Quarterly report pursuant to Section 13 or 15(d)

Discontinued Operations

v3.21.1
Discontinued Operations
3 Months Ended
Mar. 31, 2021
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations

Note 14 – 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. On March 23, 2021, TPT changed the name of InnovaQor, Inc. to TPT Strategic, Inc. 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.

 

On May 13, 2021, Rennova signed an agreement with VisualMED Clinical Solutions Corp. (“VisualMED”) a Nevada based public company, for VisualMED to acquire AMSG & HTS. After closing these entities will operate as wholly owned subsidiaries of VisualMED. Closing is subject to a number of customary conditions for a transaction of this nature and was intended to happen on or before May 31, 2021. As part of the agreement, VisualMED is required to complete any outstanding applications necessary to be fully compliant with OTC requirements before closing. VisualMED is in process of completing these applications but delayed communication from the OTC Markets has resulted in the May 31, 2021 timeframe not being met. The Company anticipates this agreement to close successfully in the coming weeks. Once the agreement has closed, VisualMED intends to file audited financial statements and other filings as required to become fully reporting with the SEC.

 

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.

 

EPIC Reference Labs, Inc.

 

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.

 

On March 10, 2021, Rennova terminated the proposed agreement that it had entered into with TPT on August 6, 2020 for the purchase and sale of EPIC Reference Labs, Inc. The Company also terminated an Interim Management Agreement with TPT entered into on August 6, 2020 granting TPT an exclusive right and responsibility to undertake certain management and financial responsibility of EPIC Reference Labs, Inc., on our behalf and terminated all rights and approvals granted under letters dated November 2, 2020 and November 24, 2020 in reference to the Quicklab Application in partnership with EPIC Reference Labs, Inc. Rennova intends to pursue whatever legal action necessary against TPT and TPT Medtech, LLC to recover money and damages owed from the breach of these agreements by TPT and to stop TPT from all activities that utilize or have been derived from their access to and use of Rennova owned confidential information.

 

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 March 31, 2021 and December 31, 2020 consisted of the following:

 

AMSG & HTS Group Assets and Liabilities:

 

    March 31, 2021     December 31, 2020  
    (unaudited)        
Cash   $ 6,887     $ 31,294  
Accounts receivable, net     138,466       151,363  
Prepaid expenses and other current assets     858       1,717  
Current assets classified as held for sale   $ 146,211     $ 184,374  
                 
Property and equipment, net   $ 948     $ 685  
Deposits     -       -  
Right of use assets     -       -  
Non-current assets classified as held for sale   $ 948     $ 685  
                 
Accounts payable and checks issued in excess of bank balance   $ 711,305     $ 726,220  
Accrued expenses     1,311,146       1,308,283  
Current portion of right-of-use operating lease obligation     -       -  
Current portion of notes payable     216,269       168,751  
Current liabilities classified as held for sale   $ 2,238,720     $ 2,203,254  
                 
Note payable   $ 82,151     $ 69,267  
Right-of-use operating lease obligation     -       -  
Non-current liabilities classified as held for sale   $ 82,151     $ 69,267  

 

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

 

    March 31, 2021     December 31, 2020  
    (unaudited)        
Cash   $ 1,596     $ 136  
Accounts receivable, net     -       -  
Prepaid expenses and other current assets     -       -  
Current assets classified as held for sale   $ 1,596     $ 136  
                 
Property and equipment, net   $ -     $ -  
Deposits     100,014       100,014  
Right-of-use assets     76,587       100,116  
Non-current assets classified as held for sale   $ 176,601     $ 200,130  
                 
Accounts payable  and checks in excess of bank balance   $ 1,193,766     $ 1,185,158  
Accrued expenses     334,882       334,667  
Current portion of right-of-use operating lease obligation     76,587       91,166  
Current portion of notes payable     -       -  
Current liabilities classified as held for sale   $ 1,605,235     $ 1,610,991  
                 
Note payable   $ -     $ -  
Right-of-use operating lease obligation     -       8,950  
Non-current liabilities classified as held for sale   $ -     $ 8,950  

 

Consolidated Discontinued Operations Assets and Liabilities:

 

    March 31, 2021     December 31, 2020  
    (unaudited)        
Cash   $ 8,483     $ 31,430  
Accounts receivable, net     138,466       151,363  
Prepaid expenses and other current assets     858       1,717  
Current assets classified as held for sale   $ 147,807     $ 184,510  
                 
Property and equipment, net   $ 948     $ 685  
Deposits     100,014       100,014  
Right-of-use assets     76,587       100,116  
Non-current assets classified as held for sale   $ 177,549     $ 200,815  
                 
Accounts payable and checks issued in excess of bank balance   $ 1,905,071     $ 1,911,378  
Accrued expenses     1,646,028       1,642,950  
Current portion of right-of-use operating lease obligation     76,587       91,166  
Current portion of notes payable     216,269       168,751  
Current liabilities classified as held for sale   $ 3,843,955     $ 3,814,245  
                 
Note payable   $ 82,151     $ 69,267  
Right-of-use operating lease obligation     -       8,950  
Non-current liabilities classified as held for sale   $ 82,151     $ 78,217  

 

Major line items constituting (loss) income from discontinued operations in the consolidated statements of operations for the three months ended March 31, 2021 and 2020 consisted of the following (unaudited):

 

AMSG & HTS Group (Loss) Income from Discontinued Operations:

 

    Three Months Ended  
    March 31, 2021     March 31, 2020  
             
Revenue from services**   $ 118,216     $ 159,067  
Cost (recovery) of services     390       8,777  
Gross profit     117,826       150,290  
Operating expenses     283,500       184,368  
Other expense     9,790       25,931  
Provision for income taxes     -       -  
(Loss) income from discontinued operations   $ (175,464 )   $ (60,009 )

 

**Revenue from services, includes related party revenue of $62,316 and $23,400, respectively.

 

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

 

    Three Months Ended  
    March 31, 2021     March 31, 2020  
             
Revenue from services   $ -     $ 442  
Cost (recovery) of services (1)     -       (110,257 )
Gross profit     -       110,699  
Operating expenses     48,097       29,116  
Other expense     3,105       2,643  
Provision for income taxes     -       -  
(Loss) income from discontinued operations   $ (51,202 )   $ 78,940  

 

Consolidated (Loss) Income from Discontinued Operations:

 

    Three Months Ended  
    March 31, 2021     March 31, 2020  
             
Revenue from services   $ 118,216     $ 159,509  
Cost (recovery) of services (1)     390       (101,480 )
Gross profit     117,826       260,989  
Operating expenses     331,597       213,484  
Other expense     12,895       28,574  
Provision for income taxes     -       -  
(Loss) income from discontinued operations   $ (226,666 )   $ 18,931  

 

  (1) Costs (recovery) of services in 2020 reflect a reduction of $130,000 in the amount previously recorded for laboratory supplies due to the settlement of a claim during the period.