Quarterly report pursuant to Section 13 or 15(d)

Subsequent Events

v3.21.1
Subsequent Events
3 Months Ended
Mar. 31, 2021
Subsequent Events [Abstract]  
Subsequent Events

Note 16 – Subsequent Events

 

Conversions of Series M Preferred Stock and Series N Preferred Stock

 

Subsequent to March 31, 2021 and through June 2, 2021, the Company issued 450,000,000 shares of its common stock upon conversions of 619. 65 shares of its Series M Preferred Stock with a stated value of $0.6 million and 9.1 billion shares of its common stock upon conversions of 8,720.97 shares of its Series N Preferred Stock with a stated value of $8.7 million.

 

Potential Common Stock as of June 2, 2021

 

The following table presents the dilutive effect of our various potential common shares as of June 2, 2021:

 

    June 2, 2021  
Common shares outstanding     10.000.000.000  
Dilutive potential shares:        
Stock options     26  
Warrants     89,899,582,113  
Convertible debt     4,408,900,000  
Convertible preferred stock     60,438,595,502  
Total dilutive potential common shares, including outstanding common stock     164,747,077,641  

 

On August 13, 2020, Mr. Diamantis entered into the Voting Agreement with the Company, Mr. Lagan and Alcimede (of which Mr. Lagan is the sole manager) pursuant to which Mr. Diamantis granted an irrevocable proxy to Mr. Lagan to vote the Series M Preferred Stock held by Mr. Diamantis, Mr. Diamantis has retained all other rights under the Series M Preferred Stock. Regardless of the number of shares of Series M Preferred Stock outstanding and so long as at least one share of Series M Preferred Stock is outstanding, the outstanding shares of Series M Preferred Stock shall have the number of votes, in the aggregate, equal to 51% of all votes entitled to be voted at any meeting of stockholders or action by written consent. This means that the holders of Series M Preferred Stock have sufficient votes, by themselves, to approve or defeat any proposal voted on by the Company’s stockholders, unless there is a supermajority required under applicable law or by agreement.

 

As a result of the Voting Agreement, as of the date of filing this report, the Company believes that it has the ability to ensure that it has and or can obtain sufficient authorized shares of its common stock to cover all potentially dilutive common shares outstanding.

 

Funding Activities- Warrants Prepayment Promissory Notes

 

On April 9, 2021, the Company entered into agreements with certain institutional investors for warrant prepayment promissory notes with an aggregate principal amount of $165,000. The Company received proceeds of $150,000 from the payees who may at their option apply all or any portion of the principal amount outstanding to the exercise of any common stock purchase warrants of the Company held by the payee. The notes are unsecured and they mature 12 months from the date of issuance. The notes do not bear interest but an interest rate of 18% will be applied to the outstanding principal commencing five days after any event of default that results in the acceleration of the notes.

 

On April 22, 2021, the Company entered into agreements with certain institutional investors for warrant prepayment promissory notes with an aggregate principal amount of $220,000. The Company received proceeds of $200,000 from the payees who may at their option apply all or any portion of the principal amount outstanding to the exercise of any common stock purchase warrants of the Company held by the payee. The notes are unsecured and they mature 12 months from the date of issuance. The notes do not bear interest but an interest rate of 18% will be applied to the outstanding principal commencing five days after any event of default that results in the acceleration of the notes.

 

Funding Activities – Preferred Stock

 

On May 10, 2021, the Company closed an offering of shares of its newly-authorized Series O Convertible Redeemable Preferred Stock (the “Series O Preferred Stock”). The offering was pursuant to the terms of the Securities Purchase Agreement, dated as of May 10, 2021 (the “Purchase Agreement”), between the Company and certain existing institutional investors of the Company. The Purchase Agreement provides for the issuance of up to 4,400 shares of Series O Preferred Stock at four closings of 1,100 shares each. If all such shares of Series O Preferred Stock are issued, the Company will receive proceeds of $4,000,000.

 

The first closing occurred on May 10, 2021 and the second closing occurred on May 18, 2021. The Company issued an aggregate of 2,200 shares of its Series O Preferred Stock and received total proceeds of $2,000,000 as a result of the first and second closings. The subsequent closings depend upon the Company’s satisfaction of certain conditions, including effecting certain specified transactions to make additional shares of common stock available for issuance by the Company. There can be no assurance that the Company will satisfy all or any of these conditions or that any additional closings will take place. In addition, the Purchase Agreement restricts the Company’s use of any proceeds of the issuances of the Series O Preferred Stock, including to payroll and tax arrears and legal and accounting expenses.

 

The shares of Series O Preferred Stock were issued in reliance on the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended, and by Rule 506 of Regulation D promulgated thereunder as a transaction by an issuer not involving any public offering.

 

The terms of the Series O Preferred Stock were set forth in the Company’s Current Report on Form 8-K filed with the SEC on May 11, 2021, In particular:

 

General. The Company’s Board of Directors has designated 10,000 shares of the 5,000,000 authorized shares of preferred stock as the Series O Preferred Stock. Each share of the Series O Preferred Stock has a stated value of $1,000.

 

Voting Rights. Except as provided below or by law, the Series O Preferred Stock shall have no voting rights. However, as long as any shares of Series O Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series O Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series O Preferred Stock or alter or amend the Certificate of Designation, (b) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders, (c) increase the number of authorized shares of the Series O Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.

 

Dividends. Dividends at the rate per annum of 10% of the stated value per share shall accrue on each outstanding share of Series O Preferred Stock from and after the date of the original issuance of such share of Series O Preferred Stock (the “Series O Preferred Accruing Dividends”). The Series O Preferred Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative and non-compounding; provided, however, that such Series O Preferred Accruing Dividends shall be payable only when, as, and if declared by the Board of Directors. No cash dividends shall be paid on the common stock unless the Series O Preferred Accruing Dividends are paid.

 

Rank. The Series O Preferred Stock ranks with respect to dividends or a liquidation, (i) on parity with the common stock, the Company’s Series H Convertible Preferred Stock, the Company’s Series L Convertible Preferred Stock, the Company’s Series M Convertible Preferred Stock and the Company’s Series N Convertible Preferred Stock, (ii) senior to the Company’s Series F Convertible Preferred Stock, and (iii) junior to any other class or series of preferred stock of the Company afterwards created and ranking by its terms senior to the Series O Preferred Stock.

 

Conversion. Each share of the Series O Preferred Stock is convertible into shares of the Company’s common stock, at any time and from time to time, at the option of the holder, into that number of shares of common stock determined by dividing the stated value of such share of Series O Preferred Stock, plus any accrued declared and unpaid dividends, by the conversion price. The conversion price is equal to 90% of the lowest VWAP during the 10 trading days immediately prior to the conversion date. Holders of the Series O Preferred Stock are prohibited from converting Series O Preferred Stock into shares of common stock if, as a result of such conversion, the holder, together with its affiliates, would own more than 9.99% of the total number of shares of common stock then issued and outstanding. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days after notice to the Company.

 

Liquidation Preference. Upon any liquidation, dissolution or winding up of the Company, the holders of the Series O Preferred Stock shall be entitled to receive an amount equal to the stated value of the Series O Preferred Stock, plus any accrued declared and unpaid dividends thereon and any other fees or liquidated damages then due and owing thereon, for each share of the Series O Preferred Stock before any distribution or payment shall be made on any junior securities.

 

Redemption. At any time the Company shall have the right to redeem all, or any part, of the Series O Preferred Stock then outstanding. The Series O Preferred Stock subject to redemption shall be redeemed by the Company in cash in an amount equal to the stated value of the shares of the Series O Preferred Stock being redeemed plus all accrued declared and unpaid dividends.

 

Shareholder Proposal to Increase Shares of Authorized Common Stock

 

As a result of conversions of shares of the Company’s preferred stock, the Company, as of the date of this report, has 10,000,000,000 shares of its common stock issued and outstanding. The Company, therefore, has issued all of its authorized shares of common stock. It cannot issue additional shares of common stock unless and until it is able to amend its Certificate of Incorporation to increase its authorized common stock or it effects a reverse stock split. The Company needs immediate additional capital to execute on its business plan and without the ability to issue shares of common stock will have difficulty securing the capital required to continue in business. Accordingly, on May 14, 2021, the Company filed a preliminary Information Statement on Schedule 14C to seek approval to effect a reverse stock split of its common stock. The ratio and timing of the proposed reverse stock split have not yet been determined.

 

Merger of AMSG & HTS Group

 

On May 13, 2021, Rennova completed an agreement with 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 that this agreement will 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.