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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  ___ to ___.
Commission File No. 001-37392
Apollo Medical Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware95-4472349
(State or Other Jurisdiction(I.R.S. Employer
of Incorporation)Identification Number)
1668 S. Garfield Avenue, 2nd Floor, Alhambra, California 91801
(Address of principal executive offices and zip code)
(626) 282-0288
(Registrant’s telephone number, including area code) 
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     No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes     No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):  Yes     No
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol
Name of Each Exchange on Which Registered
Common Stock, $0.001 par value per share
AMEH
Nasdaq Capital Market
As of November 2, 2020, there were 54,265,602 shares of common stock of the registrant, $0.001 par value per share, issued and outstanding.



APOLLO MEDICAL HOLDINGS, INC.
INDEX TO FORM 10-Q FILING
TABLE OF CONTENTS
PAGE


2


Glossary

The following abbreviations or acronyms that may be used in this document shall have the adjacent meanings set forth below:
Accountable Health CareAccountable Health Care IPA, a Professional Medical Corporation
AHMCAHMC Healthcare Inc.
AIPBPAll-Inclusive Population-Based Payments
Alpha CareAlpha Care Medical Group, Inc.
AMGAMG, a Professional Medical Corporation
AMHApolloMed Hospitalists, a Medical Corporation
AMMApollo Medical Management, Inc.
AP-AMHAP-AMH Medical Corporation
APAACOAPA ACO, Inc.
APCAllied Physicians of California, a Professional Medical Corporation
APC-LSMAAPC-LSMA Designated Shareholder Medical Corporation
BAHABay Area Hospitalist Associates
BrightBright Health Company of California, Inc.
CDSCConcourse Diagnostic Surgery Center, LLC
CMSCenters for Medicare & Medicaid Services
CQMCCritical Quality Management Corporation
CSICollege Street Investment LP, a California limited partnership
DMHCCalifornia Department of Managed Healthcare
DMGDiagnostic Medical Group
HSMSOHealth Source MSO Inc., a California corporation
ICCAHMC International Cancer Center, a Medical Corporation
IPAindependent practice association
LMALaSalle Medical Associates
MMGMaverick Medical Group, Inc.
MPPMedical Property Partners
NGACONext Generation Accountable Care Organization
NMMNetwork Medical Management, Inc.
PASCPacific Ambulatory Health Care, LLC
PMIOCPacific Medical Imaging and Oncology Center, Inc.
SCHCSouthern California Heart Centers
UCAPUniversal Care Acquisition Partners, LLC
UCIUniversal Care, Inc.
VIEvariable interest entity
3



INTRODUCTORY NOTE
Unless the context dictates otherwise, references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us,” “our,” and similar words are references to Apollo Medical Holdings, Inc., a Delaware corporation, and its consolidated subsidiaries and affiliated entities, as appropriate, including its consolidated variable interest entities (“VIEs”) and “ApolloMed” refers to Apollo Medical Holdings, Inc.
The Centers for Medicare & Medicaid Services (“CMS”) have not reviewed any statements contained in this Quarterly Report on Form 10-Q describing the participation of APA ACO, Inc. (“APAACO”) in the Next Generation Accountable Care Organization (“NGACO”) Model.
Trade names and trademarks of the Company and its subsidiaries referred to herein and their respective logos, are our property. This Quarterly Report on Form 10-Q may contain additional trade names and/or trademarks of other companies, which are the property of their respective owners. We do not intend our use or display of other companies’ trade names and/or trademarks, if any, to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.
NOTE ABOUT FORWARD-LOOKING STATEMENTS
    This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, statements about the Company's guidance for the year ending December 31, 2020, any statements about our business (including the impact of the 2019 Novel Coronavirus (COVID-19) pandemic on our business), financial condition, operating results, plans, objectives, expectations and intentions, any guidance on, or projections of, earnings, revenue or other financial items, such as our projected capitation from CMS for the year ending December 31, 2020 or otherwise, and our future liquidity, including cash flows and any payments under the $545.0 million loan we made to our VIE, AP-AMH; any statements of any plans, strategies and objectives of management for future operations such as the material opportunities that we believe exist for our Company; any statements concerning proposed services, developments, mergers or acquisitions; any statements regarding the outlook on our NGACO Model or strategic transactions; any statements regarding management’s view of future expectations and prospects for us; any statements about prospective adoption of new accounting standards or effects of changes in accounting standards; any statements regarding future economic conditions or performance; any statements of belief; any statements of assumptions underlying any of the foregoing; and other statements that are not historical facts. Forward-looking statements may be identified by the use of forward-looking terms such as “anticipate,” “could,” “can,” “may,” “might,” “potential,” “predict,” “should,” “estimate,” “expect,” “project,” “believe,” “think,” “plan,” “envision,” “intend,” “continue,” “target,” “seek,” “contemplate,” “budgeted,” “will,” “would,” and the negative of such terms, other variations on such terms or other similar or comparable words, phrases or terminology. These forward-looking statements present our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q and are subject to change.
    Forward-looking statements involve risks and uncertainties and are based on the current beliefs, expectations and certain assumptions of management. Some or all of such beliefs, expectations and assumptions may not materialize or may vary significantly from actual results. Such statements are qualified by important economic, competitive, governmental and technological factors that could cause our business, strategy, or actual results or events to differ materially from those in our forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K, for the year ended December 31, 2019, filed with the SEC on March 16, 2020, including, the risk factors discussed under the heading “Risk Factors” in Part I, Item IA thereof. Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change, and significant risks and uncertainties that could cause actual conditions, outcomes and results to differ materially from those indicated by such statements.

PART I FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
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APOLLO MEDICAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
September 30,
2020
December 31,
2019
Assets
Current assets
Cash and cash equivalents$166,082 $103,189 
Restricted cash 75 
Investment in marketable securities118,309 116,539 
Receivables, net18,257 11,004 
Receivables, net – related parties41,518 48,136 
Other receivables3,988 16,885 
Prepaid expenses and other current assets12,119 10,315 
Loan receivable6,425 6,425 
Loan receivable – related parties 16,500 
Total current assets
366,698 329,068 
Noncurrent assets
Restricted cash746 746 
Land, property and equipment, net10,929 12,130 
Intangible assets, net90,781 103,012 
Goodwill239,053 238,505 
Investment in other entities – equity method27,220 28,427 
Investments in privately held entities37,075 896 
Operating lease right-of-use assets19,298 14,248 
Other assets22,473 1,681 
Total noncurrent assets
447,575 399,645 
Total assets (1)
$814,273 $728,713 
Liabilities, mezzanine equity and stockholders’ equity
Current liabilities
Accounts payable and accrued expenses$40,474 $27,279 
Fiduciary accounts payable3,986 2,027 
Medical liabilities57,455 58,725 
Income taxes payable16,169 4,529 
Dividend payable485 271 
Finance lease liabilities102 102 
Operating lease liabilities3,290 2,990 
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September 30,
2020
December 31,
2019
Current portion of long-term debt9,500 9,500 
Total current liabilities
131,461 105,423 
Noncurrent liabilities
Deferred tax liability11,659 18,269 
Finance lease liabilities, net of current portion337 416 
Operating lease liabilities, net of current portion16,616 11,373 
Long-term debt, net of current portion and deferred financing costs226,051 232,172 
Total noncurrent liabilities
254,663 262,230 
Total liabilities (1)
386,124 367,653 
Commitments and contingencies (Note 11)


Mezzanine equity
Noncontrolling interest in Allied Physicians of California, a Professional Medical Corporation198,731 168,725 
Stockholders’ equity
Series A Preferred stock, $0.001 par value per share; 5,000,000 shares authorized (inclusive of all preferred stock, including Series B Preferred stock); 1,111,111 issued and zero outstanding
  
Series B Preferred stock, $0.001 par value per share; 5,000,000 shares authorized (inclusive of all preferred stock, including Series A Preferred stock); 555,555 issued and zero outstanding
  
Common stock, $0.001 par value per share; 100,000,000 shares authorized, 36,775,817 and 35,908,057 shares outstanding, excluding 17,475,707 and 17,458,810 treasury shares, as of September 30, 2020 and December 31, 2019, respectively
37 36 
Additional paid-in capital
168,653 159,608 
Retained earnings
59,714 31,905 
228,404 191,549 
Noncontrolling interest
1,014 786 
Total stockholders’ equity
229,418 192,335 
Total liabilities, mezzanine equity and stockholders’ equity
$814,273 $728,713 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
(1) The Company's consolidated balance sheets include the assets and liabilities of its consolidated variable interest entities ("VIEs"). The consolidated balance sheets include total assets that can be used only to settle obligations of the Company’s consolidated VIEs totaling $877.6 million and $849.3 million as of September 30, 2020 and December 31, 2019, respectively, and total liabilities of the Company’s consolidated VIEs for which creditors do not have recourse to the general credit of the primary beneficiary of $113.0 million and $114.5 million as of September 30, 2020 and December 31, 2019, respectively. See Note 15 – Variable Interest Entities (VIEs) for further detail.
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APOLLO MEDICAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
September 30,
Nine Months Ended September 30,
2020201920202019
Revenue
Capitation, net$135,032 $130,807 $416,402 $305,548 
Risk pool settlements and incentives30,916 11,355 54,155 32,640 
Management fee income8,707 8,518 26,212 27,867 
Fee-for-service, net3,737 4,100 9,434 12,059 
Other income1,731 1,280 4,194 3,753 
Total revenue180,123 156,060 510,397 381,867 
Operating expenses
Cost of services121,823 131,130 402,106 315,925 
General and administrative expenses16,270 7,950 39,660 30,031 
Depreciation and amortization4,674 4,920 14,004 13,793 
Provision for doubtful accounts   (1,363)
Impairment of intangibles 1,994  1,994 
Total expenses142,767 145,994 455,770 360,380 
Income from operations37,356 10,066 54,627 21,487 
Other (expense) income
Income from equity method investments403 2,054 3,291 1,162 
Gain on sale of equity method investment  99,647  
Interest expense(2,466)(828)(8,007)(1,350)
Interest income752 509 2,544 1,305 
Other income130 2,620 1,514 2,832 
Total other (expense) income, net(1,181)4,355 98,989 3,949 
Income before provision for income taxes36,175 14,421 153,616 25,436 
Provision for income taxes10,751 3,682 44,204 6,483 
Net income25,424 10,739 109,412 18,953 
Net income attributable to noncontrolling interest8,711 7,035 81,603 11,564 
Net income attributable to Apollo Medical Holdings, Inc.$16,713 $3,704 $27,809 $7,389 
Earnings per share – basic$0.46 $0.11 $0.77 $0.21 
Earnings per share – diluted$0.45 $0.10 $0.75 $0.20 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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APOLLO MEDICAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF MEZZANINE AND STOCKHOLDERS’ EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
Mezzanine
Equity –
Noncontrolling
Interest in APC
Retained
Earnings
Common Stock Outstanding
Additional
Paid-in Capital
Noncontrolling
Interest
Shareholders’
Equity
Shares
Amount
Balance at January 1, 2020$168,725 35,908,057 $36 $159,608 $31,905 $786 $192,335 
Net (loss) income(1,161)— — — 4,052 95 4,147 
Purchase of treasury shares
— (16,897)— (301)— — (301)
Purchase of noncontrolling interest(125)— — — — —  
Shares issued for exercise of options and warrants— 151,601 — 722 — — 722 
Share-based compensation— — — 1,058 — — 1,058 
Dividends(10,000)— — — — —  
Balance at March 31, 2020$157,439 36,042,761 $36 $161,087 $35,957 $881 $197,961 
Net income73,667 — — — 7,044 291 7,335 
Purchase of noncontrolling interest(126)— — — — —  
Shares issued for vesting of restricted stock awards— 24,453 — — — —  
Shares issued for exercise of options and warrants— 242,299 — 2,283 — — 2,283 
Share-based compensation— — — 852 — — 852 
Cancellation of restricted stock awards— — — (236)— — (236)
Dividends(20,000)— — — — (347)(347)
Balance at June 30, 2020$210,980 36,309,513 $36 $163,986 $43,001 $825 $207,848 
Net income8,522 — — — 16,713 189 16,902 
Purchase of noncontrolling interest(771)— — — — —  
Shares issued for cashless exercise of warrants— 66,517 — — — —  
Shares issued for exercise of options and warrants— 399,787 1 4,019 — — 4,020 
Share-based compensation— — — 648 — — 648 
Dividends(20,000)— — — — —  
Balance at September 30, 2020$198,731 36,775,817 $37 $168,653 $59,714 $1,014 $229,418 
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Mezzanine
Equity –
Noncontrolling
Interest in APC
Retained
Earnings
Common Stock Outstanding
Additional
Paid-in Capital
Noncontrolling
Interest
Shareholders’
Equity
Shares
Amount
Balance at January 1, 2019$225,117 34,578,000 $35 $162,723 $17,788 $998 $181,544 
Net (loss) income
(3,000)— — — 140 410 550 
Purchase of treasury shares(40)(93,000)— — — —  
Shares issued for exercise of options and warrants155 17,000 — 140 — — 140 
Share-based compensation202 2,000 — 143 — — 143 
Dividends(10,000)— — — — —  
Balance at March 31, 2019$212,434 34,504,000 $35 $163,006 $17,928 $1,408 $182,377 
Net income6,896 — — — 3,545 223 3,768 
Shares issued for exercise of options and warrants50 135,000 — 758 — — 758 
Share-based compensation203 — — 128 — — 128 
Dividends— — — — — (942)(942)
Balance at June 30, 2019$219,583 34,639,000 $35 $163,892 $21,473 $689 $186,089 
Net income6,285 — — — 3,704 751 4,455 
Shares issued for exercise of options and warrants— 184,000 — 1,502 — — 1,502 
Share-based compensation202 — — 128 — — 128 
Stock subscriptions550 — — — — —  
Stock issued in connection with a business combination414 — — — — —  
Cost related to issuance of preferred shares(804)— — — — —  
Dividends(50,000)— — — — —  
Balance at September 30, 2019$176,230 34,823,000 $35 $165,522 $25,177 $1,440 $192,174 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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APOLLO MEDICAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
Nine Months Ended September 30,
20202019
Cash flows from operating activities
Net income $109,412 $18,953 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization
14,004 13,793 
Impairment of intangibles 1,994 
Amortization of debt issuance costs1,004  
Provision for doubtful accounts
 (1,363)
Share-based compensation
2,558 1,006 
Unrealized loss (gain) from investment in equity securities23 (6)
Income from equity method investments(3,291)(1,162)
Gain on sale of equity method investments(99,647) 
Gain on loan assumption (2,250)
Deferred tax
(6,137)(186)
Changes in operating assets and liabilities, net of business combinations:
Receivables, net(6,953)1,904 
Receivables, net – related parties6,618 5,864 
Other receivables
12,898 (13,719)
Prepaid expenses and other current assets
(1,804)(2,914)
Right-of-use assets
2,601 1,877 
Other assets
(5,090)(525)
Accounts payable and accrued expenses
12,644 4,868 
Fiduciary accounts payable
1,958 196 
Medical liabilities
(1,566)(6,226)
Income taxes payable
11,642 (10,229)
Operating lease liabilities
(2,110)(1,790)
Net cash provided by operating activities48,764 10,085 
Cash flows from investing activities
Payments for business acquisition, net of cash acquired (49,403)
Proceeds from repayment of loans receivable – related parties16,500  
Advances on loans receivable (7,425)
Purchases of marketable securities
(1,793)(20)
Purchases of investments – equity method(500)(2,949)
Proceeds from sale of equity method investment52,743  
Purchases of property and equipment
(553)(807)
Dividend received 240 
Net cash provided by (used in) investing activities66,397 (60,364)
Cash flows from financing activities
Repayment of bank loan and lines of credit
 (52,640)
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Nine Months Ended September 30,
20202019
Dividends paid
(50,133)(60,670)
Repayment of term loan
(7,125) 
Payment of finance lease obligations
(78)(76)
Proceeds from the exercise of stock options and warrants
6,552 2,400 
Repurchase of shares
(1,559)(40)
Borrowings on line of credit 289,600 
Proceeds from common stock offering
 755 
Cost of debt and equity issuance costs (5,622)
Net cash (used in) provided by financing activities(52,343)173,707 
Net increase in cash, cash equivalents and restricted cash62,818 123,428 
Cash, cash equivalents and restricted cash, beginning of period
104,010 107,637 
Cash, cash equivalents and restricted cash, end of period
$166,828 $231,065 
Supplementary disclosures of cash flow information:
Cash paid for income taxes$37,900 $17,900 
Cash paid for interest
6,961 1,000 
Supplemental disclosures of non-cash investing and financing activities
Dividend declared included in dividend payable
$485 $271 
Deferred tax liability adjustment to goodwill$ $11,540 
Deferred tax liability adjustment related to warrant exercises$473 $ 
APC stock issued in exchange for AMG$ $414 
Preferred shares received from sale of equity method investment$36,179 $ 
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total amounts of cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows (in thousands):
December 31,
20192018
Cash and cash equivalents$103,189 $106,892 
Restricted cash – current75  
Restricted cash – non-current746 745 
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows$104,010 $107,637 
September 30,
20202019
Cash and cash equivalents$166,082 $230,299 
Restricted cash – current 20 
Restricted cash – non-current746 746 
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows$166,828 $231,065 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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APOLLO MEDICAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.    Description of Business
Overview

Apollo Medical Holdings, Inc. ("ApolloMed") together with its affiliated physician groups and consolidated entities (collectively, the “Company”) is a leading physician-centric, technology-enabled healthcare management company. Leveraging its proprietary population health management and healthcare delivery platform, ApolloMed operates an integrated, value-based healthcare model, which aims to empower the providers in its network to deliver the highest quality of care to its patients in a cost-effective manner.

Headquartered in Alhambra, California, ApolloMed's subsidiaries include management services organizations ("MSOs"), affiliated independent practice associations ("IPAs") and a Next Generation Accountable Care Organization ("NGACO"). Network Medical Management, Inc. ("NMM") and Apollo Medical Management, Inc. ("AMM") are the administrative and managerial services companies for the affiliated physician owned professional corporations that contract with independent physicians to deliver medical services in-office and virtually under the Allied Physicians of California, a Professional Medical Corporation d.b.a. Allied Pacific of California IPA ("APC"), Alpha Care Medical Group, Inc. and Accountable Health Care IPA brands. These affiliates are supported by ApolloMed Hospitalists, a Medical Corporation ("AMH") and Southern California Heart Centers, a Medical Corporation ("SCHC"). The Company's NGACO operates under the APA ACO, Inc. ("APAACO") brand and participates in the Centers for Medicare & Medicaid Services program that allows provider groups to assume higher levels of financial risk and potentially achieve a higher reward from participation in the program's attribution-based risk sharing model.

The Company provides care coordination services to each major constituent of the healthcare delivery system, including patients, families, primary care physicians, specialists, acute care hospitals, alternative sites of inpatient care, physician groups and health plans. The Company’s physician network consists of primary care physicians, specialist physicians, and hospitalists.
NMM was formed in 1994 as an MSO for the purposes of providing management services to medical companies and IPAs. The management services primarily include billing, collection, accounting, administration, quality assurance, marketing, compliance, and education. Following a business combination, NMM became a wholly-owned subsidiary of ApolloMed in December 2017.
APC was incorporated in 1992, for the purpose of arranging healthcare services as an IPA. APC has contracts with various health maintenance organizations (“HMOs”) and other licensed healthcare service plans as defined in the California Knox-Keene Health Care Service Plan Act of 1975. Each HMO negotiates a fixed amount per member per month (“PMPM”) that is to be paid to APC. In return, APC arranges for the delivery of healthcare services by contracting with physicians or professional medical corporations for primary care and specialty care services. APC assumes the financial risk of the cost of delivering healthcare services in excess of the fixed amounts received. Some of the risk is transferred to the contracted physicians or professional corporations. The risk is also minimized by stop-loss provisions in contracts with HMOs.
In July 1999, APC entered into an amended and restated management and administrative services agreement with NMM (the initial management services agreement was entered into in 1997) for an initial fixed term of 30 years. In accordance with relevant accounting guidance, APC is determined to be a variable interest entity (“VIE”) of the Company as NMM is the primary beneficiary with the ability to direct the activities (excluding clinical decisions) that most significantly affect APC’s economic performance through its majority representation on the APC Joint Planning Board; therefore APC is consolidated by NMM.
AP-AMH Medical Corporation (“AP-AMH”) was formed in May 2019, as a designated shareholder professional corporation. Dr. Thomas Lam, a shareholder, and the Chief Executive Officer and Chief Financial Officer of APC and Co-Chief Executive Officer of ApolloMed, is the sole shareholder of AP-AMH. ApolloMed makes all the decisions on behalf of AP-AMH and funds and receives all the distributions from its operations. ApolloMed has the rights to receive benefits from the operations of AP-AMH and has the option, but not the obligation, to cover losses. Therefore, AP-AMH is controlled and consolidated by ApolloMed as the primary beneficiary of this VIE.
In September 2019, ApolloMed completed the following series of transactions with its affiliates, AP-AMH and APC;
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1.ApolloMed loaned AP-AMH $545.0 million pursuant to a 10-year secured loan agreement (the “AP-AMH Loan”). The loan bears interest at a rate of 10% per annum simple interest, is not prepayable (except in certain limited circumstances), requires quarterly payments of interest only in arrears, and is secured by a first priority security interest in all of AP-AMHs assets, including the shares of APC Series A Preferred Stock purchased by AP-AMH, as described below. To the extent that AP-AMH is unable to make any interest payment when due because it has received dividends on the APC Series A Preferred Stock insufficient to pay in full such interest payment, then the outstanding principal amount of the loan will be increased by the amount of any such accrued but unpaid interest, and any such increased principal amounts will bear interest at the rate of 10.75% per annum simple interest.
2.AP-AMH purchased 1,000,000 shares of APC Series A Preferred Stock for aggregate consideration of $545.0 million in a private placement. Under the terms of the APC Certificate of Determination of Preferences of Series A Preferred Stock (the “Certificate of Determination”), AP-AMH is entitled to receive preferential, cumulative dividends that accrue on a daily basis and that are equal to the sum of (i) APC’s net income from healthcare services (as defined in the Certificate of Determination), plus (ii) any dividends received by APC from certain of APC’s affiliated entities, less (iii) any Retained Amounts (as defined in the Certificate of Determination).
3.APC purchased 15,015,015 shares of ApolloMed’s common stock for total consideration of $300.0 million in private placement. In connection therewith, ApolloMed granted APC certain registration rights with respect to ApolloMed’s common stock that APC purchased, and APC agreed that APC votes in excess of 9.99% of ApolloMed’s then outstanding shares will be voted by proxy given to ApolloMed’s management, and that those proxy holders will cast the excess votes in the same proportion as all other votes cast on any specific proposal coming before ApolloMed’s stockholders.
4.ApolloMed licensed to AP-AMH the right to use certain trade names for certain specified purposes for a fee equal to a percentage of the aggregate gross revenues of AP-AMH. The license fee is payable out of any Series A Preferred Stock dividends received by AP-AMH from APC.
5.Through its subsidiary, NMM, the Company agreed to provide certain administrative services to AP-AMH for a fee equal to a percentage of the aggregate gross revenues of AP-AMH. The administrative fee also is payable out of any APC Series A Preferred Stock dividends received by AP-AMH from APC.
As part of the series of transaction, APC and AP-AMH entered into Second Amendment to Series A Preferred Stock Purchase Agreement clarifying the term excluded assets ("Excluded Assets"). Excluded Assets means (i) assets received from the sale of shares of the Series A Preferred equal to the Series A Purchase Price, (ii) the assets of the Company that are not Healthcare Services Assets, including the Company’s equity interests in Universal Care, Inc., Apollo Medical Holdings, Inc., and any entity that is primarily engaged in the business of owning, leasing, developing or otherwise operating real estate, (iii) any assets acquired with the proceeds of the sale, assignment or other disposition of any of the assets described in clauses (i) or (ii), and (iv) any proceeds of the assets described in clauses (i), (ii) and (iii).
APC's ownership in ApolloMed was 32.00% at September 30, 2020 and 32.50% at December 31, 2019.
Concourse Diagnostic Surgery Center, LLC (“CDSC”) was formed in March 2010 in the state of California. CDSC is an ambulatory surgery center in City of Industry, California organized by a group of highly qualified physicians, which utilizes some of the most advanced equipment in the eastern part of Los Angeles County and the San Gabriel Valley. The facility is Medicare certified and accredited by the Accreditation Association for Ambulatory Healthcare, Inc. As of September 30, 2020, APC owned 45.01% of CDSCs capital stock. CDSC is determined to be a VIE and APC is determined to be the primary beneficiary. APC has the ability to direct the activities that most significantly affect CDSC’s economic performance and receives the most economic benefits; therefore CDSC is consolidated by APC.
APC-LSMA Designated Shareholder Medical Corporation (“APC-LSMA”) was formed in October 2012 as a designated shareholder professional corporation. Dr. Thomas Lam, a stockholder and the Chief Executive Officer and Chief Financial Officer of APC and Co-Chief Executive Officer of ApolloMed, is a nominee shareholder of APC. APC makes all investment decisions on behalf of APC-LSMA, funds all investments and receives all distributions from the investments. APC has the obligation to absorb losses and right to receive benefits from all investments made by APC-LSMA. APC-LSMA’s sole function is to act as the nominee shareholder for APC in other California medical professional corporations. Therefore, APC-LSMA is controlled and consolidated by APC as the primary beneficiary of this VIE. The only activity of APC-LSMA is to hold the investments in medical corporations, including the IPA lines of business of LaSalle Medical Associates (“LMA”), Pacific Medical Imaging and Oncology Center, Inc. (“PMIOC”), Diagnostic Medical Group (“DMG”) and AHMC International Cancer Center, a Medical Corporation (“ICC”). APC-LSMA also holds a 100% ownership interest in Maverick Medical Group,
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Inc. (“MMG”), Alpha Care Medical Group, Inc. (“Alpha Care”), Accountable Health Care IPA, a Professional Medical Corporation (“Accountable Health Care”), and AMG, a Professional Medical Corporation (“AMG”).
Alpha Care, an IPA acquired by the Company in May 2019, has been operating in California since 1993 as a risk bearing organization engaged in providing professional services under capitation arrangements with its contracted health plans through a provider network consisting of primary care and specialty care physicians. Alpha Care specializes in delivering high-quality healthcare to its enrollees and focuses on Medi-Cal/Medicaid, Commercial, and Medicare and Dual Eligible members in the Riverside and San Bernardino counties of Southern California.
Accountable Health Care is a California-based IPA that has served the local community in the greater Los Angeles County area through a network of physicians and healthcare providers for more than 20 years. Accountable Health Care currently has a network of over 300 primary care physicians and 600 specialty care physicians, as well as one community and regional hospital medical center, that provides quality healthcare services to its members of three federally qualified health plans and multiple product lines, including Medi-Cal, Commercial, Medicare and the California Healthy Families program. In August 2019, APC and APC-LSMA acquired the remaining outstanding shares of Accountable Health Care’s capital stock that they did not already own (comprising