|9 Months Ended|
Sep. 30, 2022
|Discontinued Operations and Disposal Groups [Abstract]|
Note 13 – Discontinued Operations
Sale of HTS and AMSG
On June 25, 2021, the Company sold the shares of stock of HTS and AMSG to InnovaQor. HTS and AMSG held Rennova’s software and genetic testing interpretation divisions. In consideration for the shares of HTS and AMSG and the elimination of intercompany debt among the Company and HTS and AMSG, InnovaQor issued the Company 90% of the average closing price of the InnovaQor common stock during the 10 trading days immediately prior to the conversion date. Conversion of the InnovaQor Series B-1 Preferred Stock, however, is subject to the limitation that no conversion can be made to the extent the holder’s beneficial interest (as defined pursuant to the terms of the InnovaQor Series B-1 Preferred Stock) in the common stock of InnovaQor would exceed 4.99%. The shares of the InnovaQor Series B-1 Preferred Stock may be redeemed by InnovaQor upon payment of the stated value of the shares plus any accrued declared and unpaid dividends. shares of its Series B-1 Non-Voting Convertible Preferred Stock (the “InnovaQor Series B-1 Preferred Stock”), of the shares were issued on June 25, 2021 and of the shares were issued in the third quarter of 2021 as a result of a post-closing adjustment. Each share of InnovaQor Series B-1 Preferred Stock has a stated value of $ and is convertible into that number of shares of InnovaQor common stock equal to the stated value divided by
As a result of the sale, the Company recorded the InnovaQor Series B-1 Preferred Stock as a long-term asset valued at $9.1 million and a gain on the sale of HTS and AMSG of $11.3 million of which $0.6 million and $11.3 million was recorded in the three and nine months ended September 30, 2021, respectively. The $0.6 million recorded in the three months ended September 30, 2021 resulted from a post-closing adjustment. Approximately $9.1 million of the gain resulted from the value of the shares of InnovaQor Series B-1 Preferred Stock received and $2.2 million resulted from the transfer to InnovaQor of the net liabilities of HTS and AMSG. The fair value of the InnovaQor Series B-1 Preferred Stock that the Company received as consideration for the sale of $9.1 million was based on 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 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 InnovaQor Series B-1 Preferred Stock and the underlying liquidity of InnovaQor’s common stock.
During the three months ended September 30, 2021, 60,714 were used to settle accrued interest that was due under the terms of notes payable dated January 31, 2021 and February 16, 2021, leaving a balance of the InnovaQor Series B-1 Preferred Stock held by the Company of $9.0 million at September 30, 2022 and December 31, 2021. The notes payable are more fully discussed in Note 6. shares of InnovaQor Series B-1 Preferred Stock valued at $
See Note 7 for a discussion of related party transactions between the Company and InnovaQor.
EPIC Reference Labs, Inc. and Other Non-Operating Subsidiaries
During the third quarter of 2020, the Company made a decision to sell EPIC and it made a decision to discontinue several other non-operating subsidiaries, and as a result, EPIC’s operations and the other non-operating subsidiaries’ liabilities have been included in discontinued operations for all periods presented. The Company has been unable to find a buyer for EPIC and, therefore, it has ceased all efforts to sell EPIC and closed down its operations.
Carrying amounts of major classes of liabilities included as part of discontinued operations in the condensed consolidated balance sheets as of September 30, 2022 (unaudited) and December 31, 2021 consisted of the following:
Schedule of Discontinued Operation of Balance Sheet and Operation Statement
Major line items constituting (loss) income from discontinued operations in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021 consisted of the following:
Consolidated (Loss) Income from Discontinued Operations:
The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef