued to employees, directors and consultants with a right of repurchase of unlapsed or unvested shares is as follows:

	Weighted-Average Remaining Vesting Life				Weighted-Average Per Share
	Shares		(In Years)		Intrinsic Value		Grant Date Fair Value
Unvested or unlapsed shares at April 1, 2014		90,741		1.3	$	-	$	4.10
Granted		-		-		-		-
Vested/lapsed		(78,519)		-		-		-
Forfeited		-		-		-		-
Unvested or unlapsed shares at March 31, 2015		12,222		0.3		0.50		4.10
Granted		-		-		-		-
Vested/lapsed		(12,222)		-		-		-
Forfeited		-		-		-		-
Unvested or unlapsed shares at March 31, 2016		-		-		-		-

Options

In July 2014, the Company issued 56,500 options to acquire the Company’s common stock to certain employees and consultants. The Company determined that the weighted average fair value of the options of $2.80 per share using the Black-Scholes method with the following weighted-average inputs: term of 6 years, risk free rate of 1.63%, no dividends, volatility of 63.7%, exercise price of $10.00 per share, share price of $5.90 per share.

In October 2014, in connection with services provided to the Company, the Company issued to various employees and consultants options to purchase an aggregate of 7,500 shares of common stock of the Company, which options have an exercise price of $10.00 and vest evenly and monthly over a three year period. The Company determined that the weighted average fair value of the options of $1.70 per share using the Black-Scholes method with the following weighted-average inputs: term of 6 years, risk free rate of 1.62%, no dividends, volatility of 62.9%, share price of $4.30 per share.

On various dates in October, November and December 2014, in connection with services provided to the Company, the Company issued to a certain consultant options to purchase an aggregate of 1,500 shares of common stock of the Company, which options have an exercise price of $10.00 and vested upon grant. The Company determined that the weighted average fair value of the options of $1.50 per share using the Black-Scholes method with the following weighted-average inputs: term of 6 years, risk free rate of 1.62%, no dividends, volatility of 62.9%, share price of $3.90 per share.

On November 18, 2014, in connection with services provided to the Company, the Company issued options to purchase 10,000 shares of common stock of the Company to an employee, which options have an exercise price of $10.00 and vest evenly and monthly over a one year period. The Company determined that the weighted average fair value of the options of $1.80 per share using the Black-Scholes method with the following weighted-average inputs: term of 6 years, risk free rate of 1.47%, no dividends, volatility of 62.1%, share price of $4.60 per share.

On December 13, 2014, in connection with services provided to the Company, the Company issued to various physicians and consultants options to purchase 10,000 shares of common stock of the Company, which options have an exercise price of $10.00 and vest evenly and monthly over a three year period. The Company determined that the weighted average fair value of the options of $1.50 per share using the Black-Scholes method with the following weighted-average inputs: term of 6 years, risk free rate of 1.62%, no dividends, volatility of 62.9%, share price of $3.90 per share.

In December 2014, the Company issued 6,000 options to an employee. The Company determined that the weighted average fair value of the options of $1.20 using the Black Scholes method with the following inputs: term of 6 years / risk free rate of 1.47%, no dividends, volatility of 62.1%, and an exercise price of $10.00 share price of $3.46. These options vest evenly over 3 years.

In June 2014, the Company issued 40,000 options to an employee. The Company determined that the weighted average fair value of the options of $1.60 using the Black Scholes method using the following inputs: term of 6 years, risk free rate of 1.62%, no dividends, volatility factor of 62.9%, exercise price of $9.00 per share, share price of $4.00 per share. These options vest evenly over 3 years.

On various dates in January, February and March 2015, in connection with services provided to the Company, the Company issued to certain consultants and employees options to purchase an aggregate of 30,500 shares of common stock of the Company, which options have an exercise price of $10.00 and vested upon grant. The Company determined that the weighted average fair value of the options of $1.10 per share using the Black Scholes method with the following weighted average inputs: term 6 years, risk free rate of 1.48%, no dividends, weighted average volatility factor of 62.1%, share price of $3.40 per share.

During January and February 2016, the Company issued options to purchase an aggregate of 374,150 shares of the Company’s common stock to certain employees and consultants. The options have exercise prices ranging from $5.79 - $6.37 and vesting terms between immediate through three years. The Company determined the weighted average fair value of the options of $5.21 per share using the Black Scholes option pricing model with the following assumptions: term of six years, risk free rate of 1.31% - 1.94%, no dividends, average volatility of 133% and a share price $5.79 per share.

Stock option activity is summarized below:

	Shares		Weighted-Average Per Share Exercise Price		Weighted-Average Remaining Life (Years)		Weighted-Average Per Share Intrinsic Value
Balance, April 1, 2014		628,700	$	2.00		8.70	$	1.10
Granted		162,000		10.00		-		-
Cancelled/expired		(14,200)		-		-		-
Exercised		-		-		-		-
Balance, March 31, 2015		776,500		4.69		7.40		1.50
Granted		374,150		5.97		-		-
Cancelled/expired		(86,500)		2.63		-		-
Exercised		-		-		-		-
Balance, March 31, 2016		1,064,150	$	4.27		7.94	$	2.27
Vested and exercisable, March 31, 2016		814,802	$	2.67		6.99	$	3.84

 

ApolloMed ACO 2012 Equity Incentive Plan

On October 18, 2012 ApolloMed ACO’s Board of Directors adopted the ApolloMed Accountable Care Organization, Inc. 2012 Equity Incentive Plan (the “ACO Plan”) and reserved 9,000,000 shares of ApolloMed ACO’s common stock for issuance thereunder. The purpose of the ACO Plan is to encourage selected employees, directors, consultants and advisers to improve operations and increase the profitability of ApolloMed ACO and encourage selected employees, directors, consultants and advisers to accept or continue employment or association with ApolloMed ACO.

 

The following table summarizes the restricted stock award in the ACO Plan:

	Shares		Weighted-Average Remaining Vesting Life (Years)		Weighted-Average Per Share Fair Value
Balance, April 1, 2014		3,752,000		0.8	$	0.03
Granted		184,000		-		0.77
Released		(183,996)		-		0.03
Balance, March 31, 2015		3,752,004		0.1		0.07
Granted		-		-		-
Released		-		-		-
Balance, March 31, 2016		3,752,004		-	$	0.07
Vested and exercisable, end of year		3,752,004		-	$	0.07

Awards of restricted stock under the ACO Plan vest (i) one-third on the date of grant; (ii) one-third on the first anniversary of the date of grant, if the grantee has remained in service continuously until that date; and (iii) one-third on the second anniversary of the date of grant if the grantee has remained in service continuously until that date.

As of March 31, 2016, total unrecognized compensation costs related to non-vested stock-based compensation arrangements granted under the Company’s 2010 and 2013 Equity Plans, and the ACO Plans are as follows:

Common stock options	$	1,143,280
Restricted stock	$	-
ACO Plan restricted stock	$	-

The weighted-average period of years expected to recognize these compensation costs is 1.3 years.

Stock-based compensation expense related to common stock and common stock option awards is recognized over their respective vesting periods and was included in the accompanying consolidated statement of operations as follows:

	For The Years Ended March 31,
	2016		2015
Stock-based compensation expense:
Cost of services	$	4,959	$	13,376
General and administrative		1,099,017		1,245,472
	$	1,103,976	$	1,258,848

 

Warrants

Warrants consisted of the following:

	Weighted-Average Per Share Intrinsic Value		Number of Warrants
Outstanding at April 1, 2014	$	0.20		714,500
Granted		-		200,000
Exercised		-		-
Cancelled		-		-
Outstanding at March 31, 2015		0.46		914,500
Granted		-		1,676,666
Exercised		-		(500,000)
Cancelled		-		-
Outstanding at March 31, 2016	$	3.12		2,091,166

				Weighted				Weighted
				Average				Average
Exercise Price Per		Warrants		Remaining		Warrants		Exercise Price Per
Share		Outstanding		Contractual Life		Exercisable		Share
	$1.15		150,000		0.33		150,000	$	0.08
	$4.00-$5.00		164,500		1.36		164,500		0.35
	$9.00-$10.00		1,776,666		4.54		1,776,666		7.96
	$1.15-$10.00		2,091,166		3.99		2,091,166	$	8.39

In connection with the 2014 NNA financing, NNA received warrants to purchase up to 200,000 shares of the Company’s common stock at an exercise price of $10.00 per share and up to 200,000 shares at an exercise price of $20.00 per share, subject to adjustment for stock splits, reverse stock splits and stock dividends, and which are exercisable after March 28, 2017 and before March 28, 2021. The warrants also contained down-round protection under which the exercise price of the warrants is subject to adjustment in the event the Company issues future common shares at a price below $9.00 per share. Following the funding of the Convertible Note on July 30, 2014, additional warrants to purchase up to 100,000 shares of the Company’s common stock at an exercise price of $10.00 per share were issued and were exercisable after March 28, 2017 and before March 28, 2021 (see Note 6). All of which were exercised during fiscal 2016 (see Note 7).

On July 21, 2014, in connection with the SCHC acquisition, the Company issued warrants to purchase up to 100,000 shares of the Company’s common stock at an exercise price of $10.00 per share. The warrants are exercisable at any date prior to July 21, 2018.

On October 15, 2015, in connection with the NMM financing the Company issued a 5 year stock warrant to purchase up to 1,111,111 shares of common stock at an exercise price of $9.00 per share, which is the only warrant classified as a liability warrant. (see Note 9).

On March 30, 2016, in connection with the NMM financing the Company issued a 5 year stock warrant to purchase up to 555,555 shares of common stock at an exercise price of $10.00 per share (see Note 9).

Authorized Stock

At March 31, 2016 the Company was authorized to issue up to 100,000,000 shares of common stock. The Company is required to reserve and keep available out of the authorized but unissued shares of common stock such number of shares sufficient to effect the conversion of all outstanding preferred stock, the exercise of all outstanding warrants exercisable into shares of common stock, and shares granted and available for grant under the Company’s stock option plans. The amount of shares of common stock reserved for these purposes is as follows at March 31, 2016:

 

Common stock issued and outstanding	5,876,852
Warrants outstanding	2,091,166
Stock options outstanding	1,064,150
Preferred stock	1,666,666
	10,698,834