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 July 31, 2010





OR





o 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)




450
N. Brand Blvd., Suite 600


Glendale,
California 91203


(Address
of principal executive offices)





(818)
396-8050


Issuer’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 x  No
o .





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 o No o





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 o
            Accelerated
      filer oNon-accelerated
      filer o
            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 o No x





As of
August 10,, 2010, there were 27,635,774 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 SIX MONTHS ENDED JULY 31, 2010 AND 2009




TABLE
OF CONTENTS




PAGEPART
      IFINANCIAL
      INFORMATIONItem
      1.
                Financial
      Statements – UnauditedCondensed
      Consolidated Balance Sheet As of  July 31, 2010 and January 31,
      2010
                
                3Condensed
      Consolidated Statements of Operations For the Three and Six
      months  ended July 31, 2010  and 2009
                
                4Condensed
      Consolidated Statements of Cash Flows For the Six months ended July 31,
      2010 and 2009
                
                5Notes
      to Condensed Consolidated Financial Statements
                
                6-13Item
      2.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                
                14-17Item
      3.
                Quantitative
      and Qualitative Disclosures about Market Risk
                
                18Item
      4.
                Control
      and Procedures.
                
                18PART
      IIOTHER
      INFORMATIONItem
      1.
                Legal
      Proceedings
                
                19Item
      2.
                Unregistered
      Sales of Equity Securities and the Use of Proceeds
                
                19Item
      3.
                Defaults
      upon Senior Securities
                
                19Item
      4.
                Submission
      of Matters to a Vote of Security Holders
                
                19Item
      5.
                Other
      Information
                
                19Item
      6.
                Exhibits
                
                19




2




APOLLO
MEDICAL HOLDINGS, INC.


CONSOLIDATED
BALANCE SHEETS


(UNAUDITED)




As of July 31,2010
                                              
                                              
                                              As of January 31,2010ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                                              
                                              $
                                              534,332
                                              
                                              
                                              $
                                              665,737Accounts
      receivable, net
                                              
                                              
                                              622,734
                                              
                                              
                                              
                                              457,517Receivable
      from officers
                                              
                                              
                                              23,664
                                              
                                              
                                              
                                              23,483Due
      from affiliate
                                              
                                              
                                              3,650
                                              
                                              
                                              
                                              2,850Prepaid
      expenses
                                              
                                              
                                              12,567
                                              
                                              
                                              
                                              30,165Total
      current assets
                                              
                                              
                                              1,196,947
                                              
                                              
                                              
                                              1,179,752Prepaid
      commssion cost
                                              
                                              
                                              95,312
                                              
                                              
                                              
                                              114,063Property
      and equipment - net
                                              
                                              
                                              10,196
                                              
                                              
                                              
                                              11,627TOTAL
      ASSETS
                                              
                                              $
                                              1,302,455
                                              
                                              
                                              $
                                              1,305,442LIABILITIES
      AND STOCKHOLDERS' DEFICIT:CURRENT
      LIABILITIES:Accounts
      payable and accrued liabilities
                                              
                                              $
                                              114,457
                                              
                                              
                                              $
                                              104,252Total
      current liabilities
                                              
                                              
                                              114,457
                                              
                                              
                                              
                                              104,252Convertible
      notes, net
                                              
                                              
                                              1,247,985
                                              
                                              
                                              
                                              1,247,582Total
      liabilities
                                              
                                              
                                              1,362,442
                                              
                                              
                                              
                                              1,351,834STOCKHOLDERS'
      DEFICIT:Preferred
      stock, par value $0.001 ;5,000,000  shares
      authorized; none issued
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Common
      Stock, par value $0.001; 100,000,000 shares authorized,27,635,774
      and 27,041,328 shares issued and outstandingas
      on July 31, 2010 and January 31, 2010
                                              
                                              
                                              27,636
                                              
                                              
                                              
                                              27,041Additional
      paid-in-capital
                                              
                                              
                                              986,266
                                              
                                              
                                              
                                              939,483Accumulated
      deficit
                                              
                                              
                                              (1,302,004
                                              )
                                              
                                              
                                              (1,241,031
                                              )Total
                                              
                                              
                                              (288,102
                                              )
                                              
                                              
                                              (274,507
                                              )Non-controlling
      interest
                                              
                                              
                                              228,115
                                              
                                              
                                              
                                              228,115Total
      stockholders' deficit
                                              
                                              
                                              (59,987
                                              )
                                              
                                              
                                              (46,392
                                              )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
                                              
                                              $
                                              1,302,455
                                              
                                              
                                              $
                                              1,305,442





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




3




APOLLO
MEDICAL HOLDINGS, INC.


CONSOLIDATED
STATEMENTS OF OPERATIONS


FOR THE
THREE MONTHS AND SIX MONTHS ENDED JULY 31, 2010 AND 2009


(UNAUDITED)




For the Three Months ended
                                                    
                                                    
                                                    For the Six Months endedJuly 31,
                                                    
                                                    
                                                    July 31,2010
                                                    
                                                    
                                                    2009
                                                    
                                                    
                                                    2010
                                                    
                                                    
                                                    2009REVENUES
                                                    
                                                    $
                                                    1,039,695
                                                    
                                                    
                                                    $
                                                    580,942
                                                    
                                                    
                                                    $
                                                    1,842,580
                                                    
                                                    
                                                    $
                                                    1,082,125COST
      OF SERVICES
                                                    
                                                    
                                                    864,719
                                                    
                                                    
                                                    
                                                    387,692
                                                    
                                                    
                                                    
                                                    1,539,405
                                                    
                                                    
                                                    
                                                    807,247GROSS
      REVENUE
                                                    
                                                    
                                                    174,976
                                                    
                                                    
                                                    
                                                    193,250
                                                    
                                                    
                                                    
                                                    303,175
                                                    
                                                    
                                                    
                                                    274,878Operating
      expenses:General
      and administrative
                                                    
                                                    
                                                    190,516
                                                    
                                                    
                                                    
                                                    122,105
                                                    
                                                    
                                                    
                                                    275,708
                                                    
                                                    
                                                    
                                                    294,668Depreciation
                                                    
                                                    
                                                    2,993
                                                    
                                                    
                                                    
                                                    10,338
                                                    
                                                    
                                                    
                                                    5,999
                                                    
                                                    
                                                    
                                                    20,675Total
      operating expenses
                                                    
                                                    
                                                    193,509
                                                    
                                                    
                                                    
                                                    132,443
                                                    
                                                    
                                                    
                                                    281,707
                                                    
                                                    
                                                    
                                                    315,343PROFIT/(LOSS)
      FROM OPERATIONS
                                                    
                                                    
                                                    (18,533
                                                    )
                                                    
                                                    
                                                    60,807
                                                    
                                                    
                                                    
                                                    21,468
                                                    
                                                    
                                                    
                                                    (40,465
                                                    )OTHER  EXPENSES:Interest
      expense
                                                    
                                                    
                                                    31,465
                                                    
                                                    
                                                    
                                                    4,958
                                                    
                                                    
                                                    
                                                    62,988
                                                    
                                                    
                                                    
                                                    9,807Financing
      cost
                                                    
                                                    
                                                    9,375
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    18,750
                                                    
                                                    
                                                    
                                                    -Other
      expense
                                                    
                                                    
                                                    757
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (97
                                                    )
                                                    
                                                    
                                                    -Total
      other expenses
                                                    
                                                    
                                                    41,597
                                                    
                                                    
                                                    
                                                    4,958
                                                    
                                                    
                                                    
                                                    81,641
                                                    
                                                    
                                                    
                                                    9,807INCOME/(LOSS)
      BEFORE INCOME TAXES
                                                    
                                                    
                                                    (60,130
                                                    )
                                                    
                                                    
                                                    55,849
                                                    
                                                    
                                                    
                                                    (60,173
                                                    )
                                                    
                                                    
                                                    (50,272
                                                    )Provision
      for income tax
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    800
                                                    
                                                    
                                                    
                                                    800NET
      INCOME/(LOSS)
                                                    
                                                    $
                                                    (60,130
                                                    )
                                                    
                                                    $
                                                    55,849
                                                    
                                                    
                                                    $
                                                    (60,973
                                                    )
                                                    
                                                    $
                                                    (51,072
                                                    )WEIGHTED
      AVERAGE SHARES OF COMMON STOCK OUTSTANDING, BASIC AND
      DILUTED
                                                    
                                                    
                                                    27,452,197
                                                    
                                                    
                                                    
                                                    26,096,306
                                                    
                                                    
                                                    
                                                    27,342,771
                                                    
                                                    
                                                    
                                                    25,985,136*BASIC
      AND DILUTED NET INCOME/(LOSS) PER SHARE
                                                    
                                                    $
                                                    (0.00
                                                    )
                                                    
                                                    $
                                                    0.00
                                                    
                                                    
                                                    $
                                                    (0.00
                                                    )
                                                    
                                                    $
                                                    (0.00
                                                    )




*Weighted
average number of shares used to compute basic and diluted loss per share is the
same since the effect of dilutive securities is anti-dilutive.





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




4




APOLLO
MEDICAL HOLDINGS, INC.


CONSOLIDATED
STATEMENT OF CASH FLOWS


FOR THE
SIX MONTH PERIODS ENDED JULY 31, 2010 AND 2009


(UNAUDITED)




Six month periods ended July 31,2010
                                                
                                                
                                                2009CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                                                
                                                $
                                                (60,973
                                                )
                                                
                                                $
                                                (51,072
                                                )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
                                                
                                                
                                                5,999
                                                
                                                
                                                
                                                20,675Bad
      debt expense
                                                
                                                
                                                (64,566
                                                )
                                                
                                                
                                                2,253Issuance
      of shares for services
                                                
                                                
                                                47,167
                                                
                                                
                                                
                                                95,167Amortization
      of prepaid commsion cost
                                                
                                                
                                                18,750
                                                
                                                
                                                
                                                -Amortization
      of debt discount
                                                
                                                
                                                403
                                                
                                                
                                                
                                                -Changes
      in assets and liabilities:Accounts
      receivable
                                                
                                                
                                                (100,650
                                                )
                                                
                                                
                                                (77,567
                                                )Receivable
      from officers
                                                
                                                
                                                (181
                                                )Prepaid
      financing cost
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Prepaid
      expenses
                                                
                                                
                                                17,599
                                                
                                                
                                                
                                                11,718Deferred
      compensation
                                                
                                                
                                                -
                                                
                                                
                                                
                                                22,000Accounts
      payable and accrued liabilities
                                                
                                                
                                                10,205
                                                
                                                
                                                
                                                (9,944
                                                )Net
      cash provided by/(used in) operating activities
                                                
                                                
                                                (126,248
                                                )
                                                
                                                
                                                13,230CASH
      FLOWS FROM INVESTING ACTIVITIES:Property
      and equipment
                                                
                                                
                                                (4,568
                                                )
                                                
                                                
                                                -Due
      from related parties
                                                
                                                
                                                (800
                                                )
                                                
                                                
                                                -Net
      cash used in investing activities
                                                
                                                
                                                (5,368
                                                )
                                                
                                                
                                                -CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from shares issued
                                                
                                                
                                                211
                                                
                                                
                                                
                                                -Payments
      of notes payable
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (18,741
                                                )Proceeds
      from business line
                                                
                                                
                                                -
                                                
                                                
                                                
                                                12,087Net
      cash used in financing activities
                                                
                                                
                                                211
                                                
                                                
                                                
                                                (6,654
                                                )NET
      INCREASE/(DECREASE) IN CASH & CASH EQUIVALENTS
                                                
                                                
                                                (131,405
                                                )
                                                
                                                
                                                6,576CASH
      & CASH EQUIVALENTS, BEGINNING BALANCE
                                                
                                                
                                                665,737
                                                
                                                
                                                
                                                84,161CASH
      & CASH EQUIVALENTS, ENDING BALANCE
                                                
                                                $
                                                534,332
                                                
                                                
                                                $
                                                90,737SUPPLEMENTARY
      DISCLOSURES OF CASH FLOW INFORMATIONInterest
      paid during the six month period
                                                
                                                $
                                                62,586
                                                
                                                
                                                $
                                                5,061Taxes
      paid during the six month period
                                                
                                                
                                                1,600
                                                
                                                
                                                
                                                1,600Conversion
      of notes payable to equity
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                200,000




The
accompanying notes are an integral part of these unaudited condensed
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.





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 six month
period ended July 31, 2010 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, 2010.





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 six month periods
ended July 31, 2010 and 2009.





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.





6





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. One contract
with our clients provides  30 percent of reported
revenues.




7




Recently
Issued Accounting Pronouncements




In
January 2010, FASB issued ASU No. 2010-06 – Improving Disclosures about Fair
Value Measurements. This update provides amendments to Subtopic 820-10 that
requires new disclosure as follows: 1) Transfers in and out of Levels 1 and 2. A
reporting entity should disclose separately the amounts of significant transfers
in and out of Level 1 and Level 2 fair value measurements and describe the
reasons for the transfers. 2) Activity in Level 3 fair value measurements. In
the reconciliation for fair value measurements using significant unobservable
inputs (Level 3), a reporting entity should present separately information about
purchases, sales, issuances, and settlements (that is, on a gross basis rather
than as one net number). This update provides amendments to Subtopic 820-10 that
clarifies existing disclosures as follows: 1) Level of disaggregation. A
reporting entity should provide fair value measurement disclosures for each
class of assets and liabilities. A class is often a subset of assets or
liabilities within a line item in the statement of financial position. A
reporting entity needs to use judgment in determining the appropriate classes of
assets and liabilities. 2) Disclosures about inputs and valuation techniques. A
reporting entity should provide disclosures about the valuation techniques and
inputs used to measure fair value for both recurring and nonrecurring fair value
measurements. Those disclosures are required for fair value measurements that
fall in either Level 2 or Level 3. The new disclosures and clarifications of
existing disclosures are effective for interim and annual reporting periods
beginning after December 15, 2009, except for the disclosures about purchases,
sales, issuances, and settlements in the roll forward of activity in Level 3
fair value measurements. These disclosures are effective for fiscal years
beginning after December 15, 2010, and for interim periods within those fiscal
years. The Company is currently evaluating the impact of this ASU, however, the
Company does not expect the adoption of this ASU to have a material impact on
its consolidated financial statements.




In
February 2010, FASB issued ASU No. 2010-9 –Amendments to Certain Recognition and
Disclosure Requirements. This update addresses certain implementation issues
related to an entity’s requirement to perform and disclose subsequent-events
procedures, removes the requirement that public companies disclose the date of
their financial statements in both issued and revised financial statements.
According to the FASB, the revised statements include those that have been
changed to correct an error or conform to a retrospective application of U.S.
GAAP. The amendment is effective for interim and annual reporting periods in
fiscal year ending after June 15, 2010. The Company does not expect the adoption
of this ASU to have a material impact on the Company’s consolidated financial
statements.





In April
2010, The FASB issued ASU No. 2010-17, Revenue Recognition – Milestone
Method (Topic 605), to provide guidance on the criteria that should be
met for determining whether the milestone method of revenue recognition is
appropriate. The amendments in the update are effective on a prospective basis
for milestones achieved for fiscal years, and interim periods within those
years, beginning on or after June 15, 2010. Early adoption is
permitted.  The Company is currently assessing the future impact of
this new accounting update to its financial statements.




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.




8





Basic
and Diluted Earnings Per Share





Earnings
per share is calculated in accordance with the Statement of financial accounting
standards No. 128 (SFAS No. 128, 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 at July 31, 2010 was  $534,332 and included cash in
bank representing the Company’s current operating account and $487,647 in a
brokerage money market account.  The $46,685 balance in the Company's
operating account is insured by the FDIC.





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.





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 $1,302,004 as of
July 31, 2010. Net Cash Flow used by Operating Activities for the six months
ended July31, 2010 was
$126,248.





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 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.





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 July 31, 2010, Accounts Receivable totals $622,734, net
of a provision for bad debt expense of $46,410, and represents amounts invoiced
by AMH. Accounts Receivable was $457,517, net of the provision for bad debt
expense of $110,976, on January 31, 2010.





5.  Other
Receivables





Other
receivables total $23,664 and $23,483 at July 31, 2010 and January 31, 2010,
respectively, and represent amounts due the Company from two officers. The
balances were interest free, unsecured and due on demand.




9





6.  Due
from affiliate




Due from
affiliate totals $3,650 and $2,850 as of July 31, 2010 and January 31, 2010,
respectively, and represents amounts due from AMA, an unconsolidated Affiliate
of the Company.





7. 
Prepaid Expenses




Prepaid
Expenses of $12,567 and $30,165 as of July 31, 2010 and January 31, 2010,
respectively, are amounts prepaid for medical malpractice insurance and
Director’s and Officer’s insurance.




8.  Prepaid
Commission Cost





Unamortized
financing cost of $95,312 on July 31, 2010 and $114,063 as of January 31, 2010
represent the financing cost associated with 10% Senior Subordinated Callable
Convertible Notes due January 31, 2013, $125,000 paid by the Company on the
closing of the placement on October 16, 2009 (see Note 11).





9.
Property and Equipment




Property
and Equipment consists of the following as of :




July 31, 2010
                        
                        
                        January 31,2010Website
                        
                        $
                        4,568
                        
                        
                        $Computers
                        
                        
                        13,912
                        
                        
                        
                        13,912Software
                        
                        
                        138,443
                        
                        
                        
                        138,443Machinery
      and equipment
                        
                        
                        50,815
                        
                        
                        
                        50,815Gross
      Property and Equipment
                        
                        
                        207,738
                        
                        
                        
                        203,170Less
      accumulated depreciation
                        
                        
                        (197,542
                        )
                        
                        
                        (191,543
                        )Net
      Property and Equipment
                        
                        $
                        10,196
                        
                        
                        $
                        11,627




The
Company had no Capital Expenditures in the quarter ended July 31,
2010.  Capital expenditures totaled $4,568 at AMM in the quarter ended
April 30, 2010 for the development of a Company web site.




Depreciation
expense was $2,993 and $10,338 for the three month periods ended July 31, 2010
and 2009, respectively. Depreciation expense was $5,999 and $20,675 for the six
month periods ended July 31, 2010 and 2009, respectively.




10





10.            Accounts Payable and
Accrued Liabilities





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





July 31,2010
                      
                      
                      January 31,2010Accounts
      payable
                      
                      $
                      76,875
                      
                      
                      $
                      32,460D&O
      insurance payable
                      
                      
                      
                      
                      
                      
                      8,210Accrued
      professional fees
                      
                      
                      15,575
                      
                      
                      
                      22,141Accrued
      payroll and income taxes
                      
                      
                      22,007
                      
                      
                      
                      41,441Total
                      
                      $
                      114,457
                      
                      
                      $
                      104,252




11.
 Long-term Debt





The
Company’s long-term debt consisted of the following at July 31, 2010 and January
31, 2010




July 31,
                        
                        
                        January 30,2010
                        
                        
                        2010Subordinated
      Borrowings:10%
      Senior Subordinated Convertible Notes due January 31, 2013
                        
                        $
                        1,247,985
                        
                        
                        $
                        1,247,582Total
      long-term debt
                        
                        $
                        1,247,985
                        
                        
                        $
                        1,247,582Less:
      Current Portion
                        
                        _
                        
                        
                        _Total
                        
                        $
                        1,247,985
                        
                        
                        $
                        1,247,582





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 an Agent 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.




11




In
connection with the placement of the subordinated notes, the Company paid a
commission of $125,000 and $25,000 of other direct expenses. The 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 agent also received 100,000
shares of restricted common stock for pre-transaction advisory services and due
diligence. The commission of $125,000 paid at closing, is accounted for as
prepaid financing cost and will be amortized over a forty-month period through
January 31, 2013, the maturity date of the notes. The $25,000 of other direct
expenses were paid at closing and reported as financing costs in the Operating
Statement in the year ended January 31, 2010. In addition, financing costs
included $4,000 related to the value of the 100,000 shares granted to the
Placement Agent.





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 $2,653 using the Black-Scholes pricing model which was recorded as
unamortized warrant discount on granted date and $2,015 as of July 31,
2010.




In
connection with this offering, the Company 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 on granted date. 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.





The
Company recorded interest expense of $ 31,250 and $62,500 related to these notes
for the three months and six months ended July 31, 2010,
respectively.  No interest related to these subordinated borrowings
was reported for the respective periods in 2009.





12. 
Related Party Transactions




During
the six months ended July 31, 2010 and 2009, the Company generated revenue of
$367,000 and $201,135, 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.





13.  Non-Controlling
Interest




The
Company recorded AMH owner ship interest in the accompanying financial
statements as Non-Controlling Interest of $228,115 at July 31, 2010 and January
31, 2010.




14. 
Stockholder’s Equity





In the
second quarter ended July 31, 2010, the Company issued 211,113 common shares to
Suresh Nihalani, a Director, under an amendment to his Board of Director's
Agreement dated October 27, 2008, which brought the total outstanding shares to
27,635,774 at July 31, 2010. (see Note 15) The Company recorded an expense of
$17,100 on shares issued for the period ended July 31, 2010.




In the
first quarter ended April 30, 2010, the Company issued 383,333 common
shares.  A total of 350,000 shares were issued to Kanehoe Advisors and
33,333 shares were issued to Suresh Nihalani, a director. The total shares of
383,333 were valued at $30,066 based on the fair value of shares at issuance
dates.




The
Company issued a total of 1,171,108 common shares in the twelve months ended
January 31, 2010, including 266,665 shares in the second quarter ended July 31,
2009, 826,666 shares in the third quarter ended October 31, 2009, and
77,777 shares in the fourth quarter ended January 31, 2010. 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. The 77,777
shares issued in the fourth quarter were to Suresh Nihalani, a Director of the
Company.





12


Warrants
outstanding:





No
warrants were issued by the Company in the six months ended July 31,
2010.





Aggregate
                      intrinsic value
                    
                    
                    Number of
                      warrantsOutstanding
      at January 31, 2010
                    
                    $
                    —
                    
                    
                    
                    2,125,803Granted
                    
                    
                    —
                    
                    
                    
                    -Exercised
                    
                    
                    —
                    
                    
                    
                    —Lapsed
                    
                    
                    —
                    
                    
                    
                    165,620Outstanding
      at July 31, 2010
                    
                    $
                    —
                    
                    
                    
                    1,960,183




Exercise Price
                    
                    Warrants
                      outstanding
                    
                    
                    Weighted
                      average
                      remaining
                      contractual life
                    
                    
                    Warrants
                      exercisable
                    
                    
                    Weighted
                      average
                      exercise price$
                    1.100
                    
                    
                    304,850
                    
                    
                    
                    0.50
                    
                    
                    
                    304,850
                    
                    
                    $
                    1.10$
                    1.500
                    
                    
                    155,333
                    
                    
                    
                    1.24
                    
                    
                    
                    155,333
                    
                    
                    $
                    1.50$
                    0.250
                    
                    
                    1,250,000
                    
                    
                    
                    4.25
                    
                    
                    
                    1,250,000
                    
                    
                    $
                    0.25$
                    0.250
                    
                    
                    250,000
                    
                    
                    
                    4.25
                    
                    
                    
                    250,000
                    
                    
                    $
                    0.25





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 March 15, 2010, the first anniversary of the Consulting Agreement, Mr.
Francis was granted an additional 350,000 shares (see Note 14).





On
October 27, 2008, the Company entered into a Board of Director’s Agreement with
Suresh Nihalani, under which the Company agreed to issue a stock award of
400,000 shares to Mr. Nihalani. Under the terms of the Director’s Agreement,
these 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 a Director. Mr. Nihalani was issued 188,887 shares under this Director's
Agreement through April 30, 2010. (see Note 14)





On July
16, 2010, the Company and Mr. Nihalani agreed to amend the October 27, 2008
Director's Agreement, whereby the Company issued 211,113 shares of Common Stock
to Mr. Nihalani. These 211,113 shares represented the balance of the shares due
Mr. Nihalani under his agreement and  brought the total shares held by
Suresh Nihalani to 400,000 common shares.  Under the Amendment, the Company
has the right to repurchase shares in the event that Mr. Nihalani fails to serve
as a Director through November 30, 2011.


13


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.


14


Results
of Operations and Operating Data





Three
Months Ended July  31, 2010 vs. Three Months Ended July 31,
2009





Apollo
reported net revenues of $1,039,695 for the three months ended July 31, 2010,
compared to net revenues of $580,942 for the comparable three month period ended
July 2009. The revenue increase of $458,753, or 79%, was attributable to new
hospital contracts, increased same-market area growth and expansion of services
with existing medical group clients at new hospitals. 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.





Physician
practice salaries, benefits and other expenses for the three months ended July
31, 2010 were $864,719, at 83% of net revenues, compared to $387,692 for
the three months ended July 31, 2009, at 67% 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 increase in physician costs were attributable to start-up losses
at new hospital contracts and expansions of services at new hospitals in the
quarter.





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 were $190,516, at 18% of net revenues, for the three
months ended July 31, 2010, higher by $68,411 from General and Administrative
expenses of $122,105 for the three months ended July 31, 2009, at 21% of net
revenues.  In the second quarter of 2010, the Company recorded bad
debt expense of $25,700 compared to bad debt expense of $1,791in the second
quarter of 2009. Legal fees in the second quarter of 2010 of $26,775 compared to
legal fees of $10,610.  In addition, Apollo recorded an expense of
$17,100 related to shares issued to a director, and incurred higher rent, audit
and public company costs.




Depreciation
and amortization expense was $2,993 for the three months ended July 31, 2010,
and $10,338 for the comparable three-month period in 2009.





The
Company reported a loss from operations of $18,533 for the three months
ended July 31, 2010, compared to a profit from operations of
$60,807 recorded in the same period of 2009. Although net revenues in 2010
continued to benefit from the addition of contracts with hospitals and the
hiring of several additional physicians, the higher cost of services as a
percent of revenue, 84%  in the quarter just ended versus 67% in the
second quarter of 2009, impeded the operating results.





Interest
expense and amortization of financing costs totaled $40,840 for the three months
ended July 31, 2010, compared to interest and financing costs of $4,958 in
the three months ended July 31, 2009. Interest expense and financing costs in
2010 included interest on the subordinated borrowings of $31,250, and the
amortization of financing costs of $9,375, related to these notes. Interest
expense in the three months ended July 31, 2009 of $4,958 represents interest
expense paid on the SBA loan with Wells Fargo Bank, interest expense on
convertible notes and interest expense accrued at AMM for related party
notes.





A net
loss of $60,130 was reported for the three months ended July 31,
2010, compared to a net income of $55,849 for the three months ended
July 31, 2009.  The factors contributing to the net loss in the
current quarter compared to the net income in the quarter ended July 2009 are
discussed above.


15


Six
Months Ended July  31, 2010 vs. Six Months Ended July 31,
2009





Net
revenues for the six months ended July 31, 2010 of $1,842,580 increased
$760,455, or 70 percent, over net revenues of $1,082,125 reported for the six
months ended July 31, 2009. 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. The increase was attributable
to new hospital contracts, increased same-market area growth and expansion of
services with existing medical group clients at new hospitals.





Physician
practice salaries, benefits and other expenses for the six months ended July 31,
2010 were $1,539,405, at 84% of net revenues, compared to $807,247 , at 75%
of net revenues, for the six months ended July310, 2009.  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 increase in physician costs was attributable to start-up losses
on new hospital contracts and expansions of services at new hospitals in the
quarter.





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 were $275,708, at 15% of net revenues, for the six
months ended July 31, 2010. General and Administrative expenses were $294,668
for the six months ended July 31, 2009, at 27% of net revenues.  In
the six months ended July 2010, the Company recorded non-cash compensation
expenses of $47,378, related to the issuance of shares for service, lower than
the  $95,167 of such non-cash costs in the first six months of
2009.  Also, the Company recorded a reduction in bad debt expense
of  $64,566 in the six month period ended July 2010.  The
Company incurred  higher legal fees, rent and consulting fees which
partially offset the above two favorable factors. Depreciation and amortization
expense was $5,999 for the six months ended July 31, 2010, and $20,675 for the
comparable six-month period in 2009.





The
Company reported a profit from operations of $21,468 for the six months
ended July 31, 2010, compared to a loss from operations of $40,465 recorded
in the same period of 2009. Net revenues in 2010 continued to benefit from the
addition of contracts with hospitals and the hiring of several additional
physicians.  In addition, the operating profit in 2010 benefitted from
the lower non-cash compensation costs and a favorable  adjustment to
bad debt expense.





Interest
expense and the amortization of financing costs totaled $81,738 for the six
months ended July 31, 2010,  compared to interest and financing costs
of $9,807 in the six months ended July 31, 2009. Interest expense and financing
costs in 2010 included interest on the subordinated borrowings of $62,500, and
the amortization of financing costs of $18,750,  related to these
notes. Interest expense in the six months ended July 31, 2009 of $9,807 included
interest on the convertible notes, interest expense paid on the SBA loan with
Wells Fargo Bank, and interest expense accrued at AMM for the related party
notes.





Apollo
reported a net loss of $60,973 for the six months ended July 31,
2010, compared to a net loss of $51,072 for the six months ended July
31, 2009.  The reduction in the net loss was the result of the factors
discussed above.





Liquidity
and Capital Resources





At July
31, 2010, the Company had cash and cash equivalents of $534,332, compared to
cash and cash equivalents of  $665,737 at  January 31, 2010.
The cash balance at July 31, 2010 included $487,647 in a money market brokerage
account.  There were no short-term borrowings at July 31, 2010 or
January 31, 2010.   Long-term borrowings totaled $1,247,985 as of July
31, 2010 and  $1,247,582 on January 31, 2010.


16


Net cash
used in operating activities totaled $126,248 in the six months ended July 31,
2010, compared to net cash  provided by operations of $13,230 for the
comparable six months ended July 31, 2009.  The  large
unfavorable adjustment in bad debt expense and the greater increase in accounts
receivable in the six months ended July 2010 were responsible for the decrease
in the operating cash flow.





Net cash
used in operating activities for the three months ended July 31, 2010 of
$126,248 was comprised of a net loss of $60,973 for the six month
period.  Adjustments for non-cash charges which include depreciation,
bad debt expense, shares issued for service and amortization of commission cost
and debt discount, provided $7,753.  In addition, net changes in
operating assets and liabilities used cash of $73,028.





The
Company invested $4,568 to develop a Web Site and an $800 advance to an
affiliated Company during  the first six months of 2010.  We
did not spend any cash for investing activities in the comparable six-month
period of 2009.





For the
six months ended July 31, 2010, the Company received $211 from the issuance of
shares to a director under financing activities. In the six months ended July
2009, net cash used in financing activities totaled $6,655 and consisted of
principal pay downs on notes payable totaling $18,741, partially offset by
$12,087 of borrowings on the Company's SBA loan with Wells Fargo
Bank.





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. There were no borrowings under this
facility during the six months ended July 31, 2010.





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
July 31, 2010, 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.


17


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
July 31, 2010, 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 July 31, 2010.





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 July 31,
2010, 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.


18


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 six-month period ended July 31,
2010) 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 a 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
                  
                  Description10.6
                  
                  Amendment
      to Suresh Nihalani's Director Agreement and Indemnification Agreement ,
      dated July 17, 2010, (filed as exhibits to Current Report on Form 8-K
      filed on July 21, 2010 and incorporated herein by
    reference).10.7
                  
                  2010
      Equity Incentive Plan (filed as Appendix A to Schedule 14C Information
      filed on August 17, 2010 and incorporated herein by
      reference).31.1
                  
                  Certification
      by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a)
      of the Exchange Act.31.2
                  
                  Certification
      by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a)
      of the Exchange Act.32.1
                  
                  Certification
      by Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b)
      of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the
      United States Code.32.2
                  
                  Certification
      by Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b)
      of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the
      United States
Code.


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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:
       September 10, 2010
            By:
            /s/ Warren HosseinionWarren
      HosseinionChief
      Executive Officer and DirectorDated:
       September 10, 2010
            By:
            /s/ A. Noel DeWinterA.
      Noel DeWinterChief
      Financial Officer and Principal Accounting
  Officer


20