13. Business Combinations

12 Months Ended

Dec. 31, 2015

Business Combinations [Abstract]

Business Combinations

Completion of Merger

On November 2, 2015, the Company completed its merger (the “Merger”) with CollabRx, Inc. (“CollabRx”). In connection with the Merger, (i) each share of common stock of Medytox was converted into the right to receive about 0.4096 shares of common stock of CollabRx, (ii) each share of Series B Preferred Stock of Medytox was converted into the right to receive one share of a newly-authorized Series B Convertible Preferred Stock of CollabRx, and (iii) each share of Series E Convertible Preferred Stock of Medytox was converted into the right to receive one share of a newly-authorized Series E Convertible Preferred Stock of CollabRx.

Holders of CollabRx equity prior to the closing of the Merger (including all outstanding CollabRx common stock and all restricted stock units, options and warrants exercisable for shares of CollabRx common stock) held 10% of CollabRx’s common stock following the closing of the Merger, and holders of Medytox equity prior to the closing of the Merger (including all outstanding Medytox common stock and all outstanding options exercisable for shares of Medytox common stock, but less certain options that were cancelled upon the closing pursuant to agreements between Medytox and such optionees) held 90% of CollabRx’s common stock following the closing of the Merger, in each case on a fully diluted basis, provided, however, outstanding shares of the newly designated Series B Convertible Preferred Stock and Series E Convertible Preferred Stock, certain outstanding convertible promissory notes exercisable for CollabRx common stock after the closing and certain option grants expected to be made at or immediately following the closing of the Merger are excluded from such ownership percentages.

Also in connection with the Merger: (i) each of James Karis, Jeffrey M. Kraus and Carl Muscari resigned from CollabRx’s Board of Directors; (ii) each of Seamus Lagan, Christopher Diamantis, Benjamin Frank, Michael L. Goldberg and Robert Lee was appointed to serve on CollabRx’s Board of Directors; and (iii) Thomas R. Mika was appointed Chairman of the Board, Seamus Lagan was appointed Chief Executive Officer and President, Jason Adams was appointed Chief Financial Officer, and Sebastian Sainsbury was appointed as Secretary.

In connection with the completion of the merger, CollabRx changed its name to Rennova Health, Inc. (“Rennova”). On November 3, 2015, the common stock of Rennova commenced trading on the Nasdaq Capital Market under the symbol RNVA. Immediately after the consummation of the Merger, Rennova had 13,750,010 shares of common stock, 5,000 shares of Series B Convertible Preferred Stock and 45,000 shares of Series E Convertible Preferred Stock issued and outstanding.

The transaction was accounted for as a reverse acquisition. As such, the prior period equity amounts have been retro-actively restated to reflect the equity instruments of the legal acquirer. The consideration given for CollabRx totals $12,289,297, consisting of the fair value of common stock and warrants exchanged in the merger transaction.

The following table summarizes the fair values of assets acquired and liabilities assumed at the acquisition date of CollabRx.

Cash	$	4,737,773
Accounts receivable		54,675
Other current assets		105,700
Property and equipment		92,636
Accounts payable and accrued expenses		(1,620,000	)
Deferred revenue		(123,000	)
Other liabilities		(520,070	)
Derivative liabilities		(1,578,976	)
Identifiable intangible assets		170,000
Total identifiable net assets		1,818,738
Goodwill		12,237,380
Total consideration	$	13,510,777

Epinex Diagnostics Laboratories, Inc.

On August 26, 2014, the Company, through its subsidiary, MDI, purchased all of the outstanding stock of Epinex from an unrelated party. The purchase price was an aggregate of $1,241,745, consisting of the items in the table below.

The following table summarizes the consideration given for Epinex and the fair values of the assets acquired and liabilities assumed at the acquisition date.

Consideration Given:
Cash at closing	$	100,000
Acquisition Notes		385,545
Series E Convertible Preferred Stock (100,000 shares)		800,000
Contingent consideration adjustment		(43,800	)
	$	1,241,745
Fair value of identifiable assets acquired and liabilities assumed:
Cash	$	36,677
Property and equipment, net		26,983
Deposits		285
Accounts payable		(227,855	)
Accrued expenses		(75,945	)
Identifiable intangible assets		900,000
Total identifiable net assets		660,145
Goodwill		581,600
Total consideration	$	1,241,745

Intangible assets consisting of certain medical licenses ($820,000) and Trade Names ($80,000) were valued based on their fair value. The licenses have indefinite lives and are non-amortizable. Trade Names are being amortized over their estimated useful life. (See Note 6 – Long-Lived Assets) 

GlobalOne Information Technologies, LLC

On May 23, 2014, the Company, through its subsidiary, Mime, purchased certain net assets, primarily consisting of software, of GlobalOne. The purchase price was an aggregate of $675,000, consisting of $500,000 in cash, 10,000 shares of Common Stock, and $150,000 in cash payable six months after the date of closing.

The following table summarizes the consideration given for the net assets of GlobalOne and the fair values of the assets acquired and liabilities assumed recognized at the acquisition date.

Consideration Given:
Cash at closing	$	500,000
Common stock (10,000 shares)		25,000
Contingent acquisition liability		150,000
Total Consideration	$	675,000
Fair value of identifiable assets acquired and liabilities assumed:
Accounts receivable	$	93,270
Property and equipment, net		7,005
Software		182,000
Accounts payable		(95,086	)
Identifiable intangible assets		213,000
Total identifiable net assets		400,189
Goodwill		274,811
Total consideration	$	675,000

Intangible assets consisting of Trade Names ($66,000), Customer Relationships ($128,000) and Non-Compete arrangements ($19,000) were valued at fair value and are being amortized over their estimated useful lives. (See Note 6 – Long-Lived Assets) 

ClinLab, Inc.

On March 18, 2014, the Company, through its subsidiary, MIT, purchased all of the outstanding stock of ClinLab from two unrelated parties. The purchase price was an aggregate of $2,304,107, consisting of the items shown in the table below.

The following table summarizes the consideration given for ClinLab and the fair values of the assets acquired and liabilities assumed recognized at the acquisition date.

Consideration Given:
Cash at closing	$	1,000,000
Series D Convertible Preferred Stock (200,000 shares)		1,250,000
Contingent acquisition liability		54,017
Total Consideration	$	2,304,017
Fair value of identifiable assets acquired and liabilities assumed:
Cash	$	31,671
Accounts receivable		54,017
Other current assets		241
Software		1,252,000
Deposits		700
Accounts payable		(4,942	)
Accrued expenses		(39,202	)
Identifiable intangible assets		152,000
Total identifiable net assets		1,446,485
Goodwill		857,532
Total consideration	$	2,304,017

Intangible assets consisting of Trade Names ($75,000) and Customer Relationships ($77,000) were valued at fair value and are being amortized over their estimated useful lives. (See Note 6 – Long-Lived Assets) 

Goodwill was attributable to the following subsidiaries as of December 31, 2015 and December 31, 2014:

	December 31, 2015		December 31, 2014
Medical Billing Choices, Inc.	$	–	$	1,202,112
PB Laboratories, LLC		–		107,124
Biohealth Medical Laboratory, Inc.		–		116,763
Clinlab, Inc.		–		857,532
Medical Mime, Inc.		–		274,811
Epinex Diagnostics Laboratories, Inc.		–		581,600
	$	–	$	3,139,942

At December 31, 2015, the Company determined that all of its goodwill and intangibles were impaired. As a result, it recorded an impairment charge of $20,143,320 for the year ended December 31, 2015.

Pro-Forma Financial Information

The following unaudited pro forma data summarizes the results of operations for the years ended December 31, 2015 and 2014 as if the acquisitions of CollabRx, Clinlab and Epinex had been completed January 1, 2014. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place on January 1, 2014.

	For the Year Ended December 31, 2015
		Rennova Health, Inc. Historical			CollabRx, Inc. (a)			Pro-Forma Adjustments			Combined
Net Revenues	$	18,393,038		$	425,000		$	–		$	18,818,038
Operating Expenses		63,858,012			4,881,000			–			68,739,012
Income (Loss) from operations		(45,464,974	)		(4,456,000	)		–			(49,920,974	)
Other income (expense)		474,215			(43,000	)		–			431,215
Income (Loss) before income taxes		(44,990,759	)		(4,499,000	)		–			(49,489,759	)
Provision for income taxes		(9,028,253	)		(269,000	)		–	(b)		(9,297,253	)
Net income (loss) attributable to Rennova Health		(35,962,506	)		(4,230,000	)		–			(40,192,506	)
Preferred stock dividends		1,627,188			–			(1,627,188	)(c)		–
Net income (loss) attributable to Rennova Health common shareholders	$	(37,589,694	)	$	(4,230,000	)	$	1,627,188		$	(40,192,506	)
Net income (loss) per common share:
Basic	$	(3.02	)							$	(2.96	)
Diluted	$	(3.02	)							$	(2.96	)
Weighted average number of common shares outstanding during the period:
Basic		12,465,486									13,556,303
Diluted		12,465,486									13,556,303

	For the Year Ended December 31, 2014
		Rennova Health, Inc. Historical			Epinex Diagnostics Laboratories, Inc.			Clinlab, Inc.		CollabRx, Inc.			Pro-Forma Adjustments			Combined
Net Revenues	$	57,927,820		$	44,299		$	98,446	$	498,000		$	–		$	58,568,565
Operating Expenses		42,272,826			329,258			94,414		5,936,000			–			48,632,498
Income (Loss) from operations		15,654,994			(284,959	)		4,032		(5,438,000	)		–			9,936,067
Other income (expense)		(273,362	)		12,753			1		(27,000	)		–			(287,608	)
Income (Loss) before income taxes		15,381,632			(272,206	)		4,033		(5,465,000	)		–			9,648,459
Provision for income taxes		7,561,300			–			–		(301,000	)		(2,532,555	)(b)		4,727,745
Net income (loss) attributable to Rennova Health		7,820,332			(272,206	)		4,033		(5,164,000	)		–			4,920,714
Preferred stock dividends		5,010,300			–			–		–			(5,010,300	)(c)		–
Net income (loss) attributable to Rennova Health common shareholders	$	2,810,032		$	(272,206	)	$	4,033	$	(5,164,000	)	$	5,010,300		$	4,920,714
Net income (loss) per common share:
Basic	$	0.23													$	0.36
Diluted	$	0.22													$	0.35
Weighted average number of common shares outstanding during the period:
Basic		12,247,978														13,553,382
Diluted		12,667,858														13,973,262

_______________

(a) Reflects 2015 and 2014 results of operations prior to the acquisition dates. Clinlab was acquired on March 18, 2014, Epinex was acquired on August 26, 2014 and CollabRx was acquired on November 2, 2015. For the year ended December 31, 2014, CollabRx is included using its fiscal year ended March 31, 2015 financial statements.

(b) Reflects changes in taxes, if any, resulting from including the aggregate net losses of acquired operations in the corporate tax return.

(c) Reflects elimination of preferred stock dividend accruals resulting from the reverse merger with CollabRx.