Stockholders' Deficit

3 Months Ended

Apr. 30, 2013

Stockholders' Equity Note [Abstract]

Stockholders' Deficit

6.  Stockholders’ Deficit

Common Stock Placement

In March 2013, the Company initiated a private placement of up to 7,500,000 shares of its common stock at a price per share of $0.40 (the “Equity Offering”), and during the three months ended April 30, 2013 the Company has received proceeds of $300,000 which are being held in escrow pending a closing anticipated to take place on or around July 31, 2013. No shares have been issued in connection therewith at April 30, 2013.

Equity Incentive Plans  

The Company’s amended 2010 Equity Incentive Plan (the “2010 Plan”) allowed the Board to grant up to 12,000,000 shares of the Company’s common stock, and provided for awards including incentive stock options, non-qualified options, restricted common stock, and stock appreciation rights. As of April 30, 2013, there were no shares available for future grants under the 2010 Plan, and no further shares will be issued under the 2010 Plan.

On April 29, 2013 the Company’s Board of Directors approved the Company’s 2013 Equity Incentive Plan (the “2013 Plan”), pursuant to which 5,000,000 shares of the Company’s common stock will be reserved for issuance thereunder. The Company received approval of the 2013 Plan Company’s stockholders on May 19, 2013. The Company issues new shares to satisfy stock option and warrant exercises under the 2013 Plan. As of April 30, 2013 there were 3,810,333 shares available for future grants under the 2013 Plan.

Stock options and restricted common stock issued to non-employees as compensation for services to be provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair value of the option or share, whichever can be more clearly determined. The Company recognizes this expense over the period in which the services are provided.   

Share Issuances   

On April 30, 2013 the Company’s Board of Directors authorized the issuance of 300,000 shares of common stock to Kanehoe Advisors for consulting services, 300,000 shares of common stock to Gary Augusta for consulting services, and 100,000 shares of common stock for other professional services during the three months ended April 30, 2013. The 700,000 shares authorized had an aggregate cost of $315,000 and were recorded as stock-based compensation expense based on the fair values of the shares at the commitment dates. These shares were not issued as of April 30, 2013, and were recorded as a liability at April 30, 2013.

Option Issuances

During the three months ended April 30, 2013 the Company’s Board of Directors authorized the issuance of options for 150,000 shares of common stock with an exercise price of $0.21 per share to Mark Meyers pursuant to Mr. Meyer’s consulting agreement. The options vest immediately and expire on the tenth anniversary of issuance. The fair value of the 150,000 stock options of $55,774 was determined under the Black-Scholes option pricing model. The calculation was based on the Company’s closing stock price on the date of grant and the following weighted-average inputs:

Expected term (years)	3.0
Volatility	17.4	%
Dividends	0.0	%
Interest rate	0.82	%

In addition, during the three months ended April 30, 2013 , the Company issued awards of options for 382,000 shares of the Company’s common stock at an exercise price equal to the 30 day trailing volume-weighted average share price (“VWAP”) of the Company’s common stock from the date of grant. The options generally vest on a monthly basis over a 36 month period, and expire on the tenth anniversary of issuance. The aggregate fair value of the stock options of $94,162 was determined using the Black-Scholes option pricing model. The fair values of each option grant were estimated on the date of grant using the Black-Scholes option pricing model inputs. No options were issued during the three months ended April 30, 2012.

The weighted-average inputs for the three months ended April 30, 2013 were as follows:

Exercise Price	$	0.41
Expected Term (in years)	$	4.59
Volatility		26.0	%
Dividend rate		0.0	%
Interest rate		0.5	%

Stock option activity for the three months ended April 30, 2013 is summarized below:

			Weighted		Weighted
			Average		Average
			Per Share		Remaining		Aggregate
			Exercise		Life		Intrinsic
	Shares		Price		(Years)		Value
Balance, January 31, 2013		5,300,000	$	0.18		9.1	$	-
Granted		532,000		0.37		9.7		-
Exercised		-		-		-		-
Expired		-		-		-		-
Forfeited		-		-		-		-
Balance, April 30, 2013		5,832,000	$	0.20		9.1	$	-
Vested and exercisable - April 30, 2013		3,398,419	$	0.20		8.9	$	-

Stock-based compensation expense related to restricted stock and option awards is recognized over their respective vesting periods, and is as follows for the three months ended April 30:

	2013		2012
Stock-based compensation expense:
Cost of services	$	147,895	$	61,254
General and administrative		475,331		42,880
	$	623,226	$	104,134

ApolloMed ACO 2012 Equity Incentive Plan

On October 18, 2012 ApolloMed ACO’s Board of Directors adopted the ApolloMed Accountable Care Organization, Inc. 2012 Equity Incentive Plan (the “ACO Plan”) and reserved 9,000,000 shares of ApolloMed ACO’s common stock for issuance thereunder. The purpose of the ACO Plan is to encourage selected employees, directors, consultants and advisers to improve operations and increase the profitability of ApolloMed ACO and encourage selected employees, directors, consultants and advisers to accept or continue employment or association with ApolloMed ACO. No shares were issued under the ACO Plan for the three months ended April 30, 2013.

Awards of restricted stock under the Plan vest (i) one-third on the date of grant; (ii) one-third on the first anniversary of the date of grant, if the grantee has remained in service continuously until that date; and (iii) one-third on the second anniversary of the date of grant if the grantee has remained in service continuously until that date. 

As of April 30, 2013, total unrecognized compensation costs related to non-vested stock-based compensation arrangements granted under our 2010 and 2013 Equity Plans, and the ACO Plan’s and the weighted-average period of years expected to recognize those costs are as follows:

	Unrecognized Compensation Cost		Weighted  Average Remaining Life (Years)
Common stock options	$	326,128		0.8
ACO Plan restricted stock	$	21,525		1.8

Warrants

Warrants consisted of the following as of and for the three months ended April 30, 2013:

	Aggregate		Number of
	intrinsic value		warrants
Outstanding at January 31, 2013	$	-		2,936,000
Granted		-		75,000
Exercised		-		-
Cancelled		-		-
Outstanding at April 30, 2013	$	-		3,011,000

				Weighted
				average				Weighted
		Warrants		remaining		Warrants		average
Exercise Price		outstanding		contractual life		exercisable		exercise price
$	0.11485		1,250,000		3.25		1,250,000	$	0.1149
$	0.11485		250,000		3.25		250,000	$	0.1149
$	0.45000		500,000		3.25		500,000	$	0.4500
$	0.50000		100,000		4.50		100,000	$	0.5000
$	0.45000		735,000		4.76		735,000	$	0.4500
$	0.40000		176,000		4.76		176,000	$	0.4000
			3,011,000		3.75		3,011,000	$	0.2818

Authorized stock

At April 30, 2013 the Company was authorized to issue up to 100,000,000 shares of common stock. The Company is required to reserve and keep available out of the authorized but unissued shares of common stock such number of shares sufficient to effect the conversion of all outstanding shares of the 10% Senior Subordinated Callable Convertible Notes, the 8% Senior Subordinated Convertible Promissory Notes, the 9% Senior Subordinated Callable Notes, the exercise of all outstanding warrants exercisable into shares of common stock, and shares granted and available for grant under the Company’s 2013 Plan. The amount of shares of common stock reserved for these purposes is as follows at April 30, 2013: 

Common stock issued and outstanding	34,843,441
Conversion of 10% Notes	10,883,761
Conversion of 8% Notes	600,000
Conversion of 9% Notes	2,006,283
Warrants outstanding	3,011,000
Stock options outstanding	5,832,000
Shares issuable under 2013 Equity Incentive Plan	3,810,333
	60,986,818