10. Subsequent Events

Acquisition

On July 22, 2014, pursuant to a Stock Purchase Agreement dated as of July 21, 2014 (the “Purchase Agreement”) among the Target (as defined below), the shareholders of the Target (the “Sellers”) and an affiliate in which the sole physician shareholder is Warren Hosseinion, M.D., the Company's Chief Executive Officer (the “Affiliate”) of Apollo Medical Holdings, Inc. (the “Company”), the Affiliate acquired all of the outstanding shares of capital stock of a medical group that provides professional medical services in Los Angeles County, California (the “Target”). The shares of the Target were acquired from the Sellers. The purchase price for the shares was (i) $2,000,000 in cash, (ii) $362,646 to pay off and discharge certain indebtedness of the Target, (iii) warrants to purchase up to 1,000,000 shares of the Company’s common stock at an exercise price of $1.00 per share and (iv) a contingent amount of up to $1,000,000 payable, if at all, in cash. The acquisition was funded by an intercompany loan from AMM, which also provided an indemnity in favor of one of the Sellers relating to certain indebtedness of the Target that remained outstanding following the closing of the acquisition. Following the acquisition of the Target by the Affiliate, the Affiliate was merged with and into the Target, with the Target being the surviving corporation.

In connection with the acquisition of the Target, AMM entered into a management services agreement with the Affiliate on July 21, 2014. As a result of the Affiliate’s merger with and into the Target, the Target is now the counterparty to this management services agreement and bound by its terms. Pursuant to the management services agreement, AMM will manage all non-medical services for the Target and will have exclusive authority over all non-medical decision making related to the ongoing business operations of the Target, and is the primary beneficiary of the Target, and the financial statements of the Target will be consolidated as a variable interest entity with those of the Company from the date of the management services agreement.

Stock-based compensation

In July 2014 the Company issued 200,000 options to acquire the common shares of the Company to Warren Hosseinion, M.D., the Company’s Chief Executive Officer; 200,000 options to acquire the common shares of the Company to Gary Augusta, the Company’s Executive Chairman of the Board; and 100,000 options to acquire the common shares of the Company to Adrian Vazquez, M.D., a senior executive with the Company. Each option grant has an exercise price of $1.00 per share and will vest evenly on monthly basis over 36 months from the date of grant.