For the period of November 2, 2015 through December 31, 2016

Authorized Capital

The Company has 500,000,000 authorized shares of Common Stock at $0.01 par value and 5,000,000 authorized shares of Preferred Stock at a par value of $0.01.

Preferred Stock

In conjunction with the Merger, all outstanding Medytox Series B preferred shares were cancelled in exchange for shares of Rennova Series B Convertible Preferred Stock (the “Series B Preferred Stock”), which were not entitled to receive dividends unless dividends were declared on the Company’s common stock. On September 6, 2016, all of the outstanding shares of Series B Preferred Stock were converted into an aggregate of 191,135 shares of the Company’s common stock, in accordance with the terms of the Series B Preferred Stock.

On December 30, 2015, the Company issued 9,000 Class B Units, each consisting of one share of the Company’s Series C Convertible Preferred Stock (the “Series C Preferred Stock”) and warrants to purchase 21.5054 shares of common stock, in a public offering for $1,000 per unit, less underwriting discounts totaling $70 per share.

Between January 1, 2016 and July 10, 2016, holders of the Company’s Series C Preferred Stock converted a total of 260 shares of Series C Preferred Stock into 5,592 shares of common stock. On July 11, 2016, the Company entered into Exchange Agreements with the holders of the Series C Preferred Stock and the holders of the Company’s 215,054 warrants to purchase shares of common stock issued December 30, 2015 (the “December 2015 Warrants”), to exchange such securities for shares of newly-authorized Series G Convertible Preferred Stock with a stated value of $1,000 per share (the “Series G Preferred Stock”) and new warrants to purchase shares of common stock (the “Exchange”). The Exchange closed on July 19, 2016 in conjunction with the public offering discussed below, and the outstanding 8,740 shares of Series C Preferred Stock and the December 2015 Warrants were exchanged for 13,793 shares of Series G Preferred Stock and new warrants to purchase 341,651 shares of the Company’s common stock (the “Exchange Warrants”). On July 6, 2016, stockholders representing approximately 74% of the voting power of the Company approved the Exchange. The Exchange was made in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 3(a)(9) thereof based on the representations of the holders. No commission or other remuneration was paid or given directly or indirectly for soliciting the Exchange.

The Series G Preferred Stock is convertible into common stock at the stated value divided by $13.50. The exercise price of the Exchange Warrants is $13.50 per share. No gain or loss was recognized by the Company as result of the Exchange, however the Company did record a gain on the change in fair value of the December 2015 Warrants of $1.7 million in July 2016. Subsequent to the closing of the Exchange through December 31, 2016, 5,232 shares of Series G Preferred Stock were converted into 387,542 shares of the Company’s common stock.

On August 26, 2016, in accordance with the terms of a stock purchase agreement between the Company and Epinex Diagnostics, Inc. (“Epinex Diagnostics”), the Company cancelled the 45,000 shares of its Series E Preferred Stock that had previously been issued to Epinex Diagnostics.

On December 20, 2016, the Company completed a public offering whereby the Company issued 12,350 shares of its newly designated Series H Convertible Preferred Stock (the “Series H Preferred Stock”) and received net proceeds of $11.8 million, net of offering costs of $0.5 million. The underwriters to the offering also received warrants to purchase an aggregate of 228,704 shares of common stock at an exercise price of $3.38 per share. The Series H Preferred Stock has a stated value of $1,000 per share and is convertible into shares of the Company’s common stock at a conversion price of $2.70 per share. A total of $8.3 million of the net proceeds received from this offering was used to redeem 8,346 shares of Series G Preferred Stock. Subsequent to the closing of the offering and prior to December 31, 2016, 2,331 shares of Series H Preferred Stock were converted into 863,327 shares of common stock.

The following table summarizes the activity in the Company’s various classes of preferred stock for the years ended December 31, 2016 and 2015:

Common Stock

During the year ended December 31, 2016, the Company issued an aggregate of 8,777 shares of its common stock to consultants for services valued at approximately $73,000. Also during the year ended December 31, 2016, the Company issued 1,627 shares of common stock for the cashless exercise of outstanding warrants, issued 1,687 shares of common stock as an adjustment to previously converted preferred stock and cancelled 1,366 shares of common stock previously issued to an employee.

On July 17, 2016, the Company issued an aggregate of 19,445 shares of common stock to three of its executive officers as compensation. In November of 2016, the Company issued 2,048 shares of common stock to one employee in connection with an employment agreement and 2,778 shares of common stock to another employee in conjunction with a separation agreement. Also during the year ended December 31, 2016, the Company granted 2,778 shares of restricted common stock to an employee which vested in January of 2017. The Company recognized compensation cost in the amount of $0.3 million in connection with the foregoing grants, which were issued under the 2007 Equity Plan as defined below. During the year ended December 31, 2015, the Company recognized $2.9 million in compensation expense related to the issuance of Medytox common stock to employees and consultants.

On July 19, 2016, the Company closed a public offering of its equity securities whereby the Company issued 637,167 shares of its common stock and warrants to purchase an additional 637,167 shares of its common stock and received net proceeds of $7.5 million. In conjunction with this offering, the Company also issued an additional 10,122 warrants to cover over-allotments. The proceeds were used for working capital and general corporate purposes, continued development of new diagnostics processes and methodologies, continued development, roll out and implementation of EHR and Revenue Cycle Management services, acquisitions and expansions of the Company’s business and the repayment of certain related party notes and advances.

During the year ended December 31, 2016, the Company exchanged an aggregate of $2.23 million of indebtedness and other obligations to various related parties for an aggregate of 192,223 shares of common stock and warrants to purchase 111,518 shares of the Company’s common stock. The warrants issued have an exercise price of $13.50 per share, are immediately exercisable and have a five-year term. The issuance of the shares of common stock and warrants was exempt from the registration requirements of the Securities Act of 1933, as amended, in accordance with Section 4(a)(2) thereof, as a transaction by an issuer not involving any public offering.

At December 31, 2016, the Company had 2,800,377 shares of common stock outstanding.

On December 30, 2015, the Company issued 21,506 Class A Units consisting of one share of common stock and one warrant to purchase one share of common stock in a public offering at $46.50 per unit with a 7% underwriting discount.

Stock Options

The Tegal Corporation 2007 Incentive Award Plan (the “2007 Equity Plan”), as amended, which became available upon the acquisition of CollabRx., authorizes an aggregate of 50 million shares of common stock to be available for grant under the 2007 Equity Plan. The 2007 Equity Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights, performance shares, performance stock units, dividend equivalents, stock payments, deferred stock, restricted stock units, other stock-based awards, and performance-based awards.  The option exercise price of all stock options granted pursuant to the 2007 Equity Plan will not be less than 100% of the fair market value of the common stock on the date of grant. Stock options may be exercised as determined by the Board, but in no event after the tenth anniversary date of grant, provided that a vested nonqualified stock option may be exercised up to 12 months after the optionee's death. Awards granted under the 2007 Equity Plan are generally subject to vesting at the discretion of the Committee.  As of December 31, 2016, 1,004,760 shares were available for issuance under the 2007 Equity Plan. The following table summarizes the stock option activity for the years ended December 31, 2016 and 2015:

The Company recognized stock option expense of $0.9 million and $0.7 million for the years ended December 31, 2016 and 2015, respectively. Stock options granted during the year ended 2016 were recorded at their grant date fair value using a binomial model with the following assumptions: (i) dividend yield 0%; (ii) expected volatility 168%; and (iii) risk free rate of interest 1.88%. Stock options granted during the year ended 2015 were recorded at their grant date fair value using a Black-Scholes model with the following assumptions: (i) dividend yield 0%; (ii) expected volatility 24.43%; and (iii) risk free rate of interest 0.43%. The following table summarizes information with respect to stock options outstanding and exercisable by employees and directors at December 31, 2016.

As of December 31, 2016, there was unrecognized compensation cost of $0.4 million related to stock options. The Company expects to recognize those costs over a weighted average period of 1.37 years as of December 31, 2016.

Warrants

The following table summarizes warrants outstanding at December 31, 2016 and 2015:

For the period through November 2, 2015

The Company had 500,000,000 authorized shares of Common Stock at $0.0001 par value and 100,000,000 authorized shares of Preferred Stock at a par value of $0.0001.

On October 1, 2012, the Company filed a certificate of designation with the Secretary of State of Nevada to designate 5,000 shares of Series B Non-convertible Preferred Stock, at $0.0001 par value per share (the “Medytox Series B Preferred Stock”). The Medytox Series B Preferred Stock did not include any voting rights and allowed for monthly dividends in an amount equal to the sum of 1) 10% of the amount of gross sales in excess of $1 million collected in the ordinary course of business, not to exceed $150,000, and 2) 15% of the amount of gross sales in excess of $2.5 million collected in the ordinary course of business. During the year ended December 31, 2012, the Company issued 5,000 shares of Medytox Series B Preferred Stock to executives as compensation. The shares were valued at par totaling $1 and charged to operations.

Between January 1, 2015 and the date of the Merger, the holders of the Medytox Series B Preferred Stock earned dividends totaling $1.6 million, and $2.1 million of Medytox Series B Preferred Stock dividends was due and payable at December 31, 2015. On the date of the Merger, the Medytox Series B Preferred Stock was cancelled and 5,000 shares of Rennova Series B Preferred Stock were issued.

On March 17, 2014, the Company filed a Certificate of Designation with the Secretary of State of Nevada authorizing up to 200,000 shares of Series D Convertible Preferred Stock at $0.0001 par value per share (the “Medytox Series D Preferred Stock”). Each share of Medytox Series D Preferred Stock was convertible into the number of shares of Common Stock equal to the quotient of 5 divided by the product of 0.80 multiplied by the market price, as defined in Certificate of Designation, at the date of conversion. As of the date of the Merger, all of the Medytox Series D Preferred Stock had been converted into shares of the Company’s common stock.

On August 21, 2014, the Company filed a Certificate of Designation with the Secretary of State of Nevada authorizing 100,000 shares of Series E Convertible Preferred Stock at a par value of $.0001 per share (the “Medytox Series E Preferred Stock”). On August 28, 2014, 100,000 shares of Medytox Series E Preferred Stock were issued in connection with the acquisition of one of the Company’s diagnostic laboratories. On March 3, 2015, 55,000 of these shares were converted to 58,856 shares of common stock. On the date of the Merger, the remaining 45,000 shares of Medytox Series E Preferred Stock were cancelled and the holders were issued 45,000 shares of Rennova Series E Preferred Stock.

On September 25, 2013, the Company’s board of directors approved and adopted the Medytox Solutions, Inc. 2013 Incentive Compensation Plan (the “2013 Plan”). The 2013 Plan was approved by a majority of stockholders of the Company on November 22, 2013. The 2013 Plan provides for the grant of shares of common stock, options, performance shares, performance units, restricted stock, stock appreciation rights and other awards. No awards of any kind were granted under the 2013 Plan during the year ended December 31, 2013. As a result of the Merger, this Plan was cancelled. Any grants issued prior to the cancellation remain in force.

The following summarizes option activity for the 2013 Plan for the years ended December 31, 2015 and 2014: