Apollo Medical(AMEH) - 2020 Q1 - Quarterly Report

Introductory Note This section defines the terms 'Company' and 'ApolloMed' as used in the Quarterly Report and clarifies that the Centers for Medicare & Medicaid Services (CMS) have not reviewed statements regarding APA ACO, Inc.'s participation in the Next Generation Accountable Care Organization (NGACO) Model - References to 'Company,' 'we,' 'us,' 'our,' and similar words refer to Apollo Medical Holdings, Inc. and its consolidated subsidiaries and affiliated entities, including consolidated variable interest entities ('VIEs')[7] - 'ApolloMed' specifically refers to Apollo Medical Holdings, Inc[7] - The Centers for Medicare & Medicaid Services ('CMS') have not reviewed any statements in this report describing APA ACO, Inc.'s ('APAACO') participation in the Next Generation Accountable Care Organization ('NGACO') Model[8] Note About Forward-Looking Statements This section provides a standard disclaimer regarding forward-looking statements, outlining their nature, the risks and uncertainties involved, and the factors that could cause actual results to differ materially from projections - The report contains 'forward-looking statements' as defined by the Private Securities Litigation Reform Act of 1995, covering business, financial condition, operating results, plans, objectives, expectations, and intentions, including guidance for the year ending December 31, 2020[10] - Forward-looking statements involve risks and uncertainties based on current beliefs and assumptions, which may not materialize or may vary significantly from actual results[11] - Factors that could cause material differences include economic, competitive, governmental, and technological factors, as well as specific risk factors discussed in the Annual Report on Form 10-K[11] PART I FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Consolidated Financial Statements – Unaudited This section presents the unaudited consolidated financial statements for Apollo Medical Holdings, Inc. for the three months ended March 31, 2020 and 2019, including balance sheets, income statements, statements of mezzanine and stockholders' equity, cash flows, and detailed notes to the financial statements Consolidated Balance Sheets The consolidated balance sheets show the company's financial position as of March 31, 2020, and December 31, 2019, indicating a slight decrease in total assets and an increase in total liabilities, while stockholders' equity also increased Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2020 | December 31, 2019 | | :----- | :------------- | :---------------- | | Total Assets | $724,415 | $728,713 | | Total Liabilities | $369,015 | $367,653 | | Total Stockholders' Equity | $197,961 | $192,335 | - Current assets decreased from $329,068 thousand at December 31, 2019, to $318,063 thousand at March 31, 2020[12] - Medical liabilities increased from $58,725 thousand at December 31, 2019, to $63,698 thousand at March 31, 2020[12] Consolidated Statements of Income The consolidated statements of income reveal significant revenue growth and a shift from a net loss in Q1 2019 to a net income in Q1 2020, primarily driven by increased capitation revenue and improved equity method investment performance Consolidated Statements of Income Highlights (in thousands) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Change ($) | Change (%) | | :----- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Total Revenue | $165,105 | $95,758 | $69,347 | 72% | | Income (loss) from operations | $4,365 | $(3,307) | $7,672 | (232)% | | Net income (loss) | $2,987 | $(2,450) | $5,437 | (222)% | | Net income attributable to Apollo Medical Holdings, Inc. | $4,052 | $140 | $3,912 | 2794% | | Earnings per share – basic | $0.11 | $0.00 | - | - | - Capitation, net, increased by $68,904 thousand (96%) year-over-year[18] - Income from equity method investments improved significantly from a loss of $850 thousand in Q1 2019 to an income of $2,054 thousand in Q1 2020[18] Consolidated Statements of Mezzanine and Stockholders' Equity This statement details the changes in mezzanine equity and stockholders' equity for the three months ended March 31, 2020, and 2019, reflecting the impact of net income, share transactions, and dividends Mezzanine and Stockholders' Equity Highlights (in thousands) | Metric | Balance January 1, 2020 | Net (loss) income | Purchase of treasury shares | Dividends | Balance at March 31, 2020 | | :----- | :---------------------- | :---------------- | :-------------------------- | :-------- | :------------------------ | | Mezzanine Equity – Noncontrolling Interest in APC | $168,725 | $(1,161) | - | $(10,000) | $157,439 | | Total Stockholders' Equity | $192,335 | $4,147 | $(301) | - | $197,961 | - Share-based compensation contributed $1,058 thousand to additional paid-in capital in Q1 2020[20] - Retained earnings increased by $4,052 thousand in Q1 2020 due to net income[20] Consolidated Statements of Cash Flows The consolidated statements of cash flows show a net decrease in cash, cash equivalents, and restricted cash for the three months ended March 31, 2020, primarily driven by cash used in operating and financing activities Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :----- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(9,293) | $(3,967) | | Net cash used in investing activities | $(943) | $(112) | | Net cash used in financing activities | $(12,061) | $(9,810) | | Net decrease in cash, cash equivalents and restricted cash | $(22,297) | $(13,889) | | Cash, cash equivalents and restricted cash, end of period | $81,713 | $93,748 | - Cash paid for interest increased significantly to $2,619 thousand in Q1 2020 from $182 thousand in Q1 2019[24] - Dividends paid were $9,934 thousand in Q1 2020, consistent with $10,000 thousand in Q1 2019[23] Notes to Consolidated Financial Statements These notes provide detailed explanations and disclosures for the financial statements, covering business operations, significant accounting policies, recent acquisitions, debt and equity structures, related-party transactions, and subsequent events 1. Description of Business Apollo Medical Holdings, Inc. is a physician-centric integrated population health management company operating in California, providing coordinated medical care through various subsidiaries and consolidated entities, primarily serving insured patients. Key transactions in 2019 included a $545.0 million loan to AP-AMH and APC's purchase of ApolloMed common stock - ApolloMed is a physician-centric integrated population health management company providing coordinated, outcome-based medical care in California, primarily to patients covered by private or public insurance[27] - Key operating subsidiaries include Network Medical Management, Inc. (NMM), Apollo Medical Management, Inc. (AMM), APAACO, and Apollo Care Connect, Inc[27] - In September 2019, ApolloMed loaned AP-AMH $545.0 million, which AP-AMH used to purchase APC Series A Preferred Stock. APC, in turn, purchased $300.0 million of ApolloMed's common stock[32][33][35] 2. Basis of Presentation and Summary of Significant Accounting Policies This note outlines the basis for preparing the unaudited consolidated financial statements in accordance with U.S. GAAP for interim information, detailing principles of consolidation, use of estimates, revenue recognition policies for various streams (capitation, risk pool, management fees, FFS), and the impact of recently adopted and upcoming accounting pronouncements - The unaudited consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q instructions[48] - The Company consolidates entities where it has a controlling financial interest, including subsidiaries and Variable Interest Entities (VIEs) where it is the primary beneficiary[49] - Revenue primarily consists of capitation, risk pool settlements and incentives, NGACO All-Inclusive Population-Based Payments (AIPBP), management fee income, and Fee-for-Service (FFS) revenue, recognized when services are rendered or obligations are met[89] - The Company adopted ASU 2016-13 (Credit Losses) and ASU 2018-17 (VIEs) on January 1, 2020, with no material impact on consolidated financial statements. It is currently assessing the impact of ASU 2019-12 (Income Taxes) and ASU 2020-01 (Equity Securities)[128][129][130][131] 3. Business Combination and Goodwill This note details the acquisitions of Alpha Care Medical Group and Accountable Health Care IPA in 2019, including their respective purchase prices, the fair values of assets acquired and liabilities assumed, and the resulting goodwill recognized - On May 31, 2019, APC and APC-LSMA acquired 100% of Alpha Care for approximately $45.1 million in cash[134] - On August 30, 2019, APC and APC-LSMA acquired the remaining 75% of Accountable Health Care for $7.3 million, with a total purchase price of $25.1 million[136] Goodwill Carrying Value (in thousands) | Date | Amount | | :--- | :----- | | Balance, January 1, 2020 | $238,505 | | Adjustments | $34 | | Balance, March 31, 2020 | $238,539 | 4. Intangible Assets, Net This note provides a breakdown of the company's amortized intangible assets, including network relationships, management contracts, and patient management platforms, and their net values as of March 31, 2020, and December 31, 2019, along with amortization expense and future estimates Intangible Assets, Net (in thousands) | Asset Type | March 31, 2020 (Net) | December 31, 2019 (Net) | | :--------- | :------------------- | :---------------------- | | Network relationships | $80,099 | $83,404 | | Management contracts | $12,626 | $13,156 | | Member relationships | $4,123 | $4,344 | | Patient management platform | $1,099 | $1,202 | | Trade name/trademarks | $893 | $906 | | Total Intangible Assets, Net | $98,840 | $103,012 | - Amortization expense was $4.2 million for the three months ended March 31, 2020, compared to $3.9 million for the same period in 2019[143] Estimated Future Amortization Expense (in thousands) | Year | Amount | | :--- | :----- | | 2020 (remaining) | $11,856 | | 2021 | $14,524 | | 2022 | $12,673 | | 2023 | $10,842 | | 2024 | $9,830 | | Thereafter | $39,115 | | Total | $98,840 | 5. Investments in Other Entities — Equity Method This note details the company's equity method investments in entities such as LaSalle Medical Associates (LMA), Pacific Medical Imaging and Oncology Center, Inc. (PMIOC), Universal Care, Inc. (UCI), Diagnostic Medical Group (DMG), and 531 W. College LLC, outlining ownership interests, financial performance, and the significant disposition of UCI Rollforward of Equity Method Investment (in thousands) | Entity | December 31, 2019 | Allocation of Income (Loss) | Contribution | March 31, 2020 | | :----- | :---------------- | :-------------------------- | :----------- | :------------- | | LaSalle Medical Associates – IPA Line of Business | $6,397 | $(643) | $0 | $5,754 | | Pacific Medical Imaging & Oncology Center, Inc. | $1,396 | $87 | $0 | $1,483 | | Universal Care, Inc. | $1,438 | $2,670 | $0 | $4,108 | | Diagnostic Medical Group | $2,334 | $(5) | $0 | $2,329 | | 531 W. College, LLC – related party | $16,698 | $(111) | $300 | $16,887 | | MWN, LLC – related party | $164 | $56 | $0 | $220 | | Total | $28,427 | $2,054 | $300 | $30,781 | - The Company recorded income from equity method investments of $2.1 million for the three months ended March 31, 2020, a significant improvement from a loss of $0.9 million in the prior year[146] - On April 30, 2020, UCAP completed the disposition of its 48.9% ownership interest in UCI for approximately $69.2 million in cash and $33.3 million in Bright Health, Inc.'s preferred stock, plus escrowed amounts[153] 6. Loan Receivable and Loan Receivable – Related Parties This note describes the company's loan receivables, including a convertible secured promissory note with Dr. Albert Arteaga and advances to Universal Care, Inc. (UCI), and highlights the subsequent repayment of the UCI loan - A $6.4 million convertible secured promissory note with Dr. Albert H. Arteaga, CEO of LMA, was outstanding as of March 31, 2020, bearing interest at prime rate plus 1%. APC has the right to convert it into a 21.25% interest in LMA common stock[171][172] - Loans receivable from related parties, primarily Universal Care, Inc. (UCI), totaled $16.5 million as of March 31, 2020, and December 31, 2019[175] - The $16.5 million indebtedness owed by UCI to APC was repaid on April 30, 2020, as part of the disposition of APC's ownership interest in UCI[175] 7. Accounts Payable and Accrued Expenses This note provides a breakdown of the company's accounts payable and accrued expenses, showing a decrease in total amounts primarily due to a significant reduction in contract liabilities Accounts Payable and Accrued Expenses (in thousands) | Category | March 31, 2020 | December 31, 2019 | | :------- | :------------- | :---------------- | | Accounts payable | $7,745 | $6,914 | | Capitation payable | $2,802 | $2,813 | | Subcontractor IPA payable | $2,886 | $3,360 | | Professional fees | $1,792 | $1,837 | | Due to related parties | $55 | $225 | | Accrued compensation | $4,162 | $3,238 | | Contract liabilities | $664 | $8,892 | | Total | $20,106 | $27,279 | - Contract liabilities decreased significantly from $8,892 thousand at December 31, 2019, to $664 thousand at March 31, 2020, with $8.5 million repaid to CMS for AIPBP capitation not earned[178][118] 8. Medical Liabilities This note details the company's medical liabilities, which include claims reported and estimates for incurred but not reported (IBNR) claims, showing an increase in the ending balance for Q1 2020 compared to Q1 2019, reflecting higher medical care costs Medical Liabilities (in thousands) | Metric | March 31, 2020 | March 31, 2019 | | :----- | :------------- | :------------- | | Medical liabilities, beginning of period | $58,725 | $33,642 | | Total medical care costs | $85,326 | $34,975 | | Total paid | $(80,251) | $(45,437) | | Medical liabilities, ending balance | $63,698 | $23,266 | - Medical care costs related to claims incurred for the current period increased to $85,928 thousand in Q1 2020 from $31,870 thousand in Q1 2019[179] 9. Credit Facility, Bank Loan and Lines of Credit This note describes the company's secured credit agreement, including a $100.0 million revolving credit facility and a $190.0 million term loan, detailing their terms, interest rates, financial covenants, and security interests. It also mentions the termination and reissuance of related party lines of credit under the new facility Credit Facility (in thousands) | Debt Type | March 31, 2020 | | :-------- | :------------- | | Term loan A | $185,250 | | Revolver loan | $60,000 | | Total debt | $245,250 | | Less: Current portion of debt | $(9,500) | | Less: Unamortized financing costs | $(5,645) | | Long-term debt | $230,105 | - The Credit Agreement provides for a five-year revolving credit facility of $100.0 million and a $190.0 million term loan, with quarterly principal payments[184] - As of March 31, 2020, the interest rate on Term Loan A was 3.57% and Revolver Loan was 3.24%. The company was in compliance with all financial covenants[188][190] - Previous NMM and APC Business Loan Agreements with Preferred Bank were terminated and certain letters of credit reissued under the new Credit Agreement[198] 10. Mezzanine and Stockholders' Equity This note explains the classification of noncontrolling interests in APC as mezzanine equity due to redemption features and provides details on the company's stock options, restricted stock awards, warrants, and treasury stock, including their impact on equity and related compensation expenses - Noncontrolling interests in APC are classified as mezzanine equity because the redemption feature of APC's shares is not solely within APC's control[205] - During Q1 2020, 100,000 stock options were exercised, generating approximately $0.2 million in proceeds, and 97,447 restricted stock awards were granted with a fair value of $1.6 million[209][211] - 51,601 common stock warrants were exercised in Q1 2020, resulting in approximately $0.5 million in proceeds[218] - APC held 17,307,214 shares of ApolloMed's common stock as of March 31, 2020, which are treated as treasury shares for accounting purposes[219] 11. Commitments and Contingencies This note addresses the company's regulatory compliance, claims disputes, standby letters of credit, and ongoing litigation, including a significant arbitration demand against MMG, highlighting the inherent uncertainties in resolving these matters - APC, Alpha Care, and Accountable Health Care are in compliance with California DMHC regulations for minimum working capital, tangible net equity (TNE), cash-to-claims ratio, and claims payment requirements[223] - The company has established irrevocable standby letters of credit totaling $8.2 million for APAACO (CMS), $0.3 million for APC, and $3.8 million for Alpha Care[225][226][227] - MMG is involved in an arbitration demand by Prospect Medical Group, Inc. and Prospect Medical Systems, Inc., seeking damages in excess of $5.0 million for alleged breach of contract and tortious interference[228] 12. Related-Party Transactions This note details various transactions with related parties, including management fees earned, payments for provider services, office leases, and risk-sharing agreements, highlighting the financial interactions with affiliated entities and board members - NMM earned approximately $4.2 million in management fees from LMA for the three months ended March 31, 2020, an increase from $3.2 million in the prior year[232] - APC paid approximately $0.6 million to PMIOC and $1.8 million to DMG for provider services in Q1 2020[233][234] Net Fees Incurred and Income Earned Related to AHMC, HSMSO, and Aurion (in thousands) | Entity | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :----- | :-------------------------------- | :-------------------------------- | | AHMC – Risk pool and capitation | $11,999 | $11,600 | | HSMSO – Management fees, net | $(132) | $(650) | | Aurion – Management fees | $(75) | $(100) | | Net total | $11,792 | $10,850 | 13. Income Taxes This note explains the company's accounting for income taxes using the liability method, discusses the factors influencing its effective tax rate, the maintenance of a valuation allowance against deferred tax assets, and the ongoing assessment of the CARES Act's impact - The Company uses the liability method of accounting for income taxes (ASC 740), determining deferred taxes based on temporary differences between financial statement and tax bases of assets and liabilities[245] - A full valuation allowance is maintained against deferred tax assets related to loss entities due to uncertainty of realization from cumulative losses in recent years[247] - The effective tax rate for Q1 2020 differed from the U.S. federal statutory rate primarily due to state income taxes, income from flow-through entities, nondeductible permanent items, and changes in the valuation allowance[248] - The Company is analyzing the Coronavirus Aid, Relief and Economic Security Act (CARES Act) but does not expect it to impact the Q1 2020 annual estimated tax rate[250] 14. Earnings Per Share This note details the calculation of basic and diluted earnings per share, including the weighted average number of common shares outstanding and the treatment of potentially dilutive securities and treasury shares Earnings Per Share Computations | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :----- | :-------------------------------- | :-------------------------------- | | Earnings per share – basic | $0.11 | $0.00 | | Earnings per share – diluted | $0.11 | $0.00 | | Weighted average shares of common stock outstanding – basic | 36,010,268 | 34,496,622 | | Weighted average shares of common stock outstanding – diluted | 37,439,099 | 38,074,174 | - APC held 17,307,214 shares of ApolloMed's common stock as of March 31, 2020, which are treated as treasury shares and excluded from the number of shares outstanding for EPS calculation[252] 15. Variable Interest Entities (VIEs) This note defines Variable Interest Entities (VIEs) and the company's qualitative approach to determine the primary beneficiary for consolidation. It also provides a summary of the assets and liabilities of APC and its consolidated VIEs, emphasizing the limited recourse between creditors - A VIE is a legal entity whose equity owners lack sufficient equity at risk or lack decision-making rights, the obligation to absorb losses, or the right to receive expected residual returns[255] - The Company consolidates VIEs where it is the primary beneficiary, having both the power to direct activities that significantly affect economic performance and the obligation to absorb losses or right to receive benefits[255] Assets and Liabilities of APC and Consolidated VIEs (in thousands) | Metric | March 31, 2020 | December 31, 2019 | | :----- | :------------- | :---------------- | | Total Assets | $731,961 | $849,291 | | Total Liabilities | $107,186 | $114,499 | - Creditors of APC and its consolidated VIEs have no recourse to the Company, and vice versa[257] 16. Leases This note details the company's operating and finance leases for corporate offices, doctors' offices, and equipment, outlining lease terms, associated costs, and supplemental cash flow information related to lease liabilities Components of Lease Expense (in thousands) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :----- | :-------------------------------- | :-------------------------------- | | Operating lease cost | $1,942 | $1,102 | | Total finance lease cost, net | $1,838 | $1,032 | - Operating leases have a weighted average remaining lease term of 7.33 years and a weighted average discount rate of 6.10% as of March 31, 2020[264] Future Minimum Lease Payments (in thousands) | Year | Operating Leases | Finance Leases | | :--- | :--------------- | :------------- | | 2020 (remaining) | $3,227 | $89 | | 2021 | $3,745 | $119 | | 2022 | $2,970 | $119 | | 2023 | $2,724 | $119 | | 2024 | $2,340 | $79 | | Thereafter | $8,484 | $0 | | Total future minimum lease payments | $23,490 | $525 | 17. Subsequent Events This note reports on significant events occurring after the reporting period, specifically the disposition of Universal Care, Inc. (UCI) by UCAP and a substantial dividend distribution by APC to its shareholders - On April 30, 2020, UCAP completed the sale of its 48.9% ownership interest in UCI for approximately $69.2 million in cash proceeds and $33.3 million in Bright Health, Inc.'s preferred stock, plus additional escrowed amounts[269] - On May 4, 2020, APC's board of directors approved a $20.0 million dividend distribution to its shareholders, which was paid on May 6, 2020[270] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations for the three months ended March 31, 2020, highlighting significant revenue growth, changes in expenses, and an updated 2020 guidance, primarily influenced by recent acquisitions and the disposition of an investment - Total revenue for Q1 2020 was $165.1 million, a 72% increase from $95.8 million in Q1 2019, primarily driven by the acquisitions of Alpha Care and Accountable Health Care, and the APA ACO program[285] - Net income attributable to Apollo Medical Holdings, Inc. increased significantly to $4.1 million in Q1 2020 from $0.1 million in Q1 2019, a 2794% increase[282] Updated 2020 Guidance (in millions) | Metric | Previous Range (March 12, 2020) | Updated Range | | :----- | :------------------------------ | :------------ | | Total Revenue | $665.0 - $675.0 | $665.0 - $675.0 (Maintained) | | Net Income | $20.0 - $30.0 | $100.0 - $110.0 (Adjusted) | | EBITDA | $55.0 - $67.0 | $155.0 - $167.0 (Adjusted) | | Adjusted EBITDA | $75.0 - $90.0 | $75.0 - $90.0 (Maintained) | - The increase in net income and EBITDA guidance is primarily due to the expected gain of approximately $80.0 million from the sale of UCAP's 48.9% investment in UCI, which closed on April 30, 2020[299] - Cash, cash equivalents, and investment in marketable securities totaled $198.0 million at March 31, 2020, with working capital at $211.5 million[305] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section discusses the company's exposure to market risks, specifically focusing on interest rate risk associated with its credit facility, and quantifies the potential impact of interest rate fluctuations on its financial performance - The company is exposed to interest rate risk due to $245.3 million in outstanding borrowings under its Credit Agreement, which bear variable interest rates[339] - A hypothetical 1% change in interest rates would have increased or decreased the company's interest expense for the three months ended March 31, 2020, by $2.5 million[339] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2020, despite a delay in filing the Quarterly Report on Form 10-Q due to the COVID-19 outbreak and a change in independent registered public accounting firm - Management, including Co-Chief Executive Officers and Chief Financial Officer, concluded that disclosure controls and procedures were effective as of March 31, 2020[340] - The filing of the Q1 2020 Form 10-Q was delayed due to circumstances related to the COVID-19 outbreak (work-from-home policy, disrupted interactions) and a change in the independent registered public accounting firm from BDO USA, LLP to Ernst & Young LLP[342] - No other changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the period[341] PART II OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings The company is involved in various legal proceedings in the normal course of business, primarily medical malpractice claims and contract disputes, acknowledging the inherent uncertainty in their resolution and potential material adverse effects - The company is involved in pending and threatened legal actions, mostly involving claims of medical malpractice related to services provided by affiliated hospitalists[344] - Many payor and provider contracts are complex and subject to differing interpretations, which may lead to claims disputes[344] - 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[344] Item 1A. Risk Factors This section highlights key risk factors affecting the business, emphasizing the potential adverse impact of a national or localized outbreak of a highly contagious disease, such as COVID-19, on the company's operations and financial results - The company's operations and financial results could be adversely affected by an epidemic outbreak or other public health crisis, such as the COVID-19 pandemic[347][348] - Precautionary measures like work-from-home policies implemented due to COVID-19 may impact employee attendance, productivity, recruitment, and the ability to effectively provide management services[348] - An extended outbreak could disrupt critical infrastructures and supply chains for pharmaceuticals and medical supplies[348] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports on the issuance of common stock during the three months ended March 31, 2020, resulting from the exercise of certain warrants, which were exempt from registration under federal securities laws - During Q1 2020, the Company issued 44,356 shares of common stock[351] - These shares were issued from the exercise of certain warrants at exercise prices between $9.00 and $10.00 per share, generating approximately $414,110 in proceeds[351] - The issuances were exempt from registration provisions of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) and/or Regulation D[351] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period Item 4. Mine Safety Disclosures This section indicates that the disclosures related to mine safety are not applicable to the company Item 5. Other Information This section states that there is no other information to report under this item Item 6. Exhibits This section lists all exhibits incorporated by reference into or filed/furnished with the Quarterly Report on Form 10-Q, including various agreements, corporate documents, and certifications - The exhibits include merger agreements, restated certificates of incorporation, amendments to bylaws, and a stock purchase agreement[354] - Certifications of Principal Executive Officers and Principal Financial Officer pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 are filed/furnished[354] - XBRL (eXtensible Business Reporting Language) documents, including the Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, and Presentation Linkbase, are filed[354][355]