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Commitments and Contingencies | 6 Months Ended
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Sep. 30, 2017
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies |
8. | Commitments and Contingencies
Standby Letters of Credit, Lines of Credit and Outstanding Notes See Note 7 - “ Debt - Standby Letters of Credit and Lines of Credit ” above. Lease Commitments The Company’s lease for its current corporate headquarters, as amended, sets base rent at $ 37,913 per month for the first year and schedules annual increases in base rent each year until the final rental year, which is capped at $ 43,957 per month. The base rent may be abated by up to $ 228,049 subject to other terms of the lease. As of September 30, 2017, deferred rent liability associated with such leases was approximately $ 648,000 . Employment Agreements In December 2016, AMM entered into employment agreements with Warren Hosseinion, M.D., Adrian Vazquez, M.D., Gary Augusta and Mihir Shah, which replaced such officers’ previous employment agreements and revised certain term, bonus and severance arrangements. Such agreements, as amended as of the date of this Report, provide annual base salaries in the aggregate amount of $ 1,550,000 for such officers. Each of the new employment agreements has an initial term of three years with automatic annual renewals and provide 20 business days of paid time off per calendar year. Accrued and unused paid time off shall be paid in cash at the end of each calendar year. Under the new employment agreements, each officer is eligible to receive an annual bonus and is granted certain vesting rights and accrued benefits (as such term is defined therein) if his employment is terminated without “cause” (as such term is defined therein) or if he resigns with “good reason” (as such term is defined therein) during the employment term. Regulatory Matters The healthcare industry and Medicare and Medicaid programs are subject to numerous laws and regulations of federal, state and local governments, including the Health Insurance Portability and Accountability Act, the Health Information Technology for Economic and Clinical Health Act and the Patient Protection and Affordable Care Act, which are generally are complex and subject to interpretation. These laws and regulations govern matters such as licensure, accreditation, security and privacy of health information, health insurance portability, health insurance exchanges, government healthcare program participation requirements, reimbursement for patient services, and Medicare and Medicaid fraud and abuse. Government activity has continued with respect to investigations and allegations concerning possible violations of such laws and regulations by healthcare providers. Compliance with such laws and regulations can be subject to government review and interpretation. Violations of these laws and regulations may result in significant adverse regulatory actions, including fines, penalties, exclusion from government healthcare programs, repayments for patient services previously billed as well as those unknown or unasserted at this time. As a risk-bearing organization (“RBO”), the Company is required to follow regulations of the California Department of Managed Health Care (“DMHC”). The Company and its applicable affiliates must comply with a minimum working capital requirement, Tangible Net Equity (“TNE”) requirement, cash-to-claims ratio and claims payment requirements prescribed by the DMHC. TNE is defined as net assets less intangibles, less non-allowable assets (which include amounts due from affiliates), plus subordinated obligations. The DMHC determined that, as of February 28, 2016, MMG, was not in compliance with the DMHC’s positive TNE requirement for a RBO. As a result, the DMHC required MMG to develop and implement a corrective action plan (“CAP”) for such deficiency. MMG’s CAP has been submitted and was approved by DMHC in December 2016. Through a $ 2,000,000 intercompany revolving subordinate loan from AMM dated November 22, 2016, where AMM agreed to subordinate to other creditors its right in and to the repayment of the revolving loan, MMG achieved positive TNE in the third quarter of fiscal year 2017 and has maintained positive TNE to date. The DMHC is in the process of reviewing the Company’s filings for MMG to be taken off the CAP. As of the date of this Quarterly Report on Form 10-Q, the DMHC staff has indicated to the Company that it has no objections to the closing of the CAP. On August 31, 2017, AMM and MMG entered into an amendment to the intercompany revolving loan, increasing the revolving loan commitment from $ 2,000,000 to $ 3,000,000 . In addition, the Company has from time to time issued securities to investors to raise capital and as compensation to directors, employees and consultants to attract and retain talent. As a result, the Company is subject to federal and state securities laws. Non-compliance with such laws, such as its failing to file information statements for two corporate actions taken by its majority stockholders in written consents in 2012 and 2013, could cause federal or state agencies to take action against the Company, including restricting its ability to issue securities or imposing fines or penalties on it. Legal Actions and Proceedings In the ordinary course of the Company’s business, the Company from time to time becomes involved in pending and threatened legal actions and proceedings, most of which involve claims of medical malpractice related to medical services provided by the Company’s affiliated hospitalists. The Company may also become subject to other lawsuits which could involve significant claims and/or significant defense costs. See “ Potential Third-Party Claims ” below. Many of the Company’s payer and provider contracts are complex in nature and may be subject to differing interpretations regarding amounts due for the provision of medical services, which may not come to light until a substantial period of time has passed following contract implementation. Liabilities for claims are recorded when the loss is probable and can be estimated. Any adjustments to reserves are reflected in current operations. As of the date of this Quarterly Report on Form 10-Q, the Company is not a party to any legal proceedings, which the Company expects individually or in the aggregate to have a material adverse effect on the Company’s financial condition, cash flows or results of operations. Nonetheless, the resolution of any claim or litigation is subject to inherent uncertainty and could have a material adverse effect on the Company’s financial condition, cash flows or results of operations. Potential Third-Party Claims Monteverde & Associates PC, a plaintiffs’ securities law firm, has announced that it is investigating the Company and its board of directors for potential federal law violations and/or breaches of fiduciary duties in connection the Merger. This investigation purportedly focuses on whether the Company and/or its board of directors violated federal securities laws and/or breached their fiduciary duties to the Company’s stockholders by failing to properly value the Merger and failing to disclose all material information in connection with the Merger. While the Company believes that its board of directors and management have faithfully upheld their fiduciary duties in negotiating and executing the Merger for the combined interest of all of the Company’s stockholders, the Company cannot preclude the possibility that this investigation may lead to legal actions and proceedings against the Company. Liability Insurance Although the Company currently maintains liability insurance policies on a claims-made basis, which are mainly intended to cover malpractice liability and certain other claims, the coverage must be renewed annually, and may not continue to be available to the Company in future years at acceptable costs, and on favorable terms. In addition, the Company cannot be certain that the Company’s current insurance coverage will be adequate to cover liabilities arising out of claims asserted against the Company, the Company’s affiliated professional organizations or the Company’s affiliated hospitalists in the future where the outcomes of such claims are unfavorable. Liabilities in excess of the Company’s insurance coverage may have a material adverse effect on the Company’s business, financial position, results of operations and cash flows.

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