UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended September 30, ~~2021~~2022

☐	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 S. Australian Avenue, Suite 800 West Palm Beach, FL		33401
(Address of principal executive offices)		(Zip Code)

(561) 855-1626

(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Act:

Title of Each Class

Trading

Symbol(s)

Name of each exchange on which

registered

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.0001 Par Value

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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:

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	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 ☒

As of November 10, ~~2021,~~2022, the registrant had ~~13,491,000,000~~29,084,322,257 shares of its Common Stock, $0.0001 par value, outstanding.

RENNOVA HEALTH, INC. AND SUBSIDIARIES

FORM 10-Q

September 30, ~~2021~~2022

TABLE OF CONTENTS

			Page No.
PART I – FINANCIAL INFORMATION			3

Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of September 30, ~~2021~~2022 (unaudited) and December 31, ~~2020~~2021		3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (unaudited)		4
	Condensed Consolidated Statements of Changes in Stockholders’ Deficit for each of the quarters in the periods ended September 30, ~~2021~~2022 and ~~2020~~2021 (unaudited)		5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (unaudited)		7
	Notes to Condensed Consolidated Financial Statements (unaudited)		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50	47
Item 4.	Controls and Procedures	50	47

PART II – OTHER INFORMATION		51	48

Item 1.	Legal Proceedings	51	48
Item 1A.	Risk Factors	51	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51	48
Item 3.	Defaults Upon Senior Securities	51	48
Item 4.	Mine Safety Disclosures	51	48
Item 5.	Other Information	51	48
Item 6.	Exhibits	51	48

SIGNATURES		53	49

RENNOVA HEALTH, INC.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,			September 30,			December 31,
	2021			2020			2022			2021
	(unaudited)							(unaudited)
ASSETS
Current assets:
Cash	$	331,491		$	25,353		$	10,958		$	724,524
Accounts receivable, net		998,759			499,454			3,330,734			2,079,288
Receivable from related party		158,118			-
Note receivable / receivable from related party								961,169			374,473
Inventory		280,762			445,415			273,644			280,513
Prepaid expenses and other current assets		151,938			148,522			116,848			121,879
Income tax refunds receivable		1,139,226			1,420,251			1,139,226			1,139,226
Current assets of discontinued operations		-			184,510
Total current assets		3,060,294			2,723,505			5,832,579			4,719,903

Property and equipment, net		7,060,539			7,814,435			4,312,188			4,630,090
Intangibles, net		259,443			259,443
Investments		9,016,072			-
Intangible asset								259,443			259,443
Investment								9,016,072			9,016,072
Deposits		221,063			263,621			227,814			187,814
Right-of-use assets		877,412			1,000,272			640,386			821,274
Non-current assets of discontinued operations		5,014			200,815

Total assets	$	20,499,837		$	12,262,091		$	20,288,482		$	19,634,596

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable (includes related party amounts of $0.5 million and $0.3 million, respectively)	$	13,960,059		$	14,251,851
Checks issued in excess of bank account balance		79,518			84,760
Accrued expenses (includes related party amounts of $0.3 million and $0.2 million, respectively)		17,442,164			19,135,569
Accounts payable (includes related party amounts of $0.3 million and $0.3 million, respectively)							$	12,380,408		$	12,135,237
Accrued expenses (includes related party amounts of $0.1 million and $0.3 million, respectively)								19,352,488			15,499,935
Income taxes payable		1,157,812			1,438,837			1,337,342			1,337,342
Current portion of notes payable		7,051,278			4,786,976			3,119,505			4,667,819
Current portion of note payable, related party		2,627,000			2,097,000
Current portion of finance lease obligations		220,461			249,985
Current portion of loan payable, related party								3,027,000			2,127,000
Current portion of debentures		12,690,539			12,690,539			8,222,240			8,222,240
Current portion of right-of-use operating lease obligations		237,026			172,952			239,449			247,017
Current portion of finance lease obligation								220,461			220,461
Derivative liabilities		455,336			455,336			455,336			455,336
Current liabilities of discontinued operations		1,447,967			3,814,245			1,447,762			1,449,476
Total current liabilities		57,369,160			59,178,050			49,801,991			46,361,863

Other liabilities:
Notes payable, net of current portion		-			1,196,256
Right-of-use operating lease obligations, net of current portion		640,386			827,320			400,937			574,257
Non-current liabilities of discontinued operations		-			78,217
Total liabilities		58,009,546			61,279,843			50,202,928			46,936,120

Commitments and contingencies		-						-			-

Stockholders’ deficit:
Series H preferred stock, $0.01 par value, 14,202 shares authorized, 10 shares issued and outstanding		-			-
Series F preferred stock, $0.01 par value, 1,750,000 shares authorized, 1,750,000 shares issued and outstanding		17,500			17,500
Series L preferred stock, $0.01 par value, 250,000 shares authorized, 250,000 shares issued and outstanding		2,500			2,500
Series M preferred stock, $0.01 par value, 30,000 shares authorized, 20,810 and 22,000 shares issued and outstanding, respectively		208			220
Series N preferred stock, $0.01 par value, 50,000 shares authorized, 11,084 and 29,434 shares issued and outstanding, respectively		110			294
Series O preferred stock, $0.01 par value, 10,000 shares authorized, 5,500 and 0 shares issued and outstanding, respectively		55			-
Common stock, $0.0001 par value, 10,000,000,000 shares authorized, 4,777,350,000 and 39,648 shares issued and outstanding, respectively		477,735			4
Series F preferred stock, $0.01 par value, $1.00 stated value per share, 1,750,000 shares authorized, 0 and 1,750,000 shares issued and outstanding, respectively								-			17,500
Series H preferred stock, $0.01 par value, $1,000 stated value per share, 14,202 shares authorized, 10 shares issued and outstanding								-			-
Series L preferred stock, $0.01 par value, $1.00 stated value per share, 250,000 shares authorized, 250,000 shares issued and outstanding								2,500			2,500
Series M preferred stock, $0.01 par value, $1,000 stated value per share, 30,000 shares authorized, 20,810 shares issued and outstanding								208			208
Series N preferred stock, $0.01 par value, $1,000 stated value per share, 50,000 shares authorized, 3,583 and 5,936 shares issued and outstanding, respectively								36			59
Series O preferred stock, $0.01 par value, $1,000 stated value per share, 10,000 shares authorized, 9,262 and 9,900 shares issued and outstanding, respectively								92			99
Series P preferred stock, $0.01 par value, $1,000 stated value per share, 30,000 shares authorized, 10,195 and 8,545 shares issued and outstanding, respectively								102			85
Common stock, $0.0001 par value, 250,000,000,000 shares authorized, 15,094,322,257 and 4,244,700 shares issued and outstanding, respectively								1,509,432			424
Additional paid-in-capital		1,233,162,879			819,498,236			1,672,970,822			1,342,085,957
Accumulated deficit		(1,271,170,696	)		(868,536,506	)		(1,704,397,638	)		(1,369,408,356	)
Total stockholders’ deficit		(37,509,709	)		(49,017,752	)		(29,914,446	)		(27,301,524	)
Total liabilities and stockholders’ deficit	$	20,499,837		$	12,262,091		$	20,288,482		$	19,634,596

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

RENNOVA HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020

Net revenues $ 1,010,245 $ 1,950,698 $ 1,288,402 $ 5,860,807

Operating expenses:
Direct costs of revenues 1,207,749 2,805,829 4,074,149 8,151,478
General and administrative expenses 2,019,086 3,274,508 6,915,453 8,593,756
Depreciation and amortization 135,065 53,579 513,929 399,377
Total operating expenses 3,361,900 6,133,916 11,503,531 17,144,611

Loss from continuing operations before other income (expense) and income taxes (2,351,655 ) (4,183,218 ) (10,215,129 ) (11,283,804 )

Other income (expense):
Other income (expense), net (346,197 ) 169,101 4,140,049 6,907,670
Gain from extinguishment of debt 1,027,000 389,864 1,027,000 389,864
Gain (loss) from legal settlements 3,157,203 (23,652 ) 3,179,393 1,096,613
Interest expense (700,786 ) (2,377,980 ) (2,503,173 ) (7,926,750 )
Total other income (expense), net 3,137,220 (1,842,667 ) 5,843,269 467,397

Net income (loss) from continuing operations before income taxes 785,565 (6,025,885 ) (4,371,860 ) (10,816,407 )

Benefit from income taxes - - - (1,118,485 )

Net income (loss) from continuing operations 785,565 (6,025,885 ) (4,371,860 ) (9,697,922 )

Loss from discontinued operations (31,388 ) (166,180 ) (423,791 ) (164,293 )
Gain on sale 576,787 - 11,303,939 -
Total income (loss) from discontinued operations 545,399 (166,180 ) 10,880,148 (164,293 )

Net income (loss) 1,330,964 (6,192,065 ) 6,508,288 (9,862,215 )
Deemed dividends (259,530,999 ) (63,544,950 ) (409,142,478 ) (66,695,318 )
Net loss available to common stockholders $ (258,200,035 ) $ (69,737,015 ) $ (402,634,190 ) $ (76,557,533 )

Net loss per share of common stock available to common stockholders- basic and diluted:
Continuing operations $ (0.59 ) $ (54,182.89 ) $ (2.75 ) $ (70,343.68 )
Discontinued operations $ 0.00 $ (129.42 ) $ 0.07 $ (151.28 )
Total basic and diluted $ (0.59 ) $ (54,312.31 ) $ (2.68 ) $ (70,494.96 )
Weighted average number of shares of common stock outstanding during the period:
Basic and diluted 438,998,913 1,284 150,459,817 1,086
~~The accompanying notes are an integral part of these condensed consolidated financial statements.~~

4
~~RENNOVA HEALTH, INC.~~
~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT~~
~~For each of the quarters in the period ended September 30, 2021~~
~~(unaudited)~~
Shares Amount Shares Amount capital Deficit Deficit
Preferred Stock Common Stock
Additional
paid-in-
Accumulated  Total
Stockholders’
Shares Amount Shares Amount capital Deficit Deficit
Balance at December 31, 2020 2,051,444 $ 20,514 39,648 $ 4 $ 819,498,236 $ (868,536,506 ) $    (49,017,752 )
Conversion of Series M Preferred Stock into common stock
Conversion of Series M Preferred Stock into common stock, shares
Conversion of Series N Preferred Stock into common stock (4,177 ) (42 ) 435,082 44 (2 ) - -
Issuance of Series O Preferred Stock
Issuance of Series O Preferred Stock, shares
Payment of cash in lieu of fractional shares
Deemed dividends from issuance of Series N Preferred Stock
Deemed dividends from issuance of warrants under exchange agreement
Deemed dividends from extension of warrants
Deemed dividends from trigger of down round provision features
Deemed dividends 50,358,149 (50,358,149 ) -
Conversion of Series I-2 Preferred Stock into common stock
Conversion of Series I-2 Preferred Stock into common stock, shares
Issuance of Series N Preferred Stock
Issuance of Series N Preferred Stock, shares
Exchange of Series K Preferred Stock for Series L Preferred Stock
Exchange of Series K Preferred Stock for Series L Preferred Stock , shares
Issuance of Series L Preferred Stock
Issuance of Series L Preferred Stock, shares
Issuance of Series M Preferred Stock in exchange for related party loans and accrued interest
Issuance of Series M Preferred Stock in exchange for related party loans and accrued interest , shares
Deemed dividend from issuance of Series M Preferred Stock
Net loss - - - - - (3,893,994 ) (3,893,994 )
Balance at March 31, 2021 2,047,267 $ 20,472 474,730 $ 48 $ 869,856,383 $ (922,788,649 ) $ (52,911,746 )
Conversion of Series M Preferred Stock into common stock (620 ) (6 ) 450,000 45 (39 ) - -
Conversion of Series N Preferred Stock into common stock (8,888 ) (89 ) 9,075,270 907 (818 ) - -
Issuance of Series O Preferred Stock 2,750 28 - - 2,499,972 - 2,500,000
Deemed dividends from trigger of down round provision features 99,253,330 (99,253,330 ) -
Net income - - - - - 9,071,318 9,071,318
Balance at June 30, 2021 2,040,509 $ 20,405 10,000,000 $ 1,000 $ 971,608,828 $ (1,012,970,661 ) $ (41,340,429 )
Exchange of Series M Preferred Stock into common stock (570 ) (6 ) 95,000,000 9,500 (9,494 ) - -
Conversion of Series N Preferred Stock into common stock (5,285 ) (53 ) 4,672,350,000 467,235 (467,182 ) - -
Issuance of Series O Preferred Stock 2,750 28 - - 2,499,972 - 2,500,000
Payment of cash in lieu of fractional shares - - - - (244 ) - (244 )
Deemed dividends from issuance of warrants under exchange agreement - - - - 341,525 (341,525 ) -
Deemed dividends from extension of warrants - - - - 291,592 (291,592 ) -
Deemed dividends from trigger of down round provision features - - - - 258,897,882 (258,897,882 ) -
Net income - - - - - 1,330,964 1,330,964
Balance at September 30, 2021 2,037,404 $ 20,374 4,777,350,000 $   477,735 $ 1,233,162,879 $   (1,271,170,696 ) $ (37,509,709 )
2022 2021 2022 2021
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021

Net revenues $ 2,825,937 $ 1,010,245 $ 7,576,693 $ 1,288,402

Operating expenses:
Direct costs of revenues 1,823,473 1,207,749 4,769,789 4,074,149
General and administrative expenses 1,809,835 2,019,086 5,262,338 6,915,453
Depreciation and amortization 117,441 135,065 351,481 513,929
Total operating expenses 3,750,749 3,361,900 10,383,608 11,503,531

Loss from continuing operations before other income (expense) and income taxes (924,812 ) (2,351,655 ) (2,806,915 ) (10,215,129 )

Other income (expense):
Other income (expense), net 129,451 (346,197 ) 87,170 4,140,049
Gain from forgiveness of debt - 1,027,000 334,819 1,027,000
Gain (loss) from legal settlements, net 60,808 3,157,203 (15,410 ) 3,179,393
Interest expense (605,312 ) (700,786 ) (1,705,502 ) (2,503,173 )
Total other income (expense), net (415,053 ) 3,137,220 (1,298,923 ) 5,843,269

Net (loss) income from continuing operations before income taxes (1,339,865 ) 785,565 (4,105,838 ) (4,371,860 )

Provision for income taxes - - - -

Net (loss) income from continuing operations (1,339,865 ) 785,565 (4,105,838 ) (4,371,860 )
Loss from discontinued operations (1,696 ) (31,388 ) (7,075 ) (423,791 )
Gain from sale - 576,787 - 11,303,939

Net (loss) income from discontinued operations (1,696 ) 545,399 (7,075 ) 10,880,148
Net (loss) income (1,341,561 ) 1,330,964 (4,112,913 ) 6,508,288
Deemed dividends - (259,530,999 ) (330,876,369 ) (409,142,478 )
Net loss available to common stockholders $ (1,341,561 ) $ (258,200,035 ) $ (334,989,282 ) $ (402,634,190 )

Net loss per share of common stock available to common stockholders - basic and diluted:
Continuing operations $ (0.00 ) $ (5,893.97 ) $ (0.08 ) $ (27,483.34 )
Discontinued operations (0.00 ) 12.42 (0.00 ) 723.13
Total basic and diluted $ (0.00 ) $ (5,881.55 ) $ (0.08 ) $ (26,760.21 )
Weighted average number of shares of common stock outstanding during the period:
Basic and diluted 10,569,572,256 43,900 4,130,876,898 15,046

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

54
RENNOVA HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
For each of the quarters in the period ended September 30, ~~2020~~2022
(unaudited)

Preferred Stock Common Stock
Additional
paid-in-
Accumulated
Total
Stockholders’

Shares Amount Shares Amount capital Deficit Deficit
Balance at December 31, 2019 2,000,010 $ 20,000 965 $   - $ 510,402,293 $ (586,942,014 ) $   (76,519,721 )
Conversion of Series I-2 Preferred Stock into common stock - - 25 - 25,000 - 25,000
Net loss - - - - - (5,791,778 ) (5,791,778 )
Balance at March 31, 2020 2,000,010 $ 20,000 990 $ - $ 510,427,293 $  (592,733,792 ) $ (82,286,499 )
Exchange of Series K Preferred Stock for Series L Preferred Stock (250,000 ) (2,500 ) - - - - (2,500 )
Issuance of Series L Preferred Stock 250,000 2,500 - - - - 2,500
Issuance of Series M Preferred Stock in exchange for related party loans and accrued interest 22,000 220 - - 21,999,780 - 22,000,000
Deemed dividend from issuance of Series M Preferred Stock - - - - - (3,150,368 ) (3,150,368 )
Net income - - - - - 2,121,628 2,121,628
Balance at June 30, 2020 2,022,010 $ 20,220 990 $ - $ 532,427,073 $ (593,762,532 ) $ (61,315,239 )
Conversions of Series I-2 Preferred Stock into common stock - - 288 - 252,964 - 252,994
Issuance of Series N Preferred Stock 30,435 304 - - 30,435,215 - 30,435,519
Conversions of Series N Preferred Stock into common stock (131 ) (1 ) 589 - 1 - -
Payment of cash in lieu of fractional shares - - - - (684 ) - (684 )
Deemed dividends from issuance of Series N Preferred Stock - - - - - (3,720,718 ) (3,720,718 )
Deemed dividends from trigger of down round provision features - - - - 59,824,232 (59,824,232 ) -
Net loss - - - - - (6,192,065 ) (6,192,065 )
Net income (loss) - - - - - (6,192,065 ) (6,192,065 )
Balance at September 30, 2020 2,052,314 $ 20,523 1,867 $ - $   622,938,831 $ (663,499,547 ) $ (40,540,193 )
Shares Amount Shares Amount capital Deficit Deficit
Preferred Stock Common Stock Additional paid-in- Accumulated Total Stockholders’
Shares Amount Shares Amount capital Deficit Deficit
Balance at December 31, 2021 2,045,201 $ 20,451 4,244,700 $ 424 $ 1,342,085,957 $ (1,369,408,356 ) $ (27,301,524 )
Conversion of Series N Preferred Stock into common stock (593 ) (6 ) 12,932,500 1,293 (1,287 ) - -
Issuance of Series P Preferred Stock 1,100 11 - - 999,989 - 1,000,000
Deemed dividends from issuance of Series P Preferred Stock - - - - 222,222 (222,222 ) -
Payment of cash in lieu of fractional shares - - (10 ) - (9 ) - (9 )
Deemed dividends from triggers of down round provisions - - - - 135,702,523 (135,702,523 ) -
Net loss - - - - - (2,267,566 ) (2,267,566 )
Balance at March 31, 2022 2,045,708 $ 20,456 17,177,190 $ 1,717 $ 1,479,009,395 $ (1,507,600,667 ) $ (28,569,099 )
Conversion of Series N Preferred Stock into common stock (1,240 ) (12 ) 2,627,145,066 262,715 (262,703 ) - -
Conversion of Series O Preferred Stock into common stock (179 ) (2 ) 1,581,000,000 158,100 (158,098 ) - -
Issuance of Series P Preferred Stock 550 6 - - 499,994 - 500,000
Deemed dividends from issuance of Series P Preferred Stock - - - - 111,111 (111,111 ) -
Deemed dividends from triggers of down round provisions - - - - 194,840,513 (194,840,513 ) -
Net loss - - - - - (503,786 ) (503,786 )
Balance at June 30, 2022   2,044,838 $ 20,448 4,225,322,256 $ 422,532 $ 1,674,040,212 $ (1,703,056,077 ) $ (28,572,885 )

Conversion of Series F Preferred Stock into common stock (1,750,000 ) (17,500 ) 1 - (17,500 ) - -
Conversion of Series N Preferred Stock into common stock (519 ) (5 ) 5,769,000,000 576,900 (576,895 ) - -
Conversion of Series O Preferred Stock into common stock (459 ) (5 ) 5,100,000,000 510,000 (509,995 ) - -
Net loss - - - - - (1,341,561 ) (1,341,561 )
Balance at September 30, 2022 293,860 $ 2,938   15,094,322,257 $   1,509,432 $   1,672,970,822 $   (1,704,397,638 ) $ (29,914,446 )
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
RENNOVA HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
For each of the quarters in the period ended September 30, 2021
(unaudited)
Preferred Stock Common Stock Additional paid-in- Accumulated Total Stockholders’
Shares Amount Shares Amount capital Deficit Deficit
Balance at December 31, 2020 2,051,444 $ 20,514 4 $     - $ 819,498,240 $ (868,536,506 ) $ (49,017,752 )
Conversion of Series N Preferred Stock into common stock (4,177 ) (42 ) 44 - 42 - -
Deemed dividends from triggers of down round provisions - - - - 50,358,149 (50,358,149 ) -
Net loss - - - - - (3,893,994 ) (3,893,994 )
Balance at March 31, 2021 2,047,267 $ 20,472 48 $ - $ 869,856,431 $ (922,788,649 ) $ (52,911,746 )
Conversion of Series M Preferred Stock into common stock (620 ) (6 ) 45 - 6 - -
Conversion of Series N Preferred Stock into common stock (8,888 ) (89 ) 907 - 89 - -
Issuance of Series O Preferred Stock 2,750 28 - - 2,499,972 - 2,500,000
Deemed dividends from triggers of down round provisions - - - - 99,253,330 (99,253,330 ) -
Net income - - - - - 9,071,318 9,071,318
Balance at June 30, 2021 2,040,509 $ 20,405 1,000 $ - $ 971,609,828 $ (1,012,970,661 ) $ (41,340,428 )
Beginning balance 2,040,509 $ 20,405 1,000 $ - $ 971,609,828 $ (1,012,970,661 ) $ (41,340,428 )
Exchange of Series M Preferred Stock for common stock (570 ) (6 ) 9,500 - 6 - -
Conversion of Series N Preferred Stock into common stock (5,285 ) (53 ) 467,235 5 48 - -
Deemed dividends from extensions of warrants - - - - 291,592 (291,592 ) -
Issuance of Series O Preferred Stock 2,750 28 - - 2,499,972 - 2,500,000
Deemed dividends from issuance of warrants under exchange agreement - - - - 341,525 (341,525 ) -
Payment of cash in lieu of fractional shares - - - - (244 ) - (244 )
Deemed dividends from triggers of down round provisions - - - - 258,897,882 (258,897,882 ) -
Net income - - - - - 1,330,964 1,330,964
Net income (loss) - - - - - 1,330,964 1,330,964
Balance at September 30, 2021   2,037,404 $   20,374   477,735 $ 5 $   1,233,640,501 $   (1,271,170,696 ) $   (37,509,708 )
Ending balance   2,037,404 $   20,374   477,735 $ 5 $   1,233,640,501 $   (1,271,170,696 ) $   (37,509,708 )

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

6

RENNOVA HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

2022 2021

Nine Months Ended
September 30,
Nine Months Ended September 30,
2021 2020 2022 2021

Cash flows from operating activities:
Net loss from continuing operations $ (4,371,860 ) $ (9,697,922 ) $ (4,105,838 ) $ (4,371,860 )
Adjustments to reconcile net loss to net cash used in operations:
Depreciation and amortization 513,929 399,377 351,481 513,929
Amortization of debt discount and non-cash interest expense 113,552 108,958
Gain from extinguishment of debt (1,027,000 ) (389,864 )
Non-cash interest (income) expense (80,156 ) 113,552
Other income from forgiveness of PPP notes payable (334,819 ) (1,027,000 )
Loss (gain) from legal settlements 15,410 (3,179,393 )
Loss on disposal of equipment 274,468 87,293 1,215 274,468
Net gain from legal settlements (3,179,393 ) (1,096,613 )
Other income from federal government provider relief funds (4,400,000 ) (8,020,969 )
Loss on sales of accounts receivable under sale agreements - 591,563
Loss (income) from federal government provider relief funds 267,758 (4,400,000 )
Gain on sale of discontinued operations (11,303,939 ) - - (11,303,939 )
Income (loss) from discontinued operations 10,880,148 (164,293 )
(Loss) income from discontinued operations (7,075 ) 10,880,148
Changes in operating assets and liabilities:
Accounts receivable 377,088 1,241,398 (774,975 ) 377,088
Inventory 164,653 (76,065 ) 6,869 164,653
Prepaid expenses and other current assets (3,416 ) (224,733 ) 5,031 (3,416 )
Security deposits 42,558 (56,482 ) (40,000 ) 42,558
Change in right-of-use assets 122,860 (941,116 ) 180,888 122,860
Accounts payable and checks issued in excess of bank balances 1,918,004 (1,163,944 )
Accounts payable 808,097 1,918,004
Accrued expenses 4,208,698 5,563,232 2,722,120 4,208,698
Change in right-of-use operating lease obligations (122,860 ) 941,116 (180,888 ) (122,860 )
Income tax assets and liabilities - (522,885 )
Net cash used in operating activities of continuing operations (5,792,510 ) (13,421,949 ) (1,164,882 ) (5,792,510 )
Net cash provided by (used in) operating activities of discontinued operations 102,567 (100,685 )
Net cash (used in) provided by operating activities of discontinued operations (1,714 ) 102,567
Net cash used in operating activities (5,689,943 ) (13,522,634 ) (1,166,596 ) (5,689,943 )

Cash flows from investing activities:
Purchase of property and equipment - (370,890 )
Purchases of equipment (34,794 ) -
Note receivable/receivable from related party (506,540 ) (158,118 )
Net cash used in investing activities of continuing operations - (370,890 ) (541,334 ) (158,118 )
Net cash used in investing activities of discontinued operations - -
Net cash (used in) provided by investing activities of discontinued operations - -
Net cash used in investing activities - (370,890 ) (541,334 ) (158,118 )

Cash flows from financing activities:
Proceeds from issuance of related party note payable and advances 890,000 5,809,553
Payments on related party note payable and advances (360,000 ) (4,187,387 )
Payments of debentures - (920,000 )
Proceeds from issuances of notes payable 1,245,000 1,198,835
Proceeds from the issuances of notes payable - 1,245,000
Proceeds from issuance of related party loan 900,000 890,000
Payments on related party loan - (360,000 )
Payments on notes payable (350,508 ) (1,552,748 ) (1,213,495 ) (350,508 )
Receivable from related party (158,118 ) -
Proceeds from sale of accounts receivable under sales agreements - 841,700
Receivables paid under accounts receivable sales agreements (300,927 ) (1,540,929 ) (476,471 ) (300,927 )
Federal government provider relief funds 284,339 -
Proceeds from issuance of Series O Preferred Stock 5,000,000 - - 5,000,000
Federal government provider relief funds - 12,542,691
Proceeds from Paycheck Protection Program notes payable - 2,264,201
Proceeds from issuances of Series P Preferred Stock 1,500,000 -
Payment on finance lease obligation - (29,524 )
Cash paid for fractional shares in connection with reverse stock splits (244 ) (684 ) (9 ) (244 )
Payments on capital lease obligations (29,524 ) (200,709 )
Net cash provided by financing activities of continuing operations 5,935,679 14,254,523 994,364 6,093,797
Net cash provided by (used in) financing activities of discontinued operations 60,402 (157,589 )
Net cash provided by financing activities of discontinued operations - 60,402
Net cash provided by financing activities 5,996,081 14,096,934 994,364 6,154,199

Net change in cash 306,138 203,410 (713,566 ) 306,138

Cash at beginning of period 25,353 16,933 724,524 25,353

Cash at end of period $ 331,491 $ 220,343 $ 10,958 $ 331,491
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
RENNOVA HEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021
(unaudited)

Note 1 – Organization and Summary of Significant Accounting Policies

Description of Business

Rennova Health, Inc. (“Rennova”, together with its subsidiaries, the “Company”, “we”, “us”, “its” or “our”) is a provider of health care services. The Company owns one operating hospital in Oneida, Tennessee, a hospital located in Jamestown, Tennessee that it plans to reopen and operate, a ~~physician’s office~~physician practice in Jamestown, Tennessee that it plans to reopen and operate and a rural health clinic in Kentucky. ~~The Company’s operations consist of~~We operate in one business segment.

Basis of Presentation

The ~~accompanying~~ unaudited condensed consolidated financial statements were prepared using generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Regulation S-X. Accordingly, these financial statements do not include all information or notes required by generally accepted accounting principles for annual financial statements and should be read in conjunction with the consolidated financial statements as filed in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. In the opinion of management, the unaudited condensed consolidated financial statements included herein contain all adjustments necessary to present fairly the Company’s consolidated financial position as of September 30, ~~2021,~~2022, and the results of its operations and changes in stockholders’ deficit for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 and its cash flows for the nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021. Such adjustments are of a normal recurring nature. The results of operations for the three and nine months ended September 30, ~~2021~~2022 may not be indicative of results for the ~~entire~~ year ending December 31, ~~2021.~~2022.

Principles of Consolidation

The ~~accompanying~~ unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), include the accounts of Rennova and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in the consolidation.

Comprehensive (Loss) Income ~~(Loss)~~

During the three and nine months ended September 30, 2022 and 2021, ~~and 2020,~~ comprehensive (loss) income ~~(loss)~~ was equal to the net (loss) income ~~(loss)~~ amounts presented in the ~~accompanying~~ unaudited condensed consolidated statements of operations.

~~Reclassifications~~
~~Certain items in the financial statements for the three and nine months ended September 30, 2020 were reclassified for comparison purposes.~~
Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the condensed consolidated financial statements, and the reported amounts of net revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates and assumptions include the estimates of fair values of assets acquired and liabilities assumed in business combinations, ~~including hospital acquisitions, the fair values of consideration received from the sale of subsidiaries,~~contractual allowances and bad debt reserves, ~~and write-downs related to receivables and inventories,~~ the recoverability of long-lived assets, the valuation allowance relating to the Company’s deferred tax assets, the ~~valuation~~valuations of investments, equity and derivative instruments, income from HHS Provider Relief Funds and deemed dividends, litigation and ~~debt discounts,~~related reserves, among others. Actual results could differ from those estimates and would impact future results of operations and cash flows.

8
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.

Cash and Cash Equivalents

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents.

8
Reverse Stock Splits

On July ~~22, 2020,~~16, 2021 and March 15, 2022, the ~~Company’s Board of Directors approved an amendment to the Company’s Certificate of Incorporation to effect~~Company effected a 1-for-1,000 reverse stock split and a 1-for-10,000 reverse stock split, ~~effective July 31, 2020 and on July 8, 2021, the Company’s Board of Directors approved an amendment to the Company’s Certificate of Incorporation to effect a~~ ~~1-for-1,000 reverse stock split~~ ~~effective July 16, 2021~~ respectively (the “Reverse Stock Splits”).

As a result of the Reverse Stock Splits, every 1,000 shares of the Company’s then outstanding common stock was combined and automatically converted into one share of the Company’s common stock on July 16, 2021 and every 10,000 shares of the Company’s common stock then outstanding was combined and automatically converted into one share of the Company’s common stock on ~~July 31, 2020 and~~ ~~every 1,000 shares of the Company’s then outstanding common stock was combined and automatically converted into one share of the Company’s common stock~~March 15, 2022. ~~on July 16, 2021.~~ The conversion and exercise prices of all of the Company’s outstanding convertible preferred stock, common stock purchase warrants, stock options and convertible debentures were proportionately adjusted at the applicable reverse split ratio in accordance with the terms of such instruments.
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~~ ~~10,000,000,000~~ ~~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 and common stock equivalents presented herein have been restated where appropriate to give effect to the Reverse Stock Splits.

Amendment to Certificate of Incorporation, as Amended
Effective November 5, 2021, the Company filed an Amendment to its Certificate of Incorporation, as amended, with the Secretary of State of the State of Delaware to provide that the number of authorized shares of the Company’s common stock or preferred stock may be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Company entitled to vote generally in the election of directors, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law of the State of Delaware (or any successor provision thereto), voting together as a single class, without a separate vote of the holders of the class or classes the number of authorized shares of which are being increased or decreased unless a vote by any holders of one or more series of preferred stock is required by the express terms of any series of preferred stock pursuant to the terms thereof.
Increases in Authorized Shares of Common Stock
Effective November 5, 2021, the Company increased the authorized shares of common stock from 10 billion to 50 billion and, effective March 15, 2022, the Company increased the authorized shares of its common stock from ~~10,000,000,000~~50 billion to ~~50,000,000,000~~250 ~~as more fully discussed in Note 16.~~billion.

~~Sale of Health Technology Solutions, Inc. and Advanced Molecular Services Group, Inc.~~Discontinued Operations

On June 25, 2021, the Company sold its subsidiaries, Health Technology Solutions, Inc. (“HTS”) and Advanced Molecular Services Group, Inc. (“AMSG”), including their subsidiaries, to InnovaQor, Inc. (“InnovaQor”), formerly known as VisualMED Clinical Solutions ~~Corp.~~Corporation. HTS and AMSG held Rennova’s software and genetic testing interpretation divisions. The financial results of HTS and AMSG ~~including~~prior to the ~~gain on~~ sale are reflected herein as discontinued operations. The sale is more fully discussed in Note ~~14.~~13. During the third quarter of 2020, we announced that we had decided to sell our last clinical laboratory, EPIC Reference Labs, Inc. (“EPIC”), and as a result, EPIC’s operations have been included in discontinued operations for all periods presented. The Company was unable to find a buyer for EPIC and, therefore, ceased all efforts to sell EPIC and closed down its operations.

Revenue Recognition

We recognize revenue in accordance with Accounting ~~Standards~~Standard Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606),” including subsequently issued updates. ~~This series~~Under the accounting guidance, we no longer present the provision for doubtful accounts as a separate line item and our revenues are presented net of comprehensive guidance has replaced all existing revenue recognition guidance. There is a five-step approach outlined in the standard. In determining revenue, we first identify the contract according to the scope of ASU Topic 606 with the following criteria:estimated contractual allowances and estimated implicit price concessions. We also do not present “allowances for doubtful accounts” on our balance sheets.
● ~~The parties have approved the contract either in writing; orally by acknowledgement; or implicitly, based on customary business practices.~~
● ~~Each party’s rights and the contract’s payment terms are identified.~~
● ~~The contract has commercial substance.~~
● ~~Collection is probable.~~

9
We review our calculations for the realizability of gross revenues monthly 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 and within our service offerings. The contractual allowance calculation is made based on historical allowance rates for the various specific payer groups monthly with a greater weight being given to the most recent trends; this process is adjusted based on recent changes in underlying contract provisions, if any. This calculation is routinely analyzed by us based on actual allowances issued by payers and the actual payments made to determine what adjustments, if any, are needed.

Our revenues ~~generally~~ relate to contracts with patients in which our performance obligations are to provide health care services to the patients. Revenues are recorded during the period our obligations to provide health care services are satisfied. Our performance obligations for inpatient services are generally satisfied over periods ~~that average~~averaging approximately ~~five~~three days, and revenues are recognized based on charges ~~incurred in relation to total expected charges.~~incurred. Our performance obligations for outpatient services, including emergency room-related services, are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than our standard charges. Medicare, because of the Big South Fork Medical Center’s designation as a Critical Access Hospital, generally pays for inpatient and outpatient services at ~~prospectively determined~~ rates ~~based on clinical, diagnostic and other factors.~~related to the hospital’s costs. Services provided to patients having Medicaid coverage are generally paid at prospectively determined rates per discharge, per identified service or per covered member. Agreements with commercial insurance carriers, ~~and~~ managed care and preferred provider organizations generally provide for payments based upon predetermined rates per diagnosis, per diem rates or discounted fee-for-service rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals. Our net revenues are based upon the estimated amounts we expect to be entitled to receive from patients and third-party payers. Estimates of contractual allowances under managed care and commercial insurance plans are based upon the payment terms specified in the related contractual agreements. ~~Net revenues~~Revenues related to uninsured patients and uninsured copayment and deductible amounts for patients who have health care coverage may have discounts applied (uninsured discounts and contractual discounts). We also record estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record self-pay revenues at the estimated amounts we expect to collect.

Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. Estimated reimbursement amounts are adjusted in subsequent periods as cost reports are prepared and filed and as final settlements are determined (in relation to certain government programs, primarily Medicare, this is generally referred to as the “cost report” filing and settlement process). Subsequent to September 30, 2022, the Company’s Big South Fork Medical Center received a communication from its fiscal intermediary stating that its Medicare cost report for the six months ending December 31, 2021 has been accepted and the fiscal intermediary has computed a tentative retroactive adjustment reflecting an overpayment by the fiscal intermediary in the amount of $1.9 million. The Company is working with the fiscal intermediary to file an amended cost report, which we expect to result in a smaller overpayment and is seeking an extended repayment schedule for any such overpayment. There ~~were~~is no ~~adjustments~~assurance that the Medicare overpayment will be reduced or a repayment schedule agreed upon. Furthermore, the tentative retroactive adjustment is subject to ~~estimated Medicare~~a final cost report settlement. The Company has reserved $1.6 million as a liability and ~~Medicaid reimbursement amounts and disproportionate-share funds related primarily to cost reports filed during~~reduced net revenues by the same amount in its financial statements for the three and nine months ended September 30, ~~2021 and 2020.~~
~~The Emergency Medical Treatment and Labor Act (“EMTALA”) requires any hospital participating in~~2022 as the Medicare program to conduct an appropriate medical screening examination of every person who presents to the hospital’s emergency room for treatment and, if the individual is suffering from an emergency medical condition, to either stabilize the condition or make an appropriate transfer of the individual to a facility able to handle the condition. The obligation to screen and stabilize emergency medical conditions exists regardless of an individual’s ability to pay for treatment. Federal and state laws and regulations require, and our commitment to providing quality patient care encourages, us to provide services to patients who are financially unable to pay for the health care services they receive. The federal poverty level is established by the federal government and is based on income and family size. The Company considers the poverty level in determining whether patients qualify for free or reduced cost of care. Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in net revenues. We provide discounts to uninsured patients who do not qualify for Medicaid or charity care. In implementing the uninsured discount policy, we may first attempt to provide assistance to uninsured patients to help determine whether they may qualify for Medicaid, other federal or state assistance, or charity care. If an uninsured patient does not qualify for these programs, the uninsured discount is applied.estimated overpayment.

The collection of outstanding receivables for Medicare, Medicaid, managed care payers, other third-party payers and patients is our primary source of operating cash and is critical to our operating performance. The primary collection risks relate to uninsured patient accounts, including patient accounts for which the primary insurance carrier has paid the amounts covered by the applicable agreement, but patient responsibility amounts (deductibles and copayments) remain outstanding. Implicit price concessions relate primarily to amounts due directly from patients. Estimated implicit price concessions are recorded for all uninsured accounts, regardless of the aging of those accounts. Accounts are written off when all reasonable internal and external collection efforts have been performed. The estimates for implicit price concessions are based upon management’s assessment of historical write offs and expected net collections, business and economic conditions, trends in federal, state and private employer health care coverage and other collection indicators. Management relies on the results of detailed reviews of historical write-offs and collections at facilities that represent a majority of our revenues and accounts receivable (the “hindsight analysis”) as a primary source of information in estimating the collectability of our accounts receivable. We perform the hindsight analysis quarterly, utilizing rolling accounts receivable collection and write off data. We believe our quarterly updates to the estimated contractual allowance amounts and to the estimated implicit price concessions at each of our facilities provide reasonable estimates of our net revenues and valuation of our accounts receivable.
10
~~For the three months ended September 30, 2021 and 2020, we recorded estimated contractual allowances of $6.8~~ ~~million and $14.0~~ ~~million, respectively, and estimated implicit price concessions of $1.9~~ ~~million and $2.2~~ ~~million, respectively. For the nine months ended September 30, 2021 and 2020, we recorded estimated contractual allowances of $16.2~~ ~~million and $32.9~~ ~~million, respectively, and estimated implicit price concessions of $6.2~~ ~~million and $6.2~~ ~~million, respectively. These amounts have been recorded as to enable us to record our net revenues and accounts receivable at the estimated amounts we expect to collect.~~

Contractual Allowances and Doubtful Accounts Policy

Accounts receivable are reported at realizable value, net of estimated contractual allowances and estimated implicit price concessions (also referred to as 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 contractual allowances and doubtful accounts. In addition, the Company regularly assesses the state of its billing operations in order to identify issues which may impact the 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 are recorded as an adjustment to revenues.
10
During the three months ended September 30, 2022 and 2021, estimated contractual allowances of $10.2 million and $6.8 million, respectively, and estimated implicit price concessions of $1.6 million and $1.9 million, respectively, have been recorded as reductions to our revenues and accounts receivable balances to enable us to record our revenues and accounts receivable at the estimated amounts we expect to collect. As required by Topic 606, for the three months ended September 30, 2022 and 2021, after estimated implicit price concessions and contractual and related allowance adjustments to revenues of $~~8.7~~11.8 million and $~~16.2~~8.7 million, respectively, ~~for the three months ended September 30, 2021 and 2020,~~ we reported net revenues of $2.8 million (inclusive of the $1.6 million tentative retroactive Medicare cost report adjustment) and $1.0 million, respectively.
During the nine months ended September 30, 2022 and 2021, estimated contractual allowances of $23.4million and $~~2.0~~ 16.2million, ~~respectively. After~~respectively, and estimated implicit price concessions of $5.7 million and $6.2 million, respectively, have been recorded as reductions to our revenues and accounts receivable balances to enable us to record our revenues and accounts receivable at the estimated amounts we expect to collect. As required by Topic 606, for the nine months ended September 30, 2022 and 2021, after estimated implicit price concessions and contractual and related allowance adjustments to revenues of $~~22.4~~ 29.1million and $~~39.1~~ 22.4million, respectively, ~~for the nine months ended September 30, 2021 and 2020,~~ we reported net revenues of $~~1.3~~ 7.6million and $~~5.9~~ 1.3million, respectively. ~~We continue to review the provisions for implicit price concessions and contractual allowances. See Note 4 – Accounts Receivable and Income Tax Refunds Receivable.~~

~~Leases in Accordance with ASU No. 2016-02~~
~~We account for leases in accordance with ASU No. 2016-02,~~ ~~Leases (Topic 842)~~ as updated, which requires leases with durations greater than 12 months to be recognized on the balance sheet. Upon adoption in 2019, we elected the package of transition provisions available which allowed us to carryforward our historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. We lease property and equipment under finance and operating leases. For leases with terms greater than 12 months, we record the related right-of-use assets and right-of-use obligations at the present value of lease payments over the term. We do not separate lease and non-lease components of contracts. Our finance and operating leases are more fully discussed in Note 9.
Impairment or Disposal of Long-Lived Assets

We account for the impairment or disposal of long-lived assets according to the Financial Accounting Standards Board (the “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.
The Company did not record an asset impairment charge during the three and nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021.
11

~~Fair Value Measurements~~Leases in Accordance with ASU No. 2016-02

We ~~define~~account for leases in accordance with ASU No. 2016-02, Leases (Topic 842), which requires leases with durations greater than 12 months to be recognized on the balance sheet. Upon adoption in 2019, we elected the package of transition provisions available which allowed us to carryforward our historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. We lease property and equipment under finance and operating leases. For leases with terms greater than 12 months, we record the related right-of-use assets and right-of-use obligations at the present value of lease payments over the term. We do not separate lease and non-lease components of contracts. Our finance and operating leases are more fully discussed in Note 8.
Fair Value Measurements
In accordance with ASC 820, “Fair Value Measurements and Disclosures,” the Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities which are required to be recorded at fair value, ~~we consider~~the Company considers the principal or most advantageous market in which weit would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent ~~risk,~~in valuation techniques, transfer restrictions and credit risk. ~~We apply~~Fair value is estimated by applying the following ~~fair value~~ hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

● Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date.
● Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets; or quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets).
● Level 3 applies to assets or liabilities for which fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including our own assumptions.
~~Level 1 – Quoted prices in active markets for identical assets or liabilities.~~
11

~~Level 2 – Observable inputs other than quoted prices in active markets for identical assets~~On September 30, 2022 and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
~~Level 3 – Inputs that are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.~~
WeDecember 31, 2021, we applied the Level 3 fair value hierarchy in determining the fair value of the InnovaQor Series BB-1 Preferred Stock, which is reflected on our condensed consolidated balance sheets as an investment, as more fully discussed in Notes 9 and 13. Also, on September 30, 2022 and December 31, 2021, we applied the Level 3 fair value hierarchy in determining the fair value of a derivative liability for an embedded conversion option of an outstanding convertible debenture, as more fully discussed in Note ~~14.~~9.

Derivative Financial Instruments and Fair Value, Including ~~the Adoption of~~ ASU 2017-11 and ASU 2021-04

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 (loss) 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 stockholders 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).

~~Deemed dividends represent~~In May 2021, the ~~economic transfer~~FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40), Issuer’s Accounting for Certain Modifications or Exchanges of ~~value~~Freestanding Equity-Classified Written Call Options. The FASB issued this update to ~~holders~~clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The guidance clarifies whether an issuer should account for a modification or an exchange of a freestanding ~~financial~~equity-classified written call option that remains equity classified after modification or exchange as (1) an adjustment to equity (that is, deemed dividends) and, if so, the related earnings per share (EPS) effects, if any, or (2) an expense and, if so, the manner and pattern of recognition. We adopted this new accounting guidance on January 1, 2022. Under the new guidance, the FASB decided not to include convertible debt instruments ~~when certain~~in the guidance because ASU No 2016-01, Financial Instruments – Overall (Subtopic 825-10) requires that an entity capture the impact of changes in down round provision features ~~(commonly referred~~of convertible debt within the fair value of the instruments. During the three and nine months ended September 30, 2022, there were no changes in the fair values of the Company’s convertible debentures with down round provision features as these debentures have floors that were not in-the-money at September 30, 2022. Prior to ~~as “ratchets”) are present. The~~the adoption of the guidance in ASU No 2016-01, Financial Instruments – Overall (Subtopic 825-10), in the three and nine months ended September 30, 2021, we recorded deemed dividends for changes in down round provisions of debentures of $5.4 million in both periods. Debentures are ~~presented as a reduction~~more fully discussed in ~~net income or an increase in net loss available~~Note 6. There were no triggers of down round provisions to ~~common stockholders and a corresponding increase to additional paid-in-capital resulting in no change to stockholders’ equity/deficit.~~warrants during the three months ended September 30, 2022. The incremental value of ~~convertible debentures and~~modifications to warrants as a result of the trigger of down round ~~provision features~~provisions of $~~258.9~~253.5 ~~million and $59.8~~ million were recorded as deemed dividends for the three months ended September 30, ~~2021 and 2020, respectively.~~2021. The incremental value of ~~convertible debentures and~~modifications to warrants as a result of the trigger of down round ~~provision features~~provisions of $~~408.5~~ 330.6million and $~~59.8~~ 403.1million were recorded as deemed dividends for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

In addition, we recorded deemed dividends of approximately $0.3 million during the nine months ended September 30, 2022 as a result of the issuances of shares of our Series P Convertible Redeemable Preferred Stock (the “Series P Preferred Stock”), which is more fully discussed in Note 10. In addition, we recorded deemed dividends of $0.3 million in both the three and nine months ended September 30, 2021 ~~and 2020~~ as a result ~~of: (i)~~of the ~~issuance~~extension of ~~our Series M Convertible Redeemable Preferred Stock (the “Series M Preferred Stock”) on June 30, 2020; (ii)~~certain common stock warrants and $0.3 million and $0.3 million in both the ~~issuance of warrants on August 27,~~three and nine months ended September 31, 2021 in connection with the conversion of a portion of our Series M Preferred Stock; (iii) the issuance of our Series N Convertible Redeemable Preferred Stock (the “Series N Preferred Stock”) on August 31, 2020; and (iv) thean exchange agreement. The extension of ~~certain~~the warrants ~~during~~and the ~~three months ended September 30, 2021. Each of these transactions is~~exchange agreement are more fully discussed in Note ~~11.~~10. See Note 109 for an additional discussion of derivative financial ~~instruments.~~instruments and deemed dividends.

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Income Taxes

Income taxes are accounted for under the liability method of accounting for income taxes. Under the liability method, future tax liabilities and assets are recognized for the estimated future tax consequences attributable to differences between the amounts reported in the financial statement carrying amounts of assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using enacted or substantially enacted income tax rates expected to apply when the asset is realized or the liability settled. The effect of a change in income tax rates on future income tax liabilities and assets is recognized in income in the period that the change occurs. Future income tax assets are recognized to the extent that they are considered more likely than not to be realized. When projected future taxable income is insufficient to provide for the realization of deferred tax assets, the Company recognizes a valuation allowance.

In accordance with U.S. GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Derecognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce net assets. Based on its analysis, the Company has determined that it has not incurred any liability for unrecognized tax benefits as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

Earnings (Loss) Per Share

The Company reports earnings (loss) per share in accordance with ASC Topic 260, “Earnings Per Share,” which establishes standards for computing and presenting earnings (loss) per share. Basic earnings (loss) per share of common stock is calculated by dividing net earnings (loss) available to common stockholders by the weighted-average shares of common stock outstanding during the period, without consideration of common stock equivalents. Diluted earnings (loss) per share is calculated by adjusting the weighted-average shares of common stock outstanding for the dilutive effect of common stock equivalents, including preferred stock, convertible debt, stock options and warrants outstanding for the period, aswith options and warrants determined using the treasury stock method. For purposes of the diluted net loss per share calculation, common stock equivalents are excluded from the calculation when their effect would be anti-dilutive. See Note 3 for the computation of ~~the~~ loss per share for the three and nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021.

Note 2 – Liquidity and Financial Condition

Big South Fork Medical Center
On January 13, 2017, we acquired certain assets related to Scott County Community Hospital, based in Oneida, Tennessee (the “Oneida Assets”). The Oneida Assets include a 52,000 square foot hospital building and a 6,300 square foot professional building on approximately 4.3 acres. Scott County Community Hospital has 25 beds, a 24/7 emergency department 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 Oneida Assets out of bankruptcy for a purchase price of $1.0 million. The hospital, which has since been renamed Big South Fork Medical Center, became operational on August 8, 2017. The hospital became certified as a Critical Access Hospital (rural) hospital in December 2021, retroactive to June 30, 2021.
Jamestown Regional Medical Center and Mountain View Physician Practice

~~Following~~On June 1, 2018, the Company acquired from Community Health Systems, Inc. certain assets related to an ~~inspection at~~acute care hospital located in Jamestown, Tennessee, referred to as Jamestown Regional Medical Center, ~~it was determined that several conditions~~for a purchase price of ~~participation in its Medicare agreement were deficient~~$0.7 million. The hospital is an 85-bed facility of approximately 90,000 square feet on over eight acres of land, which offered a 24-hour emergency department with two trauma bays and ~~the hospital failed to adequately correct the deficiencies. As~~seven private exam rooms, inpatient and outpatient medical services and a result, on June 12, 2019, Jamestown Regional Medical Center’s Medicare agreement was terminated. A significant percentage of patients at Jamestown Regional Medical Center are covered by Medicare and without any ability to get paid for these services, theprogressive care unit which provided telemetry services. The acquisition also included a separate physician practice known as Mountain View Physician Practice, Inc.
The Company suspended operations at the ~~hospital.~~hospital and physician practice in June 2019, as a result of the termination of the hospital’s Medicare agreement and other factors. The Company ~~plans~~is evaluating whether to reopen the facility as an acute care hospital ~~upon securing adequate capital to do so. The reopening plans have also been disrupted by the coronavirus (“COVID-19”) pandemic and the timing~~or as another type of ~~the reopening has been delayed and~~healthcare facility. Jamestown is ~~now intended that the re-opening process will be initiated in 2022.~~located 38 miles west of Big South Fork Medical Center.

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Jellico Community Hospital and CarePlus Rural Health Clinic

~~Effective~~On March 5, 2019, ~~the Company~~we acquired certain assets related to a 54-bed acute care hospital that offered comprehensive services located in Jellico, Tennessee known as Jellico Community ~~Hospital.~~Hospital and an outpatient clinic located in Williamsburg, Kentucky known as CarePlus Clinic. The hospital and the clinic and their associated assets were acquired from Jellico Community Hospital, Inc. and CarePlus Rural Health Clinic, LLC, respectively. On March 1, 2021, the Company closed Jellico Community Hospital, after the ~~city~~City of Jellico issued a 30-day termination notice for the lease of the building. ~~The closure reduced operating losses and the monthly cash deficit for the Company. The collections~~Jellico Community Hospital was located 33 miles east of ~~accounts receivable for the hospital were negatively impacted by the closure and resulted in a significant shortfall in the funds available to satisfy liabilities at the facility.~~our Big South Fork Medical Center.

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The CarePlus Clinic offers compassionate care in a patient-friendly facility. The CarePlus Clinic is located 32 miles northeast of our Big South Fork Medical Center.

Impact of the Pandemic

~~COVID-19~~The coronavirus (“COVID-19”) pandemic was declared a global pandemic by the World Health Organization on March 11, 2020. We have been closely monitoring the COVID-19 pandemic and its impact on our operations and we have taken steps intended to minimize the risk to our employees and patients. These steps have increased our costs and our revenues have been significantly adversely affected. Demand for hospital services has substantially decreased.operations. As more fully discussed in Note 6, we have received Paycheck Protection Program (“PPP”) loans. We have also received Department of Health and Human Services (“HHS”) Provider Relief Funds and employee retention credits from the federal government as more fully discussed below. If the COVID-19 pandemic continues for a further extended period, we expect to incur significant losses and additional financial assistance may be required. Going forward, the Company is unable to determine the extent to which the COVID-19 pandemic will continue to affect its business. The nature and effect of the COVID-19 pandemic on our balance sheet and results of operations will depend on the severity and length of the pandemic in our service areas; government activities to mitigate the pandemic’s effect; regulatory changes in response to the pandemic, especially those affecting rural hospitals; and existing and potential government assistance that may be provided.

HHS Provider Relief Funds

The Company received HHS Provider Relief Funds, ~~from HHS~~which were provided to eligible healthcare providers out of the $100 billion Public Health and Social Services Emergency Fund provided for in the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The funds were allocated to eligible healthcare providers for expenses and lost revenue attributable to the COVID-19 pandemic. As of September 30, ~~2021,~~2022, our facilities have received approximately $~~12.5~~13.5 million in relief funds. The fund payments are grants, not loans, and HHS will not require repayment, but the funds must be used only for grant approved purposes. Based on an analysis of the compliance and reporting requirements of the Provider Relief Funds and the impact of the pandemic on our operating results through September 30, ~~2021,~~2022, we have recognized a net of $~~12.4~~12.1 million of these funds as income ~~as of September 30, 2021~~ of which $~~7.5million and $0.5million was recognized during the second and third quarters of 2020, respectively, and $2.5~~ ~~million and $1.9~~4.4 million was recognized as income during the ~~first~~nine months ended September 30, 2021 and ~~second quarters of 2021, respectively. The remaining~~ $~~0.1~~8.0 million iswas recognized as income in 2020, offset by a reduction of income of $0.3million during the three and nine months ended September 30, 2022, based on a review and further analysis of the amount of income previously recorded. Accordingly, $1.4 million of relief funds received as of September 30, 2022 are included ~~with PPP loans~~on our unaudited condensed consolidated balance sheet in ~~the accompanying balance sheets.~~accrued expenses as more fully discussed in Note 5.

OnAs of September 19, 2020, HHS issued a Post-Payment Notice of Reporting Requirements (the “September 19, 2020 Notice”), which indicates that providers may recognize reimbursement for healthcare-related expenses, as defined therein, attributable to coronavirus that another source has not reimbursed and is not obligated to reimburse. Additionally, amounts received from HHS that are not fully expended on eligible healthcare-related expenses may be recognized as reimbursement for lost revenues, represented as a negative change in year-over-year net patient care operating income. Providers may apply payments to lost revenues up to the amount of the 2019 net gain from healthcare-related sources or, for entities that reported a negative net operating gain in 2019, receipts from HHS may be recognized up to a net zero gain/loss in 2020. On October 22, 2020, HHS issued an updated Post-Payment Notice of Reporting Requirements and a Reporting Requirements Policy Update (together, the “October 22, 2020 Notice”), which includes two primary changes: (1) the definition of lost revenue is changed to refer to the negative year-over-year difference in 2019 and 2020 actual revenue from patient care related sources as opposed to the negative year-over-year change in net patient care operating income, and (2) the definition of reporting entities is broadened to include the parent of one or more subsidiary tax identification numbers that received general distribution payments, entities having providers associated with it that provide diagnoses, testing or treatment for cases of COVID-19, or entities that can otherwise attest to the terms and conditions. As codified in the October 22, 2020 Notice,30, 2022, the Company’s estimate of ~~pandemic relief funds that do not have to be reimbursed includes~~ the ~~allocation~~amount for which it is reasonably assured of certain general funds among subsidiaries. Regarding the amended definition of lost revenues, such change served to increase amounts eligible to be recognized as income, as compared to the September 19, 2020 Notice. As evidenced by the October 22, 2020 Notice, HHS’ interpretation ofmeeting the underlying terms and conditions ~~of such payments, including auditing~~was based on, among other things, the various notices issued by HHS in September 19, 2020, October 22, 2020, and ~~reporting requirements, continues to evolve. On~~ January 15, 2021 and the ~~government issued “General~~Company’s results of operations during the years ended December 31, 2020 and ~~Targeted Distribution Post-Payment Notice~~2021 and the three and nine months ended September 30, 2022. The Company believes that it was appropriate to recognize a net of ~~Reporting Requirements,” (the “January 15, 2021 Notice”), which again provides guidance on reporting instructions and use~~$12.1 million of ~~funds.~~the HHS Provider Relief Funds as income in various periods, as discussed in the paragraph above. Accordingly, the $12.1 million is not recognized as a liability at September 30, 2022. Additional guidance or new and amended interpretations of existing guidance on the terms and conditions of such payments may result in changes in the Company’s estimate of amounts for which the terms and conditions are reasonably assured of being met, and any such changes may be material. Additionally, any such changes may result in derecognition of amounts of income previously recognized, which may be material. If we are unable to attest to or comply with current or future terms and conditions, and there is no assurance we will be able to do so, our ability to retain some or all of the funds received may be impacted.

~~As of September 30,~~Federal Employee Retention Credits
The CARES Act, passed by Congress on March 27, 2020, contained the employee retention credit, a refundable payroll tax credit to employers that have experienced hardship in their operations due to COVID-19. The CARES Act was amended and extended on December 27, 2020 by the Consolidated Appropriations Act, 2021 (the “CAA”) and in March 2021, the ~~Company’s estimate~~Internal Revenue Code was amended by the American Rescue Plan Act of 2021 to provide new employee retention credit provisions designed to promote employee retention and hiring. As a result, the Company received $1.5 million in employee retention credits during the year ended December 31, 2021, which the Company recognized as other income and applied to its outstanding past-due payroll tax liabilities. See Note 5 for an additional discussion of the amount for which it is reasonably assured of meeting the underlying terms and conditions was updated based on, among other things, the September 19, 2020 Notice, the October 22, 2020 Notice, the January 15, 2021 Notice and the Company’s results of operations during 2020 and the nine months ended September 30, 2021. The Company believes that it was appropriate to recognize as income $~~8.0~~ ~~million of the HHS relief funds in 2020 and $4.4~~ ~~million of the HHS relief funds in the nine months ended September 30, 2021.~~employee retention credit.

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Going Concern

Under ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40) (“ASC 205-40”), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. As required by ASC 205-40, this evaluation shall initially not take into consideration the potential mitigating effects of plans that have not been fully implemented as of the date the financial statements are issued. Management has assessed the Company’s ability to continue as a going concern in accordance with the requirements of ASC 205-40.

~~As reflected in the unaudited condensed consolidated financial statements,~~At September 30, 2022, the Company had a working capital deficit and a stockholders’ deficit of $~~54.3~~44.0 million and $~~37.5~~29.9 million, ~~respectively, at September 30, 2021.~~respectively. In addition, the Company had a loss from continuing operations ~~before other income (expense) and income taxes~~ of approximately $~~2.4~~4.1 million and $~~4.2~~ ~~million for the three months ended September 30, 2021 and 2020, respectively, and a loss from continuing operations before other income (expense) and income taxes of approximately $10.2~~ ~~million and $11.3~~4.4 million for the nine months ended September 30, 2022 and 2021, respectively, and ~~2020, respectively. Cash~~cash used in operating activities was $~~5.7~~1.2 million and $~~13.5~~5.7 million for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. As of the date of this report, our cash is deficient and payments for our operations in the ordinary course are not being made. The continued losses and other related factors, including ~~the~~past due accounts payable and payroll taxes, as well as payment defaults under the terms of certain outstanding notes payable and debentures, ~~as more discussed in Notes 6 and 7,~~ raise substantial doubt about the Company’s ability to continue as a going concern for ~~twelve~~12 months from the filing date of this report.

The Company’s unaudited condensed consolidated financial statements are prepared assuming the Company can continue as a going concern, which contemplates continuity of operations through realization of assets, and the settling of liabilities in the normal course of business. ~~As more fully discussed~~The Company’s current financial condition may make it difficult to attract and maintain adequate expertise in ~~Note 14, on June 25, 2021, the Company sold HTS and AMSG~~its management team to ~~InnovaQor and the Company received InnovaQor’s Series B Preferred Stock valued at $9.1~~ ~~million as consideration for the sale. In addition, $2.2~~ million of net liabilities of HTS and AMSG were transferred to InnovaQor. The Company has reflected the assets and liabilities relating to HTS and AMSG held prior to the sale as part of discontinued operations.successfully operate its remaining healthcare facilities.

There can be no assurance that the Company will be able to achieve its business plan, ~~which is to acquire and operate clusters of rural hospitals and related healthcare service providers,~~ 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 raise adequate capital to fund its operations and repay its outstanding debt and other past due obligations, fully align its operating costs, increase its net revenues, and eventually ~~regain~~gain profitable operations. The unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Note 3 – Loss Per Share

Basic loss per share is computed by dividing the loss available to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Basic loss per share excludes potential dilution of securities or other contracts to issue shares of common stock. 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 each of the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, basic loss per share is the same as diluted loss per share.
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The following table sets forth the computation of the Company’s basic and diluted net loss per share ~~available to common stockholders~~(unaudited) during the three and nine months ended September 30, ~~2021~~2022 and ~~2020 (unaudited):~~2021:
Schedule of Earnings Per Share ~~Available to Common stockholders~~
2021 2020 2021 2020

Three Months Ended
September 30,

Nine Months Ended
September 30,
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020 2022 2021 2022 2021
Numerator
Net income (loss) from continuing operations $ 785,565 $ (6,025,885 ) $ (4,371,860 ) $ (9,697,922 )
Net (loss) income from continuing operations $ (1,339,865 ) $ 785,565 $ (4,105,838 ) $ (4,371,860 )
Deemed dividends (259,530,999 ) (63,544,950 ) (409,142,478 ) (66,695,318 ) - (259,530,999 ) (330,876,369 ) (409,142,478 )
Net loss available to common stockholders, continuing operations (258,745,434 ) (69,570,835 ) (413,514,338 ) (76,393,240 ) (1,339,865 ) (258,745,434 ) (334,982,207 ) (413,514,338 )
Net income (loss) from discontinued operations 545,399 (166,180 ) 10,880,148 (164,293 )
Net (loss) income from discontinued operations (1,696 ) 545,399 (7,075 ) 10,880,148
Net loss available to common stockholders $ (258,200,035 ) $ (69,737,015 ) $ (402,634,190 ) $ (76,557,533 ) $ (1,341,561 ) $ (258,200,035 ) $ (334,989,282 ) $ (402,634,190 )

Denominator
Basic and diluted weighted average shares of common stock outstanding 438,998,913 1,284 150,459,817 1,086
Weighted average number of shares of common stock outstanding during the period - basic and diluted 10,569,572,256 43,900 4,130,876,898 15,046

Loss per share available to common stockholders- basic and diluted:
Net loss per share of common stock available to common stockholders - basic and diluted:
Continuing operations $ (0.59 ) $ (54,182.89 ) $ (2.75 ) $ (70,343.68 ) $ (0.00 ) $ (5,893.97 ) $ (0.08 ) $ (27,483.34 )
Discontinued operations $ 0.00 $ (129.42 ) $ 0.07 $ (151.28 ) (0.00 ) 12.42 (0.00 ) 723.13
Total basic and diluted $ (0.59 ) $ (54,312.31 ) $ (2.68 ) $ (70,494.96 ) $ (0.00 ) $ (5,881.55 ) $ (0.08 ) $ (26,760.21 )
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Diluted loss per share excludes all dilutive potential shares if their effect is anti-dilutive. As of September 30, ~~2021~~2022 and ~~2020,~~2021, the following potential common stock equivalents were excluded from the calculation of diluted loss per share as their effect was anti-dilutive:
Schedule of ~~Antidilutive~~Anti-dilutive Securities Excluded from Computation of Earnings Per Share
2021 2020
September 30, Nine Months September 30,
2021 2020 2022 2021
Warrants 182,663,835,039 335,461 511,333,351,092 18,266,394
Convertible preferred stock 89,770,798,934 313,808 466,707,633,333 8,977,081
Convertible debentures 9,664,944,444 51,133 28,777,833,333 966,494
Stock options 26 26 26 26
Dilutive potential shares 282,099,578,443 700,428
1,006,818,817,784 28,209,995

The terms of certain of the warrants, convertible preferred stock and convertible debentures issued by the Company provide for reductions in the per share exercise prices of the warrants and the per share conversion prices of the debentures and preferred stock (if applicable and subject to floors in certain cases) in the event that the Company issues common stock or common stock equivalents (as that term is defined in the agreements) at an effective exercise/conversion price that is less than the then exercise/conversion prices of the outstanding warrants, preferred stock or debentures, as the case may be. In addition, many of these ~~equity-based~~ securities contain exercise or conversion prices that vary based upon the price of the Company’s common stock on the date of exercise/conversion (see Notes ~~7, 11~~6, 9, 10 and ~~12)~~15). These provisions have resulted in significant dilution of the Company’s common stock.

As a result of these down round provisions, the potential common stock ~~equivalents, including outstanding~~and common stock equivalents totaled ~~476.2~~1.0 trillion ~~billion~~ at November 10, ~~2021,~~2022, as more fully discussed in Note ~~16.~~15. See ~~Notes 11 and 16~~Note 10 regarding a discussion of the number of shares of the Company’s authorized common and preferred stock.
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Note 4 – Accounts ~~Receivable and Income Tax Refunds~~ Receivable

Accounts receivable at September 30, ~~2021~~2022 (unaudited) and December 31, ~~2020~~2021 consisted of the following:
Schedule of Accounts Receivable
September 30, December 31,
September 30, December 31,
2021 2020

Accounts receivable $ 9,626,490 $ 16,922,576
Less:
Allowance for contractual obligations (6,788,342 ) (13,185,843 )
Allowance for doubtful accounts (992,330 ) (1,513,827 )
Accounts receivable owed under settlement/sales agreements (847,059 ) (1,723,452 )
Accounts receivable, net $ 998,759 $ 499,454

~~The allowances reflected in the table above decreased as a percentage of accounts receivable to~~ ~~80.8% at September 30, 2021 compared to~~ ~~86.9% at December 31, 2020.~~
~~Estimated implicit price concessions deducted from revenues for the three months ended September 30, 2021 and 2020 were $1.9~~ ~~million and $2.2~~ ~~million, respectively, and for the nine months ended September 30, 2021 and 2020 were $6.2~~ ~~million and $6.2~~ ~~million, respectively. The allowance for doubtful accounts deducted from accounts receivable was $1.0~~ ~~million at September 30, 2021 compared to $1.5~~ ~~million at December 31, 2020, a decrease of $0.5~~ million. The decrease was due to lower implicit price concessions in the three months ended September 30, 2021 and to write offs of past due accounts receivable. The Company’s policy is to write off accounts receivable balances against the allowance for implicit price concessions once an accounts receivable ages past a specified number of days.
~~Accounts Receivable Sales Agreements~~
~~During the year ended December 31, 2020, the Company entered into six accounts receivable sales agreements under which the Company sold an aggregate of $3.3~~ ~~million of accounts receivable on a non-recourse basis for an aggregate purchase price paid to the Company of $2.2~~ ~~million, less $0.1~~ ~~million of origination fees. Accordingly, the Company recorded a loss on the sales of $1.2~~ ~~million during the year ended December 31, 2020. As of December 31, 2020, $1.7~~ million was outstanding and owed to three funding parties under three accounts receivable sales agreements. On September 14, 2021, the Company entered into separate settlement agreements with the three funding parties under which the Company agreed to repay an aggregate of $~~0.9~~ ~~million in full settlement of the sales agreements. Per the settlement agreements, the Company is required to make equal monthly payments totaling $52,941~~ ~~through January 1, 2023. As a result of the settlements, the Company recorded a gain from legal settlements of $0.6~~ ~~million in the three and nine months ended September 30, 2021.~~
~~Income Tax Refunds Receivable~~
~~As of September 30, 2021 and December 31, 2020, the Company had $1.1~~ ~~million and $1.4~~ million, respectively, of income tax refunds receivable. During 2020, the U.S. Congress approved the CARES Act, which allowed a five-year carryback privilege for federal net operating tax losses that arose in a tax year beginning in 2018 and through 2020. As a result, during the year ended December 31, 2020, the Company recorded approximately $~~1.1~~ ~~million in refunds from the carryback of certain of its federal net operating losses. In addition, during the year ended December 31, 2020, the Company recorded $0.3~~ ~~million in refunds related to other net operating loss carryback adjustments. During the nine months ended September 30, 2021, the Company received income tax refunds of $0.3~~ ~~million, which represented refunds associated with the CARES Act.~~ ~~NaN~~ ~~refunds were received during the nine months ended September 30, 2020. The Company used the $0.3~~ million of refunds that it received in the nine months ended September 30, 2021 to repay a portion of the amount that it owes for federal income tax liabilities that arose from an audit of the Company’s 2015 Federal tax return as more fully discussed in Note 13. The Company’s income taxes are more fully discussed in Note 15 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

September 30, December 31,
2022 2021

Accounts receivable $ 13,393,254 $ 12,961,817
Less:
Allowance for contractual obligations (8,125,400 ) (8,737,502 )
Allowance for doubtful accounts (1,725,356 ) (1,456,791 )
Accounts receivable owed under settlements/sales agreements (211,764 ) (688,236 )
Accounts receivable, net $ 3,330,734 $ 2,079,288

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Note 5 – Accrued Expenses

Accrued expenses at September 30, ~~2021~~2022 (unaudited) and December 31, ~~2020~~2021 consisted of the following:
Schedule of Accrued Expenses

September 30, December 31, September 30, December 31,
2021 2020 2022 2021
Accrued payroll and related liabilities $ 9,152,027 $ 8,263,940 $ 7,833,193 $ 7,528,464
HHS Provider Relief Funds (See Note 2) - 4,400,000
HHS Provider Relief Funds 1,415,549 863,452
Accrued interest 5,989,653 4,728,942 5,413,828 5,027,459
Accrued legal 1,097,318 1,097,318
Accrued legal expenses and settlements 454,486 632,318
Medicare overpayment reserve 1,600,000 -
Other accrued expenses 1,203,166 645,369 2,635,432 1,448,242
Accrued expenses $ 17,442,164 $ 19,135,569 $ 19,352,488 $ 15,499,935

~~Accrued payroll~~Payroll and related liabilities at September 30, ~~2021~~2022 and December 31, ~~2020~~2021 included approximately $~~2.7~~2.6 million and $~~2.5~~ 2.3million, respectively, for penalties associated with approximately $~~5.0~~4.1 million and $~~4.4~~ 3.9million of accrued past due payroll taxes as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. This liability account at September 30, 2022 and December 31, 2021 is net of employee retention credits totaling $1.5 million and $1.5 million, respectively. Employee retention credits are also discussed in Note 2.

As of September 30, 2022 and December 31, 2021, the Company has accrued $1.4 million and $0.9 million, respectively, of HHS Provider Relief Funds. These funds are more fully discussed in Note 2.
Accrued interest at September 30, 2022 and December 31, 2021 included accrued interest of $0.1 million and $0.3 million, respectively, on loans made to the Company by Christopher Diamantis, a former member of the Company’s Board of Directors. The loans from Mr. Diamantis are more fully discussed in Note 6.
Subsequent to September 30, 2022, the Company’s Big South Fork Medical Center received a communication from its fiscal intermediary stating that its Medicare cost report for the six months ending December 31, 2021 has been accepted and there was an overpayment by the fiscal intermediary as more fully discussed in Notes 1 and 15. As a result of the communication, during the three and nine months ended September, 30, 2022, the Company recorded a $1.6 million reduction in net revenues and a corresponding Medicare overpayment reserve.
Note 6 – ~~Notes Payable~~Debt

~~The Company and its subsidiaries are party to a number of loans with third parties and related parties.~~ At September 30, ~~2021~~2022 (unaudited) and December 31, ~~2020, notes payable~~2021, debt consisted of the following:
Schedule of ~~Notes Payable~~Debt

September 30,
2022

December 31,
2021

Notes payable- third parties $ 3,119,505 $ 4,667,819
Loan payable – related party 3,027,000 2,127,000
Debentures 8,222,240 8,222,240
Total debt 14,368,745 15,017,059
Less current portion of debt (14,368,745 ) (15,017,059 )
Total debt, net of current portion $ - $ -
17
At September 30, 2022 (unaudited) and December 31, 2021, notes payable with third parties consisted of the following:
Notes Payable – Third Parties
Schedule of Notes Payable Third Parties
September 30,
2021 December 31,
2020

Loan payable to TCA Global Master Fund, L.P. (“TCA”) in the original principal amount of $3 million at 16% interest (the “TCA Debenture”). Payable in various installments through May 4, 2022 (balance at September 30, 2021 as per settlement agreement – See Note 13) $ 500,000 $ 1,741,893

Notes payable to CommerceNet and Jay Tenenbaum in the original principal amount of $500,000, bearing interest at 6% per annum (the “Tegal Notes”). Principal and interest payments due annually from July 12, 2015 through July 12, 2017 291,557 297,068

Note payable to Anthony O’Killough dated September 27, 2019 in the original principal amount of $1.9 million. Interest is due only upon event of default. Issued net of $0.3 million of debt discount and $0.1 million of financing fees. Payment due in installments through November 2020. 1,450,000 1,450,000

Notes payable under the PPP loans issued on April 20, 2020 through May 1, 2020 bearing interest at a rate of 1% per annum. To the extent not forgiven, principal and interest payments are due monthly beginning sixteen months from the date of issuance and the notes mature 40 months from the date of issuance. 1,358,923 2,385,921

Installment promissory note dated January 29, 2020, less original issue discount of $0.1 million, non-interest bearing, payable in weekly installment payments ranging from $22,500 to $34,000 due on or before February 5, 2020 through on or before October 21, 2020, the maturity date. - 108,350

Notes payable dated January 31, 2021 and February 16, 2021 due six months from the date of issuance. The notes bear interest at 10% for the period outstanding. Under the terms of the notes, the holder is to receive a total of 100 shares of InnovaQor’s Series B Preferred Stock held by the Company. 245,000 -

Notes payable to Western Healthcare, LLC dated August 10, 2021, in the aggregate principal amount of $2.4 million, bearing interest at 18% per annum, payable in monthly installments aggregating $0.2 million, due August 30, 2022. 2,152,961 -

Warrant pre-payment promissory notes dated February 25, 2021, April 9, 2021, April 16, 2021 and April 22, 2021, non-interest bearing, $1,100,000 aggregate principal amount, issued with $100,000 of original issue discounts and each payable 12 months from the date of issuance 1,052,837 -

Note payable 7,051,278 5,983,232
Less current portion (7,051,278 ) (4,786,976 )
Notes payable - third parties, net of current portion $ - $ 1,196,256
18

September 30,
2022

December 31,
2021

- 250,000
Settlement amount/loan payable to TCA Global Credit Master Fund, L.P. (“TCA”) in the original principal amount of $3 million. Settled on September 30, 2021 for $500,000 pursuant to a payment plan as discussed below. $ - $ 250,000

Notes payable to CommerceNet and Jay Tenenbaum in the original principal amount of $500,000 (the “Tegal Notes”). 291,557 291,557

Note payable to Anthony O’Killough dated September 27, 2019 in the original principal amount of $1.9 million. Interest is due only upon event of default. Issued net of $0.3 million of debt discount and $0.1 million of financing fees. Payment due in installments through November 2020. 1,339,495 1,450,000

Notes payable under the PPP loans issued on April 20, 2020 through May 1, 2020. - 400,800

Notes payable dated January 31, 2021 and February 16, 2021 in the original aggregate amount of $245,000 due six months from the date of issuance. The notes bore interest at 10% for the period outstanding. Under the terms of the notes, the holder received 100 shares of InnovaQor’s Series B-1 Preferred Stock held by the Company (see Note 13). - 122,500

Notes payable to Western Healthcare, LLC dated August 10, 2021, in the aggregate principal amount of $2.4 million, bearing interest at 18% per annum, payable in monthly installments aggregating $0.2 million, due August 30, 2022. 1,488,453 2,152,962

Note payable 3,119,505 4,667,819
Less current portion (3,119,505 ) (4,667,819 )
Notes payable - third parties, net of current portion $ - $ -

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 September 19, 2017, the Company entered into a new agreement with TCA, which extended the repayment schedule through December 31, 2017. In May 2020, the SEC appointed a Receiver to close down the TCA Global Credit Master Fund, L.P. The ~~amount recorded by the Company as being owed to TCA as of December 31, 2020 was based on TCA’s application of prior payments made by the Company. The~~ Company and ~~TCA~~the Receiver entered into a settlement agreement dated effective as of September 30, 2021, under which the Company agreed to pay ~~TCA a total of~~ $500,000 as full and final settlement of principal and accrued interest, of which $~~200,000~~250,000 was paid during 2021 and $250,000 was paid ~~on November 4, 2021 and~~during the ~~remaining $300,000~~ ~~is due in six consecutive monthly installments of $50,000~~ ~~payable on or before the fifth day of each month beginning December 2021.~~nine months ended September 30, 2022. As a result of the settlement, in the three and nine months ended September 30, 2021 the Company recorded a gain from legal settlement, resulting from the adjustments of principal and accrued interest, of $2.2 million.

The Company did not make the second annual principal payment under the Tegal Notes that was 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 at that time of $341,612 and accrued interest of $43,000. On December 7, 2016, the Company received a breach of contract complaint with a request for the entry of a default judgment (see Note ~~13)~~12). On April 23, 2018, the holders of the Tegal Notes received a judgment against the Company. As of September 30, ~~2021,~~2022, the Company has paid $50,055 of the principal amount of these notes.
18

On September 27, 2019, the Company issued a promissory note payable to Anthony O’Killough in the principal amount of $1.9 million and received proceeds of $1.5 million, which was net of a $0.3 million original issue discount and $0.1 million inof financing fees. The first principal payment of $1.0 million was due on November 8, 2019 and the remaining $0.9 million was due on December 26, ~~2019~~.2019. These payments were not made. In February 2020, Mr. O’Killough sued the Company and Mr. Diamantis, as guarantor, in New York State Supreme Court for the County of New York, for approximately $2.2 million for non-payment of the promissory note. ~~Mr. Diamantis was a former member of the Company’s Board of Directors.~~ In May 2020, the Company, Mr. Diamantis, as guarantor, and Mr. O’Killough entered into a Stipulation providing for a payment of a total of $2.2 million (which included accrued “penalty” interest as of that date) in installments through November 1, 2020. The Company made payments totaling $450,000 in 2020. On January 18, 2022, Mr. Diamantis paid $750,000 and the remaining balance was due 120 days thereafter. Mr. O’Killough agreed to forebear from any further enforcement action until then. The Company is obligated to repay Mr. Diamantis the $750,000 payment, plus interest, as well as any further payments that may be made by him. On May 16, 2022, the Company paid $250,000 to Mr. Diamantis for further payment to Mr. O’Killough and on July 18, 2022, Mr. Diamantis paid a further $150,000 to Mr. O’Killough. As a result of the $750,000 payment to Mr. O’Killough made by Mr. Diamantis on January 18, 2022 and the additional $400,000 in payments made to Mr. O’Killough on May 16, 2022 and July 18, 2022, the past due balance owed to Mr. O’Killough was $1.3 million on September 30, ~~2021, $450,000~~ ~~has been paid in cash~~2022. The promissory note and $~~2.2~~ ~~million ($1.5~~ ~~million of principal and $0.7~~ ~~million of accrued penalty interest), remains past due. The Stipulation is more fully~~forbearance agreement are also discussed in Note ~~13.~~12.

~~As of April 20, 2020 and through May 1, 2020, the~~The Company, ~~and~~including its subsidiaries, received PPP loan proceeds in the ~~form of promissory notes (the “PPP Notes”) in the~~ aggregate amount of approximately $2.4~~million.~~ million (the “PPP Notes”). The PPP Notes and accrued interest ~~are~~were forgivable as long as the borrower ~~uses~~used the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries. No collateral or guarantees were provided in connection with the PPP Notes. The unforgiven portion of the PPP Notes is payable over ~~two yearsat an interest rate of~~ ~~1.0~~% per annum, with a deferral of payments for the first sixteen months. Beginning sixteen months from the dates of issuance, the Company is required (if not forgiven) to make monthly payments of principal and interest to the lenders.utilities. As of September 30, ~~2021,~~2022, $~~1.0~~ 2.3million of the principal balance of the PPP Notes ~~has been~~was forgiven of which $0.3 million was forgiven in the nine months ended September 30, 2022, $1.0 million was forgiven in the three months ended September 30, 2021 and ~~approximately~~ $~~15,000~~ 1.0~~of accrued interest has been reversed. On November 3, 2021, an additional $0.8~~ million ofwas forgiven in the three months ended December 31, 2021. During the nine months ended September 30, 2022, the remaining principal balance was ~~forgiven.~~
19
~~On January 29, 2020, the Company entered into a secured installment promissory note (the “Ponte Note”) in the principal amount of $1.2~~ million, the proceeds of which were used to satisfy in full the amounts due under accounts receivable sales agreements entered into during 2019. Pursuant to the Ponte Note, weekly installment payments ranging from $~~22,500~~ ~~to $34,000~~ ~~were~~ ~~due on or before February 5, 2020 through on or before October 21, 2020, the maturity date.~~ ~~The Ponte Note, which was issued with an original issue discount in the amount of approximately $0.1~~ ~~million, was non-interest bearing and subject to a late-payment fee of~~ 10~~%. The Company did not make certain installment payments due under the note and accordingly it recorded a $9,850~~ late payment penalty and incurred certain legal fees in connection with the payment default. On May 5, 2021, the Company entered into a settlement agreement with the holder under which the Company agreed to pay $~~125,000~~ ~~in full satisfaction of the note, which has been paid in full.~~repaid.

On August 10, 2021, the Company entered into two notes payable with Western Healthcare, LLC in the aggregate principal amount of $2.4million. The notes were issued under the terms of a settlement agreement related to ~~professional medical staffing services~~ agreements that the Company had previously entered into for medical staffing services. The notes bear interest at a rate of 18% per annum and payments consisting of principal and interest are due no later than August 30, 2022. The Company paid $0.2million to the note holders upon issuance of the notes. ~~Monthly~~The Company has not made all of the monthly installments ~~aggregating $0.2~~ ~~million are~~ due ~~beginning August 31, 2021.~~under the notes.

On each of February 25, 2021, April 9, 2021, April 16, 2021 and April 22, 2021, the Company entered into agreements with certain institutional investors for warrant prepayment promissory notes with an aggregate principal amount of $~~1.1~~ ~~million. The Company received proceeds of $1.0~~ ~~million from the investors and, accordingly, it recorded a total of $0.1~~ ~~million in original issue discount of which $25,205~~ ~~and $52,836~~ ~~was amortized in the three and nine months ended September 30, 2021, respectively. The notes did not bear interest but an interest rate of~~ 18% would be applied in the event of default that resulted in their acceleration. On November 7, 2021, these notes were exchanged for the Company’s Series P Convertible Redeemable Preferred Stock (the “Series P Preferred Stock”) as more fully discussed in Note 16.
~~Note~~Loan Payable – Related Party

At September 30, 2022 (unaudited) and December 31, 2021, loan payable - related party consisted of the following:
Schedule of Notes Payable - Related Parties
September 30,
2021 December 31,
2020
(unaudited)

Note payable to Christopher Diamantis due on demand and bearing interest at 10% on the majority of amounts loaned $ 2,627,000 $ 2,097,000

Total note payable, related party 2,627,000 2,097,000

Less current portion of note payable, related party (2,627,000 ) (2,097,000 )
Total note payable, related party, net of current portion $ - $ -

September 30,
2022

December 31,
2021

Loan payable to Christopher Diamantis $ 3,027,000 $ 2,127,000
Less current portion of loan payable, related party (3,027,000 ) (2,127,000 )
Total loan payable, related party, net of current portion $ — $ —

Mr. Diamantis was a member of the Company’s Board of Directors until his resignation on February 26, 2020. During the nine months ended September 30, 2022, Mr. Diamantis loaned the Company $0.9 million, which was used to pay principal and accrued interest due under the note payable to Mr. O’Killough. The note payable to Mr. O’Killough, including payments made in the nine months ended September 30, 2002, is more fully discussed above under the heading Notes Payable –Third Parties. During the nine months ended September 30, 2021, ~~and 2020,~~ Mr. ~~Christopher~~ Diamantis ~~a former member of our Board of Directors,~~ loaned the Company $0.9 million, ~~and $4.6~~ ~~million, respectively, the majority of~~ which was used for working capital ~~purposes. During the nine months ended September 30, 2021~~purposes and ~~2020,~~ the Company repaid ~~in cash~~Mr. Diamantis $0.4 ~~million and $4.2~~ ~~million of the loans from Mr. Diamantis, respectively.~~million. In ~~addition, on June 30, 2020, the Company exchanged the total amount owed to Mr. Diamantis on that date for outstanding loans and accrued interest, net of repayments, which totaled approximately $18.8~~ ~~million, for shares of the Company’s Series M Preferred Stock. The Series M Preferred Stock is more fully discussed in Note 11. On August 27,~~November 2021, Mr. Diamantis requested the Company repay the outstanding note payable to him, which was ~~issued warrants to acquire shares~~$3.0 million at September 30, 2022, and facilitate repayment of the ~~Company’s common stock as more fully discussed in Note 11.~~note payable to Mr. O’Killough for which he is a guarantor.

During the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the Company ~~accrued~~incurred interest expense of $015,000 and $~~55,000~~0, respectively, on the loans from Mr. Diamantis and during the nine months ended September 30, 2022 and 2021, ~~and 2020, it accrued~~the Company incurred interest expense of $0.1 million and $~~0.5~~0.1 million, respectively. During the three and nine months ended September 30, 2022, the Company paid $0.2 million and $0.3 million, respectively, ~~on the loans from~~of accrued interest owed to Mr. Diamantis. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, accrued interest on the loans from Mr. Diamantis totaled approximately $~~0.3~~0.1 million and $~~0.2~~0.3 million, respectively. Interest accrues on loans from Mr. Diamantis at a rate of 10% on the majority of the amounts loaned. In addition, the Company incurs interest expense related to the amounts Mr. Diamantis ~~incurs interest expenses as a result of borrowing money~~borrows from ~~third parties~~third-parties to ~~lend~~loan to the Company. ~~Therefore, the Company reimburses Mr. Diamantis for a certain portion of the third-party interest he incurs.~~

2019
~~Note 7 –~~ Debentures

The carrying amount of all outstanding debentures with institutional investors as of September 30, ~~2021~~2022 (unaudited) and December 31, ~~2020 is~~2021 was as follows:
Schedule of Debentures
September 30, 2021 December 31, 2020
September 30,
2022

December 31,
2021

(unaudited)
Debentures $ 12,690,539 $ 12,690,539 $ 8,222,240 $ 8,222,240

Less current portion (12,690,539 ) (12,690,539 ) (8,222,240 ) (8,222,240 )
Debentures, net of current portion $ - $ - $ - $ -

Payment of all outstanding debentures with institutional investors totaling $~~12.7~~8.2 million ~~including late-payment penalties,~~ at both September 30, 2022 and December 31, ~~2020~~2021 was past due by the debentures’ original terms. A 30% late payment penalty was added to the principal amount of each debenture. Included in the outstanding debentures as of September 30, 2022 and December 31, 2021 were late payment penalties of $1.9 million. The debentures bear default interest at the rate of 18% per annum and are secured by a first priority lien on all of the Company’s assets. During the three months ended September 30, 2022 and 2021, the Company incurred default interest expense on debentures of $0.4 million and $0.6 million, respectively, and during the nine months ended September 30, 2022 and 2021, the Company incurred default interest expense on debentures of $1.1 million and $1.7 million, respectively. At September 30, 2022 and December 31, 2021, accrued interest on debentures was $4.7 million and $3.6 million, respectively. The debentures include the March 2017 Debenture and the 2018 Debentures, as described below.
March 2017 Debenture
In March 2017, the Company issued a debenture due in March 2019 (the “March 2017 Debenture”) with a principal balance of $2.6 million at both September 30, 2022 and December 31, 2021, including a 30% late-payment penalty. The March 2017 Debenture is convertible into shares of the Company’s common stock, at a conversion price which has been adjusted pursuant to the terms of the ~~outstanding debentures~~March 2017 Debenture to $0.00009 per share on September 30, 2022, or 28.7 billion shares of common stock. The conversion price is 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 of December 31, 2020 are more fully described in Note 9 to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2020. Certain of these debentures werewell as other customary anti-dilution protections.
The March 2017 Debenture was issued with warrants ~~to purchase~~exercisable into shares of the Company’s common stock. Outstanding warrants are more fully discussed in Note ~~11.~~10.

~~The Company accrued interest expense on outstanding debentures during the three months ended September 30, 2021 and 2020 of $0.6~~ ~~million and $1.5~~ ~~million, respectively, and during the nine months ended September 30, 2021 and 2020 of $1.7~~ ~~million and $5.4~~ ~~million, respectively.~~2018 Debentures

~~Certain~~During 2018, the Company closed various offerings of the ~~debentures are convertible into shares~~2018 Debentures with principal balances aggregating $14.5 million, including late-payment penalties, due in September 2019. The conversion terms of the ~~Company’s common stock.~~2018 Debentures are the same as those of the March 2017 Debenture, as more fully described above, with the exception of the conversion price, which was $0.052 On per share at September 30, 2022 and is subject to a floor of $0.052 per share. At both September 30, 2022 and December 31, 2021, the outstanding principal balance of the 2018 Debentures, including late-payment penalties, was $~~2.6~~ 5.6million ~~of principal amount of outstanding~~and the debentures were convertible into ~~9.6~~ 108.5~~billion shares of the Company’s common stock at a price of $0.00027~~ ~~per share and $5.6~~ ~~million of outstanding debentures were convertible on that date into~~ ~~108.5~~ million shares of the Company’s common stock ~~at a conversion price of $0.052. The remaining outstanding debentures of $4.5~~ ~~million are non-convertible.~~
~~See Notes 3 and 11 for a discussion of the dilutive effect of the outstanding convertible debentures and warrants as of~~on September 30, ~~2021 and Note 16 for the dilutive effect of outstanding convertible debentures and warrants as of November 10, 2021.~~2022.
See Note 11 for a discussion of the exchange of certain debentures for shares of the Company’s Series N Preferred Stock on August 31, 2020 and Note 16 for a discussion of the exchange of certain debentures for shares of the Company’s Series P Preferred Stock.

Note 87 – Related Party Transactions

In addition to the transactions discussed in Notes 6 and 10, the Company had the following related party activity during the three and nine months ended September 30, 2022 and 2021:
Alcimede LLC and Alcimede Limited

On November 1, 2021, the Company and Alcimede ~~LLC (“Alcimede”)~~Limited entered into a new Consulting Agreement that replaced the agreement between the Company and Alcimede LLC. Pursuant to the respective consulting agreements, Alcimede Limited billed $0.1 ~~million and $0.1~~ ~~million for consulting fees for the three months ended September 30, 2021 and 2020, respectively, and $0.3~~ million and $0.3 million for ~~consulting fees~~services for the three and nine months ended September 30, ~~2021~~2022, respectively, and ~~2020,~~Alcimede LLC billed $0.1 million and $0.3 million for services for the three and nine months ended September 30, 2021, respectively. Seamus Lagan, the Company’s President and Chief Executive Officer, is the sole manager of Alcimede LLC and the Managing Director of Alcimede Limited (also see Note ~~11)~~10).
20

InnovaQor

In addition to the investment in InnovaQor’s Series BB-1 Preferred Stock resulting from the sale of HTS and AMSG to InnovaQor in June 2021 (see Notes 1 and ~~14)~~13), at September 30, 2022 and December 31, 2021, the Company had a ~~receivable from~~ note receivable/related party receivable resulting from working capital advances to InnovaQor of approximately $~~0.2~~1.0 million ~~during~~and $0.4 million, respectively. The balance at September 30, 2022 of $1.0 million includes amounts due under a note receivable as discussed below.
As of July 1, 2022, the Company had an outstanding receivable from InnovaQor of $803,416. InnovaQor signed a promissory note, dated July 1, 2022, in favor of the Company that provides that InnovaQor will repay the Company $883,757 on December 31, 2022. That amount represents a 10% original issue discount above the loan amount outstanding on July 1, 2022. The Note, in the event of default, bears interest at 18% per annum. During the three and nine months ended September 30, ~~2021.~~2022, the Company recognized $80,156 of the original issue discount as interest income.
During the three and nine months ended September 30, 2022, the Company contracted with InnovaQor to provide ongoing health information technology-related services totaling approximately $53,555 and $133,841, respectively. During the three and nine months ended September 30, 2021, the Company contracted with InnovaQor to provide ongoing health information technology-related services totaling $51,229. In addition, InnovaQor currently subleases office space from the Company on a month to month term at a cost of approximately $9,700 per month for rent and utilities.

The terms of the foregoing ~~transactions~~activities, and ~~the transactions~~those discussed in Notes 1, 6 11 and 1410, are not necessarily indicative of those that would have been agreed to with unrelated parties for similar transactions.
21

Note 98 –Finance and Operating Lease Obligations

We lease property and equipment under finance and operating leases. For leases with terms greater than 12 months, we record the related right-of-use assets and right-of-use obligations at the present value of lease payments over the term. We do not separate lease and non-lease components of contracts.

Generally, we use our most recent agreed upon borrowing interest rate at lease commencement as our interest rate, as most of our operating leases do not provide a readily determinable implicit interest rate.

The following table presents our lease-related assets and liabilities at September 30, ~~2021~~2022 (unaudited) and December 31, ~~2020:~~2021:
Schedule of Lease-related Assets and Liabilities
Balance Sheet Classification
September 30,
2021

December 31,
2020
Balance Sheet Classification
September 30,
2022

December 31,
2021

Assets:
Operating leases Right-of-use operating lease assets $ 877,412 $ 1,000,272 Right-of-use operating lease assets $ 640,386 $ 821,274
Finance leases Property and equipment, net 220,461 249,985
Finance lease Property and equipment, net 220,461 220,461

Total lease assets $ 1,097,873 $ 1,250,257 $ 860,847 $ 1,041,735

Liabilities:
Current:
Operating leases Right-of-use operating lease obligations $ 237,026 $ 172,952 Right-of-use operating lease obligations $ 239,449 $ 247,017
Finance leases Current liabilities 220,461 249,985
Finance lease Current liabilities 220,461 220,461
Noncurrent:
Operating leases Right-of-use operating lease obligations 640,386 827,320 Right-of-use operating lease obligations 400,937 574,257

Total lease liabilities $ 1,097,873 $ 1,250,257 $ 860,847 $ 1,041,735

Weighted-average remaining term:
Operating leases 3.50 years 4.17 years 2.68 years 3.57 years
Finance leases 0 years 0 years
Finance lease (1) 0 years 0 years
Weighted-average discount rate:
Operating leases 13.0 % 13.0 % 13.0 % 13.0 %
Finance leases 4.9 % 4.9 % 4.9 % 4.9 %
21

The following table presents certain information related to lease expense for finance and operating leases for the three ~~months~~ and nine months ended September 30, 2022 and 2021 ~~and 2020:~~(unaudited):
Schedule of ~~Information Related to~~ Lease Expense ~~for Finance and Operating Leases~~

Three Months
Ended
September 30,
2021

Three Months
Ended
September 30,
2020

Nine Months
Ended
September 30,
2021

Nine Months
Ended
September 30,
2020
Three Months Ended
September 30, 2022 Three Months Ended
September 30, 2021 Nine Months Ended
September 30, 2022 Nine Months Ended
September 30, 2021
Finance lease expense:
Depreciation/amortization of leased assets $ - $ - $ - $ 26,349
Depreciation/amortization of lease assets $ - $ - $ - $ -
Interest on lease liabilities - - - 9,455 - - - -
Operating leases:
Short-term lease expense ⁽¹⁾⁽²⁾ 44,342 49,196 151,025 219,138 83,211 44,342 248,250 151,025

Total lease expense $ 44,342 $ 49,196 $ 151,025 $ 254,942 $ 83,211 $ 44,342 $ 248,250 $ 151,025

(1) As of September 30, 2022 and December 31, 2021, the Company was in default under its finance lease obligation, therefore, the aggregate future minimum lease payments and accrued interest under this finance lease in the amount of $0.2 million are deemed to be immediately due.
(2) Expenses are included in general and administrative expenses in the unaudited condensed consolidated statements of operations.
22

Other Information

The following table presents supplemental cash flow information for the nine months ended September 30, 2022 and 2021 ~~and 2020:~~(unaudited):
Schedule of Lease Supplemental Cash Flow Information

Nine Months
Ended
September 30,
2021

Nine Months
Ended
September 30,
2020
Nine Months Ended
September 30, 2022 Nine Months Ended
September 30, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases $ 168,923 $ 98,374
Operating cash flows for finance leases - 9,455
Operating cash flows for operating leases obligations $ 218,846 $ 168,923
Operating cash flows for finance lease $ - $ -
Financing cash flows for finance lease payments 29,524 200,709 $ - $ 29,524

Aggregate future minimum lease payments under right-of-use operating and finance leases are as ~~follows:~~follows (unaudited):
Schedule of Future Minimum Rentals Under ~~Right-to-use~~Right-of-use Operating and Finance Leases

Right-of-Use
Operating
Leases

Finance
Leases
Right-of-Use Operating Leases Finance Lease
Twelve months ended September 30, 2022 $ 337,357 $ 224,252
Twelve months ended September 30, 2023 307,082 -
Twelve months ended September 30, 2024 217,839 -
Twelve months ended September 30, 2025 223,795 -
Twelve months ended September 30, 2026 18,650 -
Twelve months ending September 30:
2023 $ 307,082 $ 224,252
2024 217,839 -
2025 223,795 -
2026 18,650 -
2027 - -
Thereafter - - - -
Total 1,104,723 224,252 767,366 224,252

Less interest - -
(126,980
) (3,791 )
Present value of minimum lease payments $ 1,104,723 $ 224,252 640,386 220,461

Less current portion of lease obligations (227,311 ) (3,791 ) (239,449 ) (220,461 )
Lease obligations, net of current portion $ 877,412 $ 220,461 $
400,937
$ -

As of September 30, 2021, the Company was in default under its finance lease obligation, therefore, the aggregate future minimum lease payments and accrued interest under this finance lease totaling approximately $~~0.2~~ ~~million is deemed to be immediately due.~~
22

Note 109 – Derivative Financial Instruments, Fair Value ~~Measurements~~and Deemed Dividends

Fair Value Measurements
We define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.
We apply the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
~~Level 1 – Quoted prices in active markets for identical assets or liabilities.~~
Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
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~~Level 3 – Inputs that are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.~~

The estimated fair value of financial instruments was determined by the Company using available market information and valuation methodologies considered to be appropriate. The fair value measurements accounting guidance is more fully discussed in Note 1. At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the carrying value of the Company’s accounts receivable, accounts payable and accrued expenses approximated their fair values due to their short-term nature.

The following table sets forth the financial assets and liabilities carried at fair value measured on a recurring basis as of September 30, ~~2021~~2022 (unaudited) and December 31, ~~2020:~~2021:
Schedule of Fair Value of Assets and Liabilities Measured on Recurring Basis
Level 1 Level 2 Level 3 Total
(unaudited)
As of December 31, 2020:

InnovaQor Series B Preferred Stock $ - $ - $ - $ -
Embedded conversion option of debenture - $ - $ 455,336 $ 455,336
Total $ - $ - $ 455,336 $ 455,336

As of September 30, 2021:
InnovaQor Series B Preferred Stock $ - $ - $ 9,016,072 $ 9,016,072
Embedded conversion option of debenture - - 455,336 455,336
Total $ - $ - $ 9,471,408 $ 9,471,408
Level 1 Level 2 Level 3 Total

As of September 30, 2022:
Asset - InnovaQor Series B-1 Preferred Stock $ - $ - $ 9,016,072 $ 9,016,072
Liability - Embedded conversion option of debenture - - 455,336 455,336

As of December 31, 2021:
Asset - InnovaQor Series B-1 Preferred Stock $ - $ - $ 9,016,072 $ 9,016,072
Liability - Embedded conversion option of debenture       -        - 455,336 455,336

The fair value of the InnovaQor Series BB-1 Preferred Stock of ~~$9.1~~$9.0 million as of September 30, 2022 and December 31, 2021 is more fully discussed in Note ~~14.~~13.

The Company utilized the following method to value its derivative liability as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 for an embedded conversion option related to an outstanding convertible debenture valued at $455,336. The Company determined the fair value by comparing the conversion price per share, (which based on the conversion terms is 85% of the market price of the ~~Company’~~Company’s common ~~stock)~~stock, multiplied by the number of shares issuable at the balance sheet dates to the actual price per share of the Company’s common stock multiplied by the number of shares issuable at that date with the difference in value recorded as a liability. There was 0no change in the value of the embedded conversion option in the three and nine months ended September 30, 2022 and 2021 and ~~2020~~the year ended December 31, 2021 as there was 0no change in the conversion price terms during the periods.

Deemed Dividends
During the nine months ended September 30, 2022 and during the three and nine months ended September 30, 2021, ~~and 2020,~~ the conversions of preferred stock triggered a further reduction in the exercise prices of warrants (and conversion prices of debentures ~~and warrants~~in the 2021 periods) containing ~~ratchet features that had not already ratcheted~~ down ~~to their floor.~~round provisions. In accordance with U.S. GAAP, the incremental fair value of the ~~debentures and~~ warrants, as a result of the decreases in the ~~conversion/exercise~~exercise/conversion prices, was measured using Black ~~Scholes. The following assumptions were utilized in the Black~~ Scholes valuation ~~models for the three months ended September 30, 2021: risk free rates ranging from~~ ~~0.04% to~~ ~~0.55%, volatility ranging from~~ ~~25.0% to~~ ~~574.0% and terms ranging from one day to~~ ~~three years. The following assumptions were utilized in the Black Scholes valuation models for the nine months ended September 30, 2021: risk free rates ranging from~~ ~~0.04% to~~ ~~0.55%, volatility ranging from~~ ~~25.0% to~~ ~~574.0% and terms ranging from one day to~~ ~~three years. The incremental fair value of $259.2~~ ~~million $408.5~~ ~~million was recorded as deemed dividends for the three and nine months ended September 30, 2021, respectively.~~models. The following assumptions were utilized in the Black Scholes valuation models for the three and nine months ended September 30, ~~2020:~~2021: risk free rates ranging from 0.04% to 0.55%, volatility ranging from 25.0% to 574.0% and terms ranging from one day to three years. The following assumptions were utilized in the Black Scholes valuation models for the nine months ended September 30, 2022: risk free rates ranging from ~~0.09~~0.0% to ~~0.12~~2.73%, volatility ranging from ~~134.3~~1.94% to ~~208.2~~1,564% and ~~weighted average lives~~terms ranging from ~~.25~~ 0.01to ~~1.49~~ 2.45years. ~~The~~Based on the Black Scholes valuations, the incremental value of modifications to warrants (and debentures in the 2021 periods) as a result of the down round provisions of $~~59.8~~ 258.9million ~~was~~were recorded as deemed dividends ~~in both~~during the three months ended September 30, 2021 and $330.5 million and $408.5 million were recorded during the nine months ended September 30, ~~2020,~~2022 and 2021, respectively.
2423

In addition, deemed dividends of ~~$0.3~~$0.1 million and $0.3 million were recorded in the three and nine months ended September 30, 2022, respectively, as a result of the issuances of shares of our Series P Preferred Stock, as more fully discussed in Note 10. Deemed dividends of $0.3 million were recorded in both the three and nine months ended September 30, 2021 as a result of the issuance of warrants to acquire ~~47.5 million~~4,750 shares of the Company’s common stock and deemed dividends of ~~$0.3~~$0.3 million were recorded in both the three and nine months ended September 2021 as a result of the extension of warrants. These deemed dividends are more fully discussed in Note 11. Deemed dividends of $3.2 million were recorded in the nine months ended September 30, 2020 as a result of the issuance of the Series M Preferred Stock as more fully discussed in Note 11 and deemed dividends of $3.7 million were recorded in the three and nine months ended September 30, 2020 as a result of the issuance of our Series N Preferred Stock as more fully discussed in Note 11.10. Deemed dividends are also discussed in Notes 1 and 3.

Note 1110 – Stockholders’ Deficit

Authorized Capital

~~As of September 30, 2021, the~~The Company ~~had~~has ~~10,000,000,000~~250,000,000,000 authorized shares of ~~common stock~~Common Stock at a par value of $$0.0001 ~~par value~~per share and 5,000,000 authorized shares of Preferred Stock at a par value of $$0.01~~. Effective November 5, 2021, the Company increased its authorized shares of common stock to~~ ~~50,000,000,000~~ ~~as more fully discussed in Note 16. No change was made to the authorized shares of preferred stock.~~ per share.

Preferred Stock

~~The Company has~~ ~~5,000,000shares, par value~~ ~~$0.01, of preferred stock authorized.~~ As of September 30, ~~2021,~~2022, the Company had outstanding shares of preferred stock consisting of ~~1,750,000~~ 10~~shares of its Series F Convertible Preferred Stock,~~ 10 shares of its Series H Convertible Preferred Stock (the “Series H Preferred Stock”), 250,000shares of its Series L Convertible Preferred Stock (the “Series L Preferred Stock”),~~20,810~~ 20,810.35~~.35~~ shares of its Series M Convertible Redeemable Preferred Stock (the “Series M Preferred Stock”),~~11,084~~ 3,582.96 shares of its Series N Preferred Stock, ~~and~~ ~~5,500~~ 9,261.54shares of its Series O Convertible Redeemable Preferred Stock (the “Series O Preferred Stock”). and 10,194.87 shares of its Series P Preferred Stock. The Company’s outstanding shares of preferred stock do not contain mandatory redemption or other features that would require them to be presented on the balance sheet outside of equity and, therefore, they qualify for equity accounting treatment. As a result of the equity accounting treatment, fair value accounting is not required in connection with the issuances of the stock and no gains, losses or derivative liabilities have been recorded in connection with the preferred stock.
Series F Preferred Stock
On September ~~30, 2021,~~27, 2022, the Company’s then outstanding 17,500 shares of Series F Convertible Preferred Stock ~~is convertible~~that were issued on September 27, 2017 in connection with the acquisition of Genomas, Inc. and valued at $174,097 were mandatorily converted into 1one share of the Company’s common stock ~~and~~in accordance with their terms.
Series H Preferred Stock
Each of the 10 shares of the Series H ~~Convertible~~ Preferred Stock has a stated value of $1,000 per share and is convertible into37 ~~million~~ shares of the Company’s common ~~stock. The Series L Preferred Stock,~~stock at a conversion price of 85% of the ~~Series M Preferred Stock,~~volume weighted average price of the ~~Series N Preferred Stock and~~Company’s common stock at the ~~Series O Preferred Stock are more fully described below. In addition, on November 7, 2021, the Company issued its Series P Preferred Stock, which is more fully described in Note 16.~~time of conversion.

Series L Preferred Stock

~~On May 4, 2020, the Company filed a Certificate of Designation with the Secretary of State of the State of Delaware to authorize the issuance of up to~~ ~~250,000~~ ~~shares of its Series L Preferred Stock. On May 5, 2020, the Company entered into an exchange agreement with Alcimede. Pursuant to the exchange agreement, the Company issued to Alcimede~~ ~~250,000~~ ~~shares of its~~The Series L Preferred Stock ~~in exchange for the~~ ~~250,000~~ ~~shares of the Company’s Series K Preferred Stock~~is held by ~~Alcimede. Upon the issuance~~Alcimede LLC and has a stated value of ~~the Series L Preferred Stock to Alcimede, the shares of Series K Preferred Stock were cancelled.~~$1.00 per share. The Series L Preferred Stock is not entitled to receive any dividends. Each share of the Series L Preferred Stock is convertible into shares of the Company’s common stock at a conversion price equal to the average closing price of the Company’s common stock on the ten trading days immediately prior to the conversion date. On September 30, 2022, the Series L Preferred Stock was convertible into 2.5 billion shares of the Company’s common stock.

Series M Preferred Stock

~~The Company’s Board of Directors has designated~~ ~~30,000~~ ~~shares of the~~ ~~5,000,000~~ ~~shares of authorized preferred stock as the Series M Preferred Stock. Each share of Series M Preferred Stock has a stated value of~~ ~~$1,000~~. On June 30, 2020, the Company and Mr. Diamantis entered into an exchange agreement wherein Mr. Diamantis agreed to the extinguishment of the Company’s indebtedness to ~~Mr. Diamantis~~him totaling $$18.8 million, including accrued interest, on that date in exchange for 22,000 shares of the Company’s Series M Preferred Stock with a par value of $$0.01 per ~~share. As~~share and a ~~result of the exchange, the Company recorded a deemed dividend of approximately~~ ~~$3.2~~ ~~million in the nine months ended September 30, 2020, which represented the difference between the~~ ~~$18.8~~ ~~million of debt and accrued interest exchanged and the~~stated value of ~~the Series M Preferred Stock of~~ $~~$22.0~~1,000 ~~million.~~per share. See Note 6 for a discussion of the Company’s ~~current~~ indebtedness to Mr. ~~Diamantis.~~ Diamantis as of September 30, 2022 and December 31, 2021.
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The terms of the Series M Preferred Stock ~~were set forth in the Company’s Current Report on Form 8-K filed with the SEC on June 16, 2020.~~
~~On August 27, 2021, the Company entered into an exchange agreement with Mr. Diamantis. Pursuant to the exchange agreement, Mr. Diamantis exchanged~~ ~~570~~ ~~shares of his Series M Preferred Stock for~~ ~~95,000,000~~ ~~shares of common stock and warrants to purchase~~ ~~47.5~~ ~~million shares of the Company’s common stock at an exercise price of~~ ~~$.007~~ ~~per share. The warrants have a~~ ~~three-year~~ ~~term and, as of September 30, 2021, are exercisable into~~ ~~1.2~~ ~~billion shares of the Company’s common stock at an exercise price of~~ ~~$0.00027~~ ~~per share as a result of down-round provision features. The Company recorded the initial fair value of the warrants as deemed dividends of~~ ~~$0.3~~ ~~million during the three and nine months ended September 30, 2021. The initial fair value was calculated using the Black Scholes valuation model using the following assumptions: risk free rate of~~ ~~0.41%, volatility of~~ ~~364% and a term of~~ ~~three years~~.
25
~~Each~~include: (i) each share of the Series M Preferred Stock is convertible into shares of the Company’s common stock at a conversion price equal to ~~90%~~90% of the average closing price of the Company’s common stock on the ten trading days immediately prior to the conversion date but in any event not less than the par value of the Company’s common ~~stock.~~ ~~During~~stock; (ii) dividends at the ~~nine months ended September 30, 2021, Mr. Diamantis converted a total~~rate per annum of ~~610.65~~ 10~~shares~~% of ~~his~~the stated value per share shall accrue on each outstanding share of Series M Preferred Stock ~~with~~from and after the date of the original issuance of such share of Series M Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization). The dividends shall accrue from day to day, whether or not declared, and shall be cumulative and non-compounding; provided, however, that such dividend shall be payable only when, as, and if declared by the Board of Directors and the Company shall be under no obligation to pay such dividends. No cash dividends shall be paid on the Company’s common stock unless the dividends are paid on the Series M Preferred Stock; and (iii) each holder of the Series M Preferred Stock shall be entitled to vote on all matters submitted to a ~~stated value~~vote of ~~$0.6~~ ~~million into~~ ~~450,000~~ ~~shares~~the holders of the Company’s common ~~stock and, as discussed above, he exchanged~~ ~~570~~ stock. Regardless of the number of shares of ~~his~~ Series M Preferred Stock ~~with a stated value~~outstanding and so long as at least one share of ~~$0.6~~ ~~million,~~ ~~into~~ ~~95,000,000~~ Series M Preferred Stock is outstanding, the outstanding shares of Series M Preferred Stock shall have the ~~Company’s~~number of votes, in the aggregate, equal to 51% of all votes entitled to be voted at any meeting of stockholders or action by written consent. Each outstanding share of the Series M Preferred Stock shall represent its proportionate share of the 51% allocated to the outstanding shares of Series M Preferred Stock in the aggregate. The Series M Preferred Stock shall vote with the common ~~stock.~~
stock and any other voting securities as if they were a single class of securities. On August 13, 2020, Mr. Diamantis entered into a Voting Agreement and Irrevocable Proxy with the Company, Mr. Lagan and Alcimede LLC (of which Mr. Lagan is the sole manager) pursuant to which Mr. Diamantis granted an irrevocable proxy to Mr. Lagan to vote the Series M Preferred Stock held by Mr. ~~Diamantis,~~Diamantis. Mr. Diamantis has retained all other rights under the Series M Preferred Stock.

During the nine months ended September 30, 2021, Mr. Diamantis converted a total of 610.65 shares of his Series M Preferred Stock with a stated value of $0.6 million into 45 shares of the Company’s common stock. On August 27, 2021, the Company entered into an exchange agreement with Mr. Diamantis. Pursuant to the exchange agreement, Mr. Diamantis exchanged 570 shares of his Series M Preferred Stock with a stated value of approximately $0.6 million for 9,500 shares of the Company’s common stock and warrants to purchase 4,750 shares of the Company’s common stock at an exercise price of $70.00 per share. The Company recorded $0.3 million of deemed dividends in both the three and nine months ended September 30, 2021 as a result of the issuance of the warrants. The warrants have athree-year term and, as of September 30, 2022, are exercisable into 3.7 billion shares of the Company’s common stock at an exercise price of $0.00009 per share as a result of down-round provision features. On September 30, 2022, 20,810.35 shares of Series M Preferred Stock remained outstanding and were convertible into 208.1 billion shares of the Company’s common stock.
Series N Preferred Stock

The Company’s Board of Directors has designated 50,000 shares of the 5,000,000 shares of authorized preferred stock as the Series N Preferred Stock. Each share of Series N Preferred Stock has a stated value of $1,000. On August 31, 2020, the Company and its debenture holders exchanged, under the terms of ~~the~~ Exchange, Redemption and Forbearance Agreements, ~~(the “Exchange and Redemption Agreements”),~~ certain outstanding debentures and all of the then outstanding shares of the Company’s Series I-1 Convertible Preferred Stock ~~(the “Series I-1 Preferred Stock”)~~ and Series I-2 Convertible Preferred Stock ~~(the “Series I-2 Preferred Stock”)~~ for ~~30,435,52~~ 30,435.52shares of the Company’s Series N Preferred Stock.
The terms of the Series N Preferred Stock ~~were set forth in~~include: (i) each share of the Series N Preferred Stock is convertible into shares of the Company’s ~~Current Report on Form 8-K filed with~~common stock, at any time and from time to time, at the ~~SEC on September 1, 2020. During the three and nine months ended September 30, 2020, as a result~~option of the ~~Exchange~~holder, into that number of shares of common stock determined by dividing the stated value of such share of Series N Preferred Stock, plus any accrued declared and ~~Redemption Agreements,~~unpaid dividends, by the conversion price; (ii) the conversion price is equal to 90% of the lowest VWAP during the 10 trading days immediately prior to the conversion date; (iii) dividends at the rate per annum of 10% of the stated value per share shall accrue on each outstanding share of Series N Preferred Stock from and after the date of the original issuance of such share of Series N Preferred Stock (the “Series N Preferred Accruing Dividends”). The Series N Preferred Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative and non-compounding; provided, however, that such Series N Preferred Accruing Dividends shall be payable only when, as, and if declared by the Board of Directors. No cash dividends shall be paid on the common stock unless the Series N Preferred Accruing Dividends are paid; and (iv) except as provided below or by law, the Series N Preferred Stock shall have no voting rights. However, as long as any shares of Series N Preferred Stock are outstanding, the Company ~~recorded: (i) a $0.4~~ ~~million gain on~~shall not, without the ~~extinguishment of debt, which included the potential exchange premium of $1.65~~ ~~million, and a $0.3~~ ~~million fair value adjustment to the debenture principal, partially offset by the reduction in interest expense of $2.3~~ ~~million; and (ii) deemed dividends of $3.7~~ ~~million as a result~~affirmative vote of the ~~exchange~~holders of a majority of the ~~debentures and Series I-1 Preferred Stock and Series I-2 Preferred Stock for~~then outstanding shares of the Series N Preferred ~~Stock.~~Stock, (a) alter or change adversely the powers, preferences or rights given to the Series N Preferred Stock or alter or amend the Certificate of Designation, (b) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders, (c) increase the number of authorized shares of the Series N Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.
25

During the nine months ended September 30, 2022 and 2021, the holders converted 2,352 shares and 18,350.1 shares, respectively, of their Series N Preferred Stock with a stated value of $2.4 million and $18.4 million, respectively, into 8.4 billion and 486,186 shares of the Company’s common stock. As of December 31, 2021, the holders had converted a total of 24,499.64shares of their Series N Preferred Stock, with a stated value of $~~18.4~~ 24.5million, into~~4.7~~ 4.2 ~~billion~~million shares of the Company’s common stock. ~~During the nine months ended~~On September 30, ~~2020, the holders converted~~2022, ~~131~~3,582.96 shares of ~~their~~ Series N Preferred Stock ~~with a stated value of $~~remained outstanding and were convertible into~~0.1~~ 39.8~~million, into~~ ~~589~~ billion shares of the Company’s common stock.
Series O Preferred Stock

On May 10, 2021, the Company closed an offering of shares of its newly-authorized Series O Preferred Stock. The offering was pursuant to the terms of the ~~Securities Purchase Agreement,~~securities purchase agreement dated as of May 10, 2021. On September 7, 2021, ~~(the “Purchase Agreement”),~~the Company entered into a second securities purchase agreement and on October 28, 2021, the Company entered into a third securities purchase agreement. These agreements were between the Company and certain existing institutional investors of the Company. ~~The Purchase Agreement provided for the issuance of up to~~ ~~4,400~~ ~~shares of Series O Preferred Stock at four closings of~~ ~~1,100~~ ~~shares each. The four closings occurred on May 10, 2021, May 18, 2021, July 12, 2021 and August 10, 2021.~~
~~The~~ ~~Company entered into a second Securities Purchase Agreement (the “Second Purchase Agreement”), dated as of September 7, 2021, between~~Under these agreements, the Company ~~and the existing institutional investors of the Company. The Second Purchase Agreement provided for the issuance of up to~~ ~~1,100~~ ~~shares of the Series O Preferred Stock at two closings of~~ ~~550~~ ~~shares each. The two closings under the Second Purchase Agreement occurred on September 7, 2021 and September 30, 2021.~~
~~As a result, as of September 30, 3021, the Company has~~ issued ~~5,500~~9,900 shares of its Series O Preferred Stock and it received $9.0 million in aggregate proceeds of which $$5.0 million~~$2.5~~ ~~million of which~~ was received in the ~~three months ended June 30, 2021 and~~ ~~$2.5~~ ~~million of which was received in the three~~nine months ended September 30, 2021.
On October 28, 2021, the Company entered into the Securities Purchase Agreement, dated as of October 28, 2021 (the “October 28 Agreement”), among the Company and certain existing institutional investors of the Company. The October 28 Agreement provides for the issuance of up to ~~4,400~~ ~~shares of the Company’s Series O Preferred Stock at two closings of~~ ~~2,200~~ ~~shares each as more fully discussed in Note 16.~~
The Series O Preferred Stock, which has been issued for cash, does not contain mandatory redemption or other features that would require it to be presented on the balance sheet outside of equity and, therefore, it qualifies for equity accounting treatment. As a result of the equity accounting treatment, fair value accounting is not required in connection with the issuances of the stock and no gains, losses, derivative liabilities or deemed dividends have been recorded in connection with the issuances of the stock.
26

The terms of the Series O Preferred Stock ~~were set forth in the Company’s Current Report on Form 8-K filed with the SEC on May 11, 2021, in particular:~~
~~General~~~~. The Company’s Board~~include: (i) each share of ~~Directors has designated~~ ~~10,000~~ ~~shares of the~~ ~~5,000,000~~ ~~authorized shares of preferred stock as~~ the Series O Preferred ~~Stock.~~Stock is convertible into shares of the Company’s common stock, at any time and from time to time, at the option of the holder, into that number of shares of common stock determined by dividing the stated value of such share of Series O Preferred Stock, plus any accrued declared and unpaid dividends, by the conversion price; (ii) the conversion price is equal to 90% of the lowest VWAP during the 10 trading days immediately prior to the conversion date; (iii) dividends at the rate per annum of 10% of the stated value per share shall accrue on each outstanding share of Series O Preferred Stock from and after the date of the original issuance of such share of Series O Preferred Stock (the “Series O Preferred Accruing Dividends”). The Series O Preferred Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative and non-compounding; provided, however, that such Series O Preferred Accruing Dividends shall be payable only when, as, and if declared by the Board of Directors. Each share of the Series O Preferred Stock has a stated value of $$1,000.
~~Voting Rights~~~~. Except~~ No cash dividends shall be paid on the common stock unless the Series O Preferred Accruing Dividends are paid; and (iv) except as provided below or by law, the Series O Preferred Stock shall have no voting rights. However, as long as any shares of Series O Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series O Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series O Preferred Stock or alter or amend the Certificate of Designation, (b) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders, (c) increase the number of authorized shares of the Series O Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.

~~Dividends~~~~. Dividends at~~During the ~~rate per annum~~nine months ended September 30, 2022, the holders converted 638 shares of their Series O Preferred Stock with a stated value of $~~10%~~0.6 million into 6.7 billion shares of the ~~stated value per share shall accrue on each outstanding share~~Company’s common stock. On September 30, 2022, 9,261.54 shares of Series O Preferred Stock ~~from~~remained outstanding and ~~after the date~~were convertible into 102.9 billion shares of the original issuance of such share of Series O Preferred Stock (the “Series O Preferred Accruing Dividends”). The Series O Preferred Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative and non-compounding; ~~provided~~, ~~however, that such Series O Preferred Accruing Dividends shall be payable only when, as, and if declared by the Board of Directors. No cash dividends shall be paid on the~~Company’s common ~~stock unless the Series O Preferred Accruing Dividends are paid.~~stock.

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

~~Conversion~~.On November 7, 2021, the Company entered into Exchange and Amendment Agreements (the “November 2021 Exchange Agreements”) with certain institutional investors in the Company wherein the investors agreed to reduce their holdings of $1.1 million principal value of then outstanding warrant promissory notes payable and $4.5 million of then outstanding non-convertible debentures, plus accrued interest thereon of $1.5 million, by exchanging the indebtedness and accrued interest for 8,544.87 shares of the Company’s Series P Preferred Stock. Each share of the Series OP Preferred Stock has a stated value of $1,000. In addition, pursuant to the November 2021 Exchange Agreements, the expiration dates of the March Warrants that were issued by the Company to the debenture holders in March 2017 were extended from March 21, 2022 to March 21, 2024.
26
On March 11, 2022, under the terms of a securities purchase agreement dated January 31, 2022, the Company issued to the institutional investors an additional 1,100 shares of its Series P Preferred Stock for aggregate proceeds of $1.0 million. On April 1, 2022, the Company issued an additional 550 shares of its Series P Preferred Stock and received proceeds of $0.5 million. During the nine months ended September 30, 2022, the Company recorded $0.3 million of deemed dividends as a result of the issuances of shares of its Series P Preferred Stock. The deemed dividends resulted from the difference between the stated value of the shares issued and the proceeds received, as well as the 10% conversion price discount.
The terms of the Series P Preferred Stock include: (i) each share of the Series P Preferred Stock is convertible into shares of the Company’s common stock, at any time and from time to time, at the option of the holder, into that number of shares of common stock determined by dividing the stated value of such share of Series OP Preferred Stock, plus any accrued declared and unpaid dividends, by the conversion ~~price.~~ ~~The~~price; (ii) the conversion price is equal to ~~90%~~90% of the lowest VWAP during the 10 trading days immediately prior to the conversion ~~date. Holders~~date; (iii) dividends at the rate per annum of 10% of the stated value per share shall accrue on each outstanding share of Series P Preferred Stock from and after the date of the original issuance of such share of Series P Preferred Stock (the “Series P Preferred Accruing Dividends”). The Series P Preferred Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative and non-compounding; provided, however, that such Series P Preferred Accruing Dividends shall be payable only when, as, and if declared by the Board of Directors. No cash dividends shall be paid on the common stock unless the Series P Preferred Accruing Dividends are paid; and (iv) except as provided below or by law, the Series P Preferred Stock shall have no voting rights. However, as long as any shares of Series P Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series OP Preferred Stock, ~~are prohibited from converting~~(a) alter or change adversely the powers, preferences or rights given to the Series OP Preferred Stock ~~into~~or alter or amend the Certificate of Designation, (b) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders, (c) increase the number of authorized shares of ~~common stock if, as a result of such conversion,~~ the ~~holder, together~~Series P Preferred Stock, or (d) enter into any agreement with ~~its affiliates, would own more than 9.99%~~respect to any of the total number of shares of common stock then issued and outstanding. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days after notice to the Company.foregoing.

~~Liquidation Preference~~. Upon any liquidation, dissolution or winding up of the Company, the holders of the Series O Preferred Stock shall be entitled to receive an amount equal to the stated value of the Series O Preferred Stock, plus any accrued declared and unpaid dividends thereon and any other fees or liquidated damages then due and owing thereon, for each share of the Series O Preferred Stock before any distribution or payment shall be made on any junior securities.On September 30, 2022, 10,194.87
~~Redemption~~. At any time the Company shall have the right to redeem all, or any part, of the Series O Preferred Stock then outstanding. The Series O Preferred Stock subject to redemption shall be redeemed by the Company in cash in an amount equal to the stated value of the shares of the Company’s Series OP Preferred Stock ~~being redeemed plus all accrued declared~~were outstanding and ~~unpaid dividends.~~were convertible into 113.3 billion shares of the Company’s common stock.

Common Stock

The Company had ~~4,777,350,000~~15.1 billion and ~~39,648~~4.2 million shares of its common stock issued and outstanding at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. ~~During the nine months ended September 30, 2021, the Company issued~~ ~~450,000~~ ~~shares of its common stock upon the conversion of~~ ~~619.65~~ ~~shares of its Series M Preferred Stock,~~ ~~95,000,000~~ ~~shares of its common stock upon the exchange of 570 shares of its Series M Preferred Stock and 4.7 billion shares of its common stock upon the conversions of~~ ~~18,355.5~~ ~~shares of its Series N Preferred Stock. During the nine months ended September 30, 2020, the Company issued~~ ~~313~~ ~~shares of its common stock upon the conversion of~~ ~~236.3~~ ~~shares of its Series I-2 Preferred Stock and~~ ~~589~~ ~~shares of its common stock upon the conversion of~~ ~~131~~ ~~shares of its Series N Preferred Stock.~~
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The Company has outstanding options, warrants, convertible preferred stock and convertible debentures. Exercise of the outstanding options and warrants, and conversions of the convertible preferred stock and debentures could result in substantial dilution of the Company’s common stock and a decline in the market price of the common stock. In addition, the terms of certain of the warrants, convertible preferred stock and convertible debentures issued by the Company provide for reductions in the per share exercise prices of the warrants and the per share conversion prices of the debentures and preferred stock (if applicable and subject to a floor in certain cases), in the event that the Company issues common stock or common stock equivalents (as that term is defined in the agreements) at an effective exercise/conversion price that is less than the then exercise/conversion prices of the outstanding warrants, preferred stock or debentures, as the case may be. These provisions, as well as the issuances of debentures and preferred stock with conversion prices that vary based upon the price of our common stock on the date of conversion, have resulted in significant dilution of the Company’s common stock and have given rise to reverse splits of its common stock, including the Reverse Stock Splits, which are more fully discussed in Note 1. See Note 1615 for a discussion of the number of shares of the Company’s common stock and common stock equivalents outstanding as of November 10, ~~2021.~~2022.

On August 13, 2020, Mr. Diamantis entered into the Voting Agreement with the Company, Mr. Lagan and Alcimede LLC (of which Mr. Lagan is the sole manager) pursuant to which Mr. Diamantis granted an irrevocable proxy to Mr. Lagan to vote the Series M Preferred Stock held by Mr. Diamantis. Mr. Diamantis has retained all other rights under the Series M Preferred Stock. Regardless of the number of shares of Series M Preferred Stock outstanding and so long as at least one share of Series M Preferred Stock is outstanding, the outstanding shares of Series M Preferred Stock shall have the number of votes, in the aggregate, equal to 51% of all votes entitled to be voted at any meeting of stockholders or action by written consent. This means that the holders of Series M Preferred Stock have sufficient votes, by themselves, to approve or defeat any proposal voted on by the Company’s stockholders, unless there is a supermajority required under applicable law or by agreement.
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As a result of the Voting Agreement discussed above and the November 5, 2021 Amendment to the Company’s Certificate of Incorporation, as amended, to provide that the number of authorized shares of the Company’s common stock or preferred stock may be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Company, which is more fully discussed in Note 1, as of the date of filing this report, the Company believes that it has the ability to ensure that it has and or can obtain sufficient authorized shares of its common stock to cover all potentially dilutive common shares outstanding.

~~Effective November 5, 2021, the Company increased its authorized shares of common stock to~~ ~~50,000,000,000~~ ~~as more fully discussed in Note 16.~~
Stock Options

The Company maintained and sponsored the Tegal Corporation 2007 Incentive Award Equity Plan (the “2007 Equity Plan”). Tegal Corporation is the prior name of 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. The 2007 Equity Plan terminated pursuant to its terms in September 2017. As of September 30, 2022 and December 31, 2021, the Company had 26 stock options ~~were~~ outstanding ~~and exercisable~~ with a weighted average exercise price of $~~$2,992,125~~2.9 million per ~~share. No options were issued, forfeited or expired during the nine months ended September 30, 2021. The remaining~~share and a weighted average remaining contractual ~~term is~~life of ~~4.62~~ 3.62~~years.~~ years for options outstanding and exercisable. The intrinsic value of ~~the~~ options exercisable at ~~each~~September 30, 2022 and December 31, 2021 was $0. As of September 30, ~~2021 and December 31, 2020~~2022, there was ~~$0. No~~no remaining compensation expense ~~was recorded in the three and nine months ended September 30, 2021 and 2020~~associated with stock options as all of the outstanding options ~~were~~had fully vested as of December 31, 2019.

Warrants
The following summarizes the information related to warrant activity during the nine months ended September 30, 2022:
Schedule of Warrants Activity

Number of
Shares of
Common Stock
Issuable for
Warrants

Weighted
average
exercise price

Balance at December 31, 2021 54,280,658 $ 1.43
Expiration of warrants (33,601,209 ) (0.8970 )
Increase in number of shares of common stock issuable under warrants during the period as a result of down round provisions 511,312,671,644 -
Balance at September 30, 2022 511,333,351,093 $ 0.00009

The Company, as part of various debt and equity financing transactions, has issued warrants to purchase shares of the Company’s common stock exercisable into a total of ~~182.7~~ 511.3billion shares at September 30, ~~2021.~~2022. During the nine months ended September 30, ~~2021,~~2022, 33.6 million warrants expired and, as a result of the ~~anti-dilution~~down round provisions of outstanding warrants, the exercise prices of certain warrants decreased and they became exercisable into an additional ~~182.7~~ 511.3billion shares of the Company’s common stock. ~~Certain of these warrants were issued in connection with the issuances of the debentures. Debentures are more fully discussed in Note 7.~~

Included in the warrants outstanding at September 30, ~~2021,~~2022 were warrants issued in March 2017 in connection with the ~~debentures issued~~March 2017 Debenture. (The March 2017 Debenture is more fully discussed in ~~March 2017.~~Note 6.) The Company issued these warrants to purchase shares of the Company’s common stock to several accredited investors (the “March Warrants”). AtOn September 30, ~~2021,~~2022, these warrants were exercisable into an aggregate of approximately ~~177.8~~ 507.6billion shares of the Company’s common stock. The March Warrants were issued to the investors in three tranches, Series A Warrants, Series B Warrants and Series C Warrants. At September 30, ~~2021,~~2022, the Series A Warrants were exercisable for ~~66.5~~190.0 billion shares of the Company’s common stock. They were exercisable upon issuance in March 2017 and ~~have a~~had an initial term of exercise equal to five years. AtOn September 30, ~~2021,~~2022, the Series B Warrants were exercisable for ~~42.6~~ 127.6billion shares of the Company’s common stock and ~~are~~were exercisable, prior to the extension discussed below, until March ~~31,~~21, 2022. AtOn September 30, ~~2021,~~2022, the Series C Warrants were exercisable for ~~68.7~~ 190.0billion shares of the Company’s common stock and ~~have a~~had an initial term of five yearsprovided such warrants shall only vest if, when and to the extent that the holders exercise the Series B Warrants. On November 7, 2021, the expiration dates of the March Warrants were extended to March 21, 2024~~, as more fully discussed~~ in ~~Note 16. At~~connection with the November 2021 Exchange Agreements. On September 30, ~~2021,~~2022, the Series A, Series B and Series C Warrants each have an exercise price of $~~$0.00027~~ 0.00009per share, which reflects down round provision adjustments pursuant to their terms. The March Warrants are subject to “full ratchet” and other customary anti-dilution protections. During the three and nine months ended September 30, 2021 and 2020, reductions in the exercise prices of the March Warrants have given rise to deemed dividends. Deemed dividends are also discussed below and in Notes 1, 3 and 10.

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~~The Company extended certain common stock warrants during the three and nine months ended September 30, 2021, and as a result of the extension, deemed dividends of~~ $~~0.3~~ million were recorded during the three and nine months ended September 30, 2021. The initial fair value was calculated using the Black Scholes valuation model using the following assumptions: risk free rate of ~~0.05%, volatility of~~ ~~230% and a term of~~ ~~six months~~.

The number of shares of common stock issuable under outstanding warrants ~~issued~~ and ~~outstanding as well as~~ the exercise prices of the warrants reflected in the table ~~below~~above have been adjusted to reflect the full ratchet and other dilutive and down round provisions pursuant to the warrant agreements. As a result of the full ~~ratchet~~down round provisions of the majority of the outstanding warrants (subject to a floor in some cases), subsequent issuances of the Company’s common stock or common stock equivalents at prices below the then current exercise prices of the warrants have resulted in increases in the number of shares issuable pursuant to the warrants and decreases in the exercise prices of the warrants.
~~The following summarizes the information related to the number of shares of common stock issuable under outstanding warrants during the nine months ended September 30, 2021:~~
~~Schedule of Warrants Activity~~

Number of
Shares of
Common Stock
Issuable for
Warrants

Weighted
average exercise price

Balance at December 31, 2020 4,571,165 $ 19.99
Issuance of warrants 47,500,000 0.007
Expiration of warrants (44,078,213 ) (0.3110 )
Increase in number of shares of common stock issuable under warrants during the period as a result of down round provisions 182,655,951,726 -
Balance at September 30, 2021 182,663,835,038 $ 0.00043
~~The~~ ~~47.5~~ million warrants issued during the nine months ended September 30, 2021 were issued pursuant to an exchange agreement with the holder of the Series M Preferred Stock as more fully discussed above under the heading, ~~“Series M Preferred Stock.”~~ See, ~~above and~~also, Notes 1, 3, 10 and 1615 for a discussion of the dilutive effect on the Company’s common stock as a result of the outstanding warrants.
Deemed Dividends
During the nine months ended September 30, 2022 and the three and nine months ended September 30, 2021, reductions in the exercise prices of the March Warrants have given rise to deemed dividends. See Note 9 for the assumptions used in the calculations of deemed dividends. Deemed dividends are also discussed under the heading “Preferred Stock” above and in Notes 1 and 3.

Note 1211 – Supplemental Disclosure of Cash Flow Information
Schedule of Supplemental ~~Disclosure of~~ Cash Flow Information
2021 2020

Nine Months Ended
September 30,

2021 2020
Cash paid for interest $ - $ 64,454
Cash paid for income taxes $
281,025
$ -

Non-cash investing and financing activities:
Preferred stock of InnovaQor received from the sale of HTS and AMSG $ 9,117,500 $ -
Net liabilities of HTS and AMSG transferred to InnovaQor 2,227,152 -
Settlement of liability with InnovaQor preferred stock 60,714 -
Issuance of notes payable in settlement of accounts payable and accrued expenses 2,352,961 -
Series I-2 Preferred Stock converted into common stock - 277,994
Exchange of Series K Preferred Stock for Series L Preferred Stock - (2,500 )
Issuance of Series L Preferred Stock - 2,500
Issuance of Series M Preferred Stock in exchange for related party loans and accrued interest - 22,000,000
Loans and accrued interest exchanged for Series M Preferred Stock - (18,849,632 )
Deemed dividend from exchange of loans and accrued interest for Series M Preferred Stock - 3,150,368
Series M Preferred Stock converted/exchanged into common stock 1,189,650 -
Deemed dividends from issuance of common stock warrants under exchange agreement 341,525 -
Issuance of Series N Preferred Stock in exchange for debentures, accrued interest and Series I-1 and Series I-2 Preferred Stock - 30,435,519
Debentures, accrued interest and Series I-1 and Series I-2 Preferred Stock exchanged for Series N Preferred Stock - (19,342,322 )
Series N Preferred Stock converted into common stock 18,355,507 58
Deemed dividends from the issuance of Series N Preferred Stock - 3,720,718
Deemed dividends for trigger of down round provisions 408,509,361 59,824,232
Deemed dividends from extension of common stock warrants 291,592 -
Original issue discounts on debt 52,836 108,958
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2022 2021

Nine Months Ended September 30,

2022 2021
Cash paid for interest $ 1,369,955 $ -
Cash paid for income taxes $ - $ 281,025

Non-cash investing and financing activities:
Preferred stock of InnovaQor received from the sale of HTS and AMSG $ - $ 9,117,500
Net liabilities of HTS and AMSG transferred to InnovaQor - 2,227,152
Settlement of liability with InnovaQor preferred stock - 60,714
Issuance of notes payable in settlement of accounts payable and accrued expenses - 2,352,961
Series F Preferred Stock converted into common stock 17,500 -
Series M Preferred Stock converted/exchanged into common stock - 1,189,650
Deemed dividends from issuance of common stock warrants under exchange agreement - 341,525
Series N Preferred Stock converted into common stock 2,352,000 18,355,507
Series O Preferred Stock converted into common stock 638,000 -
Preferred Stock converted into common stock 638,000 -
Deemed dividends from issuances of Series P Preferred Stock 333,333 -
Deemed dividends for trigger of down round provisions 330,543,036 408,509,361
Deemed dividends from extension of common stock warrants - 291,292
Non-cash interest income 80,056 -
Original issue discounts on debt - 52,836

Note 1312 – Commitments and Contingencies

Concentration of Credit Risk

Credit risk with respect to accounts receivable is generally diversified due to the large number of patients comprising the ~~accounts receivable.~~client base. The Company ~~has~~does have significant receivable balances with government payers and various insurance carriers. ~~The~~Generally, the Company does not require collateral or other security to support customer receivables. However, the Company continually monitors and evaluates its client acceptance and collection procedures to minimize potential credit risks associated with its accounts receivable and establishes an allowance for uncollectible accounts and as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is not material to the financial statements.

A number of proposals for legislation continue to be under discussion which could substantially reduce Medicare and Medicaid reimbursements to hospitals. Depending upon the nature of regulatory action, and the content of legislation, the Company could experience a significant decrease in revenues from Medicare and Medicaid, which could have a material adverse effect on the Company. The Company is unable to predict, however, the extent to which such actions will be taken.
The Company maintains its cash balances in high credit quality financial institutions. The Company’s cash balances may, at times, including on December 31, 2021, exceed the deposit insurance limits provided by the Federal Deposit Insurance ~~Corporation.~~Corp.

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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. The Company’s policy is to expense legal fees and expenses incurred in connection with the legal proceedings in the period in which the expense is incurred. 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 in late 2017 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. In July 2019, the Companies and EPIC ~~Reference Labs, Inc.~~ filed suit against CIGNA Health for failure to pay claims for laboratory services provided. Cigna Health, in turn, sued for alleged improper billing practices. The suit remains ongoing but because the Company did not have the financial resources to see the legal action to conclusion it assigned the benefit, if any, from the suit to ~~Christopher~~Mr. Diamantis for his ~~continued~~ financial support to the Company and assumption of all costs to carry the ~~cost~~case to conclusion.
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In November of 2016, the IRS commenced an audit of the Company’s 2015 Federal tax return. Based upon the audit results, the Company made provisions of approximately $1.0 million as a liability and approximately $0.9 million as a receivable in its financial statements for the year ended December 31, 2018. During the first quarter of 2020, the U.S. Congress approved the CARES Act, which allows a five-year carryback privilege for federal net operating tax losses that arose in a tax year beginning in 2018 and through 2020. As a result, during ~~the nine months ended September 30,~~ 2020, the Company recorded approximately $1.1 million in refunds from the carryback of certain of its federal net operating losses. In addition, during the year ended December 31, 2020, the Company recorded $0.3 million in refunds related to other net operating loss carryback adjustments and it received income tax refunds of $0.6 million related to the audit of the Company’s 2015 Federal tax return. During the ~~nine months~~year ended ~~September 30,~~December 31, 2021, the Company received income tax refunds of $0.3 million, which represented income tax refunds associated with the CARES Act. ~~No refunds were received during the nine months ended September 30, 2020.~~ The Company used the $0.3 million of refunds that it received in ~~the nine months ended September 30,~~ 2021 to repay a portion of the amount that it owes for federal income tax liabilities that arose from the 2015 federal income tax audit. As of September 30, 2022 and December 31, 2021, the Company had federal income tax receivables of $1.1 million and $1.1 million, respectively, and federal income tax liabilities of $~~0.8~~0.7 ~~million.~~million and $0.7 million, respectively.

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. The Company entered into a Stipulation Agreement with the DOR allowing the Company to make monthly installments until July 2019. The Company has made payments to reduce the amount owed. The ~~Company intends to renegotiate another stipulation agreement. However, there can be no assurance the Company will be successful. The~~ balance accrued of approximately $0.4 million remained outstanding to the DOR at September 30, ~~2021.~~2022.

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 9)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 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 was to be paid in variable monthly installments through January of 2019, with an implicit interest rate of ~~4.97%~~4.97%. The Company and DeLage disposed of certain equipment and reduced the balance owed to ~~DeLage. A balance of~~DeLage to $0.2 million, which remained outstanding at September 30, ~~2021.~~2022.

On December 7, 2016, the holders of the Tegal Notes (see Note 6) filed suit against the Company seeking payment for the amounts due under the notes in the aggregate ~~of the~~ principal balance of $341,612, and accrued interest of $43,000. A request for entry of default judgment was filed on January 24, 2017. On April 23, 2018, the holders of the Tegal Notes received a judgment against the Company. As of September 30, ~~2021,~~2022, the Company has repaid $50,055 of the principal amount of these notes.
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The Company, as well as many of its subsidiaries, were defendants in a case filed in Broward County Circuit Court by TCA Global Credit Master Fund, L.P. The plaintiff alleged a breach by Medytox Solutions, Inc. of its obligations under a debenture and claimed damages of approximately $2,030,000plus interest, costs and fees. The Company and the other subsidiaries were sued as alleged guarantors of the debenture. The complaint was filed on August 1, 2018. In May 2020, the SEC appointed a Receiver to close down the TCA Global Credit Master Fund, L.P. The Company and ~~TCA~~the Receiver entered into a settlement agreement dated effective as of September 30, 2021, under which the Company agreed to pay ~~TCA $500,000~~$500,000 as full and final settlement of principal and interest, of which ~~$200,000~~$200,000 was paid on November 4, 2021 and the remaining $300,000 iswas due in six consecutive monthly installments of ~~$50,000 payable on or before~~$50,000. Accordingly, the ~~fifth day~~settlement amount was fully paid as of ~~each month beginning December 2021.~~September 30, 2022 (see Note 6). As a result of the settlement, the Company recorded a gain from legal settlement of ~~$2.2~~$2.2 million in the three and nine months ended September 30, 2021.

On September 13, 2018, Laboratory Corporation of America sued EPIC, ~~Reference Labs, Inc.,~~ a subsidiary of the Company, in Palm Beach County Circuit Court for amounts claimed to be owed. The court awarded a judgment against EPIC ~~Reference Labs, Inc.~~ in May 2019 for approximately $155,000. The Company has recorded the amount owed as a liability as of September 30, ~~2021.~~2022.

In February 2020, Anthony ~~O. Killough~~O’Killough sued the Company and Mr. Diamantis, as guarantor, in New York State Supreme Court for the County of New York, for approximately $2.0million relating to the promissory note issued by the Company in September 2019. In May 2020, the ~~parties~~Company, Mr. Diamantis, as guarantor, and Mr. O’Killough entered into a Stipulation providing for a payment of a total of $~~2,158,168~~2.2 million (which ~~includes~~included accrued ~~interest)~~“penalty” interest as of that date) in installments through November 1, ~~2020 (See Note 6).~~2020. The Company made payments totaling $450,000 in 2020. On January 18, 2022, Mr. Diamantis paid $750,000 and the remaining balance was due 120 days thereafter. Mr. O’Killough agreed to forebear from any further enforcement action until then. The Company is obligated to repay Mr. Diamantis the $750,000 payment as well as any further payments that may be made by him. On May 16, 2022, the Company paid $250,000 to Mr. Diamantis for further payment to Mr. O’Killough and on July 18, 2022, Mr. Diamantis paid a further $150,000 to Mr. O’Killough. As a result of the $750,000 payment to Mr. O’Killough made by Mr. Diamantis on January 18, 2022 and the additional $400,000 in payments made to Mr. O’Killough on May 16, 2022 and July 18, 2022, the past due balance owed to Mr. O’Killough was $1.3 million on September 30, ~~2021, the Company has not made the majority of the required payments~~2022. The promissory note and ~~as a result, approximately $1.5~~ ~~million of principal and $0.7~~ ~~million of penalty interest, which accrues at a rate of~~ ~~20%~~ ~~per annum,~~forbearance agreement are ~~due and owing.~~
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~~In February 2021, a supplier to the Company’s hospitals, Shared Medical Services, Inc., filed suit~~also discussed in ~~Palm Beach County Circuit Court for approximately $90,000~~Note 6. ~~by virtue of default and for breach of contract and charges totaling approximately another $100,000. On September 30, 2021, the parties agreed to settle this case for $50,000~~ ~~payable in installments through February 2022.~~
Following the Company’s decision to suspend operations at Jamestown Regional Medical Center in June 2019 a number of vendors remain unpaid. A number have initiated or threatened legal actions. The Company believes it will come to satisfactory arrangements with these parties as it works toward reopening the hospital. The Company has accrued the amounts that it expects to owe in its financial statements. The Company plans to reopen the hospital upon securing adequate capital to do so. The reopening plans have also been disrupted by the COVID-19 pandemic and the timing of the reopening has been delayed. It is now intended that the re-opening process will be initiated in 2022.
Two former employees of Jamestown Regional Medical Center filed suit alleging violations of the federal Worker Adjustment and Retraining Notification Act (“WARN”). The Court entered a default against the Company on August 14, 2019. The parties disagreed to the amount of damages, specifically to whether part-time employees are entitled to WARN act damages. The parties have agreed to a settlement agreement dated May 14, 2021. Pursuant to the terms of this agreement, the Company was required to pay a sum of $~~425,000~~ ~~, which was paid in full in October 2021.~~

In June 2019, CHSPSC, the former owners of Jamestown Regional Medical Center, obtained a judgment against the Company in the amount of $592,650. The Company has recorded $~~130,000~~ of this judgment as a liability as of September 30, ~~2021, as~~2022. However, management believes that a number of insurance payments were made to CHSPSC after the change of ownership ~~and~~that will likely offset ~~the majority~~portions of the ~~claim made by CHSPSC.~~judgment.

In August 2019, Morrison Management Specialists, Inc. obtained a judgment against Jamestown Regional Medical Center and the Company in Fentress County, Tennessee in the amount of $194,455 in connection with housekeeping and dietary services. The Company has recorded this liability as of September 30, ~~2021.~~2022.

In November 2019, Newstat, PLLC obtained a judgment against Big South Fork Medical Center in Knox County, Tennessee in the amount of $190,600 in connection with the provision of medical services. The Company has recorded this liability as of September 30, ~~2021.~~2022.

On June 30, 2021, the Company entered into a settlement agreement with the Tennessee Bureau of Workers’ Compensation. Per the terms of the settlement agreement, the Company is obligated to pay a total of $109,739, payable in a lump sum payment of $32,922 on or before August 15, 2021 and in 24 consecutive monthly payments of $3,201 each on or before the 15^thday of each month beginning September 15, 2021. The Company has made the required payments due ~~during the three months ended September 30, 2021 and has accrued the remaining obligation owed~~ as of September 30, ~~2021.~~2022 and has recorded the remaining amounts owed as a liability as of September 30, 2022.

In July 2021, WG Fund, Queen Funding and Diesel Funding filed legal actions in New York State Supreme Court for Kings County to recover amounts claimed to be outstanding on accounts receivable sales agreements entered into in 2020. On September 14, 2021, the Company entered into separate stipulation of settlement agreements with the three funding parties under which the Company agreed to repay an aggregate of $0.9 million in equal monthly payments totaling $52,941 through January 1, 2023. The Company has made the required payments through September 30, 2022 and has reflected the remaining obligations owed as of September 30, 2022 as a reduction of its accounts receivable (see Note 4).
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An employee of the Big South Fork Medical Center has filed a workers’ compensation claim in the Tennessee Court of Workers’ Compensation for an alleged workplace injury from July 2019. The case is in its early stages. Big South Fork Medical Center intends to contest the claimed benefits, although there can be no assurance that there will not be some liability.
The Company has received questions in the form of a civil investigation inquiry from the Department of Justice with regards to the use of monies received from PPP Notes and HHS Provider Relief Funds. There is no allegation of wrongdoing and no indication that any additional liability will materialize. HHS Provider Relief Funds are more fully discussed in Notes 2 and 5. The Company is confident that all PPP Notes and HHS Provider Relief Funds monies were appropriately utilized and accounted for and believes that provision of the details and records will provide satisfactory answers to the inquiry.

Note 1413 – Discontinued Operations

Sale of HTS and AMSG

~~In 2017, the Company announced plans to spin off or sell its wholly-owned subsidiaries, HTS and AMSG.~~ On June 25, 2021, the Company sold the shares of stock of HTS and AMSG to InnovaQor. HTS and AMSG held Rennova’s software and genetic testing interpretation divisions. In consideration for the shares of HTS and AMSG and the elimination of intercompany debt among the Company and HTS and AMSG, InnovaQor issued the Company 14,950 shares of its Series BB-1 Non-Voting Convertible Preferred Stock (the “InnovaQor Series BB-1 Preferred Stock”), 14,000 of the shares were issued on June 25, 2021 and 950of the shares were issued in the ~~three months ended September 30,~~third quarter of 2021 as a result of a post-closing adjustment. Each share of InnovaQor Series BB-1 Preferred Stock has a stated value of $$1,000 and is convertible into that number of shares of InnovaQor common stock equal to the stated value divided by ~~90%~~90% of the average closing price of the InnovaQor common stock during the 10 trading days immediately prior to the conversion date. Conversion of the InnovaQor Series BB-1 Preferred Stock, however, is subject to the limitation that no conversion can be made to the extent the holder’s beneficial interest (as defined pursuant to the terms of the InnovaQor Series BB-1 Preferred Stock) in the common stock of InnovaQor would exceed ~~4.99%~~4.99%. The shares of the InnovaQor Series BB-1 Preferred Stock may be redeemed by InnovaQor upon payment of the stated value of the shares plus any accrued declared and unpaid dividends.

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As a result of the sale, the Company recorded the InnovaQor Series BB-1 Preferred Stock as a long-term asset valued at $9.1million ~~at September 30, 2021~~ and a gain on the sale of HTS and AMSG of $11.3 million of which $0.6 million and $11.3 million was recorded in the three and nine months ended September 30, 2021, respectively. The $0.6million recorded in the three months ended September 30, 2021 ~~which~~resulted from a post-closing adjustment. Approximately $9.1 million of the gain resulted from the value of the ~~950~~ 14,950shares of InnovaQor Series BB-1 Preferred Stock received ~~as a result of a post-closing adjustment, and a gain on the sale of HTS and AMSG of $11.3~~ ~~million in the nine months ended September 30, 2021, of which $9.1~~ ~~million resulted from the value of the InnovaQor Series B Preferred Stock~~ and $2.2million resulted from the transfer to InnovaQor of the net liabilities of HTS and AMSG. ~~A discussion of the assumptions used in the valuation of the InnovaQor Series B Preferred Stock is presented below. During the three and nine months ended September 30, 2021,~~ ~~100~~ ~~shares of InnovaQor Series B Preferred Stock valued at $60,714~~ ~~were used to settle accrued interest that was due under the terms of notes payable dated January 31, 2021 and February 16, 2021. The notes payable are more fully discussed in Note 6.~~
~~See Note 8 for a discussion of related party transactions between the Company and InnovaQor.~~
~~EPIC Reference Labs, Inc.~~
During the three months ended September 30, 2020, the Company made a decision to sell its last clinical laboratory, EPIC Reference Labs, Inc., and it made a decision to discontinue several other non-operating subsidiaries, and as a result, EPIC Reference Labs, Inc.’s operations and the other non-operating subsidiaries have been included in discontinued operations for all periods presented. The Company has been unable to find a buyer for EPIC Reference Labs, Inc. and, therefore, it has ceased all efforts to sell the company and closed down its operations.
Carrying amounts of major classes of assets and liabilities sold or included as part of discontinued operations in the consolidated balance sheets as of September 30, 2021 and December 31, 2020 consisted of the following:
~~Schedule of Discontinued Operation of Balance Sheet and Operation Statement~~
~~HTS and AMSG Assets and Liabilities:~~

September 30,
2021

December 31,
2020

(unaudited)
Cash $        - $ 31,294
Accounts receivable, net - 151,363
Prepaid expenses and other current assets - 1,717
Current assets classified as held for sale $ - $ 184,374

Property and equipment, net $ - $ 685
Deposits - -
Right-of-use assets - -
Non-current assets classified as held for sale $ - $ 685

Accounts payable and checks issued in excess of bank balance $ - $ 726,220
Accrued expenses - 1,308,283
Current portion of right-of-use operating lease obligation - -
Current portion of notes payable - 168,751
Current liabilities classified as held for sale $ - $ 2,203,254

Note payable $ - $ 69,267
Right-of-use operating lease obligation - -
Non-current liabilities classified as held for sale $ - $ 69,267
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~~EPIC Reference Labs, Inc. and Other Subsidiaries Assets and Liabilities:~~
September 30,
2021 December 31,
2020
(unaudited)
Cash $ - $ 136
Accounts receivable, net - -
Prepaid expenses and other current assets - -
Current assets classified as held for sale $ - $ 136

Property and equipment, net $ - $ -
Deposits 5,014 100,014
Right-of-use assets - 100,116
Non-current assets classified as held for sale $ 5,014 $ 200,130

Accounts payable and checks in excess of bank balance $ 1,111,557 $ 1,185,158
Accrued expenses 336,410 334,667
Current portion of right-of-use operating lease obligation - 91,166
Current portion of notes payable - -
Current liabilities classified as held for sale $ 1,447,967 $ 1,610,991

Note payable $ - $ -
Right-of-use operating lease obligation - 8,950
Non-current liabilities classified as held for sale $ - $ 8,950
~~Consolidated Discontinued Operations Assets and Liabilities:~~
September 30,
2021 December 31,
2020
(unaudited)
Cash $ - $ 31,430
Accounts receivable, net - 151,363
Prepaid expenses and other current assets - 1,717
Current assets classified as held for sale $ - $ 184,510

Property and equipment, net $ - $ 685
Deposits 5,014 100,014
Right-of-use assets - 100,116
Non-current assets classified as held for sale $ 5,014 $ 200,815

Accounts payable and checks issued in excess of bank balance $ 1,111,557 $ 1,911,378
Accrued expenses 336,410 1,642,950
Current portion of right-of-use operating lease obligation - 91,166
Current portion of notes payable - 168,751
Current liabilities classified as held for sale $ 1,447,967 $ 3,814,245

Note payable $ - $ 69,267
Right-of-use operating lease obligation - 8,950
Non-current liabilities classified as held for sale $ - $ 78,217
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Major line items constituting income (loss) from discontinued operations in the consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020 consisted of the following (unaudited):
~~HTS and AMSG Income (Loss) from Discontinued Operations (unaudited):~~
Three Months
Ended
September 30,
2021
Three Months
Ended
September 30,
2020
Nine Months
Ended
September 30,
2021 Nine Months
Ended
September 30,
2020
Revenue from services $ - $ 174,941 $ 216,941 $ 437,119
Cost of services - 390 2,386 11,379
Gross profit - 174,551 214,555 425,740
Operating expenses - (258,710 ) (551,296 ) (509,989 )
Other income (expense) - (9,636 ) (9,577 ) (61,067 )
Gain on sale 576,787 - 11,303,939 -
Provision for income taxes - - - -
Income (loss) from discontinued operations $ 576,787 $ (93,795 ) $ 10,957,621 $ (145,316 )
The fair value of the InnovaQor Series BB-1 Preferred Stock that the Company received as consideration for the sale of ~~$9.1~~$9.1 million was based on ~~a third-party valuation using~~ the Option Price Method (the “OPM”). The OPM treats common and preferred interests as call options on the equity value of the subject company, with exercise prices based on the liquidation preference of the preferred interests and participation thresholds for subordinated classes. The common interest is modeled as a call option that gives its owner the right but not the obligation to buy the enterprise value at a predetermined or exercise price. In the model, the exercise price is based on a comparison with the enterprise value rather than, as in the case of a “regular” call option, a comparison with a per share stock price. Thus, the common interest is considered to be a call option with a claim on the enterprise at an exercise price equal to the remaining value immediately after the preferred interests are liquidated. The Black Scholes model was used to price the call options. The assumptions used were: risk free rate of ~~0.84%~~0.84%; volatility of ~~250.0%~~250.0%; and exit period of 5 years. Lastly, a discount rate of ~~35%~~35% was applied due to the lack of marketability of the InnovaQor Series BB-1 Preferred Stock and the underlying liquidity of InnovaQor’s common stock.

During the three months ended September 30, 2021, 100 shares of InnovaQor Series B-1 Preferred Stock valued at $60,714 were used to settle accrued interest that was due under the terms of notes payable dated January 31, 2021 and February 16, 2021, leaving a balance of the InnovaQor Series B-1 Preferred Stock held by the Company of $9.0 million at September 30, 2022 and December 31, 2021. The notes payable are more fully discussed in Note 6.
See Note 7 for a discussion of related party transactions between the Company and InnovaQor.
EPIC Reference Labs, Inc. and Other Non-Operating Subsidiaries ~~Income (Loss) from Discontinued Operations (unaudited):~~

Three Months
Ended
September 30,
2021
Three Months
Ended
September 30,
2020
Nine Months
Ended
September 30,
2021 Nine Months
Ended
September 30,
2020
Revenue from services $ - $ - $ - $ 441
Cost of services - - - -
Gross profit - - - 441
Operating expenses (31,388 ) (41,439 ) (126,243 ) (106,704 )
Other income (expense) - (30,946 ) 48,770 87,286
Gain on sale - - - -
Provision for income taxes - - - -
Loss from discontinued operations $ (31,388 ) $ (72,385 ) $ (77,473 ) $ (18,977 )
During the third quarter of 2020, the Company made a decision to sell EPIC and it made a decision to discontinue several other non-operating subsidiaries, and as a result, EPIC’s operations and the other non-operating subsidiaries’ liabilities have been included in discontinued operations for all periods presented. The Company has been unable to find a buyer for EPIC and, therefore, it has ceased all efforts to sell EPIC and closed down its operations.
~~Consolidated Income (Loss) from Discontinued Operations (unaudited):~~
Three Months
Ended
September 30,
2021
Three Months
Ended
September 30,
2020
Nine Months
Ended
September 30,
2021 Nine Months
Ended
September 30,
2020
Revenue from services $ - $ 174,941 $ 216,941 $ 437,560
Cost of services - 390 2,386 11,379
Gross profit - 174,551 214,555 426,181
Operating expenses (31,388 ) (300,149 ) (677,539 ) (616,693 )
Other income (expense) - (40,582 ) 39,193 26,219
Gain on sale 576,787 - 11,303,939 -
Provision for income taxes - - - -
Income (loss) from discontinued operations $ 545,399 $ (166,180 ) $ 10,880,148 $ (164,293 )

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Carrying amounts of major classes of liabilities included as part of discontinued operations in the condensed consolidated balance sheets as of September 30, 2022 (unaudited) and December 31, 2021 consisted of the following:
Schedule of Discontinued Operation of Balance Sheet and Operation Statement
September 30,
2022 December 31,
2021
(unaudited)
Accounts payable $ 1,108,066 $ 1,108,066
Accrued expenses 339,696 341,410
Current liabilities of discontinued operations $ 1,447,762 $ 1,449,476
Major line items constituting (loss) income from discontinued operations in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021 consisted of the following:
Consolidated (Loss) Income from Discontinued Operations:

Three Months Ended
September 30, 2022

Three Months Ended
September 30, 2021

Nine Months Ended
September 30, 2022

Nine Months Ended
September 30, 2021

(unaudited) (unaudited) (unaudited) (unaudited)
Net revenues $ - $ - $ - $ 216,941
Cost of revenues - - - 2,386
Operating expenses (1,696 ) (31,388 ) (5,941 ) (677,539 )
Other (expense) income - - (1,134 ) 39,193
Gain on sale - 576,787 - 11,303,939
Provision for income taxes - - - -
(Loss) income from discontinued operations $ (1,696 ) $ 545,399 $ (7,075 ) $ 10,880,148

Note 1514 – Recent Accounting Pronouncements
~~In December 2019, the FASB issued ASU 2019-12,~~ ~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.~~ The new guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles and also simplifies areas such as franchise taxes, the step-up in basis of goodwill, separate entity financial statements and interim recognition of enactment of tax laws or rate changes. This standard became effective for us on January 1, 2021. The adoption of this ASU did not have a material impact on our consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).The new guidance provides accounting for convertible instruments and contracts in an entity’s own equity. The FASB issued this Update to address issues identified as a result of the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. The Board focused on amending the guidance on convertible instruments and the guidance on the derivatives scope exception for contracts in an entity’s own equity. This standard will be effective for us for annual periods beginning on January 1, 2024, including interim periods within those fiscal years. Early adoption of this standard is not permitted for us because we have already adopted ASU 2017-11 “Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815).” We have not yet determined the impact of adopting this new accounting guidance on our consolidated financial statements.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic ~~815-40,~~815-40), Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The FASB issued this Update to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The guidance clarifies whether an issuer should account for a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as (1) an adjustment to equity and, if so, the related earnings per share (EPS) effects, if any, or (2) an expense and, if so, the manner and pattern of recognition. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. We adopted this new accounting guidance on January 1, 2022. The impact of the adoption of this new accounting guidance on our consolidated financial statements is discussed in Note 1.
33
In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820), Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The FASB is issuing this ASU (1) to clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The amendments in this ASU do not change the principles of fair value measurement. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted for ~~all entities, including adoption in an~~both interim ~~period. If an entity elects to early adopt~~and annual financial statements that have not yet been issued or made available for issuance. The Company should apply the amendments ~~in this Update in an interim period,~~prospectively with any adjustments from the ~~guidance should be applied as~~adoption of the ~~beginning~~amendments recognized in earnings and disclosed on the date of ~~the fiscal year that includes that interim period.~~adoption. We have not yet determined the impact of adopting this new accounting guidance on our consolidated financial statements.

Other recent accounting standards issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

Note 1615 – Subsequent Events

~~PPP Notes~~Conversions of Series N and Series O Preferred Stock

OnSubsequent to September 30, 2022 and through November ~~3, 2021,~~10, 2022, the Company issued an aggregate of 14.0 billion shares of its common stock upon conversions of 682.65 shares of its Series N Preferred Stock with a stated value of $~~0.8~~682,650 ~~million~~and 576.45 shares of ~~the outstanding principal amount~~its Series O Preferred Stock with a stated value of ~~the PPP Notes was forgiven. PPP Notes are more fully discussed in Note 6.~~$576,450.
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~~Shareholder Proposals Effective~~Potential Common Stock as of November ~~5, 2021~~10, 2022

OnThe following table presents the dilutive effect of our various potential shares of common stock as of November 10, 2022:
Schedule of Dilutive Effect of Various Potential Common Shares
November 10,
2022
Shares of common stock outstanding 29,084,322,257
Dilutive potential shares:
Stock options 26
Warrants 511,333,351,092
Convertible debt 28,777,833,333
Convertible preferred stock 452,717,633,333
Total dilutive potential shares of common stock, including outstanding common stock 1,021,913,140,041
As a result of the Voting Agreement discussed in Note 10 and the November 5, 2021 ~~the Company filed an~~ Amendment to its Articles of Incorporation, as amended (the “Amendment”), with the Secretary of State of Delaware to make effective the following proposals, which had previously been approved by the Company’s Board of Directors and stockholders:
~~Proposal 1~~~~: To approve an amendment to our~~ Certificate of Incorporation, as amended, ~~to increase the number of authorized shares of our common stock from~~ ~~10,000,000,000~~ to ~~50,000,000,000~~ ~~shares.~~
~~Proposal 2~~: To approve an amendment to our Certificate of Incorporation, as amended, to provide that the number of authorized shares of Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares then outstanding) byproviding for the affirmative vote of the holders of a majority in voting power of the stock of the Company ~~entitled~~ to ~~vote generally~~authorize an increase in the election of directors, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law of the State of Delaware (or any successor provision thereto), voting together as a single class, without a separate vote of the holders of the class or classes the number of authorized shares of ~~which are being increased or decreased unless a vote by any holders of one or~~the Company’s common stock, as more ~~series of Preferred Stock is required by the express terms of any series of Preferred Stock pursuant to the terms thereof.~~
~~As a result of the Voting Agreement~~fully discussed in Note ~~11 and the two proposals above that became effective on November 5, 2021, as of the date of filing this report,~~1, the Company believes that it has the practical ability to ensure that it has ~~and or can obtain~~a sufficient number of authorized shares of its common stock to ~~cover~~accommodate all potentially dilutive ~~common shares outstanding.~~instruments.
~~Issuances~~Issuance of ~~Preferred Stock~~Debentures

On October ~~28, 2021,~~12, 2022, the Company ~~entered into the October 28 Agreement among the Company and certain existing institutional investors of the Company. The October 28 Agreement provides for the issuance of up~~issued debentures to~~4,400~~ ~~shares of the Company’s Series O Preferred Stock at two closings of~~ ~~2,200~~ ~~shares each. The first closing occurred on October 28, 2021 in which the Company received $2.0~~ million. The second closing is expected to occur on or before December 1, 2021. The subsequent closing depends upon the Company’s satisfaction of certain conditions. If the second closing occurs, the Company will receive proceeds of $~~2.0~~ ~~million.~~
~~Debt Exchange and Amendment Agreements~~
~~On November 7, 2021, the Company entered into Exchange and Amendment Agreements (the “November 2021 Exchange Agreements”) with certain~~ institutional investors in the ~~Company. In the November 2021 Exchange Agreements, the investors agreed to reduce their holdings~~amount of $~~1.1~~ 550,000~~million stated amount~~ for net proceeds of ~~outstanding warrant promissory notes payable~~$500,000. The Debentures are due on February 12, 2023 and $~~4.5~~ ~~million of outstanding non-convertible debentures, plus accrued interest thereon of approximately $1.4~~ ~~million,~~are secured by ~~exchanging the indebtedness and accrued interest for~~ ~~8,545~~ ~~shares~~a portion of the Company’s investment in InnovaQor Series ~~P Preferred Stock. The warrant promissory notes payable and the debentures are more fully discussed in Notes 6 and 7, respectively. After the exchange, the investors continue to own approximately $8.2~~ ~~million of the outstanding debentures, plus the associated accrued interest of approximately $3.3~~ million. In addition, pursuant to the November 2021 Exchange Agreements, the expiration dates of the March Warrants that were issued by the Company to the investors in March 2017, as more fully described in Note 11, were extended from varying dates in March 2022 to March 21, 2024. The terms of the Series P Preferred Stock are set forth in the Company’s Current Report on Form 8-K filed with the SEC on November 8, 2021, in particular:
~~General~~~~. The Company’s Board of Directors has designated~~ ~~30,000~~ ~~shares of the~~ ~~5,000,000~~ ~~authorized shares of preferred stock as the Series P Preferred Stock. Each share of the Series P Preferred Stock has a stated value of $1,000~~.
~~Voting Rights~~. Except as provided below or by law, the Series P Preferred Stock shall have no voting rights. However, as long as any shares of Series P Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series P Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series P Preferred Stock or alter or amend the Certificate of Designation, (b) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders, (c) increase the number of authorized shares of the Series P Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.
37
~~Dividends~~~~. Dividends at the rate per annum of~~ 10% of the stated value per share shall accrue on each outstanding share of Series P Preferred Stock from and after the date of the original issuance of such share of Series P Preferred Stock (the “Preferred Accruing Dividends”). The Preferred Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative and non-compounding; ~~provided~~, ~~however~~, that such Preferred Accruing Dividends shall be payable only when, as, and if declared by the Board of Directors. No cash dividends shall be paid on the common stock unless the Preferred Accruing Dividends are paid.
~~Rank~~. The Series P Preferred Stock ranks with respect to dividends or a liquidation, (i) on parity with the common stock, the Series H Preferred Stock, Series L Preferred Stock, Series M Convertible Preferred Stock, Series N Convertible Preferred Stock, and Series O Preferred Stock, (ii) senior to the Company’s Series F Convertible Preferred Stock, and (iii) junior to any other class or series of preferred stock of the Company afterwards created and ranking by its terms senior to the Series PB-1 Preferred Stock.

~~Conversion~~Big South Fork Medical Center Cost Report. Each share of the Series P Preferred Stock is convertible into shares of the Company’s common stock, at any time and from time to time, at the option of the holder, into that number of shares of common stock determined by dividing the stated value of such share of Series P Preferred Stock, plus any accrued declared and unpaid dividends, by the conversion price. The conversion price is equal to 90% of the lowest VWAP during the 10 trading days immediately prior to the conversion date. Holders of the Series P Preferred Stock are prohibited from converting Series P Preferred Stock into shares of common stock if, as a result of such conversion, the holder, together with its affiliates, would own more than 9.99% of the total number of shares of common stock then issued and outstanding. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days after notice to the Company.
~~Liquidation Preference~~. Upon any liquidation, dissolution or winding up of the Company, the holders of the Series P Preferred Stock shall be entitled to receive an amount equal to the stated value of the Series P Preferred Stock, plus any accrued declared and unpaid dividends thereon and any other fees or liquidated damages then due and owing thereon, for each share of the Series P Preferred Stock before any distribution or payment shall be made on any junior securities.
~~Redemption~~. At any time the Company shall have the right to redeem all, or any part, of the Series P Preferred Stock then outstanding. The Series P Preferred Stock subject to redemption shall be redeemed by the Company in cash in an amount equal to the stated value of the shares of the Series P Preferred Stock being redeemed plus all accrued declared and unpaid dividends.

~~Issuances of Common Stock~~
Subsequent to September 30, 2022, the Company’s Big South Medical Center Hospital received a communication from its fiscal intermediary stating that its Medicare cost report for the six months ending December 31, 2021 has been accepted and ~~through November 10, 2021,~~ the ~~Company issued~~ ~~8.7~~ ~~billion shares of its common stock upon conversions of~~ ~~2,495.84~~ ~~shares of its Series N Preferred Stock with~~fiscal intermediary has computed a ~~stated value~~tentative retroactive adjustment reflecting an overpayment by the fiscal intermediary in the amount of $~~2.5~~1.9 million. The Company is working with the fiscal intermediary to file an amended cost report which we expect will result in a smaller overpayment and is seeking an extended repayment schedule for any overpayment. There is no assurance that the overpayment will be reduced. Furthermore, the tentative retroactive adjustment is subject to a final Medicare cost report settlement. The Company recognized $1.6 million as a liability and reduced net revenues by a similar amount in its financial statements for the three and nine months ending September 30, 2022.
~~Potential Common Stock as of November 10, 2021~~
~~The following table presents the potential dilutive effect of our various equity-linked instruments as of November 10, 2021:~~
~~Schedule of Dilutive Effect of Various Potential Common Shares~~
November 10,
2021
~~Shares of common stock outstanding~~ ~~13,491,000,000~~
~~Dilutive potential shares:~~
~~Convertible preferred stock~~ ~~174,319,763,738~~
~~Warrants~~ ~~273,995,752,554~~
~~Convertible debt~~ ~~14,443,166,667~~
~~Stock options~~ 26
~~Total dilutive potential shares of common stock, including outstanding common stock~~ ~~476,249,682,985~~
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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, ~~2020~~2021 (the ~~“2020~~“2021 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 ~~2020~~2021 Form 10-K and with our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this report.

COMPANY OVERVIEW

Our Services

~~Our~~We are a provider of health care services. We own one operating hospital ~~operations began with the opening of our~~in Oneida, Tennessee, a hospital located in Jamestown, Tennessee that we plan to reopen and operate, a physician practice in Jamestown, Tennessee that we plan to reopen and operate and a rural health clinic in Kentucky. We operate in one business segment.
Scott County Community Hospital (d/b/a Big South Fork Medical ~~Center~~Center)
On January 13, 2017, we acquired certain assets related to Scott County Community Hospital, based in Oneida, Tennessee (the “Oneida Assets”). The Oneida Assets include a 52,000-square foot hospital building and a 6,300 square foot professional building on ~~August 8, 2017, following the receipt of the required licenses and regulatory approvals. Big South Fork Medical Center is classified as a Critical Access~~approximately 4.3 acres. Scott County Community Hospital ~~(rural) with~~has 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 Oneida Assets out of bankruptcy for a purchase price of $1.0 million. The hospital, which has since been renamed Big South Fork Medical Center, became operational on August 8, 2017. The hospital became certified as a Critical Access Hospital (rural) hospital in December 2021, retroactive to June 30, 2021.
Jamestown Regional Medical Center and Mountain View Physician Practice
On ~~January 31,~~June 1, 2018, we ~~entered into an asset purchase agreement~~acquired from Community Health Systems, Inc. certain assets related to ~~acquire~~ an acute care hospital located in Jamestown, Tennessee, referred to as Jamestown Regional Medical ~~Center.~~Center, for a purchase price of $0.7 million. The hospital is an 85-bed facility of approximately 90,000 square feet on over eight acres of land, which provided for a 24-hour emergency department with two trauma bays and seven private exam rooms, inpatient and outpatient medical services and a progressive care unit which provided telemetry services. The acquisition also included a separate physician practice known as Mountain View Physician Practice, Inc.
35
The Company suspended operations at the hospital and physician practice in June 2019, as a result of the termination of the hospital’s Medicare agreement and other factors. The Company is evaluating whether to reopen the facility as an acute care hospital or as another type of healthcare facility. Jamestown is located 38 miles west of Big South Fork Medical Center. ~~In addition, on~~
Jellico Community Hospital and CarePlus Rural Health Clinic
On March 5, 2019, ~~we closed an asset purchase agreement whereby~~ we acquired certain assets related to ana 54-bed acute care hospital that offered comprehensive services located in Jellico, Tennessee known as Jellico Community Hospital and an outpatient clinic located in Williamsburg, Kentucky known as ~~CarePlus.~~CarePlus Clinic. The hospital and the clinic and their associated assets were acquired from Jellico Community Hospital, Inc. and CarePlus Rural Health Clinic, LLC, respectively.

~~We suspended operations at Jamestown Regional~~The CarePlus Clinic offers compassionate care in a modern, patient-friendly facility. The CarePlus Clinic is located 32 miles northeast of our Big South Fork Medical Center in June 2019, as a result of the termination of its Medicare agreement. We plan to reopen the hospital upon securing adequate capital to do so. The reopening plans have also been disrupted by the coronavirus (“COVID-19”) pandemic and the timing of the reopening has been delayed. It is now intended that the re-opening process will be initiated in 2022.Center.

On March 1, 2021, wethe Company closed Jellico Community Hospital, after the ~~city~~City of Jellico issued a 30-day termination notice for the lease of the building.
39

Discontinued Operations

Sale of Health Technology Solutions, Inc. and Advanced Molecular Services Group, Inc.

~~In 2017, we announced plans to spin off or sell our wholly-owned subsidiaries, Advanced Molecular Services Group, Inc. (“AMSG”) and Health Technology Solutions, Inc. (“HTS”).~~ On June 25, 2021, the Company sold the shares of stock of ~~HTS~~Health Technology Solutions, Inc. (“HTS”) and ~~AMSG~~Advanced Molecular Services Group, Inc. (“AMSG”) to InnovaQor, Inc. (“InnovaQor”). HTS and AMSG held Rennova’s software and genetic testing interpretation divisions. In consideration for the shares of HTS and AMSG and the elimination of intercompany debt among the Company and HTS and AMSG, InnovaQor issued the Company 14,950 shares of its Series BB-1 Non-Voting Convertible Preferred Stock (the “InnovaQor Series BB-1 Preferred Stock”), 14,000 of the shares were issued on June 25, 2021 and 950 of the shares were issued in the ~~three months ended September 30,~~third quarter of 2021 as a result of a post-closing adjustment. Each share of InnovaQor Series B Preferred Stock has a stated value of $1,000 and is convertible into that number of shares of InnovaQor common stock equal to the stated value divided by 90% of the average closing price of the InnovaQor common stock during the 10 trading days immediately prior to the conversion date. Conversion of the InnovaQor Series B Preferred Stock, however, is subject to the limitation that no conversion can be made to the extent the holder’s beneficial interest (as defined pursuant to theThe terms of the InnovaQor Series ~~B Preferred Stock)~~B-1Preferred Stock are more fully described in Note 13 to the common stock of InnovaQor would exceed 4.99%. The shares of the InnovaQor Series B Preferred Stock may be redeemed by InnovaQor upon payment of the stated value of the shares plus any accrued declared and unpaid dividends.
accompanying unaudited condensed consolidated financial statements. As a result of the sale, the Company ~~has~~ recorded the InnovaQor Series BB-1 Preferred Stock as a long-term asset valued at $9.1 million ~~at September 30, 2021~~ and a gain on the sale of HTS and AMSG of $11.3 million of which $0.6 million and $11.3 million was recorded in the three and nine months ended September 30, 2021, respectively. The $0.6 million recorded in the three months ended September 30, 2021 ~~which~~resulted from a post-closing adjustment. Approximately $9.1 million of the gain resulted from the value of the ~~950~~14,950 shares of InnovaQor Series B Preferred Stock received as a result of a post-closing adjustment, and a gain on sale of HTS and AMSG of $11.3 million in the nine months ended September 30, 2021, of which $9.1 million resulted from the value of the InnovaQor Series BB-1 Preferred Stock received and $2.2 million resulted from the transfer to InnovaQor of the net liabilities of HTS and AMSG.
During the ~~three and nine months~~year ended ~~September~~December 31, 2021, 100 shares of InnovaQor Series BB-1 Preferred Stock valued at $60,714 were used to settle accrued interest that was due under the terms of notes payable that were issued on January 31, 2021 and February 16, 2021, leaving a balance of the InnovaQor Series B-1 Preferred Stock of $9.0 million at September 30, 2022 and December 31, 2021.

We have reflected the ~~amounts relating to~~financial results of HTS and AMSG ~~including~~prior to the ~~gain on~~ sale as ~~a disposal group classified as held for sale and included in~~ discontinued operations in our accompanying unaudited condensed consolidated financial statements.

EPIC Reference Labs, Inc.

During the third quarter of 2020, we announced that we had decided to sell EPIC Reference Labs, Inc., (“EPIC”) and as a result, ~~EPIC Reference Labs, Inc.’s~~EPIC’s operations have been included in discontinued operations in the accompanying ~~unaudited condensed~~ consolidated financial statements. ~~The Company has~~We have been unable to find a buyer for EPIC ~~Reference Labs, Inc.~~ and, therefore, ~~it has~~have ceased all efforts to sell ~~company~~EPIC and closed down its operations.

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Outlook
~~We believe that the~~The transition of our business model from health information technology and diagnostics to ownership and operation of rural hospitals and related healthcare service providers is now complete and we believe the new model, once stabilized, will create more predictable and stable ~~revenue. Rural hospitals provide a much-needed service to their local communities and reduce our reliance on commission-based sales employees to generate sales.~~revenues. We currently operate one hospital and a rural health clinic and we own another hospital and ~~physician’s office~~physician practice at which operations are currently suspended. Owning a number of facilities in the same geographic location will create numerous efficiencies in management, purchasing and staffing and will enable the provision of additional, specialized and more valuable services that are needed by rural communities but cannot be sustained by a standalone rural hospital. We remain confident that this is a sustainable model we can continue to grow through acquisition and development. The progress of the COVID-19 pandemic, which is more fully discussed below, has severely affected our operations and may cause such expectations not to be achieved or, even if achieved, not to be done in the expected timeframe.

Impact of the Pandemic

The COVID-19 pandemic was declared a global pandemic by the World Health Organization on March 11, 2020. We have been closely monitoring the COVID-19 pandemic and its impact on our operations and we have taken steps intended to minimize the risk to our employees and patients. These steps have increased our costs and our revenues have been significantly adversely affected. As noted in Notes 2 and 6 to the accompanying unaudited condensed consolidated financial statements, we have received Paycheck Protection Program loans (“PPP Notes”) as well as Department of Health and Human Services (“HHS”) Provider Relief Funds and employee retention credits from the federal government. If the COVID-19 pandemic continues for a further extended period, we expect to incur significant losses and additional financial assistance may be required. Going forward, we are unable to determine the extent to which the COVID-19 pandemic will continue to affect our business. Our ability to make estimates of the effect of the COVID-19 pandemic on net revenues, expenses or changes in accounting judgments that have had or are reasonably likely to have a material effect on our financial statements is currently limited. The nature and effect of the COVID-19 pandemic on our balance sheet and results of operations will depend on the severity and length of the pandemic in our service areas; government activities to mitigate the pandemic’s effect; regulatory changes in response to the pandemic, especially those affecting rural hospitals; ~~and~~ existing and potential government assistance that may be ~~provided.~~
provided; and the requirements of Provider Relief Fund receipts, including our ability to retain such funds as have been received.
40

The COVID-19 pandemic and the steps taken by governments to seek to reduce its spread have severely impacted the economy and the health care industry in particular. Hospitals have especially been affected. Small rural hospitals, such as ours, may be overwhelmed by patients if conditions worsen in their local areas. Staffing costs, and concerns due to the potential exposure to infections, may increase, as may the costs of needed medical supplies necessary to keep the hospitals open. Doctors and patients may defer elective procedures and other health care services. Travel bans, social distancing and quarantines may limit access to our facilities. Business closings and layoffs in our local areas may result in the loss of insurance and adversely affect demand for our services, as well as the ability of patients and other payers to pay for services as rendered.

From third party information, in Tennessee there have been 1,286,713 cases and 16,509 deaths from COVID-19 as of November 5, 2021. One concern previously cited in the report and shared by health leaders is low vaccination rates in the State. Tennessee is the 8th-worst in population of fully vaccinated individuals with approximately 48% fully vaccinated. Moreover, Scott County, in which Big South Fork Medical Center is located, currently has the second highest rate of new daily COVID-19 cases per 100,000 persons in the State of Tennessee.
It is hoped that the ~~continued~~current roll out of vaccinations and boosters will continue to significantly reduce the risk of death and ~~reduce~~the transmission of the virus so that awe can continue the return to more normal ~~expectations occurs throughout the remainder of 2021 and in 2022. These developments have had, and may continue to have, a material adverse effect on us and the operations of our hospitals.~~expectations. Our plans to reopen our Jamestown Regional Medical Center, whose operations were suspended in June 2019, have been disrupted by the pandemic and the timing of the reopening has been delayed. These developments have had, and may continue to have, a material adverse effect on us and the operations of our hospitals.

Recent Developments – Formation of Behavioral Health Services Subsidiary
In the second quarter of 2022, we formed a subsidiary, Myrtle Recovery Centers, Inc., to pursue opportunities in the behavioral sector initially in our core, rural markets. We intend to focus on leveraging our existing physical locations and corporate and regional infrastructure to offer behavioral services including, but not limited to, substance abuse treatment. Services will be provided on either an inpatient, residential basis or an outpatient basis. The Company is finalizing its plans for such initiatives, which are subject to raising additional capital, licensure and the hiring of clinical and operational staff. There is no assurance that the Company will proceed with such plans.
37
Three ~~months ended~~Months Ended September 30, ~~2021 compared~~2022 Compared to the ~~three months ended~~Three Months Ended September 30, ~~2020~~2021

The following table summarizes the results of our consolidated continuing operations for the three months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

Three Months Ended
September 30,

Three Months Ended September 30,

2021 2020 2022 2021
% % % %
Net revenues(1) $ 1,010,245 100.0 % $ 1,950,698 100.0 % $ 2,825,937 100.0 % $ 1,010,245 100.0 %
Operating expenses:
Direct costs of revenues 1,207,749 119.6 % 2,805,829 143.8 % 1,823,473 64.5 % 1,207,749 119.6 %
General and administrative expenses 2,019,086 199.9 % 3,274,508 167.9 % 1,809,835 64.0 % 2,019,086 199.9 %
Depreciation and amortization 135,065 13.4 % 53,579 2.7 % 117,441 4.2 % 135,065 13.4 %
Loss from continuing operations before other income (expense) and income taxes (2,351,655 ) -232.8 % (4,183,218 ) -214.4 % (924,812 ) -32.7 % (2,351,655 ) -232.8 %
Other income (expense), net (346,197 ) -34.3 % 169,101 8.7 % 129,451 4.6 % (346,197 ) -34.3 %
Gain from extinguishment of debt 1,027,000 101.7 % 389,864 20.0 % - 0.0 % 1,027,000 101.7 %
Gain (loss) from legal settlements 3,157,203 312.5 % (23,652 ) -1.2 %
Gain from legal settlements, net 60,808 2.2 % 3,157,203 312.5 %
Interest expense (700,786 ) -69.4 % (2,377,980 ) -121.9 % (605,312 ) -21.4 % (700,786 ) -69.4 %
Benefit from income taxes - 0.0 % - 0.0 %
Net income (loss) from continuing operations $ 785,565 77.8 % $ (6,025,885 ) -308.9 %
Provision for income taxes - 0.0 % - 0.0 %
Net (loss) income from continuing operations $ (1,339,865 ) -47.4 % $ 785,565 77.8 %
41 ⁽¹⁾ Net revenues for the three months ended September 30, 2022 include $1.6 million in reserves related to a tentative retroactive adjustment calculation of the Medicare cost report for the six months ended December 31, 2021.

Net Revenues

~~Consolidated~~Net revenues were $2.8 million for the three months ended September 30, 2022, as compared to net revenues ~~were~~of $1.0 million for the three months ended September 30, 2021, ~~as compared to consolidated~~an increase of $1.8 million. We attribute the increase in net revenues ~~of $2.0 million for the three months ended September 30, 2020, a decrease of $1.0 million. Net revenues from~~primarily due to increased billings and collections and increased inpatient admissions both at our Big South Fork Medical ~~Center decreased by approximately $0.2 million~~Center. We began billing as a Critical Access Hospital in the three months ended ~~September~~June 30, ~~2021 compared~~2022 retroactive to ~~the 2020 period. We attribute the decrease in net revenues from~~July 1, 2021. Partially offsetting Big South Fork Medical Center to less inpatient activity in the 2021 period. In addition, approximately $0.6 million of the decrease was from Jellico Community Hospital and CarePlus Center. We closed Jellico Community Hospital on March 1, 2021 after the city of Jellico issued a 30-day termination notice for the lease of the building.
~~Net~~Center’s net revenues for the three months ended September 30, ~~2021 and 2020 included estimated implicit price concessions~~2022 were $1.6 million of ~~$1.9 million and $2.2 million, respectively,~~reserves related to a tentative retroactive adjustment calculation of the Medicare cost report for ~~doubtful accounts and $6.8 million and $14.0 million, respectively, for contractual allowances.~~the six months ended December 31, 2021.

Direct ~~Costs~~Cost of Revenues

Direct costs of revenues ~~decreased~~increased by ~~$1.6~~$0.6 million for the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020.~~2021. We attribute the ~~decrease~~increase primarily to ~~the closure~~increased professional fees related to greater inpatient admissions and a restructuring of Jellico Community Hospital on March 1, 2021. As a percentage of net revenues, direct costs decreased to 119.6% in the three months ended September 30, 2021 compared to 143.8% in the comparable 2020 period.our relationships with certain professional services firms.

General and Administrative Expenses

General and administrative expenses decreased by $1.3 million, or 38.3%, for the three months ended September 30, 2021 compared to the same period a year ago. General and administrative expenses for our hospital operations decreased by $1.5 million in the 2021 period, primarily as a result of the closure of Jellico Community Hospital on March 1, 2021. Partially offsetting the decrease was an increase of corporate related expenses of approximately $0.3$0.2 million in the three months ended September 30, ~~2021~~2022 compared to the ~~2020~~three months ended September 30, 2021. Our hospitals’ general and administrative expenses contributed approximately $0.3 million of the decrease due primarily to reductions of general and administrative expenses at Jellico Community Hospital and Jamestown Regional Medical Center. While these hospitals were closed, certain fixed expenses remained in the 2021 period. Partially offsetting the decrease were approximately $0.1 million of additional corporate related expenses.

Depreciation and Amortization ~~Expense~~

Depreciation and amortization expense ~~was~~remained relatively constant at $0.1 million for both the three months ended September 30, ~~2021 compared to $53,579 for the three months ended September 30, 2020. We attribute the increase to purchases of medical equipment during the latter part of 2020.~~2022 and 2021.

Loss from Continuing Operations Before Other Income (Expense) and Income Taxes

Our loss from continuing operations before other income (expense) and income taxes for the three months ended September 30, ~~2021~~2022 was ~~$2.4~~$0.9 million compared to a loss of ~~$4.2~~$2.4 million for the three months ended September 30, ~~2020.~~2021. We attribute the ~~decrease~~reduction in the ~~operating~~ loss ~~primarily~~in the three months ended September 30, 2022 compared to the ~~operating losses associated with Jellico Community Hospital.~~
loss in the three months ended September 30, 2021 to the increase in net revenues in the three months ended September 30, 2022 compared to the comparable 2021 period, partially offset by higher direct costs of revenues in the three months ended September 30, 2022 versus the 2021 period.

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Other Income (Expense), Net

Other income (expense), net of $0.1 million for the three months ended September 30, 2022 consisted primarily of adjustments totaling approximately $0.2 million for certain previously accrued payroll related expenses, $0.1 million of non-cash interest income and $0.1 million of other income, net from various items, partially offset by $0.3 million of adjustments to HHS Provider Relief Funds liabilities. Other income (expense), net of ($0.3) million for the three months ended September 30, 2021 ~~was a net expense~~consisted primarily of ~~$0.3 million, which resulted primarily from~~ the write off of equipment and inventory associated with Jellico Community Hospital, ~~that~~which we closed in March 2021. We had previously expected to be able to use the equipment and inventory at our other facilities but we determined during the period that the equipment and inventory could not be used. ~~Other income (expense), net~~
Gain from Extinguishment of Debt
We did not incur a gain from extinguishment of debt for the three months ended September 30, 2020 was $0.2 million, which included income of approximately $0.6 million from HHS Provider Relief Funds that were received from the federal government, partially offset by $0.3 million of loss on the sale of accounts receivable under sales agreements and $0.1 million for the loss on disposal of property.
~~Gain from Extinguishment of Debt~~
2022. We recorded gain from extinguishment of debt of $1.0 million during the three months ended September 30, 2021, which resulted from the forgiveness of PPP Notes during the period. We recorded a $0.4 million gain on extinguishment of debt in the three months ended September 30, 2020, which resulted from exchange, redemption and forbearance agreements that we entered into on August 31, 2020. Under these agreements preferred stock and debentures and associated accrued interest were exchanged for shares of the Company’s Series N Convertible Redeemable Preferred Stock (the “Series N Preferred Stock”).
42
Gain ~~(Loss)~~ from Legal Settlements, Net

We recorded a gain ~~(loss)~~ from legal settlements, net of $0.1 million and $3.2 million ~~and ($23,652)~~ for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The gain from legal settlements, net of $0.1 million for the three months ended September 30, 2022 resulted from the settlement of a service agreement. The gain from legal settlements, net of $3.2 million for the three months ended September 30, 2021 ~~resulted from:~~consisted of: (i) a gain of $0.6 million from the settlements of obligations under accounts receivable sale agreements; (ii) a gain of $2.2 million from the settlement of obligations under the TCA Debenture; and (iii) $0.3 million ~~pursuit~~pursuant to the settlement of obligations owed under professional services agreements.
Interest Expense

Interest expense for the three months ended September 30, ~~2021~~2022 was ~~$0.7~~$0.6 million, as compared to ~~$2.4~~$0.7 million for the three months ended September 30, ~~2020.~~2021. Interest expense for the three months ended September 30, 2022 and 2021 ~~was for~~consisted primarily of interest on ~~past due~~ debentures and on notes payable. ~~Interest~~In addition, we incurred interest expense ~~for~~of $15,000 on loans from Christopher Diamantis, a former member of our Board of Directors during the three months ended September 30, 2020 included $1.7 million for interest on past due debentures and on notes payable, $0.6 million for interest incurred by Mr. Diamantis on borrowings he procured in order to lend funds to the Company and $55,000 of interest on loans from Mr. Diamantis.
2022. The decrease in interest expense in the three months ended September 30, ~~2021~~2022 as compared to the ~~2020~~2021 period was due primarily to the exchange of debentures ~~on August 31, 2020~~and notes payable in November 2021 for preferred ~~stock, as well as a reduction in the rate of interest charged on certain debentures under the terms of the exchange.~~stock.

Net (Loss) Income ~~(Loss)~~ from Continuing Operations

Our ~~net income~~loss from continuing operations for the three months ended September 30, ~~2021~~2022 was ~~$0.8~~$1.3 million, as compared to a net ~~loss from continuing operations~~income of ~~$6.0~~$0.8 million for the three months ended September 30, ~~2020.~~2021. The ~~improvement~~net loss in the 2022 period as compared to the net income in the 2021 period was primarily due to a gain of $1.0 million from the forgiveness of PPP Notes in the 2021 period compared to a gain of $0.3 million in the 2022 period and a gain from legal settlements, net of $0.1 million in the three months ended September 30, ~~2021 as~~2022 compared to a gain of $3.2 million in the ~~2020 period~~2021 period. Partially offsetting these factors was ~~due primarily to: (i)~~ a reduction in the loss from continuing operations before other income (expense) and income taxes of ~~$1.8~~$1.4 million in the three months ended September 30, 2022 compared to the 2021 period, ~~(ii) the gain from extinguishment~~other income, net of ~~debt of $1.0~~$0.1 million in the ~~2021~~2022 period ~~versus a gain from extinguishment~~compared to other expense, net of ~~debt of $0.4 million in the 2020 period, (iii) the gain from legal settlements of $3.2~~$0.3 million in the 2021 period, and ~~(iv)~~ a ~~decrease of~~reduction in interest expense of ~~$1.7~~$0.1 million in three months ended September 30, 2022 compared to the 2021 period.
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Nine ~~months ended~~Months Ended September 30, ~~2021 compared~~2022 Compared to the ~~nine months ended~~Nine Months Ended September 30, ~~2020~~2021

The following table summarizes the results of our consolidated continuing operations for the nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

Nine Months Ended
September 30,

2021 2020
% %
Net revenues $ 1,288,402 100.0 % $ 5,860,807 100.0 %
Operating expenses:
Direct costs of revenues 4,074,149 316.2 % 8,151,478 139.1 %
General and administrative expenses 6,915,453 536.7 % 8,593,756 146.6 %
Depreciation and amortization 513,929 39.9 % 399,377 6.8 %
Loss from continuing operations before other income (expense) and income taxes (10,215,129 ) -792.9 % (11,283,804 ) -192.5 %
Other income (expense), net 4,140,049 321.3 % 6,907,670 117.9 %
Gain from extinguishment of debt 1,027,000 79.7 % 389,864 6.7 %
Gain from legal settlements 3,179,393 246.8 % 1,096,613 18.7 %
Interest expense (2,503,173 ) -194.3 % (7,926,750 ) -135.3 %
Benefit from income taxes - 0.0 % 1,118,485 19.1 %
Net loss from continuing operations $ (4,371,860 ) -339.3 % $ (9,697,922 ) -165.5 %
43

Nine Months Ended September 30,

2022 2021
% %
Net revenues $ 7,576,693 100.0 % $ 1,288,402 100.0 %
Operating expenses:
Direct costs of revenues 4,769,789 63.0 % 4,074,149 316.2 %
General and administrative expenses 5,262,338 69.5 % 6,915,453 536.7 %
Depreciation and amortization 351,481 4.6 % 513,929 39.9 %
Loss from continuing operations before other income (expense) and income taxes (2,806,915 ) -37.0 % (10,215,129 ) -792.9 %
Other income, net 87,170 1.2 % 4,140,049 321.3 %
Gain from extinguishment of debt 334,819 4.4 % 1,027,000 79.7 %
(Loss) gain from legal settlements, net (15,410 ) -0.2 % 3,179,393 246.8 %
Interest expense (1,705,502 ) -22.5 % (2,503,173 ) -194.3 %
Provision for income taxes - 0.0 % - 0.0 %
Net loss from continuing operations $ (4,105,838 ) -54.2 % $ (4,371,860 ) -339.3 %

Net Revenues

~~Consolidated net~~Net revenues were $7.6 million for the nine months ended September 30, 2022, as compared to $1.3 million for the nine months ended September 30, 2021, an increase of $6.3 million. We attribute the increase in net revenues primarily due to retroactive and current billings and collections and increased inpatient admissions both at our Big South Fork Medical Center. We began billing as ~~compared~~a Critical Access Hospital in the three months ended June 30, 2022 retroactive to ~~$5.9~~July 1, 2021.
Direct Costs of Revenues
Direct costs of revenue increased by $0.7 million for the nine months ended September 30, ~~2020, a decrease of $4.6 million. Net revenues from Big South Fork Medical Center decreased by approximately $2.9 million in~~2022 compared to the nine months ended September 30, ~~2021 compared to the 2020 period.~~2021. We attribute the ~~decrease in net revenues from Big South Fork Medical Center~~increase primarily to ~~reduced~~professional fees related to greater inpatient ~~activity~~admissions and ~~to adjustments for contractual allowances and estimated implicit price concessions during the 2021 period. In addition, approximately $1.6 million~~a restructuring of ~~the decrease was from~~our relationships with certain professional service firms, partially offset by lower costs at Jellico ~~Community Hospital and CarePlus Center. We closed Jellico Community Hospital on March 1, 2021 after the city of Jellico issued a 30-day termination notice for~~due to the lease ~~of the building.~~
Net revenues for the nine months ended September 30, 2021 and 2020 included estimated implicit price concessions of $6.2 million and $6.2 million, respectively, for doubtful accounts and $16.2 million and $32.9 million, respectively, for contractual allowances.termination in March 2021.

~~Direct Costs of Revenues~~
Direct costs of revenue decreased by $4.1 million for the nine months ended September 30, 2021 compared to the 2020 period. We attribute the decrease primarily to the closure of Jellico Community Hospital on March 1, 2021. As a percentage of net revenues, direct costs increased to 316.2% in the nine months ended September 30, 2021 compared to 139.1% in the comparable 2020 period.
General and Administrative Expenses

General and administrative expenses decreased by $1.7 million ~~or 19.5%, for~~in the nine months ended September 30, ~~2021~~2022 compared to the same period a year ago. ~~General~~We attribute the decrease primarily to reductions of general and administrative expenses ~~for our hospital operations decreased by $1.9 million in the 2021 period, primarily as a result of the closure of~~at Jellico Community Hospital ~~on March 1, 2021. Partially offsetting the decrease was an increase~~and Jamestown Regional Medical Center. Both of ~~corporate related expenses~~these hospitals were closed during some or all of ~~approximately $0.2 million in~~ the nine ~~months~~month period ended September 30, ~~2021 compared to the 2020 period.~~
2021.
Depreciation and Amortization Expense

Depreciation and amortization expense was ~~$0.5~~$0.4 million and ~~$0.4~~$0.5 million for the nine months ended September 30, 2022 and 2021, respectively. We attribute the decrease to fully depreciating certain assets in 2021. In addition, we recorded a $2.3 million impairment of Jamestown Regional Medical Center’s building in the fourth quarter of 2021, which resulted in a reduction of depreciation and ~~2020, respectively. The increase in~~amortization for the building for the nine months ended September 30, ~~2021 was due to depreciation expense associated with the purchases of medical equipment during the latter part of 2020.~~2022.

Loss from Continuing Operations Before Other Income (Expense) and Income Taxes

Our loss from continuing operations before other income (expense) and income taxes for the nine months ended September 30, ~~2021~~2022 was ~~$10.2~~$2.8 million compared to a loss of ~~$11.3~~$10.2 million for the nine months ended September 30, ~~2020.~~2021. We attribute the decrease in the operating loss primarily to the ~~closure of Jellico Community Hospital on March 1, 2021.~~increase in net revenues and the reduction in general and administrative expenses.
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Other Income, net

Other ~~Income (Expense), Net~~
income, net of $0.1 million for the nine months ended September 30, 2022 consisted primarily of adjustments totaling approximately $0.3 million for certain previously accrued payroll related expenses and $0.1 million of non-cash interest income, as well as approximately $0.3 million of other income, net from various other items, partially offset by $0.3 million of adjustments to HHS Provider Relief Funds liabilities and $0.3 million of penalties and interest associated with past due payroll taxes. Other income (expense), net of $4.1 million for the nine months ended September 30, 2021 included primarily $4.4 million of income from HHS Provider Relief Funds, partially offset by $0.3 million of loss on disposal of equipment and inventory. Other income (expense), net of $6.9 million for the nine months ended September 30, 2020 included primarily $8.0 million of HHS Provider Relief Funds, partially offset by $0.6 million in penalties and interest associated with non-payment of payroll taxes and $0.6 million of loss on the sale of accounts receivable under sales agreements.
equipment.

Gain from Extinguishment of Debt
~~We recorded gain~~Gain from extinguishment of debt consisted of $0.3 million and $1.0 million ~~during the nine months ended September 30, 2021, which resulted~~of gain from the forgiveness of PPP Notes ~~during the period. We recorded a $0.4 million gain on extinguishment of debt~~ in the nine months ended September 30, ~~2020, which resulted from exchange, redemption~~2022 and forbearance agreements that we entered into on August 31, 2020. Under these agreements preferred stock and debentures and associated accrued interest were exchanged for shares of the Company’s Series N Preferred Stock.2021, respectively.
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(Loss) Gain from Legal Settlements, net

~~The~~(Loss) gain from legal settlements, net was ~~$3.2 million~~($15,410) and ~~$1.1 million for the nine months ended September 30, 2021 and 2020, respectively. The gain from legal settlements of~~ $3.2 million for the nine months ended September 30, 2022 and 2021, ~~resulted from:~~respectively. For the nine months ended September 30, 2021 the gain consisted of: (i) a gain of $0.6 million from the settlements of obligations under accounts receivable sale agreements, (ii) a gain of $2.2 million from the settlement of obligations under the TCA Debenture, and (iii) a gain of $0.3 million ~~pursuit~~pursuant to the settlement of obligations owed under professional services agreements. ~~The settlement of obligations under a financing lease for property and equipment resulted in $0.9 million of the gain for the 2020 period.~~

Interest Expense

Interest expense for the nine months ended September 30, ~~2021~~2022 was ~~$2.5~~$1.7 million, as compared to ~~$7.9~~$2.5 million for the nine months ended September 30, ~~2020.~~2021. Interest expense for the nine months ended September 30, 2022 included $1.6 million for interest on debentures and notes payable and $0.1 million for interest on loans from Mr. Diamantis, a former member of our Board of Directors. Interest expense for the nine months ended September 30, 2021 included $2.4 million for interest on ~~past due~~ debentures and notes payable and $0.1 million for interest on loans from Mr. Diamantis. Interest expense for the nine months ended September 30, 2020 included $5.7 million for interest on past due debentures and note payable, $1.3 million for interest incurred by Mr. Diamantis on borrowings he procured in order to lend funds to the Company and approximately $0.6 million of interest on loans from Mr. Diamantis.
The decrease in interest expense in the nine months ended September 30, ~~2021 as~~2022 compared to the ~~2020~~2021 period was due ~~primarily~~ to the exchange of ~~loans from Mr. Diamantis on June 30, 2020~~debentures and notes payable in November 2021 for preferred ~~stock and the exchange of debentures in the third quarter of 2020 for preferred stock, as well as a reduction in the rate of interest charged on certain debentures under the terms of the exchange.~~stock.

~~Benefit from Income Taxes~~
During 2020, the U.S. Congress approved the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The CARES Act allows a five-year carryback privilege for federal net operating tax losses that arose in a tax year beginning in 2018 and through the current tax year, that is, 2020. As a result, during the nine months ended September 30, 2020, we recorded approximately $1.1 million in refunds from the carryback of certain of our federal net operating losses.
Net Loss from Continuing Operations

Our net loss from continuing operations for the nine months ended September 30, ~~2021~~2022 was ~~$4.4~~$4.1 million compared to a net loss from continuing operations of ~~$9.7~~$4.4 million for the nine months ended September 30, ~~2020.~~2021. The decrease in the net loss in the 2022 period as compared to the 2021 period of approximately $0.3 million was primarily due ~~to: (i) a~~to the decrease in the loss from continuing operations before other income (expense) and income taxes of ~~$1.1~~$7.4 million ~~(ii)~~and a ~~gain~~reduction in interest expense of $0.8 million, partially offset by the income from ~~extinguishment~~HHS Provider Relief Funds of ~~debt of $1.0~~$4.4 million in the 2021 period versus a ~~gain~~loss from ~~extinguishment~~HHS Provider Relief Funds of ~~debt of $0.4~~$0.3 million in the ~~2020~~2022 period, ~~(iii)~~ a ~~$3.2 million gain~~loss from legal settlements, net of $15,410 in the ~~2021~~2022 period compared to a ~~$1.1 million~~ gain ~~from legal settlements in the 2020 period, and (iv) a decrease in interest expense~~ of ~~$5.4~~$3.2 million in the 2021 period and a gain on forgiveness of PPP Notes of $0.3 million in the nine months ended September 30, 2022 compared to ~~the 2020 period. Partially offsetting the decrease in the net loss~~a $1.0 million gain in the 2021 period was a reduction in income of $3.6 million from HHS Provider Relief Funds in the 2021 period compared to the 2020 period and a benefit from income taxes of $1.1 million in the 2020 period, among other items.period.
~~LIQUIDITY AND CAPITAL RESOURCES~~Liquidity and Capital Resources

Overview
For the ~~three and~~ nine months ended September 30, ~~2021~~2022 and the year ended December 31, ~~2020,~~2021, we financed our operations from issuances of preferred stock, notes payable and loans from ~~Christopher~~Mr. Diamantis, a former member of our Board of ~~Directors, and the sale of accounts receivable under sales agreements.~~Directors. Also, during the year ended December 31, 2020, we received approximately $2.4 million from PPP Notes and our continuing operations received approximately $12.5 million from HHS Provider Relief Funds, of which $8.0 million was recognized as other income in the nine months ended September 30, ~~2020~~2022 and ~~$4.4~~the year ended December 31, 2021, we received $0.3 million ~~was recognized as other income in~~and $0.9 million, respectively, from HHS Provider Relief Funds. During the nine months ended September 30, ~~2021. The PPP Notes and associated accrued interest are forgivable as long as~~2022, we received $1.5 million from the ~~borrower uses~~issuance of our Series P Convertible Redeemable Preferred Stock (“Series P Preferred Stock”). During the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries. As of September 30,year ended December 31, 2021, $1.0 million of the PPP Notes has been forgiven. On November 3, 2021, an additional $0.8 million of the PPP Notes was forgiven. The HHS Provider Relief Funds are grants, not loans, and HHS will not require repayment, but providers are restricted and the funds must be used only for grant approved purposes as more fully discussed in Note 2 to the accompanying unaudited condensed consolidated financial statements. Wewe received approximately $1.2 million in cash from the issuances of promissory notes ~~during the nine months ended September 30, 2021~~ and ~~$5.0~~$9.0 million from the ~~issuance~~issuances of our Series O Convertible Redeemable Preferred Stock (“Series O Preferred Stock”). During the nine months ended September 30, ~~2021, Mr. Diamantis loaned the Company $0.9 million~~2022 and ~~during~~ the year ended December 31, ~~2020,~~2021, Mr. Diamantis’ loans to the Company increased by a net of $0.9 million and $0.9 million, respectively. The loans from Mr. Diamantis ~~loaned~~in the ~~Company $7.6 million,~~nine months ended September 30, 2022 were used to repay a portion of the amounts due under a third-party promissory note, pursuant to a personal guaranty of the promissory note by Mr. Diamantis. The majority of ~~which was~~the loans from Mr. Diamantis in 2021 were used for working capital purposes.

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Subsequent to September 30, 2021, we received $2.0 million in proceeds from issuances of our Series O Preferred Stock. On or before December 1, 2021, we expect to receive an additional $2.0 million in proceeds from the issuance of an additional 2,200 shares of our Series O Preferred Stock.
On November 7, 2021, we entered into Exchange and Amendment Agreements (the “November 2021 Exchange Agreements”) with certain institutional investors in the Company. In the November 2021 Exchange Agreements, the investors agreed to reduce their holdings of $1.1 million ~~stated amount~~principal value of then outstanding warrant promissory notes payable and $4.5 million of then outstanding non-convertible debentures, plus accrued interest thereon of approximately ~~$1.4~~$1.5 million, by exchanging the indebtedness and accrued interest for ~~8,545~~8,544.870 shares of the Company’s ~~newly-authorized~~ Series P ~~Convertible Redeemable~~ Preferred Stock ~~(the “Series P Preferred Stock”).~~with a stated value of $8,544,870. After the ~~exchange,~~November 2021 Exchange Agreements, the investors ~~continue~~continued to own approximately $8.2 million of the outstanding debentures, plus the associated accrued interest of approximately ~~$3.3 million.~~$4.7 million at September 30, 2022. In addition, pursuant to the November 2021 Exchange Agreements, the expiration dates of the ~~March Warrants~~certain warrants that were issued by the Company to the investors in March 2017, as more fully described in Note ~~11,~~10 to the accompanying unaudited condensed consolidated financial statements, were extended from ~~varying dates in~~ March 21, 2022 to March 21, 2024.

41
~~The foregoing~~
Each of these financing transactions ~~are~~is more fully discussed in Notes 2, ~~4, 5,~~ 6, 1110, and 1615 to our accompanying unaudited condensed consolidated financial statements.

On June 25, 2021, the Company sold HTS and AMSG to InnovaQor and the Company received 14,950 shares of InnovaQor’s Series BB-1 Preferred Stock with a stated value of $1,000 per share and valued at $9.1 million as consideration for the sale. In addition, $2.2 million of net liabilities of HTS and AMSG were transferred to InnovaQor. The sale is more fully discussed above under the heading, “Discontinued Operations,” and in Note 1413 to our accompanying unaudited condensed consolidated financial statements.

Future cash needs for working capital, capital expenditures, pursuit of opportunities in the behavioral sector, debt service obligations and potential acquisitions will require management to seek additional capital. The Company and our facilities may also receive additional government assistance. The sale/issuances of additional equity will result in additional dilution to our stockholders.
Going Concern and Liquidity

Under ~~ASU~~Accounting Standards Update (“ASU”) 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40) (Accounting Standards Codification (“ASC 205-40”)), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. As required by ASC 205-40, this evaluation shall initially not take into consideration the potential mitigating effects of plans that have not been fully implemented as of the date the financial statements are issued. Management has assessed the Company’s ability to continue as a going concern in accordance with the requirement of ASC 205-40.

As reflected in the accompanying ~~unaudited~~ condensed consolidated financial statements, the Company had a working capital deficit and a stockholders’ deficit of ~~$54.3~~$44.0 million and ~~$37.5~~$29.9 million, respectively, at September 30, ~~2021.~~ 2022.
The Company had a loss from continuing operations ~~before other income (expense) and income taxes~~ of approximately ~~$2.4~~$4.1 million and ~~$4.2 million for the three months ended September 30, 2021 and 2020, respectively, and a loss from continuing operations before other income (expense) and income taxes of $10.2 million and $11.3~~$4.4 million for the nine months ended September 30, 2022 and 2021, respectively, and ~~2020, respectively. In addition,~~ cash used in its operating activities was ~~$5.7~~$1.2 million and ~~$13.5~~$5.7 million for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. As of the date of this report, our cash is deficient and payments for our operations in the ordinary course are not being made. The continued losses and other related factors, including ~~the~~past due accounts payable and payroll taxes, as well as payment defaults under the terms of certain outstanding notes payable and debentures, as more fully discussed in ~~Notes~~Note 6 ~~and 7~~ to the accompanying unaudited condensed consolidated financial statements, raise substantial doubt about the Company’s ability to continue as a going concern for 12 months from the filing date of this report.

The Company’s accompanying unaudited condensed consolidated financial statements are prepared assuming the Company can continue as a going concern, which contemplates continuity of operations through realization of assets, and the settling of liabilities in the normal course of business. As more fully discussed in Note 1413 to the accompanying ~~unaudited condensed~~ consolidated financial statements, on June 25, 2021, the Company sold HTS and AMSG to InnovaQor and the Company received 14,950 shares of InnovaQor’s Series BB-1 Preferred Stock valued at $9.1 million as consideration for the sale. In addition, $2.2 million of net liabilities of HTS and AMSG were transferred to InnovaQor. The Company has reflected the ~~assets and liabilities~~financial results relating to HTS and AMSG ~~held~~ prior to the sale as part of discontinued operations. In addition, during 2020, the Company announced plans to sell its last clinical laboratory, EPIC Reference Labs, Inc., and as a result, EPIC Reference Labs, Inc.’s operations have been included in discontinued operations for all periods presented. The Company has been unable to find a buyer for EPIC Reference Labs, Inc. and, therefore, it has ceased all efforts to sell the company and closed down its operations.
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On March 1, 2021, the Company closed Jellico Community Hospital, after the city of Jellico issued a 30-day termination notice for the lease of the building. Jellico Community Hospital had been operating at a loss since it was acquired by the Company in March 2019. The Company’s core operating businesses are now a rural hospital, CarePlus Center and a hospital and physician’s office that it plans to reopen and operate. The Company’s current financial condition may make it difficult to attract and maintain adequate expertise in its management team to successfully operate these businesses.

We need to raise additional funds immediately and continue to do so until we begin to realize positive cash flow from operations. There can be no assurance that we will be able to achieve our business plan, which is to acquire and operate clusters of rural hospitals and related service providers, raise any additional capital or secure the additional financing necessary to implement our current operating plan. Our ability to continue as a going concern is dependent upon our ability to significantly increase our revenues, reduce our operating costs and eventually achieve profitable operations. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
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As of September 30, ~~2021,~~2022, we were party to legal proceedings, which are presented in Note 1312 to the accompanying unaudited condensed consolidated financial statements.

The following table presents our capital resources as of September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:

September 30, December 31, September 30, December 31,
2021 2020 Change 2022 2021 Change

Cash $ 331,491 $ 25,353 $ 306,138 $ 10,958 $ 724,524 $ (713,566 )
Working capital deficit (54,308,866 ) (56,454,545 ) 2,145,679 (43,969,412 ) (41,641,960 ) (2,327,452 )
Total debt, exclusive of debt discounts 22,415,981 20,770,771 1,645,210
Total debt 14,368,745 15,017,059 (648,314 )
Finance lease obligations 220,461 249,985 (29,524 ) 220,461 220,461 -
Stockholders’ deficit (37,509,709 ) (49,017,752 ) 11,508,043 (29,914,446 ) (27,301,524 ) (2,612,922 )

The following table presents the major sources and uses of cash for the nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

Nine Months Ended
September 30,

Nine Months Ended September 30,

2021 2020 Change 2022 2021 Change

Net cash used in operations $ (5,689,943 ) $ (13,522,634 ) $ 7,832,691
Net cash used in investing activities - (370,890 ) 370,890
Net cash provided by financing activities 5,996,081 14,096,934 (8,100,853 )
Cash used in operations $ (1,166,596 ) $ (5,689,943 ) $ 4,523,347
Cash used in investing activities (541,334 ) (158,118 ) (383,216 )
Cash provided by financing activities 994,364 6,154,199 (5,159,835 )

Net change in cash 306,138 203,410 102,728 (713,566 ) 306,138 (1,019,704 )
Cash and cash equivalents, beginning of the year 25,353 16,933 8,420 724,524 25,353 699,171
Cash and cash equivalents, end of the period $ 331,491 $ 220,343 $ 111,148 $ 10,958 $ 331,491 $ (320,533 )

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The components of cash used in operations for the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 are presented in the following table:

Nine Months Ended
September 30,

2021 2020 Change

Net loss from continuing operations $ (4,371,860 ) $ (9,697,922 ) $ 5,326,062
Non-cash adjustments to net loss continuing operations⁽¹⁾ (7,704,444 ) (8,320,255 ) 615,811
Gain on sale of discontinued operations (11,303,939 ) - 11,303,939
Change in operating assets and liabilities:
Accounts receivable 377,088 1,241,398 (864,310 )
Inventory 164,653 (76,065 ) 240,718
Accounts payable, checks issued in excess of bank balance and accrued expenses 6,126,702 4,399,288 1,727,414
Income (loss) from discontinued operations 10,880,148 (164,293 ) 11,044,441
Income tax assets and liabilities - (522,885 ) 522,885
Other 39,142 (281,215 ) 320,357
Net cash used in operating activities (5,792,510 ) (13,421,949 ) 7,629,439
Net cash provided by (used in) discontinued operations 102,567 (100,685 ) 203,252
Net cash used in operations $ (5,689,943 ) $ (13,522,634 ) $ 7,832,691

Nine Months Ended September 30,

2022 2021 Change

Net loss from continuing operations $ (4,105,838 ) $ (4,371,860 ) $ 266,022
Non-cash adjustments to net loss: (1) 220,889 (7,704,444 ) 7,925,333
Non-cash gain on sale of discontinued operations - (11,303,939 ) 11,303,939
Changes in operating assets and liabilities:
Accounts receivable (774,975 ) 377,088 (1,152,063 )
Inventory 6,869 164,653 (157,784 )
Accounts payable and accrued expenses 3,530,217 6,126,702 (2,596,485 )
(Loss) income from discontinued operations (7,075 ) 10,880,148 (10,887,223 )
Other (34,969 ) 39,142 (74,111 )
Net cash used in operating activities of continuing operations (1,164,882 ) (5,792,510 ) 4,627,628
Cash (used in) provided by discontinued operations (1,714 ) 102,567 (104,281 )
Cash used in operations $ (1,166,596 ) $ (5,689,943 ) $ 4,523,347

(1) Non-cash adjustments to net loss for the nine months ended September 30, 2022 of $0.2 million include primarily $0.3 million of other income from forgiveness of PPP Notes and $0.1 million of non-cash interest income, offset by $0.4 million of depreciation and amortization and $0.3 million of loss from HHS Provider Relief Funds. Non-cash adjustments to net loss for the nine months ended September 30, 2021 include primarily $3.2 million gain from legal settlements, $1.0 million gain from extinguishment of debt and $4.4 million gain from HHS provider relief funds. Non-cash adjustments to net loss for the nine months ended September 30, 2020 include primarily $1.1 million gain from legal settlements, $0.4 million gain from extinguishment of debt and $8.0 million gain from HHS provider relief funds,Provider Relief Funds, partially offset by $0.5 million of depreciation and amortization, $0.3 million of ~~$0.5 million.~~loss on disposal of equipment and $0.1 million of amortization of debt discount.

~~No cash was used by investing activities during the nine months ended September 30, 2021.~~ Cash of ~~$0.4~~$0.5 million was used by investing activities during the nine months ended September 30, ~~2020~~2022 for the purchase of $34,794 of equipment and cash of $0.5 million was used to ~~purchase hospital equipment.~~fund working capital needs at InnovaQor (classified as a note receivable / receivable from related party). Cash of $0.2 million was used by investing activities during the nine months ended September 30, 2021 to fund working capital needs of InnovaQor (classified as a receivable from related party).

Cash provided by financing activities for the nine months ended September 30, 2022 of $1.0 million included $0.9 million in loans from a former member of our Board of Directors, $1.5 million from the issuance of shares of our Series P Preferred Stock and $0.3 million in HHS Provider Relief funds, partially offset by $1.2 million in payments of notes payable and $0.5 million in payments of accounts receivable under sales agreements. Cash provided by financing activities for the nine months ended September 30, 2021 of $6.0 million included primarily $5.0 million in proceeds from the issuance of our Series O Preferred Stock, $0.9 million in loans from a former member of our Board of Directors and $1.2 million from the issuances of notes payable, partially offset by $0.4 million in repayments of loans from a former member of our Board of Directors, $0.4 million in payments of notes payable and $0.3 million in payments of accounts receivable under sales agreements. Cash provided by financing activities for the nine months ended September 30, 2020 of $14.1 million included primarily $5.8 million in loans from a former member of our Board of Directors, $2.3 million from PPP Notes, $12.5 million from HHS Provider Relief Funds, $0.8 million from the sale of accounts receivable under sales agreements and $1.2 million from the issuance of a note payable. Partially offsetting these cash receipts were $0.9 million in payments of debentures, $1.6 million of notes payable payments, $4.2 million in repayments of loans from a former member of our Board of Directors, $1.5 million in payments on accounts receivable sales agreements and $0.2 million of finance lease obligation payments.

Common Stock and Common Stock Equivalents

The Company had ~~4.8~~15.1 billion and ~~39,648~~4.2 million shares of its common stock issued and outstanding at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. During the nine months ended September 30, 2022, the Company issued 8.4 billion shares of its common stock upon conversions of 2,352 shares of its Series N Convertible Redeemable Preferred Stock (the “Series N Preferred Stock”) and it issued 6.7 billion shares of its common stock upon conversions of 638 shares of its Series O Preferred Stock. During the nine months ended September 30, 2021, the Company issued ~~95,450,000~~9,545 shares of its common stock upon the exchange ~~and conversion~~/conversion of $1.2 million of stated value of its Series M Convertible Redeemable Preferred Stock (the “Series M Preferred Stock”) and ~~4.7 billion~~468,186 shares of its common stock upon the conversions of $18.4 million of stated value of its Series N Preferred Stock. During the nine months ended September 30, 2020, the Company issued 313 shares of its common stock upon the conversion of $0.2 million of stated value of its Series I-2 Preferred Stock and 589 shares of its common stock upon the conversion of $0.1 million of stated value of its Series N Preferred Stock.

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The terms of certain of the outstanding warrants, convertible preferred stock and convertible debentures issued by the Company provide for reductions in the per share exercise prices of the warrants and the per share conversion prices of the debentures and preferred stock (if applicable and subject to a floor in certain cases), in the event that the Company issues common stock or common stock equivalents (as that term is defined in the agreements) at an effective exercise/conversion price that is less than the then exercise/conversion price of the outstanding warrants, preferred stock or debentures, as the case may be. In addition, the majority of these equity-based securities contain exercise/conversion prices that vary based upon the price of the Company’s common stock on the date of exercise/conversion (see Notes 7,3, 6, 10 11 and 1615 to the accompanying unaudited condensed consolidated financial statements). These provisions have resulted in significant dilution of the Company’s common stock and have given rise to reverse splits of the Company’s common stock, including a ~~1-for-10,000 reverse stock split effected on July 31, 2020 and a~~ 1-for-1,000 reverse stock split effected on July 16, ~~2021.~~2021 and a 1-for-10,000 reverse stock split effected on March 15, 2022. As a result of these down round provisions, the potential common stock equivalents, including outstanding common stock, totaled ~~286.9 billion~~1.0 trillion at both September 30, ~~2021~~2022 and ~~476.2 billion at~~ November 10, ~~2021.~~
2022.
48

On August 13, 2020, Mr. Diamantis entered into the Voting Agreement with the Company, Mr. Seamus Lagan and Alcimede LLC (of which Mr. Lagan, the Company’s Chief Executive Officer, is the sole manager) pursuant to which Mr. Diamantis granted an irrevocable proxy to Mr. Lagan to vote the Series M Convertible Redeemable Preferred Stock (the “Series M Preferred Stock”) held by Mr. Diamantis. Mr. Diamantis has retained all other rights under the Series M Preferred Stock. Regardless of the number of shares of Series M Preferred Stock outstanding and so long as at least one share of Series M Preferred Stock is outstanding, the outstanding shares of Series M Preferred Stock shall have the number of votes, in the aggregate, equal to 51% of all votes entitled to be voted at any meeting of stockholders or action by written consent. This means that the holders of Series M Preferred Stock have sufficient votes, by themselves, to approve or defeat any proposal voted on by the Company’s stockholders, unless there is a supermajority required under applicable law or by agreement.
~~Shareholder Proposals Effective November 5, 2021~~
OnAlso, on November 5, 2021, the Company ~~filed an Amendment to~~amended its Articles of Incorporation, as amended (the “Amendment”), with the Secretary of State of Delaware to make effective the following proposals, which had previously been approved by the Company’s Board of Directors and stockholders:
~~Proposal 1~~~~: To approve an amendment to our Certificate of Incorporation, as amended, to increase the number of authorized shares of our common stock from 10,000,000,000 to 50,000,000,000 shares.~~
~~Proposal 2~~~~: To approve an amendment to our~~ Certificate of Incorporation, as amended, to provide that the number of authorized shares of ~~Common Stock~~its common stock or ~~Preferred Stock~~preferred stock may be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Company entitled to vote generally in the election of directors, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law of the State of Delaware (or any successor provision thereto), voting together as a single class, without a separate vote of the holders of the class or classes the number of authorized shares of which are being increased or decreased unless a vote by any holders of one or more series of ~~Preferred Stock~~preferred stock is required by the express terms of any series of ~~Preferred Stock~~preferred stock pursuant to the terms thereof.

As a result of the Voting Agreement and the ~~two proposals listed above that became effective on~~ November 5, 2021 amendment to the Company’s Certificate of Incorporation discussed above, as of the date of filing of this report, the Company believes that it has the ability to ensure that it has and or can obtain sufficient authorized shares of its common stock to cover all potentially dilutive shares of common ~~shares~~stock outstanding.

OTHER MATTERS

Inflation and Supply Chain Issues

~~We do not believe inflation~~The healthcare industry is very labor intensive and salaries and benefits are subject to inflationary pressures, as are supply and other costs. The nationwide shortage of nurses and other clinical staff and support personnel has been a significant ~~effect~~operating issue facing us and other healthcare providers. In particular, like others in the healthcare industry, we continue to experience a shortage of nurses and other clinical staff and support personnel, which has been exacerbated by the COVID-19 pandemic. We are treating patients with COVID-19 in our facilities and, in some areas, the increased demand for care is putting a strain on our resources and staff, which has required us to utilize higher-cost temporary labor and pay premiums above standard compensation for essential workers. The length and extent of the ~~Company’s operations at this time.~~disruptions caused by the COVID-19 pandemic are currently unknown; however, we expect such disruptions to continue. This staffing shortage may require us to further enhance wages and benefits to recruit and retain nurses and other clinical staff and support personnel or require us to hire expensive temporary personnel. Our ability to pass on increased costs associated with providing healthcare to Medicare and Medicaid patients is limited due to various federal, state and local laws which have been enacted that, in certain cases, limit our ability to increase prices.
45

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.

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As of September 30, ~~2021,~~2022, 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.
46
Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Interim Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure. Under the supervision and with the participation of our management, including our Chief Executive Officer, who also serves as our Interim Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures. Based on the foregoing evaluation, our management concluded that, as of September 30, ~~2021,~~2022, our disclosure controls and procedures were not effective to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, including our Chief Executive Officer (Principal Executive Officer), who also serves as our Interim Chief Financial Officer (Principal Financial Officer), does not expect that our disclosure controls and procedures will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

In our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, we identified material weaknesses in our internal control over financial reporting. 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. ~~With the acquisitions of our hospitals, there~~There are risks related to the timing and accuracy of the integration of information from various accounting systems whereby the Company has experienced delays in receiving information in a timely manner from its subsidiaries. Based on these material weaknesses in internal control over financial reporting, management concluded the Company did not maintain effective internal control over financial reporting as of December 31, ~~2020.~~2021. As of September 30, ~~2021,~~2022, we concluded that these material weaknesses continued to exist.

The Company expects improvements to be made on the integration of information issues during ~~the remainder of 2021~~2022 and ~~beyond~~2023 as we plan to move towards securing a prompt and accurate reporting system. The Company is continuing to further remediate the material weaknesses identified above as its resources permit. The Company is in the process of taking the following steps to remediate these material weaknesses: (i) increasing the staffing of its internal ~~finance department, including hiring a chief financial officer;~~accounting department; and (ii) ~~continuing 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 ~~finance department, including independent review of material cash disbursements.~~accounting department.
50

Notwithstanding such material weakness, management believes that the unaudited 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.

47
(b) Changes in Internal Control over Financial Reporting

During the nine months ended September 30, ~~2021,~~2022, there have been 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 except as disclosed above.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

From ~~time to time,~~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 1312 to the accompanying unaudited condensed consolidated financial statements.

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 ~~2020~~2021 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 ~~2020~~2021 Form 10-K.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits

~~3.27~~ Certificate of Amendment to Certificate of Incorporation of Rennova Health, Inc. (incorporated by reference to Exhibit 3.27 of the Company’s Current Report on Form 8-K filed with the SEC on July 19, 2021).
~~10.1~~ Exchange Agreement, dated as of August 27, 2021, between Rennova Health, Inc. and Christopher Diamantis (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on September 2, 2021).
51
~~10.2~~ Form of Securities Purchase Agreement, dated as of September 7, 2021, among Rennova Health, Inc. and the investors signatory thereto (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on September 8, 2021).
~~10.3~~ ~~Promissory Note, dated August 10, 2021, by Rennova Health, Inc. and~~ Jellico Medical Center, Inc.*
~~10.4~~ Promissory Note, dated August 10, 2021, by Rennova Health, Inc. and Scott County Community Hospital, Inc. d/b/a Big South Fork Medical Center*
31.1 Rule 13a-14(a) Certification by the Principal Executive Officer.*

31.2 Rule 13a-14(a) Certification by the Principal Financial Officer.*

32.1 Certification by the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.2 Certification by the 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 Inline XBRL Instance Document

101.SCH Inline XBRL Schema Document

101.CAL Inline XBRL Calculation Link base Document

101.DEF Inline XBRL Definition Link base Document

101.LAB Inline XBRL Label Link base Document

101.PRE Inline XBRL Presentation Link base Document
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

*Filed herewith
**Furnished herewith
* Filed herewith
** Furnished herewith

5248
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 ~~15, 2021~~14, 2022 By: /s/ Seamus Lagan
Seamus Lagan

Chief Executive Officer, President and Interim Chief Financial Officer
(Principal Executive Officer and Principal Financial Officer)

5349


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020

Net revenues	$	1,010,245		$	1,950,698		$	1,288,402		$	5,860,807

Operating expenses:
Direct costs of revenues		1,207,749			2,805,829			4,074,149			8,151,478
General and administrative expenses		2,019,086			3,274,508			6,915,453			8,593,756
Depreciation and amortization		135,065			53,579			513,929			399,377
Total operating expenses		3,361,900			6,133,916			11,503,531			17,144,611

Loss from continuing operations before other income (expense) and income taxes		(2,351,655	)		(4,183,218	)		(10,215,129	)		(11,283,804	)

Other income (expense):
Other income (expense), net		(346,197	)		169,101			4,140,049			6,907,670
Gain from extinguishment of debt		1,027,000			389,864			1,027,000			389,864
Gain (loss) from legal settlements		3,157,203			(23,652	)		3,179,393			1,096,613
Interest expense		(700,786	)		(2,377,980	)		(2,503,173	)		(7,926,750	)
Total other income (expense), net		3,137,220			(1,842,667	)		5,843,269			467,397

Net income (loss) from continuing operations before income taxes		785,565			(6,025,885	)		(4,371,860	)		(10,816,407	)

Benefit from income taxes		-			-			-			(1,118,485	)

Net income (loss) from continuing operations		785,565			(6,025,885	)		(4,371,860	)		(9,697,922	)

Loss from discontinued operations		(31,388	)		(166,180	)		(423,791	)		(164,293	)
Gain on sale		576,787			-			11,303,939			-
Total income (loss) from discontinued operations		545,399			(166,180	)		10,880,148			(164,293	)

Net income (loss)		1,330,964			(6,192,065	)		6,508,288			(9,862,215	)
Deemed dividends		(259,530,999	)		(63,544,950	)		(409,142,478	)		(66,695,318	)
Net loss available to common stockholders	$	(258,200,035	)	$	(69,737,015	)	$	(402,634,190	)	$	(76,557,533	)

Net loss per share of common stock available to common stockholders- basic and diluted:
Continuing operations	$	(0.59	)	$	(54,182.89	)	$	(2.75	)	$	(70,343.68	)
Discontinued operations	$	0.00		$	(129.42	)	$	0.07		$	(151.28	)
Total basic and diluted	$	(0.59	)	$	(54,312.31	)	$	(2.68	)	$	(70,494.96	)
Weighted average number of shares of common stock outstanding during the period:
Basic and diluted		438,998,913			1,284			150,459,817			1,086

	Shares			Amount			Shares		Amount		capital			Deficit			Deficit
	Preferred Stock						Common Stock				Additional paid-in-			Accumulated			Total Stockholders’
	Shares			Amount			Shares		Amount		capital			Deficit			Deficit
Balance at December 31, 2020		2,051,444		$	20,514			39,648	$	4	$	819,498,236		$	(868,536,506	)	$	(49,017,752	)
Conversion of Series M Preferred Stock into common stock
Conversion of Series M Preferred Stock into common stock, shares
Conversion of Series N Preferred Stock into common stock		(4,177	)		(42	)		435,082		44		(2	)		-			-
Issuance of Series O Preferred Stock
Issuance of Series O Preferred Stock, shares
Payment of cash in lieu of fractional shares
Deemed dividends from issuance of Series N Preferred Stock
Deemed dividends from issuance of warrants under exchange agreement
Deemed dividends from extension of warrants
Deemed dividends from trigger of down round provision features
Deemed dividends												50,358,149			(50,358,149	)		-
Conversion of Series I-2 Preferred Stock into common stock
Conversion of Series I-2 Preferred Stock into common stock, shares
Issuance of Series N Preferred Stock
Issuance of Series N Preferred Stock, shares
Exchange of Series K Preferred Stock for Series L Preferred Stock
Exchange of Series K Preferred Stock for Series L Preferred Stock , shares
Issuance of Series L Preferred Stock
Issuance of Series L Preferred Stock, shares
Issuance of Series M Preferred Stock in exchange for related party loans and accrued interest
Issuance of Series M Preferred Stock in exchange for related party loans and accrued interest , shares
Deemed dividend from issuance of Series M Preferred Stock
Net loss		-			-			-		-		-			(3,893,994	)		(3,893,994	)
Balance at March 31, 2021		2,047,267		$	20,472			474,730	$	48	$	869,856,383		$	(922,788,649	)	$	(52,911,746	)
Conversion of Series M Preferred Stock into common stock		(620	)		(6	)		450,000		45		(39	)		-			-
Conversion of Series N Preferred Stock into common stock		(8,888	)		(89	)		9,075,270		907		(818	)		-			-
Issuance of Series O Preferred Stock		2,750			28			-		-		2,499,972			-			2,500,000
Deemed dividends from trigger of down round provision features												99,253,330			(99,253,330	)		-
Net income		-			-			-		-		-			9,071,318			9,071,318
Balance at June 30, 2021		2,040,509		$	20,405			10,000,000	$	1,000	$	971,608,828		$	(1,012,970,661	)	$	(41,340,429	)
Exchange of Series M Preferred Stock into common stock		(570	)		(6	)		95,000,000		9,500		(9,494	)		-			-
Conversion of Series N Preferred Stock into common stock		(5,285	)		(53	)		4,672,350,000		467,235		(467,182	)		-			-
Issuance of Series O Preferred Stock		2,750			28			-		-		2,499,972			-			2,500,000
Payment of cash in lieu of fractional shares		-			-			-		-		(244	)		-			(244	)
Deemed dividends from issuance of warrants under exchange agreement		-			-			-		-		341,525			(341,525	)		-
Deemed dividends from extension of warrants		-			-			-		-		291,592			(291,592	)		-
Deemed dividends from trigger of down round provision features		-			-			-		-		258,897,882			(258,897,882	)		-
Net income		-			-			-		-		-			1,330,964			1,330,964
Balance at September 30, 2021		2,037,404		$	20,374			4,777,350,000	$	477,735	$	1,233,162,879		$	(1,271,170,696	)	$	(37,509,709	)

	Preferred Stock						Common Stock				Additional paid-in-			Accumulated			Total Stockholders’
	Shares			Amount			Shares		Amount		capital			Deficit			Deficit
Balance at December 31, 2020		2,051,444		$	20,514			4	$	-	$	819,498,240		$	(868,536,506	)	$	(49,017,752	)
Conversion of Series N Preferred Stock into common stock		(4,177	)		(42	)		44		-		42			-			-
Deemed dividends from triggers of down round provisions		-			-			-		-		50,358,149			(50,358,149	)		-
Net loss		-			-			-		-		-			(3,893,994	)		(3,893,994	)
Balance at March 31, 2021		2,047,267		$	20,472			48	$	-	$	869,856,431		$	(922,788,649	)	$	(52,911,746	)
Conversion of Series M Preferred Stock into common stock		(620	)		(6	)		45		-		6			-			-
Conversion of Series N Preferred Stock into common stock		(8,888	)		(89	)		907		-		89			-			-
Issuance of Series O Preferred Stock		2,750			28			-		-		2,499,972			-			2,500,000
Deemed dividends from triggers of down round provisions		-			-			-		-		99,253,330			(99,253,330	)		-
Net income		-			-			-		-		-			9,071,318			9,071,318
Balance at June 30, 2021		2,040,509		$	20,405			1,000	$	-	$	971,609,828		$	(1,012,970,661	)	$	(41,340,428	)
Beginning balance		2,040,509		$	20,405			1,000	$	-	$	971,609,828		$	(1,012,970,661	)	$	(41,340,428	)
Exchange of Series M Preferred Stock for common stock		(570	)		(6	)		9,500		-		6			-			-
Conversion of Series N Preferred Stock into common stock		(5,285	)		(53	)		467,235		5		48			-			-
Deemed dividends from extensions of warrants		-			-			-		-		291,592			(291,592	)		-
Issuance of Series O Preferred Stock		2,750			28			-		-		2,499,972			-			2,500,000
Deemed dividends from issuance of warrants under exchange agreement		-			-			-		-		341,525			(341,525	)		-
Payment of cash in lieu of fractional shares		-			-			-		-		(244	)		-			(244	)
Deemed dividends from triggers of down round provisions		-			-			-		-		258,897,882			(258,897,882	)		-
Net income		-			-			-		-		-			1,330,964			1,330,964
Net income (loss)		-			-			-		-		-			1,330,964			1,330,964
Balance at September 30, 2021		2,037,404		$	20,374			477,735	$	5	$	1,233,640,501		$	(1,271,170,696	)	$	(37,509,708	)
Ending balance		2,037,404		$	20,374			477,735	$	5	$	1,233,640,501		$	(1,271,170,696	)	$	(37,509,708	)

							2022				2021
	Nine Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2022				2021

Cash flows from operating activities:
Net loss from continuing operations	$	(4,371,860	)	$	(9,697,922	)		$	(4,105,838	)		$	(4,371,860	)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation and amortization		513,929			399,377				351,481				513,929
Amortization of debt discount and non-cash interest expense		113,552			108,958
Gain from extinguishment of debt		(1,027,000	)		(389,864	)
Non-cash interest (income) expense									(80,156	)			113,552
Other income from forgiveness of PPP notes payable									(334,819	)			(1,027,000	)
Loss (gain) from legal settlements									15,410				(3,179,393	)
Loss on disposal of equipment		274,468			87,293				1,215				274,468
Net gain from legal settlements		(3,179,393	)		(1,096,613	)
Other income from federal government provider relief funds		(4,400,000	)		(8,020,969	)
Loss on sales of accounts receivable under sale agreements		-			591,563
Loss (income) from federal government provider relief funds									267,758				(4,400,000	)
Gain on sale of discontinued operations		(11,303,939	)		-				-				(11,303,939	)
Income (loss) from discontinued operations		10,880,148			(164,293	)
(Loss) income from discontinued operations									(7,075	)			10,880,148
Changes in operating assets and liabilities:
Accounts receivable		377,088			1,241,398				(774,975	)			377,088
Inventory		164,653			(76,065	)			6,869				164,653
Prepaid expenses and other current assets		(3,416	)		(224,733	)			5,031				(3,416	)
Security deposits		42,558			(56,482	)			(40,000	)			42,558
Change in right-of-use assets		122,860			(941,116	)			180,888				122,860
Accounts payable and checks issued in excess of bank balances		1,918,004			(1,163,944	)
Accounts payable									808,097				1,918,004
Accrued expenses		4,208,698			5,563,232				2,722,120				4,208,698
Change in right-of-use operating lease obligations		(122,860	)		941,116				(180,888	)			(122,860	)
Income tax assets and liabilities		-			(522,885	)
Net cash used in operating activities of continuing operations		(5,792,510	)		(13,421,949	)			(1,164,882	)			(5,792,510	)
Net cash provided by (used in) operating activities of discontinued operations		102,567			(100,685	)
Net cash (used in) provided by operating activities of discontinued operations									(1,714	)			102,567
Net cash used in operating activities		(5,689,943	)		(13,522,634	)			(1,166,596	)			(5,689,943	)

Cash flows from investing activities:
Purchase of property and equipment		-			(370,890	)
Purchases of equipment									(34,794	)			-
Note receivable/receivable from related party									(506,540	)			(158,118	)
Net cash used in investing activities of continuing operations		-			(370,890	)			(541,334	)			(158,118	)
Net cash used in investing activities of discontinued operations		-			-
Net cash (used in) provided by investing activities of discontinued operations									-				-
Net cash used in investing activities		-			(370,890	)			(541,334	)			(158,118	)

Cash flows from financing activities:
Proceeds from issuance of related party note payable and advances		890,000			5,809,553
Payments on related party note payable and advances		(360,000	)		(4,187,387	)
Payments of debentures		-			(920,000	)
Proceeds from issuances of notes payable		1,245,000			1,198,835
Proceeds from the issuances of notes payable									-				1,245,000
Proceeds from issuance of related party loan									900,000				890,000
Payments on related party loan									-				(360,000	)
Payments on notes payable		(350,508	)		(1,552,748	)			(1,213,495	)			(350,508	)
Receivable from related party		(158,118	)		-
Proceeds from sale of accounts receivable under sales agreements		-			841,700
Receivables paid under accounts receivable sales agreements		(300,927	)		(1,540,929	)			(476,471	)			(300,927	)
Federal government provider relief funds									284,339				-
Proceeds from issuance of Series O Preferred Stock		5,000,000			-				-				5,000,000
Federal government provider relief funds		-			12,542,691
Proceeds from Paycheck Protection Program notes payable		-			2,264,201
Proceeds from issuances of Series P Preferred Stock									1,500,000				-
Payment on finance lease obligation									-				(29,524	)
Cash paid for fractional shares in connection with reverse stock splits		(244	)		(684	)			(9	)			(244	)
Payments on capital lease obligations		(29,524	)		(200,709	)
Net cash provided by financing activities of continuing operations		5,935,679			14,254,523				994,364				6,093,797
Net cash provided by (used in) financing activities of discontinued operations		60,402			(157,589	)
Net cash provided by financing activities of discontinued operations									-				60,402
Net cash provided by financing activities		5,996,081			14,096,934				994,364				6,154,199

Net change in cash		306,138			203,410				(713,566	)			306,138

Cash at beginning of period		25,353			16,933				724,524				25,353

Cash at end of period	$	331,491		$	220,343			$	10,958			$	331,491

	●	~~The parties have approved the contract either in writing; orally by acknowledgement; or implicitly, based on customary business practices.~~
	●	~~Each party’s rights and the contract’s payment terms are identified.~~
	●	~~The contract has commercial substance.~~
	●	~~Collection is probable.~~

	●	Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date.

	●	Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets; or quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets).

	●	Level 3 applies to assets or liabilities for which fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including our own assumptions.

	September 30, 2022			December 31, 2021

Notes payable- third parties	$	3,119,505		$	4,667,819
Loan payable – related party		3,027,000			2,127,000
Debentures		8,222,240			8,222,240
Total debt		14,368,745			15,017,059
Less current portion of debt		(14,368,745	)		(15,017,059	)
Total debt, net of current portion	$	-		$	-

	September 30, 2021			December 31, 2020

Loan payable to TCA Global Master Fund, L.P. (“TCA”) in the original principal amount of $3 million at 16% interest (the “TCA Debenture”). Payable in various installments through May 4, 2022 (balance at September 30, 2021 as per settlement agreement – See Note 13)	$	500,000		$	1,741,893

Notes payable to CommerceNet and Jay Tenenbaum in the original principal amount of $500,000, bearing interest at 6% per annum (the “Tegal Notes”). Principal and interest payments due annually from July 12, 2015 through July 12, 2017		291,557			297,068

Note payable to Anthony O’Killough dated September 27, 2019 in the original principal amount of $1.9 million. Interest is due only upon event of default. Issued net of $0.3 million of debt discount and $0.1 million of financing fees. Payment due in installments through November 2020.		1,450,000			1,450,000

Notes payable under the PPP loans issued on April 20, 2020 through May 1, 2020 bearing interest at a rate of 1% per annum. To the extent not forgiven, principal and interest payments are due monthly beginning sixteen months from the date of issuance and the notes mature 40 months from the date of issuance.		1,358,923			2,385,921

Installment promissory note dated January 29, 2020, less original issue discount of $0.1 million, non-interest bearing, payable in weekly installment payments ranging from $22,500 to $34,000 due on or before February 5, 2020 through on or before October 21, 2020, the maturity date.		-			108,350

Notes payable dated January 31, 2021 and February 16, 2021 due six months from the date of issuance. The notes bear interest at 10% for the period outstanding. Under the terms of the notes, the holder is to receive a total of 100 shares of InnovaQor’s Series B Preferred Stock held by the Company.		245,000			-

Notes payable to Western Healthcare, LLC dated August 10, 2021, in the aggregate principal amount of $2.4 million, bearing interest at 18% per annum, payable in monthly installments aggregating $0.2 million, due August 30, 2022.		2,152,961			-

Warrant pre-payment promissory notes dated February 25, 2021, April 9, 2021, April 16, 2021 and April 22, 2021, non-interest bearing, $1,100,000 aggregate principal amount, issued with $100,000 of original issue discounts and each payable 12 months from the date of issuance		1,052,837			-

Note payable		7,051,278			5,983,232
Less current portion		(7,051,278	)		(4,786,976	)
Notes payable - third parties, net of current portion	$	-		$	1,196,256

	September 30, 2022			December 31, 2021


	-			250,000
Settlement amount/loan payable to TCA Global Credit Master Fund, L.P. (“TCA”) in the original principal amount of $3 million. Settled on September 30, 2021 for $500,000 pursuant to a payment plan as discussed below.	$	-		$	250,000

Notes payable to CommerceNet and Jay Tenenbaum in the original principal amount of $500,000 (the “Tegal Notes”).		291,557			291,557

Note payable to Anthony O’Killough dated September 27, 2019 in the original principal amount of $1.9 million. Interest is due only upon event of default. Issued net of $0.3 million of debt discount and $0.1 million of financing fees. Payment due in installments through November 2020.		1,339,495			1,450,000

Notes payable under the PPP loans issued on April 20, 2020 through May 1, 2020.		-			400,800

Notes payable dated January 31, 2021 and February 16, 2021 in the original aggregate amount of $245,000 due six months from the date of issuance. The notes bore interest at 10% for the period outstanding. Under the terms of the notes, the holder received 100 shares of InnovaQor’s Series B-1 Preferred Stock held by the Company (see Note 13).		-			122,500

Notes payable to Western Healthcare, LLC dated August 10, 2021, in the aggregate principal amount of $2.4 million, bearing interest at 18% per annum, payable in monthly installments aggregating $0.2 million, due August 30, 2022.		1,488,453			2,152,962

Note payable		3,119,505			4,667,819
Less current portion		(3,119,505	)		(4,667,819	)
Notes payable - third parties, net of current portion	$	-		$	-

	September 30, 2022			December 31, 2021

Loan payable to Christopher Diamantis	$	3,027,000		$	2,127,000
Less current portion of loan payable, related party		(3,027,000	)		(2,127,000	)
Total loan payable, related party, net of current portion	$	—		$	—

	September 30, 2021			December 31, 2020			September 30, 2022			December 31, 2021
	(unaudited)
Debentures	$	12,690,539		$	12,690,539		$	8,222,240		$	8,222,240

Less current portion		(12,690,539	)		(12,690,539	)		(8,222,240	)		(8,222,240	)
Debentures, net of current portion	$	-		$	-		$	-		$	-

	Balance Sheet Classification	September 30, 2021			December 31, 2020			Balance Sheet Classification	September 30, 2022			December 31, 2021

Assets:
Operating leases	Right-of-use operating lease assets	$	877,412		$	1,000,272		Right-of-use operating lease assets	$	640,386		$	821,274
Finance leases	Property and equipment, net		220,461			249,985
Finance lease								Property and equipment, net		220,461			220,461

Total lease assets		$	1,097,873		$	1,250,257			$	860,847		$	1,041,735

Liabilities:
Current:
Operating leases	Right-of-use operating lease obligations	$	237,026		$	172,952		Right-of-use operating lease obligations	$	239,449		$	247,017
Finance leases	Current liabilities		220,461			249,985
Finance lease								Current liabilities		220,461			220,461
Noncurrent:
Operating leases	Right-of-use operating lease obligations		640,386			827,320		Right-of-use operating lease obligations		400,937			574,257

Total lease liabilities		$	1,097,873		$	1,250,257			$	860,847		$	1,041,735

Weighted-average remaining term:
Operating leases			3.50 years			4.17 years				2.68 years			3.57 years
Finance leases			0 years			0 years
Finance lease (1)										0 years			0 years
Weighted-average discount rate:
Operating leases			13.0	%		13.0	%			13.0	%		13.0	%
Finance leases			4.9	%		4.9	%			4.9	%		4.9	%

		Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020	Three Months Ended September 30, 2022		Three Months Ended September 30, 2021		Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021
Finance lease expense:
Depreciation/amortization of leased assets	$	-	$	-	$	-	$	26,349
Depreciation/amortization of lease assets									$	-	$	-	$	-	$	-
Interest on lease liabilities		-		-		-		9,455		-		-		-		-
Operating leases:
Short-term lease expense ⁽¹⁾⁽²⁾		44,342		49,196		151,025		219,138		83,211		44,342		248,250		151,025

Total lease expense	$	44,342	$	49,196	$	151,025	$	254,942	$	83,211	$	44,342	$	248,250	$	151,025

	(1)	As of September 30, 2022 and December 31, 2021, the Company was in default under its finance lease obligation, therefore, the aggregate future minimum lease payments and accrued interest under this finance lease in the amount of $0.2 million are deemed to be immediately due.

	(2)	Expenses are included in general and administrative expenses in the unaudited condensed consolidated statements of operations.

	Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020		Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	168,923	$	98,374
Operating cash flows for finance leases		-		9,455
Operating cash flows for operating leases obligations					$	218,846	$	168,923
Operating cash flows for finance lease					$	-	$	-
Financing cash flows for finance lease payments		29,524		200,709	$	-	$	29,524

	Right-of-Use Operating Leases			Finance Leases			Right-of-Use Operating Leases			Finance Lease
Twelve months ended September 30, 2022	$	337,357		$	224,252
Twelve months ended September 30, 2023		307,082			-
Twelve months ended September 30, 2024		217,839			-
Twelve months ended September 30, 2025		223,795			-
Twelve months ended September 30, 2026		18,650			-
Twelve months ending September 30:
2023							$	307,082		$	224,252
2024								217,839			-
2025								223,795			-
2026								18,650			-
2027								-			-
Thereafter		-			-			-			-
Total		1,104,723			224,252			767,366			224,252

Less interest		-			-			(126,980	)		(3,791	)
Present value of minimum lease payments	$	1,104,723		$	224,252			640,386			220,461

Less current portion of lease obligations		(227,311	)		(3,791	)		(239,449	)		(220,461	)
Lease obligations, net of current portion	$	877,412		$	220,461		$	400,937		$	-

	Level 1		Level 2		Level 3		Total
					(unaudited)
As of December 31, 2020:

InnovaQor Series B Preferred Stock	$	-	$	-	$	-	$	-
Embedded conversion option of debenture		-	$	-	$	455,336	$	455,336
Total	$	-	$	-	$	455,336	$	455,336

As of September 30, 2021:
InnovaQor Series B Preferred Stock	$	-	$	-	$	9,016,072	$	9,016,072
Embedded conversion option of debenture		-		-		455,336		455,336
Total	$	-	$	-	$	9,471,408	$	9,471,408

	Number of Shares of Common Stock Issuable for Warrants			Weighted average exercise price
Balance at December 31, 2021		54,280,658		$	1.43
Expiration of warrants		(33,601,209	)		(0.8970	)
Increase in number of shares of common stock issuable under warrants during the period as a result of down round provisions		511,312,671,644			-
Balance at September 30, 2022		511,333,351,093		$	0.00009

	Number of Shares of Common Stock Issuable for Warrants			Weighted average exercise price
Balance at December 31, 2020		4,571,165		$	19.99
Issuance of warrants		47,500,000			0.007
Expiration of warrants		(44,078,213	)		(0.3110	)
Increase in number of shares of common stock issuable under warrants during the period as a result of down round provisions		182,655,951,726			-
Balance at September 30, 2021		182,663,835,038		$	0.00043

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020			Nine Months Ended September 30, 2021			Nine Months Ended September 30, 2020
Revenue from services	$	-	$	174,941		$	216,941		$	437,119
Cost of services		-		390			2,386			11,379
Gross profit		-		174,551			214,555			425,740
Operating expenses		-		(258,710	)		(551,296	)		(509,989	)
Other income (expense)		-		(9,636	)		(9,577	)		(61,067	)
Gain on sale		576,787		-			11,303,939			-
Provision for income taxes		-		-			-			-
Income (loss) from discontinued operations	$	576,787	$	(93,795	)	$	10,957,621		$	(145,316	)

	Three Months Ended September 30, 2021			Three Months Ended September 30, 2020			Nine Months Ended September 30, 2021			Nine Months Ended September 30, 2020
Revenue from services	$	-		$	-		$	-		$	441
Cost of services		-			-			-			-
Gross profit		-			-			-			441
Operating expenses		(31,388	)		(41,439	)		(126,243	)		(106,704	)
Other income (expense)		-			(30,946	)		48,770			87,286
Gain on sale		-			-			-			-
Provision for income taxes		-			-			-			-
Loss from discontinued operations	$	(31,388	)	$	(72,385	)	$	(77,473	)	$	(18,977	)

	September 30, 2022		December 31, 2021
	(unaudited)
Accounts payable	$	1,108,066	$	1,108,066
Accrued expenses		339,696		341,410
Current liabilities of discontinued operations	$	1,447,762	$	1,449,476

	Three Months Ended September 30, 2022			Three Months Ended September 30, 2021			Nine Months Ended September 30, 2022			Nine Months Ended September 30, 2021
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net revenues	$	-		$	-		$	-		$	216,941
Cost of revenues		-			-			-			2,386
Operating expenses		(1,696	)		(31,388	)		(5,941	)		(677,539	)
Other (expense) income		-			-			(1,134	)		39,193
Gain on sale		-			576,787			-			11,303,939
Provision for income taxes		-			-			-			-
(Loss) income from discontinued operations	$	(1,696	)	$	545,399		$	(7,075	)	$	10,880,148

	November 10, 2022
Shares of common stock outstanding		29,084,322,257
Dilutive potential shares:
Stock options		26
Warrants		511,333,351,092
Convertible debt		28,777,833,333
Convertible preferred stock		452,717,633,333
Total dilutive potential shares of common stock, including outstanding common stock		1,021,913,140,041

	November 10, 2021
~~Shares of common stock outstanding~~		~~13,491,000,000~~
~~Dilutive potential shares:~~
~~Convertible preferred stock~~		~~174,319,763,738~~
~~Warrants~~		~~273,995,752,554~~
~~Convertible debt~~		~~14,443,166,667~~
~~Stock options~~		26
~~Total dilutive potential shares of common stock, including outstanding common stock~~		~~476,249,682,985~~

	Three Months Ended September 30,												Three Months Ended September 30,
	2021						2020						2022						2021
				%						%						%						%
Net revenues(1)	$	1,010,245			100.0	%	$	1,950,698			100.0	%	$	2,825,937			100.0	%	$	1,010,245			100.0	%
Operating expenses:
Direct costs of revenues		1,207,749			119.6	%		2,805,829			143.8	%		1,823,473			64.5	%		1,207,749			119.6	%
General and administrative expenses		2,019,086			199.9	%		3,274,508			167.9	%		1,809,835			64.0	%		2,019,086			199.9	%
Depreciation and amortization		135,065			13.4	%		53,579			2.7	%		117,441			4.2	%		135,065			13.4	%
Loss from continuing operations before other income (expense) and income taxes		(2,351,655	)		-232.8	%		(4,183,218	)		-214.4	%		(924,812	)		-32.7	%		(2,351,655	)		-232.8	%
Other income (expense), net		(346,197	)		-34.3	%		169,101			8.7	%		129,451			4.6	%		(346,197	)		-34.3	%
Gain from extinguishment of debt		1,027,000			101.7	%		389,864			20.0	%		-			0.0	%		1,027,000			101.7	%
Gain (loss) from legal settlements		3,157,203			312.5	%		(23,652	)		-1.2	%
Gain from legal settlements, net														60,808			2.2	%		3,157,203			312.5	%
Interest expense		(700,786	)		-69.4	%		(2,377,980	)		-121.9	%		(605,312	)		-21.4	%		(700,786	)		-69.4	%
Benefit from income taxes		-			0.0	%		-			0.0	%
Net income (loss) from continuing operations	$	785,565			77.8	%	$	(6,025,885	)		-308.9	%
Provision for income taxes														-			0.0	%		-			0.0	%
Net (loss) income from continuing operations													$	(1,339,865	)		-47.4	%	$	785,565			77.8	%

	●	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.

~~3.27~~	Certificate of Amendment to Certificate of Incorporation of Rennova Health, Inc. (incorporated by reference to Exhibit 3.27 of the Company’s Current Report on Form 8-K filed with the SEC on July 19, 2021).

~~10.1~~	Exchange Agreement, dated as of August 27, 2021, between Rennova Health, Inc. and Christopher Diamantis (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on September 2, 2021).

~~10.2~~	Form of Securities Purchase Agreement, dated as of September 7, 2021, among Rennova Health, Inc. and the investors signatory thereto (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on September 8, 2021).

~~10.3~~	~~Promissory Note, dated August 10, 2021, by Rennova Health, Inc. and~~ Jellico Medical Center, Inc.*

~~10.4~~	Promissory Note, dated August 10, 2021, by Rennova Health, Inc. and Scott County Community Hospital, Inc. d/b/a Big South Fork Medical Center*

31.1	Rule 13a-14(a) Certification by the Principal Executive Officer.*

31.2	Rule 13a-14(a) Certification by the Principal Financial Officer.*

32.1	Certification by the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.2	Certification by the 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	Inline XBRL Instance Document

101.SCH	Inline XBRL Schema Document

101.CAL	Inline XBRL Calculation Link base Document

101.DEF	Inline XBRL Definition Link base Document

101.LAB	Inline XBRL Label Link base Document

101.PRE	Inline XBRL Presentation Link base Document

104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

	RENNOVA HEALTH, INC.

Date: November ~~15, 2021~~14, 2022	By:	/s/ Seamus Lagan
		Seamus Lagan
		Chief Executive Officer, President and Interim Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)