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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~~March 3031, ~~2022~~2023

☐	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		None		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~~May 109, ~~2022~~2023, the registrant had 29,~~084~~934,322,257 shares of its Common Stock, $0.0001 par value, outstanding.

RENNOVA HEALTH, INC. AND SUBSIDIARIES

FORM 10-Q

~~September~~March 3031, ~~2022~~2023

TABLE OF CONTENTS

		Page No.	~~Page No.~~
PART I – FINANCIAL INFORMATION		3	3
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021		3
	Condensed Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022	3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (unaudited)		4
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022 (unaudited)	4
	Condensed Consolidated Statements of Changes in Stockholders’ Deficit for each of the quarters in the periods ended September 30, 2022 and 2021 (unaudited)		5
	Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the three months ended March 31, 2023 and 2022 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (unaudited)		7
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited)	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38	47
Item 4.	Controls and Procedures	38	47
PART II – OTHER INFORMATION		39	48
Item 1.	Legal Proceedings	39	48
Item 1A.	Risk Factors	39	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39	48
Item 3.	Defaults Upon Senior Securities	39	48
Item 4.	Mine Safety Disclosures	39	48
Item 5.	Other Information	39	48
Item 6.	Exhibits	39	48
SIGNATURES		40	49

RENNOVA HEALTH, INC.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	March 31,			December 31,
	2022			2021
	2023			2022
	(unaudited)	~~(unaudited)~~
ASSETS
Current assets:
Cash	$	10251,~~958~~221		$	~~724~~499,~~524~~470
Accounts receivable, net		32,~~330~~848,~~734~~916			23,~~079~~110,~~288~~969
Note receivable / receivable from related party		~~961~~1,~~169~~771,106			~~374~~1,~~473~~457,253
Inventory		~~273~~277,~~644~~178			~~280~~242,~~513~~645
Prepaid expenses and other current assets		~~116~~320,~~848~~404			~~121~~215,~~879~~365
Income tax refunds receivable		1837,~~139,226~~460			1837,~~139,226~~460
Total current assets		56,~~832~~306,~~579~~285			46,~~719~~363,~~903~~162
Property and equipment, net		4,~~312~~320,~~188~~617			4,~~630~~194,~~090~~299
Intangible asset		259,443			259,443
Investment		9,016,072			9,016,072
Deposits		~~227~~164,~~814~~413			~~187~~165,~~814~~530
Right-of-use assets		~~640~~505,~~386~~954			~~821~~574,~~274~~256
Total assets	$	20,~~288~~572,~~482~~784		$	1920,~~634~~572,~~596~~762
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable (includes related party amounts of $0.3 million and $0.3 million, respectively)	$	12,380,408		$	12,135,237
Accounts payable (includes related party amounts of $15,625 and $47,636, respectively)	$	11,755,867		$	11,514,322
Accrued expenses (includes related party amounts of $0.1 million and $0.3 million, respectively)		19,352,488			15,499,935
Accrued expenses		20,014,407			19,563,808
Income taxes payable		1,~~337~~348,~~342~~425			1,~~337~~348,~~342~~425
Current portion of notes payable		31,~~119~~780,~~505~~010			42,~~667~~917,~~819~~390
Current portion of loan payable, related party		3,~~027~~003,000			2,~~127~~995,000
Current portion of debentures		8,~~222~~322,240			8,~~222~~622,240
Current portion of right-of-use operating lease obligations		~~239~~189,~~449~~875			~~247~~215,~~017~~063
Current portion of finance lease obligation		220,461			220,461
Derivative liabilities		455,336			455,336
Current liabilities of discontinued operations		1,~~447~~456,~~762~~112			1,~~449~~456,~~476~~112
Total current liabilities		4948,~~801~~545,~~991~~733			4649,~~361~~308,~~863~~157
Right-of-use operating lease obligations, net of current portion		~~400~~316,~~937~~079			~~574~~359,~~257~~193
Total liabilities		5048,~~202~~861,~~928~~812			4649,~~936~~667,~~120~~350
Commitments and contingencies		-			-
Stockholders’ deficit:
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 N preferred stock, $0.01 par value, $1,000 stated value per share, 50,000 shares authorized, 2,864 and 2,900 shares issued and outstanding, respectively		29			29
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 O preferred stock, $0.01 par value, $1,000 stated value per share, 10,000 shares authorized, 8,645 and 8,685 shares issued and outstanding, respectively		86			87
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
Series P preferred stock, $0.01 par value, $1,000 stated value per share, 30,000 shares authorized, 10,195 shares issued and outstanding		102			102
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
Preferred stock		102			102
Additional paid-in-capital		1,672,970,822			1,342,085,957
Common stock, $0.0001 par value, 250,000,000,000 shares authorized, 29,934,322,257 and 29,084,322,257 shares issued and outstanding, respectively		2,993,432			2,908,432
Accumulated deficit		(1,704,397,638	)		(1,369,408,356	)
Additional paid-in-capital		1,671,486,835			1,671,571,834
Total stockholders’ deficit		(29,914,446	)		(27,301,524	)
Accumulated deficit		(1,702,772,220	)		(1,703,577,780	)
Total liabilities and stockholders’ deficit	$	20,288,482		$	19,634,596
Total stockholders’ deficit		(28,289,028	)		(29,094,588	)
Total liabilities and stockholders’ deficit	$	20,572,784		$	20,572,762

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

RENNOVA HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	2022			2021			2022			2021
	2023			2022
	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
	2022			2021			2022			2021
	2023			2022
Net revenues	$	24,~~825~~915,~~937~~896		$	1,~~010~~144,~~245~~520		$	~~7,576,693~~		$	~~1,288,402~~
Operating expenses:
Direct costs of revenues		1,~~823~~853,~~473~~046			1,~~207~~374,~~749~~643			~~4,769,789~~			~~4,074,149~~
General and administrative expenses		12,~~809~~216,~~835~~670			21,~~019~~572,~~086~~336			~~5,262,338~~			~~6,915,453~~
Depreciation and amortization		~~117~~94,~~441~~135			~~135~~116,~~065~~824			~~351,481~~			~~513,929~~
Total operating expenses		34,~~750~~163,~~749~~851			3,~~361~~063,~~900~~803			~~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	)
Income (loss) from continuing operations before other income (expense) and income taxes		752,045			(1,919,283	)
Other income (expense):
Other income (expense), net		129,451			(346,197	)		87,170			4,140,049
Other income, net		42,746			268,806
Gain from forgiveness of debt		-			1,027,000			334,819			1,027,000
Net gain from legal settlements		563,032			5,282
Gain (loss) from legal settlements, net		60,808			3,157,203			(15,410	)		3,179,393
Interest expense		(552,263	)		(620,937	)
Interest expense		(605,312	)		(700,786	)		(1,705,502	)		(2,503,173	)
Total other income (expense), net		53,515			(346,849	)
Total other income (expense), net		(415,053	)		3,137,220			(1,298,923	)		5,843,269
Net income (loss) from continuing operations before income taxes		805,560			(2,266,132	)
Net (loss) income from continuing operations before income taxes		(1,339,865	)		785,565			(4,105,838	)		(4,371,860	)
Provision for income taxes		-			-
Provision for income taxes		-			-			-			-
Net income (loss) from continuing operations		805,560			(2,266,132	)
Net (loss) income from continuing operations		(1,339,865	)		785,565			(4,105,838	)		(4,371,860	)
Loss from discontinued operations		-			(1,434	)
Loss from discontinued operations		(1,696	)		(31,388	)		(7,075	)		(423,791	)
Net income (loss)		805,560			(2,267,566	)
Gain from sale		-			576,787			-			11,303,939
Deemed dividends		-			(135,924,745	)
Net (loss) income from discontinued operations		(1,696	)		545,399			(7,075	)		10,880,148
Net income (loss) available to common stockholders	$	805,560		$	(138,192,311	)
Net (loss) income		(1,341,561	)		1,330,964			(4,112,913	)		6,508,288
Net income (loss) per share of common stock available to common stockholders - basic and diluted
Deemed dividends		-			(259,530,999	)		(330,876,369	)		(409,142,478	)
Continuing operations	$	0.00		$	(28.71	)
Net loss available to common stockholders	$	(1,341,561	)	$	(258,200,035	)	$	(334,989,282	)	$	(402,634,190	)
Discontinued operations		-			(0.00	)
Net loss per share of common stock available to common stockholders - basic and diluted:
Total basic and diluted	$	0.00		$	(28.71	)
Continuing operations	$	(0.00	)	$	(5,893.97	)	$	(0.08	)	$	(27,483.34	)
Weighted average number of shares of common stock outstanding during the period – basic		29,754,877,813			4,812,754
Discontinued operations		(0.00	)		12.42			(0.00	)		723.13
Weighted average number of shares of common stock and common stock equivalents outstanding during the period - diluted		509,813,067,665			4,812,754
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.

RENNOVA HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

For ~~each of~~ the ~~quarters~~Three inMonths ~~the~~Ended ~~period~~March ~~ended September 30~~31, ~~2022~~2023

(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, 2021		2,045,201		$	20,451			4,244,700		$	424	$	1,342,085,957		$	(1,369,408,356	)	$	(27,301,524	)
Balance at December 31, 2022		292,600		$	2,926			29,084,322,257		$	2,908,432	$	1,671,571,834		$	(1,703,577,780	)	$	(29,094,588	)
Conversion of Series N Preferred Stock into common stock		(593	)		(6	)		12,932,500			1,293		(1,287	)		-			-
Conversions of Series N Preferred Stock into common stock		(36	)		-			400,000,000			40,000		(40,000	)		-			-
Issuance of Series P Preferred Stock		1,100			11			-			-		999,989			-			1,000,000
Conversions of Series O Preferred Stock into common stock		(40	)		(1	)		450,000,000			45,000		(44,999	)		-			-
Deemed dividends from issuance of Series P Preferred Stock		-			-			-			-		222,222			(222,222	)		-
Net income		-			-			-			-		-			805,560			805,560
Payment of cash in lieu of fractional shares		-			-			(10	)		-		(9	)		-			(9	)
Balance at March 31, 2023		292,524		$	2,925			29,934,322,257		$	2,993,432	$	1,671,486,835		$	(1,702,772,220	)	$	(28,289,028	)
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.

RENNOVA HEALTH, INC.

CONDENSED CONSOLIDATED ~~STATEMENTS~~STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

For ~~each of~~ the ~~quarters~~Three inMonths ~~the~~Ended ~~period~~March ~~ended September 30~~31, ~~2021~~2022

(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	)
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		(4,177	)		(42	)		44			-		42			-			-
Balance		2,045,201		$	20,451			4,244,700		$	424	$	1,342,085,957		$	(1,369,408,356	)	$	(27,301,524	)
Deemed dividends from triggers of down round provisions		-			-			-			-		50,358,149			(50,358,149	)		-
Conversions of Series N Preferred Stock into common stock		(593	)		(6	)		12,932,500			1,293		(1,287	)		-			-
Net loss		-			-			-			-		-			(3,893,994	)		(3,893,994	)
Issuances of Series P Preferred Stock		1,100			11			-			-		999,989			-			1,000,000
Balance at March 31, 2021		2,047,267		$	20,472			48		$	-	$	869,856,431		$	(922,788,649	)	$	(52,911,746	)
Deemed dividends from issuances of Series P Preferred Stock		-			-			-			-		222,222			(222,222	)		-
Conversion of Series M Preferred Stock into common stock		(620	)		(6	)		45			-		6			-			-
Payment of cash in lieu of fractional shares		-			-			(10	)		-		(9	)		-			(9	)
Conversion of Series N Preferred Stock into common stock		(8,888	)		(89	)		907			-		89			-			-
Deemed dividends from triggers of down round provisions		-			-			-			-		135,702,523			(135,702,523	)		-
Issuance of Series O Preferred Stock		2,750			28			-			-		2,499,972			-			2,500,000
Net loss		-			-			-			-		-			(2,267,566	)		(2,267,566	)
Deemed dividends from triggers of down round provisions		-			-			-			-		99,253,330			(99,253,330	)		-
Net income (loss)		-			-			-			-		-			(2,267,566	)		(2,267,566	)
Net income		-			-			-			-		-			9,071,318			9,071,318
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	)
Balance at June 30, 2021		2,040,509		$	20,405			1,000		$	-	$	971,609,828		$	(1,012,970,661	)	$	(41,340,428	)
Balance		2,045,708		$	20,456			17,177,190		$	1,717	$	1,479,009,395		$	(1,507,600,667	)	$	(28,569,099	)
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.

RENNOVA HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	2022				2021
		2023				2022
	Nine Months Ended September 30,
		Three Months Ended March 31,
	2022				2021
		2023				2022
Cash flows from operating activities:
Net loss from continuing operations		$	(4,105,838	)		$	(4,371,860	)
Net income (loss) from continuing operations		$	805,560			$	(2,266,132	)
Adjustments to reconcile net loss to net cash used in operations:
Adjustments to reconcile net (income) loss to net cash used in operations:
Depreciation and amortization			~~351~~94,~~481~~135				~~513~~116,~~929~~824
Non-cash interest (income) expense			(80,156	)			113,552
Other income from forgiveness of PPP notes payable			-				(334,819	)
Other income from forgiveness of PPP notes payable			(334,819	)			(1,027,000	)
Net gain from legal settlements			(563,032	)			(5,282	)
Loss (gain) from legal settlements			15,410				(3,179,393	)
Loss from discontinued operations			-				(1,434	)
Loss on disposal of equipment			1,215				274,468
Loss (income) from federal government provider relief funds			267,758				(4,400,000	)
Gain on sale of discontinued operations			-				(11,303,939	)
(Loss) income from discontinued operations			(7,075	)			10,880,148
Changes in operating assets and liabilities:
Accounts receivable			~~(774~~262,~~975~~053	)			~~377~~140,~~088~~155
Inventory			6(34,~~869~~533	)			~~164~~(10,~~653~~764	)
Prepaid expenses and other current assets			5(105,~~031~~039	)			(322,~~416~~217	)
Security deposits			~~(40~~1,~~000~~117	)			42(10,~~558~~000	)
Change in right-of-use assets			~~180~~68,~~888~~302				~~122~~27,~~860~~412
Accounts payable			~~808~~241,~~097~~545				1734,~~918,004~~227
Accrued expenses			2439,~~722,120~~425				4465,~~208,698~~651
Change in right-of-use operating lease obligations			(~~180~~68,~~888~~302	)			(~~122~~27,~~860~~412	)
Net cash used in operating activities of continuing operations			(1,164,882	)			(5,792,510	)
Net cash provided by (used in) operating activities of continuing operations			1,141,231				(1,149,357	)
Net cash (used in) provided by operating activities of discontinued operations			(1,714	)			102,567
Net cash used in operating activities of discontinued operations			-				(2,323	)
Net cash used in operating activities			(1,166,596	)			(5,689,943	)
Net cash provided by (used in) operating activities			1,141,231				(1,151,680	)
Cash flows from investing activities:
Purchases of equipment			(34220,~~794~~453	)			-
Note receivable/receivable from related party			(506,540	)			(158,118	)
Note receivable / receivable from related party			(313,853	)			(127,313	)
Net cash used in investing activities of continuing operations			(~~541~~534,~~334~~306	)			(~~158~~127,~~118~~313	)
Net cash (used in) provided by investing activities of discontinued operations			-				-
Net cash from investing activities of discontinued operations			-				-
Net cash used in investing activities			(~~541~~534,~~334~~306	)			(~~158~~127,~~118~~313	)
Cash flows from financing activities:
Proceeds from the issuances of notes payable			-				1,245,000
Proceeds from related party loans			580,000				750,000
Proceeds from issuance of related party loan			900,000				890,000
Payments on related party loans			(572,000	)			-
Payments on related party loan			-				(360,000	)
Payments of debentures			(300,000	)			-
Payments on notes payable			(1563,~~213,495~~174	)			(~~350~~933,~~508~~418	)
Receivables paid under accounts receivable sales agreements			~~(476,471~~-	)			(~~300~~158,~~927~~824	)
Federal government provider relief funds			284,339				-
Proceeds from issuances of Series P Preferred Stock			-				1,000,000
Proceeds from issuance of Series O Preferred Stock			-				5,000,000
Cash paid for fractional shares in connection with reverse stock split			-				(9	)
Proceeds from issuances of Series P Preferred Stock			1,500,000				-
Net cash (used in) provided by financing activities of continuing operations			(855,174	)			657,749
Payment on finance lease obligation			-				(29,524	)
Net cash from financing activities of discontinued operations			-				-
Cash paid for fractional shares in connection with reverse stock splits			(9	)			(244	)
Net cash (used in) provided by financing activities			(855,174	)			657,749
Net cash provided by financing activities of continuing operations			994,364				6,093,797
Net change in cash			(248,249	)			(621,244	)
Net cash provided by financing activities of discontinued operations			-				60,402
Cash at beginning of period			499,470				724,524
Net cash provided by financing activities			994,364				6,154,199
Cash at end of period		$	251,221			$	103,280
Net change in cash			(713,566	)			306,138
Cash at beginning of period			724,524				25,353
Cash at end of period		$	10,958			$	331,491

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

RENNOVA HEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three ~~and Nine~~ Months Ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022

(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 practice in Jamestown, Tennessee that it plans to reopen~~ and ~~operate and~~ a rural health clinic in Kentucky. WeThe ~~operate~~Company’s inoperations consist ~~one~~of ~~business~~only one segment.

Scott County Community Hospital (d/b/a 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 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

On June 1, 2018, we acquired from Community Health Systems, Inc. certain assets related to an acute care hospital located in Jamestown, Tennessee, referred to as Jamestown Regional Medical 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 offered 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.

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.

CarePlus Clinic

On March 5, 2019, we acquired certain assets related to an outpatient clinic located in Williamsburg, Kentucky. The clinic and its associated assets, which were acquired from CarePlus Rural Health Clinic, LLC, offers compassionate care in a modern, patient-friendly facility. The CarePlus Clinic is located 32 miles northwest of our Big South Fork Medical Center.

Basis of Presentation

The 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, ~~2021~~2022. 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~~March 3031, ~~2022~~2023, and the results of its operations and ~~changes~~ changes in stockholders’ deficit for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022 and its cash flows for the ~~nine~~ three months ended ~~September 30~~March 31, ~~2022~~2023 and ~~2021~~2022. Such adjustments are of a normal recurring nature. The results of operations for the three ~~and~~ ~~nine~~ months ended ~~September~~March 3031, 2023 ~~2022~~ may not be indicative of results for the year ending December 31, ~~2022~~2023.

Principles of Consolidation

The 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 Income (Loss) ~~Income~~

During the three ~~and nine~~ months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022, comprehensive income (loss) ~~income~~ was equal to the net income (loss) ~~income~~ amounts presented in the unaudited condensed consolidated statements of operations.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect ~~the~~ 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, contractual allowances and bad debt reserves, the recoverability of long-lived assets, the valuation allowance relating to the Company’s deferred tax assets, the valuations of investments, equity and derivative instruments, ~~income from HHS Provider Relief Funds and~~ deemed dividends, litigation and related reserves, among others. Actual results could differ from those estimates and would impact future results of operations and cash flows.

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.

Reverse Stock Splits

On July 16, 2021 and March 15, 2022, the Company effected a 1-for-1,000 reverse stock split and a 1-for-10,000 reverse stock split, 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 March 15, 2022. 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. 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 50 billion to 250 billion.

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 Corporation. HTS and AMSG held Rennova’s software and genetic testing interpretation divisions. The financial results of HTS and AMSG prior to the sale are reflected herein as discontinued operations. The sale is more fully discussed in Note 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 Standard Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606),” including subsequently issued updates. 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 estimated contractual allowances and estimated implicit price concessions. We also do not present “allowances for doubtful accounts” on our balance sheets.

Revenue Recognition

We recognize revenue in accordance with Accounting Standard Codification (“ASC”), “Revenue from Contracts with Customers (Topic 606),” including subsequently issued updates. 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 estimated contractual allowances and estimated implicit price concessions. We also do not present “allowances for doubtful accounts” on our balance sheets.

Our revenues 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 averaging approximately three days, and revenues are recognized based on 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 rates 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, 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. 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~~ 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). During ~~Subsequent~~the tofourth ~~September~~quarter ~~30,~~of 2022, the Company’s Big South Fork Medical Center received a communication ~~from~~ ~~its fiscal intermediary stating~~ that its ~~Medicare~~final Medicare cost report for the six months ending December 31, 2021 ~~has~~was ~~been~~ accepted and ~~the~~ ~~fiscal~~that ~~intermediary~~it ~~has~~reflected ~~computed~~ a ~~tentative~~ retroactive adjustment ~~reflecting an overpayment by the fiscal intermediary in the amount~~ of $1.9 6 million~~. The~~ ~~Company~~as a isresult ~~working~~of ~~with~~an overpayment. Accordingly, the ~~fiscal~~Company ~~intermediary~~has toreflected ~~file~~the an$1.6 ~~amended~~million cost report, ~~which~~adjustment weas ~~expect~~a toliability ~~result~~at inMarch a31, ~~smaller~~2023 ~~overpayment~~ and isDecember ~~seeking~~31, ~~an extended repayment schedule for any such overpayment~~2022. ~~There is no assurance that the Medicare overpayment will be reduced or a repayment schedule agreed upon.~~ Furthermore, the ~~tentative~~Company ~~retroactive~~recognized ~~adjustment~~additional isliabilities ~~subject to~~of ~~a final cost report settlement~~$0.4 ~~The~~million ~~Company~~and ~~has reserved~~ $10.6 5 million, asrespectively, at aMarch ~~liability~~31, 2023 and ~~reduced~~December ~~net~~31, ~~revenues~~2022 by(net ~~the~~of ~~same~~recoupments) ~~amount~~based inon ~~its~~further ~~financial~~correspondence ~~statements~~with ~~for~~its ~~the~~fiscal ~~three~~intermediary and ~~nine months ended~~likely ~~September~~overpayments ~~30,~~by ~~2022~~Medicare asfor ~~the~~fiscal ~~estimated overpayment~~2022.

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.

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.

During the three months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022, estimated contractual allowances of $1011.2 1 million and $6.8 .1 million, respectively, and estimated implicit price concessions of $10.6 9 million and $1.9 4 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 $1112.8 0 million and $89.7 5 million, respectively, for the three months ended March 31, 2023 and 2022, we reported net revenues of $24.8 9 million and ~~(inclusive of the~~ $1.61 million, ~~tentative~~respectively. ~~retroactive~~We ~~Medicare~~continue ~~cost~~to ~~report~~review ~~adjustment)~~the provisions for implicit price concessions and $1contractual allowances.0 See Note ~~million,~~4 ~~respectively~~– Accounts Receivable.

During the nine months ended September 30, 2022 and 2021, estimated contractual allowances of $23.4 million and $16.2 million, 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 $29.1 million and $22.4 million, respectively, we reported net revenues of $7.6 million and $1.3 million, respectively.

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 either 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~~ 30March 31, ~~2022~~2023 and ~~2021~~2022.

Leases in Accordance with ASU No. 2016-02

We account for leases in accordance with Accounting Standards Update (“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 operating 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. For finance leases, we record the present value of the lease payments as finance lease obligations. 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, the Company considers the principal or most advantageous market in which it 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 in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following 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.

On March 31, 2023 and December 31, 2022, we applied the Level 3 fair value hierarchy in determining the fair value of InnovaQor, Inc.’s Series B-1 Non-Voting Convertible Preferred Stock (the “InnovaQor Series B-1 Preferred Stock”), which is reflected on our condensed consolidated balance sheets as an investment. Also, on March 31, 2023 and December 31, 2022, 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. Our determination of fair value is more fully discussed in Note 9.

On September 30, 2022 and December 31, 2021, we applied the Level 3 fair value hierarchy in determining the fair value of the InnovaQor Series B-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 9.

Derivative Financial Instruments and Fair Value, Including 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~~ 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 and diluted 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).

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), 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 (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 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 of convertible debt within the fair value of the instruments. During the three ~~and nine~~ months ended ~~September~~March 3031, 2023 and 2022, there were no changes in the fair values of the Company’s convertible debentures with down round provision features as these debentures ~~have~~issued ~~floors that were not~~ in~~-the-money~~ at2018 ~~September~~have ~~30,~~floors ~~2022~~of $0.052 ~~Prior~~per toshare ~~the~~and ~~adoption~~were ofnot ~~the guidance~~ in ~~ASU No 2016~~-~~01, Financial Instruments – Overall (Subtopic 825~~the-~~10),~~money induring ~~the~~these ~~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 more fully discussed in Note 6. There were no triggers of down round provisions to warrants during the three months ended September 30, 2022. The incremental value of modifications to warrants as a result of the trigger of down round provisions of $253.5 million were recorded as deemed dividends for the three months ended September 30, 2021. The incremental value of modifications to warrants as a result of the trigger of down round provisions of $330.6 million and $403.1 million were recorded as deemed dividends for the nine months ended September 30, 2022 and 2021, respectively.

InThere ~~addition,~~were weno ~~recorded~~triggers ~~deemed~~of ~~dividends~~down ofround ~~approximately~~provisions ~~$0.3~~to ~~million~~warrants during the ~~nine~~three months ended ~~September~~March 3031, ~~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~~2023. InThe ~~addition,~~incremental wevalue ~~recorded deemed dividends~~ of ~~$0.3 million in both the three and nine months ended September~~modification ~~30,~~to ~~2021~~warrants as a result of ~~the~~triggers ~~extension~~ of ~~certain~~the ~~common~~down ~~stock~~round ~~warrants~~provisions ~~and~~of $0135.37 million ~~and~~was ~~$0.3~~recorded ~~million~~as indeemed ~~both~~dividends in the three ~~and nine~~ months ended ~~September~~March 31, ~~2021 in connection with an exchange agreement~~2022. ~~The extension of the warrants and the exchange agreement are more fully discussed in Note 10.~~ See Note 9 for an additional discussion of derivative financial instruments and deemed dividends.

12In addition, we recorded deemed dividends of approximately $0.2 million during the three months ended March 31, 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.

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, 2022 and December 31, 2021.12

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, with options and warrants determined using the treasury stock method. For purposes of the diluted ~~net~~earnings (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 earnings (loss) per share for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022.

Reverse Stock Split

On March 15, 2022, the Company effected a 1-for-10,000 reverse stock split (the “Reverse Stock Split”). As a result of the Reverse Stock Split, 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 March 15, 2022. 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 Split. 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 Split.

Amendment to Certificate of Incorporation

Note 2 – Liquidity and Financial Condition

~~Big South Fork Medical Center~~Going Concern

OnThe ~~January~~Company ~~13,~~has ~~2017,~~the weresponsibility ~~acquired certain assets related~~ to ~~Scott~~evaluate ~~County~~whether ~~Community~~conditions ~~Hospital,~~and/or ~~based~~events inraise ~~Oneida,~~substantial ~~Tennessee~~doubt ~~(the~~about ~~“Oneida Assets”).~~its ~~The~~ability ~~Oneida~~to ~~Assets~~meet ~~include~~its ~~a 52,000 square foot hospital building and a 6,300 square foot professional building on approximately~~future ~~4.3~~financial ~~acres.~~obligations ~~Scott~~as ~~County~~they ~~Community~~become ~~Hospital~~due ~~has~~within 25one ~~beds,~~year aafter ~~24/7~~the ~~emergency~~date ~~department and a laboratory~~ that ~~provides~~the afinancial ~~range~~statements ofare ~~diagnostic services~~issued. ~~Scott~~As ~~County~~required ~~Community~~by ~~Hospital~~ASC, Presentation ~~closed~~of inFinancial ~~July~~Statements-Going ~~2016~~Concern in(Subtopic ~~connection~~205-40) ~~with~~(“ASC ~~the~~205-40”), ~~bankruptcy~~this ~~filing~~evaluation ofshall ~~its parent company, Pioneer~~initially ~~Health~~not ~~Services,~~take ~~Inc.~~into Weconsideration ~~acquired~~ the ~~Oneida~~potential ~~Assets~~mitigating ~~out~~effects of ~~bankruptcy~~plans ~~for~~that ahave ~~purchase~~not ~~price~~been offully ~~$1.0~~implemented ~~million.~~as ~~The~~of ~~hospital,~~the ~~which~~date ~~has~~the ~~since~~financial ~~been~~statements ~~renamed~~are ~~Big~~issued. ~~South~~Management ~~Fork~~has ~~Medical~~assessed ~~Center,~~the ~~became~~Company’s ~~operational~~ability onto ~~August~~continue ~~8, 2017. The hospital became certified~~ as a ~~Critical~~going ~~Access Hospital~~concern ~~(rural) hospital~~ in ~~December~~accordance ~~2021,~~with ~~retroactive~~the torequirements of ~~June~~ASC ~~30, 2021~~205-40.

~~Jamestown~~At ~~Regional~~March ~~Medical~~31, ~~Center~~2023, the Company had a working capital deficit and ~~Mountain~~a ~~View~~stockholders’ ~~Physician~~deficit ~~Practice~~of $42.2 million and $28.3 million, respectively. While we generated $0.8 million of income in the three months ended March 31, 2023, we incurred losses of $2.3 million and $3.3 million in the three months ended March 31, 2022 and the year ended December 31, 2022, 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 losses in prior periods and other related factors, including past due accounts payable and payroll taxes, as well as payment defaults under the terms of outstanding notes payable and debentures, raise substantial doubt about the Company’s ability to continue as a going concern for 12 months from the filing date of this report.

OnThe ~~June 1, 2018, the~~ Company’s ~~acquired~~condensed ~~from~~consolidated ~~Community~~financial ~~Health~~statements ~~Systems,~~are ~~Inc.~~prepared ~~certain~~assuming ~~assets~~the ~~related~~Company tocan ancontinue ~~acute care hospital located in Jamestown, Tennessee, referred to~~ as ~~Jamestown~~a ~~Regional~~going ~~Medical Center~~concern, ~~for~~which contemplates acontinuity ~~purchase price~~ of ~~$0.7~~operations ~~million.~~through ~~The~~realization ~~hospital is an 85-bed facility~~ of ~~approximately 90~~assets,~~000~~ ~~square~~and ~~feet~~the onsettling ~~over eight acres~~ of ~~land,~~liabilities ~~which~~in ~~offered~~the anormal ~~24-hour~~course ~~emergency~~of ~~department~~business. The ~~with~~Company’s ~~two~~current ~~trauma~~financial ~~bays~~condition ~~and seven~~may ~~private~~make ~~exam~~it ~~rooms,~~difficult ~~inpatient~~to ~~and~~attract ~~outpatient medical services~~ and amaintain ~~progressive~~adequate ~~care~~expertise ~~unit~~in ~~which~~its ~~provided~~management ~~telemetry services. The~~team ~~acquisition~~to ~~also~~successfully ~~included~~operate aits ~~separate~~remaining ~~physician~~healthcare ~~practice known as Mountain View Physician Practice, Inc~~facilities.

~~The~~There ~~Company~~can ~~suspended~~be ~~operations~~no atassurance that the ~~hospital~~Company ~~and~~will ~~physician~~be ~~practice~~able into ~~June~~achieve ~~2019,~~its asbusiness aplan, ~~result~~raise ofany ~~the~~additional ~~termination~~capital ofor secure the ~~hospital’s~~additional ~~Medicare~~financing ~~agreement~~necessary ~~and~~to ~~other~~implement ~~factors~~its current operating plan. The ability of the Company to continue as a going concern is ~~evaluating~~dependent ~~whether~~upon its ability to ~~reopen~~raise ~~the~~adequate ~~facility~~capital asto anfund ~~acute~~its ~~care~~operations ~~hospital~~and orrepay asits ~~another~~outstanding debt and other past due obligations, fully align ~~type~~its ofoperating ~~healthcare~~costs, ~~facility~~increase its net revenues, and eventually gain profitable operations. ~~Jamestown~~The iscondensed ~~located~~consolidated 38financial ~~miles~~statements do ~~west~~not ofinclude ~~Big~~any ~~South~~adjustments ~~Fork~~that ~~Medical~~might ~~Center~~be necessary if the Company is unable to continue as a going concern.

Jellico Community Hospital and CarePlus Rural Health Clinic

On March 5, 2019, 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 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 of Jellico issued a 30-day termination notice for the lease of the building. Jellico Community Hospital was located 33 miles east of our Big South Fork Medical Center.

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

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. AsWe ~~more fully discussed in Note 6, we~~ have received Paycheck Protection Program loans (“PPP Notes”), ~~loans.~~which We have ~~also~~been ~~received~~forgiven in accordance with their terms and employee retention credits and Department of Health and Human Services (“HHS”) Provider Relief Funds ~~and employee retention credits~~ from the federal government. asThe HHS Provider Relief Funds are more fully discussed below. IfGoing forward, the Company is unable to determine the extent to which the COVID-19 pandemic ~~continues~~will continue to affect its business. ~~for~~Our aability ~~further~~to ~~extended~~make ~~period~~estimates of the effect of the COVID-19 pandemic on net revenues, weexpenses ~~expect~~or changes in accounting judgments that have had or are reasonably likely to ~~incur~~have ~~significant~~a ~~losses~~material ~~and~~effect ~~additional~~on our financial ~~assistance~~statements ~~may~~is becurrently ~~required~~limited. ~~Going~~The ~~forward,~~nature and effect of the ~~Company~~COVID-19 ispandemic ~~unable~~on toour ~~determine~~balance sheet and results of operations will depend on the ~~extent~~severity and length of the pandemic in our service areas; government activities to ~~which~~mitigate the ~~COVID-19~~pandemic’s effect; regulatory changes in response to the pandemic, ~~will~~especially ~~continue~~those affecting rural hospitals; existing and potential government assistance that may be provided; and the requirements of HHS Provider Relief Fund receipts, including our ability to ~~affect~~retain ~~its~~such ~~business~~funds as have been received.

HHS Provider Relief Funds

The Company received HHS Provider Relief Funds, 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 March ~~September 30~~31, ~~2022~~2023, our facilities have received approximately $13.56 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~~March 3031, ~~2022~~2023, we have recognized a net of $1213.10 million of these funds as income of which $40.46 million ~~was recognized as income during the nine months ended September 30~~, ~~2021~~$4.4 million and $8.0 million ~~was~~ ~~recognized~~were recognized as income ~~in 2020, offset by a reduction of income of $0.3 million~~ during the ~~three~~years ~~and nine months~~ ended ~~September~~December 3031, 2022, ~~based~~2021 ~~on a review~~ and ~~further~~2020, ~~analysis of the amount of income previously recorded~~respectively. Accordingly, approximately $10.46 million of relief funds received as of ~~September~~March 3031, ~~2022~~2023 are included on our ~~unaudited condensed consolidated~~ balance ~~sheet~~sheets in accrued expenses, as more fully discussed in Note 5.

As of ~~September~~March 3031, ~~2022~~2023, the Company’s estimate of the amount for which it is reasonably assured of meeting the underlying terms ~~and~~ and conditions of the grants was based on, among other things, the various notices issued by HHS inon September 19, 2020, October 22, 2020, and January 15, 2021 and the Company’s results of operations during the ~~years~~three months ended ~~December~~March 31, ~~2020~~2023 and ~~2021 and~~ the ~~three~~years ~~and nine months~~ ended ~~September 30~~December 31, 2022, 2021 and 2020. The Company believes that it was appropriate to recognize a net of $1213.10 million of the HHS Provider Relief Funds as income in various periods, as discussed in the paragraph above. Accordingly, the $1213.10 million is not recognized as a liability at ~~September~~March 3031, ~~2022~~2023. Additional guidance or new and amended interpretations of existing guidance on the terms and conditions of such ~~payments~~ 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.

~~Federal~~The ~~Employee~~Company ~~Retention~~has ~~Credits~~been served with a qui tam complaint with regards to the use of monies received from HHS Provider Relief Funds, as more fully discussed in Note 12.

~~The~~Note ~~CARES~~3 ~~Act,~~– ~~passed~~Earnings 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”~~Loss) ~~and~~Per in March 2021, the 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 employee retention credit.Share

Basic earnings (loss) per share is computed by dividing the earnings (loss) available to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (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.

~~Going~~The ~~Concern~~following table sets forth the computation of the Company’s basic and diluted net income (loss) per share (unaudited) during the three months ended March 31, 2023 and 2022:

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.

At September 30, 2022, the Company had a working capital deficit and a stockholders’ deficit of $44.0 million and $29.9 million, respectively. In addition, the Company had a loss from continuing operations of approximately $4.1 million and $4.4 million for the nine months ended September 30, 2022 and 2021, respectively, and cash used in operating activities was $1.2 million and $5.7 million for the nine months ended September 30, 2022 and 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 past due accounts payable and payroll taxes, as well as payment defaults under the terms of certain outstanding notes payable and debentures, 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 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. The Company’s current financial condition may make it difficult to attract and maintain adequate expertise in its management team to successfully operate its remaining healthcare facilities.

There can be no assurance that the Company will be able to achieve its business plan, raise any additional capital or secure the additional financing necessary to implement its current operating plan. The ability of the Company to continue as a going concern is dependent upon its ability to 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 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, 2022 and 2021, basic loss per share is the same as diluted loss per share.

The following table sets forth the computation of the Company’s basic and diluted net loss per share (unaudited) during the three and nine months ended September 30, 2022 and 2021:

Schedule of Earnings Per Share

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022
	2022			2021			2022			2021
	Three Months Ended March 31,
Numerator
	2023			2022
Net (loss) income from continuing operations	$	(1,339,865	)	$	785,565		$	(4,105,838	)	$	(4,371,860	)
Numerator
Deemed dividends		-			(259,530,999	)		(330,876,369	)		(409,142,478	)
Net income (loss) from continuing operations	$	805,560		$	(2,266,132	)
Net loss available to common stockholders, continuing operations		(1,339,865	)		(258,745,434	)		(334,982,207	)		(413,514,338	)
Deemed dividends		-			(135,924,745	)
Net (loss) income from discontinued operations		(1,696	)		545,399			(7,075	)		10,880,148
Net income (loss) available to common stockholders, continuing operations		805,560			(138,190,877	)
Net loss available to common stockholders	$	(1,341,561	)	$	(258,200,035	)	$	(334,989,282	)	$	(402,634,190	)
Net loss from discontinued operations		-			(1,434	)
Denominator
Net income (loss) available to common stockholders	$	805,560		$	(138,192,311	)
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
Denominator
Net loss per share of common stock available to common stockholders - basic and diluted:
Weighted average number of shares of common stock outstanding during the period – basic		29,754,877,813			4,812,754
Continuing operations	$	(0.00	)	$	(5,893.97	)	$	(0.08	)	$	(27,483.34	)
Warrants		27,733,334,296			-
Discontinued operations		(0.00	)		12.42			(0.00	)		723.13
Preferred stock		452,324,855,556			-
Total basic and diluted	$	(0.00	)	$	(5,881.55	)	$	(0.08	)	$	(26,760.21	)
Weighted average number of shares of common stock and common stock equivalents outstanding during the period - diluted		509,813,067,665			4,812,754
Net income (loss) per share of common stock available to common stockholders – basic and diluted:
Continuing operations	$	0.00		$	(28.71	)
Discontinued operations		-			(0.00	)
Total	$	0.00		$	(28.71	)

15Diluted income (loss) per share excludes all dilutive potential shares if their effect is anti-dilutive. As of March 31, 2023 and 2022, the following potential common stock equivalents were excluded from the calculation of diluted income (loss) per share as their effect was anti-dilutive:

Diluted loss per share excludes all dilutive potential shares if their effect is anti-dilutive. As of September 30, 2022 and 2021, the following potential common stock equivalents were excluded from the calculation of diluted loss per share as their effect was anti-dilutive:

	Nine Months September 30,
	2023		2022
	2022		2021
	Three Months Ended March 31,
Warrants		511,333,351,092		18,266,394
	2023		2022
Convertible preferred stock		466,707,633,333		8,977,081
Common stock warrants		483,600,016,793		5,002,174,096
Convertible debentures		28,777,833,333		966,494
Convertible preferred stock		-		3,093,872,894
Convertible debentures		28,777,833,333		388,960,870
Stock options		26		26
		1,006,818,817,784		28,209,995
Anti-dilutive shares		512,377,850,152		8,485,007,886

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 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 6, 9, 10 and 1510). These provisions have resulted in significant dilution of the Company’s common stock.

As a result of ~~these~~the ~~down~~Voting ~~round~~Agreement ~~provisions~~and Irrevocable Proxy (the “Voting Agreement”) discussed in Note 10 and the November 5, 2021 Amendment to the ~~potential~~Company’s Certificate of Incorporation, as amended, to provide that the number of authorized shares of the Company’s common stock ~~and~~or ~~common~~preferred stock ~~equivalents~~may ~~totaled~~be ~~1.0~~increased ~~trillion~~or atdecreased ~~November~~(but ~~10,~~not below the number of shares then outstanding) by ~~2022~~the affirmative vote of the holders of a majority in voting power of the stock of the Company, aswhich is more fully discussed in Note 1, ~~15.~~as ~~See~~of ~~Note~~the 10date ~~regarding~~of afiling ~~discussion~~this ofreport, the ~~number~~Company ofbelieves ~~shares~~that ofit has the ~~Company’s~~ability ~~authorized common~~to ensure that it has and ~~preferred~~or can obtain sufficient authorized shares of its common stock to cover all outstanding rights to acquire potentially dilutive common shares.

As a result of these down round provisions, the potential common stock and common stock equivalents totaled 1.0 trillion at May 9, 2023. See Note 10 for a discussion of the number of shares of the Company’s authorized common and preferred stock.

Note 4 – Accounts Receivable

Accounts receivable at ~~September~~March 3031, ~~2022~~2023 (unaudited) and December 31, ~~2021~~2022 consisted of the following:

Schedule of Accounts Receivable

	September 30,			December 31,
	2023			2022
	2022			2021
	March 31,			December 31,
Accounts receivable	$	13,393,254		$	12,961,817
	2023			2022
Accounts receivable	$	12,873,266		$	13,046,646
Less:
Allowance for contractual obligations		(8,~~125~~874,~~400~~259	)		(8,~~737~~529,~~502~~904	)
Allowance for doubtful accounts		(1,~~725~~150,~~356~~091	)		(1,~~456~~405,~~791~~773	)
Accounts receivable owed under settlements/sales agreements		(211,764	)		(688,236	)
Accounts receivable, net	$	2,848,916		$	3,110,969
Accounts receivable, net	$	3,330,734		$	2,079,288

Note 5 – Accrued Expenses

Accrued expenses at ~~September~~March 3031, ~~2022~~2023 (unaudited) and December 31, ~~2021~~2022 consisted of the following:

Schedule of Accrued Expenses

	September 30,		December 31,
	March 31,		December 31,
	2022		2021
	2023		2022
Accrued payroll and related liabilities	$	78,~~833~~496,~~193~~774	$	78,~~528~~533,~~464~~710
HHS Provider Relief Funds		1552,~~415,549~~099		~~863~~552,~~452~~099
Accrued interest		56,~~413~~176,~~828~~589		5,~~027~~736,~~459~~096
Accrued legal expenses and settlements		~~454~~534,~~486~~550		~~632~~534,~~318~~550
Medicare overpayment reserve		1,~~600~~976,~~000~~423		-2,101,837
Other accrued expenses		2,~~635~~277,~~432~~972		12,~~448~~105,~~242~~516
Accrued expenses	$	1920,~~352~~014,~~488~~407	$	1519,~~499~~563,~~935~~808

~~Payroll~~Accrued payroll and related liabilities at ~~September~~March 3031, ~~2022~~2023 and December 31, ~~2021~~2022 included approximately $23.61 million and $2.3.0 million, respectively, for penalties associated with approximately $4.10 million and $34.90 million of accrued past due payroll taxes as of ~~September~~March ~~30, 2022 and December~~ 31, ~~2021,~~2023 ~~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~~2022, respectively. ~~Employee retention credits are also discussed in Note 2.~~

AsDuring ofthe ~~September~~fourth ~~30,~~quarter of 2022, ~~and~~the Company’s Big South Fork Medical Center received a communication that its final Medicare cost report for the six months ending December 31, 2021 was accepted and that it reflected a retroactive adjustment of $1.6 million as a result of an overpayment. Accordingly, the Company has ~~accrued~~reflected the $1.46 million cost report adjustment as a liability at March 31, 2023 and December 31, 2022. Furthermore, the Company recognized an additional $0.4 million and $0.95 million as a liability (net of recoupments) at March 31, 2023 and December 31, 2022, respectively, ofbased ~~HHS~~on ~~Provider~~further ~~Relief~~correspondence ~~Funds.~~with ~~These~~its ~~funds~~fiscal ~~are~~intermediary ~~more~~and ~~fully~~likely ~~discussed~~overpayments inby Medicare ~~Note~~for 2fiscal 2022.

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 – Debt

At ~~September~~March 3031, ~~2022~~2023 (unaudited) and December 31, ~~2021~~2022, debt consisted of the following:

Schedule of Debt

	September 30, 2022			December 31, 2021
	March 31, 2023			December 31, 2022
Notes payable- third parties	$	31,~~119~~780,~~505~~010		$	42,~~667~~917,~~819~~390
Loan payable – related party		3,~~027~~003,000			2,~~127~~995,000
Debentures		8,~~222~~322,240			8,~~222~~622,240
Total debt		1413,~~368~~105,~~745~~250			1514,~~017~~534,~~059~~630
Less current portion of debt		(1413,~~368~~105,~~745~~250	)		(1514,~~017~~534,~~059~~630	)
Total debt, net of current portion	$	-		$	-

1716

At ~~September~~March 3031, ~~2022~~2023 (unaudited) and December 31, ~~2021~~2022, notes payable with third parties consisted of the following:

Notes Payable – Third Parties

Schedule of Notes Payable Third Parties

	September 30, 2022			December 31, 2021
	March 31, 2023			December 31, 2022
	-			250,000
	$	291,557		$	291,557
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
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. Issued net of $0.4 million of debt discount and financing fees. Payment due in installments through November 2020.		-			1,137,380
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 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			1,488,453
Notes payable under the PPP loans issued on April 20, 2020 through May 1, 2020.		-			400,800
Note payable		1,780,010			2,917,390
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
Less current portion		(1,780,010	)		(2,917,390	)
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	$	-		$	-

~~In May~~On ~~2020~~December 7, 2016, the ~~SEC~~holders ~~appointed~~of athe Tegal ~~Receiver~~Notes tofiled ~~close~~suit ~~down~~against the ~~TCA~~Company ~~Global~~seeking ~~Credit~~payment ~~Master~~for ~~Fund,~~the ~~L.P.~~amounts ~~The~~due ~~Company~~under ~~and~~ the ~~Receiver~~notes ~~entered~~in ~~into a settlement agreement dated effective as of September 30, 2021, under which~~ the ~~Company~~aggregate ~~agreed~~principal tobalance ~~pay~~ of $~~500~~341,~~000~~612 ~~as full~~ and ~~final settlement of principal and~~ accrued interest,. ofOn ~~which~~April ~~$250~~23,~~000~~ ~~was paid during 2021 and $250~~2018,~~000~~ ~~was~~the ~~paid~~holders ~~during~~of the ~~nine~~Tegal ~~months~~Notes ~~ended~~received ~~September 30, 2022. As~~ a ~~result~~judgment ofagainst the ~~settlement,~~Company in the ~~three~~amount of ~~and~~$384,384. ~~nine~~As ~~months~~of ~~ended~~March ~~September~~31, 302023, ~~2021~~ the Company ~~recorded~~has arepaid ~~gain from legal settlement~~$50,055 ~~resulting~~of ~~from~~ the ~~adjustments of~~ principal ~~and~~amount ~~accrued interest,~~ of ~~$2.2~~these ~~million~~notes.

~~The~~On September 27, 2019, the Company ~~did~~issued ~~not~~a ~~make~~promissory note payable to Anthony O’Killough in the ~~second~~principal ~~annual~~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 of financing fees. The first principal payment ~~under~~of $1.0 million was due on November 8, 2019 and the ~~Tegal~~remaining ~~Notes~~$0.9 ~~that~~million was due on ~~July~~December 1226, ~~2016~~2019. OnThese payments ~~November~~were 3,not ~~2016~~made. In February 2020, Mr. O’Killough sued the Company ~~received~~and aMr. ~~default~~Diamantis, ~~notice~~as ~~from~~guarantor, in New York State Supreme Court for the ~~holders~~County of ~~the~~New ~~Tegal~~York, ~~Notes~~for ~~demanding~~approximately ~~immediate~~$2.2 ~~repayment~~million for non-payment of the ~~outstanding~~promissory ~~principal~~note. atIn ~~that~~May 2020, the Company, Mr. ~~time~~Diamantis, ofas ~~$341~~guarantor,~~612~~ 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 $43450,000 in 2020. On ~~December~~January 718, ~~2016~~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. On various dates during the remainder of 2022, Mr. Diamantis made additional payments to Mr. O’Killough totaling $300,000 and the Company ~~received~~gave Mr. Diamantis $350,000 for further payment to Mr. O’Killough. As a ~~breach~~result of ~~contract~~these ~~complaint~~payments, ~~with~~the apast ~~request~~due balance owed to Mr. O’Killough was $1.1 million on ~~for~~December ~~the~~31, ~~entry~~2022. ofThe aCompany ~~default~~is ~~judgment~~obligated ~~(see~~to ~~Note~~repay ~~12)~~Mr. OnDiamantis ~~April~~for 23any payments, ~~2018~~plus interest, that he made to Mr. O’Killough. During the ~~holders~~three ofmonths ended March 31, 2023, the ~~Tegal~~parties ~~Notes~~entered ~~received~~into a ~~judgment~~final ~~against~~settlement wherein the Company and Mr. Diamantis settled the obligation in full for $580,000. As a result of ~~September~~the ~~30,~~final ~~2022~~settlement, during the ~~Company~~three ~~has~~months ~~paid~~ended ~~$50~~March 31,~~055~~ of2023, the ~~principal~~Company ~~amount~~recorded a gain on legal settlement of ~~these~~$0.6 ~~notes~~million.

On August 10, 2021, the Company entered into two notes payable with Western Healthcare, LLC in the aggregate principal amount of $2.4 million. The notes were issued under the terms of a settlement agreement related to 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 were due no later than August 30, 2022. The Company paid $0.2 million to the note holders upon issuance of the notes. The Company has not made all of the monthly installments due under the notes and the notes are past due. On May 12, 2023, the Company and Western Healthcare, LLC agreed to reduce the aggregate principal amount of the notes by $400,000 in exchange for a cash payment of $200,000.

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 of 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. 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. 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, 2022. The promissory note and forbearance agreement are also discussed in Note 12.17

The Company, including its subsidiaries, received PPP loan proceeds in the aggregate amount of approximately $2.4 million (the “PPP Notes”). The PPP Notes and accrued interest were forgivable as long as the borrower used the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities. As of September 30, 2022, $2.3 million of the principal balance of the PPP Notes 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 $1.0 million was forgiven in the three months ended December 31, 2021. During the nine months ended September 30, 2022, the remaining principal balance was repaid.

On August 10, 2021, the Company entered into two notes payable with Western Healthcare, LLC in the aggregate principal amount of $2.4 million. The notes were issued under the terms of a settlement agreement related to 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 $0.2 million to the note holders upon issuance of the notes. The Company has not made all of the monthly installments due under the notes.

Loan Payable – Related Party

At ~~September~~March 3031, ~~2022~~2023 (unaudited) and December 31, ~~2021~~2022, loan payable - related party consisted of the following:

Schedule of ~~Notes~~Loan Payable Related Parties

	September 30, 2022			December 31, 2021
	March 31, 2023			December 31, 2022
Loan payable to Christopher Diamantis	$	3,~~027~~003,000		$	2,~~127~~995,000
Less current portion of loan payable, related party		(3,~~027~~003,000	)		(2,~~127~~995,000	)
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~~three months ~~ended~~ ~~September~~ended 30March 31, 2023 and 2022, Mr. Diamantis loaned the Company $~~0.9~~580,000 and ~~million~~$750,000, respectively, which ~~was~~the Company used to pay ~~principal~~amounts ~~and~~owed ~~accrued interest due~~ under the note payable to Mr. O’Killough. ~~The~~These ~~note~~payments and the note payable to Mr. O’Killough, ~~including~~are ~~payments made in the nine months ended September 30, 2002, is~~ more fully discussed above under the heading Notes Payable –Third Parties. During the three ~~nine~~ months ended ~~September 30~~March 31, ~~2021~~2023, ~~Mr. Diamantis loaned~~ the Company ~~$0.9~~made ~~million,~~payments ~~which~~on ~~was~~the ~~used~~principal ~~for~~amount ~~working~~of ~~capital purposes and~~ the ~~Company~~loans ~~repaid~~from Mr. Diamantis of $0572,000.4 No principal payments ~~million.~~were Inmade ~~November~~on ~~2021,~~loans from Mr. Diamantis ~~requested~~during the ~~Company~~three ~~repay~~months ~~the~~ended ~~outstanding~~March ~~note payable to him~~31, ~~which was $3.0 million at September 30,~~ 2022~~, and facilitate repayment of the note payable to Mr~~. ~~O’Killough for which he is a guarantor.~~

During the three months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022, the Company incurred interest expense ~~of $15,000 and $0, respectively,~~ on the loans from Mr. Diamantis ~~and during the nine months ended September 30, 2022 and 2021, the Company incurred interest expense~~ of $0.1  million and $0.1 million, respectively. During the three ~~and nine~~ months ended ~~September~~March 3031, 2023 and 2022, the Company paid $0.2 1 million and $0~~.3 million~~, respectively, of accrued interest owed to Mr. Diamantis. ~~As of September 30, 2022 and December 31, 2021,~~ No accrued interest onwas ~~the~~owed ~~loans from~~to Mr. Diamantis ~~totaled~~at ~~approximately~~March ~~$0.1~~31, ~~million~~2023 and ~~$0.3~~December ~~million~~31, ~~respectively~~2022. Interest accrues on loans from Mr. ~~Diamantis~~ 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 borrows from third-parties to loan to the Company.~~

Debentures

The carrying amount of all outstanding debentures with institutional investors as of ~~September~~March 3031, ~~2022~~2023 (unaudited) and December 31, ~~2021 was~~2022 was as follows:

Schedule of Debentures

	September 30, 2022			December 31, 2021
	March 31, 2023			December 31, 2022
Debentures	$	8,222,240		$	8,222,240
March 2017 Debenture	$	2,580,240		$	2,580,240
Less current portion		(8,222,240	)		(8,222,240	)
2018 Debentures		5,642,000			5,642,000
October 2022 Debentures		100,000			400,000
Debentures, Gross		8,322,240			8,622,240
Less current portion		(8,322,240	)		(8,622,240	)
Debentures, net of current portion	$	-		$	-

Payment of all outstanding debentures with institutional investors totaling $8.2 million at both September 30, 2022 and December 31, 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~~March ~~September 30~~31, ~~2022~~2023 and December 31, ~~2021~~2022, including a 30% late-payment penalty of $0.6 million. The March 2017 Debenture is ~~convertible~~past due ~~into~~by ~~shares~~its oforiginal ~~the~~terms. ~~Company’s~~The ~~common~~March ~~stock,~~2017 atDebenture abears ~~conversion~~default ~~price~~interest ~~which~~at ~~has~~the ~~been~~rate ~~adjusted~~of ~~pursuant~~18% toper ~~the~~annum ~~terms~~and ofis ~~the~~secured ~~March~~by ~~2017 Debenture~~a tofirst ~~$0.00009~~priority lien ~~per share~~ on ~~September~~all ~~30,~~of ~~2022,~~the orCompany’s 28assets.7 ~~billion~~The ~~shares~~Company ofincurred ~~common~~default ~~stock.~~interest ~~The~~expense ~~conversion~~on ~~price~~this ispast ~~subject~~due todebenture ~~reset in~~of ~~the~~$0.1 ~~event~~million ofand $0.1 ~~offerings~~million, orrespectively, ~~other~~during ~~issuances~~the ofthree ~~common~~months ~~stock,~~ended orMarch ~~rights~~31, to2023 ~~purchase~~and ~~common~~2022 ~~stock~~and, atas aof ~~price~~March ~~below~~31, ~~the~~2023, ~~then~~accrued ~~conversion~~default interest ~~price,~~on asthe ~~well~~March as2017 ~~other~~Debenture ~~customary~~totaled ~~anti-dilution~~$1.9 ~~protections~~million.

~~The~~On March ~~2017~~31, ~~Debenture~~2023, ~~was~~the ~~issued~~March ~~with~~2017 ~~warrants~~Debenture ~~exercisable~~is convertible into shares of the Company’s common stock, at a conversion price, which has been adjusted pursuant to its terms, of $0.00009 ~~Outstanding~~per ~~warrants~~share ~~are~~or ~~more~~28.7 billion shares of the Company’s common stock. The conversion ~~fully~~price ~~discussed~~is subject to reset in ~~Note~~the 10event of offerings or other issuances of common stock, or rights to purchase common stock, at a price below the then conversion price, as well as other customary anti-dilution protections.

The March 2017 Debenture was issued with warrants (the “March Warrants”), which are exercisable into shares of the Company’s common stock until March 21, 2024. During the three months ended March 31, 2022, the Company recorded $135.7 million of deemed dividends as a result of the down round provisions of warrants. No deemed dividends were recorded in the three months ended March 31, 2023 as there was no change in the exercise prices of warrants during the period. Deemed dividends and outstanding warrants are more fully discussed in Notes 1, 9 and 10.

2018 Debentures

During 2018, the Company closed various offerings of debentures (the “2018 Debentures”) with principal balances aggregating $14.5 million, including late-payment penalties, due in September 2019. The conversion terms of the 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 per share at ~~September~~March 3031, ~~2022~~2023 and is subject to a floor of $0.052 per share. At ~~both~~March ~~September 30~~31, ~~2022~~2023 and December 31, ~~2021~~2022, the outstanding principal balance of the 2018 Debentures, including 30% late-payment penalties of $1.3 million, was $5.6 million and the debentures were convertible into 108.5 million shares of the Company’s common stock. The debentures bear default interest at the rate of 18% per annum and are secured by a first priority lien on ~~September~~all 30of the Company’s assets. The Company incurred default interest expense on these past due debentures of $0.3 million and $0.3 million, respectively, during the three months ended March 31, 2023 and 2022 and, as of March 31, 2023, accrued default interest on the 2018 Debentures totaled $3.6 million.

See Notes 3 and 10 for a discussion of the dilutive effect of the outstanding convertible debentures and warrants as of March 31, 2023.

October 2022 Debentures

On October 12, 2022, the Company issued non-convertible, non-interest bearing debentures to institutional investors in the amount of $550,000, including $50,000 of original issue discounts, for net proceeds of $500,000. These debentures were due by their initial terms on February 12, 2023 and were secured by a portion of the Company’s investment in InnovaQor Series B-1 Preferred Stock. On December 15, 2022, the Company and the institutional investors agreed to revise the repayment terms of these debentures as follows: (i) payment of $150,000 on December 15, 2022; and (ii) monthly payments of $100,000 due by the 12^th day of January, February, March and April 2023. The Company has made all required payments and the debentures were fully repaid in April 2023.

Note 7 – 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~~March 3031, ~~2022~~2023 and ~~2021~~2022:

Alcimede ~~LLC and Alcimede~~ Limited

OnPursuant ~~November~~to ~~1, 2021, the Company and Alcimede Limited entered into~~ a ~~new Consulting Agreement that replaced the agreement between the Company and Alcimede LLC. Pursuant to the respective~~ consulting ~~agreements~~agreement, Alcimede Limited billed $0.1 million and $0.31 million for services for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2022, respectively, and Alcimede LLC billed $0.1 million~~2023 and ~~$0.3 million for services for the three and nine months ended September 30~~2022, ~~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~~ ~~10)~~Limited.

20InnovaQor, Inc.

In addition to the investment in InnovaQor’s Series B-1 Preferred Stock (see Notes 1 and 9), at March 31, 2023 and December 31, 2022, the Company had a note receivable / related party receivable resulting from working capital advances to InnovaQor, Inc. (“InnovaQor”) of approximately $1.8 million and $1.5 million, respectively. The balance at March 31, 2023 and December 31, 2022 includes amounts due under a note receivable as discussed below.

InAs ~~addition~~of toJuly ~~the~~1, ~~investment~~2022, inthe ~~InnovaQor’s~~Company ~~Series~~had ~~B-1~~an ~~Preferred~~outstanding ~~Stock~~related ~~resulting~~party receivable from ~~the~~InnovaQor ~~sale~~ of ~~HTS~~$803,416. ~~and~~InnovaQor ~~AMSG~~signed toa ~~InnovaQor~~promissory note, dated July 1, 2022, in ~~June 2021~~favor ~~(see~~of ~~Notes~~the 1Company ~~and~~that ~~13)~~provided that InnovaQor repay the Company $883,757 aton ~~September~~December 3031, 2022 ~~and~~(inclusive of 10% original issue discount). Effective December 31, ~~2021~~2022, the Company ~~had~~and aInnovaQor ~~note~~agreed ~~receivable/related~~to ~~party~~restructure ~~receivable~~the ~~resulting~~promissory note in favor ~~from~~of ~~working~~the ~~capital~~Company ~~advances~~in tothe ~~InnovaQor~~amount of ~~approximately~~$883,757 and additional monies owed in the amount of $441,018 for a new promissory note with a principal amount of $1.0,457,253 ~~million~~(inclusive ~~and~~of $~~0.4~~132,478 ~~million~~of 10% original issue discount) and a maturity date of June 30, ~~respectively~~2023 except that InnovaQor will pay 25% of any capital it receives from new capital secured prior to the maturity date. The ~~balance~~note, atin ~~September~~the 30event of default, bears ~~2022~~interest ofat $118% per annum.0 ~~million~~During ~~includes~~the ~~amounts~~year ~~due~~ended ~~under~~December a31, ~~note~~2022, ~~receivable~~the Company recognized original issue discounts totaling $0.2 million as ~~discussed~~interest ~~below~~income.

AsFrom ofJanuary ~~July~~ 1, ~~2022,~~2023 ~~the~~to ~~Company~~March ~~had an outstanding receivable from InnovaQor of $803~~31,~~416.~~ ~~InnovaQor signed a promissory note~~2023, ~~dated July 1, 2022, in favor of~~ the Company ~~that~~advanced ~~provides that InnovaQor will repay the Company~~ $~~883,757 on December 31, 2022~~0.3 ~~That~~million ~~amount~~to ~~represents a~~InnovaQor ~~10%~~to ~~original~~finance ~~issue~~its ~~discount~~working ~~above~~capital ~~the loan amount outstanding on July 1, 2022~~requirements. The Note, in the event of default, bears interest at 18% per annum. During the three and nine months ended September 30, 2022, the Company recognized $80,156 of the original issue discount as interest income.

During the three ~~and nine~~ months ended ~~September~~March 3031, 2023 and 2022, the Company contracted with InnovaQor to provide ongoing health information technology-related services totaling approximately $~~53,555~~0.1 million and $~~133~~54,~~841~~000, 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 activities, and those discussed in Notes 6 and 10, are not necessarily indicative of those that would have been agreed to with unrelated parties for similar transactions.

Note 8 – Finance and Operating Lease Obligations

We lease property and equipment under finance and operating leases. For operating leases with terms greater than 12 months, we record the ~~related~~ 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~~March 3031, ~~2022~~2023 (unaudited) and December 31, ~~2021~~2022:

	Balance Sheet Classification	~~September~~March 3031, ~~2022~~2023			December 31, ~~2021~~2022
Assets:
Operating leases	Right-of-use operating lease assets	$	~~640~~505,~~386~~954		$	~~821~~574,~~274~~256
Finance lease	Property and equipment, net		~~220,461~~-			~~220,461~~-
Total lease assets		$	~~860~~505,~~847~~954		$	1574,~~041,735~~256
Liabilities:
Current:
Operating leases	Right-of-use operating lease obligations	$	~~239~~189,~~449~~875		$	~~247~~215,~~017~~063
Finance lease	~~Current~~Finance ~~liabilities~~lease obligation		220,461			220,461
Noncurrent:
Long-term	Right-of-use operating lease obligations		316,079			359,193
Operating leases	Right-of-use operating lease obligations		400,937			574,257
Total lease liabilities		$	726,415		$	794,717
Total lease liabilities		$	860,847		$	1,041,735
Weighted-average remaining term:
Operating leases			2.6845 years			32.5759 years
Finance lease (1)			0 years			0 years
Weighted-average discount rate:
Operating leases			13.0	%		13.0	%
Finance leases			4.9	%		4.9	%
Finance lease			4.9	%		4.9	%

21The following table presents certain information related to lease expense for finance and operating leases for the three months ended March 31, 2023 and 2022 (unaudited):

The following table presents certain information related to lease expense for finance and operating leases for the three and nine months ended September 30, 2022 and 2021 (unaudited):

Schedule of Lease Expense

Three Months Ended September 30, 2022

Three Months Ended September 30, 2021

Nine Months Ended September 30, 2022

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2023

Three Months Ended March 31, 2022

Finance lease expense:

Depreciation/amortization of lease assets

Depreciation/amortization of leased assets

Interest on lease liabilities

Operating leases:

Short-term lease expense (2)

8392,~~211~~569

4449,~~342~~182

~~248,250~~

~~151,025~~

Total lease expense

8392,~~211~~569

4449,~~342~~182

~~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.

Other Information

The following table presents supplemental cash flow information for the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022 (unaudited):

	Nine Months Ended September 30, 2022		Nine Months Ended September 30, 2021
	Three Months Ended March 31, 2023		Three Months Ended March 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases obligations	$	218,846	$	168,923
Operating cash flows for operating leases	$	82,892	$	56,208
Operating cash flows for finance lease	$	-	$	-
Financing cash flows for finance lease payments	$	-	$	~~29,524~~-

Aggregate future minimum lease payments under right-of-use operating and finance leases are as follows (unaudited):

(1)	As of March 31, 2023 and December 31, 2022, 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 condensed consolidated statements of operations.

Aggregate future minimum lease payments under right-of-use operating and finance leases are as follows:

	Right-of-Use Operating Leases			Finance Lease
Twelve months ending September 30:
Twelve months ending March 31:
2023	$	307,082		$	224,252
2024	$	243,270		$	224,252
2024		217,839			-
2025		221,088			-
2025		223,795			-
2026		130,547			-
2026		18,650			-
2027		-			-
2028		-			-
Thereafter		-			-
Total		~~767~~594,~~366~~905			224,252
Less interest		(~~126~~88,~~980~~951	)		(3,791	)
Present value of minimum lease payments		~~640~~505,~~386~~954			220,461
Less current portion of lease obligations		(~~239~~189,~~449~~875	)		(220,461	)
Lease obligations, net of current portion	$	~~400~~316,~~937~~079		$	-

22Note 9 – Fair Value, Derivative Financial Instruments and Deemed Dividends

Note 9 – Derivative Financial Instruments, Fair Value and Deemed Dividends

Fair Value Measurements

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~~March 3031, ~~2022 and~~2023 and December 31, ~~2021~~2022, the carrying value of the Company’s accounts receivable, ~~accounts~~note receivable / receivable from related party, 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, 2022 (unaudited) and December 31, 2021:~~21

The following table sets forth the financial assets and liabilities carried at fair value measured on a recurring basis as of March 31, 2023 (unaudited) and December 31, 2022:

	Level 1		Level 2		Level 3		Total
As of September 30, 2022:
As of March 31, 2023:
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:
As of December 31, 2022:
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 B-1 Preferred Stock ~~of $9.0 million as of September 30, 2022 and December 31, 2021 is more fully discussed in Note 13.~~

~~The~~During ~~Company~~2021, ~~utilized~~ the ~~following~~Company ~~method~~sold toseveral ~~value~~subsidiaries ~~its~~to ~~derivative~~InnovaQor. ~~liability~~As asconsideration offor ~~September~~the 30sale, ~~2022~~the ~~and~~Company ~~December~~received 3114,950 ~~2021~~shares ~~for~~of ~~an embedded~~InnovaQor’s ~~conversion~~Series ~~option~~B-1 ~~related~~Preferred Stock of which 100 shares were used in 2021 to settle an outstanding ~~convertible~~liability ~~debenture~~leaving ~~valued~~a balance of 14,850 shares at ~~$455~~March 31,~~336.~~ ~~The~~2023 ~~Company~~and ~~determined~~December ~~the~~31, 2022. The fair value byof ~~comparing~~ the ~~conversion~~Company’s ~~price~~InnovaQor ~~per~~Series ~~share,~~B-1 ~~which~~Preferred Stock investment was initially determined based on the ~~conversion~~Option ~~terms~~Price isMethod ~~85%~~(the of“OPM”). ~~the~~The ~~market~~OPM ~~price~~treats ofcommon ~~the~~and ~~Company’s~~preferred ~~common~~interests ~~stock,~~as ~~multiplied by~~call options on the ~~number~~equity value of ~~shares~~the ~~issuable~~subject atcompany, ~~the~~with ~~balance~~exercise ~~sheet~~prices ~~dates~~based toon the ~~actual~~liquidation ~~price~~preference ~~per share~~ of the ~~Company’s~~preferred ~~common~~interests ~~stock~~and ~~multiplied~~participation bythresholds ~~the~~for ~~number~~subordinated ofclasses. ~~shares~~The ~~issuable~~Black atScholes ~~that~~model ~~date~~was ~~with~~used ~~the~~to ~~difference~~price inthe ~~value~~call ~~recorded~~options. asThe aassumptions ~~liability.~~used ~~There~~were: ~~was~~risk nofree rate ~~change~~of in0.84%; ~~the~~volatility ~~value~~ of ~~the~~250.0%; ~~embedded~~and ~~conversion~~exit ~~option~~period inof ~~the~~5 ~~three~~years. ~~and~~Lastly, ~~nine~~a ~~months~~discount ~~ended~~rate ~~September~~of ~~30,~~35% ~~2022~~was ~~and~~applied ~~2021~~due ~~and~~to the ~~year~~lack ~~ended~~of ~~December~~marketability of ~~31,~~the ~~2021 as~~InnovaQor ~~there~~Series ~~was~~B-1 noPreferred ~~change~~Stock inand the ~~conversion~~underlying ~~price~~liquidity ~~terms~~of ~~during~~InnovaQor’s ~~the~~common ~~periods~~stock.

In reviewing the fair value of the InnovaQor Series B-1 Preferred Stock, the Company believes that the value recorded at March 31, 2023 and December 31, 2022 of $9.0 million represents its fair value. In determining fair value, consideration was given to: (i) the variable rate conversion feature of the InnovaQor Series B-1 Preferred Stock in that changes in the price of the common stock do not affect conversion value; (ii) recent sales and offering prices by InnovaQor of shares of its common stock; (iii) that InnovaQor is actively seeking additional capital; and (iv) other considerations that we believe will bolster the underlying liquidity of InnovaQor’s common stock.

Embedded Conversion Option

The Company utilized the following method to value its derivative liability as of March 31, 2023 and December 31, 2022 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’s common 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 no change in the value of the embedded conversion option in the three months ended March 31, 2023 and the year ended December 31, 2022 as there was no change in the conversion price terms during the periods.

Deemed Dividends

During the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023, there were no triggers of down round provision of outstanding warrants and, ~~during~~therefore, no associated deemed dividends were recorded in the ~~three~~period. ~~and~~During ~~nine~~the three months ended ~~September~~March 3031, ~~2021~~2022, the conversions of preferred stock triggered a ~~further~~ reduction in the exercise prices of warrants ~~(and conversion prices of debentures in the 2021 periods)~~ containing down round provisions. In accordance with U.S. GAAP, the incremental fair value of the warrants, as a result of the decreases in the exercise~~/conversion~~ prices, was measured using Black Scholes ~~valuation models~~. The following assumptions were utilized in the Black Scholes valuation models for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2021~~2022: risk free rates ranging from 0~~.04~~% to 02.55%, 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 ~~0.0% to 2.73%, volatility ranging from~~ 1.94% to 1,564% and terms ranging from 0.01 to 2.45 years. ~~Based~~The ~~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 $~~258~~135.97 million were recorded as deemed dividends during the three months ended ~~September~~March 3031, ~~2021 and $330.5 million and $408.5 million were recorded during the nine months ended September 30,~~ 2022 ~~and 2021, respectively~~.

23In addition, deemed dividends of $0.2 million were recorded in the three months ended March 31, 2022 as a result of the issuance of 1,100 shares of our Series P Preferred Stock, as more fully discussed in Note 10. Deemed dividends are also discussed in Notes 1 and 3.

In addition, deemed dividends of $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 4,750 shares of the Company’s common stock and deemed dividends of $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 10. Deemed dividends are also discussed in Notes 1 and 3.

Note 10 – Stockholders’ Deficit

Authorized Capital

The Company has 250,000,000,000 authorized shares of Common Stock at a par value of $0.0001 per share and 5,000,000 authorized shares of Preferred Stock at a par value of $0.01 per share.

Preferred Stock

As of ~~September~~March 3031, ~~2022~~2023, the Company had outstanding shares of preferred stock consisting of 10 shares of its Series H Convertible Preferred Stock (the “Series H Preferred Stock”), 250,000 shares of its Series L Convertible Preferred Stock (the “Series L Preferred Stock”), 20,810.35 shares of its Series M Convertible Redeemable Preferred Stock (the “Series M Preferred Stock”), 32,~~582~~864.9631 shares of its Series N Convertible Redeemable Preferred Stock (the “Series N Preferred Stock”), 98,~~261~~644.5459 shares 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 27, 2022, the Company’s then outstanding 17,500 shares of Series F Convertible Preferred Stock that were issued on September 27, 2017 in connection with the acquisition of Genomas, Inc. and valued at $174,097 were mandatorily converted into one share of the Company’s common stock in accordance with their terms.

Series H Preferred Stock

Each of the 10 shares of the Series H Preferred Stock has a stated value of $1,000 per share and is convertible into shares of the Company’s common stock at a conversion price of 85% of the volume weighted average price of the Company’s common stock at the time of conversion.

Series L Preferred Stock

The Series L Preferred Stock is held by Alcimede LLC and has a stated value of $1.00 per share. Mr. Lagan is the sole manager of Alcimede LLC. 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~~March 3031, ~~2022~~2023, the Series L Preferred Stock was convertible into approximately 2.58 billion shares of the Company’s common stock at a conversion price of $0.00009 per share.

Series M Preferred Stock

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 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 and a stated value of $1,000 per share. See Note 6 for a discussion of the Company’s indebtedness to Mr. Diamantis as of ~~September~~March 3031, ~~2022~~2023 and December 31, ~~2021~~2022.

24The terms of the Series M Preferred Stock 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% 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; (ii) dividends at the rate per annum of 10% of the stated value per share shall accrue on each outstanding share of Series M Preferred Stock 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 vote of the holders of the Company’s common 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. 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 and any other voting securities as if they were a single class of securities. On August 13, 2020, Mr. Diamantis entered into the Voting Agreement with, 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.

The terms of the Series M Preferred Stock 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% 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; (ii) dividends at the rate per annum of 10% of the stated value per share shall accrue on each outstanding share of Series M Preferred Stock 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 vote of the holders of the Company’s common 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. 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 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. Mr. Diamantis has retained all other rights under the Series M Preferred Stock.23

During the ~~nine~~year ~~months~~ ended ~~September~~December 3031, 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 a three-year term and, as of ~~September~~March 3031, ~~2022~~2023, 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~~March 3031, 2023 and December 31, 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 Exchange, Redemption and Forbearance Agreements, certain outstanding debentures and all of the then outstanding shares of the Company’s Series I-1 Convertible Preferred Stock and Series I-2 Convertible Preferred Stock for 30,435.52 shares of the Company’s Series N Preferred Stock.

The terms of the Series N Preferred Stock include: (i) each share of the Series N 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 N 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 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 shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series N Preferred 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.

25During the three months ended March 31, 2023 and 2022, the holders converted 36 shares and 593.33 shares, respectively, of their Series N Preferred Stock with a stated value of $36,000 and $0.6 million, respectively, into 400.0 million and 12.9 million shares, respectively, of the Company’s common stock. On March 31, 2023, 2,864.31 shares of Series N Preferred Stock remained outstanding and were convertible into 31.8 billion shares of the Company’s common stock.

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 24,499.64 shares of their Series N Preferred Stock, with a stated value of $24.5 million, into 4.2 million shares of the Company’s common stock. On September 30, 2022, 3,582.96 shares of Series N Preferred Stock remained outstanding and were convertible into 39.8 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 dated as of May 10, 2021. On September 7, 2021, 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. Under these agreements, the Company issued 9,900 shares of its Series O Preferred Stock and it received $9.0 million in aggregate proceeds ~~of which $5~~.~~0 million was received in the nine months ended September 30, 2021.~~

The terms of the Series O Preferred Stock include: (i) each share of the Series O Preferred Stock is convertible into shares of the Company’s common stock, at any time and from time to time, at the option of the holder, into that number of shares of common stock determined by dividing the stated value of such share of Series O Preferred Stock, plus any accrued declared and unpaid dividends, by the conversion price; (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.~~ 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.

During the nine months ended September 30, 2022, the holders converted 638 shares of their Series O Preferred Stock with a stated value of $0.6 million into 6.7 billion shares of the Company’s common stock. On September 30, 2022, 9,261.54 shares of Series O Preferred Stock remained outstanding and were convertible into 102.9 billion shares of the Company’s common stock.24

During the three months ended March 31, 2023, the holders converted 40.5 shares of their Series O Preferred Stock with a stated value of $40,500 into 450.0 million shares of the Company’s common stock. No shares of Series O Preferred Stock were converted during the three months ended March 31, 2022. On March 31, 2023, 8,644.59 shares of Series O Preferred Stock remained outstanding and were convertible into 96.1 billion shares of the Company’s common stock.

Series P Preferred Stock

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 P 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.

26On 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 three months ended March 30, 2022, the Company recorded $0.2 million of deemed dividends as a result of the issuances of shares of its Series P Preferred Stock during that period. 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.

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 P 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 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 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.

On ~~September~~March 3031, ~~2022~~2023, 10,194.87 shares of the Company’s Series P Preferred Stock were outstanding and were convertible into 113.3 ~~billion~~ billion shares of the Company’s common stock.

Common Stock

The Company had 1529.19 billion and 429.21 ~~million~~billion shares of its common stock issued and outstanding at ~~September~~March 3031, ~~2022~~2023 and December 31, ~~2021~~2022, respectively. During the three months ended March 31, 2023, the Company issued 400 million shares of its common stock upon the conversions of 36 shares of its Series N Preferred Stock and 450 million shares of its common stock upon conversions of 40.5 shares of its Series O Preferred Stock. During the three months ended March 31, 2022, the Company issued 12.9 million shares of its common stock upon the conversions of 593.33 shares of its Series N Preferred Stock.

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 15 for a discussion of the number of shares of the Company’s common stock and common stock equivalents outstanding as of November 10, 2022.25

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.

27As a result of the Voting Agreement discussed above and in Note 10 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 outstanding rights to acquire potentially dilutive common shares.

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.

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~~March 3031, ~~2022~~2023 and December 31, ~~2021~~2022, the Company had 26 stock options outstanding with a weighted average exercise price of $2.9 million per share. ~~and~~At aMarch 31, 2023, the weighted average remaining contractual life ofwas 3.6212 years for options outstanding and exercisable. The intrinsic value of options exercisable at ~~September~~March 3031, ~~2022~~2023 and December 31, ~~2021~~2022 was $0. As of ~~September~~March 3031, 2023 and 2022, there was no remaining compensation expense associated with stock options as all of the outstanding options had fully vested as of December 31, 2019.

Warrants

The following summarizes the information related to warrant activity during the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023:

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
Balance at December 31, 2022		511,333,351,090		$	0.00009
Expiration of warrants		(33,601,209	)		(0.8970	)
Issuance of warrants		-			-
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			-
Expiration of warrants		(1	)		(794,998.13	)
Balance at September 30, 2022		511,333,351,093		$	0.00009
Balance at March 31, 2023		511,333,351,089		$	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 511.3 billion shares at September 30, 2022. During the nine months ended September 30, 2022, 33.6 million warrants expired and, as a result of the down round provisions of outstanding warrants, the exercise prices of certain warrants decreased and they became exercisable into an additional 511.3 billion shares of the Company’s common stock.26

~~Included in the warrants outstanding at September 30, 2022 were warrants issued in March 2017 in connection with the March 2017 Debenture. (~~The ~~March 2017 Debenture is more fully discussed in Note 6.) The~~ Company, ~~issued~~as ~~these~~part ~~warrants to purchase shares~~ of ~~the~~various ~~Company’s common~~financing ~~stock to several accredited investors (the “March Warrants”). On September 30~~transactions, ~~2022,~~has ~~these~~issued warrants ~~were exercisable into an aggregate of approximately 507.6 billion shares of the Company’s common stock. The March Warrants were issued~~ to ~~the~~purchase ~~investors in three tranches, Series A Warrants, Series B Warrants and Series C Warrants. At September 30, 2022, the Series A Warrants were exercisable for 190.0 billion~~ shares of the Company’s common stock. ~~They were~~ exercisable ~~upon issuance in March 2017 and had an initial term~~ ofinto ~~exercise~~a ~~equal~~total ~~to five years. On September 30, 2022, the Series B Warrants were exercisable for 127.6 billion shares~~ of ~~the Company’s common stock and were exercisable, prior to the extension discussed below, until March 21, 2022~~511.3 ~~On September 30, 2022, the Series C Warrants were exercisable for 190.0~~ billion shares ofat the Company’s common stock and had an initial term of five years provided 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~~31, ~~2024 in connection with the November 2021 Exchange Agreements~~2023. On September 30, 2022, the Series A, Series B and Series C Warrants each have an exercise price of $0.00009 per 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.

28Included in the warrants outstanding at March 31, 2023 were the March Warrants issued in March 2017 in connection with the March 2017 Debenture. (The March 2017 Debenture is more fully discussed in Note 6.) The Company issued these warrants to purchase shares of the Company’s common stock to several accredited investors. On March 31, 2023, the March Warrants were exercisable into an aggregate of approximately 507.6 billion 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 March 31, 2023, the Series A Warrants were exercisable for 190.0 billion shares of the Company’s common stock. They were exercisable upon issuance in March 2017 and had an initial term of exercise equal to five years. On March 31, 2023, the Series B Warrants were exercisable for 127.6 billion shares of the Company’s common stock and were exercisable, prior to the extension discussed below, until March 21, 2022. On March 31, 2023, the Series C Warrants were exercisable for 190.0 billion shares of the Company’s common stock and had an initial term of five years provided 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. On March 31, 2023, the Series A, Series B and Series C Warrants each have an exercise price of $0.00009 per 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.

The number of shares of common stock issuable under outstanding warrants and the exercise prices of the warrants as reflected in the table ~~above~~ 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~~ 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. See, also, Notes 1, 3, and 153 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~~three months ended ~~September~~March 3031, 2022 ~~and the three and nine months ended September 30~~, ~~2021,~~ reductions in the exercise prices of the ~~March~~warrants ~~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 11 – Supplemental Disclosure of Cash Flow Information

	2022		2021
	Three Months Ended March 31,
	Nine Months Ended September 30,
	2023		2022
	2022		2021
	(unaudited)		(unaudited)
Cash paid for interest	$	1111,~~369,955~~768	$	-762,250
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
Stated value of Series N Preferred Stock converted into common stock	$	36,000	$	593,330
Net liabilities of HTS and AMSG transferred to InnovaQor		-		2,227,152
Stated value of Series O Preferred Stock converted into common stock		40,500		-
Settlement of liability with InnovaQor preferred stock		-		60,714
Deemed dividends from issuances of Series P Preferred Stock		-		222,222
Issuance of notes payable in settlement of accounts payable and accrued expenses		-		2,352,961
Deemed dividends from triggers of down round provisions of warrants		-		135,702,523
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 12 – 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~~at ~~the~~its ~~client base~~facilities. The ~~Company~~ Company does have significant receivable balances with government ~~payers~~ and ~~various~~other ~~insurance carriers~~payers. Generally, the Company ~~does~~ does not require collateral or other security to support ~~customer~~accounts 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.

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 Corp.27

29The Company maintains its cash balances in high credit quality financial institutions. The Company’s cash balances may, at times, exceed the deposit insurance limits provided by the Federal Deposit Insurance Corp.

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 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 Mr. Diamantis for his financial support to the Company and assumption of all costs to carry the case to conclusion.

InOn ~~November~~September of27, 2016, ~~the~~a ~~IRS commenced an audit of the Company’s 2015 Federal~~ tax ~~return.~~warrant ~~Based~~was ~~upon~~issued ~~the~~against ~~audit results,~~ the Company ~~made~~ ~~provisions~~by ~~of approximately $1.0 million as a liability and approximately $0.9 million as a receivable in its financial statements for~~ the ~~year~~Florida ~~ended~~Department ~~December 31, 2018. During the first quarter~~ of ~~2020,~~Revenue (the ~~U.S.~~“DOR”) ~~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~~unpaid ~~2020,~~2014 ~~the~~state ~~Company~~income ~~recorded~~taxes ~~approximately $1.1 million~~ in ~~refunds from~~ the ~~carryback~~approximate ofamount ~~certain~~ of ~~its federal net operating losses. In addition, during the year ended December 31, 2020, the Company recorded~~ $0.39 million, inincluding ~~refunds~~penalties ~~related to other net operating loss carryback adjustments~~ and ~~it received income tax refunds of $0~~interest.6 ~~million~~The ~~related to the audit of the~~ Company’s ~~2015~~entered ~~Federal~~into ~~tax~~a ~~return. During~~Stipulation ~~the~~Agreement ~~year~~with ~~ended~~the ~~December~~DOR ~~31,~~allowing ~~2021,~~ the Company ~~received~~to ~~income~~make ~~tax~~monthly ~~refunds~~installments ofuntil ~~$0.3~~July ~~million, which represented income tax refunds associated with the CARES Act~~2019. The Company ~~used~~has ~~the~~made ~~$0.3~~payments ~~million of refunds that it received in 2021~~ to ~~repay~~reduce ~~a portion of~~ the amount ~~that it owes for federal income tax liabilities that arose from the 2015 federal income tax audit~~owed. AsThe ofbalance ~~September~~accrued ~~30, 2022 and December 31, 2021, the Company had federal income tax receivables~~ of ~~$1.1~~approximately ~~million and~~ $10.14 million, ~~respectively,~~remained ~~and~~outstanding ~~federal~~to ~~income~~the ~~tax~~DOR ~~liabilities~~at ~~of $0.7~~March ~~million and $0.7 million~~31, ~~respectively~~2023.

On ~~September~~December 277, 2016, athe ~~tax~~holders ~~warrant~~of ~~was~~the ~~issued~~Tegal ~~against~~Notes ~~the~~filed ~~Company~~suit byagainst the ~~Florida~~Company ~~Department~~seeking ofpayment ~~Revenue~~for (the ~~“DOR”)~~amounts ~~for~~due ~~unpaid~~under ~~2014~~the ~~state~~notes ~~income taxes~~ in the ~~approximate~~aggregate ~~amount~~principal balance of $~~0.9 million~~341,612 ~~including penalties~~ and accrued interest. ~~The~~On ~~Company~~April ~~entered~~23, ~~into~~2018, ~~a Stipulation Agreement with~~ the ~~DOR~~holders ~~allowing~~of the ~~Company~~Tegal toNotes ~~make~~received a ~~monthly~~judgment ~~installments~~against ~~until~~the ~~July 2019. The~~ Company ~~has~~in ~~made payments to reduce~~ the amount ~~owed~~of $384,384. ~~The~~As ~~balance~~of ~~accrued~~March of31, ~~approximately~~2023, ~~$0.4~~the ~~million~~Company ~~remained~~has ~~outstanding~~repaid to$50,055 of the ~~DOR~~principal atamount of ~~September~~these ~~30, 2022~~notes.

In ~~December~~February ~~of 2016~~2020, ~~DeLage~~Anthony ~~Landen~~O’Killough ~~Financial~~sued ~~Services,~~the ~~Inc~~Company and Mr. ~~(“DeLage”)~~Diamantis, ~~filed~~as ~~suit~~guarantor, ~~against~~in ~~the~~New ~~Company~~York ~~for~~State ~~failure~~Supreme toCourt ~~make~~for the County ~~required~~of ~~payments~~New ~~under~~York, anfor ~~equipment~~approximately ~~leasing~~$2.0 ~~contract~~million ~~that~~relating to the ~~Company~~promissory ~~had~~note ~~with~~issued ~~DeLage~~by ~~(see~~the ~~Note~~Company 8)in September 2019. OnIn ~~January~~May 242020, ~~2017~~the Company, ~~DeLage~~Mr. ~~received a~~Diamantis, ~~default~~as ~~judgment~~guarantor, ~~against~~and ~~the~~Mr. ~~Company~~O’Killough inentered ~~the~~into ~~approximate~~a ~~amount~~Stipulation providing for a payment of a total of $12.0 2 million, ~~representing~~(which ~~the~~included ~~balance~~accrued ~~owed~~“penalty” oninterest ~~the~~as ~~lease~~of that date) in installments through November 1, as2020. ~~well~~The Company asmade ~~additional~~payments ~~interest~~totaling $450,000 ~~penalties~~in 2020. On January 18, 2022, Mr. Diamantis paid $750,000 and ~~fees~~the remaining balance was due 120 days thereafter. ~~The~~Mr. ~~Company~~O’Killough ~~recognized~~agreed ~~this~~to ~~amount~~forebear infrom ~~its~~any ~~consolidated~~further ~~financial~~enforcement ~~statements~~action asuntil ofthen. ~~December~~On various dates during the remainder 31of 2022, ~~2016~~Mr. OnDiamantis ~~February~~made 8additional payments to Mr. O’Killough totaling $300,000 ~~2017~~and the Company gave Mr. Diamantis $350,000 for afurther ~~Stay~~payment ofto ~~Execution~~Mr. ~~was~~O’Killough. ~~filed~~As ~~and~~a ~~under~~result ~~its~~of ~~terms~~these payments, the ~~balance~~past due ~~was~~balance owed to beMr. ~~paid~~O’Killough inwas ~~variable monthly installments~~$1.1 ~~through~~million ~~January~~on ofDecember ~~2019~~31, ~~with~~2022. anThe ~~implicit~~Company is obligated to repay Mr. Diamantis for any payments, plus interest, ~~rate~~that ofhe 4made to Mr.~~97%~~ O’Killough. During ~~The~~the three months ended March 31, 2023, the parties entered into a final settlement wherein the Company and ~~DeLage~~Mr. ~~disposed~~Diamantis ofsettled the ~~certain~~obligation ~~equipment~~in ~~and~~full ~~reduced~~for $580,000. As a result, during the ~~balance~~ ~~owed~~three tomonths ~~DeLage~~ended toMarch 31, 2023, the Company recorded a gain on legal settlement of $0.26 million. The promissory note, ~~which~~forbearance ~~remained~~agreement ~~outstanding~~and atfinal ~~September~~settlement ~~30,~~are ~~2022~~also discussed in Note 6.

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 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, 2022, the Company has repaid $50,055 of the principal amount of these notes.28

30In 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 this judgment as a liability as of December 31, 2022. However, management believes that a number of insurance payments were made to CHSPSC for services provided after the change of ownership and believes that these payments will offset portions of the judgment.

~~The~~In ~~Company~~November 2019, ~~as well as many of its subsidiaries~~Newstat, ~~were~~PLLC ~~defendants~~obtained in a ~~case~~judgment ~~filed~~against inBig ~~Broward~~South ~~County~~Fork ~~Circuit~~Medical ~~Court~~Center byin ~~TCA~~Knox ~~Global Credit Master Fund~~County, ~~L.P.~~Tennessee ~~The~~in ~~plaintiff~~the ~~alleged~~amount ~~a breach by Medytox Solutions, Inc.~~ of ~~its obligations under a debenture and claimed damages of approximately~~ $2190,~~030,000~~600 in ~~plus~~connection ~~interest,~~with ~~costs and fees. The Company and~~ the ~~other~~provision ~~subsidiaries were sued as alleged guarantors~~ of ~~the~~medical ~~debenture~~services. ~~The complaint~~On ~~was~~February ~~filed on August 1~~15, ~~2018. In May 2020~~2023, the ~~SEC appointed a Receiver to close down the TCA Global Credit Master Fund, L.P. The~~ Company and ~~the~~Newstat ~~Receiver~~agreed ~~entered~~to ~~into~~settle ~~a settlement agreement dated effective as of September 30, 2021, under which~~ the ~~Company~~amount ~~agreed~~owed tofor ~~pay~~ $~~500~~210,000 asin ~~full~~four ~~and~~equal ~~final~~monthly ~~settlement~~payments of ~~principal and interest, of which~~ $~~200~~52,~~000~~500 ~~was~~beginning ~~paid~~February on2023. ~~November~~The 4,Company ~~2021~~has ~~and~~made the ~~remaining $300,000~~payments ~~was~~under ~~due in six consecutive monthly installments of $50,000. Accordingly,~~ the settlement ~~amount was fully paid as of September~~ ~~30,~~agreement ~~2022~~to ~~(see Note 6)~~date. AsThe ~~a result of the settlement, the~~ Company has recorded ~~a gain from legal settlement of $2.2 million in~~ the ~~three and~~remaining ~~nine~~liability ~~months~~at ~~ended~~March ~~September 30~~31, ~~2021~~2023.

On ~~September~~June 1330, ~~2018~~2021, ~~Laboratory~~the ~~Corporation~~Company ofentered ~~America~~into ~~sued~~a ~~EPIC,~~settlement aagreement ~~subsidiary~~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 ~~Palm~~a ~~Beach~~lump ~~County~~sum ~~Circuit~~payment ~~Court~~of ~~for~~$32,922 on or before ~~amounts~~August ~~claimed~~15, to2021 beand ~~owed.~~in ~~The~~24 ~~court~~consecutive ~~awarded~~monthly apayments ~~judgment~~of ~~against~~$3,201 ~~EPIC~~each inon ~~May~~or ~~2019~~before ~~for~~the ~~approximately~~15th ~~$155~~day of each month beginning September 15,~~000~~ 2021. The Company made the required payments due to date and has recorded the ~~amount~~remaining amounts owed as a liability as of ~~September~~March 3031, ~~2022~~ 2023.

InA ~~February~~sealed ~~2020,~~qui ~~Anthony~~tam ~~O’Killough~~lawsuit ~~sued~~in the US District Court for the Southern District of Florida against the Company ~~and~~was Mrfiled in July 2021. This ~~Diamantis,~~lawsuit aswas ~~guarantor,~~unsealed in ~~New~~November ~~York~~2022 ~~State~~and ~~Supreme~~Clifford ~~Court~~Barron ~~for~~disclosed as the ~~County~~ Plaintiff-Relator asserting violations of ~~New~~the ~~York,~~False ~~for~~Claims Act. ~~approximately~~Clifford $2Barron was an employee of CollabRx, Inc.~~0 million~~ ~~relating~~(a toSan ~~the~~Francisco ~~promissory~~based, ~~note~~wholly ~~issued by~~owned subsidiary of the Company) inuntil ~~September~~early ~~2019~~2018. Following Inhis ~~May~~resignation ~~2020~~on January 17, 2018, Clifford Barron sought and received a judgment against the Company, ~~Mr.~~for ~~Diamantis~~approximately $253,000 he asclaimed ~~guarantor,~~was ~~and~~owed ~~Mr.~~to ~~O’Killough~~him ~~entered~~by ~~into~~the aCollabRx ~~Stipulation providing~~subsidiary for aseverance and payment of aCOBRA. ~~total~~On ofreceiving ~~$2.2 million~~the ~~(which~~judgment, ~~included~~he ~~accrued~~collected ~~“penalty”~~all ~~interest~~monies asowed ofto ~~that~~him ~~date)~~under inthis ~~installments through November 1~~judgment, ~~2020.~~including ~~The~~from the Company’s ~~made~~rural ~~payments~~healthcare ~~totaling~~operations ~~$450,000~~ in ~~2020.~~Tennessee Onwith ~~January~~which ~~18,~~he ~~2022,~~was not Mrinvolved. ~~Diamantis~~Payments ~~paid~~ included approximately $~~750~~164,000 ~~and~~ ~~the~~secured ~~remaining~~from ~~balance~~hospital ~~was~~operating ~~due~~and ~~120~~other ~~days~~bank ~~thereafter.~~accounts by garnishments initiated ~~Mr.~~by ~~O’Killough~~Jonathan ~~agreed~~Swann toTaylor ~~forebear~~of ~~from~~Taylor ~~any~~& ~~further~~Knight, ~~enforcement~~GP, ~~action~~Knoxville ~~until~~Tennessee, ~~then.~~on ~~The~~behalf ~~Company~~of isClifford ~~obligated~~Barron toin ~~repay~~May Mr2022. ~~Diamantis~~Clifford Barron has not been an employee of any subsidiary of the ~~$750~~Company since January 2018,~~000 payment~~ asis ~~well~~not asinvolved ~~any~~with ~~further~~the ~~payments~~Company ~~that~~and has no knowledge of the ~~may~~Company’s beoperations, ~~made~~financial bystatus, ~~him~~or controls. On ~~May~~November 1621, 2022, the Company ~~paid~~was ~~$250,000 to~~advised Mrthat the U.S. ~~Diamantis~~Department ~~for~~of Justice ~~further~~has ~~payment~~intervened toin ~~Mr.~~the ~~O’Killough and~~action onfiled ~~July~~by ~~18,~~the ~~2022~~Plaintiff-Relator, MrClifford Barron and has requested repayment of HHS Provider Relief Funds that certain subsidiaries of the Company obtained and other relief. ~~Diamantis~~The ~~paid~~Company has retained the services of a ~~further~~specialist ~~$150,000~~third-party toaccounting ~~Mr.~~firm ~~O’Killough.~~to Ascomplete a ~~result~~forensic review of the ~~$750,000 payment~~expenditure toof Mrall monies expended since the receipt of HHS Provider Relief Funds. It Ohas been discovered that certain filing requirements of the Company’~~Killough~~s ~~made~~operating bysubsidiaries ~~Mr.~~were ~~Diamantis~~incomplete or contained errors onthat ~~January~~did ~~18,~~not ~~2022~~accurately ~~and~~reflect the ~~additional~~expenditure ~~$400,000 in~~of ~~payments~~HHS ~~made~~Provider toRelief MrFunds received. ~~O’Killough~~The onCompany ~~May~~disputes ~~16,~~the allegations made and ~~2022~~believes that the forensic review of funds expended will address the lawsuit and ~~July~~demonstrate ~~18,~~adherence ~~2022,~~with the ~~past~~applicable ~~due~~rules ~~balance~~for use ~~owed~~of toHHS MrProvider Relief Funds. ~~O’Killough~~Accordingly, ~~was~~no ~~$1.3~~amount ~~million~~has onbeen ~~September~~accrued 30for this potential liability at December 31, 2022. ~~The~~There ~~promissory~~is no ~~note~~assurance that the Company will be able to retain all HHS Provider Relief Funds it has received nor avoid payment of other relief ~~and~~sought ~~forbearance~~by ~~agreement~~the ~~are~~Department ~~also~~of ~~discussed~~Justice. inAny ~~Note~~requirement 6to repay a significant amount of HHS Provider Relief Funds could have a material adverse effect on the Company.

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 this judgment as a liability as of September 30, 2022. However, management believes that a number of insurance payments were made to CHSPSC after the change of ownership that will likely offset portions of the 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, 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, 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 15th day of each month beginning September 15, 2021. The Company has made the required payments due as of September 30, 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).

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 13 – Discontinued Operations

Sale of HTS and AMSG

On June 25, 2021, the Company sold the shares of stock of HTS and AMSG to InnovaQor. HTS and AMSG held Rennova’s software and genetic testing interpretation divisions. In consideration for the shares of HTS and AMSG and the elimination of intercompany debt among the Company and HTS and AMSG, InnovaQor issued the Company 14,950 shares of its Series B-1 Non-Voting Convertible Preferred Stock (the “InnovaQor Series B-1 Preferred Stock”), 14,000 of the shares were issued on June 25, 2021 and 950 of the shares were issued in the third quarter of 2021 as a result of a post-closing adjustment. Each share of InnovaQor Series B-1 Preferred Stock has a stated value of $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-1 Preferred Stock, however, is subject to the limitation that no conversion can be made to the extent the holder’s beneficial interest (as defined pursuant to the terms of the InnovaQor Series B-1 Preferred Stock) in the common stock of InnovaQor would exceed 4.99%. The shares of the InnovaQor Series B-1 Preferred Stock may be redeemed by InnovaQor upon payment of the stated value of the shares plus any accrued declared and unpaid dividends.

As a result of the sale, the Company recorded the InnovaQor Series B-1 Preferred Stock as a long-term asset valued at $9.1 million and a gain on the sale of HTS and AMSG of $11.3 million of which $0.6 million and $11.3 million was recorded in the three and nine months ended September 30, 2021, respectively. The $0.6 million recorded in the three months ended September 30, 2021 resulted from a post-closing adjustment. Approximately $9.1 million of the gain resulted from the value of the 14,950 shares of InnovaQor Series B-1 Preferred Stock received and $2.2 million resulted from the transfer to InnovaQor of the net liabilities of HTS and AMSG. The fair value of the InnovaQor Series B-1 Preferred Stock that the Company received as consideration for the sale of $9.1 million was based on the Option Price Method (the “OPM”). The OPM treats common and preferred interests as call options on the equity value of the subject company, with exercise prices based on the liquidation preference of the preferred interests and participation thresholds for subordinated classes. The Black Scholes model was used to price the call options. The assumptions used were: risk free rate of 0.84%; volatility of 250.0%; and exit period of 5 years. Lastly, a discount rate of 35% was applied due to the lack of marketability of the InnovaQor Series B-1 Preferred Stock and the underlying liquidity of InnovaQor’s common stock.

During the three months ended September 30, 2021, 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

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~~was ~~been~~ unable to find a buyer for EPIC and, therefore, it has ceased all efforts to sell EPIC and closed down its operations.

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Carrying amounts of major classes of liabilities of EPIC and the other non-operating subsidiaries included as part of discontinued operations in the condensed consolidated balance sheets as of ~~September~~ 30March 31, ~~2022~~2023 (unaudited) and December 31, ~~2021~~2022 consisted of the following:

	September 30, 2022		December 31, 2021
	March 31, 2023		December 31, 2022
	(unaudited)
Accounts payable	$	1,115,066	$	1,115,066
Accounts payable	$	1,108,066	$	1,108,066
Accrued expenses		341,046		341,046
Accrued expenses		339,696		341,410
Current liabilities of discontinued operations	$	1,456,112	$	1,456,112
Current liabilities of discontinued operations	$	1,447,762	$	1,449,476

~~Major~~The ~~line items constituting (~~loss) ~~income~~ from discontinued operations in the unaudited condensed consolidated statements of operations for the three ~~and nine~~ months ended ~~September~~March 3031, 2022 ~~and 2021~~ consisted of ~~the~~$1,434 of ~~following:~~general and administrative expenses.

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 14 – Recent Accounting Pronouncements

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~~June ~~2021~~2022, the FASB issued ASU ~~2021~~2022-0403, ~~Earnings~~Fair ~~Per~~Value ~~Share~~Measurement (Topic ~~260~~820), ~~Debt—Modifications~~Fair ~~and~~Value ~~Extinguishments~~Measurement ~~(Subtopic~~of ~~470-50), Compensation—Stock~~Equity ~~Compensation~~Securities ~~(Topic~~Subject to ~~718),~~Contractual ~~and~~Sale ~~Derivatives~~Restrictions. ~~and~~The ~~Hedging—Contracts~~FASB inis ~~Entity’s~~issuing ~~Own~~this ~~Equity~~ASU to: (~~Subtopic 815-40~~1), ~~Issuer’s~~clarify ~~Accounting~~the ~~for~~guidance ~~Certain~~in ~~Modifications~~Topic or820, ~~Exchanges~~Fair ofValue ~~Freestanding Equity-Classified Written Call Options. The~~Measurement, ~~FASB~~when ~~issued~~measuring ~~this~~the ~~Update~~fair tovalue ~~clarify~~of ~~and~~an ~~reduce~~equity ~~diversity~~security insubject anto ~~issuer’s~~contractual ~~accounting~~restrictions ~~for~~that ~~modifications~~prohibit orthe ~~exchanges~~sale of ~~freestanding~~ an equity~~-classified~~ ~~written~~security, (2) ~~call~~amend ~~options~~a ~~(for~~related illustrative example, ~~warrants~~and (3) ~~that~~introduce ~~remain~~new ~~equity~~disclosure ~~classified~~requirements ~~after~~for ~~modification~~equity orsecurities ~~exchange.~~subject ~~The~~to ~~guidance~~contractual ~~clarifies~~sale ~~whether~~restrictions anthat ~~issuer~~are ~~should~~measured ~~account~~at ~~for~~fair avalue ~~modification~~in oraccordance anwith ~~exchange~~Topic of820. aThe ~~freestanding~~amendments ~~equity-classified~~in ~~written~~this ~~call~~ASU ~~option that~~do ~~remains~~not ~~equity~~change ~~classified~~the ~~after~~principles of ~~modification~~fair orvalue ~~exchange~~measurement. asFor ~~(1)~~public anbusiness ~~adjustment to equity and~~entities, ~~if so,~~ the ~~related~~amendments ~~earnings~~are ~~per~~effective ~~share (EPS)~~for ~~effects,~~fiscal ifyears ~~any,~~beginning orafter ~~(2)~~December ~~an expense and~~15, ~~if so~~2023, and ~~the~~interim ~~manner~~periods ~~and~~within ~~pattern~~those offiscal ~~recognition~~years. ~~The~~Early ~~amendments~~adoption inis ~~this~~permitted ~~Update are effective~~ for ~~all~~both ~~entities~~interim ~~for~~and ~~fiscal~~annual ~~years~~financial ~~beginning~~statements ~~after~~that ~~December~~have not ~~15,~~yet ~~2021,~~been ~~including~~issued ~~interim~~or ~~periods~~made ~~within~~available ~~those~~for ~~fiscal years~~issuance. AnThe ~~entity~~Company should apply the amendments prospectively towith ~~modifications~~any oradjustments ~~exchanges~~from ~~occurring on or after~~ the adoption ~~effective date~~ of the amendments. Werecognized ~~adopted this~~in ~~new~~earnings ~~accounting~~and ~~guidance~~disclosed on ~~January~~the 1,date ~~2022~~of adoption. ~~The~~We ~~impact~~have ofnot yet determined the ~~adoption~~impact of adopting this new accounting guidance on our consolidated financial ~~statements~~ ~~is discussed in Note 1~~statements.

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 both interim and annual financial statements that have not yet been issued or made available for issuance. The Company should apply the amendments prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of 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 15 – Subsequent Events~~30

Conversions of Series N and Series O Preferred Stock

Subsequent to September 30, 2022 and through November 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 $682,650 and 576.45 shares of its Series O Preferred Stock with a stated value of $576,450.

Potential Common Stock as of November 10, 2022

The 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 Amendment to its Certificate of Incorporation, as amended, providing for the affirmative vote of the holders of a majority in voting power of the stock of the Company to authorize an increase in the number of authorized shares of the Company’s common stock, as more fully discussed in Note 1, the Company believes that it has the practical ability to ensure that it has a sufficient number of authorized shares of its common stock to accommodate all potentially dilutive instruments.

Issuance of Debentures

On October 12, 2022, the Company issued debentures to institutional investors in the amount of $550,000 for net proceeds of $500,000. The Debentures are due on February 12, 2023 and are secured by a portion of the Company’s investment in InnovaQor Series B-1 Preferred Stock.

Big South Fork Medical Center Cost Report

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 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 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.

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, ~~2021~~2022 (the “~~2021~~2022 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 ~~2021~~2022 Form 10-K and with our unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this report.

COMPANY OVERVIEW

Our Services

We are a provider of health care services for our patients. We own one operating hospital 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. WeThe ~~operate~~Company’s inoperations ~~one~~consist ~~business~~of only one segment.

Scott County Community Hospital (d/b/a 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~~

On June 1, 2018, we acquired from Community Health Systems, Inc. certain assets related to an acute care hospital located in Jamestown, Tennessee, referred to as Jamestown Regional Medical 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~~offered ~~for~~ a 24-hour emergency department with two trauma bays ~~and~~ and seven private exam rooms, inpatient and outpatient medical services and a progressive care unit which provided telemetry services. ~~The~~ The acquisition also included a separate physician practice known as Mountain View Physician Practice, Inc.

3531

~~Jellico Community Hospital and~~ CarePlus Rural Health Clinic

On March 5, 2019, 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 and~~ an outpatient clinic located in Williamsburg, Kentucky known as CarePlus Clinic. ~~The~~ ~~hospital~~The ~~and~~clinic, ~~the~~which ~~clinic~~was ~~and~~acquired ~~their~~from ~~associated~~CarePlus ~~assets~~Rural ~~were~~Health ~~acquired~~Clinic, ~~from~~LLC, ~~Jellico~~offers ~~Community~~compassionate ~~Hospital~~care in a modern, ~~Inc~~patient-friendly facility. The ~~and~~ CarePlus ~~Rural~~Clinic ~~Health~~is ~~Clinic, LLC,~~located ~~respectively~~32 miles northeast of our Big South Fork Medical Center.

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.

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.

Discontinued Operations

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

On June 25, 2021, the Company sold the shares of stock of Health Technology Solutions, Inc. (“HTS”) and 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 B-1 Non-Voting Convertible Preferred Stock (the “InnovaQor Series B-1 Preferred Stock”), 14,000 of the shares were issued on June 25, 2021 and 950 of the shares were issued in the third quarter of 2021 as a result of a post-closing adjustment. The terms of the InnovaQor Series B-1Preferred Stock are more fully described in Note 13 to the accompanying unaudited condensed consolidated financial statements. As a result of the sale, the Company recorded the InnovaQor Series B-1 Preferred Stock as a long-term asset valued at $9.1 million and a gain on the sale of HTS and AMSG of $11.3 million of which $0.6 million and $11.3 million was recorded in the three and nine months ended September 30, 2021, respectively. The $0.6 million recorded in the three months ended September 30, 2021 resulted from a post-closing adjustment. Approximately $9.1 million of the gain resulted from the value of the 14,950 shares of the InnovaQor Series B-1 Preferred Stock received and $2.2 million resulted from the transfer to InnovaQor of the net liabilities of HTS and AMSG.

During the year ended December 31, 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 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 financial results of HTS and AMSG prior to the sale as 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’s operations have been included in discontinued operations in the accompanying consolidated financial statements. We have been unable to find a buyer for EPIC and, therefore, have ceased all efforts to sell EPIC and closed down its operations.

Outlook

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 revenues. We currently operate one hospital and a rural health clinic and we own another hospital ~~and 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~~facility. We remain confident that this is a sustainable model we can continue to grow through acquisition and development.

Impact of the Pandemic

The COVID-19 pandemic was declared a global pandemic by the World Health Organization on March 11, 2020. We ~~have~~continue ~~been~~to ~~closely~~monitor ~~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~~ These steps have increased our costs and our revenues have been significantly adversely affected. As noted in ~~Notes~~Note 2 ~~and 6~~ to the accompanying ~~unaudited~~ unaudited condensed consolidated financial ~~statements~~statement, we have received Paycheck Protection Program loans (“PPP Notes”), aswhich have ~~well~~been asforgiven in accordance with their terms, and employee retention credits and 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; existing and potential government assistance that may be provided; and the requirements of Provider Relief Fund receipts, including our ability to retain such funds as have been received.

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.

It is hoped that the current roll out of vaccinations and boosters will continue to significantly reduce the risk of death and the transmission of the virus so that we can continue the return to more normal 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~~ initially in our core, rural markets. We intend to focus on leveraging our existing physical locations and corporate and regional ~~infrastructure~~ 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~~these initiatives, which are subject to ~~raising~~many ~~additional capital~~factors, including licensure and the hiring of clinical and operational staff. ~~There~~The Company has advanced its plans to open its first facility at its Big South Fork Medical Center campus and is nowaiting ~~assurance~~on ~~that~~receipt of the ~~Company~~required ~~will~~licensure ~~proceed~~to ~~with~~confirm an ~~such~~opening ~~plans~~date.

3732

Three Months Ended ~~September~~March 3031, ~~2022~~2023 Compared to the Three Months Ended ~~September~~March 3031, ~~2021~~2022

The following table summarizes the results of our consolidated continuing operations for the three months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022:

	Three Months Ended September 30,
	Three Months Ended March 31,
	2022						2021
	2023						2022
				%						%
Net revenues(1)	$	2,825,937			100.0	%	$	1,010,245			100.0	%
Net revenues	$	4,915,896			100.0	%	$	1,144,520			100.0	%
Operating expenses:
Direct costs of revenues		1,~~823~~853,~~473~~046			6437.57	%		1,~~207~~374,~~749~~643			~~119~~120.61	%
General and administrative expenses		12,~~809~~216,~~835~~670			6445.01	%		21,~~019~~572,~~086~~336			~~199~~137.94	%
Depreciation and amortization		~~117~~94,~~441~~135			41.29	%		~~135~~116,~~065~~824			1310.42	%
Loss from continuing operations before other income (expense) and income taxes		(924,812	)		-32.7	%		(2,351,655	)		-232.8	%
Income (loss) from continuing operations before other income (expense) and income taxes		752,045			15.3	%		(1,919,283	)		-167.7	%
Other income (expense), net		129,451			4.6	%		(346,197	)		-34.3	%
Other income, net		42,746			0.9	%		268,806			23.5	%
Gain from extinguishment of debt		-			0.0	%		1,027,000			101.7	%
Net gain from legal settlements		563,032			11.5	%		5,282			0.5	%
Gain from legal settlements, net		60,808			2.2	%		3,157,203			312.5	%
Interest expense		(552,263	)		-11.2	%		(620,937	)		-54.3	%
Interest expense		(605,312	)		-21.4	%		(700,786	)		-69.4	%
Provision for income taxes		-			0.0	%		-			0.0	%
Net (loss) income from continuing operations	$	(1,339,865	)		-47.4	%	$	785,565			77.8	%
Net income (loss) from continuing operations	$	805,560			16.4	%	$	(2,266,132	)		-198.0	%

(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

Net revenues were $24.89 million for the three months ended ~~September~~March 3031, ~~2022~~2023, as compared to net revenues of $1.01 million for the three months ended ~~September~~March 3031, ~~2021~~2022, an increase of $13.8 million. We attribute the increase in net revenues ~~primarily due~~ to increased billings ~~and~~related ~~collections and~~primarily ~~increased~~to greater inpatient admissions ~~both~~and increased collections at our Big South Fork Medical Center. We began billing as a Critical Access Hospital in the three months ended June 30, 2022 retroactive to July 1, 2021. Partially offsetting Big South Fork Medical Center’s net revenues for the three months ended September 30, 2022 were $1.6 million of reserves related to a tentative retroactive adjustment calculation of the Medicare cost report for the six months ended December 31, 2021.

Direct Cost of Revenues

Direct costs of revenues increased by $0.65 million for the three months ended ~~September~~March 3031, ~~2022~~2023 compared to the three months ended ~~September 30~~March 31, ~~2021~~2022. We attribute the increase primarily to ~~increased~~higher professional fees ~~related~~and salaries and wages. Professional fees increased due to greater inpatient admissions and ato the restructuring of our relationships with certain professional ~~services~~service firms. Salaries and wages increased due to greater inpatient admissions, increased non-clinical staffing and reduced contract labor.

General and Administrative Expenses

General and administrative expenses ~~decreased~~increased by $0.26 million in the three months ended ~~September~~March 3031, ~~2022~~2023 compared to the three months ended ~~September~~ 30March 31, ~~2021~~2022. Our hospitals’ general and administrative expenses contributed approximately $0.34 million of the ~~decrease~~increase due ~~primarily~~ primarily to ~~reductions~~increased ofsalaries ~~general~~ and ~~administrative~~wages ~~expenses~~and atprofessional ~~Jellico Community Hospital~~ and ~~Jamestown~~purchased ~~Regional Medical Center~~services. ~~While~~ ~~these~~In ~~hospitals were closed~~addition, ~~certain~~we ~~fixed~~incurred ~~expenses~~$0.1 ~~remained~~million inof ~~the~~additional ~~2021~~corporate ~~period.~~related ~~Partially~~expenses ~~offsetting~~and ~~the decrease were approximately~~ $0.1 million of ~~additional~~startup ~~corporate~~expenses ~~related~~associated ~~expenses~~with our newly-formed behavioral health subsidiary.

Depreciation and Amortization

Depreciation and amortization expense remained relatively constant at approximately $0.1 million ~~for~~in ~~both~~ the three months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022.

~~Loss from Continuing Operations Before Other Income (Expense) and Income Taxes~~33

~~Our~~ Income (loss) from ~~continuing~~Continuing ~~operations~~Operations ~~before~~Before ~~other~~Other ~~income~~ Income (~~expense~~Expense) and ~~income~~Income taxes for the three months ended September 30, 2022 was $0.9 million compared to a loss of $2.4 million for the three months ended September 30, 2021. We attribute the reduction in the loss in the three months ended September 30, 2022 compared to the 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.Taxes

38Income from continuing operations before other income (expense) and income taxes for the three months ended March 31, 2023 was $0.8 million compared to a loss of $1.9 million for the three months ended March 31, 2022. We attribute the income in the three months ended March 31, 2023 compared to the loss in the three months ended March 31, 2022 to the $3.8 million increase in net revenues in the three months ended March 31, 2023 compared to the comparable 2022 period, partially offset by higher direct costs of net revenues and general and administrative expense in the three months ended March 31, 2023 versus the 2022 period.

Other Income ~~(Expense)~~, Net

Other income ~~(expense)~~, net of $~~0.1~~42,746 ~~million~~ for the three months ended ~~September~~March 3031, ~~2022~~2023 consisted ~~primarily~~ of ~~adjustments~~other ~~totaling~~miscellaneous ~~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 1 million of ~~adjustments~~penalties toand ~~HHS~~interest ~~Provider~~from ~~Relief~~non-payment ~~Funds~~of ~~liabilities~~payroll taxes. Other income ~~(expense)~~, net ~~of ($0.3) million~~ for the three months ended ~~September~~March 3031, ~~2021~~2022 ~~consisted primarily~~ of ~~the write off of equipment and inventory associated with Jellico Community Hospital, which we closed in March 2021~~$0.3 Wemillion ~~had~~consisted ~~previously~~primarily ~~expected~~of toa begain ~~able~~from ~~to use~~ the ~~equipment~~ ~~and~~forgiveness ~~inventory~~of ~~at our other facilities but we determined during the period that the equipment and inventory could not be used~~PPP Notes.

~~Gain~~Net Gain from ~~Extinguishment~~Legal ~~of Debt~~Settlements

WeThe ~~did~~net ~~not~~gain ~~incur~~from alegal ~~gain~~settlements ~~from~~was ~~extinguishment~~$0.6 ofmillion ~~debt~~and $5,282 for the three months ended ~~September~~March 3031, ~~2022.~~2023 Weand ~~recorded~~2022, ~~gain~~respectively. ~~from extinguishment~~The ofgain ~~debt~~in ~~of $1.0 million during~~ the ~~three~~2023 ~~months~~period ~~ended September 30, 2021, which~~ resulted primarily from the ~~forgiveness~~settlement of ~~PPP~~an ~~Notes~~obligation ~~during~~under ~~the period~~a note payable.

Gain from Legal Settlements, Net

We recorded a gain from legal settlements, net of $0.1 million and $3.2 million for the three months ended September 30, 2022 and 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 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 pursuant to the settlement of obligations owed under professional services agreements.

Interest Expense

Interest expense ~~for the three months ended September 30, 2022~~ was $0.6 million, ~~as compared to $0.7 million~~ for the three months ended ~~September~~ 30March 31, ~~2021~~2023 and 2022. Interest expense for the three months ended ~~September~~March 3031, ~~2022~~ 2023 and ~~2021~~2022 consisted primarily of interest on debentures and notes payable. In addition, we incurred interest expense of $~~15,000~~0.1 onmillion on loans from Christopher Diamantis, a former member of our Board of Directors, during the three months ended ~~September~~March 3031, ~~2022.~~2023 ~~The decrease in interest expense in the three months ended September 30, 2022 as compared to the 2021 period was due primarily to the exchange of debentures~~ and ~~notes payable in November 2021 for preferred stock~~2022.

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

~~Our~~Net ~~loss~~income from continuing operations for the three months ended ~~September~~March 3031, ~~2022~~2023 was $10.38 million, as compared to a net ~~income~~loss from continuing operations of $02.83 million for the three months ended ~~September~~March 3031, ~~2021~~2022. The net ~~loss~~income in the ~~2022~~2023 period as compared to the net ~~income~~loss in the ~~2021~~2022 period was primarily due to athe ~~gain of~~ $13.08 million ~~from~~increase ~~the~~in ~~forgiveness~~net ofrevenues ~~PPP~~and ~~Notes in~~ the ~~2021 period compared to a gain of~~ $0.36 million innet ~~the 2022 period and a~~ gain ~~from~~on legal settlements, ~~net of $0.1 million~~ in ~~the three months ended September 30, 2022 compared to a gain of $3.2 million~~ in the ~~2021~~2023 period., ~~Partially~~partially ~~offsetting~~offset ~~these~~by ~~factors~~increases ~~was a reduction~~ in ~~the~~direct ~~loss~~costs ~~from~~and ~~continuing~~general ~~operations before other income (expense)~~ and ~~income~~administrative ~~taxes~~expenses of $1.40 million in the ~~three~~2023 ~~months ended September 30, 2022 compared to the 2021~~ period~~, other income, net of $0.1~~ ~~million~~and ina ~~the~~gain ~~2022 period compared to other expense, net~~ of $0.3 million infrom the ~~2021~~forgiveness ~~period,~~of ~~and~~PPP aNotes ~~reduction~~ in ~~interest~~the ~~expense of $0.1 million in three months ended September 30,~~ 2022 ~~compared to the 2021~~ period.

Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021

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

	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

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 a Critical Access Hospital in the three months ended June 30, 2022 retroactive to July 1, 2021.

Direct Costs of Revenues

Direct costs of revenue increased by $0.7 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. We attribute the increase primarily to professional fees related to greater inpatient admissions and a restructuring of our relationships with certain professional service firms, partially offset by lower costs at Jellico due to the lease termination in March 2021.

General and Administrative Expenses

General and administrative expenses decreased by $1.7 million in the nine months ended September 30, 2022 compared to the same period a year ago. We attribute the decrease primarily to reductions of general and administrative expenses at Jellico Community Hospital and Jamestown Regional Medical Center. Both of these hospitals were closed during some or all of the nine month period ended September 30, 2021.

Depreciation and Amortization Expense

Depreciation and amortization expense was $0.4 million and $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 amortization for the building for the nine months ended September 30, 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, 2022 was $2.8 million compared to a loss of $10.2 million for the nine months ended September 30, 2021. We attribute the decrease in the operating loss primarily to the increase in net revenues and the reduction in general and administrative expenses.

Other Income, net

Other 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.

Gain from Extinguishment of Debt

Gain from extinguishment of debt consisted of $0.3 million and $1.0 million of gain from the forgiveness of PPP Notes in the nine months ended September 30, 2022 and 2021, respectively.

(Loss) Gain from Legal Settlements, net

(Loss) gain from legal settlements, net was ($15,410) and $3.2 million for the nine months ended September 30, 2022 and 2021, 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 pursuant to the settlement of obligations owed under professional services agreements.

Interest Expense

Interest expense for the nine months ended September 30, 2022 was $1.7 million, as compared to $2.5 million for the nine months ended September 30, 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 debentures and notes payable and $0.1 million for interest on loans from Mr. Diamantis. The decrease in interest expense in the nine months ended September 30, 2022 compared to the 2021 period was due to the exchange of debentures and notes payable in November 2021 for preferred stock.

Net Loss from Continuing Operations

Our net loss from continuing operations for the nine months ended September 30, 2022 was $4.1 million compared to a net loss from continuing operations of $4.4 million for the nine months ended September 30, 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 the decrease in the loss from continuing operations before other income (expense) and income taxes of $7.4 million and a reduction in interest expense of $0.8 million, partially offset by the income from HHS Provider Relief Funds of $4.4 million in the 2021 period versus a loss from HHS Provider Relief Funds of $0.3 million in the 2022 period, a loss from legal settlements, net of $15,410 in the 2022 period compared to a gain of $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 a $1.0 million gain in the 2021 period.

Liquidity and Capital Resources

Overview

For the ~~nine~~three months ended ~~September~~March ~~30, 2022 and the year ended December~~ 31, ~~2021~~2023, we financed our operations ~~from~~with ~~issuances~~the $1.1 million of ~~preferred~~cash ~~stock,~~that ~~notes~~we ~~payable~~generated from operations and $0.6 million of loans from Mr. Diamantis, a former member of our Board of Directors. ~~Also,~~During ~~during~~ the ~~nine~~three months ended ~~September~~March 3031, 2022 ~~and the year ended December 31~~, ~~2021,~~ we financed ~~received~~our ~~$0.3~~operations ~~million~~with ~~and~~ $~~0.9 million, respectively, from HHS Provider Relief Funds. During the nine months ended September 30, 2022, we received $~~1.50 million from the ~~issuance~~issuances of our Series P Convertible Redeemable Preferred Stock (“Series P Preferred Stock”)~~. During~~ ~~the~~and ~~year ended December 31, 2021, we received approximately~~ $10.28 million inof ~~cash~~loans from ~~the issuances of promissory notes and $9~~Mr.~~0 million~~ ~~from the issuances of our Series O Convertible Redeemable Preferred Stock (“Series O Preferred Stock”)~~Diamantis. During the ~~nine~~ three months ended ~~September~~March ~~30, 2022 and the year ended December~~ 31, ~~2021~~2023, ~~Mr. Diamantis’ loans to~~ the Company ~~increased by a net~~repaid of $0.96 million ~~and~~of ~~$0.9 million, respectively. The~~ loans from Mr. Diamantis inand ~~the~~$0.3 ~~nine~~million ~~months~~of ~~ended~~debentures. ~~September~~During ~~30, 2022 were used to repay a portion of~~ the ~~amounts~~three ~~due~~months ~~under~~ended aMarch ~~third-party promissory note~~31, ~~pursuant~~2023 toand a2022, ~~personal~~we ~~guaranty~~repaid $0.6 ofmillion ~~the~~and ~~promissory note by Mr~~$0.9 ~~Diamantis. The~~million ~~majority~~ of ~~the~~notes ~~loans~~payable, ~~from Mr~~respectively. ~~Diamantis in 2021 were used for working capital purposes.~~

~~On November 7, 2021, we entered into Exchange and~~Each 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~~these ~~million~~financing ~~principal~~transactions ~~value~~is of then outstanding warrant promissory notes payable and $4.5 million of then outstanding non-convertible debentures, plus accrued interest thereon of approximately $1.5 million, by exchanging the indebtedness and accrued interest for 8,544.870 shares of the Company’s Series P Preferred Stock with a stated value of $8,544,870. After the November 2021 Exchange Agreements, the investors continued to own approximately $8.2 million of the outstanding debentures, plus the associated accrued interest of approximately $4.7 million at September 30, 2022. In addition, pursuant to the November 2021 Exchange Agreements, the expiration dates of the certain warrants that were issued by the Company to the investors in March 2017, as more fully ~~described~~discussed in ~~Note~~Notes 6 and 10 to ~~the~~our accompanying unaudited condensed consolidated financial ~~statements,~~ ~~were extended from March 21, 2022 to March 21, 2024~~statements.

41Future 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/issuance of additional equity will result in additional dilution to our stockholders.

Each of these financing transactions is more fully discussed in Notes 2, 6, 10, and 15 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 B-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 13 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 Accounting Standards ~~Update~~Codification (“~~ASU~~ASC”) ~~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~~ 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 condensed consolidated financial statements, the Company had a working capital deficit and a stockholders’ deficit of $44.0 million and $29.9 million, respectively, at September 30, 2022.34

~~The~~At March 31, 2023, the Company had a ~~loss~~working ~~from~~capital ~~continuing~~deficit ~~operations~~and ofa ~~approximately~~stockholders’ deficit of $442.12 million and $428.43 million, respectively. ~~for~~While ~~the~~we ~~nine~~generated ~~months~~$0.8 ~~ended~~million ~~September~~of ~~30,~~income ~~2022 and~~in ~~2021,~~the ~~respectively,~~three ~~and~~months ~~cash~~ended ~~used~~March 31, in2023, ~~its~~we ~~operating~~incurred ~~activities~~losses ~~was~~of $1.2.3 million and $53.73 million ~~for~~in the ~~nine~~three months ended ~~September 30~~March 31, 2022 and ~~2021, respectively. As of~~ the ~~date~~year ofended ~~this~~December ~~report~~31, ~~our~~2022, ~~cash~~respectively. isThe ~~deficient~~losses ~~and payments for our operations~~ in ~~the~~prior ~~ordinary course~~periods ~~are not being made. The continued losses~~ and other related factors, including 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 Note 6 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. AsIn ~~more fully discussed in Note 13 to the accompanying consolidated financial statements, on June 25,~~ 2021, the Company sold ~~HTS~~subsidiaries ~~and AMSG~~ to InnovaQor Inc. and the Company received 14,950 shares of InnovaQor, Inc.’s Series B-1 Non-Voting Convertible Preferred Stock (the “InnovaQor Series B-I Preferred Stock”) valued at $9.1 million as consideration for the sale. InAs ~~addition, $2.2 million~~ of ~~net~~March ~~liabilities~~31, of2023, ~~HTS~~the ~~and~~Company ~~AMSG~~held ~~were~~14,850 ~~transferred~~shares toof InnovaQor.’s ~~The Company~~Series ~~has~~B-1 ~~reflected~~Preferred ~~the~~Stock ~~financial~~valued at ~~results~~$9.0 ~~relating~~million ~~to HTS and AMSG prior to the sale~~ as ~~part~~an ~~of discontinued operations~~investment.

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.

42As of March 31, 2023, we were party to legal proceedings, which are presented in Note 12 to the accompanying unaudited condensed consolidated financial statements.

AsThe offollowing ~~September~~table ~~30,~~presents ~~2022,~~our wecapital ~~were~~resources ~~party~~as toof ~~legal~~March ~~proceedings~~31, ~~which~~2023 ~~are~~and ~~presented~~December in31, ~~Note 12 to the accompanying unaudited condensed consolidated financial statements.~~2022:

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

	March 31,			December 31,
	2023			2022			Change

Cash	$	807,947		$	499,470		$	308,477
Working capital deficit		(42,239,448	)		(42,044,995	)		(194,453	)
Total debt		13,105,250			14,534,630			(1,429,380	)
Finance lease obligation		220,461			220,461			-
Stockholders’ deficit		(28,289,028	)		(29,094,588	)		805,560

	September 30,			December 31,
	2022			2021			Change
Cash	$	10,958		$	724,524		$	(713,566	)
Working capital deficit		(43,969,412	)		(41,641,960	)		(2,327,452	)
Total debt		14,368,745			15,017,059			(648,314	)
Finance lease obligations		220,461			220,461			-
Stockholders’ deficit		(29,914,446	)		(27,301,524	)		(2,612,922	)

The following table presents the major sources and uses of cash for the three months ended March 31, 2023 and 2022:

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

	Three Months Ended March 31,
	2023			2022			Change

Net cash provided by (used in) operations	$	1,141,231		$	(1,151,680	)	$	2,292,911
Net cash used in investing activities		(534,306	)		(127,313	)		(406,993	)
Net cash (used in) provided by financing activities		(855,174	)		657,749			(1,512,923	)

Net change in cash		(248,249	)		(621,244	)		372,995
Cash and cash equivalents, beginning of the year		499,470			724,524			(225,054	)
Cash and cash equivalents, end of the period	$	251,221		$	103,280		$	147,941

	Nine Months Ended September 30,
	2022			2021			Change
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		(713,566	)		306,138			(1,019,704	)
Cash and cash equivalents, beginning of the year		724,524			25,353			699,171
Cash and cash equivalents, end of the period	$	10,958		$	331,491		$	(320,533	)

43The components of cash provided by (used in) operations for the three months ended March 31, 2023 and 2022 are presented in the following table:

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

	Three Months Ended March 31,
	2023			2022			Change

Net income (loss) from continuing operations	$	805,560		$	(2,266,132	)	$	3,071,692
Non-cash adjustments to net income (loss) ⁽¹⁾		(468,897	)		(224,711	)		(244,186	)
Changes in operating assets and liabilities:
Accounts receivable		262,053			140,155			121,898
Inventory		(34,533	)		(10,764	)		(23,769	)
Accounts payable and accrued expenses		680,970			1,199,878			(518,908	)
Other		(103,922	)		12,217			(116,139	)
Net cash provided by (used in) operating activities of continued operations		1,141,231			(1,149,357	)		2,290,588
Net cash used by operating activities of discontinued operations		-			(2,323	)		2,323
Net cash provided by (used in) operations	$	1,141,231		$	(1,151,680	)	$	2,292,911

	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 income from continuing operations for the three months ended March 31, 2023 of ($0.5) million include primarily ($0.6) million of net gain from legal settlements, partially offset by $0.1 million of depreciation and amortization. Non-cash adjustments to net loss from continuing operations for the three months ended March 31, 2022 of ($0.2) million consisted of $0.3 million of other income from forgiveness of PPP Notes, partially offset by $0.1 million of depreciation and amortization.

(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, partially offset by $0.5 million of depreciation and amortization, $0.3 million of loss on disposal of equipment and $0.1 million of amortization of debt discount.

Cash of $0.5 million was used by investing activities during the nine months ended September 30, 2022 for the purchase of $34,794 of equipment and cash of $0.5 million was used to 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.

Common Stock and Common Stock Equivalents

The Company had ~~15.1~~29,934,322,257 ~~billion~~ and ~~4.2~~29,084,322,257 ~~million~~ shares of its common stock issued and outstanding at ~~September~~March 3031, ~~2022~~2023 and December 31, ~~2021~~2022, respectively. During the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023, the Company issued ~~8.4~~850,000,000 ~~billion~~ shares of its common stock upon conversions of ~~2,352~~36 shares of its Series N Convertible Redeemable Preferred Stock (the “Series N Preferred Stock”) and ~~it issued 6~~40.~~7 billion~~5 shares of its Series ~~common~~O ~~stock~~Convertible ~~upon~~Redeemable ~~conversions~~Preferred ofStock ~~638~~(the ~~shares of its~~ “Series O Preferred Stock”). During the ~~nine~~three months ended ~~September~~March 31, 302022, ~~2021,~~ the Company issued 12.9~~,545~~ ~~shares of its common stock upon the exchange /conversion of $1.2~~ million ~~of stated value of its Series M Convertible Redeemable Preferred Stock (the “Series M Preferred Stock”) and 468,186~~ shares of its common stock upon ~~the~~ conversions of ~~$18~~593.433 ~~million~~shares of ~~stated value of~~ its Series N Preferred Stock.

44The 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 8, 11 and 12 to the accompanying 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 March 15, 2022. As a result of these down round provisions, the potential common stock equivalents, including outstanding common stock, totaled 1.0 trillion at March 31, 2023 and May 9, 2023.

~~The~~On ~~terms~~August of13, ~~certain~~2020, ofMr. ~~the~~Diamantis ~~outstanding~~entered ~~warrants,~~into ~~convertible~~the ~~preferred~~Voting ~~stock~~Agreement and ~~convertible~~Irrevocable ~~debentures~~Proxy ~~issued by~~ (the ~~Company~~“Voting ~~provide~~Agreement”) ~~for reductions~~with in the ~~per~~Company, ~~share~~Mr. ~~exercise~~Seamus ~~prices~~Lagan ~~of the warrants~~ and ~~the~~Alcimede ~~per~~LLC ~~share conversion prices~~ (of ~~the~~which ~~debentures~~Mr. ~~and preferred stock~~Lagan, ~~(if~~the ~~applicable~~Company’s ~~and~~Chief ~~subject~~Executive toOfficer, ais ~~floor~~the insole ~~certain cases~~manager), inpursuant ~~the~~to ~~event~~which ~~that~~Mr. ~~the~~Diamantis ~~Company~~granted ~~issues~~an ~~common~~irrevocable ~~stock~~proxy orto ~~common stock equivalents~~Mr. ~~(as~~Lagan ~~that~~to ~~term~~vote ~~is defined in~~ the ~~agreements)~~Series atM anPreferred ~~effective~~Stock ~~exercise/conversion~~held ~~price~~by ~~that~~Mr. isDiamantis. ~~less~~Mr. ~~than~~Diamantis ~~the~~has ~~then~~retained ~~exercise/conversion price~~all ofother ~~the~~rights ~~outstanding~~under ~~warrants, preferred stock or debentures, as~~ the ~~case~~Series ~~may~~M bePreferred Stock. InRegardless ~~addition,~~of the ~~majority~~number of ~~these~~shares ~~equity-based securities~~of ~~contain~~Series ~~exercise/conversion~~M ~~prices~~Preferred ~~that~~Stock ~~vary~~outstanding ~~based~~and ~~upon~~so ~~the~~long ~~price~~as ofat ~~the~~least ~~Company’s~~one ~~common~~share ~~stock~~of onSeries ~~the~~M ~~date of exercise/conversion~~Preferred ~~(see~~Stock ~~Notes~~is 3outstanding, ~~6, 10 and 15 to~~ the ~~accompanying~~outstanding ~~unaudited~~shares ~~condensed~~of ~~consolidated~~Series ~~financial~~M ~~statements).~~Preferred ~~These~~Stock ~~provisions~~shall have ~~resulted in~~the ~~significant~~number ~~dilution~~ of ~~the~~votes, ~~Company’s~~in ~~common~~the ~~stock~~aggregate, ~~and~~equal ~~have given rise~~ to ~~reverse splits~~ 51% of ~~the~~all ~~Company’s~~votes ~~common~~entitled ~~stock, including~~to abe ~~1-for-1,000~~voted ~~reverse~~at ~~stock~~any ~~split~~meeting ~~effected~~of onstockholders ~~July~~or ~~16,~~action ~~2021~~by ~~and~~written aconsent. ~~1-for-10,000~~This ~~reverse~~means ~~stock~~that ~~split~~the ~~effected~~holders onof ~~March 15, 2022.~~Series AsM aPreferred ~~result~~Stock ofhave ~~these~~sufficient ~~down~~votes, ~~round~~by ~~provisions~~themselves, ~~the~~to ~~potential~~approve ~~common~~or ~~stock~~defeat ~~equivalents,~~any ~~including~~proposal ~~outstanding~~voted ~~common~~on ~~stock,~~by ~~totaled~~the ~~1.0~~Company’s ~~trillion~~stockholders, atunless ~~both~~there ~~September~~is ~~30,~~a ~~2022~~supermajority ~~and~~required ~~November~~under ~~10,~~applicable ~~2022~~law or by agreement.

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.36

Also, on November 5, 2021, the Company amended its Certificate of Incorporation, as amended, to provide that the number of authorized shares of its 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.

As a result of the Voting Agreement and the 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 stock outstanding.

OTHER MATTERS

Inflation and Supply Chain Issues

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 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 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.

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.

As of ~~September~~March 3031, ~~2022~~2023, 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.

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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~~March 3031, ~~2022~~2023, 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, ~~2021~~2022, 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. 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, ~~2021~~2022. As of ~~September~~March 3031, ~~2022~~2023, we concluded ~~that~~ that these material weaknesses continued to exist.

The Company expects improvements to be made on the integration of information issues during ~~2022 and~~ 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 has taken or is in the process of taking the following steps to remediate these material weaknesses: (i) increasing the staffing of its internal accounting department; and (ii) implementing enhanced documentation procedures to be followed by the internal accounting department.

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.

(b)

Changes in Internal Control over Financial Reporting

During the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023, 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, 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 12 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 ~~2021~~our 2022 Form 10-K, which could materially affect our business, financial condition, or future results. There have been no ~~material~~ material changes to the risk factors previously disclosed in our ~~2021~~2022 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

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

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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 14, 2022	By:	/s/ Seamus Lagan
Date: May 15, 2023	By:	/s/ Seamus Lagan
		Seamus Lagan
		Chief Executive Officer, President and Interim Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)

4940

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