Note 14 – Discontinued Operations

Sale of HTS and AMSG

In 2017, the Company announced plans to spin off or sell its wholly-owned subsidiaries, HTS and AMSG. On June 25, 2021, the Company sold the shares of stock of HTS and AMSG to VisualMED. HTS and AMSG held Rennova’s software and genetic testing interpretation divisions. The terms of the sale are discussed in Note 1.

EPIC Reference Labs, Inc.

During the three months ended September 30, 2020, the Company made a decision to sell its last clinical laboratory, EPIC Reference Labs, Inc., 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 included in discontinued operations for all periods presented. The Company has been unable to find a buyer for EPIC Reference Labs, Inc. and, therefore, effective June 30, 2021, it has ceased all efforts to sell the company.

Carrying amounts of major classes of assets and liabilities sold or included as part of discontinued operations in the consolidated balance sheets as of June 30, 2021 and December 31, 2020 consisted of the following:

 Schedule of Discontinued Operation of Balance Sheet and Operation Statement

HTS and AMSG Assets and Liabilities:

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

Consolidated Discontinued Operations Assets and Liabilities:

Major line items constituting income (loss) from discontinued operations in the consolidated statements of operations for the three and six months ended June 30, 2021 and 2020 consisted of the following (unaudited):

HTS and AMSG Income (Loss) from Discontinued Operations:

As presented in the table above, the Company recorded a gain on the sale of HTS and AMSG of $10.7 million of which $8.5 million resulted from the value of the VisualMED Series B Preferred Stock received per the terms of the sale and $2.2 million resulted from the transfer to VisualMED of the net liabilities of HTS and AMSG. The sale is more fully discussed in Note 1. The fair value of the VisualMED Series B Preferred Stock that the Company received as consideration for the sale of $8.5 million was based on a third-party valuation using the Option Price Method (the “OPM”) The OPM treats common and preferred interests as call options on the equity value of the subject company, with exercise prices based on the liquidation preference of the preferred interests and participation thresholds for subordinated classes. The common interest is modeled as a call option that gives its owner the right but not the obligation to buy the enterprise value at a predetermined or exercise price. In the model, the exercise price is based on a comparison with the enterprise value rather than, as in the case of a “regular” call option, a comparison with a per share stock price. Thus, the common interest is considered to be a call option with a claim on the enterprise at an exercise price equal to the remaining value immediately after the preferred interests are liquidated. The Black Scholes model was used to price the call options. The assumptions used were: risk free rate of 0.84%; volatility of 250.0%; and exit period of 5 years. Lastly, a discount rate of 35% was applied due to the lack of marketability of the VisualMED Series B Preferred Stock and the underlying liquidity of VisualMED’s common stock.