UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
  FORM
10-Q
 
 (MARK
ONE)
 
 x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF
1934
 
 FOR THE
QUARTERLY PERIOD ENDED October 31, 2009
 
 OR
 
  ̈ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF
1934
 
 COMMISSION
FILE NUMBER: 000-25809
 
  APOLLO
MEDICAL HOLDINGS, INC.
 (Exact
name of registrant as specified in its charter)
  
  Delaware
              
              20-8046599(State
      or other jurisdiction of
                incorporation
      or organization)
              
              (I.R.S.
      Employer
                Identification
      Number)1010
      N. Central Avenue
                Glendale,
      California 91202(Address
      of principal executive offices)(818)
      507-4617Issuer’s
      telephone number:
  
 (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 xNo  ̈ .
 
 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.
 
 Large
      accelerated filer  ̈
              Accelerated
      filer  ̈Non-accelerated
      filer  ̈
              Smaller
      reporting company x
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act):  Yes  ̈ No x
 
 As of
December 10, 2009, there were 26,963,551 shares of the registrant’s common
stock, $0.001 par value per share, issued and outstanding.


APOLLO
MEDICAL HOLDINGS, INC.




INDEX
TO FORM 10-Q FILING




FOR THE
THREE AND NINE MONTHS ENDED OCTOBER 31, 2009 AND 2008




TABLE
OF CONTENTS




PAGEPART
      IFINANCIAL
      INFORMATIONItem
      1.
                Financial
      Statements – UnauditedCondensed
      Consolidated Balance Sheet As of October 31, 2009 and January 31,
      2009
                3Condensed
      Consolidated Statements of Operations For the Three months and Nine months
      ended October 31, 2009 and 2008
                4Condensed
      Consolidated Statements of Cash Flows For the Nine months ended October
      31, 2009 and 2008
                5Notes
      to Condensed Consolidated Financial Statements
                6-16Item
      2.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                17-21Item
      3.
                Quantitative
      and Qualitative Disclosures about Market Risk
                22Item
      4.
                Control
      and Procedures.
                22PART
      IIOTHER
      INFORMATIONItem
      1.
                Legal
      Proceedings
                23Item
      2.
                Unregistered
      Sales of Equity Securities and the Use of Proceeds
                23Item
      3.
                Defaults
      upon Senior Securities
                23Item
      4.
                Submission
      of Matters to a Vote of Security Holders
                23Item
      5.
                Other
      Information
                23Item
      6.
                Exhibits
                23


2


APOLLO
MEDICAL HOLDINGS, INC.


CONSOLIDATED
BALANCE SHEETS


(UNAUDITED)





October
      31,
                
                
                January
      31,2009
                
                
                2009ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                
                $
                863,394
                
                
                $
                84,161Accounts
      receivable, net
                
                
                416,586
                
                
                
                255,665Due
      from affiliate
                
                
                2,850
                
                
                
                2,050Prepaid
      commission
                
                
                123,438
                
                
                
                -Prepaid
      expenses
                
                
                35,847
                
                
                
                25,025Total
      current assets
                
                
                1,442,115
                
                
                
                366,901Property
      and equipment - net
                
                
                17,032
                
                
                
                47,330TOTAL
      ASSETS
                
                $
                1,459,147
                
                
                $
                414,232LIABILITIES
      AND STOCKHOLDERS EQUITY (DEFICIT):CURRENT
      LIABILITIES:Accounts
      payable and accrued liabilities
                
                $
                111,599
                
                
                $
                65,141Shares
      to be issued
                
                
                1,999
                
                
                
                284,000Convertible
      notes payable
                
                
                10,000
                
                
                
                10,000Convertible
      notes payable-related party
                
                
                23,000
                
                
                
                23,000Current
      portion of loan
                
                
                -
                
                
                
                41,782Total
      current liabilities
                
                
                146,598
                
                
                
                423,923Loan
                
                
                -
                
                
                
                156,218Convertible
      notes
                
                
                1,240,358
                
                
                
                -Convertible
      notes payable-related party
                
                
                -
                
                
                
                75,000Total
      liabilities
                
                
                1,386,956
                
                
                
                655,141STOCKHOLDERS'
      EQUITY (DEFICIT):Preferred
      stock, par value $.001 and $0.0001 per share; 5,000,000 and 25,000,000
      shares authorized, respectively; none issued
                
                
                -
                
                
                
                -Common
      stock, par value $.001 and $0.0001, 100,000,000 shares authorized,
      26,963,511  shares issued and outstanding as of October 31, 2009
      and  25,870,220 shares issued and outstanding as of January 31,
      2009
                
                
                26,964
                
                
                
                25,870Non-controlling
      interest
                
                
                334,202
                
                
                
                228,115Additional
      paid-in-capital
                
                
                942,062
                
                
                
                550,058Accumulated
      deficit
                
                
                (1,231,036
                )
                
                
                (1,044,951
                )Total
      stockholders' equity (deficit)
                
                
                72,191
                
                
                
                (240,909
                )TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                
                $
                1,459,147
                
                
                $
                414,232




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


3


APOLLO
MEDICAL HOLDINGS, INC.


CONSOLIDATED
STATEMENTS OF OPERATIONS


FOR
THE NINE MONTHS AND THREE MONTHS ENDING OCTOBER 31, 2009 AND 2008


(UNAUDITED)




For
      the Three months ended
                    
                    
                    For
      the Nine months endedOctober 31,
                    
                    
                    October 31,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008REVENUES
                    
                    $
                    616,975
                    
                    
                    
                    479,808
                    
                    
                    $
                    1,699,100
                    
                    
                    
                    499,603Operating
      expenses:Cost
      of services - physician practice salaries, benefits and
    other
                    
                    
                    455,183
                    
                    
                    
                    488,605
                    
                    
                    
                    1,262,430
                    
                    
                    
                    531,411General
      and administrative
                    
                    
                    139,557
                    
                    
                    
                    278,854
                    
                    
                    
                    434,225
                    
                    
                    
                    681,233Depreciation
                    
                    
                    9,622
                    
                    
                    
                    9,996
                    
                    
                    
                    30,297
                    
                    
                    
                    9,996Total
      operating expenses
                    
                    
                    604,362
                    
                    
                    
                    777,455
                    
                    
                    
                    1,726,952
                    
                    
                    
                    1,222,640INCOME
      (LOSS) FROM OPERATIONS
                    
                    
                    12,613
                    
                    
                    
                    (297,647
                    )
                    
                    
                    (27,852
                    )
                    
                    
                    (723,037
                    )OTHER  EXPENSES:Interest
      expense
                    
                    
                    15,738
                    
                    
                    
                    5,356
                    
                    
                    
                    25,546
                    
                    
                    
                    5,356Financing
      cost
                    
                    
                    25,000
                    
                    
                    
                    23,500
                    
                    
                    
                    25,000
                    
                    
                    
                    23,500Total
      other expenses
                    
                    
                    40,738
                    
                    
                    
                    28,856
                    
                    
                    
                    50,546
                    
                    
                    
                    28,856NET
      LOSS BEFORE INCOME TAXES
                    
                    
                    (28,125
                    )
                    
                    
                    (326,503
                    )
                    
                    
                    (78,398
                    )
                    
                    
                    (751,893
                    )Provision
      for income tax
                    
                    
                    800
                    
                    
                    
                    -
                    
                    
                    
                    1,600
                    
                    
                    
                    800NET
      LOSS
                    
                    
                    (28,925
                    )
                    
                    
                    (326,503
                    )
                    
                    
                    (79,998
                    )
                    
                    
                    (752,693
                    )Net
      (income) loss attributable to noncontrolling interest
                    
                    
                    53,161
                    
                    
                    
                    (41,712
                    )
                    
                    
                    106,087
                    
                    
                    
                    (41,712
                    )Net
      loss attributable to Apollo Medical Holdings, Inc.
                    
                    $
                    (82,086
                    )
                    
                    $
                    (284,791
                    )
                    
                    $
                    (186,084
                    )
                    
                    $
                    (710,981
                    )WEIGHTED
      AVERAGE SHARES OF COMMON STOCK OUTSTANDING,BASIC
      AND DILUTED
                    
                    
                    26,805,493
                    
                    
                    
                    25,734,174
                    
                    
                    
                    26,260,574
                    
                    
                    
                    20,063,728*BASIC
      AND DILUTED NET LOSS PER SHARE
                    
                    $
                    (0.00
                    )
                    
                    $
                    (0.01
                    )
                    
                    $
                    (0.00
                    )
                    
                    $
                    (0.04
                    )




*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.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR
THE NINE MONTHS ENDED OCTOBER 31, 2009 AND 2008
 (UNAUDITED)
  Nine
      months ended October 31,2009
                          
                          
                          2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Adjustments
      to reconcile net loss to net cash(used
      in) operating activities:Net
      loss
                          
                          $
                          (79,998
                          )
                          
                          $
                          (752,693
                          )Depreciation
                          
                          
                          30,298
                          
                          
                          
                          9,996Bad
      debt expense
                          
                          
                          4,954
                          
                          
                          
                          23,514Issuance
      of shares for service
                          
                          
                          101,455
                          
                          
                          
                          72,545Warrant
      Discount
                          
                          
                          9,642
                          
                          
                          
                          -Shares
      issued as finance charge
                          
                          
                          -
                          
                          
                          
                          13,500Shares
      issued for consulting expense
                          
                          
                          -
                          
                          
                          
                          67,500Exercise
      of notes payable conversion
                          
                          
                          -
                          
                          
                          
                          170,375Minority
      Interest
                          
                          
                          -
                          
                          
                          
                          161,512(Increase)
      decrease in current assets:Accounts
      receivable
                          
                          
                          (165,874
                          )
                          
                          
                          (174,457
                          )Prepaid
      expenses
                          
                          
                          (10,822
                          )
                          
                          
                          (9,614
                          )Prepaid
      Commission
                          
                          
                          (123,438
                          )
                          
                          
                          -Due
      from related party
                          
                          
                          (800
                          )
                          
                          
                          (29,897
                          )Increase
      (decrease) in current liabilities:
                          
                          
                          -
                          
                          
                          
                          -Accounts
      payable and accrued liabilities
                          
                          
                          46,458
                          
                          
                          
                          17,975Net
      cash used in operating activities
                          
                          
                          (188,126
                          )
                          
                          
                          (429,743
                          )CASH
      FLOWS FROM INVESTING ACTIVITIES:Property
      and Equipment
                          
                          
                          -
                          
                          
                          
                          (69,510
                          )CASH
      FLOWS FROM FINANCING ACTIVITIES:Process
      from/(Payment to) notes payablesProcess
      from/(Payment to) notes payables- related parties
                          
                          
                          (75,000
                          )
                          
                          
                          70,000Process
      from/(Payment to) notes convertibles
                          
                          
                          1,240,358Process
      from/(Payment to) line of credit
                          
                          
                          (198,000
                          )
                          
                          
                          198,000Proceeds
      from issuance of common stock for cash
                          
                          
                          -
                          
                          
                          
                          335,000Net
      cash provided by financing activities
                          
                          
                          967,358
                          
                          
                          
                          603,000NET
      INCREASE IN CASH & CASH EQUIVALENTS
                          
                          
                          779,233
                          
                          
                          
                          103,747CASH
      & CASH EQUIVALENTS, BEGINNING BALANCE
                          
                          
                          84,161
                          
                          
                          
                          44,352CASH
      & CASH EQUIVALENTS, ENDING BALANCE
                          
                          $
                          863,394
                          
                          
                          $
                          148,099SUPPLEMENTARY
      DISCLOSURES OF CASH FLOW INFORMATIONInterest
      paid during the year
                          
                          $
                          13,153
                          
                          
                          $
                          3,452Taxes
      paid during the year
                          
                          $
                          1,600
                          
                          
                          $
                          -Conversion
      of notes payable to Equity
                          
                          $
                          200,000
                          
                          
                          $
                          -





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


5





APOLLO
MEDICAL HOLDINGS, INC.





NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





1.
            Description
      of Business





Apollo
Medical Holdings, Inc. (“Apollo” or the “Company”) is a leading provider of
hospitalist services in the Greater Los Angeles, California area. Hospitalist
medicine is organized around the admission and care of patients in an inpatient
facility such as a hospital or skilled nursing facility and is focused on
providing, managing and coordinating the care of hospitalized patients. Apollo
Medical Holdings, Inc. operates as a medical management holding company that
focuses on managing the provision of hospital-based medicine through a wholly
owned subsidiary-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.


6





2.
            Summary
      of Significant Accounting Policies





Basis
of Presentation





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 . 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, 2009 are not necessarily indicative of future
financial results.





The
condensed consolidated financial statements and notes are presented as permitted
by Form 10-Q and do not contain all of the information that is included in the
annual financial statements and notes of the Company. The condensed consolidated
financial statements and notes presented herein should be read in conjunction
with the financial statements and notes included in the Company’s Annual Report
on Form 10-K for the year ended January 31, 2009





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.





Reclassification





Certain
comparative amounts have been reclassified to conform to the nine month
periods ended October 31, 2009 and 2008.





Fair
Value of Financial Instruments





Statement
of financial accounting standard No. 107(ASC 825), 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





The
Company’s case rate and capitation revenues, reported by Apollo’s affiliate,
AMH, are governed by contractual agreements with medical groups/IPA’s and
hospitals.  As a result, receivables from this business are generally
fully collected. The Company does face issues related to the timing of these
collections, and the Company must assess the level of earned but uncollected
revenue to which it is entitled at each period end. The Company does face
collection issues with regard to its fee-for-service revenues. One is the
estimation of the amount to be received from each billing since the Company
invoices on a Medicare schedule and each of many providers remits payment on a
reduced schedule.  The Company has to estimate the amount it will
ultimately receive from each billing and properly record revenue. With a wide
variety of contract terms and providers, the Company’s revenue is not
concentrated or dependent on a specific contract.  No individual
contract with our clients provides more than 20 percent of reported
revenues.


7





Recently
Issued Accounting Pronouncements





In
April 2009, the FASB issued FSP No. FAS 107-1, (ASC 825), and APB
28-1, “Interim Disclosures about Fair Value of Financial Instruments.” This FSP
essentially expands the disclosure about fair value of financial instruments
that were previously required only annually to also be required for interim
period reporting. In addition, the FSP requires certain additional disclosures
regarding the methods and significant assumptions used to estimate the fair
value of financial instruments. These additional disclosures will be required
beginning with the quarter ending September 30, 2009. The Company is
currently evaluating the requirements of these additional
disclosures.




In
June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of
Financial Assets — an amendment of FASB Statement No. 140” (“SFAS 166”),
(ASC 860, Transfers and Servicing),which requires additional information
regarding transfers of financial assets, including securitization transactions,
and where companies have continuing exposure to the risks related to transferred
financial assets. SFAS 166 eliminates the concept of a “qualifying
special-purpose entity,” changes the requirements for derecognizing financial
assets, and requires additional disclosures. SFAS 166 is effective for fiscal
years beginning after November 15, 2009.




In
June 2009, the FASB issued SFAS No. 167, “Amendments to FASB
Interpretation No. 46(R)” (“SFAS 167”), (ASC 810, Consolidation),which
modifies how a company determines when an entity that is insufficiently
capitalized or is not controlled through voting (or similar rights) should be
consolidated. SFAS 167 clarifies that the determination of whether a company is
required to consolidate an entity is based on, among other things, an entity’s
purpose and design and a company’s ability to direct the activities of the
entity that most significantly impact the entity’s economic performance. SFAS
167 requires an ongoing reassessment of whether a company is the primary
beneficiary of a variable interest entity. SFAS 167 also requires additional
disclosures about a company’s involvement in variable interest entities and any
significant changes in risk exposure due to that involvement. SFAS 167 is
effective for fiscal years beginning after November 15, 2009.




In June
2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification
TM and the Hierarchy of Generally Accepted Accounting Principles (“SFAS No.
168”), (ASC 105, Generally Accepted Accounting Principles),which becomes
effective for financial statements issued for interim and annual periods ending
after September 15, 2009. SFAS No. 168 replaces SFAS No. 162, The Hierarchy of
Generally Accepted Accounting Principles. SFAS No. 168 identifies the sources of
accounting principles and the framework for selecting principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with US GAAP (the GAAP hierarchy).





Stock-based
compensation





On
October 17, 2006 the Company adopted SFAS No. 123R (ASC 718), “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.





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, ASC 260), “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 was at $863,394 include cash in bank representing the Company’s
current operating account and $809,934 in a brokerage money market account, as
of October 31, 2009, representing the net proceeds of the recently completed
private placement.





Revenue
Recognition





The
Company recognizes Case Rate, Hourly and Capitation revenue when persuasive
evidence of an arrangement exists, service has been rendered, the service rate
is fixed or determinable, and collection is reasonable assured.  Fee
for Service revenues are recorded at amounts reasonably assured to be collected.
The determination of reasonably assured collections is based on historical Fee
for Service collections as a percent of billings. The provisions are adjusted to
reflect actual collections in subsequent periods.


8





The
estimation and the reporting of patient responsibility revenues is highly
subjective and depends on the payer mix, contractual reimbursement rates,
collection experiences, judgment and other factors.  The Company’s fee
arrangements are with various payers, including managed care organizations,
hospitals, insurance companies, individuals, Medicare and Medicaid.





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 an accumulated deficit of $1,231,036 as of
October 31, 2009.  Net Cash Flow used by Operating Activities for the
nine months ended October 31, 2009 was $188,126.





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.





To date
the Company has funded its operations from both internally generated cash flow
and external sources, and the proceeds available from the recently completed
private placement provide funds for near-term operations and growth. The Company
will pursue additional external capitalization opportunities, as necessary, to
fund its long-term goals and objectives.


9





4.
              Accounts
      Receivable





Accounts
Receivable is stated at the amount management expects to collect from
outstanding balances. An allowance for doubtful accounts is provided for those
accounts receivable considered to be uncollectible, based upon historical
experience and management's evaluation of outstanding accounts receivable at
each quarter end. As of October 31, 2009, Accounts Receivable totals $416,586,
net of a provision for bad debt expense of $16,418, and represents amounts
invoiced by AMH. Accounts Receivable was $255,665, net of the provision for bad
debt expense of $11,465, on January 31, 2009.





5.
              Due
      from affiliate





Due from
affiliate totals $2,850 and $2,050 as of October 31, 2009 and January 31, 2009,
respectively, and represents amounts due from AMA, an unconsolidated Affiliate
of the Company.





6.
            Prepaid
      Commission





Prepaid
Commission of $123,438 as of October 31, 2009 represents the unamortized balance
of commission expense totaling $125,000 paid by the Company on the closing of
the private placement on October 16, 2009 (See Note 11). There was no Prepaid
Commission on January 31, 2009.





7.
              Prepaid
      Expenses





Prepaid
Expenses of $35,847 and $25,025 as of October 31, 2009 and January 31, 2009,
respectively, are amounts prepaid for medical malpractice insurance and
Director’s and Officer’s insurance.





8.
              Property
      and Equipment





Property
and Equipment consists of the following as of:




October 31,
                  2009
                
                
                January 31,
                  2009Computers
                
                $
                13,912
                
                
                $
                13,912Software
                
                
                138,443
                
                
                
                138,443Machinery
      and equipment
                
                
                50,815
                
                
                
                50,815Gross
      Property and Equipment
                
                
                203,170
                
                
                
                203,170Less
      accumulated depreciation
                
                
                (186,138
                )
                
                
                (155,840
                )Net
      Property and Equipment
                
                $
                17,032
                
                
                $
                47,330


10


Depreciation
expense was $9,622 and $9,996 for the three month periods ended October 31, 2009
and 2008, respectively.


Depreciation
expense was $30,297 and $9,996 for the nine month periods ended October 31, 2009
and 2008, respectively.





9.
              Accounts
      Payable and
Accrued Liabilities





Accounts
payable and accrued liabilities consist of the following as of:




October 31, 2009
                  
                  
                  January 31, 2009Accounts
      payable
                  
                  $
                  33,078
                  
                  
                  $
                  30,599D&O
      insurance payable
                  
                  
                  18,959
                  
                  
                  
                  -Accrued
      interest
                  
                  
                  12,866
                  
                  
                  
                  507Accrued
      professional fees
                  
                  
                  32,560
                  
                  
                  
                  20,267Accrued
      payroll and income taxes
                  
                  
                  14,136
                  
                  
                  
                  13,768Total
                  
                  $
                  111,599
                  
                  
                  $
                  65,141





10.
              Shares
      to be Issued





Shares to
be issued consist of the following:




October 31,
                  2009
                
                
                January 31,
                  2009Accrued
      shares to be issued for note conversion
                
                $
                -
                
                
                $
                200,000Accrued
      shares to be issued for services
                
                
                1,999
                
                
                
                84,000Total
                
                $
                1,999
                
                
                $
                284,000





As of
October 31, 2009, 44,444 shares were not yet issued for services provided.
During the third quarter, the Company issued a total of 826,666 shares to two
executives, a director, an employee and the Placement Agent for financial
advisory services. (See Note 14)


11





11.
              Long-term
      Debt





The
Company’s long-term debt consisted of the following at October 31, 2009 and
January 31, 2009





October
      31,
                  2009
                
                
                January
      31,
                  2009Senior
      Borrowings:Wells
      Fargo:Business
      Credit Line
                
                
                —
                
                
                
                —Business
      Loan
                
                
                —
                
                
                $
                198,000Subordinated
      Borrowings:10%
      Senior Subordinated Convertible Notes due January 31,
      2013
                
                $
                1,240,358
                
                
                
                —10%  Convertible
      Notes due December 12, 2009
                
                
                10,000
                
                
                
                10,00010%  Convertible
      Notes due December 23, 2009
                
                
                23,000
                
                
                
                23,0008%  Convertible
      Notes due March 31, 2009
                
                
                —
                
                
                $
                75,000Total
      debt
                
                $
                1,273,358
                
                
                $
                306,000Less:
      Current Portion
                
                
                33,000
                
                
                
                74,782Total
      long-term debt
                
                $
                1,240,358
                
                
                $
                231,218





Senior
Borrowings





Wells
Fargo Business Credit line


In
October 2008, the Company entered into a new line of credit agreement with
Wells Fargo Bank replacing a previous line of credit that was converted to an
amortizing loan. See “Wells Fargo Business Loan”. Under the terms of the
agreement, the Company may borrow up to $70,000 through a revolving credit line
at an interest rate of eight percent. The loan is collateralized by all
machinery, equipment, furniture, accounts, inventory and general intangibles of
AMH and personally guaranteed by the CEO of the Company. As of October 31, 2009,
the Company had no borrowings under the Business Credit Line. Interest expense
of $270 and $405 was recorded for the three months and nine months ended October
31, 2009, respectively.





Wells
Fargo Business Loan


On
January 5, 2006, the Company entered into a SBA line of credit loan with Wells
Fargo Bank. The line of credit provided borrowings up $200,000 and matured on
February 10, 2009. The loan is collateralized by all machinery, equipment,
furniture, accounts, inventory and general intangibles of AMH and personally
guaranteed by the CEO of the Company.  The interest rate is the bank’s
prime rate plus 200 basis points.





On
February 3, 2009, the outstanding balance of $198,000 was converted into a four
year amortizing Business Loan at an interest rate of prime plus 200 basis
points. The Business Loan maturity date was extended to February 10, 2013 and
all collateral and guarantors remained the same. On October 27, 2009, the
Company paid off the outstanding balance of $167,865 in full. As of October 31,
2009, the Company had no borrowings under the Business Loan.  Interest
expense of $8,054 related to the SBA loan was recorded during the nine months
ended October 31, 2009. Interest expense of $2,993 related to the SBA loan was
recorded during the three months ended October 31, 2009.





Subordinated
Borrowings





10%
Senior Subordinated Callable Convertible Notes due January 31, 2013


On
October 16, 2009, the Company issued $1,250,000 of its 10% Senior Subordinated
Callable Convertible Notes. The net proceeds of $1,100,000 will be used for the
repayment of existing debt, acquisitions, physician recruitment and other
general corporate purposes. The notes bear interest at a rate of 10% annually,
payable semi annually on January 31 and July 31. The Notes mature and become due
and payable on January 31, 2013 and rank senior to all other unsecured debt of
the Company.




The 10%
Notes were sold through a private placement in the form of a Unit. Each Unit was
comprised of one 10% Senior Subordinated Callable Note with a par value $25,000,
and one five-year warrant to purchase 25,000 shares of the Company’s common
stock. The purchase price of each Unit was $25,000, resulting in gross proceeds
of $1,250,000.


12


In
connection with the private placement, the Company paid a commission of $125,000
and $25,000 representing a non-accountable expense fee.  The placement
agent also received five-year warrants to purchase up to 250,000 shares of the
Common Stock at an initial exercise price of $0.25 per share.  The
placement agent also received 100,000 shares of restricted common stock for
pre-transaction advisory and due diligence. The commission of $125,000 paid at
closing is accounted for as a prepaid expense and will be amortized over a
forty-month period through January 31, 2013, the maturity date of the
notes.  The $25,000 of transaction related costs were expensed and
reported as financing costs in the Operating Statement.  Interest
expense of $9,889 was recorded in the quarter ended October 31,
2009.




The 10%
Notes are convertible any time prior to January 31, 2013. The initial conversion
rate is 200,000 shares of the Company’s common stock per $25,000 principal
amount of the 10% Notes (Subject to certain events). This represents an initial
conversion price of $0.125 per share of the Company’s common stock.




On or
after January 31, 2012, the Company may, at its option, upon 60 days notice to
both the Note-holder’s and the placement agent, redeem all or a portion of the
notes at a redemption price in cash equal to 102% of the principal amount of the
notes to be redeemed plus accrued and unpaid interest to, but excluding, the
redemption date.




The
Warrants attached to the Units are exercisable into shares of Common Stock at an
initial exercise price of $0.125.   The Warrants have a five-year
term and expire on October 31, 2014. These warrants were estimated to have a
fair value of $7,442 using the Black-Scholes pricing model which was recorded as
unamortized warrant discount in the quarter ended October 31, 2009.




In
connection with this offering, we also issued warrants to purchase
250,000 shares of our common stock to the placement agent which were
estimated to have a fair value of $2,200 using the Black-Scholes pricing model
and was recorded as unamortized warrant discount in the quarter ended October
31, 2009. These warrants have an exercise price of $0.25 per share, are
exercisable immediately upon issuance and expire five years after the date of
issuance.




10% Convertible Notesdue between October 7, 2009 and
December 12, 2009


Between
October 7, 2008 and December 12, 2008 the Company issued $210,000 of its 10%
Convertible Notes with attached Warrants. The notes bear interest at a rate of
10% annually, mature and become due twelve months from the date of issuance
ranging from October 7, 2009 and December 12, 2009. The conversion rate is
1,333.33 shares of the Company’s common stock per $1,000 principal amount of the
Notes . As of January 31, 2009, the Company had received conversion notices to
convert $200,000 of notes into shares of the Company’s common stock. The
remaining balance of $10,000 is due on December 12, 2009, and is shown as a
short-term liability on the Company’s balance sheet ended October 31, 2009 and
January 31, 2009.





Each Note
Holder also received 666.67 Warrants per $1,000 principal amount of the Notes
purchased. These Warrants are exercisable into shares of Common Stock at an
exercise price of $1.50. The Warrants have a three-year term and expire on the
third year anniversary of the respective notes. These warrants were estimated to
have a fair value of $379 using the Black-Scholes pricing model, which was fully
amortized as interest expense during the year ended January 31,
2009.





The
Company recorded interest expense of $747, related to Convertible Notes in the
nine months ended October 31, 2009 and zero for the nine months ended October
31, 2008. The Company recorded interest expense of $252, related to Convertible
Notes in the three months ended October 31, 2009 and zero for the three months
ended October 31, 2008.





10%
Convertible Notes due December 25, 2009


On
December 25, 2008, the Company issued $23,000 of its 10% Convertible Notes and
Warrants to relatives of the CEO of the Company. The notes bear interest at a
rate of 10% annually. The Notes mature and become due twelve months from the
date of issuance and are due on December 25, 2009. The conversion rate is
1,333.33 shares of the Company’s common stock per $1,000 principal amount of the
Notes (Subject to certain events).





Each Note
Holder also received 666.67 Warrants per $1,000 principal amount of the Notes
purchased. These Warrants are exercisable into shares of Common Stock at an
initial exercise price of $1.50. The Warrants have a three-year term and expire
on December 25, 2011. These warrants were estimated to have a fair value of $68
using the Black-Scholes pricing model.





The
Company recorded interest expense of $1,720 and zero for the nine months ended
October 31, 2009 and October 31, 2008, respectively. Interest expense of $580
was recorded in the three months ended October 31, 2009 compared to no interest
expense in the comparable quarter of 2008.





13





8%  Convertible
Notes due December 25, 2009


On July
28, 2008, the Company issued $70,000 in the form of a notes payable to a
relative of the CEO of the Company. The Note carried no interest rate and the
Company agreed to pay a $5,000 origination fee to be paid at the time of pay
off. The maturity date on this Note was October 1, 2008. The note was extended
by verbal agreement on its expiration date with no change in terms. On January
24, 2009, the Company formalized the note extension with the note
holder.  Under the terms of the new note, the $5,000 origination fee
was added to the note, the due date was extended to March 31, 2011, the interest
rate was set at 8% and the note is initially convertible into 214,285 shares of
common stock. The Company paid the note in full, with accumulated interest, on
October 22, 2009. The Company recorded interest expense of $4,455 and zero
for the nine months ended October 31, 2009 and October 31, 2008, respectively.
Interest expense of $1,479 was recorded in the three months ended October 31,
2009 compared to no interest expense in the comparable quarter of
2008.





12.
            Related
      Party Transactions





During
the nine months ended October 31, 2009 and 2008, the Company generated revenue
of $303,135 and $38,750, 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.





On July
28, 2008, the Company issued $70,000 in the form of a note payable to a relative
of the CEO of the Company. The Note carried no interest rate and the Company
agreed to pay a $5,000 origination fee to be paid at the time of pay off. The
maturity date on this Note was October 1, 2008. The note was extended by verbal
agreement on its expiration date with no change in terms. On January 24, 2009,
the Company formalized the note extension with the note holder.  Under
the terms of the new note, the $5,000 origination fee was added to the note, the
due date was extended to March 31, 2011, the interest rate was set at eight 8%
and the note is initially convertible into 214,285 shares of common stock. The
Company paid the note in full, with accumulated interest, on October 22,
2009.





Also,
during the fourth quarter 2008, the Company issued Convertible Notes in amounts
aggregating to $23,000 to two relatives of Warren Hosseinion, the Company’s CEO
(Note 11).


14





13
            Non-Controlling
      Interest





The
Company recorded AMH ownership interest in the accompanying financial statements
as Non-Controlling Interest of $334,202 as of October 31, 2009. Non-Controlling
Interest totaled $228,115 on January 31, 2009.





14.
            Stockholder’s
      Equity





The
Company issued a total of 1,093,331 common shares in the nine months ended
October 31, 2009, including 266,665 shares in the second quarter ended July 31,
2009, and 826,666 in the third quarter ended October 31, 2009. The 266,665
shares were issued on May 14, 2009 to nine holders of convertible notes that had
exercised their conversion rights. Of the 826,666 shares, 716,666 were issued to
officers and directors, 100,000 shares were issued to the Placement Agent for
advisory services and 10,000 shares were issued to an employee.





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 a financing fee on a note
payable.





On
October 27, 2008, the Company entered into a Board of Director’s Agreement with
Suresh Nihalani.  The Company issued a stock award of 400,000 shares
to Mr. Nihalani, under the terms of the Director’s Agreement, which shares are
to be issued ratably over a thirty-six month period commencing December
2008. During the nine months ended October 31, 2009, Mr. Nihalani was
issued 66,666 shares under this agreement.  As of October 31, 2009,
44,444 shares had not yet been issued to Mr. Nihalani under this agreement and
the Company accrued a liability of $1,999 as Shares to be
Issued.  During the year ended January 2009, Mr. Nihalani was issued
11,111 shares under this agreement.


15





Warrants
outstanding:




Aggregateintrinsic value
                    
                    
                    Number of
                      warrantsOutstanding
      at January 31, 2009
                    
                    $
                    —
                    
                    
                    
                    625,803Granted
                    
                    
                    —
                    
                    
                    
                    1,500,000Exercised
                    
                    
                    —
                    
                    
                    
                    —Cancelled
                    
                    
                    —
                    
                    
                    
                    —Outstanding
      at October 31, 2009
                    
                    $
                    —
                    
                    
                    
                    2,125,803




Exercise Price
                    
                    Warrants
                      outstanding
                    
                    
                    Weighted
                      average
                      remaining
                      contractual life
                    
                    
                    Warrants
                      exercisable
                    
                    
                    Weighted
                      average
                      exercise price$
                    1.100
                    
                    
                    470,470
                    
                    
                    
                    0.23
                    
                    
                    
                    470,470
                    
                    
                    $
                    0.24$
                    1.500
                    
                    
                    155,333
                    
                    
                    
                    0.15
                    
                    
                    
                    155,333
                    
                    
                    $
                    0.11$
                    0.125
                    
                    
                    1,250,000
                    
                    
                    
                    2.94
                    
                    
                    
                    1,250,000
                    
                    
                    $
                    0.07$
                    0.250
                    
                    
                    250,000
                    
                    
                    
                    0.59
                    
                    
                    
                    250,000
                    
                    
                    $
                    0.032,125,803
                    
                    
                    
                    3.91
                    
                    
                    
                    2,125,803





In
conjunction with the completion of the private placement on October 16, 2009, as
described in Note 11, the Company issued a total of 1,500,000
warrants.  Of this amount, 1,250,000 warrants were issued to the
holders of the Convertible Notes and 250,000 warrants were granted to the
placement agent.  The 1,250,000 warrants held by the note holders are
exercisable into shares of Common Stock at an initial exercise price of
$0.125.   The Warrants have a five-year term and expire on
October 31, 2014. The
250,000 warrants conveyed to the placement agent also have a five-year term,
expire on October 31, 2014, and are exercisable at $0.25 per share.





15.
            Commitments
      and Contingency





On March
15, 2009, the Company entered into a Consulting Agreement with Kaneohe Advisors
LLC (Kyle Francis) under which Mr. Francis would become the Company’s Executive
Vice President, Business Development and Strategy. Under the terms of the
Agreement, Mr. Francis will be paid $8,000 per month.  In addition,
Mr. Francis received 350,000 shares of restricted stock at the date of the
Agreement and is entitled to 350,000 additional restricted shares on the first
and second anniversaries of the Agreement, provided the Agreement is not
terminated.  The initial 350,000 shares, along with 50,000 shares
granted to Mr. Francis in the year ended January 2009, were issued in the third
quarter ended October 31, 2009.





On
September 4, 2008, Apollo Medical Management, Inc. executed an employment
agreement with Jilbert Issai, M.D., to provide services as Senior Vice
President.  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 may be granted options to
purchase an aggregate of 300,000 shares of the Company’s common stock at an
exercise price of $.10 per share when and if the Company is to adopt a stock
compensation plan.





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. Mr. Nihalani was
issued 11,111 shares under this agreement in the year ended January 31, 2009 and
66,666 shares in the quarter ended October 31, 2009.  In addition,
44,444 shares have been accrued as shares to be issued as a liability in the
accompanying financial statements.





The
Company received a claim for $250,000 relating to amounts purportedly owed by
the Company as a result of the initial reverse acquisition
transaction.  This dispute relates to the initial letter dated June 3,
2008.  The terms of the letter of intent call for, among other things,
the payment of cash of $250,000 within 60 days of closing.  The letter
of intent states, however, that it is intended to serve as a memorandum of the
Parties current discussions, and that a definitive transaction agreement will
follow.  The letter of intent further states that both parties
acknowledge that all provisions of the letter of intent are non binding, and
that no contract or agreement providing for a transaction shall be deemed to
exist unless and until a final agreement has been negotiated and
executed.  The final merger agreement that was executed contains a
clause that it is the “entire agreement” and thus supersedes all previous
agreements including the letter of intent; moreover, management contends that
there are no additional amounts owed under the final merger agreement. The
Company has not accrued for any amount asserted in the above claim as the
attorney of the Company has advised that the claim is in its early stage and the
outcome of this matter could not be predicted at this stage.


16





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





The
following management’s discussion and analysis should be read in conjunction
with the unaudited condensed consolidated financial statements and the notes
thereto included in this Quarterly Report. In addition, reference is made to our
audited consolidated financial statements and notes thereto and related
Management’s Discussion and Analysis of Financial Condition and Results of
Operations included in our most recent Annual Report on Form 10-K for the year
ended January  31, 2009, filed with the Securities and Exchange Commission
( SEC) on May 18, 2009.





In
this Quarterly Report, unless otherwise expressly stated or the context
otherwise requires, “Apollo,” “we,” “us” and “our” refer to Apollo Medical
Holdings, Inc,, a Delaware corporation, and its wholly-owned
subsidiary-management company, Apollo Medical management, Inc., and affiliated
medical groups.  Our affiliated professional organizations are
separate legal entities that provide physician services in
California  and with which we have management agreements. For
financial reporting purposes we consolidate the revenues and expenses of all our
practice groups that we own or manage because we have a controlling financial
interest in these practices based on applicable accounting rules and as
described in our accompanying financial statements. Also, unless otherwise
expressly stated or the context otherwise requires, “our affiliated
hospitalists” refer to physicians employed or contracted by either our
wholly-owned subsidiaries or our affiliated professional organizations.
References to “practices” or “practice groups” refer to our
subsidiary-management company and the affiliated professional organizations of
Apollo that provide medical services, unless otherwise expressly stated or the
context otherwise requires.





The
following discussion contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 regarding future events and
the future results of Apollo  that are based on management’s current
expectations, estimates, projections, and assumptions about our business. Words
such as “may,” “will,” “could,” “should,” “target,” “potential,” “project,”
“expects,” “anticipates,” “intends,” “plans,” “believes,” “sees,” “estimates”
and variations of such words and similar expressions are intended to identify
such forward-looking statements. These statements are not guarantees of future
performance and involve risks, uncertainties and assumptions that are difficult
to predict. Therefore, actual outcomes and results may differ materially from
what is expressed or forecasted in such forward-looking statements due to
numerous factors, including, but not limited to, those discussed in our most
recent Annual Report on Form 10-K, including the section entitled “Risk
Factors”, as well as those discussed from time to time in the Company’s other
SEC filings and reports. In addition, such statements could be affected by
general industry and market conditions. Such forward-looking statements speak
only as of the date of this Quarterly Report or, in the case of any document
incorporated by reference, the date of that document, and we do not undertake
any obligation to update any forward-looking statement to reflect events or
circumstances after the date of this Report, or for changes made to this
document by wire services or Internet service providers. If we update or correct
one or more forward-looking statements, investors and others should not conclude
that we will make additional updates or corrections with respect to other
forward-looking statements.





Overview





We are a
leading provider of hospitalist services in the Greater Los Angeles, California
area. Hospitalist medicine is organized around the admission and care of
patients in an inpatient facility such as a hospital or skilled nursing facility
and is focused on providing, managing and coordinating the care of hospitalized
patients.




17





Results
of Operations and Operating Data





Three
Months Ended October 31, 2009 vs. Three Months Ended October 31,
2008





Net
revenues for the three months ended October 31, 2009 were $616,975, compared to
net revenues of $479,808 for the three months ended October 31, 2008. Net
revenues are comprised of  net billings by AMH under the various fee
structures from health plans, medical groups/IPA’s and hospitals, and income
from service fee agreements. Net revenues of $479,808 in the third quarter of
2008 were solely fee based billings; there was no service fee income in
2008.





Physician
practice salaries, benefits and other expenses for the three months ended
October 31, 2009 were $455,183, at 74% of net revenues compared to
$488,605 for the three months ended October 31, 2008, at 102% of net
revenues.  Cost of Services includes the payroll and consulting costs
of the physicians, all payroll related costs, costs for all medical malpractice
insurance and physician privileges. The Company had seven physicians under
contract as hospitalists as of October 31, 2009.  There was no service
costs related to the service fee income.


18





General
and administrative expenses include all salaries, benefits, supplies and
operating expenses not specifically related to the day-to-day operations of our
physician group practices, including billing and collections
functions,  and our corporate management and overhead. General and
administrative expenses decreased $139,297, or 50%, to $139,557, at 23% of net
revenues, for the three months ended October 31, 2009. General and
Administrative expenses were $278,854 for the three months ended October 31,
2008, at 58% of net revenues..  The decrease in general and
administrative expenses resulted from the absence in 2009 of $121,677 of
non-cash compensation recorded in the third quarter of 2008.  In
addition, legal fees of $18,635 in the quarter just ended were well below legal
fees of $77,724 reported in the third quarter of 2008.  The absence of
these costs in 2009 was partially offset by higher costs incurred to support the
continuing growth of our operations, including the full period costs of our
Chief Financial Officer and Executive Vice President of Business Development
& Strategy. The Company incurred $19,500 one time Legal and Accounting
expenses in connection with its issuance of 10% Senior Subordinated Callable
Convertible Notes in the quarter ended October 31, 2009.





Depreciation
and amortization expense was $9,622 for the three months ended October 31, 2009,
and $9,996 for the comparable three-month period in 2008.





The
Company reported an income from operations of $12,613 for the three months
ended October 31, 2009, compared to a loss from operations of
$297,647 recorded in the same period of 2008. In 2009, net revenues
benefitted from the addition of several contracts with hospitals and the hiring
of several additional physicians.  In addition, operating income
benefitted from the absence in 2009 of non-cash compensation costs and residual
legal fees from the Siclone transaction which negatively impacted the third
quarter of 2008.





Interest
expense and financing costs totaled $40,738 for the three months ended
October 31, 2009, as compared to interest and financing costs of $28,856
for the three months ended October 31, 2008. Interest expense in 2009
included interest on the convertible notes, related party notes, the business
credit line and the loan with Wells Fargo Bank, and a partial month interest on
the convertible notes from the private placement. The financing cost of $25,000
in 2009 was a due diligence fee due the placement agent on completion of the
private placement. 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
was $28,925 for the three months ended October 31, 2009, compared to a
net loss of $326,503 for the three months ended October 31,
2008.  The reduction in the net loss was the result of the factors
discussed above.





Nine
Months Ended October 31, 2009 vs. Nine Months Ended October  31,
2008





Apollo
reported revenues of $1,699,100 for the nine months ended October 2009, compared
to revenues of $499,603 in the comparable nine month period ended October
2008.  The Company increased its contracts with hospitals and
independent physician associations to 12 at the end of October 2009.  In
2008, prior to the execution of the Management Services Agreement on August 1,
2008, the Company could only report 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. Consequently, net revenues in 2008 include the full third quarter of AMH
revenues and two prior quarters of management service fee income totaling
$19,795 reported by AMM.





Physician
practice salaries, benefits and other expenses were$1,262,430 for the nine
months ended October 2009, compared to $531,411 for the corresponding nine
months ended October 2008. Cost of Services were 74 % of net revenues in the
nine months ended October 2009, and 106% of revenues for the nine month period
ended October 2008. Cost of Services in 2008 included the third quarter of
consolidated costs and $42,806 of costs recorded by AMM prior to the execution
of the Management Agreement executed on August 1, 2008.   Cost of
Services includes the payroll and consulting costs of the physicians, all
payroll related costs, costs for all medical malpractice insurance and physician
privileges.


19





General
and administrative expenses were $434,225 in the nine months ended October 2009,
down $247,008, or 36 %,  from general and administrative costs of
$681,233 in the nine months ended October 31, 2008. These expenses
represented 26 % of revenues in nine months just ended.  The decrease
in General and Administrative costs from 2008 to 2009 was due to the absence in
2009 of $278,348 of costs related to the Siclone Merger which occurred in July
2009.  This reduction in costs was partially offset by higher
public-company expenses   and costs related to the continuing
growth of our operations, including the full period costs of our Chief Financial
Officer and Vice President of Business Development in 2009. The Company incurred
$19,500 one time Legal and Accounting expenses in connection with its issuance
of 10% Senior Subordinated Callable Convertible Notes in the quarter ended
October 31, 2009.The Company recorded non-cash compensation expenses totaling
$101,455, related to the issuance of shares for service in the nine months ended
October 31, 2009. The company recorded $153,545 for shares issued and to be
issued for compensation and financing costs in the nine months ended October
2008.





Depreciation
and amortization expense was $30,297 and $9,996 for the nine months ended
October 31, 2009 and 2008, respectively.





The
Company reported a Loss from Operations of $27,852 for the nine month period
ended October 31, 2009, compared to a Loss from Operations of $723,037 for
the comparable nine months ended October  31, 2008.  The
decrease in the Loss from Operations of $ 695,185 from 2008 to 2009 was due to
the absence of the costs incurred on the Siclone transaction which occurred in
2008, and a decrease of $257,931 in costs of shares granted and to be granted
for services from 2008 to 2009.





Interest
expense and financing costs were $50,546 for the nine months ended October 31,
2009, compared to interest and financing expenses of $28,856 for the nine
months ended October 31, 2008.  Interest expense in 2009 included
interest on the convertible notes, related party notes,  the bank line
and bank credit lines with Wells Fargo Bank, and a partial month of interest on
the convertible notes from the private placement.  The financing cost
of $25,000 in 2009 was a due diligence fee due the placement agent on completion
of the private placement. Interest expense in 2008 represent 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.





The
Company reported a net loss of $ 79,998 for the nine months ended
October 31, 2009, down $672,695 from the net loss of $752,693 for the nine
months ended October 31, 2008.  The reduction in net loss from the
nine months ended October 2008 to October 2009 was primarily due to the Siclone
costs which negatively impacted 2008, the lower level shares granted for
compensation,  coupled with the increased contribution from the
hospitalist services provided by AMH in 2009.


20





Liquidity
and Capital Resources





At
October 31, 2009, the Company had cash and cash equivalents of $863,394,
compared to cash and cash equivalents of $84,161 at the beginning of the fiscal
year at January 31, 2009. The cash balance at October 31, 2009 included $809,934
in a money market brokerage account.   Short-term borrowings
totaled $33,000 at October 31, 2009, compared to $74,782 as of January 31,
2009.  Long-term borrowings totaled $1,240,358 as of October 31, 2009,
compared to long-term borrowings of $231,218 on January 31, 2009.





Net cash
used in operating activities totaled $186,126 in the nine months ended October
31, 2009, compared to net cash used in operations of $429,743 for the comparable
nine months ended October 31, 2008.  The significantly smaller
operating loss in 2009 was primarily responsible for the improvement in the
operating cash flow.





Net cash
used in operating activities for the nine months in 2009 of $186,126 was
comprised of a net loss of $79,998 for the nine month period, and adjustments
for non-cash charges which include depreciation, bad debt expense and shares
issued, or to be issued, for service totaling $146,349. Also, net changes in
operating assets and liabilities used cash of $254,477.





We did
not spend any cash for investing activities in the nine months ended October
2009 and 2008.  The $69,510 reported as investment in property and
equipment during the nine months ended October 2008, represented the net asset
position in this category at AMH which was consolidated into AMM on the
execution of the Management Services Fee Agreement as of August 1,
2008.





For the
nine months ended October 31, 2009, net cash provided from financing activities
was $967,358, compared to $603,000 provided by financing activities for the same
period in 2008. During the nine months ended October 2009, the Company completed
the private placement with Syndicated Capital which provided proceeds of
$1,240,358, net of the warrant discounts totaling $9,642.  Concurrent
with the receipt of these proceeds, the Company retired the business loan with
Wells Fargo Bank of $ 198,000, on October 27, 2009, and the related party
convertible note in the amount of $75,000 on October 22, 2009.





In  2008,
the Company issued 670,000 shares for $335,000 and borrowed $70,000 from a party
related to the CEO of the Company.  In addition, the Company, with the
consolidation of AMH, recorded the $198,000 balance on the Wells Fargo Business
Loan as of October 31, 2008.





Credit
Facility and Liquidity





The
Company's Business Line with Wells Fargo Bank provides a revolving line of
credit of $70,000, and is linked to the AMH bank account. The line can be used
for short-term working capital needs and provides overdraft protection. The line
cannot be used for letters of credit.





We
continue to search for investment opportunities and anticipate that funds
generated from operations, together with our current cash on hand and funds
available under our revolving credit agreement will be sufficient to finance our
working capital requirements and fund anticipated acquisitions, contingent
acquisition consideration and capital expenditures.





Off
Balance Sheet Arrangements





As of
October 31, 2009, we had no off-balance sheet arrangements.





Recently
Adopted and New Accounting Pronouncements





See Note
2 to the Condensed Consolidated Financial Statements for information regarding
recently adopted and new accounting pronouncements.


21





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




Evaluation
of Disclosure Controls and Procedures.
  In
connection with the preparation of this Quarterly Report, 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 of
October 31, 2009, in accordance with Rules 13a-15(b) and 15d-15(b) of the
Exchange Act.
 
 Based on
that evaluation, our Chief Executive Officer and Principal Financial and
Accounting Officer have concluded that our disclosure controls and procedures
were not effective as of October 31, 2009.
 
 We have
identified the following three material weaknesses in our disclosure controls
and procedures:
  1.         
We do not have written documentation of our internal control policies and
procedures.  Written documentation of key internal controls over financial
reporting is a requirement of Section 404 of the Sarbanes-Oxley Act. 
Management evaluated the impact of our failure to have written documentation of
our internal controls and procedures on our assessment of our disclosure
controls and procedures, and concluded that the control deficiency that resulted
represented a material weakness.
  2.         
We do not have sufficient segregation of duties within accounting functions,
which is a basic internal control.  Due to our size and nature, segregation
of all conflicting duties may not always be possible and may not be economically
feasible.  However, to the extent possible, the initiation of transactions,
the custody of assets and the recording of transactions should be performed by
separate individuals.  Management evaluated the impact of our failure to
have segregation of duties on our assessment of our disclosure controls and
procedures, and concluded that the control deficiency that resulted represented
a material weakness.
  3.           We
do not have review and supervision procedures for financial reporting functions.
The review and supervision function of internal control relates to the accuracy
of financial information reported. The failure to review and supervise could
allow the reporting of inaccurate or incomplete financial information. Due to
our size and nature, review and supervision may not always be possible or
economically feasible.  Management evaluated the impact of our significant
number of audit adjustments, and concluded that the control deficiency that
resulted represented a material weakness.
  Based on
the foregoing materials weaknesses, we have determined that, as of October 31,
2009, that our disclosure controls and procedures are
insufficient.  The Company continues to take steps to improve the
timeliness and accuracy of its financial information, including the hiring of
additional employees to facilitate proper segregation of duties.  Our
management is responsible for establishing and maintaining adequate disclosure
controls and procedures, as defined in Rule 15d-15(e) under the Exchange Act,
and for assessing the effectiveness of our disclosure controls and procedures.
It should be noted that any system of controls and procedures, however well
designed and operated, can provide only reasonable and not absolute assurance
that the objectives of the system are met. In addition, the design of any
control system is based in part upon certain assumptions about the likelihood of
certain events. Because of these and other inherent limitations of control
systems, there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions, regardless of how
remote.  Therefore, even those systems determined to be effective can
only provide reasonable assurance of achieving their control
objectives.


22




Changes
in Internal Controls over Financial Reporting
  There has
been no change in our internal control over financial reporting during our most
recently completed fiscal quarter (i.e., the three-month period ended October
31, 2009) that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.




PART
II – OTHER INFORMATION





ITEM
1.  LEGAL PROCEEDINGS





The
Company is not party to any litigation and, to its knowledge, no
action, suit or proceeding has been threatened against the company.


ITEM 1A. Not Applicable


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





None





ITEM
3.  DEFAULTS UPON SENIOR SECURITIES





None





ITEM
4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





None





ITEM
5.  OTHER INFORMATION





None





ITEM
6.  EXHIBITS




Exhibit Number
            
            Description31.1
            
            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.


23





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 14, 2009
              By:
              /s/ Warren HosseinionWarren
      HosseinionChief
      Executive Officer and DirectorDated:
       December 14, 2009
              By:
              /s/ A. Noel DeWinterA.
      Noel DeWinterChief
      Financial Officer and Principal Accounting
  Officer


24