Annual report pursuant to Section 13 and 15(d)

Discontinued Operations

Discontinued Operations

12 Months Ended

Dec. 31, 2020

Discontinued Operations and Disposal Groups [Abstract]

Note 17 – Discontinued Operations

On July 12, 2017, the Company announced plans to spin off AMSG and in the third quarter 2017 our Board of Directors voted unanimously to spin off the Company’s wholly-owned subsidiary, HTS, as independent publicly traded companies by way of tax-free distributions to the Company’s stockholders. On June 10, 2020, the Company signed an agreement for the separation of these entities into a public company. The agreement with TPT Global Tech, Inc. (“TPT”) (OTC: TPTW), a California-based public company, was to merge HTS and AMSG into a public company after TPT completed a merger of its wholly-owned subsidiary, InnovaQor, Inc., with this public company. Rennova terminated its agreement with TPT on March 8, 2021 after numerous attempts to close the transaction as proposed failed due to uncertainty and last minute unviable demands from TPT that would have created a high risk to the future success of the project. Rennova is currently considering the actions of TPT with the belief that TPT acted outside of agreements that were in place and may have converted Rennova owned confidential information for its own benefit. Rennova intends to pursue any remedy available to it under the law to recover money owed from TPT and to protect its technology and assets.

The Company continues to pursue options available to it to separate these entities and believes this can be accomplished in the second quarter of 2021. In accordance with ASC 205-20 and having met the criteria for “held for sale”, the Company has reflected amounts relating to AMSG and HTS (referred to below as the AMSG & HTS Group) as a disposal group classified as held for sale and included as part of discontinued operations.

During the three months ended September 30, 2020, the Company announced that it had reached a tentative agreement to sell its last clinical laboratory, EPIC Reference Labs, Inc. to TPT and it made a decision to discontinue several other non-operating subsidiaries, and as a result, EPIC Reference Labs, Inc.’s operations and the other non-operating subsidiaries have been classified as held for sale and included in discontinued operations for all periods presented. The proposed sale of EPIC Reference Labs, Inc. was terminated by Rennova on March 10, 2021, along with a lab management agreement and other permissions that had been granted by Rennova to TPT. Rennova is owed certain payments under the agreements and intends to take the necessary actions to secure payments owed by TPT.

Carrying amounts of major classes of assets and liabilities classified as held for sale and included as part of discontinued operations in the consolidated balance sheets as of December 31, 2020 and 2019 consisted of the following:

AMSG & HTS Group Assets and Liabilities:

	December 31, 2020		December 31, 2019

Cash	$	31,294	$	16,667
Accounts receivable, net		151,363		482,472
Prepaid expenses and other current assets		1,717		5,150
Current assets classified as held for sale	$	184,374	$	504,289

Property and equipment, net	$	685	$	3,354
Deposits		-		6,029
Right of use assets		-		-
Non-current assets classified as held for sale	$	685	$	9,383

Accounts payable	$	726,220	$	805,652
Accrued expenses		1,308,283		1,350,106
Current portion of right-of-use operating lease obligations		-		-
Current portion of notes payable		168,751		256,274
Current liabilities classified as held for sale	$	2,203,254	$	2,412,032

Note payable	$	69,267	$	-
Right-of-use operating lease liability		-		-
Non-current liabilities classified as held for sale	$	69,267	$	-

EPIC Reference Labs, Inc. and Other Subsidiaries Assets and Liabilities

	December 31, 2020		December 31, 2019

Cash	$	136	$	1,100
Accounts receivable, net		-		-
Prepaid expenses and other current assets		-		-
Current assets classified as held for sale	$	136	$	1,100

Property and equipment, net	$	-	$	-
Deposits		100,014		100,014
Right-of-use assets		100,116		185,842
Non-current assets classified as held for sale	$	200,130	$	285,856

Accounts payable	$	1,185,158	$	1,235,976
Accrued expenses		334,667		364,683
Current portion of right-of-use operating lease obligations		91,166		85,726
Current portion of notes payable		-		-
Current liabilities classified as held for sale	$	1,610,991	$	1,686,385

Note payable	$	-	$	-
Right-of-use operating lease liability		8,950		100,116
Non-current liabilities classified as held for sale	$	8,950	$	100,116

Consolidated Discontinued Operations Assets and Liabilities:

	December 31, 2020		December 31, 2019

Cash	$	31,430	$	17,767
Accounts receivable, net		151,363		482,472
Prepaid expenses and other current assets		1,717		5,150
Current assets classified as held for sale	$	184,510	$	505,389

Property and equipment, net	$	685	$	3,354
Deposits		100,014		106,043
Right-of-use assets		100,116		185,842
Non-current assets classified as held for sale	$	200,815	$	295,239

Accounts payable	$	1,911,378	$	2,041,628
Accrued expenses		1,642,950		1,714,789
Current portion of right-of-use operating lease obligations		91,166		85,726
Current portion of notes payable		168,751		256,274
Current liabilities classified as held for sale	$	3,814,245	$	4,098,417

Note payable	$	69,267	$	-
Right-of-use operating lease liability		8,950		100,116
Non-current liabilities classified as held for sale	$	78,217	$	100,116

Major line items constituting loss from discontinued operations in the consolidated statements of operations for the years ended December 31, 2020 and 2019 consisted of the following:

AMSG & HTS Group Loss from Discontinued Operations:

	Year Ended
	December 31, 2020			December 31, 2019

Revenue from services**	$	528,624		$	1,109,135
Cost of services		5,536			150,205
Gross profit		523,088			958,930
Operating expenses		1,045,410			1,615,477
Other expense		84,129			62,771
Provision for income taxes		-			-
Loss from discontinued operations	$	(606,451	)	$	(719,318	)

**Revenue from services, includes related party revenue of $0.2 million and $0.4 million, respectively.

EPIC Reference Labs, Inc. and Other Subsidiaries Loss from Discontinued Operations

	Year Ended
	December 31, 2020			December 31, 2019

Revenue from services (1)	$	442		$	(14,087	)
Cost of services		-			85,982
Gross profit		442			(100,069	)
Operating expenses		138,816			589,638
Other expense (income)		(48,758	)		41,844
Provision for income taxes		-			-
Loss from discontinued operations	$	(89,616	)	$	(731,551	)

(1)

The Company recorded bad debts in excess of gross revenues in the year ended December 31, 2019.

Consolidated Loss from Discontinued Operations:

	Year Ended
	December 31, 2020			December 31, 2019

Revenue from services	$	529,066		$	1,095,048
Cost of services		5,536			236,187
Gross profit		523,530			858,861
Operating expenses		1,184,226			2,205,115
Other expense, net		35,371			104,615
Provision for income taxes		-			-
Loss from discontinued operations	$	(696,067	)	$	(1,450,869	)