10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______.

Commission File Number: 001-35141

RENNOVA HEALTH, INC.

(Exact name of registrant as specified in its charter)

Delaware	68-0370244
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
400 South Australian Ave., 8th Floor West Palm Beach, FL	33401
(Address of principal executive offices)	(Zip Code)

(561) 855-1626

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act: (Check one)

Large accelerated filer [  ]	Accelerated filer [  ]
Non-accelerated filer [  ](Do not check if a smaller reporting company)	Smaller reporting company [X]

Emerging growth company [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

As of November 17, 2017, the registrant had 5,639,669 shares of its Common Stock, $0.01 par value, outstanding.

RENNOVA HEALTH, INC.

FORM 10-Q

September 30, 2017

TABLE OF CONTENTS

		Page No.
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of September 30, 2017 (unaudited) and December 31, 2016	3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016 (unaudited)	4
	Condensed Consolidated Statement of Changes in Stockholders’ Deficit for the nine months ended September 30, 2017 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	43
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	44
SIGNATURES		46

2

RENNOVA HEALTH, INC.

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2017			December 31, 2016
	(unaudited)
ASSETS
Current assets:
Cash	$	41,019		$	75,017
Accounts receivable, net		401,026			1,199,899
Prepaid expenses and other current assets		146,713			149,385
Inventory		73,732			-
Income tax refunds receivable		1,458,438			1,458,438
Current assets of AMSG classified as held for sale		68,775			337,900
Total current assets		2,189,703			3,220,639
Property and equipment, net		3,090,047			3,043,590
Deposits		157,461			141,402
Non-current assets of AMSG classified as held for sale		928,722			76,762
Total assets	$	6,365,933		$	6,482,393
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable (includes related parties of $0.3 and $0.2 milion, respectively)	$	4,296,213		$	2,928,524
Accrued expenses		5,010,298			2,882,029
Income taxes payable		490,436			942,433
Current portion of notes payable		7,299,088			9,011,247
Current portion of notes payable, related party		223,500			328,500
Current portion of capital lease obligations		1,491,666			1,796,053
Current liabilities of AMSG classified as held for sale		1,368,612			1,675,981
Total current liabilities		20,179,813			19,564,767
Other liabilities:
Debentures		4,239,005			-
Capital lease obligations, net of current portion		735,538			1,774,121
Derivative liabilities		-			2,803
Non-current liabilities of AMSG classified as held for sale		-			26,598
Total liabilities		25,154,356			21,368,289
Commitments and contingencies
Stockholders' deficit:
Series G preferred stock, $0.01 par value, 14,000 shares authorized, 215 shares issued and outstanding	$	2			2
Series H preferred stock, $0.01 par value, 14,202 shares authorized, 60 and 10,019 shares issued and outstanding		-			100
Series F preferred stock, $0.01 par value, 1,750,000 shares authorized, 1,750,000 and 0 shares issued and outstanding		17,500			-
Common stock, $0.01 par value, 500,000,000 shares authorized,  1,354,171 and 186,692 shares issued and outstanding		13,542			1,867
Additional paid-in-capital		126,335,119			45,752,999
Accumulated deficit		(145,154,586	)		(60,640,864	)
Total stockholders' deficit		(18,788,423	)		(14,885,896	)
Total liabilities and stockholders' deficit	$	6,365,933		$	6,482,393

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

RENNOVA HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Net revenues	$	1,414,211		$	41,362		$	3,312,476		$	4,067,562
Operating expenses:
Direct costs of revenue		309,347			305,157			849,632			1,128,060
General and administrative		5,169,478			6,497,718			12,978,349			17,142,263
Sales and marketing expenses		170,028			415,976			620,560			1,441,322
Bad debt		477,249			3,666,707			1,051,590			3,667,992
Depreciation and amortization		451,597			680,579			1,508,042			2,037,910
Total operating expenses		6,577,699			11,566,137			17,008,173			25,417,547
Loss from continuing operations before other income (expense) and income taxes		(5,163,488	)		(11,524,775	)		(13,695,697	)		(21,349,985	)
Other income (expense):
Other income		40,455			127,008			91,212			227,020
Change in fair value of derivative instruments		-			1,827,112			(42,702,815	)		6,553,772
Gain (loss) on extinguishment of debt		-			-			42,702,815			-
Loss on legal settlement		-			-			-			(17,654	)
Interest expense		(5,331,681	)		(1,651,629	)		(16,510,525	)		(4,700,664	)
Total other income (expense), net		(5,291,226	)		302,491			(16,419,313	)		2,062,474
Net loss from continuing operations before income taxes		(10,454,714	)		(11,222,284	)		(30,115,010	)		(19,287,511	)
Provision for income taxes		372			-			3,622			-
Net loss from continuing operations		(10,455,086	)		(11,222,284	)		(30,118,632	)		(19,287,511	)
Net loss from discontinued operations		(370,151	)		(787,155	)		(1,053,471	)		(2,828,030	)
Net loss		(10,825,237	)		(12,009,439	)		(31,172,103	)		(22,115,541	)
Deemed dividend from trigger of down round provision feature		(2,280,280	)		-			(53,341,619	)		-
Net loss to common shareholders	$	(13,105,157	)	$	(12,009,439	)	$	(84,513,722	)	$	(22,115,541	)
Net loss per common share:
Basic and diluted: continuing operations	$	(10.59	)	$	(122.24	)	$	(122.12	)	$	(368.16	)
Basic and diluted: discontinued operations		(0.31	)		(8.57	)		(1.54	)		(53.98	)
Total Basic and diluted	$	(10.90	)	$	(130.81	)	$	(123.66	)	$	(422.14	)
Weighted average number of common shares outstanding during the period:
Basic and diluted		1,202,299			91,808			683,411			52,389

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

RENNOVA HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017

(unaudited)

	Preferred Stock																										Additional						Total
	Series G				Series H						Series F				Total						Common Stock						paid-in			Accumulated			Stockholders'
	Shares		Amount		Shares			Amount			Shares		Amount		Shares			Amount			Shares			Amount			capital			Deficit			Deficit
Balance at December 31, 2016		215	$	2		10,019		$	100			-	$	-		10,234		$	102			186,692		$	1,867		$	45,752,999		$	(60,640,864	)	$	(14,885,896	)
Conversion of preferred stock into common stock		-		-		(7,785	)		(78	)		-		-		(7,785	)	$	(78	)		370,446			3,704			(3,627	)		-			-
Preferred stock issued for business acquisition		-		-		-			-			1,750,000		17,500		1,750,000		$	17,500			-			-			156,597			-			174,097
Common stock issued in exchange for warrants		-		-		-			-			-		-		-			-			2,056			21			57,848			-			57,869
Shares issued in settlement of notes payable and warrants		-		-		-			-			-		-		-			-			26,667			267			439,733			-			440,000
Exchange of preferred stock for convertible debentures		-		-		(2,174	)		(22	)		-		-		(2,174	)		(22	)		-			-			(2,173,978	)		-			(2,174,000	)
Conversion of debentures into common stock		-		-		-			-			-		-		-			-			548,932			5,489			4,058,672			-			4,064,161
Rounding up of common shares in connection with reverse stock split		-		-		-			-			-		-		-			-			526			5			(5	)		-			-
Common stock granted to employees		-		-		-			-			-		-		-			-			185			2			(2	)		-			-
Discount on convertible debentures		-		-		-			-			-		-		-			-			-			-			252,143			-			252,143
Warrants and benefical conversion features related to the issuance of convertible notes		-		-		-			-			-		-		-			-			-			-			24,177,258			-			24,177,258
Stock-based compensation		-		-		-			-			-		-		-			-			-			-			34,081						34,081
Deemed dividend from trigger of down round provision feature		-		-		-			-			-		-		-			-			-			-			53,341,619			(53,341,619	)		-
Restricted stock issued to employees		-		-		-			-			-		-		-			-			181,933			1,819			81,145			-			82,964
Common stock issued for services and severance		-		-		-			-			-		-		-			-			41,667			417			160,586			-			161,003
Shares returned to treasury		-		-		-			-			-		-		-			-			(4,933	)		(49	)		49						-
Net loss		-		-		-			-			-		-		-			-			-			-			-			(31,172,103	)		(31,172,103	)
Balance at September 30, 2017		215	$	2		60		$	0			1,750,000	$	17,500		1,750,275		$	17,502			1,354,171		$	13,542		$	126,335,119		$	(145,154,586	)	$	(18,788,423	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

RENNOVA HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Nine Months Ended September 30,
	2017			2016
Cash flows used in operating activities:
Net loss from continuing operations	$	(30,118,632	)	$	(19,287,511	)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation and amortization		1,508,042			2,037,910
Non-cash gain on derivative instruments		-			(6,653,774	)
Stock issued for services		161,003			9,310
Stock-based compensation		34,081			884,165
Bad debt expense		1,051,590			3,667,992
Non-cash interest expense		8,441,043			-
Amortization of debt discount		6,228,352			2,474,497
Non-cash settlement of debt		(50,000	)		-
Loss (gain) on extinguishment of debt		(42,702,815	)		(100,000	)
Change in fair value of derivative instrument		42,702,815			-
Loss from discontinued operations		(1,053,471	)		(2,828,030	)
Changes in operating assets and liabilities:
Accounts receivable		(252,717	)		1,878,086
Inventory		(73,732	)		-
Prepaid expenses and other current assets		2,672			236,612
Security deposits		(16,059	)		3,040
Accounts payable		1,367,689			(1,679,960	)
Accrued expenses		2,081,876			331,797
Income tax assets and liabilities		(451,997	)		2,202,206
Net cash used in operating activities of continuing operations		(11,140,260	)		(16,823,660	)
Net cash used in discontinued operations		(643,181	)		(216,614	)
Net cash used in operating activities		(11,783,441	)		(17,040,274	)
Cash flows provided by (used in) investing activities:
Purchase of property and equipment		(1,554,499	)		(15,998	)
Net cash used in investing activities of continuing operations		(1,554,499	)		(15,998	)
Net cash provided by investing activites of discontinued operations		1,936			79,271
Net cash provided by (used in) investing activities		(1,552,563	)		63,273
Cash flows provided by financing activities:
Proceeds from the issuance of common stock and warrants, net of offering cost		-			7,521,036
Proceeds from issuance of related party notes payable and advances		3,805,000			8,285,000
Proceeds from issuance of notes payable and debentures		15,742,500			5,394,500
Payments on related party notes payable and advances		(3,860,000	)		(6,000,000	)
Payments on notes payable		(1,042,524	)		(5,715,000	)
Payments on capital lease obligations		(1,342,970	)		(791,365	)
Net cash provided by financing activities of continuing operations		13,302,006			8,694,171
Net cash used in financing activities of discontinued operations		-			(36,056	)
Net cash provided by financing activities		13,302,006			8,658,115
Net (decrease) in cash		(33,998	)		(8,318,886	)
Cash at beginning of period		75,017			8,833,230
Cash at end of period	$	41,019		$	514,344

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

RENNOVA HEALTH, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 1 – Organization and Basis of Presentation

Rennova Health, Inc. (“Rennova”), together with its subsidiaries (the “Company”, “we”, “us” or “our”), is a vertically integrated provider of healthcare related products and services. The Company’s principal lines of business are (i) clinical laboratory operations; (ii) supportive software solutions to healthcare providers including Electronic Health Records (“EHR”), Medical Billing Services and Laboratory Information Services; and (iii) the recent addition of a rural critical access hospital.

Basis of Presentation

The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with the 2016 audited financial statements included in the Company’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 10, 2017. These condensed consolidated interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC, and therefore omit or condense certain footnotes and other information normally included in consolidated interim financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). All material intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the unaudited interim condensed consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) considered necessary for the fair presentation of the financial position and results of operations and cash flows for the interim periods reported herein. The results of operations presented are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

During the three and nine months ended September 30, 2017 and 2016, comprehensive loss was equal to the net loss amounts presented in the accompanying condensed consolidated statements of operations. In addition, certain prior year balances have been reclassified to conform to the current presentation.

Reclassification

The Company has reclassified certain amounts in the 2016 condensed consolidated financial statements to be consistent with the 2017 presentation. These principally relate to classification of certain revenues, cost of revenues and related segment data, as well as balance sheet classifications to assets and liabilities held for sale. Reclassifications relating to the discontinued operations of AMSG are described further in Note 14. The reclassifications had no impact on operations or cash flows for the three and nine months ended September 30, 2016.

Reverse Stock Splits

On February 7, 2017, the Company’s Board of Directors approved an amendment to the Company’s Certificate of Incorporation to effect a 1-for-30 reverse stock split of the Company’s shares of common stock effective on February 22, 2017 and on September 21, 2017, the Company’s Board of Directors approved an amendment to the Company’s Certificate of Incorporation to effect a 1-for-15 reverse stock split effective October 5, 2017 (the “Reverse Stock Splits”). The stockholders of the Company had approved these amendments to the Company’s Certificate of Incorporation on December 22, 2016 for the February 7, 2017 reverse stock split and on September 20, 2017 for the October 5, 2017 reverse stock split. In both cases, the Company’s stockholders had granted authorization to the Board of Directors to determine in its discretion the specific ratio, subject to limitations, and the timing of the reverse splits within certain specified effective dates.

As a result of the Reverse Stock Splits, every 30 shares of the Company’s then outstanding common stock was combined and automatically converted into one share of the Company’s common stock, par value $0.01 per share, on February 7, 2017 and every 15 shares of the Company’s then outstanding common stock was combined and automatically converted into one share of the Company’s common stock, par value $0.01 per share, on October 5, 2017. In addition, the conversions and exercise prices of all of the Company’s outstanding preferred stock, common stock purchase warrants, stock options, restricted stock, equity incentive plans and convertible notes payable were proportionately adjusted at the 1:30 reverse split ratio and again at the 1:15 reverse split ratio in accordance with the terms of such instruments. In addition, proportionate voting rights and other rights of common stockholders were not affected by the Reverse Stock Splits, other than as a result of the rounding up of fractional shares in the February reverse split and the payment of cash in lieu of fractional shares in the October reverse split, as no fractional shares were issued in connection with the Reverse Stock Splits.

The par value and other terms of the common stock were not affected by the Reverse Stock Splits. The authorized capital of the Company of 500,000,000 shares of common stock and 5,000,000 shares of preferred stock were also unaffected by the Reverse Stock Splits.

All share, per share and capital stock amounts for all periods presented have been restated to give effect to the Reverse Stock Splits.

7

RENNOVA HEALTH, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Adoption of ASU 2017-11

In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-11 “Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815).” The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect.

Under current GAAP, an equity-linked financial instrument with a down round feature that otherwise is not required to be classified as a liability under the guidance in Topic 480 is evaluated under the guidance in Topic 815, Derivatives and Hedging, to determine whether it meets the definition of a derivative. If it meets that definition, the instrument (or embedded feature) is evaluated to determine whether it is indexed to an entity’s own stock as part of the analysis of whether it qualifies for a scope exception from derivative accounting. Generally, for warrants and conversion options embedded in financial instruments that are deemed to have a debt host (assuming the underlying shares are readily convertible to cash or the contract provides for net settlement such that the embedded conversion option meets the definition of a derivative), the existence of a down round feature results in an instrument not being considered indexed to an entity’s own stock. This results in a reporting entity being required to classify the freestanding financial instrument or the bifurcated conversion option as a liability, which the entity must measure at fair value initially and at each subsequent reporting date.

The amendments in this Update revise the guidance for instruments with down round features in Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, which is considered in determining whether an equity-linked financial instrument qualifies for a scope exception from derivative accounting. An entity still is required to determine whether instruments would be classified in equity under the guidance in Subtopic 815-40 in determining whether they qualify for that scope exception. If they do qualify, freestanding instruments with down round features are no longer classified as liabilities and embedded conversion options with down round features are no longer bifurcated.

For entities that present EPS in accordance with Topic 260, and when the down round feature is included in an equity-classified freestanding financial instrument, the value of the effect of the down round feature is treated as a dividend when it is triggered and as a numerator adjustment in the basic EPS calculation. This reflects the occurrence of an economic transfer of value to the holder of the instrument, while alleviating the complexity and income statement volatility associated with fair value measurement on an ongoing basis. Convertible instruments are unaffected by the Topic 260 amendments in this Update.

Those amendments in Part 1 of this Update are a cost savings relative to current GAAP. This is because, assuming the required criteria for equity classification in Subtopic 815-40 are met, an entity that issued such an instrument no longer measures the instrument at fair value at each reporting period (in the case of warrants) or separately accounts for a bifurcated derivative (in the case of convertible instruments) on the basis of the existence of a down round feature. For convertible instruments with embedded conversion options that have down round features, applying specialized guidance such as the model for contingent beneficial conversion features rather than bifurcating an embedded derivative also reduces cost and complexity. Under that specialized guidance, the issuer recognizes the intrinsic value of the feature only when the feature becomes beneficial instead of bifurcating the conversion option and measuring it at fair value each reporting period.

The amendments in Part II of this Update replace the indefinite deferral of certain guidance in Topic 480 with a scope exception. This has the benefit of improving the readability of the Codification and reducing the complexity associated with navigating the guidance in Topic 480.

For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in Part 1 of this Update should be applied in either of the following ways: 1. Retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the statement of financial position as of the beginning of the first fiscal year and interim period(s) in which the pending content that links to this paragraph is effective; or 2. Retrospectively to outstanding financial instruments with a down round feature for each prior reporting period presented in accordance with the guidance on accounting changes in paragraphs 250-10-45-5 through 45-10.

8

RENNOVA HEALTH, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting effect.

The Company has determined that this amendment had a material impact on its condensed consolidated financial statements and has early adopted this accounting standard update. The cumulative effect of the adoption of ASU 2017-11 resulted in the reclassification of the derivative liability recorded of $56 million and the reversal of $41 million of interest expense recorded in the Company’s first fiscal quarter of 2017. The remaining $16 million was offset to additional paid in capital (discount on convertible debenture). Additionally, the Company recognized a deemed dividend from the trigger of the down round provision feature of $53.3 million. A $51 million deemed dividend was recorded retrospectively as of the beginning of the issuance of the March 2017 debentures where the initial derivative liability was recorded. A $2.3 million deemed dividend adjustment was recorded in the three months ended September 30, 2017 as a result of the down round provision feature.

Going Concern

The Company’s condensed consolidated financial statements are prepared using U.S. GAAP applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has accumulated significant losses and has negative cash flows from operations, and at September 30, 2017 had a working capital deficit and stockholders’ deficit of $18.0 million and $18.8 million, respectively, which raise substantial doubt about its ability to continue as a going concern. In addition, the Company’s cash position as of the date of this report is critically deficient, critical payments are not being made in the ordinary course of business and certain indebtedness in the amount of $6.0 million matured on March 31, 2017, which the Company does not have the financial resources to satisfy (see Note 5), all of which raise substantial doubt about the Company’s ability to continue as a going concern.

The Company continues to consider efficiencies and is currently using one laboratory for the majority of its toxicology diagnostics thereby reducing the number of employees and associated operating expenses, in order to reduce costs. In addition, the Company received approximately $15.7 million in cash from the issuances of debentures and warrants in the first nine months of 2017 (see Note 6), $3.8 million from related parties and an additional $4.0 million of proceeds on October 30, 2017 from the issuance of convertible preferred stock (see Note 15). In July 2017, the Company announced that it plans to spin off its Advanced Molecular Services Group (“AMSG”) as an independent publicly traded company by way of a tax-free distribution to its shareholders. Completion of the spinoff of AMSG is expected to occur during the first quarter of 2018, and is subject to numerous conditions, including effectiveness of a Registration Statement on Form 10 to be filed with the Securities and Exchange Commission and consents, including under various funding agreements previously entered into by the Company. The intent of the spinoff of AMSG is to create two public companies, each of which can focus on its own strengths and operational plans. In accordance with ASC 205-20 and having met the criteria for “held for sale”, the Company has reflected amounts relating to AMSG as a disposal group classified as held for sale and included as part of discontinued operations. AMSG is no longer included in the segment reporting following the reclassification to discontinued operations. The discontinued operations of AMSG are described further in Note 14. The Company also announced that the Big South Fork Medical Center received CMS regional office licensure approval and opened its doors on August 8, 2017. The hospital provided services to over 1,854 patients and recognized approximately $0.6 million of revenues during the three months ended September 30, 2017. The Company may amend its current revenue recognition policy and percentage for the hospital when payments are received to support amended revenue recognition methodologies. Therefore, the Company expects that the opening of the hospital will continue to provide additional revenue and cash flow sources.

There can be no assurance that the Company will be able to achieve its business plan, raise any additional capital or secure the additional financing necessary to implement its current operating plan. The ability of the Company to continue as a going concern is dependent upon its ability to significantly reduce its operating costs, increase its revenues and eventually regain profitable operations. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Recent Events

Common Stock Listing

Effective October 25, 2017, the Company’s common stock (RNVA) and warrants to purchase common stock (RNVAW) were no longer listed on the Nasdaq Stock Market but began trading on the OTCQB instead, as more fully discussed in Note 15.

9

RENNOVA HEALTH, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Financing Agreements

On October 30, 2017, the Company issued its Series I-1 Convertible Preferred Stock, and modified the anti-dilution provisions of certain outstanding debentures and warrants that were issued in March 2017, as more fully discussed in Note 15.

Note 2 – Accounts Receivable

Accounts receivable at September 30, 2017 (unaudited) and December 31, 2016 consisted of the following:

	September 30, 2017			December 31, 2016
Accounts receivable - laboratory services	$	4,118,407		$	12,715,835
Accounts receivable - hospital		2,982,771			-
Accounts receivable - all others		528,196			499,508
Total accounts receivable		7,629,374			13,215,343
Less:
Allowance for discounts		(3,583,014	)		(11,664,490	)
Allowance for discounts - hospital		(2,368,565	)		-
Allowance for bad debts		(1,276,769	)		(350,954	)
Accounts receivable, net	$	401,026		$	1,199,899

Note 3 – Property and Equipment

Property and equipment at September 30, 2017 (unaudited) and December 31, 2016 consisted of the following:

	September 30, 2017			December 31, 2016
Medical equipment	$	713,799		$	696,195
Building		1,359,484			-
Equipment		461,912			461,912
Equipment under capital leases		4,497,025			4,497,025
Furniture		408,101			377,630
Leasehold improvements		1,333,385			1,329,387
Vehicles		196,534			196,534
Computer equipment		587,742			564,742
Software		1,859,289			1,739,348
		11,417,271			9,862,773
Less accumulated depreciation		(8,327,224	)		(6,819,183	)
Property and equipment, net	$	3,090,047		$	3,043,590

On January 13, 2017, the Company completed an asset purchase agreement to acquire certain assets related to Scott County Community Hospital, based in Oneida, Tennessee (the “Hospital Assets”). The Hospital Assets include a 52,000 square foot hospital building and 6,300 square foot professional building on approximately 4.3 acres. Scott County Community Hospital, which has since been renamed as Big South Fork Medical Center, is classified as a Critical Access Hospital (rural). The Company acquired the Hospital Assets out of bankruptcy for a purchase price of $1.0 million, and the purchase price has been recorded as property and equipment in the Company’s condensed consolidated balance sheet. The Company opened the hospital on August 8, 2017.

Depreciation expense on property and equipment was $0.5 million and $0.7 million for the three months ended September 30, 2017 and 2016, and $1.5 million and $2.0 million for the nine months ended September 30, 2017 and 2016, respectively. Management periodically reviews the valuation of long-lived assets, including property and equipment, for potential impairment. Management did not recognize any impairment of these assets during the nine months ended September 30, 2017 and 2016.

10

RENNOVA HEALTH, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 4 – Accrued Expenses

Accrued expenses at September 30, 2017 (unaudited) and December 31, 2016 consisted of the following:

	September 30, 2017		December 31, 2016
Commisions payable	$	29,860	$	44,788
Accrued payroll and related liabilities		1,755,131		493,521
Accrued interest		2,211,588		1,471,191
Other accrued expenses		1,013,719		872,529
Total accrued expenses	$	5,010,298	$	2,882,029

Note 5 – Notes Payable

The Company and its subsidiaries are party to a number of loans with affiliates and unrelated parties. At September 30, 2017 (unaudited) and December 31, 2016, notes payable consisted of the following:

Notes Payable – Third Parties

	September 30, 2017			December 31, 2016
Loan payable under prepaid forward purchase contract	$	5,000,000		$	5,000,000
Loan payable to TCA Global Master Fund, LP ("TCA") in the original principal amount of $3 million at 16% interest (the "TCA Debenture").  Principal and interest payments due in various installments through December 31, 2017.		1,957,476			3,000,000
Notes payable to CommerceNet and Jay Tenenbaum in the original principal amount of $500,000, bearing interest at 6% per annum (the "Tegal Notes"). Prinicpal and interest payments are due annually from July 12, 2015 through July 12, 2017		341,612			341,612
Other convertible notes payable		-			440,000
Unamortized discount on other convertible notes		-			(179,889	)
Derivative liability associated with the TCA Debenture, at fair value		-			409,524
		7,299,088			9,011,247
Less current portion		(7,299,088	)		(9,011,247	)
Notes payable - third parties, net of current portion	$	-		$	-

On March 31, 2016, the Company entered into an agreement to pledge certain of its accounts receivable as collateral against a prepaid forward purchase contract whereby the Company received consideration in the amount of $5.0 million. The receivables had an estimated collectable value of $8.7 million which had been adjusted down to approximately $1.5 million on the Company’s balance sheet as of December 31, 2016 and $0 as of September 30, 2017. In exchange for the consideration received, the counterparty received the right to: (i) a 20% per annum investment return from the Company on the consideration, with a minimum repayment term of six months and minimum return of $0.5 million, (ii) all payments recovered from the accounts receivable up to $5.25 million, if paid in full within six months, or $5.5 million, if not paid in full within six months, and (iii) 20% of all payments of the accounts receivable in excess of amounts received in (i) and (ii). On March 31, 2017, to the extent that the counterparty has not been paid $6.0 million, the Company was required to pay the difference, plus 30% interest per annum on the total balance. To date, the Company has not recovered any payments against the accounts receivable. As of September 30, 2017, the Company has accrued $1.9 million for the counterparty’s required investment return, which is reflected in accrued expenses in the accompanying condensed consolidated balance sheet, and $6.9 million was due to the counterparty on September 30, 2017. The Company does not have the financial resources to repay this obligation.

The Company did not make the required monthly principal and interest payments due under the TCA Debenture for the period from October 2016 through March 2017. On February 2, 2017, the Company made a payment to TCA in the amount of $0.4 million which was applied to accrued and unpaid interest and fees, including default interest, as of the date of payment. On March 21, 2017, the Company made a payment to TCA in the amount of $0.75 million, of which approximately $0.1 million was applied to accrued and unpaid interest and fees in accordance with the terms of the TCA Debenture. Also on March 21, 2017, the Company entered into a letter agreement with TCA, which (i) waived any payment defaults through March 21, 2017; (ii) provided for the $0.75 million payment discussed above; (iii) set forth a revised repayment schedule whereby the remaining principal plus interest aggregating to approximately $2.6 million was to be repaid in various monthly installments from April of 2017 through September of 2017; and (iv) provided for payment of an additional service fee in the amount of $150,000, which was due on June 27, 2017, the day after effective date of the registration statement filed by the Company; which amount is reflected in accrued expenses in the accompanying condensed consolidated balance sheet at September 30, 2017. In addition, TCA entered into an intercreditor agreement with the purchasers of the convertible debentures (see Note 6) which sets forth rights, preferences and priorities with respect to the security interests in the Company’s assets. On September 19, 2017, the Company entered into a new agreement with TCA, which extended the repayment schedule through to December 31, 2017. The Company is current with its payments.

11

RENNOVA HEALTH, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

On September 15, 2016, the Company entered into an agreement with two investors whereby the Company sold to the investors convertible notes in the aggregate principal amount of $0.4 million (the “September 2016 Notes”). The September 2016 Notes were convertible into shares of the Company’s common stock at a conversion price of $112.50 per share. In conjunction with the sale of the September 2016 Notes, the Company issued warrants to purchase an aggregate of 4,444 shares of the Company’s common stock at an exercise price of $180.00 per share. Based on the allocation of the net proceeds from the September 2016 Notes to the fair value of the warrants, and the resulting beneficial conversion features, the Company recognized a discount for the entire face value of the September 2016 Notes, which was accreted through the notes’ maturity date of March 15, 2017. On March 13, 2017, the September 2016 Notes, along with the accompanying warrants, were exchanged for 26,667 shares of the Company’s common stock.

The Company did not make the principal payments under the Tegal Notes that were due on July 12, 2016. On November 3, 2016, the Company received a default notice from the holders of the Tegal Notes demanding immediate repayment of the outstanding principal and accrued interest aggregating to $0.4 million. On December 7, 2016 the Company received a breach of contract complaint with a request for entry of a default judgment (see Note 11). To date, the Company has yet to repay this amount.

Notes Payable – Related Parties

	September 30, 2017			December 31, 2016
Loan payable to Alcimede LLC, bearing interest at 6% per annum, with all principal and interest due on February 2, 2018	$	168,500		$	218,500
Other advances from related parties		55,000			110,000
		223,500			328,500
Less current portion		(223,500	)		(328,500	)
Total notes payable - related parties, net of current portion	$	-		$	-

On February 3, 2015, the Company borrowed $3.0 million from Alcimede LLC (“Alcimede”). Seamus Lagan, the Company’s President and Chief Executive Officer, is the sole manager of Alcimede. The note has an interest rate of 6% and was originally due on February 2, 2016. Alcimede later agreed to extend the maturity date of the loan to August 2, 2017. On June 29, 2015, Alcimede exercised options granted in October 2012 to purchase 66,667 shares of the Company’s common stock at an exercise price of $37.50 per share, and the loan outstanding was reduced in satisfaction of the aggregate exercise price of $2.5 million. In August of 2016, $0.3 million was repaid by the Company through the issuance of shares of common stock. In March of 2017, the Company and Mr. Lagan agreed that a payment made to Alcimede in the amount of $50,000 would be deducted from the outstanding balance of the note. On August 2, 2017, the Company and Alcimede agreed to further extend the maturity date of the loan to February 2, 2018.

The remaining balance due on this loan as of September 30, 2017 was $0.2 million, including accrued interest.

During the nine months ended September 30, 2017, the Company repaid $0.1 million that was outstanding to a former principal stockholder, and borrowed an additional $75,000 from this same stockholder of which $50,000 has been repaid and $3.6 million from Mr. Diamantis, a director of the Company, which has been fully repaid (see Note 7).

12

RENNOVA HEALTH, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 6 – Debentures

The carrying amount of all outstanding debentures as of September 30, 2017 (unaudited) is as follows:

	September 30, 2017
Debentures	$	20,962,234
Discount on Debentures		(16,398,666	)
Deferred financing fees		(324,563	)
		4,239,005
Less current portion		-
Debentures	$	4,239,005

There were no debentures outstanding as of December 31, 2016.

February Offering

On February 2, 2017, the Company issued $1.6 million aggregate principal amount of Original Issue Discount Convertible Debentures due three months from the date of issuance (the “February Debentures”) and warrants to purchase an aggregate of 6,667 shares of common stock, which can be exercised at any time after August 17, 2017 at an exercise price of $38.70 per share (the “February Warrants”), to an accredited investor for a purchase price of $1.5 million. On March 21, 2017, the February Debentures were exchanged for $2.5 million of exchange debentures as more fully discussed below.

March Offerings

On March 21, 2017, the Company issued $10.85 million aggregate principal amount of Senior Secured Original Issue Discount Convertible Debentures due March 21, 2019 (the “Convertible Debentures”). The Company received net proceeds from this transaction in the approximate amount of $8.4 million. The Company used $3.8 million of the net proceeds to repay the 2017 Diamantis Note (see Note 7) and $0.75 million of the net proceeds to make the partial repayment on the TCA Debenture (see Note 5). The remainder of the net proceeds were used for general corporate purposes. In conjunction with the issuance of the Convertible Debentures, the holder of the February Debentures exchanged these debentures for $2.5 million of new debentures (the “Exchange Debentures” and, collectively with the Convertible Debentures, the “March Debentures”) on the same terms as, and pari passu with, the Convertible Debentures and warrants. The Company recorded non-cash interest expense in the amount of $0.4 million as a result of this exchange. Additionally, the holders of an aggregate of $2.2 million stated value of the Company’s Series H Convertible Preferred Stock (the “Series H Preferred Stock”) exchanged such preferred stock into $2.7 million principal amount of Exchange Debentures and warrants. The March Debentures contain a 24% original issue discount, have no regularly scheduled interest payments except in the event of a default and have a maturity date of March 21, 2019.

In connection with the March Debentures the Company issued warrants to purchase an aggregate of 9,166,616 shares of the Company’s common stock to several accredited investors. The warrants were issued to the investors in three tranches, Series A Warrants, Series B Warrants and Series C Warrants (collectively, the “March Warrants”). The Series A Warrants are exercisable for 3,214,911 shares of the Company’s common stock. They are immediately exercisable and have a term of exercise equal to five years. The Series B Warrants are exercisable for 2,736,794 shares of the Company’s common stock and are exercisable for a period of 18 months commencing immediately. The Series C Warrants are exercisable for 3,214,911 shares of the Company’s common stock and have a term of five years provided such warrants shall only vest if, when and to the extent that the holders exercise the Series B Warrants. At September 30, 2017, the Series A, Series B and Series C Warrants each have an exercise price of $5.85 per share, which reflects an adjustment pursuant to their terms. The Series A, Series B and Series C Warrants are subject to “full ratchet” and other customary anti-dilution protections.

The March Debentures are convertible into shares of the Company’s common stock, at a conversion price which has been adjusted pursuant to the terms of the March Debentures to $5.85 per share as of September 30, 2017, due to prices at which the Company has subsequently issued shares of common stock. The Convertible Debentures began to amortize monthly commencing on the 90th day following the closing date. The Exchange Debentures began to amortize monthly on the closing date. On each monthly amortization date, the Company may elect to repay 5% of the original principal amount of the March Debentures in cash or, in lieu thereof, the conversion price of such debentures will thereafter be 85% of the volume weighted average price at the time of conversion. In the event the Company does not elect to pay such amortization amounts in cash, each investor, in their sole discretion, may increase the conversion amount subject to the alternative conversion price by up to four times the amortization amount. The March Debentures contain customary affirmative and negative covenants. The conversion prices are subject to reset in the event of offerings or other issuances of common stock, or rights to purchase common stock, at a price below the then conversion price, as well as other customary anti-dilution protections as more fully described in the debentures.

The March Debentures are secured by all of the Company’s assets and are guaranteed by substantially all of the Company’s subsidiaries. Between March 22, 2017 and September 30, 2017, holders of the March Debentures converted an aggregate of $4.1 million of these debentures into 548,932 shares of common stock.

13

RENNOVA HEALTH, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The exercise prices of the March Warrants issued in connection with the March Debentures are subject to reset in the event of offerings or other issuances of common stock, or rights to purchase common stock, at a price below the then exercise price, as well as other customary anti-dilution protections. As a result of these provisions, both the March Debentures and the March Warrants were deemed to be not indexed to the Company’s common stock, and the Company recognized derivative liabilities for the embedded conversion feature of the March Debentures and the March Warrants in the original amount of $15.3 million and $41.3 million, respectively. The Company recognized a discount for 100% of the principal value of the March Debentures and non-cash interest expense in the amount of $43.7 million in connection with the recognition of these derivative liabilities. As a result of the adoption of ASU 2017-11 in the second quarter of 2017, the interest expense and derivative liability originally recognized were adjusted and extinguished during the three months ended June 30, 2017. See Note 1 for the adoption of ASU 2017-11 for the retrospective adjustments made to the Company’s condensed consolidated financial statements with respect to the derivative liabilities associated with these debentures and warrants.

June Offerings

In June 2017, the Company issued debentures due three months from the date of issuance in two issuances (collectively, the “June Debentures”) and warrants to purchase an aggregate of 100,000 shares of common stock (33,333 warrants in the June 2, 2017 transaction and 66,667 in the June 22, 2017 transaction), which can be exercised at any time after nine months at an exercise price of $5.85 per share for the June 2, 2017 warrants and $5.70 per share for the June 22, 2017 warrants (collectively the “June Warrants”), to accredited investors for a purchase price of $1,902,700 and proceeds to the Company of $1.5 million. The Company recorded a discount on the debentures of $107,700 which has been fully amortized. As more fully discussed below, on July 17, 2017, the June Debentures were exchanged.

July Offerings

On July 17, 2017, the Company closed an offering of $4,136,862 aggregate principal amount of Original Issue Discount Debentures due October 17, 2017 (the “July Debentures”) and warrants to purchase an aggregate of 141,333 shares of common stock (the “July Warrants”) for consideration of $2,000,000 in cash and the exchange of the full $1,902,700 aggregate principal amount of the June Debentures. Under the Purchase Agreement, the Company was required to hold a stockholders’ meeting to obtain stockholder approval for at least a 1-for-8 reverse split of the Company’s common stock on or before September 20, 2017. Accordingly, the Company’s stockholders approved a reverse stock split on September 20, 2017 and the Company effected a 1-for-15 reverse stock split of its common stock on October 5, 2017, as further discussed in Note 1. The July Debentures were guaranteed by substantially all of the subsidiaries of the Company pursuant to a Subsidiary Guarantee in favor of the holders of the July Debentures. As more fully discussed below, on September 19, 2017, the July Debentures were exchanged for $6.4 million of exchange debentures.

The July Warrants are exercisable into shares of the Company’s common stock at any time from and after six months from the closing date at an exercise price of $5.63 per common share (subject to adjustment). The July Warrants will terminate five years after they become exercisable.

September Offerings

On September 19, 2017, the Company closed an offering of $2,604,000 principal amount of Senior Secured Original Issue Discount Convertible Debentures due September 19, 2019 (the “New Debentures”) and three series of warrants to purchase an aggregate of 6,935,517 shares of the Company’s common stock (the “Series A Warrants,” the “Series B Warrants,” and the “Series C Warrants,” and collectively, the “September Warrants”). The offering was pursuant to the terms of a Securities Purchase Agreement, dated as of August 31, 2017 (the “Purchase Agreement”), between the Company and certain existing institutional investors of the Company. The Company received proceeds of $2,100,000 from the offering.

Also on September 19, 2017, the Company closed exchanges by which the holders of the Company’s July Debentures exchanged $4,136,862 principal amount of such debentures for $6,412,136 principal amount of new debentures on the same items as, and pari passu with, the New Debentures (the “September Exchange Debentures” and, together with the New Debentures, the “September Debentures”). The Company recorded non-cash interest expense in the amount of $1.0 million as a result of this exchange. All issuance amounts of the September Debentures reflect a 24% original issue discount.

The September Debentures contain customary affirmative and negative covenants. The conversion price is subject to “full ratchet” and other customary anti-dilution protections as more fully described in the debentures. The September Debentures may be converted at any time into shares of the Company’s common stock. The September Debentures begin to amortize monthly commencing on October 1, 2017. For the first three amortization dates, the amortization amount is $100,000. Thereafter, on each monthly amortization date, the Company may elect to repay 5% of the original principal amount of September Debentures in cash or, in lieu thereof, the conversion price of such September Debentures shall thereafter be 85% of the volume weighted average price at the time of conversion. In the event the Company does not elect to pay such amortization amounts in cash, each investor, in their sole discretion, may increase the conversion amount subject to the alternative conversion price by up to four times the amortization amount.

14

RENNOVA HEALTH, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The Series A Warrants are exercisable for an aggregate of 2,311,829 shares of the Company’s common stock. They are immediately exercisable and have a term of exercise equal to five years. The Series B Warrants are exercisable for an aggregate of 2,311,859 shares of the Company’s common stock and are exercisable for a period of 18 months commencing immediately. The Series C Warrants are exercisable for an aggregate of 2,311,829 shares of the Company’s common stock, and have a term of five years provided such Series C Warrants shall only vest if, when and to the extent that the holders exercise the Series B Warrants. The September Warrants each have an exercise price of $3.90. All of the September Warrants are subject to “full ratchet” and other customary anti-dilution protections.

The Company’s obligations under the September Debentures are secured by a security interest in all of the Company’s and its subsidiaries’ assets, pursuant to the terms of the Security Agreement, dated as of March 20, 2017.

During the nine months ended September 30, 2017, the Company realized approximately $15.7 million in proceeds from the issuances of these debentures and warrants. At September 30, 2017, the unamortized discounts were $16.4 million. These discounts represent original issue discounts, the relative fair value of the warrants issued with the debentures and the relative fair value of the beneficial conversion features of the debentures. During the three and nine months ended September 30, 2017, the Company recorded approximately $4.8 million and approximately $14.7 million of non-cash interest and amortization of debt discount expense primarily in connection with the debentures and warrants.

See Note 9 for summarized information related to warrants issued and the activity during the nine months ended September 30, 2017.

Note 7 – Related Party Transactions

In addition to the transactions discussed in Note 5, the Company had the following related party transactions during the nine months ended September 30, 2017 and 2016:

In January and February of 2017, the Company received advances aggregating $3.6 million from Christopher Diamantis, a director of the Company. The advances, along with $0.5 million of previously accrued but unpaid interest, were due on demand, bearing interest at 10% per annum. The Company used the advances to pay the purchase price for the Hospital Assets and for general corporate purposes. On March 7, 2017, the Company issued a promissory note to Mr. Diamantis in the amount of $3.8 million (the “2017 Diamantis Note”) in connection with these advances received in 2017, plus accrued and unpaid interest of $0.5 million. In conjunction with the issuance of the 2017 Diamantis Note, the Company also issued to Mr. Diamantis warrants to purchase 27,667 shares of the Company’s common stock, exercisable at $15.00. The 2017 Diamantis Note was repaid on March 21, 2017 with the proceeds received from the issuance of the Convertible Debentures (see Note 6). In May and June of 2017, the Company received advances from Mr. Diamantis, net of repayments totaling $0.2 million, at a 10% annum interest rate, which amount was paid in full on July 18, 2017.

Alcimede billed the Company $0.4 million and $0.3 million for consulting fees pursuant to a consulting agreement for each of the nine months ended September 30, 2017 and 2016, respectively.

Monarch Capital, LLC (“Monarch”) billed the Company for consulting fees pursuant to a consulting agreement in the amount of $0.1 million for the nine months ended September 30, 2017 and 2016, respectively. The agreement expired on August 31, 2017. Michael Goldberg, a director of the Company up until his resignation effective April 24, 2017, is the Managing Director of Monarch.

Note 8 – Capital Lease Obligations

The Company leases various assets under capital leases expiring through 2020 as follows. At September 30, 2017 (unaudited) and December 31, 2016, capital lease obligations consisted of the following:

	September 30, 2017			December 31, 2016
Medical equipment	$	4,497,025		$	4,497,025
Less accumulated depreciation		(3,582,631	)		(2,809,511	)
Net	$	914,394		$	1,687,514

15

RENNOVA HEALTH, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Aggregate future minimum rentals under capital leases are as follows:

Year ended December 31,
2017 (October through December)	$	493,282
2018		1,427,375
2019		377,919
2020		32,611
Total		2,331,187
Less interest		103,983
Present value of minimum lease payments		2,227,204
Less current portion of capital lease obligations		1,491,666
Capital lease obligations, net of current portion	$	735,538

Note 9 – Stockholders’ Equity

Preferred Stock

The Company has 5,000,000 shares, par value $0.01, of preferred stock authorized. As of September 30, 2017, the Company had outstanding 1,750,275 shares of preferred stock consisting of 215 shares of its Series G Preferred Stock, 60 shares of its Series H Preferred Stock and 1,750,000 shares of its Series F Convertible Preferred Stock (the “Series F Preferred Stock”).

During the nine months ended September 30, 2017, 7,785 shares of Series H Preferred Stock were converted into 370,446 shares of common stock in accordance with the terms of the Series H Preferred Stock. Also during the nine months ended September 30, 2017, 2,174 shares of Series H Preferred Stock with a stated value of $2.2 million were exchanged for Exchange Debentures with an aggregate principal amount of $2.7 million and warrants (see Note 6).

In connection with the acquisition of Genomas, Inc., on September 27, 2017, which is more fully discussed in Note 14, the Company issued 1,750,000 shares of its Series F Preferred Stock valued at $174,097. The following is a summary of certain terms and provisions of the Company’s Series F Preferred Stock:

Rank. The Series F Preferred Stock ranks on parity to our common stock.

Conversion. Each share of the Series F Preferred Stock is convertible into shares of our common stock (subject to adjustment as provided in the related certificate of designation of preferences, rights and limitations) at any time after the first anniversary of the issuance date at the option of the holder at a conversion price equal to the greater of $29.25 or the average closing price of the Company’s common stock for the 10 trading days immediately preceding the conversion. The maximum number of shares of common stock issuable upon the conversion of the Series F Preferred Stock is 59,829. Any shares of Series F Preferred Stock outstanding on the fifth anniversary of the issuance date will be mandatorily converted into common stock at the applicable conversion price on such date.

Liquidation Preference. In the event of our liquidation, dissolution or winding-up, holders of Series F Preferred Stock will be entitled to receive the same amount that a holder of common stock would receive if the Series F Preferred Stock were fully converted into shares of our common stock at the conversion price (assuming for such purposes that the Series F Preferred Stock is then convertible) which amounts shall be paid pari passu with all holders of common stock.

Voting Rights. Each share of Series F Preferred Stock shall have one vote, and the holders of the Series F Preferred Stock shall vote together with the holders of our common stock as a single class.

Dividends. The holders of the Series F Preferred Stock will participate, on an as-if-converted-to-common stock basis, in any cash dividends to the holders of common stock.

Redemption. At any time, from time to time after the first anniversary of the issuance date, we have the right to redeem all or any portion of the outstanding Series F Preferred Stock at a price per share equal to $1.95 plus any accrued but unpaid dividends.

Negative Covenants. As long as any shares of Series F Preferred Stock are outstanding, the Company may not amend, alter or repeal any provision of our certificate of incorporation, the certificate of designation or our bylaws in a manner that materially adversely affects the powers, preferences or rights of the Series F Preferred Stock.

16

RENNOVA HEALTH, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Preferred Stock Issued Subsequent to September 30, 2017

In October 2017, the Company issued its Series I-1 Convertible Preferred Stock in connection with a financing as more fully discussed in Note 15.

Common Stock

The Company had 1,354,171 and 186,692 shares of common stock outstanding at September 30, 2017 and December 31, 2016, respectively. The Company issued 1,167,479 shares of its common stock during the nine months ended September 30, 2017 as follows:

The February 22, 2017 reverse stock split, which is more fully described in Note 1, resulted in the issuance of 526 shares of common stock due to the rounding up of fractional shares.

On March 13, 2017, the Company issued 26,667 shares of common stock in settlement of $0.4 million of outstanding notes and warrants (see Note 5).

On March 15, 2017, the Company agreed to issue 2,056 shares of common stock to the holders of a like number of warrants to purchase the Company’s common stock in exchange for the warrants valued at $57,868.

During the nine months ended September 30, 2017, the Company issued 548,932 shares of its common stock upon conversion of $4.1 million of the principal amount of the March Debentures (See Note 6).

On July 25, 2017, the Company issued 8,333 shares of its common stock valued at $42,510 for severance owed to a former employee under the terms of the Company’s equity plan. The equity plan is more fully described below.

On August 14, 2017, the Company issued 181,933 shares of restricted stock to employees and directors, and later returned 4,933 shares of this stock to treasury, as more fully discussed under the heading Restricted Stock below.

On August 23, 2017, the Company issued 33,334 shares of its common stock in payment of professional service fees valued at $118,493.

Restricted Stock

On August 14, 2017, the Board of Directors, based on the recommendation of the Compensation Committee of the Board and in accordance with the provisions of the 2007 Equity Plan, approved grants to employees and directors of the Company of an aggregate of 181,933 shares of restricted common stock of the Company. The grants fully vest on the first anniversary of the date of grant, subject to the grantee’s continued status as an employee or director, as the case may be, on the vesting date. During the nine months ended September 30, 2017, 4,933 shares of the restricted stock were forfeited by their terms and returned to treasury and cancelled.

During the nine months ended September 30, 2017, the Company recognized stock-based compensation in the amount of $82,974 for the grant of the restricted stock based on a valuation of $3.75 per share. At September 30, 2017, the Company had approximately $580,750 of unrecognized compensation cost related to the restricted stock.

Stock Options

The Company maintained and sponsored the Tegal Corporation 2007 Incentive Award Equity Plan (the “2007 Equity Plan”). Tegal Corporation is the predecessor entity to the Company. The 2007 Equity Plan, as amended, provided for the issuance of stock options and other equity awards to the Company’s officers, directors, employees and consultants. During the nine months ended September 30, 2017 and 2016, the Company recognized stock-based compensation in the amount of $34,081 and $0.7 million, respectively, for the vesting of outstanding stock options. The 2007 Equity Plan terminated pursuant to its terms in September 2017. The following table summarizes the Company’s stock option activity for the nine months ended September 30, 2017:

17

RENNOVA HEALTH, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

	Number of options			Weighted- average exercise price		Weighted- average contractual term (Yrs.)
Outstanding at December 31, 2016		47,268		$	1,941.45		8.93
Granted		-			-
Expired		-			-
Forfeit		(8,790	)		-
Exercised		-			-
Outstanding at September 30, 2017		38,478		$	2,072.75		8.68
Exercisable at September 30, 2017		31,811		$	2,445.84

As of September 30, 2017, the Company had approximately $155,582 of unrecognized compensation cost related to stock options granted under the Company’s 2007 Equity Plan, which is expected to be recognized over a weighted-average period of 1.03 years.

Warrants

The Company, as part of various debt and equity financing transactions, has issued warrants to purchase shares of the Company’s common stock. The following summarizes the information related to warrants issued and the activity during the nine months ended September 30, 2017:

	Number of warrants			Weighted average exercise price
Balance at December 31, 2016		93,843		$	175.50
Warrants issued during the period		17,900,999		$	4.58
Warrants exchanged/exercised during period		(6,500	)
Warrants expired during the period		-
Balance at September 30, 2017		17,988,342		$	5.40

During the nine-months ended September 31, 2017, the Company issued 16,350,132 warrants with a weighted average exercise price of $5.03 per share in connection with the issuances of debentures as more fully discussed in Note 6.

Basic and Diluted Loss per Share

Basic loss per share excludes dilution and is computed by dividing loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income of the Company. For the three and nine months ended September 30, 2017 and 2016, basic loss per share is the same as diluted loss per share.

Diluted loss per share excludes all dilutive potential shares if their effect is anti-dilutive. As of September 30, 2017 and 2016, the following potential common stock equivalents were excluded from the calculation of diluted loss per share as their effect was anti-dilutive:

	As of September 30,
	2017		2016
Warrants		17,988,342		78,102
Convertible preferred stock		71,147		47,463
Convertible debt		4,353,898		3,911
Stock options		38,478		49,331
		22,451,865		178,807

18

RENNOVA HEALTH, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 10 – Supplemental Disclosure of Cash Flow Information

The supplemental cash flow information for the nine months ended September 30, 2017 and 2016 (unaudited) is as follows:

		Nine Months Ended September 30,
		2017		2016
Cash paid for interest	$	1,106,835	$	1,237,622
Cash paid for income taxes	$	506,313	$	-
Non-cash investing and financing activities:
Services and severance settled through issuance of common stock	$	161,003	$	2,131,829
Exchange of convertible debentures for convertible debentures and warrants	$	10,734,336	$	-
Series F Preferred Stock issued for business acquisition	$	174,097	$	-
Note payable and warrants settled through issuance of common stock	$	440,000	$	-
Convertible debenture issued in exchange of Series H Preferred Stock	$	2,695,760	$	-
Debentures converted into common stock	$	4,064,162	$	-
Deemed dividend for trigger of down round provision feature	$	53,341,619	$	-

Note 11 – Commitments and Contingencies

Legal Matters

From time to time, the Company may be involved in a variety of claims, lawsuits, investigations and proceedings related to contractual disputes, employment matters, regulatory and compliance matters, intellectual property rights and other litigation arising in the ordinary course of business. The Company operates in a highly regulated industry which may inherently lend itself to legal matters. Management is aware that litigation has associated costs and that results of adverse litigation verdicts could have a material effect on the Company’s financial position or results of operations. Management, in consultation with legal counsel, has addressed known assertions and predicted unasserted claims below.

Biohealth Medical Laboratory, Inc, and PB Laboratories, LLC (the “Companies”) filed suit against CIGNA Health in 2015 alleging that CIGNA failed to pay claims for laboratory services the Companies provided to patients pursuant to CIGNA - issued and CIGNA - administered plans. In 2016, the U.S. District Court dismissed part of the Companies’ claims for lack of standing. The Companies appealed that decision to the Eleventh Circuit Court of Appeals, which recently reversed the District Court’s decision and found that the Companies have standing to raise claims arising out of traditional insurance plans as well as self-funded plans.

The Company’s Epinex Diagnostics Laboratories, Inc. subsidiary was sued in a California state court by two former employees who alleged that they were wrongfully terminated, as well as for a variety of unpaid wage claims. The parties entered into a settlement agreement of this matter on July 29, 2016 for approximately $0.2 million, and the settlement was consummated on August 25, 2016. In October of 2016, the plaintiffs in this matter filed a motion with the court seeking payment for attorneys’ fees in the approximate amount of $0.7 million. On March 24, 2017, the court granted plaintiffs’ motion for payment of attorneys’ fees in the amount of $0.3 million, and the Company has accrued this amount in its condensed consolidated financial statements. Additionally, the Company is seeking indemnification for these amounts from Epinex Diagnostics, Inc. (“EDI”), the seller of Epinex Diagnostic Laboratories, Inc. (“EDL”), pursuant to a Stock Purchase Agreement entered into by and among the parties.

In February 2016, the Company received notice that the Internal Revenue Service (the “IRS”) placed a lien against Medytox Solutions, Inc. and its subsidiaries relating to unpaid 2014 taxes due, plus penalties and interest, in the amount of $5.0 million. The Company paid $0.1 million toward its 2014 tax liability on March 2016. The Company filed its 2015 Federal tax return on March 15, 2016 and the accompanying election to carryback the reported net operating losses was filed in April 2016. On August 24, 2016, the lien was released, and on September of 2016 the Company received a refund from the IRS in the amount of $1.9 million. In November of 2016, the IRS commenced an audit of the Company’s 2015 Federal tax return. The Company is currently unable to predict the outcome of the audit or any liability to the Company that may result from the audit.

On September 27, 2016, a tax warrant was issued against the Company by the Florida Department of Revenue (the “DOR”) for unpaid 2014 state income taxes in the approximate amount of $0.9 million, including penalties and interest. On January 25, 2017, the Company paid the DOR $250,000 as partial payment on this liability, and in February 2017 the Company entered into a Stipulation Agreement with the DOR which will allow the Company to make monthly installment payments of $35,000 until February 2018 and negotiate a new payment agreement then, if the balance of $0.3 million cannot be satisfied in a lump sum. If at any time during the Stipulation period the Company fails to timely file any required tax returns with the DOR or does not meet the payment obligations under the Stipulation Agreement, the entire amount due will be accelerated. The Company is current with the agreed payment plan.

19

RENNOVA HEALTH, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

In December of 2016, TCS-Florida, L.P. (“Tetra”), filed suit against the Company for failure to make the required payments under an equipment leasing contract that the Company had with Tetra (see Note 8). On January 3, 2017, Tetra received a Default Judgment against the Company in the amount of $2.6 million, representing the balance owed on the leases, as well as additional interest, penalties and fees. The Company has recognized this amount in its consolidated financial statements as of December 31, 2016. In January and February of 2017, the Company made payments to Tetra in connection with this judgment aggregating to $0.7 million, and on February 15, 2017 the Company entered into a forbearance agreement with Tetra whereby the remaining $1.9 million due will be paid in 24 equal monthly installments. Payments commenced on May 1, 2017. The Company is current with its payments.

In December of 2016, DeLage Landen Financial Services, Inc. (“DeLage”), filed suit against the Company for failure to make the required payments under an equipment leasing contract that the Company had with DeLage (see Note 8). On January 24, 2017, DeLage received a default judgment against the Company in the approximate amount of $1.0 million, representing the balance owed on the lease, as well as additional interest, penalties and fees. The Company has recognized this amount in its consolidated financial statements as of December 31, 2016. On February 8, 2017, a Stay of Execution was filed and under its terms the balance due will be paid in variable monthly installments through January of 2019, with an implicit interest rate of 4.97%. The Company is current in its payments.

On December 7, 2016, the holders of the Tegal Notes (see Note 5) filed suit against the Company seeking payment for the amounts due under the notes in the aggregate of $0.4 million, including accrued interest. A request for entry of default judgment was filed on January 24, 2017. A Case Management Conference is scheduled for December 5, 2017. The Company has submitted a settlement agreement proposal to the holders of the Tegal Notes and is awaiting a response.

Note 12 – Segment Information

Operating segments are defined under U.S. GAAP as components of an enterprise for which discrete financial information is available and are evaluated regularly by the enterprise’s chief operating decision maker in determining how to allocate resources and assess performance. The Company operates in four reportable business segments:

● Clinical Laboratory Operations, which specializes in providing urine and blood toxicology and pain medication testing to physicians, clinics and rehabilitation facilities in the United States.

● Supportive Software Solutions, including EHR and medical billing and laboratory information management systems.

● Hospital Operations, which reflects the purchase of the Hospital Assets (see Note 3) and the operations of Scott County Community Hospital, which has since been renamed as Big South Fork Medical Center.

● Corporate, which reflects consolidated company wide support services such as finance, legal counsel, human resources, and payroll.

The Company’s Decision Support and Informatics segment is now included in discontinued operations as it has been classified as held for sale as of September 30, 2017. The accounting policies of the reportable segments are the same as those described in Note 2, Summary of Significant Accounting Policies, of the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 and in Note 1 for the adoption to ASU 2017-11. Selected financial information for the Company’s operating segments is as follows:

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RENNOVA HEALTH, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net revenues - External
Clinical Laboratory Operations	$	586,663		$	(9,085	)	$	1,994,639		$	3,461,987
Supportive Software Solutions		208,070			50,447			698,359			605,575
Hospital Operations		619,478			-			619,478			-
	$	1,414,211		$	41,362		$	3,312,476		$	4,067,562
Net revenues - Intersegment (***)
Supportive Software Solutions		217,431			502,055			501,924			1,036,396
	$	217,431		$	502,055		$	501,924		$	1,036,396
(Loss) income from operations
Clinical Laboratory Operations	$	(1,039,118	)	$	(7,364,096	)	$	(3,809,146	)	$	(10,590,435	)
Supportive Software Solutions		(660,800	)		(1,253,386	)		(1,721,694	)		(3,800,893	)
Hospital Operations		(2,093,805	)		-			(3,114,473	)		-
Corporate		(1,369,765	)		(2,940,956	)		(5,058,565	)		(7,059,644	)
Eliminations		-			33,663			8,181			100,987
	$	(5,163,488	)	$	(11,524,775	)	$	(13,695,697	)	$	(21,349,985	)
Depreciation and amortization
Clinical Laboratory Operations	$	410,801		$	549,748		$	1,265,174		$	1,646,167
Supportive Software Solutions		25,015			163,749			227,999			490,236
Hospital Operations		15,436			-			22,045			-
Corporate		345			745			1,005			2,494
Eliminations		-			(33,663	)		(8,181	)		(100,987	)
	$	451,597		$	680,579		$	1,508,042		$	2,037,910
Capital expenditures
Clinical Laboratory Operations	$	-		$	-		$	-		$	6,000
Supportive Software Solutions		-			-			-			9,998
Hospital Operations		160,413			-			1,554,499			-
	$	160,413		$	-		$	1,554,499		$	15,998

***` Intersegment revenues are eliminated in consolidation.

	September 30, 2017			December 31, 2016
Total assets
Clinical Laboratory Operations	$	1,686,167		$	3,986,126
Supportive Software Solutions		1,767,251			2,602,428
Decision Support and Informatics		-			60,000
Hospital Operations		1,748,986			-
Corporate		3,037,112			2,130,191
Assets of AMSG classified as held for sale		997,497			414,662
Eliminations		(2,871,080	)		(2,711,014	)
	$	6,365,933		$	6,482,393

21

RENNOVA HEALTH, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 13 – Recently Issued Accounting Standards

The following table provides a brief description of recently issued accounting standards:

Title and reference	Prescribed	Commentary
	Effective Date
ASU No. 2015-11, “Inventory” (Topic 330): Simplifying the Measurement of Inventory.	Fiscal years beginning after December 15, 2016 and for interim periods therein.	In July 2015, the FASB issued ASU No. 2015-11, “Inventory” (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015-11”). ASU 2015-11 simplifies the measurement of inventory by requiring certain inventory to be subsequently measured at the lower of cost and net realizable value. The amendments in this guidance are effective for fiscal years beginning after December 15, 2016 and for interim periods therein and did not have a significant impact on the Company’s consolidated financial statements upon adoption.
ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”	Fiscal years beginning after December 15, 2017 and for interim periods therein.	In May 2014, the FASB issued guidance that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most recent current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also specifies the accounting for certain incremental costs of obtaining a contract and costs to fulfill a contract with a customer. Entities have the option of applying either a full retrospective approach to all periods presented or a modified approach that reflects differences prior to the date of adoption as an adjustment to equity. In April 2015, FASB deferred the effective date of this guidance until January 1, 2018 and the Company is currently assessing the impact of this guidance on its consolidated financial statements.
ASU No. 2014-15, “Presentation of Financial Statements - Going Concern” (Subtopic 205-40): Disclosure of Uncertainty about an Entity’s Ability to Continue as a Going Concern.	Fiscal years, and interim periods within those years, beginning on or after December 15, 2016, with early adoption permitted.	In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern” (Subtopic 205-40): Disclosure of Uncertainty about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 provides guidance that establishes management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and setting rules for how this information should be disclosed in the financial statements. Adoption of this new standard did not have a significant impact on the Company’s consolidated financial statements. See Note 1 regarding management’s current disclosures regarding the Company’s ability to continue as a going concern.
ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”	Fiscal years beginning on or after December 15, 2016, with early adoption permitted.	In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”). Topic 740, Income Taxes, requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. Deferred tax liabilities and assets are classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. Deferred tax liabilities and assets that are not related to an asset or liability for financial reporting are classified according to the expected reversal date of the temporary difference. To simplify the presentation of deferred income taxes, the amendments in ASU 2015-17 require that deferred income tax liabilities and assets be classified as noncurrent in a classified statement of financial position. For public business entities, the amendments in this update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Adoption of ASU 2015-17 did not have a material impact on the Company’s consolidated financial statements.

22

Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)”	Annual and interim periods within the annual period beginning after December 15, 2018.	In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The amendments in this update create Topic 842, Leases, and supersede the leases requirements in Topic 840, Leases. Topic 842 specifies the accounting for leases. The objective of Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. The main difference between Topic 842 and Topic 840 is the recognition of lease assets and lease liabilities for those leases classified as operating leases under Topic 840. Topic 842 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. The result of retaining a distinction between finance leases and operating leases is that under the lessee accounting model in Topic 842, the effect of leases in the statement of comprehensive income and the statement of cash flows is largely unchanged from previous GAAP. The amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public business entities. Early application of the amendments in ASU 2016-02 is permitted. The Company has not yet determined the impact that adoption of ASU 2016-02 will have on its consolidated financial statements.
ASU No. 2017-11, “Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815)” (“ASU 2017-11”)	Fiscal years beginning on or after December 15, 2018, with early adoption permitted.	The Company adopted this amendment as of its period ended June 30, 2017 (see Note 1).

23

ASU No. 2017-12, “Derivatives and Hedging (Topic 815)”(“ASU 2017-12”) For public business entities, the amendments in this ASU 2017-12 are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption permitted in any interim period after issuance of this ASU. The amendments in ASU 2017-12 (“Update”) provide recognition and presentation guidance for qualifying hedges. The amendments in this Update more closely align the results of cash flow and fair value hedge accounting with risk management activities through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results in the financial statements. The amendments address specific limitations in current U.S. GAAP by expanding hedge accounting for both nonfinancial and financial risk components and by refining the measurement of hedge results to better reflect an entity’s hedging strategies. Thus, the amendments will enable an entity to report more faithfully the economic results of hedging activities for certain fair value and cash flow hedges and will avoid mismatches in earnings by allowing for greater precision when measuring change in fair value of the hedged item for certain fair value hedges. Additionally, by aligning the timing of recognition of hedge results with the earnings effect of the hedged item for cash flow and net investment hedges, and by including the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is presented, the results of an entity’s hedging program and the cost of executing that program will be more visible to users of financial statements. Additionally, the amendments in this Update should ease the operational burden of applying hedge accounting by allowing more time to prepare hedge documentation and allowing effectiveness assessments to be performed on a qualitative basis after hedge inception. The Company has not yet determined the impact that adoption of ASU 2017-12 will have on its consolidated financial statements.

Note 14 – Discontinued Operations

On July 12, 2017, the Company announced plans to spin off AMSG as an independent publicly traded company by way of a tax-free distribution to the Company’s stockholders. Completion of the spinoff is expected to occur in the first quarter of 2018 and is subject to numerous conditions, including effectiveness of a Registration Statement on Form 10 to be filed with the Securities and Exchange Commission, and consents, including under various funding agreements previously entered into by the Company. A record date to determine those stockholders entitled to receive shares in the spin off should be approximately 30 to 60 days prior to the date of the spinoff. The strategic goal of the spinoff is to create two public companies, each of which can focus on its own strengths and operational plans. In addition, after the spinoff, each company will provide a distinct and targeted investment opportunity.

In accordance with ASC 205-20 and having met the criteria for “held for sale”, as the Company reached this decision prior to September 30, 2017, the Company has reflected amounts relating to AMSG as a disposal group classified as held for sale and included as part of discontinued operations. AMSG had been included in the Decision Support and Informatics segment, except for the Company’s subsidiary, Alethea Laboratories, Inc., which had been included in the Clinical Laboratory Operations segment. Segment disclosures in Note 12 no longer include amounts relating to AMSG following the reclassification to discontinued operations.

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

24

RENNOVA HEALTH, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

	September 30, 2017		December 31, 2016
	(unaudited)		(unaudited)
Cash	$	8,690	$	2,962
Accounts receivable, net		6,503		267,681
Prepaid expenses and other current assets		53,582		67,257
Current assets classified as held for sale	$	68,775	$	337,900
Property and equipment, net	$	-	$	53,012
Goodwill		914,972		-
Deposits		13,750		23,750
Non-current assets classified as held for sale	$	928,722	$	76,762
Accounts payable (includes related parties)	$	837,989	$	422,864
Accrued expenses		253,991		1,253,117
Current portion of notes payable		276,632		-
Current liabilities classified as held for sale	$	1,368,612	$	1,675,981
Non-current liabilities classified as held for sale	$	-	$	26,598

Major line items constituting loss from discontinued operations in the consolidated statements of operations for the nine months ended September 30, 2017 and 2016 consisted of the following:

	September 30, 2017			September 30, 2016
		(unaudited)			(unaudited)
Revenue from services	$	224,224		$	1,154,967
Cost of services		9,282			162,266
Gross profit		214,942			992,701
Operating expenses		1,225,638			4,073,873
Other income (expenses)		42,775			(253,142	)
Loss from discontinued operations	$	(1,053,471	)	$	(2,828,030	)

Acquisition of Genomas, Inc. on September 27, 2017

On September 29, 2016, the Company announced that it had entered into a Stock Purchase Agreement (the “Purchase Agreement”) to acquire the remaining outstanding equity securities of Genomas, Inc. (“Genomas”) that the Company did not already own, representing approximately 85% of the outstanding equity interests in Genomas, for 1,750,000 shares of the Company’s newly - designated Series F Preferred Stock. (The Series F Preferred Stock is more fully described in Note 9 and below.) Genomas is a biomedical company that develops PhyzioType Systems for DNA-guided management and prescription of drugs used to treat mental illness, pain, heart disease, and diabetes. The Company had previously announced that on July 19, 2016 it acquired approximately 15% of the outstanding equity of Genomas from Hartford Healthcare Corporation (“Hartford”), along with approximately $1.5 million of notes payable to Hartford and certain rights to and license participation in technology that is used by Genomas, for $250,000 in cash. Under the terms of the Purchase Agreement, the Company also agreed to assume approximately $0.8 million of indebtedness and other obligations of Genomas. The closing of this acquisition, which was subject to, among other things, receipt of regulatory and licensure approvals as well as other customary closing conditions, did not occur until September 27, 2017. As a result of delays in the closing of the transaction, the Company expensed all amounts previously paid for the company during the fourth quarter of 2016, including outstanding advances to Genomas in the amount of $0.4 million. Genomas will be spun-off as part of AMSG, so it is presented here in discontinued operations.

25

RENNOVA HEALTH, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The Series F Preferred Stock issued effective September 27, 2017 has an aggregate stated value of $1,750,000, and is convertible into shares of the Company’s common stock at any time after the one-year anniversary of the closing date at a conversion price per common share equal to the greater of $29.25 or the average closing sales price of the Company’s common stock for the 10 trading days immediately preceding the conversion. The maximum number of common shares issuable upon the conversion of the Series F Preferred Stock is 59,829. The Company valued the Series F Preferred Stock based on the value of the common stock issuable upon conversion on the date of the acquisition, which was $174,097.

The following table summarizes the (preliminary) fair values of assets acquired and liabilities assumed at the acquisition date of Genomas. The Fair Market Value appears to equal cost. The Company has one year to revalue goodwill and other intangible assets in accordance with GAAP per ASC 850-10-25-14.

Cash	$	7,990
Accounts receivable, net		6,503
Accounts payable and accrued expenses		(458,736	)
Deferred revenue		(20,000	)
Loans payable short-term		(142,514	)
Note payable long-term		(134,118	)
Total identifiable net liabilities		(740,875	)
Goodwill		914,972
Total consideration	$	174,097

The acquisition of Genomas was accounted for under the purchase method of accounting and, accordingly, the unaudited condensed consolidated financial statements reflect the results of operations of Genomas from the date of acquisition. Unaudited pro forma results of operations for the three-months ended September 30, 2017 and 2016 and the nine-months ended September 30, 2017 and 2016 are included below. Such pro forma information assumes that the Genomas acquisition had occurred as of January 1, 2017 and 2016, respectively, and revenue is presented in accordance with our accounting policies. These unaudited pro forma statements have been prepared for comparative purposes only and are not intended to be indicative of what our results would have been had the acquisition occurred at the beginning of the periods presented or the results which may occur in the future.

	Three Months Ended September 30,						Nine Months Ended September 30,
	(unaudited)						(unaudited)
	2017			2016			2017			2016
Net Revenue	$	1,439,151		$	122,432		$	3,460,125		$	4,251,890
Loss from discontinued operations		(475,065	)		452,083			(1,070,620	)		(1,871,057	)
Net loss		(10,930,151	)		(10,770,201	)		(31,189,252	)		(21,158,568	)
Deemed dividend from triggher of down
round provision feature		(2,280,280	)		-			(53,341,619	)		-
Net loss to common shareholders	$	(13,210,431	)	$	(10,770,201	)	$	(84,530,871	)	$	(21,158,568	)
Loss per share basic and diluted:
Loss per share – discontinued operations	$	(0.40	)	$	(4.92	)	$	(1.57	)	$	(35.71	)
Net loss per common share	$	(10.99	)	$	(117.32	)	$	(123.69	)	$	(403.88	)

Note 15 – Subsequent Events

Common Stock Listing

As previously announced, on April 18, 2017, the Company was notified by Nasdaq that the stockholders’ equity balance reported on the Company’s Form 10-K for the year ended December 31, 2016 fell below the $2.5 million minimum requirement for continued listing under the Nasdaq Capital Market’s Listing Rule 5550(b)(1) (the “Rule”). As of September 30, 2017, the Company reported a stockholders’ deficit of $18.8 million.

In accordance with the Rule, the Company submitted a plan to Nasdaq outlining how it intended to regain compliance. On August 17, 2017, Nasdaq notified the Company that its plan to correct the stockholders’ equity deficiency did not contain sufficient evidence to support a correction being achieved in the required time frame. The Company appealed this decision to a Hearing Panel which, on October 23, 2017, maintained this position and denied the Company a continued listing. Effective October 25, 2017, the Company’s common stock (RNVA) and warrants to purchase common stock (RNVAW) were no longer listed on the Nasdaq Stock Market but began trading on the OTCQB instead.

Subsequent to September 30, 2017, the Company has issued an aggregate of 4.3 million shares of common stock upon the conversion of debentures and exercise of warrants.

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RENNOVA HEALTH, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Series I-1 Convertible Preferred Stock

On October 30, 2017, the Company closed an offering of $4,960,000 stated value of its newly-authorized Series I-1 Convertible Preferred Stock (the “Series I-1 Preferred Stock”). The offering was pursuant to the terms of the Securities Purchase Agreement, dated as of October 30, 2017 (the “Purchase Agreement”), between the Company and certain existing institutional investors of the Company. The Company received proceeds of $4,000,000 from the offering.

The Purchase Agreement gives the investors the right to participate in up to 50% of any offering of common stock or common stock equivalents by the Company. In the event of any such offering, the investors may also exchange all or some of their Series I-1 Preferred Stock for such new securities on an $0.80 stated value of Series I-1 Preferred Stock for $1.00 of new subscription amount basis.

The following is a summary of certain terms and provisions of the Series I-1 Preferred Stock:

General. The Company’s board of directors has designated up to 4,960 shares of the 5,000,000 authorized shares of preferred stock as the Series I-1 Preferred Stock. Each share of Series I-1 Preferred Stock has a stated value of $1,000.

Rank. The Series I-1 Preferred Stock is senior in right of payment, including dividend rights and liquidation preference, to the Company’s Series G Preferred Stock and Series H Preferred Stock.

Conversion. Each share of Series I-1 Preferred Stock is convertible into shares of the Company’s common stock at any time at the option of the holder at a conversion price equal to the lesser of (i) $1.00, subject to adjustment, and (ii) 85% of the lesser of the volume weighted average market price of the common stock on the day prior to conversion or on the day of conversion. The conversion price is subject to “full ratchet” and other customary anti-dilution protections as more fully described in the Certificate of Designation of the Series I-1 Preferred Stock.

Liquidation Preference. Upon any liquidation, dissolution or winding-up of the Company, the holders of Series I-1 Preferred Stock shall be entitled to receive an amount equal to the stated value of the Series I-1 Preferred Stock, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages then due and owing for each share of Series I-1 Preferred Stock, before any distribution or payment shall be made on any junior securities.

Voting Rights. Shares of Series I-1 Preferred Stock generally have no voting rights, except as required by law and except that the affirmative vote of the holders of a majority of the then outstanding shares of Series I-1 Preferred Stock is required to (a) alter or change adversely the powers, preferences or rights given to the Series I-1 Preferred Stock or alter or amend the Certificate of Designation of the Series I-1 Preferred Stock, (b) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon liquidation senior to, or otherwise pari passu with, the Series I-1 Preferred Stock, (c) amend the Company’s certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders, (d) increase the number of authorized shares of Series I-1 Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing.

Dividends. Holders of Series I-1 Preferred Stock shall be entitled to receive dividends on shares of Series I-1 Preferred Stock equal (on an as-converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if dividends are paid on shares of common stock. No other dividends shall be paid on shares of Series I-1 Preferred Stock.

Redemption. Upon the occurrence of certain Triggering Events (as defined in the Certificate of Designation of the Series I-1 Preferred Stock), the holder shall, in addition to any other right it may have, have the right, at its option, to require the Company to either redeem the Series I-1 Preferred Stock in cash or in certain circumstance in shares of common stock at the redemption prices set forth in the Certificate of Designation.

Negative Covenants. As long as at least a specified number of shares of Series I-1 Preferred Stock are outstanding, unless the holders of 67% of the then outstanding shares of Series I-1 Preferred Stock shall have given prior written consent, the Company and its subsidiaries are, with certain exceptions, limited from (a) incurring indebtedness, (b) creating liens, (c) amending its charter documents, (d) repurchasing or acquiring shares of common stock or common stock equivalents, (e) paying cash dividends on junior securities, (f) entering into transactions with affiliates, or (g) entering into any agreement with respect to the foregoing.

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RENNOVA HEALTH, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Series I-2 Convertible Preferred Stock

On October 30, 2017, the Company entered into exchange agreements with the holders of the September Debentures to provide that the holders may, from time to time, exchange their September Debentures for shares of a newly-authorized Series I-2 Convertible Preferred Stock of the Company (the “Series I-2 Preferred Stock”). The exchange agreements permit the holders of the September Debentures to exchange specified principal amounts of the September Debentures on various closing dates from December 2, 2017 through March 1, 2018. Any exchange is at the option of the holders. Each holder may reduce the principal amount of September Debentures exchanged on any particular closing date, or elect not to exchange any September Debentures at all on a closing date. If a holder does choose to exchange less principal amount of September Debentures, or no September Debentures at all, it can carry forward such lesser amount to a future closing date and then exchange more than the originally specified principal amount for that later closing date. For each $0.80 of principal amount of September Debenture surrendered to the Company at any closing date, the Company will issue the holder a share of Series I-2 Preferred Stock with a stated value of $1.00. Each share of Series I-2 Preferred Stock is convertible into shares of the Company’s common stock at any time at the option of the holder at a conversion price equal to the lesser of (i) $1.00, subject to adjustment, and (ii) 85% of the lesser of the volume weighted average market price of the common stock on the day prior to conversion or on the day of conversion. The conversion price is subject to “full ratchet” and other customary anti-dilution protections as more fully described in the Certificate of Designation of the Series I-2 Preferred Stock.

The following is a summary of certain terms and provisions of the Series I-2 Preferred Stock.

General. The Company’s board of directors has designated up to 12,000 shares of the 5,000,000 authorized shares of preferred stock as the Series I-2 Preferred Stock. Each share of Series I-2 Preferred Stock has a stated value of $1,000.

Rank. The Series I-2 Preferred Stock is senior in right of payment, including dividend rights and liquidation preference, to the Company’s Series G Preferred Stock and Series H Preferred Stock.

Liquidation Preference. Upon any liquidation, dissolution or winding-up of the Company, the holders of Series I-2 Preferred Stock shall be entitled to receive an amount equal to the stated value of the Series I-2 Preferred Stock, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages then due and owing for each share of Series I-2 Preferred Stock, before any distribution or payment shall be made on any junior securities.

Voting Rights. Shares of Series I-2 Preferred Stock generally have no voting rights, except as required by law and except that the affirmative vote of the holders of a majority of the then outstanding shares of Series I-2 Preferred Stock is required to (a) alter or change adversely the powers, preferences or rights given to the Series I-2 Preferred Stock or alter or amend the Certificate of Designation of the Series I-2 Preferred Stock, (b) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon liquidation senior to, or otherwise pari passu with, the Series I-2 Preferred Stock, (c) amend the Company’s certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders, (d) increase the number of authorized shares of Series I-2 Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing.

Dividends. Holders of Series I-2 Preferred Stock shall be entitled to receive dividends on shares of Series I-2 Preferred Stock equal (on an as-converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if dividends are paid on shares of common stock. No other dividends shall be paid on shares of Series I-2 Preferred Stock.

Redemption. Upon the occurrence of certain Triggering Events (as defined in the Certificate of Designation of the Series I-2 Preferred Stock), the holder shall, in addition to any other right it may have, have the right, at its option, to require the Company to either redeem the Series I-2 Preferred Stock in cash or in certain circumstance in shares of common stock at the redemption prices set forth in the Certificate of Designation.

Negative Covenants. As long as at least a specified number of shares of Series I-2 Preferred Stock are outstanding, unless the holders of 67% of the then outstanding shares of Series I-2 Preferred Stock shall have given prior written consent, the Company and its subsidiaries are, with certain exceptions, limited from (a) incurring indebtedness, (b) creating liens, (c) amending its charter documents, (d) repurchasing or acquiring shares of common stock or common stock equivalents, (e) paying cash dividends on junior securities, (f) entering into transactions with affiliates, or (g) entering into any agreement with respect to the foregoing.

Modification of Anti-Dilution Provisions of the March Debentures and March Warrants

On October 30, 2017, the Company agreed to amend the March Debentures and March Warrants, which are more fully discussed in Note 6, to remove the floor in the anti-dilution provisions therein.

Conversions of March Debentures and Exercises of Warrants

During the month of October 2017, $2,185,464.02 aggregate principal amount of March Debentures were exercised for 1,924,037 shares of common stock and the Company received $633,000 upon the exercise of Class B Warrants issued in March 2017 for the issuance of 600,000 shares of common stock.

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RENNOVA HEALTH, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS

Certain statements made in this Form 10-Q are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company’s plans and objectives are based, in part, on assumptions involving its continued business operations. Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate and, therefore, there can be no assurance the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.

The forward-looking statements included in this Form 10-Q and referred to elsewhere are related to future events or our strategies or future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “believe,” “anticipate,” “future,” “potential,” “estimate,” “expect,” “intend,” “plan,” or the negative of such terms or comparable terminology. All forward-looking statements included in this Form 10-Q are based on information available to us as of the filing date of this report, and the Company assumes no obligation to update any such forward-looking statements, except as required by law. Our actual results could differ materially from the forward-looking statements.

Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (the “2016 Form 10-K”) and in our subsequent filings with the Securities and Exchange Commission. The following discussion of our results of operations should be read in conjunction with the audited financial statements contained within the 2016 Form 10-K and with our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this report.

COMPANY OVERVIEW

We are a healthcare enterprise that delivers products and services to healthcare providers, their patients and individuals. We currently operate in three synergistic divisions: 1) Clinical diagnostics through our clinical laboratories; 2) supportive software solutions to healthcare providers including Electronic Health Records (“EHR”), Laboratory Information Systems and Medical Billing services; and 3) the recent addition of a rural critical access hospital in Tennessee. We aspire to create a more sustainable relationship with our customers by offering needed and interoperable solutions to capture multiple revenue streams from medical providers.

Our Services

Our principal line of business to date is laboratory blood and urine testing services performed by our Clinical Laboratory Operations business segment, with a particular emphasis on the provision of urine drug toxicology testing to physicians, clinics and rehabilitation facilities in the United States. Testing services to rehabilitation facilities represented approximately 60% and 85% of our revenues for the nine months ended September 30, 2017 and 2016, respectively.

Our Supportive Software Solutions segment provides a customizable EHR and revenue cycle management services providing a full suite of billing services to substance abuse and behavioral health providers, as well as a dictation-based ambulatory EHR for physician practices and advanced transcription services.

On January 13, 2017, we closed on an asset purchase agreement to acquire certain assets related to Scott County Community Hospital, based in Oneida, Tennessee (the “Hospital Assets”). The Hospital Assets include a 52,000 square foot hospital building and 6,300 square foot professional building on approximately 4.3 acres. Scott County Community Hospital is classified as a Critical Access Hospital (rural) with 25 beds, a 24/7 emergency department, operating rooms and a laboratory that provides a range of diagnostic services. Scott County Community Hospital closed in July 2016 in connection with the bankruptcy filing of its parent company, Pioneer Health Services, Inc. We acquired the Hospital Assets out of bankruptcy for a purchase price of $1.0 million. The hospital, which has been renamed Big South Fork Medical Center, became operational on August 8, 2017. We believe that the hospital will provide us with a stable revenue base, as well as the potential for significant synergistic opportunities with our Clinical Laboratory Operations business segment. The Company is also actively seeking opportunities regarding other similar rural hospitals.

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Our Decision Support and Informatics business segment develops and markets medical information and clinical decision support products and services intended to set a standard for the clinical interpretation of genomics-based, precision medicine. CollabRx offers interpretation and decision support solutions that enhance cancer diagnoses and treatment through actionable data analytics and reporting for oncologists and their patients. This segment is now considered part of our discontinued operations.

RESULTS OF OPERATIONS

Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.

We have identified the policies and significant estimation processes discussed below as critical to our business and to the understanding of our results of operations. For a detailed application of these and other accounting policies, see Note 2 to the audited consolidated financial statements as of and for the year ended December 31, 2016 included in the 2016 Form 10-K.

Revenue Recognition

Service revenues are principally generated from laboratory testing services, including chemical diagnostic tests such as blood analysis and urine analysis. Laboratory service revenues are recognized at the time the testing services are performed and billed and are reported at their estimated net realizable amounts.

Net service revenues are determined utilizing gross service revenues net of contractual adjustments and discounts. Even though it is the responsibility of the patient to pay for laboratory service bills, most individuals in the United States have an agreement with a third-party payer such as a commercial insurance provider, Medicaid or Medicare to pay all or a portion of their healthcare expenses; the majority of services provided by us are to patients covered under a third-party payer contract. In most cases, the Company is provided the third-party billing information and seeks payment from the third party in accordance with the terms and conditions of the third party payer for health service providers like us. Each of these third-party payers may differ not only in terms of rates, but also with respect to terms and conditions of payment and providing coverage (reimbursement) for specific tests. Estimated revenues are established based on a series of procedures and judgments that require industry specific healthcare experience and an understanding of payer methods and trends. Despite follow up billing efforts, the Company does not currently anticipate collection of a significant portion of self-pay billings, including the patient responsibility portion of the billing for patients covered by third party payers. The Company currently does not have any capitated agreements.

We review our calculations for the realizability of gross service revenues on a monthly basis in order to make certain that we are properly allowing for the uncollectable portion of our gross billings and that our estimates remain sensitive to variances and changes within our payer groups. The contractual allowance calculation is made on the basis of historical allowance rates for the various specific payer groups on a monthly basis with a greater weight being given to the most recent trends; this process is adjusted based on recent changes in underlying contract provisions and shifts in the testing being performed. This calculation is routinely analyzed by us on the basis of actual allowances issued by payers and the actual payments made to determine what adjustments, if any, are needed. Based on the calculations at September 30, 2017 and 2016, we determined that the collectible portion of our gross billings that should be reflected in net revenues was approximately 13% and 15%, respectively, of the outgoing gross billings.

Contractual Allowances and Doubtful Accounts

Accounts receivable are reported at realizable value, net of allowances for credits and doubtful accounts, which are estimated and recorded in the period the related revenue is recorded. The Company has a standardized approach to estimating and reviewing the collectability of its receivables based on a number of factors, including the period they have been outstanding. Historical collection and payer reimbursement experience is an integral part of the estimation process related to allowances for contractual credits and doubtful accounts. In addition, the Company regularly assesses the state of its billing operations in order to identify issues which may impact the collectability of these receivables or reserve estimates. Receivables deemed to be uncollectible are charged against the allowance for doubtful accounts at the time such receivables are written-off. Recoveries of receivables previously written-off are recorded as credits to the allowance for doubtful accounts. Revisions to the allowances for doubtful accounts estimates are recorded as an adjustment to provision for bad debts.

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Impairment or Disposal of Long-Lived Assets

The Company accounts for the impairment or disposal of long-lived assets according to the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 360, Property, Plant and Equipment (“ASC 360”). ASC 360 clarifies the accounting for the impairment of long-lived assets and for long-lived assets to be disposed of, including the disposal of business segments and major lines of business. Long-lived assets are reviewed when facts and circumstances indicate that the carrying value of the asset may not be recoverable. When necessary, impaired assets are written down to estimated fair value based on the best information available. Estimated fair value is generally based on either appraised value or measured by discounting estimated future cash flows. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates. We did not record any impairment charges during the nine months ended September 30, 2017 and 2016.

Derivative Financial Instruments and Fair Value

We account for warrants issued in conjunction with the issuance of common stock and certain convertible debt instruments in accordance with the guidance contained in ASC Topic 815, Derivatives and Hedging (“ASC 815”) and ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”). For warrant instruments and conversion options embedded in promissory notes that are not deemed to be indexed to the Company’s own stock, we classified such instruments as liabilities at their fair values at the time of issuance and adjusted the instruments to fair value at each reporting period. These liabilities were subject to re-measurement at each balance sheet date until extinguished either through conversion or exercise, and any change in fair value was recognized in our statement of operations. The fair values of these derivative and other financial instruments had been estimated using a Black-Scholes model and other valuation techniques.

In July 2017, the FASB issued ASU 2017-11“Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815).” The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect.

Under current GAAP, an equity-linked financial instrument with a down round feature that otherwise is not required to be classified as a liability under the guidance in Topic 480 is evaluated under the guidance in Topic 815, Derivatives and Hedging, to determine whether it meets the definition of a derivative. If it meets that definition, the instrument (or embedded feature) is evaluated to determine whether it is indexed to an entity’s own stock as part of the analysis of whether it qualifies for a scope exception from derivative accounting. Generally, for warrants and conversion options embedded in financial instruments that are deemed to have a debt host (assuming the underlying shares are readily convertible to cash or the contract provides for net settlement such that the embedded conversion option meets the definition of a derivative), the existence of a down round feature results in an instrument not being considered indexed to an entity’s own stock. This results in a reporting entity being required to classify the freestanding financial instrument or the bifurcated conversion option as a liability, which the entity must measure at fair value initially and at each subsequent reporting date.

The amendments in this Update revise the guidance for instruments with down round features in Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, which is considered in determining whether an equity-linked financial instrument qualifies for a scope exception from derivative accounting. An entity still is required to determine whether instruments would be classified in equity under the guidance in Subtopic 815-40 in determining whether they qualify for that scope exception. If they do qualify, freestanding instruments with down round features are no longer classified as liabilities and embedded conversion options with down round features are no longer bifurcated.

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For entities that present EPS in accordance with Topic 260, and when the down round feature is included in an equity-classified freestanding financial instrument, the value of the effect of the down round feature is treated as a dividend when it is triggered and as a numerator adjustment in the basic EPS calculation. This reflects the occurrence of an economic transfer of value to the holder of the instrument, while alleviating the complexity and income statement volatility associated with fair value measurement on an ongoing basis. Convertible instruments are unaffected by the Topic 260 amendments in this Update.

The amendments in Part 1 of this Update are a cost savings relative to current GAAP. This is because, assuming the required criteria for equity classification in Subtopic 815-40 are met, an entity that issued such an instrument no longer measures the instrument at fair value at each reporting period (in the case of warrants) or separately accounts for a bifurcated derivative (in the case of convertible instruments) on the basis of the existence of a down round feature. For convertible instruments with embedded conversion options that have down round features, applying specialized guidance such as the model for contingent beneficial conversion features rather than bifurcating an embedded derivative also reduces cost and complexity. Under that specialized guidance, the issuer recognizes the intrinsic value of the feature only when the feature becomes beneficial instead of bifurcating the conversion option and measuring it at fair value each reporting period.

The amendments in Part II of this Update replace the indefinite deferral of certain guidance in Topic 480 with a scope exception. This has the benefit of improving the readability of the Codification and reducing the complexity associated with navigating the guidance in Topic 480.

We have early adopted this amendment as it has a material impact on our condensed consolidated financial statements.

Stock Based Compensation

We account for Stock-Based Compensation under ASC 718 “Compensation – Stock Compensation”, which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized.

The Company accounts for stock-based compensation awards to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. Under ASC 505-50, the Company determines the fair value of the options, warrants or stock-based compensation awards granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. Any stock options or warrants issued to non-employees are recorded in expense and additional paid-in capital in stockholders’ equity (deficit) over the applicable service periods using variable accounting through the vesting dates based on the fair value of the options or warrants at the end of each period.

Three months ended September 30, 2017 compared to three months ended September 30, 2016

The following table summarizes the results of our consolidated continuing operations for the three months ended September 30, 2017 and 2016 (unaudited):

	Three Months Ended September 30,
	2017					2016
	$				%	$				%
Net revenues	$	1,414,211		100.0	%	$	41,362		100.0	%
Operating expenses:
Direct costs of revenue		309,347		21.9	%		305,157		737.8	%
General and administrative expenses		5,169,478		365.5	%		6,497,718		15709.4	%
Sales and marketing expenses		170,028		12.0	%		415,976		1005.7	%
Bad debt expense		477,249		33.7	%		3,666,707		8864.9	%
Depreciation and amortization		451,597		31.9	%		680,579		1645.4	%
Loss from operations		(5,163,488	)	-365.1	%		(11,524,775	)	-27863.2	%
Interest expense		(5,331,681	)	-377.0	%		(1,651,629	)	-3993.1	%
Other income, net		40,455		2.9	%		127,008		307.1	%
Change in fair value of derivative instruments		-		0.0	%		1,827,112		4417.4	%
Gain on extinguishment of debt		-		0.0	%		-		0.0	%
Net loss	$	(10,454,714	)	-739.3	%	$	(11,222,284	)	-27131.9	%

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Net Revenues

Consolidated net revenues were $1.4 million for the three months ended September 30, 2017, as compared to $41 thousand for the three months ended September 30, 2016, an increase of $1.4 million. The increase is mainly the result of two factors; (1) the opening of the Hospital which resulted in net revenues of $0.6 million for the three months ended September 30, 2017 and (2) the increase in the Clinical Laboratory Operations business segment revenue of $0.6 million compared to last year, even though there was a 75% decline in insured test volumes. The net revenue decline for the three months ended September 30, 2016 was due to the determination that the collectible portion of gross billings should be reflected at 15%, as compared to 20% from earlier in 2016. This change in estimate resulted in a reduction in net revenues in the amount of $1.7 million. Net revenues in our Supportive Software Solutions increased by $0.2 million for the three months ended September 30, 2017 compared to the same period a year ago.

Direct Cost of Revenue

Direct costs of revenue is essentially unchanged in the three months ended September 30, 2017, as compared to the three months ended September 30, 2016.

General and Administrative Expenses

General and administrative expenses decreased by $1.3 million, or 20%, in the third quarter of 2017 as compared to the same period a year ago. The decrease is mainly the result of a $1.1 million reduction in employee compensation and related costs, as we significantly reduced our headcount throughout the latter half of 2016 and 2017 in response to the decline in revenues, and a $0.2 million reduction in maintenance costs for our laboratory equipment.

Sales and Marketing Expenses

The decline in sales and marketing expenses of $0.2 million, or 59%, for the three months ended September 30, 2017 as compared to the three months ended September 30, 2016 was primarily due to a reduction in sales employee and contractor compensation expenses in the amount of $0.2 million, as well as reduced travel, advertising and commissionable collections related to the decline in net revenues.

Bad Debt Expense

Bad debt expense for the three months ended September 30, 2017 was $0.5 million, as compared to $3.7 million for the three months ended September 30, 2016.

During the three months ended September 30, 2016, we recorded a charge of $3.5 million related to receivables in our Clinical Laboratory Operations segment that were deemed uncollectible. The primary factors in rendering these receivables uncollectible were our failure to obtain preauthorization from the third party prior to rendering services and the lack of an existing preferred provider contract with the third-party payer. We also increased the allowance for doubtful accounts for our Supportive Software Solutions segment by $0.2 million.

During the three months ended September 30, 2017, the Hospital business segment deemed uncollectible $0.4 million related to the August and September receivables since their Medicare & Medicaid certification was not approved until October 11, 2017. The Company will submit all claims for services rendered for payment since the opening of the hospital. We also increased the allowance for doubtful accounts for our Supportive Software Solutions segment by $0.1 million.

Depreciation and Amortization Expenses

Depreciation and amortization expense was $0.5 million for the three months ended September 30, 2017 as compared to $0.7 million for the same period a year ago, as some of our property and equipment became fully depreciated during 2016 and our capital expenditures have been minimal due to the reduced sample volume at our laboratories.

Loss from Operations

Our operating loss decreased by $6.4 million, to $5.2 million for the three months ended September 30, 2017, as compared to $11.5 million for the three months ended September 30, 2016. The decrease is due to the $5.0 million decrease in total operating expenses and the $1.4 million increase in net revenues.

Interest Expense

Interest expense for the three months ended September 30, 2017 was $5.3 million, as compared to $1.7 million for the three months ended September 30, 2016. Interest expense in the three months ended September 30, 2017 includes a $4.8 million non-cash interest charge related to the issuance of convertible debentures and warrants during the period. Interest expense in the three months ended September 30, 2016 mainly consists of an interest charge of $0.5 million related to the $5 million prepaid forward purchase contract and $0.4 million of non-cash interest expense related to the accretion of debt discounts.

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RENNOVA HEALTH, INC.

Other income (expense)

Other income decreased by $1.9 million for three months ended September 30, 2017 as compared to same period a year ago. The decrease consists primarily of $2.1 million in non-cash gains on the change in fair value of derivative financial instruments related to convertible notes and warrants recorded in 2016.

Net Loss

Our net loss from continuing operations for the three months ended September 30, 2017 was $10.5 million, as compared to $11.2 million for the same period of a year ago, a decrease of $0.8 million. The change is primarily due to the decrease in operating expenses of $5.0 million, an increase of $3.6 million in interest expense, and a decrease of $2.0 million in other income (expense), offset by the increase in revenue of $1.4 million.

The following table presents key financial and operating metrics for our Clinical Laboratory Operations segment:

	Three Months Ended September 30,
Clinical Laboratory Operations	2017			2016			Change			%
Net revenues	$	586,663		$	(9,085	)	$	595,748			6557.5	%
Operating expenses:
Direct costs of revenue		191,537			224,285			(32,748	)		-14.6	%
Bad debt expense		(43,887	)		3,475,252			(3,519,139	)		-101.3	%
General and administrative expenses		897,038			2,691,078			(1,794,040	)		-66.7	%
Sales and marketing expenses		170,292			414,648			(244,356	)		-58.9	%
Depreciation and amortization		410,801			549,748			(138,947	)		-25.3	%
Loss from operations	$	(1,039,118	)	$	(7,364,096	)	$	6,324,978			-85.9	%
Key Operating Measures - Revenues:
Insured tests performed		15,415			61,106			(45,691	)		-74.8	%
Net revenue per insured test	$	38.06		$	(0.15	)	$	38.21			25697.9	%
Revenue recognition percent of gross billings		13.0	%		15.0	%		-2.0	%
Key Operating Measures - Direct Costs:
Total samples processed		5,320			7,850			(2,530	)		-32.2	%
Direct costs per sample	$	36.00		$	28.57		$	7.43			26.0	%

The following table presents key financial metrics for our Supportive Software Solutions segment:

	Three Months Ended September 30,
Supportive Software Solutions	2017			2016			Change			%
Net revenues	$	208,070		$	50,447		$	157,623			312.5	%
Operating expenses:
Direct costs of revenue		47,347			80,872			(33,525	)		-41.5	%
General and administrative expenses		722,790			865,143			(142,353	)		-16.5	%
Sales and marketing expenses		491			1,329			(838	)		-63.1	%
Bad debt expense		73,227			192,740			(119,513	)		-62.0	%
Depreciation and amortization		25,015			163,749			(138,734	)		-84.7	%
Loss from operations	$	(660,800	)	$	(1,253,386	)	$	592,586			-47.3	%

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RENNOVA HEALTH, INC.

The following table presents key financial metrics for our Hospital segment:

	Three Months Ended September 30,
Hospital	2017			2016		Change			%
Net revenues	$	619,478		$	-	$	619,478			-
Operating expenses:
Direct costs of revenue		69,145			-		69,145			-
General and administrative expenses		2,180,793			-		2,180,793			-
Bad debt expense		447,909			-		447,909			-
Depreciation and amortization		15,436			-		15,436			-
Loss from operations	$	(2,093,805	)	$	-	$	(2,093,805	)		-

The following table presents key financial metrics for our Corporate group:

	Three Months Ended September 30,
Corporate	2017			2016			Change			%
Operating expenses:
General and administrative expenses	$	1,364,927		$	2,940,211		$	(1,575,284	)		-53.6	%
Direct costs of revenue		1,319			-			1,319			-
Sales and marketing expenses		3,174			-			3,174			-
Depreciation and amortization		345			745			(400	)		-53.7	%
Loss from operations	$	(1,369,765	)	$	(2,940,956	)	$	1,571,191			-53.4	%

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RENNOVA HEALTH, INC.

Nine months ended September 30, 2017 compared to Nine months ended September 30, 2016

The following table summarizes the results of our consolidated continuing operations for the nine months ended September 30, 2017 and 2016:

	Nine Months Ended September 30,
	2017					2016
	$				%	$				%
Net revenues	$	3,312,476		100.0	%	$	4,067,562		100.0	%
Operating expenses:
Direct costs of revenue		849,632		25.6	%		1,128,060		27.7	%
General and administrative expenses		12,978,349		391.8	%		17,142,263		421.4	%
Sales and marketing expenses		620,560		18.7	%		1,441,322		35.4	%
Bad debt expense		1,051,590		31.7	%		3,667,992		90.2	%
Depreciation and amortization		1,508,042		45.5	%		2,037,910		50.1	%
Loss from operations		(13,695,697	)	-413.5	%		(21,349,985	)	-524.9	%
Interest expense		(16,510,525	)	-498.4	%		(4,700,664	)	-115.6	%
Other income, net		91,212		2.8	%		6,763,138		166.3	%
Change in fair value of derivative instruments		(42,702,815	)	-1289.2	%		-		0.0	%
Gain on extinguishment of debt		42,702,815		1289.2	%		-		0.0	%
Income tax expense		3,622		0.1	%		-		0.0	%
Net loss	$	(30,118,632	)	-909.2	%	$	(19,287,511	)	-474.2	%

Net Revenues

Consolidated net revenues were $3.3 million for the nine months ended September 30, 2017, as compared to $4.1 million for the nine months ended September 30, 2016, a decrease of $0.8 million, or 19%. The decrease is mainly the result of a 72% decline in insured test volumes in our Clinical Laboratory Operations business segment, offset by the net revenue of the Hospital in the amount of $0.6 million. Net revenues in our Supportive Software Solutions increased by $0.1 million or 15% for the nine months ended September 30, 2017 as compared to the same period a year ago.

Direct Cost of Revenue

Direct costs of revenue decreased by 25%, from $1.1 million in the nine months ended September 30, 2016 to $0.8 million in the nine months ended September 30, 2017. The decrease is a result of reduced expenses for transcription, data storage and software license related to our Supportive Software Solutions segment as well as a decrease in reagents and supplies at our laboratories offset by an increase of $0.1 million related to the Hospital.

General and Administrative Expenses

General and administrative expenses decreased by $4.2 million, or 24%, for the nine months ended September 30, 2017, compared to the same period a year ago. The decrease is mainly the result of a $3.0 million reduction in employee compensation and related costs, net of Hospital employee compensation of $1.6 million, as we significantly reduced our headcount throughout the latter half of 2016 and 2017 in response to the decline in revenues in our Clinical and Supportive Software, and a $0.2 million reduction in maintenance costs for our laboratory equipment and a $0.8 million decrease in stock compensation expense.

Sales and Marketing Expenses

The decline in sales and marketing expenses of $0.8 million, or 57%, for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 was primarily due to a reduction in sales employee and contractor compensation expenses in the amount of $0.8 million, as well as reduced travel, advertising and commissionable collections related to the decline in net revenues.

Bad Debt Expense

Bad debt expense for the nine months ended September 30, 2017 was $1.1 million, as compared to $3.7 million for the same period of a year ago. The decrease is mainly due to the $3.5 million bad debt charge in 2016 related to receivables in our Clinical Laboratory Operations segment.

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Depreciation and Amortization Expenses

Depreciation and amortization expense was $1.5 million for the nine months ended September 30, 2017 as compared to $2.0 million for the same period a year ago, as some of our property and equipment became fully depreciated during 2016 and our capital expenditures have been minimal due to the reduced sample volume at our laboratories. Most of the capital expenditures for the Hospital in the amount of $1.5 million, started depreciating at the time the Hospital was opened in August 2017.

Loss from Operations

Our operating loss decreased by $7.7 million, to $13.7 million for the nine months ended September 30, 2017, as compared to $21.3 million for the nine months ended September 30, 2016. The decrease is due to the $8.4 million decrease in total operating expenses partially offset by the $0.8 million decrease in net revenues.

Interest Expense

Interest expense for the nine months ended September 30, 2017 was $16.5 million, as compared to $4.7 million for the nine months ended September 30, 2016. Interest expense in the nine months ended September 30, 2017 includes a $8.5 million non-cash interest charge related to the issuance of convertible debentures and warrants during the period, and $6.2 million for amortization of debt discount.

Other income (expense)

Other income (expense) decreased by $6.8 million for nine months ended September 30, 2017 as compared to the same period a year ago. The decrease consists of the $6.8 million in non-cash gains on the change in fair value of derivative financial instruments related to convertible notes and warrants recorded in 2016.

Net Loss

Our net loss from continuing operations for the nine months ended September 30, 2017 was $30.1 million, as compared to $19.3 million for the same period a year ago, an increase of $10.8 million. The change is primarily due to the increase of $12.2 million in non-cash interest and amortization of debt discount charge, and a decrease of $6.8 million in other income (expense), offset by a decrease in loss from operations of $7.7 million.

The following table presents key financial and operating metrics for our Clinical Laboratory Operations segment:

	Nine Months Ended September 30,
Clinical Laboratory Operations	2017			2016			Change			%
Net revenues	$	1,994,639		$	3,461,987		$	(1,467,348	)		-42.4	%
Operating expenses:
Direct costs of revenue		605,593			898,444			(292,851	)		-32.6	%
Bad debt expense		526,934			3,475,252			(2,948,318	)		-84.8	%
General and administrative expenses		2,794,143			6,592,565			(3,798,422	)		-57.6	%
Sales and marketing expenses		611,941			1,439,994			(828,053	)		-57.5	%
Depreciation and amortization		1,265,174			1,646,167			(380,993	)		-23.1	%
(Loss) income from operations	$	(3,809,146	)	$	(10,590,435	)	$	6,781,289			-64.0	%
Key Operating Measures - Revenues:
Insured tests performed		52,374			187,283			(134,909	)		-72.0	%
Net revenue per insured test	$	38.08		$	18.49		$	19.60			106.0	%
Revenue recognition percent of gross billings		13.0	%		15.0	%		-2.0	%
Key Operating Measures - Direct Costs:
Total samples processed		16,246			19,039			(2,793	)		-14.7	%
Direct costs per sample	$	37.28		$	47.19		$	(9.91	)		-21.0	%

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RENNOVA HEALTH, INC.

The following table presents key financial metrics for our Supportive Software Solutions segment:

	Nine Months Ended September 30,
Supportive Software Solutions	2017			2016			Change			%
Net revenues	$	698,359		$	605,575		$	92,784			15.3	%
Operating expenses:
Direct costs of revenue		122,728			229,616			(106,888	)		-46.6	%
General and administrative expenses		1,992,088			3,492,547			(1,500,459	)		-43.0	%
Sales and marketing expenses		491			1,329			(838	)		-63.1	%
Bad debt expense		76,747			192,740			(115,993	)		-60.2	%
Depreciation and amortization		227,999			490,236			(262,237	)		-53.5	%
Loss from operations	$	(1,721,694	)	$	(3,800,893	)	$	2,079,199			-54.7	%

The decrease in general and administrative expenses relates primarily to the reduction in employee compensation and related costs, as we significantly reduced our headcount.

The following table presents key financial metrics for our Hospital segment:

	Nine Months Ended September 30,
Hospital	2017			2016		Change			%
Net revenues	$	619,478		$	-	$	619,478			-
Operating expenses:
Direct costs of revenue		78,815			-		78,815			-
General and administrative expenses		3,185,182			-		3,185,182			-
Bad debt expense		447,909			-		447,909			-
Depreciation and amortization		22,045			-		22,045			-
Loss from operations	$	(3,114,473	)	$	-	$	(3,114,473	)		-

The following table presents key financial metrics for our Corporate group:

	Nine Months Ended September 30,
Corporate	2017			2016			Change			%
Operating expenses:
General and administrative expenses	$	5,006,936		$	7,057,150		$	(2,050,214	)		-29.1	%
Direct costs of revenue		42,496			-			42,496			-
Sales and marketing expenses		8,128			-			8,128			-
Depreciation and amortization		1,005			2,494			(1,489	)		-59.7	%
Loss from operations	$	(5,058,565	)	$	(7,059,644	)	$	2,001,079			-28.3	%

The decrease in general and administrative expenses is mainly due to reductions in stock-based compensation in 2017 as compared to the prior year in the amount of $0.8 million, $0.7 million of interest and penalties that were recognized in 2016 in connection with unpaid taxes, and a $0.3 million decrease in salaries due to headcount reduction.

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RENNOVA HEALTH, INC.

LIQUIDITY AND CAPITAL RESOURCES

For the year ended December 31, 2016 and through September 30, 2017, we have financed our operations primarily from the sale of our equity securities, short-term advances from related parties, the issuance of debentures and the proceeds we received from pledging certain of our accounts receivable as discussed below. Future cash needs for working capital, capital expenditures and potential acquisitions will require management to seek additional equity or obtain additional credit facilities. The sale of additional equity will result in additional dilution to our stockholders. A portion of our cash may be used to acquire or invest in complementary businesses or products or to obtain the right to use complementary technologies. From time to time, in the ordinary course of business, we evaluate potential acquisitions of such businesses, products or technologies.

At September 30, 2017, we had cash on hand from continuing operations of approximately $41,019, a working capital deficit of $18.0 million and a stockholders’ deficit of $18.8 million. In addition, we incurred a loss from continuing operations of $30.1 million for the nine months ended September 30, 2017. As of the date of this report, our cash position is critically deficient and payments critical to our ability to operate are not being made in the ordinary course. Our fixed operating expenses, including payroll, rent, capital lease payments and other fixed expenses, including the costs required to operate Big South Fork Medical Center, are approximately $1.5-$2.0 million per month.

On October 30, 2017, we raised $4.0 million from the issuance of our Series I-1 Convertible Preferred Stock (the “Series I-1 Preferred Stock”) as more fully discussed below. However, our failure to raise additional capital in the coming months will have a material adverse effect on our ability to operate our business. In addition, we will be required to raise additional capital in order to fund our operations for the next twelve months. There can be no assurances that we will be able to raise the necessary capital on terms that are acceptable to us, or at all. If we are unable to secure the necessary funding as and when required, it will have a material adverse effect on our business and we may be required to downsize, further reduce our workforce, sell some of our assets or possibly curtail or even cease operations, raising substantial doubt about our ability to continue as a going concern.

On July 12, 2017 we announced that we plan to spin off the Advanced Molecular Services Group (“AMSG”) as an independent publicly traded company by way of a tax-free distribution to our shareholders. Completion of the spinoff is expected to occur during the first quarter of 2018, and is subject to numerous conditions, including effectiveness of a Registration Statement on Form 10 to be filed with the Securities and Exchange Commission and consents, including under various funding agreements previously entered into by the Company. The intent of the spinoff is to create two public companies, each of which can focus on its own strengths and operational plans. We also announced on July 24, 2017 that the Big South Fork Medical Center received CMS regional office licensure approval. The hospital opened in August 2017. We expect that the hospital will provide us additional revenue and cash flow sources.

During 2017, we entered into financings as follows:

In 2017, we received short-term advances from Christopher Diamantis, a member of our Board of Directors, in the amount of $3.3 million. On March 7, 2017 we issued a promissory note to Mr. Diamantis in the amount of $3.8 million (the “2017 Diamantis Note”) in connection with the advances we received in 2017, plus accrued and unpaid interest reflecting the advances we received in both fiscal 2016 and 2017, in the amount of $0.5 million.

On February 2, 2017, we issued $1.59 million of convertible debentures (the “February Debentures”) and warrants to purchase 6,667 shares of our common stock and received cash proceeds of $1.5 million.

On March 21, 2017, we issued $10.85 million aggregate principal amount of Senior Secured Original Issue Discount Convertible Debentures due two years from the date of issuance (the “Convertible Debentures”) and three series of warrants to purchase shares of our common stock to several accredited investors. We received net proceeds from this transaction in the approximate amount of $8.4 million. We used $3.8 million of the net proceeds to repay the 2017 Diamantis Note and $0.75 million of the net proceeds to make a partial repayment on the TCA Debenture (as defined below). The remainder of the net proceeds were used for general corporate purposes. In conjunction with the issuance of the Convertible Debentures, the holder of the February Debentures exchanged these debentures for $2.7 million of new debentures (the “Exchange Debentures” and, collectively with the Convertible Debentures, the “March Debentures”) on the same terms as, and pari passu with, the Convertible Debentures and warrants. Additionally, the holders of an aggregate of $2.2 million stated value of our Series H Convertible Preferred Stock (the “Series H Preferred Stock”) exchanged such preferred stock into $2.5 million principal amount of Exchange Debentures and warrants. All of the March Debentures contain a 24% original issue discount.

On June 2, 2017 and June 22, 2017, we issued $1.9 million aggregate principal amount of Original Issue Discount Debentures due three months from the date of issuance of these two issuances (collectively, the “June Debentures”) and warrants to purchase an aggregate of 100,000 shares of common stock to accredited investors for a purchase price of $1.8 million and cash proceeds of $1.5 million.

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RENNOVA HEALTH, INC.

On July 17, 2017, we closed an offering of $4,136,862 aggregate principal amount of Original Issue Discount Debentures due October 17, 2017 and warrants to purchase an aggregate of 141,333 shares of common stock for consideration of $2,000,000 in cash and the exchange of the $1,902,700 aggregate principal amount of Original Issue Discount Debentures due September 22, 2017 issued by us on June 22, 2017.

On September 19, 2017, we closed an offering of $2,604,000 principal amount of Senior Secured Original Issue Discount Convertible Debentures due September 19, 2019 (the “New Debentures”) and three series of warrants to purchase shares of our common stock. The offering was pursuant to the terms of a Securities Purchase Agreement, dated as of August 31, 2017, between us and certain of our existing institutional investors. We received proceeds of $2,100,000 from the offering.

Also on September 19, 2017, we closed exchanges by which the holders of our July Debentures exchanged $4,136,862 principal amount of such debentures for $6,412,136 principal amount of new debentures and warrants on the same items as, and pari passu with, the New Debentures (the “September Exchange Debentures” and, together with the New Debentures, the “September Debentures”). All issuance amounts of the September Debentures reflect a 24% original issue discount.

On October 30, 2017, we closed an offering of $4,960,000 stated value of our newly-authorized Series I-1 Preferred Stock. The offering was pursuant to the terms of the Securities Purchase Agreement, dated as of October 30, 2017, between us and certain of our existing institutional investors. We received proceeds of $4,000,000 from the offering.

In September of 2016, we received $0.4 million from the sale of convertible notes and warrants with a maturity date of March 15, 2017. On March 13, 2017, these securities were exchanged for 26,666 shares of our common stock.

On March 31, 2016, we entered into an agreement to pledge certain of our accounts receivable as collateral against a prepaid forward purchase contract. The receivables had an estimated collectable value of $8.7 million which had been adjusted down to approximately $1.5 million and $0 on our balance sheet as of December 31, 2016 and September 30, 2017, respectively. The consideration received was $5.0 million. In exchange for the consideration received, the counterparty received the right to: (i) a 20% per annum investment return from us on the consideration, with a minimum repayment term of six months and minimum return of $0.5 million, (ii) all payments recovered from the accounts receivable up to $5.25 million, if paid in full within six months, or $5.5 million, if not paid in full within six months, and (iii) 20% of all payments of the accounts receivable in excess of amounts received in (i) and (ii). On March 31, 2017, to the extent that the counterparty has not been paid $6.0 million, we were required to pay the difference, plus 30% interest per annum on the total balance. As of September 30, 2017, and the date of this report, we had not collected any amounts due on these receivables, and $6.9 million, including accrued interest, is currently due to the counterparty. We currently do not have the financial resources to satisfy this obligation. Mr. Diamantis has guaranteed our payment obligation under this agreement.

On November 3, 2016, we received a Notice of Default from TCA Global Credit Master Fund, LP (“TCA”), the holder of a secured convertible debenture with an original outstanding principal amount of $3.0 million (the “TCA Debenture”), related to our failure to pay the monthly principal and interest payments required under the TCA Debenture. Prior to our issuance of the March Debentures on March 21, 2017, we had not made the last nine required payments under the TCA Debenture, other than a $0.4 million payment we made in February of 2017. In conjunction with the issuance of the March Debentures on March 21, 2017, we entered into a letter agreement with TCA, which (i) waived any non-payment default through March 21, 2017; (ii) provided for the $0.75 million payment discussed above; (iii) set forth a revised repayment schedule whereby the remaining principal plus interest aggregating to approximately $2.6 million was to be repaid in various monthly installments from April of 2017 through September of 2017; and (iv) provided for payment of an additional service fee in the amount of $150,000, which was due on June 27, 2017, the day after the effective date of the registration statement filed by us; which amount is reflected in accrued expenses in the accompanying consolidated balance sheet at September 30, 2017. In addition, TCA entered into an intercreditor agreement with the purchasers of the March Debentures which sets forth rights, preferences and priorities with respect to the security interests in our assets. On September 19, 2017, the Company entered into a new agreement with TCA, which extended the repayment schedule through to December 31, 2017. The Company is current with its payments.

As of September 30, 2017, we were party to the following legal matters:

Biohealth Medical Laboratory, Inc, and PB Laboratories, LLC (the “Companies”) filed suit against CIGNA Health in 2015 alleging that CIGNA failed to pay claims for laboratory services the Companies provided to patients pursuant to CIGNA - issued and CIGNA - administered plans. In 2016, the U.S. District Court dismissed part of the Companies’ claims for lack of standing. The Companies appealed that decision to the Eleventh Circuit Court of Appeals, which recently reversed the District Court’s decision and found that the Companies have standing to raise claims arising out of traditional insurance plans as well as self-funded plans.

Our Epinex Diagnostics Laboratories, Inc. subsidiary had been sued in a California state court by two former employees who alleged that they were wrongfully terminated, as well as for a variety of unpaid wage claims. The parties entered into a settlement agreement of this matter on July 29, 2016 for approximately $0.2 million, and the settlement was consummated on August 25, 2016. In October of 2016, the plaintiffs in this matter filed a motion with the court seeking payment for attorneys’ fees in the approximate amount of $0.7 million. On March 24, 2017, the court granted plaintiffs’ motion for payment of attorneys’ fees in the amount of $0.3 million, and we have accrued this amount in its condensed consolidated financial statements. Additionally, we are seeking indemnification for these amounts from Epinex Diagnostics, Inc. (“EDI”), the seller of Epinex Diagnostic Laboratories, Inc. (“EDL”), pursuant to a Stock Purchase Agreement entered into by and among the parties.

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RENNOVA HEALTH, INC.

In February 2016, we received notice that the Internal Revenue Service (the “IRS”) had placed a lien against Medytox Solutions, Inc. and its subsidiaries relating to unpaid 2014 taxes due, plus penalties and interest, in the amount of $5.0 million. We paid $0.1 million toward the 2014 tax liability on March 2016. We filed our 2015 Federal tax return on March 15, 2016 and the accompanying election to carryback the reported net operating losses was filed in April 2016. On August 24, 2016, the lien was released, and in September of 2016, we received a refund from the IRS in the amount of $1.9 million. In November of 2016, the IRS commenced an audit of our 2015 Federal tax return. We are currently unable to predict the outcome of the audit or any liability to us that may result from the audit.

On September 27, 2016, a tax warrant was issued against us by the Florida Department of Revenue (the “DOR”) for unpaid 2014 state income taxes in the approximate amount of $0.9 million, including penalties and interest. On January 25, 2017, we paid the DOR $250,000 as partial payment on this liability, and in February 2017, we entered into a Stipulation Agreement with the DOR which will allow us to make monthly installment payments of $35,000 until February 2018 and negotiate a new payment agreement then, if the balance of $0.3 million cannot be satisfied in a lump sum. If at any time during the Stipulation period we fail to timely file any required tax returns with the DOR or do not meet the payment obligations under the Stipulation Agreement, the entire amount due will be accelerated. The Company is current with the agreed payment plan.

In December of 2016, TCS-Florida, L.P. (“Tetra”), filed suit against us for failure to make the required payments under an equipment leasing contract that we had with Tetra. On January 3, 2017, Tetra received a Default Judgment against us in the amount of $2.6 million, representing the balance owed on the leases, as well as additional interest, penalties and fees. We have recognized this amount in our consolidated financial statements as of December 31, 2016. In January and February of 2017, we made payments to Tetra in connection with this judgment aggregating to $0.7 million, and on February 15, 2017, we entered into a forbearance agreement with Tetra whereby the remaining $1.9 million due will be paid in 24 equal monthly installments. Payments commenced on May 1, 2017. The Company is current with its payments.

In December of 2016, DeLage Landen Financial Services, Inc. (“DeLage”), filed suit against us for failure to make the required payments under an equipment leasing contract that we had with DeLage. On January 24, 2017, DeLage received a default judgment against us in the approximate amount of $1.0 million, representing the balance owed on the lease, as well as additional interest, penalties and fees. We have recognized this amount in our consolidated financial statements as of December 31, 2016. On February 8, 2017, a Stay of Execution was filed and under its terms the balance due will be paid in variable monthly installments through January of 2019, with an implicit interest rate of 4.97%. The Company is current with its payments.

On December 7, 2016, the holders of the notes payable to CommerceNet and Jay Tannenbaum (the “Tegal Notes”) filed suit against us seeking payment for the amounts due under the notes in the aggregate of $0.4 million, including accrued interest. A request for entry of default judgment was filed on January 24, 2017. A Case Management Conference is scheduled for December 5, 2017.

The following table presents our capital resources as of September 30, 2017 and December 31, 2016:

	September 30, 2017			December 31, 2016			Change
Cash	$	41,019		$	75,017		$	(33,998	)
Working capital		(17,990,110	)		(16,344,128	)		(1,645,982	)
Total debt, excluding discounts and deferred financing fees		28,484,822			9,339,747			19,145,075
Capital lease obligations		2,227,204			3,570,174			(1,342,970	)
Stockholders’ deficit	$	(18,788,423	)	$	(14,885,896	)	$	(3,902,527	)

41

RENNOVA HEALTH, INC.

The following table presents the major sources and uses of cash for the nine months ended September 30, 2017 and 2016:

	Nine Months Ended September 30,
	2017			2016			Change
Cash used in operations	$	(11,783,441	)	$	(17,040,274	)	$	5,256,833
Cash used in investing activities		(1,552,563	)		63,273			(1,615,836	)
Cash provided by financing activities		13,302,006			8,658,115			4,643,891
Net change in cash	$	(33,998	)	$	(8,318,886	)	$	8,284,888

The decrease in cash used in operations for the nine months ended September 30, 2017 and 2016 is presented in the following table:

	Nine Months Ended September 30,
	2017			2016			Change
Net loss	$	(30,118,632	)	$	(19,287,511	)	$	(10,831,121	)
Non-cash adjustments to income		17,475,571			2,320,100			15,155,471
Accounts receivable		(252,717	)		1,878,086			(2,130,803	)
Accounts payable and accrued expenses		3,449,565			(1,348,163	)		4,797,728
Loss from discontinued operations		(1,053,471	)		(2,828,030	)		1,774,559
Other		(539,116	)		2,441,858			(2,980,974	)
Net cash used in operating activities		(11,038,800	)		(16,823,660	)		5,784,860
Cash used in discontinued operations		(744,641	)		(216,614	)		(528,027	)
Cash used in operations	$	(11,783,441	)	$	(17,040,274	)	$	5,256,833

The increase in cash used in investing activities is due to the acquisition of the Hospital Assets in January of 2017. Cash provided by investing activities for the nine months ended September 30, 2017 consists of $1.6 million.

Cash provided by financing activities for the nine months ended September 30, 2017 consists of the $15.7 million of net proceeds received in connection with the issuance of debentures and warrants and $1.1 million of related party payments net of advances, partially offset by payments on capital lease obligations in the amount of $1.3 million.

Cash provided by financing activities for the nine months ended September 30, 2016 consists of the $5.0 million received from the prepaid forward purchase contract and the $7.5 million in proceeds from a public offering, partially offset by the $3.4 million of related party payments, net of advances, and repayment of capital lease obligations in the amount of $0.8 million.

OTHER MATTERS

Inflation

We do not believe inflation has a significant effect on the Company’s operations at this time.

Off Balance Sheet Arrangements

Under SEC regulations, we are required to disclose the Company’s off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, results of operations, liquidity, capital expenditures or capital resources that are material to investors. Off-balance sheet arrangements consist of transactions, agreements or contractual arrangements to which any entity that is not consolidated with us is a party, under which we have:

● Any obligation under certain guarantee contracts.

● Any retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets.

● Any obligation under a contract that would be accounted for as a derivative instrument, except that it is both indexed to the Company’s stock and classified in stockholder’s equity in the Company’s statement of financial position.

● Any obligation arising out of a material variable interest held by us in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or engages in leasing, hedging or research and development services with us.

42

RENNOVA HEALTH, INC.

As of September 30, 2017, the Company had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the Company’s financial condition, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of our chief executive officer and interim chief financial officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) as of September 30, 2017. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the chief executive officer, to allow timely decisions regarding required disclosures.

Based on that evaluation, our management concluded, as of the end of the period covered by this report, that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective. In connection with such evaluation, management concluded that the material weakness in internal control over financial reporting identified in our Form 10-K for the year ended December 31, 2016 continued to exist, and as such our disclosure controls and procedures were not effective as of September 30, 2017. Insufficient staffing, accounting processes and procedures led to a lack of contemporaneous documentation supporting the accounting for certain transactions and the approval of certain cash disbursements. The Company is in the process of taking the following steps to remediate these material weaknesses: (i) increasing the staffing of its internal accounting department, including the addition of a full time Chief Financial Officer; (ii) beginning the process of converting to a new integrated accounting system to enhance controls and procedures for recording accounting transactions; and (iii) implementing enhanced documentation procedures to be followed by the internal accounting department, including independent review of material cash disbursements.

Notwithstanding such material weakness, management believes that the condensed consolidated financial statements included in this Form 10-Q fairly present in all material respects the Company’s financial condition, results of operations and cash flows for the periods and dates presented.

(b) Changes in Internal Control over Financial Reporting

During the nine months ended September 30, 2017, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, the Company may be involved in a variety of claims, lawsuits, investigations and proceedings related to contractual disputes, employment matters, regulatory and compliance matters, intellectual property rights and other litigation arising in the ordinary course of business. The Company operates in a highly regulated industry which may inherently lend itself to legal matters. Management is aware that litigation has associated costs and that results of adverse litigation verdicts could have a material effect on the Company’s financial position or results of operations. Management, in consultation with legal counsel, has addressed known assertions and predicted unasserted claims, which are presented in Note 11 to the accompanying unaudited condensed consolidated financial statements.

43

RENNOVA HEALTH, INC.

Item 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A of the 2016 Form 10-K which could materially affect our business, financial condition, or future results. There have been no material changes to the risk factors previously disclosed in our 2016 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the three-months ended September 30, 2017, the Company had the following issuance of unregistered sales of equity securities that was not previously disclosed on a Current Report on Form 8-K:

On August 15, 2017, the Company issued 33,334 shares of its common stock in payment of professional service fees valued at $118,493. These securities were issued without registration in reliance upon the exemption provided by Section 4(2) of the Securities Act of 1933, as amended, as a transaction by an issuer not involving a public offering.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits

3.1	Amended Certificate of Designation for Series F Convertible Preferred Stock (incorporated by reference to Exhibit 3.11 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 25, 2017).
3.2	Certificate of Amendment to Certificate of Incorporation of Rennova Health, Inc., filed October 5, 2017.
4.1	Form of Common Stock Purchase Warrant (incorporated by reference to Exhibit 10.146 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 20, 2017).
4.2	Form of Series A/B/C Common Stock Purchase Warrant (incorporated by reference to Exhibit 10.149 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 1, 2017).
10.1	Amendment, dated July 10, 2017, among Rennova Health, Inc. and Sabby Healthcare Master Fund, Ltd. and Sabby Volatility Warrant Master Fund, Ltd. (incorporated by reference to Exhibit 10.143 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 13, 2017).
10.2	Securities Purchase Agreement, dated as of July 16, 2017, between Rennova Health Inc. and each purchaser identified on the signature pages thereto (incorporated by reference to Exhibit 10.144 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 17, 2017).
10.3	Form of Original Issue Discount Debenture (incorporated by reference to Exhibit 10.145 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 17, 2017).
10.4	Form of Subsidiary Guarantee (incorporated by reference to Exhibit 10.147 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 17, 2017).
10.5	Form of Grant Agreement (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 21, 2017).

44

RENNOVA HEALTH, INC.

10.6	Securities Purchase Agreement, dated as of August 31, 2017, between Rennova Health Inc. and each purchaser identified on the signature pages thereto (incorporated by reference to Exhibit 10.147 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 1, 2017).
10.7	Form of Senior Secured Original Issue Discount Convertible Debenture (incorporated by reference to Exhibit 10.148 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 1, 2017).
10.8	Form of Exchange Agreement, dated as of August 31, 2017, between Rennova Health Inc. and the investor signatory thereto (incorporated by reference to Exhibit 10.150 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 1, 2017).
10.9	Form of Security Agreement, dated March 21, 2017 (incorporated by reference to Exhibit 10.154 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 25, 2017).
10.10	Subsidiary Guarantee, dated as of September 19, 2017, by the Subsidiary Guarantors party thereto, in favor of the Purchasers (incorporated by reference to Exhibit 10.156 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 25, 2017).
10.11	Consent, dated as of September 19, 2017, by TCA Global Credit Master Fund, LP (incorporated by reference to Exhibit 10.157 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 25, 2017).
31.1	Rule 13a-14(a) Certification by the Principal Executive Officer and Interim Principal Financial Officer
32.1	Certification by the Principal Executive Officer and Interim Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101.INS	XBRL Instance Document
101.SCH	XBRL Schema Document
101.CAL	XBRL Calculation Link base Document
101.DEF	XBRL Definition Link base Document
101.LAB	XBRL Label Link base Document
101.PRE	XBRL Presentation Link base Document

*Furnished herewith

45

RENNOVA HEALTH, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	RENNOVA HEALTH, INC.
Date: November 20, 2017	By:	/s/ Seamus Lagan
		Seamus Lagan
		Chief Executive Officer and Interim Chief Financial Officer (Principal Executive Officer and Interim Principal Financial Officer)

46

EX-3.2

 

 

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF

PRINICPAL EXECUTIVE OFFICER AND INTERIM PRINCIPAL FINANCIAL OFFICER

PURSUANT TO RULE 13A-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES - OXLEY ACT OF 2002

I, Seamus Lagan, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Rennova Health, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s), if any, and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s), if any, and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Seamus Lagan

Seamus Lagan

Chief Executive Officer and Interim Chief Financial Officer

(Principal Executive Officer and Interim Principal Financial Officer)

Dated: November 20, 2017

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Rennova Health, Inc., a Delaware corporation (the “Company”), on Form 10-Q for the period ended September 30, 2017 as filed with the Securities and Exchange Commission (the “Report”), I, Seamus Lagan, Chief Executive Officer and Interim Chief Financial Officer of the Company, certify, pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Sec. 1350), that to the best of my knowledge:

1.	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Seamus Lagan

Seamus Lagan

Chief Executive Officer and Interim Chief Financial Officer

Dated: November 20, 2017

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 17, 2017
Document And Entity Information
Entity Registrant Name	Rennova Health, Inc.
Entity Central Index Key	0000931059
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	RNVA
Entity Common Stock, Shares Outstanding		5,639,669
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2017

XML

Condensed Consolidated Balance Sheets - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Current assets:
Cash	$ 41,019	$ 75,017
Accounts receivable, net	401,026	1,199,899
Prepaid expenses and other current assets	146,713	149,385
Inventory	73,732
Income tax refunds receivable	1,458,438	1,458,438
Current assets of AMSG classified as held for sale	68,775	337,900
Total current assets	2,189,703	3,220,639
Property and equipment, net	3,090,047	3,043,590
Deposits	157,461	141,402
Non-current assets of AMSG classified as held for sale	928,722	76,762
Total assets	6,365,933	6,482,393
Current liabilities:
Accounts payable (includes related parties of $0.3 and $0.2 milion, respectively)	4,296,213	2,928,524
Accrued expenses	5,010,298	2,882,029
Income taxes payable	490,436	942,433
Current portion of notes payable	7,299,088	9,011,247
Current portion of notes payable, related party	223,500	328,500
Current portion of capital lease obligations	1,491,666	1,796,053
Current liabilities of AMSG classified as held for sale	1,368,612	1,675,981
Total current liabilities	20,179,813	19,564,767
Other liabilities:
Debentures	4,239,005
Capital lease obligations, net of current portion	735,538	1,774,121
Derivative liabilities		2,803
Non-current liabilities of AMSG classified as held for sale		26,598
Total liabilities	25,154,356	21,368,289
Stockholders' deficit:
Common stock, $0.01 par value, 500,000,000 shares authorized, 1,354,171 and 186,692 shares issued and outstanding	13,542	1,867
Additional paid-in-capital	126,335,119	45,752,999
Accumulated deficit	(145,154,586)	(60,640,864)
Total stockholders' deficit	(18,788,423)	(14,885,896)
Total liabilities and stockholders' deficit	6,365,933	6,482,393
Series G Preferred Stock [Member]
Stockholders' deficit:
Preferred stock value	2	2
Series H Preferred Stock [Member]
Stockholders' deficit:
Preferred stock value		100
Series F Preferred Stock [Member]
Stockholders' deficit:
Preferred stock value	$ 17,500

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Accounts payable related parties	$ 300,000	$ 200,000
Preferred stock par value	$ 0.01
Preferred stock shares authorized	5,000,000
Preferred stock shares outstanding	1,750,275
Common stock par value	$ 0.01	$ 0.01
Common stock shares authorized	500,000,000	500,000,000
Common stock shares issued	1,354,171	186,692
Common stock shares outstanding	1,354,171	186,692
Series G Preferred Stock [Member]
Preferred stock par value	$ 0.01	$ 0.01
Preferred stock shares authorized	14,000	14,000
Preferred stock shares issued	215	215
Preferred stock shares outstanding	215	215
Series H Preferred Stock [Member]
Preferred stock par value	$ 0.01	$ 0.01
Preferred stock shares authorized	14,202	14,202
Preferred stock shares issued	60	10,019
Preferred stock shares outstanding	60	10,019
Series F Preferred Stock [Member]
Preferred stock par value	$ 0.01	$ 0.01
Preferred stock shares authorized	1,750,000	1,750,000
Preferred stock shares issued	1,750,000	0
Preferred stock shares outstanding	1,750,000	0

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Statement [Abstract]
Net revenues	$ 1,414,211	$ 41,362	$ 3,312,476	$ 4,067,562
Operating expenses:
Direct costs of revenue	309,347	305,157	849,632	1,128,060
General and administrative	5,169,478	6,497,718	12,978,349	17,142,263
Sales and marketing expenses	170,028	415,976	620,560	1,441,322
Bad debt	477,249	3,666,707	1,051,590	3,667,992
Depreciation and amortization	451,597	680,579	1,508,042	2,037,910
Total operating expenses	6,577,699	11,566,137	17,008,173	25,417,547
Loss from continuing operations before other income (expense) and income taxes	(5,163,488)	(11,524,775)	(13,695,697)	(21,349,985)
Other income (expense):
Other income	40,455	127,008	91,212	227,020
Change in fair value of derivative instruments		1,827,112	(42,702,815)	6,553,772
Gain (loss) on extinguishment of debt			42,702,815
Loss on legal settlement				(17,654)
Interest expense	(5,331,681)	(1,651,629)	(16,510,525)	(4,700,664)
Total other income (expense), net	(5,291,226)	302,491	(16,419,313)	2,062,474
Net loss from continuing operations before income taxes	(10,454,714)	(11,222,284)	(30,115,010)	(19,287,511)
Provision for income taxes	372		3,622
Net loss from continuing operations	(10,455,086)	(11,222,284)	(30,118,632)	(19,287,511)
Net loss from discontinued operations	(370,151)	(787,155)	(1,053,471)	(2,828,030)
Net loss	(10,825,237)	(12,009,439)	(31,172,103)	(22,115,541)
Deemed dividend from trigger of down round provision feature	(2,280,280)		(53,341,619)
Net loss to common shareholders	$ (13,105,517)	$ (12,009,439)	$ (84,513,722)	$ (22,115,541)
Net loss per common share:
Basic and diluted: continuing operations	$ (10.59)	$ (122.24)	$ (112.12)	$ (368.16)
Basic and diluted: discontinued operations	(0.31)	(8.57)	(1.54)	(53.98)
Total Basic and diluted	$ (10.90)	$ (130.81)	$ (123.66)	$ (422.14)
Weighted average number of common shares outstanding during the period:
Basic and diluted	1,202,299	91,808	683,411	52,389

XML

Condensed Consolidated Statement of Changes in Stockholders’ Deficit (Unaudited) - 9 months ended Sep. 30, 2017 - USD ($)	Series G Preferred Stock [Member]	Series H Preferred Stock [Member]	Series F Preferred Stock [Member]	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Deficit [Member]	Total
Balance at Dec. 31, 2016	$ 2	$ 100		$ 102	$ 1,867	$ 45,752,999	$ (60,640,864)	$ (14,885,896)
Balance, shares at Dec. 31, 2016	215	10,019		10,234	186,692
Conversion of preferred stock into common stock		$ (78)		$ (78)	$ 3,704	(3,627)
Conversion of preferred stock into common stock, shares		(7,785)		(7,785)	370,446
Preferred stock issued for business acquisition			$ 17,500	$ 17,500		156,597		174,097
Preferred stock issued for business acquisition, shares			1,750,000	1,750,000
Common stock issued in exchange for warrants					$ 21	57,848		57,869
Common stock issued in exchange for warrants, shares					2,056
Shares issued in settlement of notes payable and warrants					$ 267	439,733		440,000
Shares issued in settlement of notes payable and warrants, shares					26,667
Exchange of preferred stock for convertible debentures		$ (22)		$ (22)		(2,173,978)		(2,174,000)
Exchange of preferred stock for convertible debentures, shares		(2,174)		(2,174)
Conversion of debentures into common stock					$ 5,489	4,058,672		4,064,161
Conversion of debentures into common stock, shares					548,932
Rounding up of common shares in connection with reverse stock split					$ 5	(5)
Rounding up of common shares in connection with reverse stock split, shares					526
Common stock granted to employees					$ 2	(2)
Common stock granted to employees, shares					185
Discount on convertible debentures						252,143		252,143
Warrants and benefical conversion features related to the issuance of convertible notes						24,177,258		24,177,258
Stock-based compensation						34,081		34,081
Deemed dividend from trigger of down round provision feature						53,341,619	(53,341,619)
Restricted stock issued to employees					$ 1,819	81,145		82,964
Restricted stock issued to employees, shares					181,933
Common stock issued for services and severance					$ 417	160,586		161,003
Common stock issued for services and severance, shares					41,667
Shares returned to treasury					$ (49)	49
Shares returned to treasury, shares					(4,933)
Net loss							(31,172,103)	(31,172,103)
Balance at Sep. 30, 2017	$ 2	$ 0	$ 17,500	$ 17,502	$ 13,542	$ 126,335,119	$ (145,154,586)	$ (18,788,423)
Balance, shares at Sep. 30, 2017	215	60	1,750,000	1,750,275	1,354,171

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Cash flows used in operating activities:
Net loss from continuing operations	$ (30,118,632)	$ (19,287,511)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation and amortization	1,508,042	2,037,910
Non-cash gain on derivative instruments		(6,653,774)
Stock issued for services	161,003	9,310
Stock-based compensation	34,081	884,165
Bad debt expense	1,051,590	3,667,992
Non-cash interest expense	8,441,043
Amortization of debt discount	6,228,352	2,474,497
Non-cash settlement of debt	(50,000)
Loss (gain) on extinguishment of debt	(42,702,815)
Change in fair value of derivative instrument	42,702,815	(6,553,772)
Loss from discontinued operations	(1,053,471)	(2,828,030)
Changes in operating assets and liabilities:
Accounts receivable	(252,717)	1,878,086
Inventory	(73,732)
Prepaid expenses and other current assets	2,672	236,612
Security deposits	(16,059)	3,040
Accounts payable	1,367,689	(1,679,960)
Accrued expenses	2,081,876	331,797
Income tax assets and liabilities	(451,997)	2,202,206
Net cash used in operating activities of continuing operations	(11,140,260)	(16,823,660)
Net cash used in discontinued operations	(643,181)	(216,614)
Net cash used in operating activities	(11,783,441)	(17,040,274)
Cash flows provided by (used in) investing activities:
Purchase of property and equipment	(1,554,499)	(15,998)
Net cash used in investing activities of continuing operations	(1,554,499)	(15,998)
Net cash provided by investing activites of discontinued operations	1,936	79,271
Net cash provided by (used in) investing activities	(1,552,563)	63,273
Cash flows provided by financing activities:
Proceeds from the issuance of common stock and warrants, net of offering cost		7,521,036
Proceeds from issuance of related party notes payable and advances	3,805,000	8,285,000
Proceeds from issuance of notes payable and debentures	15,742,500	5,394,500
Payments on related party notes payable and advances	(3,860,000)	(6,000,000)
Payments on notes payable	(1,042,524)	(5,715,000)
Payments on capital lease obligations	(1,342,970)	(791,365)
Net cash provided by financing activities of continuing operations	13,302,006	8,694,171
Net cash used in financing activities of discontinued operations		(36,056)
Net cash provided by financing activities	13,302,006	8,658,115
Net (decrease) in cash	(33,998)	(8,318,886)
Cash at beginning of period	75,017	8,833,230
Cash at end of period	$ 41,019	$ 514,344

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Organization and Basis of Presentation

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Organization and Basis of Presentation

Note 1 – Organization and Basis of Presentation

Rennova Health, Inc. (“Rennova”), together with its subsidiaries (the “Company”, “we”, “us” or “our”), is a vertically integrated provider of healthcare related products and services. The Company’s principal lines of business are (i) clinical laboratory operations; (ii) supportive software solutions to healthcare providers including Electronic Health Records (“EHR”), Medical Billing Services and Laboratory Information Services; and (iii) the recent addition of a rural critical access hospital.

Basis of Presentation

The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with the 2016 audited financial statements included in the Company’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 10, 2017. These condensed consolidated interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC, and therefore omit or condense certain footnotes and other information normally included in consolidated interim financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). All material intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the unaudited interim condensed consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) considered necessary for the fair presentation of the financial position and results of operations and cash flows for the interim periods reported herein. The results of operations presented are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

During the three and nine months ended September 30, 2017 and 2016, comprehensive loss was equal to the net loss amounts presented in the accompanying condensed consolidated statements of operations. In addition, certain prior year balances have been reclassified to conform to the current presentation.

Reclassification

The Company has reclassified certain amounts in the 2016 condensed consolidated financial statements to be consistent with the 2017 presentation. These principally relate to classification of certain revenues, cost of revenues and related segment data, as well as balance sheet classifications to assets and liabilities held for sale. Reclassifications relating to the discontinued operations of AMSG are described further in Note 14. The reclassifications had no impact on operations or cash flows for the three and nine months ended September 30, 2016.

Reverse Stock Splits

On February 7, 2017, the Company’s Board of Directors approved an amendment to the Company’s Certificate of Incorporation to effect a 1-for-30 reverse stock split of the Company’s shares of common stock effective on February 22, 2017 and on September 21, 2017, the Company’s Board of Directors approved an amendment to the Company’s Certificate of Incorporation to effect a 1-for-15 reverse stock split effective October 5, 2017 (the “Reverse Stock Splits”). The stockholders of the Company had approved these amendments to the Company’s Certificate of Incorporation on December 22, 2016 for the February 7, 2017 reverse stock split and on September 20, 2017 for the October 5, 2017 reverse stock split. In both cases, the Company’s stockholders had granted authorization to the Board of Directors to determine in its discretion the specific ratio, subject to limitations, and the timing of the reverse splits within certain specified effective dates.

As a result of the Reverse Stock Splits, every 30 shares of the Company’s then outstanding common stock was combined and automatically converted into one share of the Company’s common stock, par value $0.01 per share, on February 7, 2017 and every 15 shares of the Company’s then outstanding common stock was combined and automatically converted into one share of the Company’s common stock, par value $0.01 per share, on October 5, 2017. In addition, the conversions and exercise prices of all of the Company’s outstanding preferred stock, common stock purchase warrants, stock options, restricted stock, equity incentive plans and convertible notes payable were proportionately adjusted at the 1:30 reverse split ratio and again at the 1:15 reverse split ratio in accordance with the terms of such instruments. In addition, proportionate voting rights and other rights of common stockholders were not affected by the Reverse Stock Splits, other than as a result of the rounding up of fractional shares in the February reverse split and the payment of cash in lieu of fractional shares in the October reverse split, as no fractional shares were issued in connection with the Reverse Stock Splits.

The par value and other terms of the common stock were not affected by the Reverse Stock Splits. The authorized capital of the Company of 500,000,000 shares of common stock and 5,000,000 shares of preferred stock were also unaffected by the Reverse Stock Splits.

All share, per share and capital stock amounts for all periods presented have been restated to give effect to the Reverse Stock Splits.

Adoption of ASU 2017-11

In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-11 “Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815).” The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect.

Under current GAAP, an equity-linked financial instrument with a down round feature that otherwise is not required to be classified as a liability under the guidance in Topic 480 is evaluated under the guidance in Topic 815, Derivatives and Hedging, to determine whether it meets the definition of a derivative. If it meets that definition, the instrument (or embedded feature) is evaluated to determine whether it is indexed to an entity’s own stock as part of the analysis of whether it qualifies for a scope exception from derivative accounting. Generally, for warrants and conversion options embedded in financial instruments that are deemed to have a debt host (assuming the underlying shares are readily convertible to cash or the contract provides for net settlement such that the embedded conversion option meets the definition of a derivative), the existence of a down round feature results in an instrument not being considered indexed to an entity’s own stock. This results in a reporting entity being required to classify the freestanding financial instrument or the bifurcated conversion option as a liability, which the entity must measure at fair value initially and at each subsequent reporting date.

The amendments in this Update revise the guidance for instruments with down round features in Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, which is considered in determining whether an equity-linked financial instrument qualifies for a scope exception from derivative accounting. An entity still is required to determine whether instruments would be classified in equity under the guidance in Subtopic 815-40 in determining whether they qualify for that scope exception. If they do qualify, freestanding instruments with down round features are no longer classified as liabilities and embedded conversion options with down round features are no longer bifurcated.

For entities that present EPS in accordance with Topic 260, and when the down round feature is included in an equity-classified freestanding financial instrument, the value of the effect of the down round feature is treated as a dividend when it is triggered and as a numerator adjustment in the basic EPS calculation. This reflects the occurrence of an economic transfer of value to the holder of the instrument, while alleviating the complexity and income statement volatility associated with fair value measurement on an ongoing basis. Convertible instruments are unaffected by the Topic 260 amendments in this Update.

Those amendments in Part 1 of this Update are a cost savings relative to current GAAP. This is because, assuming the required criteria for equity classification in Subtopic 815-40 are met, an entity that issued such an instrument no longer measures the instrument at fair value at each reporting period (in the case of warrants) or separately accounts for a bifurcated derivative (in the case of convertible instruments) on the basis of the existence of a down round feature. For convertible instruments with embedded conversion options that have down round features, applying specialized guidance such as the model for contingent beneficial conversion features rather than bifurcating an embedded derivative also reduces cost and complexity. Under that specialized guidance, the issuer recognizes the intrinsic value of the feature only when the feature becomes beneficial instead of bifurcating the conversion option and measuring it at fair value each reporting period.

The amendments in Part II of this Update replace the indefinite deferral of certain guidance in Topic 480 with a scope exception. This has the benefit of improving the readability of the Codification and reducing the complexity associated with navigating the guidance in Topic 480.

For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in Part 1 of this Update should be applied in either of the following ways: 1. Retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the statement of financial position as of the beginning of the first fiscal year and interim period(s) in which the pending content that links to this paragraph is effective; or 2. Retrospectively to outstanding financial instruments with a down round feature for each prior reporting period presented in accordance with the guidance on accounting changes in paragraphs 250-10-45-5 through 45-10.

The amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting effect.

The Company has determined that this amendment had a material impact on its condensed consolidated financial statements and has early adopted this accounting standard update. The cumulative effect of the adoption of ASU 2017-11 resulted in the reclassification of the derivative liability recorded of $56 million and the reversal of $41 million of interest expense recorded in the Company’s first fiscal quarter of 2017. The remaining $16 million was offset to additional paid in capital (discount on convertible debenture). Additionally, the Company recognized a deemed dividend from the trigger of the down round provision feature of $53.3 million. A $51 million deemed dividend was recorded retrospectively as of the beginning of the issuance of the March 2017 debentures where the initial derivative liability was recorded. A $2.3 million deemed dividend adjustment was recorded in the three months ended September 30, 2017 as a result of the down round provision feature.

Going Concern

The Company’s condensed consolidated financial statements are prepared using U.S. GAAP applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has accumulated significant losses and has negative cash flows from operations, and at September 30, 2017 had a working capital deficit and stockholders’ deficit of $18.0 million and $18.8 million, respectively, which raise substantial doubt about its ability to continue as a going concern. In addition, the Company’s cash position as of the date of this report is critically deficient, critical payments are not being made in the ordinary course of business and certain indebtedness in the amount of $6.0 million matured on March 31, 2017, which the Company does not have the financial resources to satisfy (see Note 5), all of which raise substantial doubt about the Company’s ability to continue as a going concern.

The Company continues to consider efficiencies and is currently using one laboratory for the majority of its toxicology diagnostics thereby reducing the number of employees and associated operating expenses, in order to reduce costs. In addition, the Company received approximately $15.7 million in cash from the issuances of debentures and warrants in the first nine months of 2017 (see Note 6), $3.8 million from related parties and an additional $4.0 million of proceeds on October 30, 2017 from the issuance of convertible preferred stock (see Note 15). In July 2017, the Company announced that it plans to spin off its Advanced Molecular Services Group (“AMSG”) as an independent publicly traded company by way of a tax-free distribution to its shareholders. Completion of the spinoff of AMSG is expected to occur during the first quarter of 2018, and is subject to numerous conditions, including effectiveness of a Registration Statement on Form 10 to be filed with the Securities and Exchange Commission and consents, including under various funding agreements previously entered into by the Company. The intent of the spinoff of AMSG is to create two public companies, each of which can focus on its own strengths and operational plans. In accordance with ASC 205-20 and having met the criteria for “held for sale”, the Company has reflected amounts relating to AMSG as a disposal group classified as held for sale and included as part of discontinued operations. AMSG is no longer included in the segment reporting following the reclassification to discontinued operations. The discontinued operations of AMSG are described further in Note 14. The Company also announced that the Big South Fork Medical Center received CMS regional office licensure approval and opened its doors on August 8, 2017. The hospital provided services to over 1,854 patients and recognized approximately $0.6 million of revenues during the three months ended September 30, 2017. The Company may amend its current revenue recognition policy and percentage for the hospital when payments are received to support amended revenue recognition methodologies. Therefore, the Company expects that the opening of the hospital will continue to provide additional revenue and cash flow sources.

There can be no assurance that the Company will be able to achieve its business plan, raise any additional capital or secure the additional financing necessary to implement its current operating plan. The ability of the Company to continue as a going concern is dependent upon its ability to significantly reduce its operating costs, increase its revenues and eventually regain profitable operations. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Recent Events

Common Stock Listing

Effective October 25, 2017, the Company’s common stock (RNVA) and warrants to purchase common stock (RNVAW) were no longer listed on the Nasdaq Stock Market but began trading on the OTCQB instead, as more fully discussed in Note 15.

Financing Agreements

On October 30, 2017, the Company issued its Series I-1 Convertible Preferred Stock, and modified the anti-dilution provisions of certain outstanding debentures and warrants that were issued in March 2017, as more fully discussed in Note 15.

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Accounts Receivable

9 Months Ended

Sep. 30, 2017

Receivables [Abstract]

Accounts Receivable

Note 2 – Accounts Receivable

Accounts receivable at September 30, 2017 (unaudited) and December 31, 2016 consisted of the following:

	September 30, 2017			December 31, 2016
Accounts receivable - laboratory services	$	4,118,407		$	12,715,835
Accounts receivable - hospital		2,982,771			-
Accounts receivable - all others		528,196			499,508
Total accounts receivable		7,629,374			13,215,343
Less:
Allowance for discounts		(3,583,014	)		(11,664,490	)
Allowance for discounts - hospital		(2,368,565	)		-
Allowance for bad debts		(1,276,769	)		(350,954	)
Accounts receivable, net	$	401,026		$	1,199,899

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Property and Equipment

9 Months Ended

Sep. 30, 2017

Property, Plant and Equipment [Abstract]

Property and Equipment

Note 3 – Property and Equipment

Property and equipment at September 30, 2017 (unaudited) and December 31, 2016 consisted of the following:

	September 30, 2017			December 31, 2016
Medical equipment	$	713,799		$	696,195
Building		1,359,484			-
Equipment		461,912			461,912
Equipment under capital leases		4,497,025			4,497,025
Furniture		408,101			377,630
Leasehold improvements		1,333,385			1,329,387
Vehicles		196,534			196,534
Computer equipment		587,742			564,742
Software		1,859,289			1,739,348
		11,417,271			9,862,773
Less accumulated depreciation		(8,327,224	)		(6,819,183	)
Property and equipment, net	$	3,090,047		$	3,043,590

On January 13, 2017, the Company completed an asset purchase agreement to acquire certain assets related to Scott County Community Hospital, based in Oneida, Tennessee (the “Hospital Assets”). The Hospital Assets include a 52,000 square foot hospital building and 6,300 square foot professional building on approximately 4.3 acres. Scott County Community Hospital, which has since been renamed as Big South Fork Medical Center, is classified as a Critical Access Hospital (rural). The Company acquired the Hospital Assets out of bankruptcy for a purchase price of $1.0 million, and the purchase price has been recorded as property and equipment in the Company’s condensed consolidated balance sheet. The Company opened the hospital on August 8, 2017.

Depreciation expense on property and equipment was $0.5 million and $0.7 million for the three months ended September 30, 2017 and 2016, and $1.5 million and $2.0 million for the nine months ended September 30, 2017 and 2016, respectively. Management periodically reviews the valuation of long-lived assets, including property and equipment, for potential impairment. Management did not recognize any impairment of these assets during the nine months ended September 30, 2017 and 2016.

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Accrued Expenses

9 Months Ended

Sep. 30, 2017

Payables and Accruals [Abstract]

Accrued Expenses

Note 4 – Accrued Expenses

Accrued expenses at September 30, 2017 (unaudited) and December 31, 2016 consisted of the following:

	September 30, 2017		December 31, 2016
Commisions payable	$	29,860	$	44,788
Accrued payroll and related liabilities		1,755,131		493,521
Accrued interest		2,211,588		1,471,191
Other accrued expenses		1,013,719		872,529
Total accrued expenses	$	5,010,298	$	2,882,029

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Notes Payable

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Notes Payable

Note 5 – Notes Payable

The Company and its subsidiaries are party to a number of loans with affiliates and unrelated parties. At September 30, 2017 (unaudited) and December 31, 2016, notes payable consisted of the following:

Notes Payable – Third Parties

	September 30, 2017			December 31, 2016
Loan payable under prepaid forward purchase contract	$	5,000,000		$	5,000,000
Loan payable to TCA Global Master Fund, LP ("TCA") in the original principal amount of $3 million at 16% interest (the "TCA Debenture").  Principal and interest payments due in various installments through December 31, 2017.		1,957,476			3,000,000
Notes payable to CommerceNet and Jay Tenenbaum in the original principal amount of $500,000, bearing interest at 6% per annum (the "Tegal Notes"). Prinicpal and interest payments are due annually from July 12, 2015 through July 12, 2017		341,612			341,612
Other convertible notes payable		-			440,000
Unamortized discount on other convertible notes		-			(179,889	)
Derivative liability associated with the TCA Debenture, at fair value		-			409,524
		7,299,088			9,011,247
Less current portion		(7,299,088	)		(9,011,247	)
Notes payable - third parties, net of current portion	$	-		$	-

On March 31, 2016, the Company entered into an agreement to pledge certain of its accounts receivable as collateral against a prepaid forward purchase contract whereby the Company received consideration in the amount of $5.0 million. The receivables had an estimated collectable value of $8.7 million which had been adjusted down to approximately $1.5 million on the Company’s balance sheet as of December 31, 2016 and $0 as of September 30, 2017. In exchange for the consideration received, the counterparty received the right to: (i) a 20% per annum investment return from the Company on the consideration, with a minimum repayment term of six months and minimum return of $0.5 million, (ii) all payments recovered from the accounts receivable up to $5.25 million, if paid in full within six months, or $5.5 million, if not paid in full within six months, and (iii) 20% of all payments of the accounts receivable in excess of amounts received in (i) and (ii). On March 31, 2017, to the extent that the counterparty has not been paid $6.0 million, the Company was required to pay the difference, plus 30% interest per annum on the total balance. To date, the Company has not recovered any payments against the accounts receivable. As of September 30, 2017, the Company has accrued $1.9 million for the counterparty’s required investment return, which is reflected in accrued expenses in the accompanying condensed consolidated balance sheet, and $6.9 million was due to the counterparty on September 30, 2017. The Company does not have the financial resources to repay this obligation.

The Company did not make the required monthly principal and interest payments due under the TCA Debenture for the period from October 2016 through March 2017. On February 2, 2017, the Company made a payment to TCA in the amount of $0.4 million which was applied to accrued and unpaid interest and fees, including default interest, as of the date of payment. On March 21, 2017, the Company made a payment to TCA in the amount of $0.75 million, of which approximately $0.1 million was applied to accrued and unpaid interest and fees in accordance with the terms of the TCA Debenture. Also on March 21, 2017, the Company entered into a letter agreement with TCA, which (i) waived any payment defaults through March 21, 2017; (ii) provided for the $0.75 million payment discussed above; (iii) set forth a revised repayment schedule whereby the remaining principal plus interest aggregating to approximately $2.6 million was to be repaid in various monthly installments from April of 2017 through September of 2017; and (iv) provided for payment of an additional service fee in the amount of $150,000, which was due on June 27, 2017, the day after effective date of the registration statement filed by the Company; which amount is reflected in accrued expenses in the accompanying condensed consolidated balance sheet at September 30, 2017. In addition, TCA entered into an intercreditor agreement with the purchasers of the convertible debentures (see Note 6) which sets forth rights, preferences and priorities with respect to the security interests in the Company’s assets. On September 19, 2017, the Company entered into a new agreement with TCA, which extended the repayment schedule through to December 31, 2017. The Company is current with its payments.

On September 15, 2016, the Company entered into an agreement with two investors whereby the Company sold to the investors convertible notes in the aggregate principal amount of $0.4 million (the “September 2016 Notes”). The September 2016 Notes were convertible into shares of the Company’s common stock at a conversion price of $112.50 per share. In conjunction with the sale of the September 2016 Notes, the Company issued warrants to purchase an aggregate of 4,444 shares of the Company’s common stock at an exercise price of $180.00 per share. Based on the allocation of the net proceeds from the September 2016 Notes to the fair value of the warrants, and the resulting beneficial conversion features, the Company recognized a discount for the entire face value of the September 2016 Notes, which was accreted through the notes’ maturity date of March 15, 2017. On March 13, 2017, the September 2016 Notes, along with the accompanying warrants, were exchanged for 26,667 shares of the Company’s common stock.

The Company did not make the principal payments under the Tegal Notes that were due on July 12, 2016. On November 3, 2016, the Company received a default notice from the holders of the Tegal Notes demanding immediate repayment of the outstanding principal and accrued interest aggregating to $0.4 million. On December 7, 2016 the Company received a breach of contract complaint with a request for entry of a default judgment (see Note 11). To date, the Company has yet to repay this amount.

Notes Payable – Related Parties

	September 30, 2017			December 31, 2016
Loan payable to Alcimede LLC, bearing interest at 6% per annum, with all principal and interest due on February 2, 2018	$	168,500		$	218,500
Other advances from related parties		55,000			110,000
		223,500			328,500
Less current portion		(223,500	)		(328,500	)
Total notes payable - related parties, net of current portion	$	-		$	-

On February 3, 2015, the Company borrowed $3.0 million from Alcimede LLC (“Alcimede”). Seamus Lagan, the Company’s President and Chief Executive Officer, is the sole manager of Alcimede. The note has an interest rate of 6% and was originally due on February 2, 2016. Alcimede later agreed to extend the maturity date of the loan to August 2, 2017. On June 29, 2015, Alcimede exercised options granted in October 2012 to purchase 66,667 shares of the Company’s common stock at an exercise price of $37.50 per share, and the loan outstanding was reduced in satisfaction of the aggregate exercise price of $2.5 million. In August of 2016, $0.3 million was repaid by the Company through the issuance of shares of common stock. In March of 2017, the Company and Mr. Lagan agreed that a payment made to Alcimede in the amount of $50,000 would be deducted from the outstanding balance of the note. On August 2, 2017, the Company and Alcimede agreed to further extend the maturity date of the loan to February 2, 2018.

The remaining balance due on this loan as of September 30, 2017 was $0.2 million, including accrued interest.

During the nine months ended September 30, 2017, the Company repaid $0.1 million that was outstanding to a former principal stockholder, and borrowed an additional $75,000 from this same stockholder of which $50,000 has been repaid and $3.6 million from Mr. Diamantis, a director of the Company, which has been fully repaid (see Note 7).

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Debentures

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Debentures

Note 6 – Debentures

The carrying amount of all outstanding debentures as of September 30, 2017 (unaudited) is as follows:

	September 30, 2017
Debentures	$	20,962,234
Discount on Debentures		(16,398,666	)
Deferred financing fees		(324,563	)
		4,239,005
Less current portion		-
Debentures	$	4,239,005

There were no debentures outstanding as of December 31, 2016.

February Offering

On February 2, 2017, the Company issued $1.6 million aggregate principal amount of Original Issue Discount Convertible Debentures due three months from the date of issuance (the “February Debentures”) and warrants to purchase an aggregate of 6,667 shares of common stock, which can be exercised at any time after August 17, 2017 at an exercise price of $38.70 per share (the “February Warrants”), to an accredited investor for a purchase price of $1.5 million. On March 21, 2017, the February Debentures were exchanged for $2.5 million of exchange debentures as more fully discussed below.

March Offerings

On March 21, 2017, the Company issued $10.85 million aggregate principal amount of Senior Secured Original Issue Discount Convertible Debentures due March 21, 2019 (the “Convertible Debentures”). The Company received net proceeds from this transaction in the approximate amount of $8.4 million. The Company used $3.8 million of the net proceeds to repay the 2017 Diamantis Note (see Note 7) and $0.75 million of the net proceeds to make the partial repayment on the TCA Debenture (see Note 5). The remainder of the net proceeds were used for general corporate purposes. In conjunction with the issuance of the Convertible Debentures, the holder of the February Debentures exchanged these debentures for $2.5 million of new debentures (the “Exchange Debentures” and, collectively with the Convertible Debentures, the “March Debentures”) on the same terms as, and pari passu with, the Convertible Debentures and warrants. The Company recorded non-cash interest expense in the amount of $0.4 million as a result of this exchange. Additionally, the holders of an aggregate of $2.2 million stated value of the Company’s Series H Convertible Preferred Stock (the “Series H Preferred Stock”) exchanged such preferred stock into $2.7 million principal amount of Exchange Debentures and warrants. The March Debentures contain a 24% original issue discount, have no regularly scheduled interest payments except in the event of a default and have a maturity date of March 21, 2019.

In connection with the March Debentures the Company issued warrants to purchase an aggregate of 9,166,616 shares of the Company’s common stock to several accredited investors. The warrants were issued to the investors in three tranches, Series A Warrants, Series B Warrants and Series C Warrants (collectively, the “March Warrants”). The Series A Warrants are exercisable for 3,214,911 shares of the Company’s common stock. They are immediately exercisable and have a term of exercise equal to five years. The Series B Warrants are exercisable for 2,736,794 shares of the Company’s common stock and are exercisable for a period of 18 months commencing immediately. The Series C Warrants are exercisable for 3,214,911 shares of the Company’s common stock and have a term of five years provided such warrants shall only vest if, when and to the extent that the holders exercise the Series B Warrants. At September 30, 2017, the Series A, Series B and Series C Warrants each have an exercise price of $5.85 per share, which reflects an adjustment pursuant to their terms. The Series A, Series B and Series C Warrants are subject to “full ratchet” and other customary anti-dilution protections.

The March Debentures are convertible into shares of the Company’s common stock, at a conversion price which has been adjusted pursuant to the terms of the March Debentures to $5.85 per share as of September 30, 2017, due to prices at which the Company has subsequently issued shares of common stock. The Convertible Debentures began to amortize monthly commencing on the 90th day following the closing date. The Exchange Debentures began to amortize monthly on the closing date. On each monthly amortization date, the Company may elect to repay 5% of the original principal amount of the March Debentures in cash or, in lieu thereof, the conversion price of such debentures will thereafter be 85% of the volume weighted average price at the time of conversion. In the event the Company does not elect to pay such amortization amounts in cash, each investor, in their sole discretion, may increase the conversion amount subject to the alternative conversion price by up to four times the amortization amount. The March Debentures contain customary affirmative and negative covenants. The conversion prices are subject to reset in the event of offerings or other issuances of common stock, or rights to purchase common stock, at a price below the then conversion price, as well as other customary anti-dilution protections as more fully described in the debentures.

The March Debentures are secured by all of the Company’s assets and are guaranteed by substantially all of the Company’s subsidiaries. Between March 22, 2017 and September 30, 2017, holders of the March Debentures converted an aggregate of $4.1 million of these debentures into 548,932 shares of common stock.

The exercise prices of the March Warrants issued in connection with the March Debentures are subject to reset in the event of offerings or other issuances of common stock, or rights to purchase common stock, at a price below the then exercise price, as well as other customary anti-dilution protections. As a result of these provisions, both the March Debentures and the March Warrants were deemed to be not indexed to the Company’s common stock, and the Company recognized derivative liabilities for the embedded conversion feature of the March Debentures and the March Warrants in the original amount of $15.3 million and $41.3 million, respectively. The Company recognized a discount for 100% of the principal value of the March Debentures and non-cash interest expense in the amount of $43.7 million in connection with the recognition of these derivative liabilities. As a result of the adoption of ASU 2017-11 in the second quarter of 2017, the interest expense and derivative liability originally recognized were adjusted and extinguished during the three months ended June 30, 2017. See Note 1 for the adoption of ASU 2017-11 for the retrospective adjustments made to the Company’s condensed consolidated financial statements with respect to the derivative liabilities associated with these debentures and warrants.

June Offerings

In June 2017, the Company issued debentures due three months from the date of issuance in two issuances (collectively, the “June Debentures”) and warrants to purchase an aggregate of 100,000 shares of common stock (33,333 warrants in the June 2, 2017 transaction and 66,667 in the June 22, 2017 transaction), which can be exercised at any time after nine months at an exercise price of $5.85 per share for the June 2, 2017 warrants and $5.70 per share for the June 22, 2017 warrants (collectively the “June Warrants”), to accredited investors for a purchase price of $1,902,700 and proceeds to the Company of $1.5 million. The Company recorded a discount on the debentures of $107,700 which has been fully amortized. As more fully discussed below, on July 17, 2017, the June Debentures were exchanged.

July Offerings

On July 17, 2017, the Company closed an offering of $4,136,862 aggregate principal amount of Original Issue Discount Debentures due October 17, 2017 (the “July Debentures”) and warrants to purchase an aggregate of 141,333 shares of common stock (the “July Warrants”) for consideration of $2,000,000 in cash and the exchange of the full $1,902,700 aggregate principal amount of the June Debentures. Under the Purchase Agreement, the Company was required to hold a stockholders’ meeting to obtain stockholder approval for at least a 1-for-8 reverse split of the Company’s common stock on or before September 20, 2017. Accordingly, the Company’s stockholders approved a reverse stock split on September 20, 2017 and the Company effected a 1-for-15 reverse stock split of its common stock on October 5, 2017, as further discussed in Note 1. The July Debentures were guaranteed by substantially all of the subsidiaries of the Company pursuant to a Subsidiary Guarantee in favor of the holders of the July Debentures. As more fully discussed below, on September 19, 2017, the July Debentures were exchanged for $6.4 million of exchange debentures.

The July Warrants are exercisable into shares of the Company’s common stock at any time from and after six months from the closing date at an exercise price of $5.63 per common share (subject to adjustment). The July Warrants will terminate five years after they become exercisable.

September Offerings

On September 19, 2017, the Company closed an offering of $2,604,000 principal amount of Senior Secured Original Issue Discount Convertible Debentures due September 19, 2019 (the “New Debentures”) and three series of warrants to purchase an aggregate of 6,935,517 shares of the Company’s common stock (the “Series A Warrants,” the “Series B Warrants,” and the “Series C Warrants,” and collectively, the “September Warrants”). The offering was pursuant to the terms of a Securities Purchase Agreement, dated as of August 31, 2017 (the “Purchase Agreement”), between the Company and certain existing institutional investors of the Company. The Company received proceeds of $2,100,000 from the offering.

Also on September 19, 2017, the Company closed exchanges by which the holders of the Company’s July Debentures exchanged $4,136,862 principal amount of such debentures for $6,412,136 principal amount of new debentures on the same items as, and pari passu with, the New Debentures (the “September Exchange Debentures” and, together with the New Debentures, the “September Debentures”). The Company recorded non-cash interest expense in the amount of $1.0 million as a result of this exchange. All issuance amounts of the September Debentures reflect a 24% original issue discount.

The September Debentures contain customary affirmative and negative covenants. The conversion price is subject to “full ratchet” and other customary anti-dilution protections as more fully described in the debentures. The September Debentures may be converted at any time into shares of the Company’s common stock. The September Debentures begin to amortize monthly commencing on October 1, 2017. For the first three amortization dates, the amortization amount is $100,000. Thereafter, on each monthly amortization date, the Company may elect to repay 5% of the original principal amount of September Debentures in cash or, in lieu thereof, the conversion price of such September Debentures shall thereafter be 85% of the volume weighted average price at the time of conversion. In the event the Company does not elect to pay such amortization amounts in cash, each investor, in their sole discretion, may increase the conversion amount subject to the alternative conversion price by up to four times the amortization amount.

The Series A Warrants are exercisable for an aggregate of 2,311,829 shares of the Company’s common stock. They are immediately exercisable and have a term of exercise equal to five years. The Series B Warrants are exercisable for an aggregate of 2,311,859 shares of the Company’s common stock and are exercisable for a period of 18 months commencing immediately. The Series C Warrants are exercisable for an aggregate of 2,311,829 shares of the Company’s common stock, and have a term of five years provided such Series C Warrants shall only vest if, when and to the extent that the holders exercise the Series B Warrants. The September Warrants each have an exercise price of $3.90. All of the September Warrants are subject to “full ratchet” and other customary anti-dilution protections.

The Company’s obligations under the September Debentures are secured by a security interest in all of the Company’s and its subsidiaries’ assets, pursuant to the terms of the Security Agreement, dated as of March 20, 2017.

During the nine months ended September 30, 2017, the Company realized approximately $15.7 million in proceeds from the issuances of these debentures and warrants. At September 30, 2017, the unamortized discounts were $16.4 million. These discounts represent original issue discounts, the relative fair value of the warrants issued with the debentures and the relative fair value of the beneficial conversion features of the debentures. During the three and nine months ended September 30, 2017, the Company recorded approximately $4.8 million and approximately $14.7 million of non-cash interest and amortization of debt discount expense primarily in connection with the debentures and warrants.

See Note 9 for summarized information related to warrants issued and the activity during the nine months ended September 30, 2017.

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Related Party Transactions

9 Months Ended

Sep. 30, 2017

Related Party Transactions [Abstract]

Related Party Transactions

Note 7 – Related Party Transactions

In addition to the transactions discussed in Note 5, the Company had the following related party transactions during the nine months ended September 30, 2017 and 2016:

In January and February of 2017, the Company received advances aggregating $3.6 million from Christopher Diamantis, a director of the Company. The advances, along with $0.5 million of previously accrued but unpaid interest, were due on demand, bearing interest at 10% per annum. The Company used the advances to pay the purchase price for the Hospital Assets and for general corporate purposes. On March 7, 2017, the Company issued a promissory note to Mr. Diamantis in the amount of $3.8 million (the “2017 Diamantis Note”) in connection with these advances received in 2017, plus accrued and unpaid interest of $0.5 million. In conjunction with the issuance of the 2017 Diamantis Note, the Company also issued to Mr. Diamantis warrants to purchase 27,667 shares of the Company’s common stock, exercisable at $15.00. The 2017 Diamantis Note was repaid on March 21, 2017 with the proceeds received from the issuance of the Convertible Debentures (see Note 6). In May and June of 2017, the Company received advances from Mr. Diamantis, net of repayments totaling $0.2 million, at a 10% annum interest rate, which amount was paid in full on July 18, 2017.

Alcimede billed the Company $0.4 million and $0.3 million for consulting fees pursuant to a consulting agreement for each of the nine months ended September 30, 2017 and 2016, respectively.

Monarch Capital, LLC (“Monarch”) billed the Company for consulting fees pursuant to a consulting agreement in the amount of $0.1 million for the nine months ended September 30, 2017 and 2016, respectively. The agreement expired on August 31, 2017. Michael Goldberg, a director of the Company up until his resignation effective April 24, 2017, is the Managing Director of Monarch.

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Capital Lease Obligations

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Capital Lease Obligations

Note 8 – Capital Lease Obligations

The Company leases various assets under capital leases expiring through 2020 as follows. At September 30, 2017 (unaudited) and December 31, 2016, capital lease obligations consisted of the following:

	September 30, 2017			December 31, 2016
Medical equipment	$	4,497,025		$	4,497,025
Less accumulated depreciation		(3,582,631	)		(2,809,511	)
Net	$	914,394		$	1,687,514

Aggregate future minimum rentals under capital leases are as follows:

Year ended December 31,
2017 (October through December)	$	493,282
2018		1,427,375
2019		377,919
2020		32,611
Total		2,331,187
Less interest		103,983
Present value of minimum lease payments		2,227,204
Less current portion of capital lease obligations		1,491,666
Capital lease obligations, net of current portion	$	735,538

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Stockholders' Equity

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

Stockholders' Equity

Note 9 – Stockholders’ Equity

Preferred Stock

The Company has 5,000,000 shares, par value $0.01, of preferred stock authorized. As of September 30, 2017, the Company had outstanding 1,750,275 shares of preferred stock consisting of 215 shares of its Series G Preferred Stock, 60 shares of its Series H Preferred Stock and 1,750,000 shares of its Series F Convertible Preferred Stock (the “Series F Preferred Stock”).

During the nine months ended September 30, 2017, 7,785 shares of Series H Preferred Stock were converted into 370,446 shares of common stock in accordance with the terms of the Series H Preferred Stock. Also during the nine months ended September 30, 2017, 2,174 shares of Series H Preferred Stock with a stated value of $2.2 million were exchanged for Exchange Debentures with an aggregate principal amount of $2.7 million and warrants (see Note 6).

In connection with the acquisition of Genomas, Inc., on September 27, 2017, which is more fully discussed in Note 14, the Company issued 1,750,000 shares of its Series F Preferred Stock valued at $174,097. The following is a summary of certain terms and provisions of the Company’s Series F Preferred Stock:

Rank. The Series F Preferred Stock ranks on parity to our common stock.

Conversion. Each share of the Series F Preferred Stock is convertible into shares of our common stock (subject to adjustment as provided in the related certificate of designation of preferences, rights and limitations) at any time after the first anniversary of the issuance date at the option of the holder at a conversion price equal to the greater of $29.25 or the average closing price of the Company’s common stock for the 10 trading days immediately preceding the conversion. The maximum number of shares of common stock issuable upon the conversion of the Series F Preferred Stock is 59,829. Any shares of Series F Preferred Stock outstanding on the fifth anniversary of the issuance date will be mandatorily converted into common stock at the applicable conversion price on such date.

Liquidation Preference. In the event of our liquidation, dissolution or winding-up, holders of Series F Preferred Stock will be entitled to receive the same amount that a holder of common stock would receive if the Series F Preferred Stock were fully converted into shares of our common stock at the conversion price (assuming for such purposes that the Series F Preferred Stock is then convertible) which amounts shall be paid pari passu with all holders of common stock.

Voting Rights. Each share of Series F Preferred Stock shall have one vote, and the holders of the Series F Preferred Stock shall vote together with the holders of our common stock as a single class.

Dividends. The holders of the Series F Preferred Stock will participate, on an as-if-converted-to-common stock basis, in any cash dividends to the holders of common stock.

Redemption. At any time, from time to time after the first anniversary of the issuance date, we have the right to redeem all or any portion of the outstanding Series F Preferred Stock at a price per share equal to $1.95 plus any accrued but unpaid dividends.

Negative Covenants. As long as any shares of Series F Preferred Stock are outstanding, the Company may not amend, alter or repeal any provision of our certificate of incorporation, the certificate of designation or our bylaws in a manner that materially adversely affects the powers, preferences or rights of the Series F Preferred Stock.

Preferred Stock Issued Subsequent to September 30, 2017

In October 2017, the Company issued its Series I-1 Convertible Preferred Stock in connection with a financing as more fully discussed in Note 15.

Common Stock

The Company had 1,354,171 and 186,692 shares of common stock outstanding at September 30, 2017 and December 31, 2016, respectively. The Company issued 1,167,479 shares of its common stock during the nine months ended September 30, 2017 as follows:

The February 22, 2017 reverse stock split, which is more fully described in Note 1, resulted in the issuance of 526 shares of common stock due to the rounding up of fractional shares.

On March 13, 2017, the Company issued 26,667 shares of common stock in settlement of $0.4 million of outstanding notes and warrants (see Note 5).

On March 15, 2017, the Company agreed to issue 2,056 shares of common stock to the holders of a like number of warrants to purchase the Company’s common stock in exchange for the warrants valued at $57,868.

During the nine months ended September 30, 2017, the Company issued 548,932 shares of its common stock upon conversion of $4.1 million of the principal amount of the March Debentures (See Note 6).

On July 25, 2017, the Company issued 8,333 shares of its common stock valued at $42,510 for severance owed to a former employee under the terms of the Company’s equity plan. The equity plan is more fully described below.

On August 14, 2017, the Company issued 181,933 shares of restricted stock to employees and directors, and later returned 4,933 shares of this stock to treasury, as more fully discussed under the heading Restricted Stock below.

On August 23, 2017, the Company issued 33,334 shares of its common stock in payment of professional service fees valued at $118,493.

Restricted Stock

On August 14, 2017, the Board of Directors, based on the recommendation of the Compensation Committee of the Board and in accordance with the provisions of the 2007 Equity Plan, approved grants to employees and directors of the Company of an aggregate of 181,933 shares of restricted common stock of the Company. The grants fully vest on the first anniversary of the date of grant, subject to the grantee’s continued status as an employee or director, as the case may be, on the vesting date. During the nine months ended September 30, 2017, 4,933 shares of the restricted stock were forfeited by their terms and returned to treasury and cancelled.

During the nine months ended September 30, 2017, the Company recognized stock-based compensation in the amount of $82,974 for the grant of the restricted stock based on a valuation of $3.75 per share. At September 30, 2017, the Company had approximately $580,750 of unrecognized compensation cost related to the restricted stock.

Stock Options

The Company maintained and sponsored the Tegal Corporation 2007 Incentive Award Equity Plan (the “2007 Equity Plan”). Tegal Corporation is the predecessor entity to the Company. The 2007 Equity Plan, as amended, provided for the issuance of stock options and other equity awards to the Company’s officers, directors, employees and consultants. During the nine months ended September 30, 2017 and 2016, the Company recognized stock-based compensation in the amount of $34,081 and $0.7 million, respectively, for the vesting of outstanding stock options. The 2007 Equity Plan terminated pursuant to its terms in September 2017. The following table summarizes the Company’s stock option activity for the nine months ended September 30, 2017:

	Number of options			Weighted- average exercise price		Weighted- average contractual term (Yrs.)
Outstanding at December 31, 2016		47,268		$	1,941.45		8.93
Granted		-			-
Expired		-			-
Forfeit		(8,790	)		-
Exercised		-			-
Outstanding at September 30, 2017		38,478		$	2,072.75		8.68
Exercisable at September 30, 2017		31,811		$	2,445.84

As of September 30, 2017, the Company had approximately $155,582 of unrecognized compensation cost related to stock options granted under the Company’s 2007 Equity Plan, which is expected to be recognized over a weighted-average period of 1.03 years.

Warrants

The Company, as part of various debt and equity financing transactions, has issued warrants to purchase shares of the Company’s common stock. The following summarizes the information related to warrants issued and the activity during the nine months ended September 30, 2017:

	Number of warrants			Weighted average exercise price
Balance at December 31, 2016		93,843		$	175.50
Warrants issued during the period		17,900,999		$	4.58
Warrants exchanged/exercised during period		(6,500	)
Warrants expired during the period		-
Balance at September 30, 2017		17,988,342		$	5.40

During the nine-months ended September 31, 2017, the Company issued 16,350,132 warrants with a weighted average exercise price of $5.03 per share in connection with the issuances of debentures as more fully discussed in Note 6.

Basic and Diluted Loss per Share

Basic loss per share excludes dilution and is computed by dividing loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income of the Company. For the three and nine months ended September 30, 2017 and 2016, basic loss per share is the same as diluted loss per share.

Diluted loss per share excludes all dilutive potential shares if their effect is anti-dilutive. As of September 30, 2017 and 2016, the following potential common stock equivalents were excluded from the calculation of diluted loss per share as their effect was anti-dilutive:

	As of September 30,
	2017		2016
Warrants		17,988,342		78,102
Convertible preferred stock		71,147		47,463
Convertible debt		4,353,898		3,911
Stock options		38,478		49,331
		22,451,865		178,807

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Supplemental Disclosure of Cash Flow Information

9 Months Ended

Sep. 30, 2017

Supplemental Cash Flow Elements [Abstract]

Supplemental Disclosure of Cash Flow Information

Note 10 – Supplemental Disclosure of Cash Flow Information

The supplemental cash flow information for the nine months ended September 30, 2017 and 2016 (unaudited) is as follows:

		Nine Months Ended September 30,
		2017		2016
Cash paid for interest	$	1,106,835	$	1,237,622
Cash paid for income taxes	$	506,313	$	-
Non-cash investing and financing activities:
Services and severance settled through issuance of common stock	$	161,003	$	2,131,829
Exchange of convertible debentures for convertible debentures and warrants	$	10,734,336	$	-
Series F Preferred Stock issued for business acquisition	$	174,097	$	-
Note payable and warrants settled through issuance of common stock	$	440,000	$	-
Convertible debenture issued in exchange of Series H Preferred Stock	$	2,695,760	$	-
Debentures converted into common stock	$	4,064,162	$	-
Deemed dividend for trigger of down round provision feature	$	53,341,619	$	-

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 11 – Commitments and Contingencies

Legal Matters

From time to time, the Company may be involved in a variety of claims, lawsuits, investigations and proceedings related to contractual disputes, employment matters, regulatory and compliance matters, intellectual property rights and other litigation arising in the ordinary course of business. The Company operates in a highly regulated industry which may inherently lend itself to legal matters. Management is aware that litigation has associated costs and that results of adverse litigation verdicts could have a material effect on the Company’s financial position or results of operations. Management, in consultation with legal counsel, has addressed known assertions and predicted unasserted claims below.

Biohealth Medical Laboratory, Inc, and PB Laboratories, LLC (the “Companies”) filed suit against CIGNA Health in 2015 alleging that CIGNA failed to pay claims for laboratory services the Companies provided to patients pursuant to CIGNA - issued and CIGNA - administered plans. In 2016, the U.S. District Court dismissed part of the Companies’ claims for lack of standing. The Companies appealed that decision to the Eleventh Circuit Court of Appeals, which recently reversed the District Court’s decision and found that the Companies have standing to raise claims arising out of traditional insurance plans as well as self-funded plans.

The Company’s Epinex Diagnostics Laboratories, Inc. subsidiary was sued in a California state court by two former employees who alleged that they were wrongfully terminated, as well as for a variety of unpaid wage claims. The parties entered into a settlement agreement of this matter on July 29, 2016 for approximately $0.2 million, and the settlement was consummated on August 25, 2016. In October of 2016, the plaintiffs in this matter filed a motion with the court seeking payment for attorneys’ fees in the approximate amount of $0.7 million. On March 24, 2017, the court granted plaintiffs’ motion for payment of attorneys’ fees in the amount of $0.3 million, and the Company has accrued this amount in its condensed consolidated financial statements. Additionally, the Company is seeking indemnification for these amounts from Epinex Diagnostics, Inc. (“EDI”), the seller of Epinex Diagnostic Laboratories, Inc. (“EDL”), pursuant to a Stock Purchase Agreement entered into by and among the parties.

In February 2016, the Company received notice that the Internal Revenue Service (the “IRS”) placed a lien against Medytox Solutions, Inc. and its subsidiaries relating to unpaid 2014 taxes due, plus penalties and interest, in the amount of $5.0 million. The Company paid $0.1 million toward its 2014 tax liability on March 2016. The Company filed its 2015 Federal tax return on March 15, 2016 and the accompanying election to carryback the reported net operating losses was filed in April 2016. On August 24, 2016, the lien was released, and on September of 2016 the Company received a refund from the IRS in the amount of $1.9 million. In November of 2016, the IRS commenced an audit of the Company’s 2015 Federal tax return. The Company is currently unable to predict the outcome of the audit or any liability to the Company that may result from the audit.

On September 27, 2016, a tax warrant was issued against the Company by the Florida Department of Revenue (the “DOR”) for unpaid 2014 state income taxes in the approximate amount of $0.9 million, including penalties and interest. On January 25, 2017, the Company paid the DOR $250,000 as partial payment on this liability, and in February 2017 the Company entered into a Stipulation Agreement with the DOR which will allow the Company to make monthly installment payments of $35,000 until February 2018 and negotiate a new payment agreement then, if the balance of $0.3 million cannot be satisfied in a lump sum. If at any time during the Stipulation period the Company fails to timely file any required tax returns with the DOR or does not meet the payment obligations under the Stipulation Agreement, the entire amount due will be accelerated. The Company is current with the agreed payment plan.

In December of 2016, TCS-Florida, L.P. (“Tetra”), filed suit against the Company for failure to make the required payments under an equipment leasing contract that the Company had with Tetra (see Note 8). On January 3, 2017, Tetra received a Default Judgment against the Company in the amount of $2.6 million, representing the balance owed on the leases, as well as additional interest, penalties and fees. The Company has recognized this amount in its consolidated financial statements as of December 31, 2016. In January and February of 2017, the Company made payments to Tetra in connection with this judgment aggregating to $0.7 million, and on February 15, 2017 the Company entered into a forbearance agreement with Tetra whereby the remaining $1.9 million due will be paid in 24 equal monthly installments. Payments commenced on May 1, 2017. The Company is current with its payments.

In December of 2016, DeLage Landen Financial Services, Inc. (“DeLage”), filed suit against the Company for failure to make the required payments under an equipment leasing contract that the Company had with DeLage (see Note 8). On January 24, 2017, DeLage received a default judgment against the Company in the approximate amount of $1.0 million, representing the balance owed on the lease, as well as additional interest, penalties and fees. The Company has recognized this amount in its consolidated financial statements as of December 31, 2016. On February 8, 2017, a Stay of Execution was filed and under its terms the balance due will be paid in variable monthly installments through January of 2019, with an implicit interest rate of 4.97%. The Company is current in its payments.

On December 7, 2016, the holders of the Tegal Notes (see Note 5) filed suit against the Company seeking payment for the amounts due under the notes in the aggregate of $0.4 million, including accrued interest. A request for entry of default judgment was filed on January 24, 2017. A Case Management Conference is scheduled for December 5, 2017. The Company has submitted a settlement agreement proposal to the holders of the Tegal Notes and is awaiting a response.

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Segment Information

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

Segment Information

Note 12 – Segment Information

Operating segments are defined under U.S. GAAP as components of an enterprise for which discrete financial information is available and are evaluated regularly by the enterprise’s chief operating decision maker in determining how to allocate resources and assess performance. The Company operates in four reportable business segments:

● Clinical Laboratory Operations, which specializes in providing urine and blood toxicology and pain medication testing to physicians, clinics and rehabilitation facilities in the United States.

● Supportive Software Solutions, including EHR and medical billing and laboratory information management systems.

● Hospital Operations, which reflects the purchase of the Hospital Assets (see Note 3) and the operations of Scott County Community Hospital, which has since been renamed as Big South Fork Medical Center.

● Corporate, which reflects consolidated company wide support services such as finance, legal counsel, human resources, and payroll.

The Company’s Decision Support and Informatics segment is now included in discontinued operations as it has been classified as held for sale as of September 30, 2017. The accounting policies of the reportable segments are the same as those described in Note 2, Summary of Significant Accounting Policies, of the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 and in Note 1 for the adoption to ASU 2017-11. Selected financial information for the Company’s operating segments is as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net revenues - External
Clinical Laboratory Operations	$	586,663		$	(9,085	)	$	1,994,639		$	3,461,987
Supportive Software Solutions		208,070			50,447			698,359			605,575
Hospital Operations		619,478			-			619,478			-
	$	1,414,211		$	41,362		$	3,312,476		$	4,067,562
Net revenues - Intersegment (***)
Supportive Software Solutions		217,431			502,055			501,924			1,036,396
	$	217,431		$	502,055		$	501,924		$	1,036,396
(Loss) income from operations
Clinical Laboratory Operations	$	(1,039,118	)	$	(7,364,096	)	$	(3,809,146	)	$	(10,590,435	)
Supportive Software Solutions		(660,800	)		(1,253,386	)		(1,721,694	)		(3,800,893	)
Hospital Operations		(2,093,805	)		-			(3,114,473	)		-
Corporate		(1,369,765	)		(2,940,956	)		(5,058,565	)		(7,059,644	)
Eliminations		-			33,663			8,181			100,987
	$	(5,163,488	)	$	(11,524,775	)	$	(13,695,697	)	$	(21,349,985	)
Depreciation and amortization
Clinical Laboratory Operations	$	410,801		$	549,748		$	1,265,174		$	1,646,167
Supportive Software Solutions		25,015			163,749			227,999			490,236
Hospital Operations		15,436			-			22,045			-
Corporate		345			745			1,005			2,494
Eliminations		-			(33,663	)		(8,181	)		(100,987	)
	$	451,597		$	680,579		$	1,508,042		$	2,037,910
Capital expenditures
Clinical Laboratory Operations	$	-		$	-		$	-		$	6,000
Supportive Software Solutions		-			-			-			9,998
Hospital Operations		160,413			-			1,554,499			-
	$	160,413		$	-		$	1,554,499		$	15,998

***` Intersegment revenues are eliminated in consolidation.

	September 30, 2017			December 31, 2016
Total assets
Clinical Laboratory Operations	$	1,686,167		$	3,986,126
Supportive Software Solutions		1,767,251			2,602,428
Decision Support and Informatics		-			60,000
Hospital Operations		1,748,986			-
Corporate		3,037,112			2,130,191
Assets of AMSG classified as held for sale		997,497			414,662
Eliminations		(2,871,080	)		(2,711,014	)
	$	6,365,933		$	6,482,393

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Recently Issued Accounting Standards

9 Months Ended

Sep. 30, 2017

Recently Issued Accounting Standards

Recently Issued Accounting Standards

Note 13 – Recently Issued Accounting Standards

The following table provides a brief description of recently issued accounting standards:

Title and reference	Prescribed	Commentary
	Effective Date
ASU No. 2015-11, “Inventory” (Topic 330): Simplifying the Measurement of Inventory.	Fiscal years beginning after December 15, 2016 and for interim periods therein.	In July 2015, the FASB issued ASU No. 2015-11, “Inventory” (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015-11”). ASU 2015-11 simplifies the measurement of inventory by requiring certain inventory to be subsequently measured at the lower of cost and net realizable value. The amendments in this guidance are effective for fiscal years beginning after December 15, 2016 and for interim periods therein and did not have a significant impact on the Company’s consolidated financial statements upon adoption.
ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”	Fiscal years beginning after December 15, 2017 and for interim periods therein.	In May 2014, the FASB issued guidance that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most recent current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also specifies the accounting for certain incremental costs of obtaining a contract and costs to fulfill a contract with a customer. Entities have the option of applying either a full retrospective approach to all periods presented or a modified approach that reflects differences prior to the date of adoption as an adjustment to equity. In April 2015, FASB deferred the effective date of this guidance until January 1, 2018 and the Company is currently assessing the impact of this guidance on its consolidated financial statements.
ASU No. 2014-15, “Presentation of Financial Statements - Going Concern” (Subtopic 205-40): Disclosure of Uncertainty about an Entity’s Ability to Continue as a Going Concern.	Fiscal years, and interim periods within those years, beginning on or after December 15, 2016, with early adoption permitted.	In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern” (Subtopic 205-40): Disclosure of Uncertainty about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 provides guidance that establishes management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and setting rules for how this information should be disclosed in the financial statements. Adoption of this new standard did not have a significant impact on the Company’s consolidated financial statements. See Note 1 regarding management’s current disclosures regarding the Company’s ability to continue as a going concern.
ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”	Fiscal years beginning on or after December 15, 2016, with early adoption permitted.	In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”). Topic 740, Income Taxes, requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. Deferred tax liabilities and assets are classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. Deferred tax liabilities and assets that are not related to an asset or liability for financial reporting are classified according to the expected reversal date of the temporary difference. To simplify the presentation of deferred income taxes, the amendments in ASU 2015-17 require that deferred income tax liabilities and assets be classified as noncurrent in a classified statement of financial position. For public business entities, the amendments in this update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Adoption of ASU 2015-17 did not have a material impact on the Company’s consolidated financial statements.

Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)”	Annual and interim periods within the annual period beginning after December 15, 2018.	In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The amendments in this update create Topic 842, Leases, and supersede the leases requirements in Topic 840, Leases. Topic 842 specifies the accounting for leases. The objective of Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. The main difference between Topic 842 and Topic 840 is the recognition of lease assets and lease liabilities for those leases classified as operating leases under Topic 840. Topic 842 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. The result of retaining a distinction between finance leases and operating leases is that under the lessee accounting model in Topic 842, the effect of leases in the statement of comprehensive income and the statement of cash flows is largely unchanged from previous GAAP. The amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public business entities. Early application of the amendments in ASU 2016-02 is permitted. The Company has not yet determined the impact that adoption of ASU 2016-02 will have on its consolidated financial statements.
ASU No. 2017-11, “Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815)” (“ASU 2017-11”)	Fiscal years beginning on or after December 15, 2018, with early adoption permitted.	The Company adopted this amendment as of its period ended June 30, 2017 (see Note 1).

ASU No. 2017-12, “Derivatives and Hedging (Topic 815)”(“ASU 2017-12”) For public business entities, the amendments in this ASU 2017-12 are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption permitted in any interim period after issuance of this ASU. The amendments in ASU 2017-12 (“Update”) provide recognition and presentation guidance for qualifying hedges. The amendments in this Update more closely align the results of cash flow and fair value hedge accounting with risk management activities through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results in the financial statements. The amendments address specific limitations in current U.S. GAAP by expanding hedge accounting for both nonfinancial and financial risk components and by refining the measurement of hedge results to better reflect an entity’s hedging strategies. Thus, the amendments will enable an entity to report more faithfully the economic results of hedging activities for certain fair value and cash flow hedges and will avoid mismatches in earnings by allowing for greater precision when measuring change in fair value of the hedged item for certain fair value hedges. Additionally, by aligning the timing of recognition of hedge results with the earnings effect of the hedged item for cash flow and net investment hedges, and by including the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is presented, the results of an entity’s hedging program and the cost of executing that program will be more visible to users of financial statements. Additionally, the amendments in this Update should ease the operational burden of applying hedge accounting by allowing more time to prepare hedge documentation and allowing effectiveness assessments to be performed on a qualitative basis after hedge inception. The Company has not yet determined the impact that adoption of ASU 2017-12 will have on its consolidated financial statements.

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Discontinued Operations

9 Months Ended

Sep. 30, 2017

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Note 14 – Discontinued Operations

On July 12, 2017, the Company announced plans to spin off AMSG as an independent publicly traded company by way of a tax-free distribution to the Company’s stockholders. Completion of the spinoff is expected to occur in the first quarter of 2018 and is subject to numerous conditions, including effectiveness of a Registration Statement on Form 10 to be filed with the Securities and Exchange Commission, and consents, including under various funding agreements previously entered into by the Company. A record date to determine those stockholders entitled to receive shares in the spin off should be approximately 30 to 60 days prior to the date of the spinoff. The strategic goal of the spinoff is to create two public companies, each of which can focus on its own strengths and operational plans. In addition, after the spinoff, each company will provide a distinct and targeted investment opportunity.

In accordance with ASC 205-20 and having met the criteria for “held for sale”, as the Company reached this decision prior to September 30, 2017, the Company has reflected amounts relating to AMSG as a disposal group classified as held for sale and included as part of discontinued operations. AMSG had been included in the Decision Support and Informatics segment, except for the Company’s subsidiary, Alethea Laboratories, Inc., which had been included in the Clinical Laboratory Operations segment. Segment disclosures in Note 12 no longer include amounts relating to AMSG following the reclassification to discontinued operations.

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

	September 30, 2017		December 31, 2016
	(unaudited)		(unaudited)
Cash	$	8,690	$	2,962
Accounts receivable, net		6,503		267,681
Prepaid expenses and other current assets		53,582		67,257
Current assets classified as held for sale	$	68,775	$	337,900
Property and equipment, net	$	-	$	53,012
Goodwill		914,972		-
Deposits		13,750		23,750
Non-current assets classified as held for sale	$	928,722	$	76,762
Accounts payable (includes related parties)	$	837,989	$	422,864
Accrued expenses		253,991		1,253,117
Current portion of notes payable		276,632		-
Current liabilities classified as held for sale	$	1,368,612	$	1,675,981
Non-current liabilities classified as held for sale	$	-	$	26,598

Major line items constituting loss from discontinued operations in the consolidated statements of operations for the nine months ended September 30, 2017 and 2016 consisted of the following:

	September 30, 2017			September 30, 2016
		(unaudited)			(unaudited)
Revenue from services	$	224,224		$	1,154,967
Cost of services		9,282			162,266
Gross profit		214,942			992,701
Operating expenses		1,225,638			4,073,873
Other income (expenses)		42,775			(253,142	)
Loss from discontinued operations	$	(1,053,471	)	$	(2,828,030	)

Acquisition of Genomas, Inc. on September 27, 2017

On September 29, 2016, the Company announced that it had entered into a Stock Purchase Agreement (the “Purchase Agreement”) to acquire the remaining outstanding equity securities of Genomas, Inc. (“Genomas”) that the Company did not already own, representing approximately 85% of the outstanding equity interests in Genomas, for 1,750,000 shares of the Company’s newly - designated Series F Preferred Stock. (The Series F Preferred Stock is more fully described in Note 9 and below.) Genomas is a biomedical company that develops PhyzioType Systems for DNA-guided management and prescription of drugs used to treat mental illness, pain, heart disease, and diabetes. The Company had previously announced that on July 19, 2016 it acquired approximately 15% of the outstanding equity of Genomas from Hartford Healthcare Corporation (“Hartford”), along with approximately $1.5 million of notes payable to Hartford and certain rights to and license participation in technology that is used by Genomas, for $250,000 in cash. Under the terms of the Purchase Agreement, the Company also agreed to assume approximately $0.8 million of indebtedness and other obligations of Genomas. The closing of this acquisition, which was subject to, among other things, receipt of regulatory and licensure approvals as well as other customary closing conditions, did not occur until September 27, 2017. As a result of delays in the closing of the transaction, the Company expensed all amounts previously paid for the company during the fourth quarter of 2016, including outstanding advances to Genomas in the amount of $0.4 million. Genomas will be spun-off as part of AMSG, so it is presented here in discontinued operations.

The Series F Preferred Stock issued effective September 27, 2017 has an aggregate stated value of $1,750,000, and is convertible into shares of the Company’s common stock at any time after the one-year anniversary of the closing date at a conversion price per common share equal to the greater of $29.25 or the average closing sales price of the Company’s common stock for the 10 trading days immediately preceding the conversion. The maximum number of common shares issuable upon the conversion of the Series F Preferred Stock is 59,829. The Company valued the Series F Preferred Stock based on the value of the common stock issuable upon conversion on the date of the acquisition, which was $174,097.

The following table summarizes the (preliminary) fair values of assets acquired and liabilities assumed at the acquisition date of Genomas. The Fair Market Value appears to equal cost. The Company has one year to revalue goodwill and other intangible assets in accordance with GAAP per ASC 850-10-25-14.

Cash	$	7,990
Accounts receivable, net		6,503
Accounts payable and accrued expenses		(458,736	)
Deferred revenue		(20,000	)
Loans payable short-term		(142,514	)
Note payable long-term		(134,118	)
Total identifiable net liabilities		(740,875	)
Goodwill		914,972
Total consideration	$	174,097

The acquisition of Genomas was accounted for under the purchase method of accounting and, accordingly, the unaudited condensed consolidated financial statements reflect the results of operations of Genomas from the date of acquisition. Unaudited pro forma results of operations for the three-months ended September 30, 2017 and 2016 and the nine-months ended September 30, 2017 and 2016 are included below. Such pro forma information assumes that the Genomas acquisition had occurred as of January 1, 2017 and 2016, respectively, and revenue is presented in accordance with our accounting policies. These unaudited pro forma statements have been prepared for comparative purposes only and are not intended to be indicative of what our results would have been had the acquisition occurred at the beginning of the periods presented or the results which may occur in the future.

	Three Months Ended September 30,						Nine Months Ended September 30,
	(unaudited)						(unaudited)
	2017			2016			2017			2016
Net Revenue	$	1,439,151		$	122,432		$	3,460,125		$	4,251,890
Loss from discontinued operations		(475,065	)		452,083			(1,070,620	)		(1,871,057	)
Net loss		(10,930,151	)		(10,770,201	)		(31,189,252	)		(21,158,568	)
Deemed dividend from triggher of down
round provision feature		(2,280,280	)		-			(53,341,619	)		-
Net loss to common shareholders	$	(13,210,431	)	$	(10,770,201	)	$	(84,530,871	)	$	(21,158,568	)
Loss per share basic and diluted:
Loss per share – discontinued operations	$	(0.40	)	$	(4.92	)	$	(1.57	)	$	(35.71	)
Net loss per common share	$	(10.99	)	$	(117.32	)	$	(123.69	)	$	(403.88	)

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Subsequent Events

9 Months Ended

Sep. 30, 2017

Subsequent Events [Abstract]

Subsequent Events

Note 15 – Subsequent Events

Common Stock Listing

As previously announced, on April 18, 2017, the Company was notified by Nasdaq that the stockholders’ equity balance reported on the Company’s Form 10-K for the year ended December 31, 2016 fell below the $2.5 million minimum requirement for continued listing under the Nasdaq Capital Market’s Listing Rule 5550(b)(1) (the “Rule”). As of September 30, 2017, the Company reported a stockholders’ deficit of $18.8 million.

In accordance with the Rule, the Company submitted a plan to Nasdaq outlining how it intended to regain compliance. On August 17, 2017, Nasdaq notified the Company that its plan to correct the stockholders’ equity deficiency did not contain sufficient evidence to support a correction being achieved in the required time frame. The Company appealed this decision to a Hearing Panel which, on October 23, 2017, maintained this position and denied the Company a continued listing. Effective October 25, 2017, the Company’s common stock (RNVA) and warrants to purchase common stock (RNVAW) were no longer listed on the Nasdaq Stock Market but began trading on the OTCQB instead.

Subsequent to September 30, 2017, the Company has issued on an aggregate of 4.3 million shares of common stock upon the conversion of debentures and exercise of warrants.

Series I-1 Convertible Preferred Stock

On October 30, 2017, the Company closed an offering of $4,960,000 stated value of its newly-authorized Series I-1 Convertible Preferred Stock (the “Series I-1 Preferred Stock”). The offering was pursuant to the terms of the Securities Purchase Agreement, dated as of October 30, 2017 (the “Purchase Agreement”), between the Company and certain existing institutional investors of the Company. The Company received proceeds of $4,000,000 from the offering.

The Purchase Agreement gives the investors the right to participate in up to 50% of any offering of common stock or common stock equivalents by the Company. In the event of any such offering, the investors may also exchange all or some of their Series I-1 Preferred Stock for such new securities on an $0.80 stated value of Series I-1 Preferred Stock for $1.00 of new subscription amount basis.

The following is a summary of certain terms and provisions of the Series I-1 Preferred Stock:

General. The Company’s board of directors has designated up to 4,960 shares of the 5,000,000 authorized shares of preferred stock as the Series I-1 Preferred Stock. Each share of Series I-1 Preferred Stock has a stated value of $1,000.

Rank. The Series I-1 Preferred Stock is senior in right of payment, including dividend rights and liquidation preference, to the Company’s Series G Preferred Stock and Series H Preferred Stock.

Conversion. Each share of Series I-1 Preferred Stock is convertible into shares of the Company’s common stock at any time at the option of the holder at a conversion price equal to the lesser of (i) $1.00, subject to adjustment, and (ii) 85% of the lesser of the volume weighted average market price of the common stock on the day prior to conversion or on the day of conversion. The conversion price is subject to “full ratchet” and other customary anti-dilution protections as more fully described in the Certificate of Designation of the Series I-1 Preferred Stock.

Liquidation Preference. Upon any liquidation, dissolution or winding-up of the Company, the holders of Series I-1 Preferred Stock shall be entitled to receive an amount equal to the stated value of the Series I-1 Preferred Stock, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages then due and owing for each share of Series I-1 Preferred Stock, before any distribution or payment shall be made on any junior securities.

Voting Rights. Shares of Series I-1 Preferred Stock generally have no voting rights, except as required by law and except that the affirmative vote of the holders of a majority of the then outstanding shares of Series I-1 Preferred Stock is required to (a) alter or change adversely the powers, preferences or rights given to the Series I-1 Preferred Stock or alter or amend the Certificate of Designation of the Series I-1 Preferred Stock, (b) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon liquidation senior to, or otherwise pari passu with, the Series I-1 Preferred Stock, (c) amend the Company’s certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders, (d) increase the number of authorized shares of Series I-1 Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing.

Dividends. Holders of Series I-1 Preferred Stock shall be entitled to receive dividends on shares of Series I-1 Preferred Stock equal (on an as-converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if dividends are paid on shares of common stock. No other dividends shall be paid on shares of Series I-1 Preferred Stock.

Redemption. Upon the occurrence of certain Triggering Events (as defined in the Certificate of Designation of the Series I-1 Preferred Stock), the holder shall, in addition to any other right it may have, have the right, at its option, to require the Company to either redeem the Series I-1 Preferred Stock in cash or in certain circumstance in shares of common stock at the redemption prices set forth in the Certificate of Designation.

Negative Covenants. As long as at least a specified number of shares of Series I-1 Preferred Stock are outstanding, unless the holders of 67% of the then outstanding shares of Series I-1 Preferred Stock shall have given prior written consent, the Company and its subsidiaries are, with certain exceptions, limited from (a) incurring indebtedness, (b) creating liens, (c) amending its charter documents, (d) repurchasing or acquiring shares of common stock or common stock equivalents, (e) paying cash dividends on junior securities, (f) entering into transactions with affiliates, or (g) entering into any agreement with respect to the foregoing.

Series I-2 Convertible Preferred Stock

On October 30, 2017, the Company entered into exchange agreements with the holders of the September Debentures to provide that the holders may, from time to time, exchange their September Debentures for shares of a newly-authorized Series I-2 Convertible Preferred Stock of the Company (the “Series I-2 Preferred Stock”). The exchange agreements permit the holders of the September Debentures to exchange specified principal amounts of the September Debentures on various closing dates from December 2, 2017 through March 1, 2018. Any exchange is at the option of the holders. Each holder may reduce the principal amount of September Debentures exchanged on any particular closing date, or elect not to exchange any September Debentures at all on a closing date. If a holder does choose to exchange less principal amount of September Debentures, or no September Debentures at all, it can carry forward such lesser amount to a future closing date and then exchange more than the originally specified principal amount for that later closing date. For each $0.80 of principal amount of September Debenture surrendered to the Company at any closing date, the Company will issue the holder a share of Series I-2 Preferred Stock with a stated value of $1.00. Each share of Series I-2 Preferred Stock is convertible into shares of the Company’s common stock at any time at the option of the holder at a conversion price equal to the lesser of (i) $1.00, subject to adjustment, and (ii) 85% of the lesser of the volume weighted average market price of the common stock on the day prior to conversion or on the day of conversion. The conversion price is subject to “full ratchet” and other customary anti-dilution protections as more fully described in the Certificate of Designation of the Series I-2 Preferred Stock.

The following is a summary of certain terms and provisions of the Series I-2 Preferred Stock.

General. The Company’s board of directors has designated up to 12,000 shares of the 5,000,000 authorized shares of preferred stock as the Series I-2 Preferred Stock. Each share of Series I-2 Preferred Stock has a stated value of $1,000.

Rank. The Series I-2 Preferred Stock is senior in right of payment, including dividend rights and liquidation preference, to the Company’s Series G Preferred Stock and Series H Preferred Stock.

Liquidation Preference. Upon any liquidation, dissolution or winding-up of the Company, the holders of Series I-2 Preferred Stock shall be entitled to receive an amount equal to the stated value of the Series I-2 Preferred Stock, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages then due and owing for each share of Series I-2 Preferred Stock, before any distribution or payment shall be made on any junior securities.

Voting Rights. Shares of Series I-2 Preferred Stock generally have no voting rights, except as required by law and except that the affirmative vote of the holders of a majority of the then outstanding shares of Series I-2 Preferred Stock is required to (a) alter or change adversely the powers, preferences or rights given to the Series I-2 Preferred Stock or alter or amend the Certificate of Designation of the Series I-2 Preferred Stock, (b) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon liquidation senior to, or otherwise pari passu with, the Series I-2 Preferred Stock, (c) amend the Company’s certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders, (d) increase the number of authorized shares of Series I-2 Preferred Stock, or (e) enter into any agreement with respect to any of the foregoing.

Dividends. Holders of Series I-2 Preferred Stock shall be entitled to receive dividends on shares of Series I-2 Preferred Stock equal (on an as-converted to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if dividends are paid on shares of common stock. No other dividends shall be paid on shares of Series I-2 Preferred Stock.

Redemption. Upon the occurrence of certain Triggering Events (as defined in the Certificate of Designation of the Series I-2 Preferred Stock), the holder shall, in addition to any other right it may have, have the right, at its option, to require the Company to either redeem the Series I-2 Preferred Stock in cash or in certain circumstance in shares of common stock at the redemption prices set forth in the Certificate of Designation.

Negative Covenants. As long as at least a specified number of shares of Series I-2 Preferred Stock are outstanding, unless the holders of 67% of the then outstanding shares of Series I-2 Preferred Stock shall have given prior written consent, the Company and its subsidiaries are, with certain exceptions, limited from (a) incurring indebtedness, (b) creating liens, (c) amending its charter documents, (d) repurchasing or acquiring shares of common stock or common stock equivalents, (e) paying cash dividends on junior securities, (f) entering into transactions with affiliates, or (g) entering into any agreement with respect to the foregoing.

Modification of Anti-Dilution Provisions of the March Debentures and March Warrants

On October 30, 2017, the Company agreed to amend the March Debentures and March Warrants, which are more fully discussed in Note 6, to remove the floor in the anti-dilution provisions therein.

Conversions of March Debentures and Exercises of Warrants

During the month of October 2017, $2,185,464.02 aggregate principal amount of March Debentures were exercised for 1,924,037 shares of common stock and the Company received $633,000 upon the exercise of Class B Warrants issued in March 2017 for the issuance of 600,000 shares of common stock.

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Organization and Basis of Presentation (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with the 2016 audited financial statements included in the Company’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 10, 2017. These condensed consolidated interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC, and therefore omit or condense certain footnotes and other information normally included in consolidated interim financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). All material intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management, the unaudited interim condensed consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) considered necessary for the fair presentation of the financial position and results of operations and cash flows for the interim periods reported herein. The results of operations presented are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

During the three and nine months ended September 30, 2017 and 2016, comprehensive loss was equal to the net loss amounts presented in the accompanying condensed consolidated statements of operations. In addition, certain prior year balances have been reclassified to conform to the current presentation.

Reclassification

Reclassification

The Company has reclassified certain amounts in the 2016 condensed consolidated financial statements to be consistent with the 2017 presentation. These principally relate to classification of certain revenues, cost of revenues and related segment data, as well as balance sheet classifications to assets and liabilities held for sale. Reclassifications relating to the discontinued operations of AMSG are described further in Note 14. The reclassifications had no impact on operations or cash flows for the three and nine months ended September 30, 2016.

Reverse Stock Splits

Reverse Stock Splits

On February 7, 2017, the Company’s Board of Directors approved an amendment to the Company’s Certificate of Incorporation to effect a 1-for-30 reverse stock split of the Company’s shares of common stock effective on February 22, 2017 and on September 21, 2017, the Company’s Board of Directors approved an amendment to the Company’s Certificate of Incorporation to effect a 1-for-15 reverse stock split effective October 5, 2017 (the “Reverse Stock Splits”). The stockholders of the Company had approved these amendments to the Company’s Certificate of Incorporation on December 22, 2016 for the February 7, 2017 reverse stock split and on September 20, 2017 for the October 5, 2017 reverse stock split. In both cases, the Company’s stockholders had granted authorization to the Board of Directors to determine in its discretion the specific ratio, subject to limitations, and the timing of the reverse splits within certain specified effective dates.

As a result of the Reverse Stock Splits, every 30 shares of the Company’s then outstanding common stock was combined and automatically converted into one share of the Company’s common stock, par value $0.01 per share, on February 7, 2017 and every 15 shares of the Company’s then outstanding common stock was combined and automatically converted into one share of the Company’s common stock, par value $0.01 per share, on October 5, 2017. In addition, the conversions and exercise prices of all of the Company’s outstanding preferred stock, common stock purchase warrants, stock options, restricted stock, equity incentive plans and convertible notes payable were proportionately adjusted at the 1:30 reverse split ratio and again at the 1:15 reverse split ratio in accordance with the terms of such instruments. In addition, proportionate voting rights and other rights of common stockholders were not affected by the Reverse Stock Splits, other than as a result of the rounding up of fractional shares in the February reverse split and the payment of cash in lieu of fractional shares in the October reverse split, as no fractional shares were issued in connection with the Reverse Stock Splits.

The par value and other terms of the common stock were not affected by the Reverse Stock Splits. The authorized capital of the Company of 500,000,000 shares of common stock and 5,000,000 shares of preferred stock were also unaffected by the Reverse Stock Splits.

All share, per share and capital stock amounts for all periods presented have been restated to give effect to the Reverse Stock Splits.

Adoption of ASU 2017-11

Adoption of ASU 2017-11

In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-11 “Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815).” The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect.

Under current GAAP, an equity-linked financial instrument with a down round feature that otherwise is not required to be classified as a liability under the guidance in Topic 480 is evaluated under the guidance in Topic 815, Derivatives and Hedging, to determine whether it meets the definition of a derivative. If it meets that definition, the instrument (or embedded feature) is evaluated to determine whether it is indexed to an entity’s own stock as part of the analysis of whether it qualifies for a scope exception from derivative accounting. Generally, for warrants and conversion options embedded in financial instruments that are deemed to have a debt host (assuming the underlying shares are readily convertible to cash or the contract provides for net settlement such that the embedded conversion option meets the definition of a derivative), the existence of a down round feature results in an instrument not being considered indexed to an entity’s own stock. This results in a reporting entity being required to classify the freestanding financial instrument or the bifurcated conversion option as a liability, which the entity must measure at fair value initially and at each subsequent reporting date.

The amendments in this Update revise the guidance for instruments with down round features in Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, which is considered in determining whether an equity-linked financial instrument qualifies for a scope exception from derivative accounting. An entity still is required to determine whether instruments would be classified in equity under the guidance in Subtopic 815-40 in determining whether they qualify for that scope exception. If they do qualify, freestanding instruments with down round features are no longer classified as liabilities and embedded conversion options with down round features are no longer bifurcated.

For entities that present EPS in accordance with Topic 260, and when the down round feature is included in an equity-classified freestanding financial instrument, the value of the effect of the down round feature is treated as a dividend when it is triggered and as a numerator adjustment in the basic EPS calculation. This reflects the occurrence of an economic transfer of value to the holder of the instrument, while alleviating the complexity and income statement volatility associated with fair value measurement on an ongoing basis. Convertible instruments are unaffected by the Topic 260 amendments in this Update.

Those amendments in Part 1 of this Update are a cost savings relative to current GAAP. This is because, assuming the required criteria for equity classification in Subtopic 815-40 are met, an entity that issued such an instrument no longer measures the instrument at fair value at each reporting period (in the case of warrants) or separately accounts for a bifurcated derivative (in the case of convertible instruments) on the basis of the existence of a down round feature. For convertible instruments with embedded conversion options that have down round features, applying specialized guidance such as the model for contingent beneficial conversion features rather than bifurcating an embedded derivative also reduces cost and complexity. Under that specialized guidance, the issuer recognizes the intrinsic value of the feature only when the feature becomes beneficial instead of bifurcating the conversion option and measuring it at fair value each reporting period.

The amendments in Part II of this Update replace the indefinite deferral of certain guidance in Topic 480 with a scope exception. This has the benefit of improving the readability of the Codification and reducing the complexity associated with navigating the guidance in Topic 480.

For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in Part 1 of this Update should be applied in either of the following ways: 1. Retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the statement of financial position as of the beginning of the first fiscal year and interim period(s) in which the pending content that links to this paragraph is effective; or 2. Retrospectively to outstanding financial instruments with a down round feature for each prior reporting period presented in accordance with the guidance on accounting changes in paragraphs 250-10-45-5 through 45-10.

The amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting effect.

The Company has determined that this amendment had a material impact on its condensed consolidated financial statements and has early adopted this accounting standard update. The cumulative effect of the adoption of ASU 2017-11 resulted in the reclassification of the derivative liability recorded of $56 million and the reversal of $41 million of interest expense recorded in the Company’s first fiscal quarter of 2017. The remaining $16 million was offset to additional paid in capital (discount on convertible debenture). Additionally, the Company recognized a deemed dividend from the trigger of the down round provision feature of $53.3 million. A $51 million deemed dividend was recorded retrospectively as of the beginning of the issuance of the March 2017 debentures where the initial derivative liability was recorded. A $2.3 million deemed dividend adjustment was recorded in the three months ended September 30, 2017 as a result of the down round provision feature.

Going Concern

Going Concern

The Company’s condensed consolidated financial statements are prepared using U.S. GAAP applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has accumulated significant losses and has negative cash flows from operations, and at September 30, 2017 had a working capital deficit and stockholders’ deficit of $18.0 million and $18.8 million, respectively, which raise substantial doubt about its ability to continue as a going concern. In addition, the Company’s cash position as of the date of this report is critically deficient, critical payments are not being made in the ordinary course of business and certain indebtedness in the amount of $6.0 million matured on March 31, 2017, which the Company does not have the financial resources to satisfy (see Note 5), all of which raise substantial doubt about the Company’s ability to continue as a going concern.

The Company continues to consider efficiencies and is currently using one laboratory for the majority of its toxicology diagnostics thereby reducing the number of employees and associated operating expenses, in order to reduce costs. In addition, the Company received approximately $15.7 million in cash from the issuances of debentures and warrants in the first nine months of 2017 (see Note 6), $3.8 million from related parties and an additional $4.0 million of proceeds on October 30, 2017 from the issuance of convertible preferred stock (see Note 15). In July 2017, the Company announced that it plans to spin off its Advanced Molecular Services Group (“AMSG”) as an independent publicly traded company by way of a tax-free distribution to its shareholders. Completion of the spinoff of AMSG is expected to occur during the first quarter of 2018, and is subject to numerous conditions, including effectiveness of a Registration Statement on Form 10 to be filed with the Securities and Exchange Commission and consents, including under various funding agreements previously entered into by the Company. The intent of the spinoff of AMSG is to create two public companies, each of which can focus on its own strengths and operational plans. In accordance with ASC 205-20 and having met the criteria for “held for sale”, the Company has reflected amounts relating to AMSG as a disposal group classified as held for sale and included as part of discontinued operations. AMSG is no longer included in the segment reporting following the reclassification to discontinued operations. The discontinued operations of AMSG are described further in Note 14. The Company also announced that the Big South Fork Medical Center received CMS regional office licensure approval and opened its doors on August 8, 2017. The hospital provided services to over 1,854 patients and recognized approximately $0.6 million of revenues during the three months ended September 30, 2017. The Company may amend its current revenue recognition policy and percentage for the hospital when payments are received to support amended revenue recognition methodologies. Therefore, the Company expects that the opening of the hospital will continue to provide additional revenue and cash flow sources.

There can be no assurance that the Company will be able to achieve its business plan, raise any additional capital or secure the additional financing necessary to implement its current operating plan. The ability of the Company to continue as a going concern is dependent upon its ability to significantly reduce its operating costs, increase its revenues and eventually regain profitable operations. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Recent Events

Recent Events

Common Stock Listing

Effective October 25, 2017, the Company’s common stock (RNVA) and warrants to purchase common stock (RNVAW) were no longer listed on the Nasdaq Stock Market but began trading on the OTCQB instead, as more fully discussed in Note 15.

Financing Agreements

On October 30, 2017, the Company issued its Series I-1 Convertible Preferred Stock, and modified the anti-dilution provisions of certain outstanding debentures and warrants that were issued in March 2017, as more fully discussed in Note 15.

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Accounts Receivable (Tables)

9 Months Ended

Sep. 30, 2017

Receivables [Abstract]

Schedule of Accounts Receivable

Accounts receivable at September 30, 2017 (unaudited) and December 31, 2016 consisted of the following:

	September 30, 2017			December 31, 2016
Accounts receivable - laboratory services	$	4,118,407		$	12,715,835
Accounts receivable - hospital		2,982,771			-
Accounts receivable - all others		528,196			499,508
Total accounts receivable		7,629,374			13,215,343
Less:
Allowance for discounts		(3,583,014	)		(11,664,490	)
Allowance for discounts - hospital		(2,368,565	)		-
Allowance for bad debts		(1,276,769	)		(350,954	)
Accounts receivable, net	$	401,026		$	1,199,899

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Property and Equipment (Tables)

9 Months Ended

Sep. 30, 2017

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment

Property and equipment at September 30, 2017 (unaudited) and December 31, 2016 consisted of the following:

	September 30, 2017			December 31, 2016
Medical equipment	$	713,799		$	696,195
Building		1,359,484			-
Equipment		461,912			461,912
Equipment under capital leases		4,497,025			4,497,025
Furniture		408,101			377,630
Leasehold improvements		1,333,385			1,329,387
Vehicles		196,534			196,534
Computer equipment		587,742			564,742
Software		1,859,289			1,739,348
		11,417,271			9,862,773
Less accumulated depreciation		(8,327,224	)		(6,819,183	)
Property and equipment, net	$	3,090,047		$	3,043,590

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Accrued Expenses (Tables)

9 Months Ended

Sep. 30, 2017

Payables and Accruals [Abstract]

Schedule of Accrued Expenses

Accrued expenses at September 30, 2017 (unaudited) and December 31, 2016 consisted of the following:

	September 30, 2017		December 31, 2016
Commisions payable	$	29,860	$	44,788
Accrued payroll and related liabilities		1,755,131		493,521
Accrued interest		2,211,588		1,471,191
Other accrued expenses		1,013,719		872,529
Total accrued expenses	$	5,010,298	$	2,882,029

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Notes Payable (Tables)

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Schedule of Notes Payable

Notes Payable – Third Parties

	September 30, 2017			December 31, 2016
Loan payable under prepaid forward purchase contract	$	5,000,000		$	5,000,000
Loan payable to TCA Global Master Fund, LP ("TCA") in the original principal amount of $3 million at 16% interest (the "TCA Debenture").  Principal and interest payments due in various installments through December 31, 2017.		1,957,476			3,000,000
Notes payable to CommerceNet and Jay Tenenbaum in the original principal amount of $500,000, bearing interest at 6% per annum (the "Tegal Notes"). Prinicpal and interest payments are due annually from July 12, 2015 through July 12, 2017		341,612			341,612
Other convertible notes payable		-			440,000
Unamortized discount on other convertible notes		-			(179,889	)
Derivative liability associated with the TCA Debenture, at fair value		-			409,524
		7,299,088			9,011,247
Less current portion		(7,299,088	)		(9,011,247	)
Notes payable - third parties, net of current portion	$	-		$	-

Schedule of Notes Payable - Related Parties

Notes Payable – Related Parties

	September 30, 2017			December 31, 2016
Loan payable to Alcimede LLC, bearing interest at 6% per annum, with all principal and interest due on February 2, 2018	$	168,500		$	218,500
Other advances from related parties		55,000			110,000
		223,500			328,500
Less current portion		(223,500	)		(328,500	)
Total notes payable - related parties, net of current portion	$	-		$	-

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Debentures (Tables)

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Schedule of Debentures

The carrying amount of all outstanding debentures as of September 30, 2017 (unaudited) is as follows:

	September 30, 2017
Debentures	$	20,962,234
Discount on Debentures		(16,398,666	)
Deferred financing fees		(324,563	)
		4,239,005
Less current portion		-
Debentures	$	4,239,005

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Capital Lease Obligations (Tables)

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Schedule of Capital Leases

The Company leases various assets under capital leases expiring through 2020 as follows. At September 30, 2017 (unaudited) and December 31, 2016, capital lease obligations consisted of the following:

	September 30, 2017			December 31, 2016
Medical equipment	$	4,497,025		$	4,497,025
Less accumulated depreciation		(3,582,631	)		(2,809,511	)
Net	$	914,394		$	1,687,514

Aggregate Future Minimum Rentals Under Capital Leases

Aggregate future minimum rentals under capital leases are as follows:

Year ended December 31,
2017 (October through December)	$	493,282
2018		1,427,375
2019		377,919
2020		32,611
Total		2,331,187
Less interest		103,983
Present value of minimum lease payments		2,227,204
Less current portion of capital lease obligations		1,491,666
Capital lease obligations, net of current portion	$	735,538

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

Schedule of Stock Option Activity

The following table summarizes the Company’s stock option activity for the nine months ended September 30, 2017:

	Number of options			Weighted- average exercise price		Weighted- average contractual term (Yrs.)
Outstanding at December 31, 2016		47,268		$	1,941.45		8.93
Granted		-			-
Expired		-			-
Forfeit		(8,790	)		-
Exercised		-			-
Outstanding at September 30, 2017		38,478		$	2,072.75		8.68
Exercisable at September 30, 2017		31,811		$	2,445.84

Schedule of Warrant Issued Activity

The following summarizes the information related to warrants issued and the activity during the nine months ended September 30, 2017:

	Number of warrants			Weighted average exercise price
Balance at December 31, 2016		93,843		$	175.50
Warrants issued during the period		17,900,999		$	4.58
Warrants exchanged/exercised during period		(6,500	)
Warrants expired during the period		-
Balance at September 30, 2017		17,988,342		$	5.40

Schedule of Anti-Dilutive

As of September 30, 2017 and 2016, the following potential common stock equivalents were excluded from the calculation of diluted loss per share as their effect was anti-dilutive:

	As of September 30,
	2017		2016
Warrants		17,988,342		78,102
Convertible preferred stock		71,147		47,463
Convertible debt		4,353,898		3,911
Stock options		38,478		49,331
		22,451,865		178,807

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Supplemental Disclosure of Cash Flow Information (Tables)

9 Months Ended

Sep. 30, 2017

Supplemental Cash Flow Elements [Abstract]

Schedule of Supplemental Cash Flow Information

The supplemental cash flow information for the nine months ended September 30, 2017 and 2016 (unaudited) is as follows:

		Nine Months Ended September 30,
		2017		2016
Cash paid for interest	$	1,106,835	$	1,237,622
Cash paid for income taxes	$	506,313	$	-
Non-cash investing and financing activities:
Services and severance settled through issuance of common stock	$	161,003	$	2,131,829
Exchange of convertible debentures for convertible debentures and warrants	$	10,734,336	$	-
Series F Preferred Stock issued for business acquisition	$	174,097	$	-
Note payable and warrants settled through issuance of common stock	$	440,000	$	-
Convertible debenture issued in exchange of Series H Preferred Stock	$	2,695,760	$	-
Debentures converted into common stock	$	4,064,162	$	-
Deemed dividend for trigger of down round provision feature	$	53,341,619	$	-

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

Schedule of Segment Reporting

Selected financial information for the Company’s operating segments is as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net revenues - External
Clinical Laboratory Operations	$	586,663		$	(9,085	)	$	1,994,639		$	3,461,987
Supportive Software Solutions		208,070			50,447			698,359			605,575
Hospital Operations		619,478			-			619,478			-
	$	1,414,211		$	41,362		$	3,312,476		$	4,067,562
Net revenues - Intersegment (***)
Supportive Software Solutions		217,431			502,055			501,924			1,036,396
	$	217,431		$	502,055		$	501,924		$	1,036,396
(Loss) income from operations
Clinical Laboratory Operations	$	(1,039,118	)	$	(7,364,096	)	$	(3,809,146	)	$	(10,590,435	)
Supportive Software Solutions		(660,800	)		(1,253,386	)		(1,721,694	)		(3,800,893	)
Hospital Operations		(2,093,805	)		-			(3,114,473	)		-
Corporate		(1,369,765	)		(2,940,956	)		(5,058,565	)		(7,059,644	)
Eliminations		-			33,663			8,181			100,987
	$	(5,163,488	)	$	(11,524,775	)	$	(13,695,697	)	$	(21,349,985	)
Depreciation and amortization
Clinical Laboratory Operations	$	410,801		$	549,748		$	1,265,174		$	1,646,167
Supportive Software Solutions		25,015			163,749			227,999			490,236
Hospital Operations		15,436			-			22,045			-
Corporate		345			745			1,005			2,494
Eliminations		-			(33,663	)		(8,181	)		(100,987	)
	$	451,597		$	680,579		$	1,508,042		$	2,037,910
Capital expenditures
Clinical Laboratory Operations	$	-		$	-		$	-		$	6,000
Supportive Software Solutions		-			-			-			9,998
Hospital Operations		160,413			-			1,554,499			-
	$	160,413		$	-		$	1,554,499		$	15,998

***` Intersegment revenues are eliminated in consolidation.

	September 30, 2017			December 31, 2016
Total assets
Clinical Laboratory Operations	$	1,686,167		$	3,986,126
Supportive Software Solutions		1,767,251			2,602,428
Decision Support and Informatics		-			60,000
Hospital Operations		1,748,986			-
Corporate		3,037,112			2,130,191
Assets of AMSG classified as held for sale		997,497			414,662
Eliminations		(2,871,080	)		(2,711,014	)
	$	6,365,933		$	6,482,393

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Discontinued Operations (Tables)

9 Months Ended

Sep. 30, 2017

Discontinued Operations and Disposal Groups [Abstract]

Schedule of Discontinued Operation of Balance Sheet and Operation Statement

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

	September 30, 2017		December 31, 2016
	(unaudited)		(unaudited)
Cash	$	8,690	$	2,962
Accounts receivable, net		6,503		267,681
Prepaid expenses and other current assets		53,582		67,257
Current assets classified as held for sale	$	68,775	$	337,900
Property and equipment, net	$	-	$	53,012
Goodwill		914,972		-
Deposits		13,750		23,750
Non-current assets classified as held for sale	$	928,722	$	76,762
Accounts payable (includes related parties)	$	837,989	$	422,864
Accrued expenses		253,991		1,253,117
Current portion of notes payable		276,632		-
Current liabilities classified as held for sale	$	1,368,612	$	1,675,981
Non-current liabilities classified as held for sale	$	-	$	26,598

Major line items constituting loss from discontinued operations in the consolidated statements of operations for the nine months ended September 30, 2017 and 2016 consisted of the following:

	September 30, 2017			September 30, 2016
		(unaudited)			(unaudited)
Revenue from services	$	224,224		$	1,154,967
Cost of services		9,282			162,266
Gross profit		214,942			992,701
Operating expenses		1,225,638			4,073,873
Other income (expenses)		42,775			(253,142	)
Loss from discontinued operations	$	(1,053,471	)	$	(2,828,030	)

Schedule of Fair Value of Acquired Assets and Liabilities Acquisition

The Company has one year to revalue goodwill and other intangible assets in accordance with GAAP per ASC 850-10-25-14.

Cash	$	7,990
Accounts receivable, net		6,503
Accounts payable and accrued expenses		(458,736	)
Deferred revenue		(20,000	)
Loans payable short-term		(142,514	)
Note payable long-term		(134,118	)
Total identifiable net liabilities		(740,875	)
Goodwill		914,972
Total consideration	$	174,097

Schedule of Pro Forma Information

These unaudited pro forma statements have been prepared for comparative purposes only and are not intended to be indicative of what our results would have been had the acquisition occurred at the beginning of the periods presented or the results which may occur in the future.

	Three Months Ended September 30,						Nine Months Ended September 30,
	(unaudited)						(unaudited)
	2017			2016			2017			2016
Net Revenue	$	1,439,151		$	122,432		$	3,460,125		$	4,251,890
Loss from discontinued operations		(475,065	)		452,083			(1,070,620	)		(1,871,057	)
Net loss		(10,930,151	)		(10,770,201	)		(31,189,252	)		(21,158,568	)
Deemed dividend from triggher of down
round provision feature		(2,280,280	)		-			(53,341,619	)		-
Net loss to common shareholders	$	(13,210,431	)	$	(10,770,201	)	$	(84,530,871	)	$	(21,158,568	)
Loss per share basic and diluted:
Loss per share – discontinued operations	$	(0.40	)	$	(4.92	)	$	(1.57	)	$	(35.71	)
Net loss per common share	$	(10.99	)	$	(117.32	)	$	(123.69	)	$	(403.88	)

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Organization and Basis of Presentation (Details Narrative) - USD ($)			3 Months Ended		9 Months Ended
	Sep. 21, 2017	Feb. 07, 2017	Sep. 30, 2017	Mar. 31, 2017	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Reserve stock split, description	1-for-15 reverse stock split effective October 5, 2017	1-for-30 reverse stock split of the Company’s shares of common stock effective on February 22, 2017
Common stock conversion description		As a result of the Reverse Stock Splits, every 30 shares of the Company;s then outstanding common stock was combined and automatically converted into one share
Common stock par value		$ 0.01	$ 0.01		$ 0.01		$ 0.01
Common stock shares authorized		500,000,000	500,000,000		500,000,000		500,000,000
Preferred stock shares authorized		5,000,000	5,000,000		5,000,000
Derivative liability				$ 56,000,000
Interest expenses				41,000,000	$ (8,441,043)
Offset to additional paid in capital					16,000,000
Deemed dividend			$ 2,300,000	$ 51,000,000	53,300,000
Working capital deficit			18,000,000		18,000,000
Stockholder's equity			18,788,423		18,788,423		$ 14,885,896
Indebtedness amount			6,000,000		6,000,000
Proceeds from issuance debentures					15,700,000
Proceeds from issuance of warrants					15,700,000
Proceeds from related parties					$ 3,805,000	$ 8,285,000
Revenue earned for services			$ 600,000
October 5 2017 [Member]
Common stock conversion description					Every 15 shares of the Company’s then outstanding common stock was combined and automatically converted into one share
Common stock par value			$ 0.01		$ 0.01
October 30 2017 [Member]
Proceeds from issuance of convertible preferred stock					$ 4,000,000

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Accounts Receivable - Schedule of Accounts Receivable (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Accounts receivable, gross	$ 7,629,374	$ 13,215,343
Less: Allowance for discounts	(3,583,014)	(11,664,490)
Less: Allowance for bad debts	(1,276,769)	(350,954)
Accounts receivable, net	401,026	1,199,899
Laboratory Service [Member]
Accounts receivable, gross	4,118,407	12,715,835
Hospital [Member]
Accounts receivable, gross	2,982,771
Less: Allowance for discounts	(2,368,565)
Others [Member]
Accounts receivable, gross	$ 528,196	$ 499,508

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Property and Equipment (Details Narrative)	3 Months Ended		9 Months Ended
	Sep. 30, 2017 USD ($) a	Sep. 30, 2016 USD ($)	Sep. 30, 2017 USD ($) a	Sep. 30, 2016 USD ($)
Area of land | a	4.3		4.3
Payments to acquire assets | $			$ 1,554,499	$ 15,998
Depreciation expenses | $	$ 500,000	$ 700,000	$ 1,500,000	$ 2,000,000
Hospital Building [Member]
Area of land | a	52,000		52,000
Professional Building [Member]
Area of land | a	6,300		6,300
Hospital Asset [Member]
Payments to acquire assets | $			$ 1,000,000

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Property and Equipment - Schedule of Property and Equipment (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Property and equipment, gross	$ 11,417,271	$ 9,862,773
Less accumulated depreciation	(8,327,224)	(6,819,183)
Property and equipment, net	3,090,047	3,043,590
Medical Equipment [Member]
Property and equipment, gross	713,799	696,195
Building [Member]
Property and equipment, gross	1,359,484
Equipment [Member]
Property and equipment, gross	461,912	461,912
Equipment under Capital Leases [Member]
Property and equipment, gross	4,497,025	4,497,025
Furniture [Member]
Property and equipment, gross	408,101	377,630
Leasehold Improvements [Member]
Property and equipment, gross	1,333,385	1,329,387
Vehicles [Member]
Property and equipment, gross	196,534	196,534
Computer Equipment [Member]
Property and equipment, gross	587,742	564,742
Software [Member]
Property and equipment, gross	$ 1,859,289	$ 1,739,348

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Accrued Expenses - Schedule of Accrued Expenses (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Payables and Accruals [Abstract]
Commisions payable	$ 29,860	$ 44,788
Accrued payroll and related liabilities	1,755,131	493,521
Accrued interest	2,211,588	1,471,191
Other accrued expenses	1,013,719	872,529
Total accrued expenses	$ 5,010,298	$ 2,882,029

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Notes Payable (Details Narrative) - USD ($)									1 Months Ended	9 Months Ended	10 Months Ended
	Mar. 21, 2017	Mar. 13, 2017	Feb. 02, 2017	Nov. 03, 2016	Sep. 15, 2016	Mar. 31, 2016	Jun. 29, 2015	Feb. 02, 2015	Mar. 31, 2017	Sep. 30, 2017	Nov. 11, 2017	Jun. 30, 2017	May 31, 2017	Mar. 15, 2017	Mar. 07, 2017	Dec. 31, 2016	Feb. 03, 2015
Consideration received						$ 5,000,000
Estimated value of accounts receivable						$ 8,700,000
Adjustment value of debt										$ 0						$ 1,500,000
Investment percentage										20.00%
Debt term						6 months
Repayment of debt						$ 500,000
Debt instrument description						All payments recovered from the accounts receivable up to $5.25 million, if paid in full within six months, or $5.5 million, if not paid in full within six months, and (iii) 20% of all payments of the accounts receivable in excess of amounts received in (i) and (ii). On March 31, 2017, to the extent that the counterparty has not been paid $6.0 million, the Company was required to pay the difference, plus 30% interest per annum on the total balance. To date, the Company has not recovered any payments against the accounts receivable.
Accrued expenses										$ 1,900,000
Due to related party										$ 6,900,000
Debt instrument periodic payment				$ 400,000
Debt instrument maturity date										Aug. 31, 2017
Warrant to purchase common stock														2,056
Stock options exercise price per share
Loan outstanding
Accrued interest										200,000
Alcimede LLC [Member]
Debt instrument maturity date								Feb. 02, 2016
Due from related party																	$ 3,000,000
Debt instrument interest rate																	6.00%
Debt instrument extended due date								Aug. 02, 2017
Share based payment of exercised options granted							66,667
Stock options exercise price per share							$ 37.50
Loan outstanding							$ 2,500,000
Repayment of common stock							$ 300,000
Mr Lagan [Member]
Repayment of debt									$ 50,000	100,000
Debt instrument extended due date									Feb. 02, 2018
Stockholder [Member]
Repayment of debt											$ 50,000
Due to related party										$ 75,000
Mr Diamantis [Member]
Due to related party												$ 3,600,000
Debt instrument face amount															$ 3,800,000
Warrant to purchase common stock															27,667
Warrant exercise per share															$ 15.00
Debt instrument interest rate												10.00%	10.00%
TCA Debenture [Member]
Repayment of debt	$ 750,000
Accrued and unpaid interest	100,000		$ 400,000
Debt instrument fee	$ 150,000
Debt instrument maturity date	Jun. 27, 2017
TCA Debenture [Member] | April 2017 Through September 2017 [Member]
Debt instrument periodic payment	$ 2,600,000
September 2016 Notes [Member]
Debt instrument maturity date					Mar. 15, 2017
Debt instrument conversion price					$ 112.50
Warrant to purchase common stock					4,444
Warrant exercise per share					$ 180.00
Warrant exchanged shares of common stock		26,667
September 2016 Notes [Member] | Two Investor [Member]
Debt instrument face amount					$ 400,000

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Notes Payable - Schedule of Notes Payable (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Unamortized discount on other convertible notes		$ (179,889)
Derivative liability associated with the TCA Debenture, at fair value		409,524
Loans with affiliates and unrelated parties	7,299,088	9,011,247
Less current portion	(7,299,088)	(9,011,247)
Notes payable, net of current portion
Notes Payable Third Parties One [Member]
Face value of note	5,000,000	5,000,000
Notes Payable Third Parties Two [Member]
Face value of note	1,957,476	3,000,000
Notes Payable Third Parties Three [Member]
Face value of note	341,612	341,612
Notes Payable Third Parties Four [Member]
Face value of note		$ 440,000

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Notes Payable - Schedule of Notes Payable (Details) (Parenthetical) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Notes Payable Third Parties Two [Member]
Purchase contract amount	$ 3,000,000
Debt instruments interest rate	16.00%
Debt maturity description	December 31, 2017
Notes Payable Third Parties Three [Member]
Purchase contract amount		$ 500,000
Debt instruments interest rate		6.00%
Debt maturity description		July 12, 2015 through July 12, 2017

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Notes Payable - Schedule of Notes Payable - Related Parties (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Notes payable
Less current portion	223,500	328,500
Notes Payable Related Parties One [Member]
Face value of note	168,500	218,500
Notes Payable Related Parties [Member]
Face value of note	55,000	110,000
Notes payable	223,500	328,500
Less current portion	(223,500)	(328,500)
Total notes payable - related parties, net of current portion

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Notes Payable - Schedule of Notes Payable - Related Parties (Details) (Parenthetical)	9 Months Ended
	Sep. 30, 2017
Debt instuments maturity date	Aug. 31, 2017
Notes Payable Related Parties One [Member]
Debt instruments interest rate	6.00%
Debt instuments maturity date	Feb. 02, 2018

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Debentures (Details Narrative) - USD ($)								3 Months Ended		6 Months Ended		9 Months Ended
	Sep. 21, 2017	Sep. 19, 2017	Jul. 17, 2017	Mar. 21, 2017	Feb. 07, 2017	Feb. 02, 2017	Mar. 31, 2016	Sep. 30, 2017	Mar. 31, 2017	Sep. 30, 2017	Sep. 30, 2017	Sep. 30, 2017	Sep. 30, 2016	Jun. 30, 2017	Jun. 22, 2017	Jun. 02, 2017	Mar. 15, 2017
Warrants to purchase common stock																	2,056
Debt instrument maturity date												Aug. 31, 2017
Proceeds from debt												$ 15,700,000
Repayment of debt							$ 500,000
Convertible debt								$ 20,962,234		$ 20,962,234	$ 20,962,234	20,962,234
Interest expenses									$ 41,000,000			(8,441,043)
Non-cash interest and amortization of debt discount expense								4,800,000				14,700,000
Proceeds from issuance warrants												15,700,000
Amortization of debt discount												(6,228,352)	$ (2,474,497)
Reserve stock split, description	1-for-15 reverse stock split effective October 5, 2017				1-for-30 reverse stock split of the Company’s shares of common stock effective on February 22, 2017
Proceeds from issuance of debenture and warrants												15,700,000
Unamortized Discount								$ 16,398,666		$ 16,398,666	$ 16,398,666	16,398,666
June Warrants [Member] | Accredited Investor [Member]
Warrant purchase price												1,902,700
Proceeds from issuance warrants												1,500,000
March Offerings [Member] | March Warrants and Exchange Warrants [Member]
Debt instrument original amount												$ 41,300,000
March Offerings [Member] | Debenture Warrant [Member]
Debenture description												The Company recognized a discount for 100% of the principal value of the March Debentures and the Exchange Debentures and non-cash interest expense in the amount of $43.7 million in connection with the recognition of these derivative liabilities.
February Offering [Member]
Debt instrument face amount						$ 1,600,000
Warrants to purchase common stock						6,667
Warrant exercise price						$ 38.70
Warrant purchase price						$ 1,500,000
Debt instrument of exchange price				$ 2,500,000
March Offerings [Member]
Debt instrument face amount				$ 10,850,000
Debt instrument maturity date				Mar. 21, 2019
Proceeds from debt				$ 8,400,000
Repayment of debt				750,000
Convertible debt				2,500,000
Interest expenses				400,000
Stock converted into debt				2,700,000
March Offerings [Member] | Series H Convertible Preferred Stock [Member]
Stock of convertible preferred stock				2,200,000
2017 Diamantis Note [Member] | March Offerings [Member]
Repayment of debt				$ 3,800,000
March Debentures and Exchange Debenture [Member] | March Offerings [Member]
Warrants to purchase common stock								9,166,616		9,166,616	9,166,616	9,166,616
Debt instrument maturity date				Mar. 21, 2019
Stock converted into debt										$ 548,932
Debt original issue discount, percentage				24.00%
Debenture description												The March Debentures and Exchange Debentures are convertible into shares of the Company’s common stock, which has been adjusted pursuant to the terms of the March Debentures to $5.85 per share as of September 30, 2017, due to prices at which the Company has subsequently issued shares of common stock). The March Debentures began to amortize monthly commencing on the 90th day following the closing date. The Exchange Debentures began to amortize monthly on the closing date. On each monthly amortization date, the Company may elect to repay 5% of the original principal amount of March Debentures and Exchange Debentures in cash or, in lieu thereof, the conversion price of such debentures will thereafter be 85% of the volume weighted average price at the time of conversion.
Stock converted into debt, value										4,100,000
Debt instrument original amount												$ 15,300,000
March Debentures and Exchange Debenture [Member] | March Offerings [Member] | Series A Warrant [Member]
Warrants to purchase common stock								3,214,911		3,214,911	3,214,911	3,214,911
Warrant exercise price								$ 5.85		$ 5.85	$ 5.85	$ 5.85
Warrant term												5 years
March Debentures and Exchange Debenture [Member] | March Offerings [Member] | Series B Warrant [Member]
Warrants to purchase common stock								2,736,794		2,736,794	2,736,794	2,736,794
Warrant exercise price								$ 5.85		$ 5.85	$ 5.85	$ 5.85
Warrant term												18 months
March Debentures and Exchange Debenture [Member] | March Offerings [Member] | Series C Warrant [Member]
Warrants to purchase common stock								3,214,911		3,214,911	3,214,911	3,214,911
Warrant exercise price								$ 5.85		$ 5.85	$ 5.85	$ 5.85
Warrant term												5 years
June Debentures [Member] | June Offerings [Member]
Warrants to purchase common stock														100,000
June Offerings [Member]
Warrants to purchase common stock															66,667	33,333
Warrant exercise price															$ 5.70	$ 5.85
July Offerings [Member]
Debt instrument face amount			$ 4,136,862
Warrants to purchase common stock			141,333
Warrant exercise price								$ 5.63		$ 5.63	$ 5.63	$ 5.63
Debt instrument of exchange price			$ 1,902,700
Warrant term											5 years
Warrant consideration in cash			$ 2,000,000
Reserve stock split, description			1-for-8 reverse split
July Offerings [Member] | October 5 2017 [Member]
Reserve stock split, description												1-for-15 reverse stock split
July Debentures [Member]
Debt instrument of exchange price		$ 6,400,000
September Offerings [Member]
Debt instrument face amount		2,604,000
Debt instrument of exchange price		4,136,862
Interest expenses												$ 1,000,000
Debt original issue discount, percentage								24.00%		24.00%	24.00%	24.00%
Debenture description												The September Debentures begin to amortize monthly commencing on the earlier of the 90th day following September 19, 2017 or the effective date of a registration statement covering the shares of common stock issuable upon conversion of the September Debentures. On each monthly amortization date, the Company may elect to repay 5% of the original principal amount of September Debentures in cash or, in lieu thereof, the conversion price of such September Debentures shall thereafter be 85% of the volume weighted average price at the time of conversion.
Proceeds of offering cost		$ 2,100,000
September Offerings [Member] | Series A Warrant [Member]
Warrants to purchase common stock		6,935,517						2,311,829		2,311,829	2,311,829	2,311,829
Warrant exercise price								$ 3.90		$ 3.90	$ 3.90	$ 3.90
Warrant term												5 years
September Offerings [Member] | Series B Warrant [Member]
Warrants to purchase common stock		6,935,517						2,311,859		2,311,859	2,311,859	2,311,859
Warrant exercise price								$ 3.90		$ 3.90	$ 3.90	$ 3.90
Warrant term												18 months
September Offerings [Member] | Series C Warrant [Member]
Warrants to purchase common stock		6,935,517						2,311,829		2,311,829	2,311,829	2,311,829
Warrant exercise price								$ 3.90		$ 3.90	$ 3.90	$ 3.90
Warrant term												5 years
September Debenture [Member]
Debt instrument of exchange price		$ 6,412,136
Amortization amount		$ 100,000

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Debentures - Schedule of Debentures (Details)	Sep. 30, 2017 USD ($)
Debt Disclosure [Abstract]
Debentures	$ 20,962,234
Discount on Debentures	(16,398,666)
Deferred financing fees	(324,563)
Total debentures	4,239,005
Less current portion
Debentures	$ 4,239,005

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Related Party Transactions (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Jun. 30, 2017	May 31, 2017	Mar. 15, 2017	Mar. 07, 2017	Feb. 28, 2017	Jan. 31, 2017
Warrant to purchase common stock					2,056
Debt instrument maturity date	Aug. 31, 2017
Alcimede [Member]
Consulting fee	$ 400,000	$ 300,000
Monarch Capital LLC [Member]
Consulting fee	$ 100,000	$ 100,000
Director [Member]
Advance from director							$ 3,600,000	$ 3,600,000
Accrued but unpaid interest							$ 500,000	$ 500,000
Debt instrument interest rate							10.00%	10.00%
Mr Diamantis [Member]
Accrued but unpaid interest						$ 500,000
Debt instrument interest rate			10.00%	10.00%
Debt face amount						$ 3,800,000
Warrant to purchase common stock						27,667
Warrant exercise price						$ 15.00
Due to related party			$ 200,000	$ 200,000

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Capital Lease Obligations - Schedule of Capital Leases (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Debt Disclosure [Abstract]
Medical equipment	$ 4,497,025	$ 4,497,025
Less accumulated depreciation	(3,582,631)	(2,809,511)
Capital lease obligations	$ 914,394	$ 1,687,514

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Capital Lease Obligations - Aggregate Future Minimum Rentals Under Capital Leases (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Debt Disclosure [Abstract]
2017 (October through December)	$ 493,282
2018	1,427,375
2019	377,919
2020	32,611
Total	2,331,187
Less interest	103,983
Present value of minimum lease payments	2,227,204
Less current portion of capital lease obligations	1,491,666	$ 1,796,053
Capital lease obligations, net of current portion	$ 735,538	$ 1,774,121

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Stockholders' Equity (Details Narrative) - USD ($)						9 Months Ended
	Sep. 27, 2017	Aug. 23, 2017	Aug. 14, 2017	Jul. 25, 2017	Feb. 22, 2017	Sep. 30, 2017	Sep. 30, 2016	Mar. 15, 2017	Mar. 13, 2017	Feb. 07, 2017	Dec. 31, 2016
Preferred stock shares authorized						5,000,000				5,000,000
Preferred stock par value						$ 0.01
Preferred stock shares outstanding						1,750,275
Number of common stock shares issued, shares						1,167,479
Debt converted into share						548,932
Debt converted into share, value						$ 4,100,000
Common stock shares outstanding						1,354,171					186,692
Shares issued to settle notes and warrants									26,667
Shares issued to settle notes and warrants, value									$ 400,000
Warrants to purchase common stock								2,056
Warrants to purchase common stock, value								$ 57,868
Common stock shares issued for professional service		33,334
Value of professional service fee		$ 118,493				$ 161,003	$ 9,310
Number of restricted stock shares forfeited and cancelled						4,933
Stock-based compensation						$ 34,081	884,165
Warrant [Member]
Number of warrant issued						16,350,132
Warrant exercise price per share						$ 5.03
Restricted Stock [Member]
Stock-based compensation						$ 82,974
Stock issued price per share						$ 3.75
Unrecognized compensation						$ 580,750
Stock Options [Member]
Stock-based compensation						34,081	$ 700,000
2007 Equity Plan [Member]
Unrecognized compensation						$ 155,582
Weighted average period						1 year 11 days
Former Employee [Member]
Number of common stock shares issued, shares				8,333
Number of common stock shares issued, value				$ 42,510
Employees and Directors [Member]
Number of restricted stock issued			181,933
Number of restricted stock returned to treasury			4,933
Employees and Directors [Member] | 2007 Equity Plan [Member]
Number of restricted stock issued			181,933
Series G Preferred Stock [Member]
Preferred stock shares authorized						14,000					14,000
Preferred stock par value						$ 0.01					$ 0.01
Preferred stock shares outstanding						215					215
Preferred stock shares issued						215					215
Preferred stock value						$ 2					$ 2
Series H Preferred Stock [Member]
Preferred stock shares authorized						14,202					14,202
Preferred stock par value						$ 0.01					$ 0.01
Preferred stock shares outstanding						60					10,019
Preferred stock shares issued						60					10,019
Number of common stock shares issued, shares						7,785
Debt converted into share						370,446
Shares converted into debt						2,174
Stock converted into debt						$ 2,200,000
Debt converted into share, value						2,700,000
Preferred stock value											$ 100
Series F Preferred Stock [Member]
Preferred stock shares authorized						1,750,000					1,750,000
Preferred stock par value						$ 0.01					$ 0.01
Preferred stock shares outstanding						1,750,000					0
Preferred stock shares issued						1,750,000					0
Shares converted into debt	59,829
Debt converted into share, value	$ 174,097
Preferred stock value	$ 1,750,000					$ 17,500
Series F Preferred Stock [Member] | Genomas, Inc. [Member]
Preferred stock shares issued	1,750,000
Debt converted into share	59,829
Preferred stock value	$ 174,097
Stock conversion price per share	$ 29.25
Preferred stock voting rights	one vote
Preferred stock price per share for unpaid dividend	$ 1.95
Reserve Stock Split [Member]
Number of common stock shares issued, shares					526

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Stockholders' Equity - Schedule of Stock Option Activity (Details)	9 Months Ended
	Sep. 30, 2017 $ / shares shares
Equity [Abstract]
Number of Options Outstanding, beginning balance | shares	47,268
Number of Options Granted | shares
Number of Options Expired | shares
Number of Options Forfeited | shares	(8,790)
Number of Options Exercised | shares
Number of Options Options Outstanding, ending balance | shares	38,478
Number of Options Options Exercisable | shares	31,811
Weighted average exercise price, Outstanding beginning | $ / shares	$ 1,941.45
Weighted average exercise price, granted | $ / shares
Weighted average exercise price, expired | $ / shares
Weighted average exercise price, forfeited | $ / shares
Weighted average exercise price, exercised | $ / shares
Weighted average exercise price, Outstanding, ending balance | $ / shares	2,072.75
Weighted average exercise price, Exercisable | $ / shares	$ 2,445.84
Weighted average contractual term, Options Outstanding, beginning balance	8 years 11 months 4 days
Weighted average contractual term, Options Outstanding, beginning balance	8 years 8 months 5 days

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Stockholders' Equity - Schedule of Warrant Issued Activity (Details) - Warrant [Member]	9 Months Ended
	Sep. 30, 2017 $ / shares shares
Warrants outstanding, beginning balance | shares	93,843
Warrants issued | shares	17,900,999
Warrants exchanged/exercised | shares	(6,500)
Warrants expired | shares
Warrants outstanding, ending balance | shares	17,988,342
Weighted average exercise price, warrants outstanding, beginning balance | $ / shares	$ 175.50
Weighted average exercise price, warrants issued | $ / shares	4.58
Weighted average exercise price, Warrants exchanged/exercised | $ / shares
Weighted average exercise price, Warrants expired | $ / shares
Weighted average exercise price, warrants outstanding, ending balance | $ / shares	$ 5.40

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Stockholders' Equity - Schedule of Anti-Dilutive (Details) - shares	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Antidilutive securities	22,451,865	178,807
Warrant [Member]
Antidilutive securities	17,988,342	78,102
Convertible Preferred Stock [Member]
Antidilutive securities	71,147	47,463
Convertible Debt [Member]
Antidilutive securities	4,353,898	3,911
Stock Options [Member]
Antidilutive securities	38,478	49,331

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Supplemental Disclosure of Cash Flow Information - Schedule of Supplemental Cash Flow Information (Details) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Supplemental Cash Flow Elements [Abstract]
Cash paid for interest	$ 1,106,835	$ 1,237,622
Cash paid for income taxes	506,313
Services and severance settled through issuance of common stock	161,003	2,131,829
Exchange of convertible debentures for convertible debentures and warrants	10,734,336
Series F Preferred Stock issued for business acquisition	174,097
Note payable and warrants settled through issuance of common stock	440,000
Convertible debenture issued in exchange of Series H Preferred Stock	2,695,760
Debentures converted into common stock	4,064,162
Deemed dividend for trigger of down round provision feature	$ 53,341,619

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Commitments and Contingencies (Details Narrative) - USD ($)					1 Months Ended			2 Months Ended
	Feb. 15, 2017	Feb. 08, 2017	Jan. 03, 2017	Sep. 27, 2016	Feb. 28, 2017	Dec. 31, 2016	Feb. 29, 2016	Feb. 28, 2017	Mar. 24, 2017	Dec. 07, 2016	Oct. 31, 2016	Sep. 30, 2016	Jul. 29, 2016	Jun. 30, 2016
Income tax penalties and interest accrued										$ 400,000
Florida Department of Revenue [Member]
Settlement payable				$ 300,000
Income tax penalties and interest paid				250,000
Income tax penalties and interest accrued				$ 900,000
TCS-Florida, L.P [Member]
Litigation Settlement in judgment			$ 2,600,000
Payment in settlement of judgment								$ 700,000
DeLage Landen Financial Services, Inc. [Member]
Litigation Settlement in judgment						$ 1,000,000
Implicit interest rate		4.97%
Epinex Diagnostics Laboratories, Inc. [Member]
Payment of attorneys’ fees									$ 300,000		$ 700,000
Medytox Solutions, Inc [Member] | Internal Revenue Service (IRS) [Member]
Settlement payable														$ 100,000
Income tax penalties and interest paid							$ 5,000,000
Income tax liability refund												$ 1,900,000
Settlement Agreement [Member] | Epinex Diagnostics Laboratories, Inc. [Member]
Settlement payable													$ 200,000
Stipulation Agreement [Member] | Florida Department of Revenue [Member]
Monthly installment payment					$ 35,000
Forbearance Agreement [Member] | TCS-Florida, L.P [Member]
Monthly installment payment	$ 1,900,000

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Segment Information (Details Narrative)	9 Months Ended
	Sep. 30, 2017 Integer
Segment Reporting [Abstract]
Number of reportable segments	4

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Segment Information - Schedule of Segment Reporting (Details) - USD ($)		3 Months Ended		9 Months Ended
		Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Net revenues - External		$ 1,414,211	$ 41,362	$ 3,312,476	$ 4,067,562
Net revenues - Intersegment	[1]	217,431	502,055	501,924	1,036,396
(Loss) income from operations		(5,163,488)	(11,524,775)	(13,695,697)	(21,349,985)
Depreciation and amortization		451,597	680,579	1,508,042	2,037,910
Capital expenditures		160,413		1,554,499	15,998
Total assets		6,365,933	6,482,393	6,365,933	6,482,393	$ 6,482,393
Clinical Laboratory Operations [Member]
Net revenues - External		586,663	(9,085)	1,994,639	3,491,987
Net revenues - Intersegment
(Loss) income from operations		(1,039,118)	(7,364,096)	(3,809,146)	(10,590,435)
Depreciation and amortization		410,801	549,748	1,265,174	1,646,167
Capital expenditures					6,000
Total assets		1,686,167	3,986,126	1,686,167	3,986,126
Supportive Software Solutions [Member]
Net revenues - External		208,070	50,447	698,359	605,575
Net revenues - Intersegment	[1]	217,431	502,055	501,924	1,036,396
(Loss) income from operations		(660,800)	(1,253,386)	(1,721,694)	(3,800,893)
Depreciation and amortization		25,015	163,749	227,999	490,236
Capital expenditures					9,998
Total assets		1,767,251	2,602,428	1,767,251	2,602,428
Hospital Operations [Member]
Net revenues - External		619,478		619,478
Net revenues - Intersegment
(Loss) income from operations		(2,093,805)		(3,114,473)
Depreciation and amortization		15,436		22,045
Capital expenditures		160,413		1,554,499
Total assets		1,748,986		1,748,986
Corporate [Member]
Net revenues - External
Net revenues - Intersegment
(Loss) income from operations		(1,369,765)	(2,940,956)	(5,058,565)	(7,059,644)
Depreciation and amortization		345	745	1,005	2,494
Capital expenditures
Total assets		3,037,112	2,130,191	3,037,112	2,130,191
Eliminations [Member]
Net revenues - External
Net revenues - Intersegment
(Loss) income from operations			33,663	8,181	100,987
Depreciation and amortization			(33,663)	(8,181)	(100,987)
Capital expenditures
Total assets		(2,871,080)	(2,711,014)	(2,871,080)	(2,711,014)
Decision Support And Informatics [Member]
Total assets			60,000		60,000
Assets of AMSG Classified As Held For Sale[Member]
Total assets		$ 997,497	$ 414,662	$ 997,497	$ 414,662

[1] Intersegment revenues are eliminated in consolidation.

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Discontinued Operations (Details Narrative) - USD ($)			9 Months Ended
	Sep. 27, 2017	Jul. 19, 2016	Sep. 30, 2017	Dec. 31, 2016	Sep. 26, 2016
Equity ownership percentage			20.00%
Notes payable
Indebtedness and other obligations			6,000,000
Due to related party			6,900,000
Number of common shares issued upon conversion, value			4,100,000
Series F Preferred Stock [Member]
Preferred stock stated value	$ 1,750,000		$ 17,500
Conversion price per share	$ 29.25
Number of common shares issued upon conversion, shares	59,829
Number of common shares issued upon conversion, value	$ 174,097
Genomas, Inc. [Member]
Cash		$ 250,000
Due to related party				$ 400,000
Genomas, Inc. [Member] | Hartford Healthcare Corporation [Member]
Equity ownership percentage		15.00%
Notes payable		$ 1,500,000
Genomas, Inc. [Member] | Series F Preferred Stock [Member]
Preferred stock stated value	$ 174,097
Stock Purchase Agreement [Member] | Genomas, Inc. [Member]
Equity ownership percentage					85.00%
Indebtedness and other obligations		$ 800,000
Stock Purchase Agreement [Member] | Genomas, Inc. [Member] | Series F Preferred Stock [Member]
Preferred stock shares designated					1,750,000

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Discontinued Operations - Schedule of Discontinued Operation of Balance Sheet and Operation Statement (Details) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Discontinued Operations and Disposal Groups [Abstract]
Cash	$ 8,690		$ 2,962
Accounts receivable, net	6,503		267,681
Prepaid expenses and other current assets	53,582		67,257
Current assets classified as held for sale	68,775		337,900
Property and equipment, net			53,012
Goodwill	914,972
Deposits	13,750		23,750
Non-current assets classified as held for sale	928,722		76,762
Accounts payable (includes related parties)	837,989		422,864
Accrued expenses	253,991		1,253,117
Current portion of notes payable	276,632
Current liabilities classified as held for sale	1,368,612		1,675,981
Non-current liabilities classified as held for sale			$ 26,598
Revenue from services	224,224	$ 1,154,967
Cost of services	9,282	162,266
Gross profit	214,942	992,701
Operating expenses	1,225,638	4,073,873
Other income (expenses)	42,775	(253,142)
Loss from discontinued operations	$ (1,053,471)	$ (2,828,030)

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Discontinued Operations - Schedule of Fair Value of Acquired Assets and Liabilities Acquisition (Details) - Genomas, Inc. [Member]	Sep. 27, 2017 USD ($)
Cash	$ 7,990
Accounts receivable, net	6,503
Accounts payable and accrued expenses	(458,736)
Deferred revenue	(20,000)
Loans payable short-term	(142,514)
Note payable long-term	(134,118)
Total identifiable net liabilities	(740,875)
Goodwill	914,972
Total consideration	$ 174,097

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Discontinued Operations - Schedule of Pro Forma Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Discontinued Operations - Schedule Of Pro Forma Information Details
Net Revenue	$ 1,439,151	$ 122,432	$ 3,460,125	$ 4,251,890
Loss from discontinued operations	(475,065)	452,083	(1,070,620)	(1,871,057)
Net loss	(10,930,151)	(10,770,201)	(31,189,252)	(21,158,568)
Deemed dividend from triggher of down round provision feature	(2,280,280)		(53,341,619)
Net loss to common shareholders	$ (13,210,431)	$ (10,770,201)	$ (84,530,871)	$ (21,158,568)
Loss per share – discontinued operations	$ (0.40)	$ 4.92	$ (1.57)	$ (35.71)
Net loss per common share	$ (10.99)	$ (117.32)	$ (123.69)	$ (403.88)

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Subsequent Events (Details Narrative) - USD ($)			1 Months Ended	9 Months Ended
	Oct. 30, 2017	Apr. 18, 2017	Oct. 31, 2017	Sep. 30, 2017	Feb. 07, 2017	Dec. 31, 2016
Stockholders' deficit				$ (18,788,423)		$ (14,885,896)
Preferred stock shares authorized				5,000,000	5,000,000
Number of shares issued shares				1,167,479
Subsequent Event [Member]
Nasdaq capital market's listing rule description		The Company was notified by Nasdaq that the stockholders’ equity balance reported on the Company’s Form 10-K for the year ended December 31, 2016 fell below the $2.5 million minimum requirement for continued listing under the Nasdaq Capital Market’s Listing Rule 5550(b)(1) (the “Rule”).
Stockholders' deficit				$ 18,800,000
Shares issued upon conversion of debentures and exercise of warrants				4,300,000
Subsequent Event [Member] | March Debentures [Member]
Number of shares authorized value			$ 633,000
Debt instrument face amount			$ 2,185,464
Number of shares issued shares			1,924,037
Subsequent Event [Member] | Series I-1 Convertible Preferred Stock [Member]
Conversion price per share	$ 1.00
Number of shares authorized value	$ 4,960,000
Proceeds from offering	$ 4,000,000
Preferred stock voting rights	The Purchase Agreement gives the investors the right to participate in up to 50% of any offering of common stock or common stock equivalents by the Company.
Share issued price per share	$ 0.80
Preferred stock subscription per share	$ 1.00
Preferred stock shares authorized	5,000,000
Preferred stock value	$ 1,000
Debt conversion percentage	85.00%
Preferred stock outstanding percentage	67.00%
Subsequent Event [Member] | Series I-1 Convertible Preferred Stock [Member] | Maximum [Member]
Preferred stock shares designated	4,960
Subsequent Event [Member] | Series I-2 Convertible Preferred Stock [Member]
Conversion price per share	$ 1.00
Share issued price per share	0.80
Preferred stock subscription per share	$ 1.00
Preferred stock shares authorized	5,000,000
Preferred stock value	$ 1,000
Debt conversion percentage	85.00%
Preferred stock outstanding percentage	67.00%
Subsequent Event [Member] | Series I-2 Convertible Preferred Stock [Member] | Maximum [Member]
Preferred stock shares designated	12,000
Subsequent Event [Member] | Class B Warrant [Member]
Warrant to purchase of common stock			600,000