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Edited Transcript of RNVA earnings conference call or presentation 12-Apr-17 3:00pm GMT

Thomson Reuters StreetEvents

Q4 2016 Rennova Health Inc Earnings Call

PETALUMA Apr 12, 2017 (Thomson StreetEvents) -- Edited Transcript of Rennova Health Inc earnings conference call or presentation Wednesday, April 12, 2017 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Kim Golodetz

LHA - IR

* Seamus Logan

Rennova Health, Inc. - CEO and Interim CFO

* Marc Gelberg

Rennova Health, Inc. - Director of Finance

* Jack Seeley

Rennova Health, Inc. - CEO of Marketing and Sales, Diagnostics

* Al Lechner

Rennova Health, Inc. - EVP of Sales, Software Solutions

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Conference Call Participants

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* Spencer Lehman

- Private Investor

* Michael Peters

- Private Investor

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Presentation

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Operator [1]

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Welcome to the Rennova 2016 conference call. (Operator Instructions) As a reminder, this conference is being recorded Wednesday, April 12, 2017. I would now like to turn the conference over to Kim Golodetz. Please go ahead, ma'am.

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Kim Golodetz, LHA - IR [2]

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Thank you. This is Kim Golodetz with LHA. Thank you all for participating in today's call. Joining me from Rennova Health are Seamus Logan, Chief Executive Officer and Interim Chief Financial Officer; Marc Gelberg, Director of Financial Reporting; Jack Seeley, Head of Sales and Marketing for Rennova's Diagnostics sector; Al Lechner, Head of Sales and Marketing for its Software sector.

Before we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements regarding the operations and future results of Rennova Health. I encourage you to review the Company's filings with the Securities and Exchange Commission, including without limitation the Company's Forms 10-K, which identifies specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements.

Factors that may affect the Company's results include but are not limited to product demand, market acceptance, impact of competitive products and prices, decisions by third-party payers, product development, commercialization or technological difficulties, the success or failure of negotiations and trade, legal, social and economic risks.

All forward-looking statements speak only as of today's date, April 12, 2017, and except as required by law, the Company assumes no obligation to update these forward-looking statements whether as a result of any new information, future events, changed circumstances or otherwise.

With that said, I would like to turn the call over to Seamus Logan. Seamus?

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Seamus Logan, Rennova Health, Inc. - CEO and Interim CFO [3]

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Thank you, Kim. I would like to thank you all for joining us today. We appreciate the opportunity to update you on our business and plans for Rennova for 2017. It has been no secret from our filings and previous communications that 2016 was a very difficult year for our core diagnostics business, and the dramatic drop in revenue and cash flow from the toxicology diagnostics for substance abuse facilities had several adverse effects on our business throughout 2016. Mark will shortly give us a financial summary for 2016.

We believe we have made significant progress in the last quarter of 2016, first quarter of 2017 in stabilizing our core business and believe that the refocused sales efforts and success achieved, combined with consolidation and cost cutting, have created a new base from which we will again grow the sector of our business into a profitable and cash flow positive division by the end of the year. I will let Jack explain further in a few minutes.

Our vision is to build a synergistic platform of needed services for the healthcare industry. We believe we have made significant progress in achieving that vision, and while the numbers for 2016 create a picture of losses, they do not reflect the developments and advances that have been made to date in the different divisions that Rennova now operates.

I would like to explain that progress further.

Rennova Health, Inc. through its subsidiaries is a provider of an expanding group of healthcare services for healthcare providers, their patients and individuals. We have historically operated our business under one management team.

Starting in 2017, to improve efficiency and progress and to provide additional clarity to our shareholders and investors, we have started to separate our different business interests into four divisions with specific management to focus on and deliver value for all of us. These four divisions can best be described as follows: one, clinical diagnostics through our clinical laboratories; two, supportive software solutions to healthcare providers, including electronic health records, laboratory information systems, and medical billing services; three, decision support and interpretation of cancer and genomic diagnostics; and four, a hospital division created by the recent addition of a hospital in Tennessee. We believe that our strategy will produce a sustainable business and capture multiple revenue streams from medical providers.

Clinical diagnostics site. Our principal line of business over the past few years has been clinical lab, blood and urine testing services with a particular emphasis on the provision of toxicology testings to physicians, clinics, and rehabilitation facilities in the United States. Testing services to rehabilitation facilities represented approximately 75% of the Company's revenues for the year ended 2016 and approximately 95% of the Companies revenues for the years ended 2015 and 2014.

As we expand our customer base to include pain management and other healthcare providers, we believe we will achieve a more diverse and stable revenue. We believe that we are responding to the challenges faced by today's healthcare providers to adopt paper free and interoperable systems and to market demand for diagnostic solutions by expanding our suite of clinical lab services.

The drug and alcohol rehabilitation and pain management sectors provide an existing and sizable target market where the need for our services already exists and opportunity is being created by continued secular growth and need for compliance.

In 2016, we added genetic testing, specifically pharmacodynamic testing to our array of services. Kinetic testing represents the most rapidly expanding segment of the diagnostics market worldwide. Growing incidence of genetic disease presents new opportunities for genetic testing. Parent report issued by Global Industry Analysts, Inc., the global market for genetic testing, is forecast to reach $2.2 billion by 2017. Increasing knowledge about the potential benefits of genetic testing is one of the prime reasons for the growth of the market. Advancements in the genetic testing space, an aging population, and a corresponding rise in the number of chronic diseases, and increasing instants of cancer cases are other factors propelling growth in the genetic testing market.

Primary revenue-generating activity in this market revolves around DNA profiling and better understanding the predisposition or diseases and possible adverse reactions that may occur with drugs that are currently available and/or under clinical development. Rising importance of early infection detection and prevention, together with growing demand of DNA tests and pharmacogenetics or cancer genetic testing, are significant factors responsible for the anticipated growth.

To further capitalize on this opportunity, we operate Genomas, Inc., a biomedical company that develops [physio] type systems for DNA-guided management and prescription of drugs used to treat mental illness, pain, heart disease, and diabetes. For those of you who may not know, a physio type system consists of three components: an array of inherited stable DNA polymorphisms from various genes to establish a patient's combined genotype, bioclinical algorithms for predicting the patient's drug response, and a portal for doctors to select the best drug for the patient.

As disclosed in our financial statements, during 2016, the Company experienced a dramatic decline in the volume of toxicology samples from the substance abuse sector processed at its labs and experienced continued difficulty in receiving reimbursement for these diagnostics in the sector. As a result, to reduce costs, the Company has in the first quarter of 2017 moved all its processing of its clinical lab business to its flagship laboratory, EPIC, and cost reduction efforts are continuing in response to the operating losses incurred in 2016. We expect that success in the last quarter of 2016 and 2017 to date in attracting new customers will drive increased revenue in this division of our business in coming months. We continue to focus on securing new customers with diversified testing needs and have initiated a relationship and integration with a California-based clinical research organization and believe that diagnostic services to clinical research organizations creates a high growth opportunity for Rennova.

Our support of software solutions, as well as providing IT support and set-up for lab customers, we have developed and owned several proprietary software solutions in this division. We own a proprietary HIPAA-compliant software developed to eliminate the need for paper acquisitions by providing an easy to use and efficient web-based system that lets customers securely place lab orders, track samples, and view test reports in real time. Historically we have used the software solely for our own labs, but we are now seeking opportunities and believe this software offers an opportunity for revenue generation from other providers.

We own a Windows-based, Web-enabled lab information management system that acts as a HIPAA compliant data warehouse for lab results and includes reporting, data acquisition, legal printing, electronic signoff, and numerous interface capabilities to a multitude of reference labs and practice systems that scale from small physician-operated labs to large clinical reference labs.

We own an EHR software for substance abuse behavior and health providers, a dictation-based ambulatory EHR for physician practices and advanced transcription services. Solutions are web-based, 100% secure, and HIPAA compliant with remote access, on-site training, and intensive 24/seven technical support. We own a medical billing company that provides revenue segment management services to third-party customers currently focused on substance abuse facilities. This billing company also functions as our in-house billing company for clinical labs.

Decision-support interpretation of cancer and genomic diagnostics in our third division. We own a solution to provide evidence, interpretation, and therapy guidance to enhance genomic testing and to provide actionable decision support for standardized evidence-based cancer care and superior clinical outcomes and precision oncology. We also own and operate Genomas, a biomedical company, which, as I mentioned earlier, brings DNA guided medicine to clinical practice with products for personalized prescription of drugs used in the treatment of mental illness, diabetes and cardiovascular disease. Our products eliminate trial and error prescription with DNA guided medicine and enable physicians to treat with unprecedented precision, avoiding significant drug side effects, improving effectiveness, and enhancing patient compliance.

Core applications are drug treatments of mood and thought disorders and mental illness and a cardiometabolic risk in diabetes and cardiovascular disease. We are developing this section of our business into a focused division with a capable and specialized management team that can deliver an exciting platform to the marketplace. We expect that we will shortly provide an update on progress for this division on a separate call that we will facilitate soon.

For hospital, the Company believes that acquisition or development of a hospital division will create a stable and more predictable revenue for a needed service and believes that it can expand the sales of its current products and services to medical providers and doctors' groups surrounding the hospital.

As previously reported, we recently acquired Scott Community Hospital in Tennessee, which includes a 52,000 square feet hospital building, 6300 square feet professional building, on approximately 4.3 acres. This is a critical access rural hospital with 25 beds, a 24/seven emergency department, operating rooms, and a laboratory that provides a range of diagnostic services. We expect to have the hospital open in part before the end of the second quarter of 2017 and expect that the hospital will be fully operational by the end of the third quarter of 2017. We are currently on target to achieve these dates, but opening is subject to the receipt of the necessary licenses and regulatory approvals of which applications are ongoing.

This hospital had unaudited revenues -- annual revenues of approximately $12 million and a normalized EBITDA of approximately $1.3 million for fiscal year 2015, the last full year of the Company's -- of the hospital's operation. These revenues were attributable to the typical services of a rural acute-care hospital, including emergency room visits, outpatient procedures, diagnostic ancillary tests, physical therapy, and in-patient hospital stays. Based on this historical information, we believe the hospital offers an established patient base and will be a source of stable and predictable revenue for Rennova.

Financial condition. With 2016 behind us and significant financial support secured from one of our institutional investors in the first quarter of 2017, we look forward to delivering value and opportunity to our shareholders with our current strategy. We will continue to consider all options available to us to fund, sale, or spin off one or more of the divisions described, and subject to required consents and regulations, we will explore the best opportunities to maximize shareholder value.

Now I would like to turn the call over to Marc Gelberg to provide us a summary of the 2016 financial report, [vintage axially], head of sales and marketing for our diagnostics business to provide some commentary on these activities. And before I wrap up, you will hear from Al Lechner to provide a summary of our software division activities. I will then take your questions.

Marc?

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Marc Gelberg, Rennova Health, Inc. - Director of Finance [4]

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Thank you, Seamus. Looking at our full-year 2016 results, our net revenues for 2016 were approximately $5.2 million as compared with $18.4 million for 2015. The decrease in net revenues was primarily due to a $13.8 million decline in clinical laboratory revenue, resulting from an 81% decrease in insured test volumes. Revenues from our supportive software solutions segment were just over $800,000 in 2016, and that amount is essentially unchanged from 2015. Revenues from our decision support and informatics operations segment were approximately $700,000 in 2016, and it reflects a full year of operations of CollabRX with whom we merged in the fourth quarter of 2015.

Our loss from operations was $32.4 million compared with $45.5 million for 2015. The narrowing of our operating loss was mainly due to asset impairment charges recognized in 2015 in the amount of $20.1 million as compared with $1 million of asset impairment charges in 2016 and a $7.6 million reduction in direct cost of revenue in 2016, which were largely offset by the decline in clinical laboratory revenues. As previously mentioned, the Company has transitioned a significant portion of its testing from external reference laboratories to internal processing, which resulted in a 67% decrease in direct costs per sample.

We reported a net after-tax loss to common shareholders of $32.6 million or $30.17 per share for 2016 compared with $37.6 million or $90.46 per share for fiscal 2015. The fiscal 2016 loss to common shareholders includes interest expense of $6.3 million, non-cash gains on the change in fair value of derivative instruments in the amount of $5.4 million, and an income tax benefit in the amount of $0.7 million. The fiscal 2015 loss to common shareholders reflects interest expense of $2.7 million, an income tax benefit of $9 million, and dividends payable on the former Medytox Series B preferred stock in the amount of $1.6 million.

I would like to point out that our financial statements for both 2016 and 2015 have been retrospectively adjusted for the 1 for 30 reverse stock split that we affected in February of 2017. We had cash on hand of approximately $78,000 as of December 31, 2016.

During the first quarter of 2017, we issued new convertible debentures with an aggregate principal amount of $12.4 million, along with warrants to purchase approximately 29 million shares of our common stock for which we received net proceeds of $9.9 million.

Now I will turn the call over to Jack Seeley. Jack?

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Jack Seeley, Rennova Health, Inc. - CEO of Marketing and Sales, Diagnostics [5]

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Thanks, Marc, and thank you for giving me the opportunity to discuss our performance and to share our optimism for this year.

Despite several challenges including overall declines in testing volumes by our clients, reduced census rates in our core client base in Florida and declines in reimbursement for testing, we came out of this year with several reasons for a positive outlook. For the year, we had solid gains in our client base in the substance abuse sector and finished with a strong fourth quarter for new business development.

In addition, we stabilized our base away from a few very large clients to several small- to medium-size customers, which will minimize the effects of attrition and essentially eliminate the violent swings in volumes that plagued us last year.

2016 also presented us an opportunity to focus on our cost structure as a division. Although they were very difficult decisions to make, we move forward with several lab consolidations.

In addition, we reduced our staff considerably throughout the year. Exiting areas of the country that were now profitable for us to be in and consolidating roles for the effect on client retention would be minimal.

Finally, we eliminated unprofitable lines of business and clients. It is our anticipation that the result of these decisions will be an increased profit margin for the coming year.

As we look ahead, we will continue to leverage both our EHR and revenue cycle management products to increase our laboratory sales activity. In addition, we will continue our focus of diversifying our client base to further insulate us from the instability of the substance abuse sector. Furthermore, we will place additional focus on becoming a reference lab to smaller laboratories, a decision that has yielded several prospects for 2017. Finally, the coming opening of the hospital will afford us a unique opportunity to provide laboratory services as an in-network lab provider to the surrounding positions.

We continue to see steady progress in securing new payer contracts as we prove our commitment to strict compliance. We are looking forward to benefit from the recent increase in reimbursement by CMS and hope that commercial payers follow suit. We will continue our focus on strict compliance, fine education on medical necessity, and suppressing over testing, all of which will ensure that we will increase our reimbursements for the work we perform and lower our bad debt. We have already begun to see the growth from our 2016 decisions and finished the quarter close to our goals. We are confident that despite the evolution of and the scrutiny surrounding the substance abuse sector, our position as a beacon for compliance has distinguished us from our competition.

Our sample counts have rebounded this year back to where we were a year ago, and we will continue to focus on moderate continuous growth. With that, I will turn the call over to Al Lechner. Al?

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Al Lechner, Rennova Health, Inc. - EVP of Sales, Software Solutions [6]

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Thank you, Jack, and thank you all for joining and providing me this opportunity to speak to you today about our software and services achievements. We finished 2016 exceeding our new customer goal by 102%. Our initial launch achieved many milestones working with our IP development team, stabilizing our platform, adding security features that helped us stay ahead of competition. Some competitors felt an ambulatory EHR could fit the substance abuse vertical soon found out that one size does not fit all. Helping us grow our customer base representing now in 17 states with approximately 1200 users in the first nine months of 2016. This was an amazing effort expended by the entire team. We continue to grow our base and gain market share through high touch customer service and offering what others only strive to provide as we have set the bar through trust and honesty. A reliable, easy to use, customizable software solution backed by the number one health care IT team in the industry.

Currently, we are in the process of restructuring our sales teams with a keen eye on revenue cycle sales coupled with our flagship EHR. This requires not only clinical sales expertise but also billing acumen.

Happy to report that this focus and initiative has netted quality customers, customers that have a larger census and stable financials. We continue to build out our team with focus on salespeople that have acquired this experience to be successful revenue cycle management sales because of their previous billing sales acumen. Our focus on quality revenue cycle sale orders mean defining facilities that have a larger census and financial stability. This focus will help us attract better clients so that we can invest in our sales teams and stabilize collected revenue. We continue to monitor our business agreements and focus on quality customers by changing our onboarding process requirement. We embraced what worked, developing a smarter inside sales team with a focus on clinical electronic health record solutions and look forward to adding a dedicated, experienced revenue cycle management billing sales team, which will solidify our momentum around our billing services. We will strategically roll this out by regions.

Our development progress is also hinged around market requirements driven beyond our attained stable platform built last year, but now are feature focused to become the software thought leaders empowering the substance abuse care teams we interact with every day. Delivering these new software solution features are paramount in fighting this substance abuse epidemic. Development has several key initiatives on the roadmap that will produce and hold our competitive edge. Automatic charge capture between our electronic health record and our billing software solution, master treatment plans, enhancing our current individual treatment plans, and new alerts to stay ahead of what is due and what is important just to name a few.

To recap our software service business, our primary focus is on our flagship electronic health record solution for substance abuse, coupled with our billings service solution. This model will deliver the higher yield quality customer revenue stream within the substance abuse vertical.

With this summary, I will turn the call back over to Seamus. Seamus?

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Seamus Logan, Rennova Health, Inc. - CEO and Interim CFO [7]

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Thank you, everyone. As Jack has said, we are currently enjoying an increasing volume of customers on tests ordered, and we expect to achieve continued growth in our core diagnostic sector throughout the year. I have previously explained the four divisions we currently operate, and we look forward to the hospital opening in Tennessee.

In closing, we have and continue to implement numerous efficiencies and readjust our infrastructure costs relative to production in our operations and are now seeing financial benefit from these actions. We believe that a combination of these efficiencies and increased revenue will return our operations to be cash flow positive.

Our hospital project has a need for continued investment until it opens and becomes cash flow positive. This is expected before the year-end. We are confident that we have adequate financial support to maintain this timeline and look forward to the hospital contributing revenue and value to our Company before year end.

On a final note, I have been asked by many shareholders about the financing mechanism used to raise the cash needed to deliver on our ambitious business strategy. We believe that a private placement as opposed to another public offering offers several advantages to our Company. The main source of recent findings is from one institutional investor who has been supportive of our business plan over the last couple of years and who wants to see us deliver on and succeed with our business plan. I would suggest that the mechanism of a convertible debenture that can be converted by the investor over time is much more beneficial to our shareholders than an immediate dilution of ownership and gives us time to attain growth and expect an increase in the value of our business. We are excited about the growth and opportunity in the markets in which we operate and believe that the quality of and need for Rennova's products and services will secure increased market share for Rennova in the years to come. We firmly believe that 2017 will deliver results more in keeping with the expectations of our shareholders and investors. We remain thankful for the support of all our shareholders and investors.

I hope you share management's expectation that Rennova Health will put what has been a difficult year behind it and deliver value for all our shareholders in 2017 and beyond.

With that, we will open the call to your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) [Spencer Lehman], private investor.

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Spencer Lehman, - Private Investor [2]

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Yes. Your area of substance abuse, there seems to be a huge epidemic of opioids and heroin and such across the country, and even the current administration is very concerned with it. Do you see a lot of government funding flowing into this in this coming year?

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Seamus Logan, Rennova Health, Inc. - CEO and Interim CFO [3]

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Jack, do you want to answer that from the sales perspective, or would you like me to have a first rattle at it?

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Jack Seeley, Rennova Health, Inc. - CEO of Marketing and Sales, Diagnostics [4]

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I can start and you can jump in, that's not a problem, and thank you for the question.

There's been a lot of talk from the government side in regards to the epidemic and how they want to fight it. But there's really been nothing that we have seen to this point in so far as any type of strategy on how to tackle it, which we are all anticipating some type of ideas actually, and the current administration I know has really tackled this right out of the gate. But to this point, we haven't seen anything from them insofar as how they are going to support this and their ideas and how to partner with various facilities on how to tackle the epidemic.

Seamus, I don't know if you want to shed anymore light beyond that.

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Seamus Logan, Rennova Health, Inc. - CEO and Interim CFO [5]

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Yes, I would make an additional comment. Your observation is absolutely correct. There is an epidemic. It is a massive sector. It's a sector that we do see first of all a large opportunity for growth. We see a need for our services, but the other side of that, it's a fragmented sector with regards to a unified solution. In other words, there is no unified approach. You have a medical necessity, a need on one side. You have various treatment plans being applied, and you have payers seeing significant costs to maintain these treatment plans and diagnostics and payers trying to -- I'm not going to suggest trying to get out of paying claims, but I will suggest that they have become much more focused on trying to understand what is medically necessary and what is medically beneficial to the patient, and that has created over the last couple of years a lot of confusion. And we've been focused on the sector. We have a good product in the sector. We provide an excellent service in the sector, but the facilities themselves, our customers, have undergone a lot of scrutiny as has the medical necessity of a lot of tests that they use to treat their patients. So we see a lot of benefit in the future from what we are trying to achieve. We are working -- Jack mentioned earlier, we work with our customers to try and educate them, to try and come up with a program that -- or at least understand what their program is and what their medical necessity is, and we now have to provide that information to our payers to ensure that we get paid. So it's become a difficult sector with a lot of opportunity. I think that last sentence -- a difficult sector with a lot of opportunity is a fair description of what's going on.

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Spencer Lehman, - Private Investor [6]

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Okay. Thank you.

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Seamus Logan, Rennova Health, Inc. - CEO and Interim CFO [7]

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Does that answer your question, sir?

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Spencer Lehman, - Private Investor [8]

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Yes, thank you very much. One way or the other, the bottom line is you see it as a great opportunity, and I think I heard a few years ago where a lot of your competitors were not doing it as well as they should and somehow had to drop out or there was a lot of some funny business. You were one of the remaining good guys and should be getting a lot of that business. Does that scenario still exist?

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Jack Seeley, Rennova Health, Inc. - CEO of Marketing and Sales, Diagnostics [9]

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Absolutely.

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Seamus Logan, Rennova Health, Inc. - CEO and Interim CFO [10]

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That is true statement. We have -- unfortunately, we have got the bills to prove it. We've spent a lot of money on compliance and understanding the rules, regulations, compliance in the sector. And we have avoided many of the business practices by -- that were adopted by other parties that definitely provided them a short-term gain, but a very short-term business opportunity. We've said very clearly that we believe we are here for the long term five, 10 years plus. We are here for the long-term in this sector, and therefore, that focus is something that, as Jack has referred to earlier, we maintain, and we believe that at the end of the day, it is becoming recognized. I appreciate your comment that we are one of the good guys. We like to think that we are. We think that that is being recognized, and we think that it is one of the current advantages that we have in attracting new customers across the sector.

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Spencer Lehman, - Private Investor [11]

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And also, of course, we all hope that your contribution will help solve the problem in the long run. So thank you for that and the (multiple speakers)

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Seamus Logan, Rennova Health, Inc. - CEO and Interim CFO [12]

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That's really what it's all about. It's trying to provide a better treatment plan and a better outcome for the patient, and that's where the payers are going as well. We have a lot of communication with payers, even national payers at the minute. We are in business long enough, we have enough recognition. Not suggesting that we have all the contracts that we would like to have, but we are certainly talking to the national payers and understanding their needs to try and demonstrate better outcomes going forward for the patient.

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Spencer Lehman, - Private Investor [13]

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Okay. Thank you.

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Operator [14]

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(Operator Instructions) [Michael Peters], private investor.

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Michael Peters, - Private Investor [15]

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Good morning. Thank you for bringing some clarity for us as individual investors as we have been following the stock for some time myself personally. I have a question about whether or not we have or has Rennova thought about the genetic testing opportunities in the fertility treatment platform. If you -- obviously very familiar with the IVF and the genetic testing that's done. Maybe perhaps you guys are. But, in that space, I'm familiar with the market where the need for genetic testing from -- with respect to the embryos and the eggs and fertility aspect and it's an epidemic unfortunately from personal experience working with -- in the medical field. Has Rennova thought about finding different areas? I can see that you are finding different areas to find revenue streams which is great, but broadening the scope a little bit to tap into things that perhaps you didn't initially plan on venturing into. I think it might be also beneficial to do that since you have the platform, the software, and perhaps there is some sort of synergy there. Any thoughts?

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Seamus Logan, Rennova Health, Inc. - CEO and Interim CFO [16]

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Michael, your last sentence is a very accurate statement. We have the platform and we have the expertise -- the knowledge to service that sector. That is a sector that we have done some diligence on. We currently do not provide diagnostics in the sector. So don't let me -- let me be very clear about the statement I made. But one of the -- if you are familiar with the sector, one of the advantages that we see with the IVF sector for consideration, it's almost all direct pay. It's almost always paid directly by the individual as opposed to insurance companies deciding whether it should be paid or not. And I have alluded to this sector of our business undergoing a little upgrade and restructure, if you like. I have alluded to a call at some stage in the near future, updating everybody of developments in the sector. And we have built a fairly extensive product offering, and we -- the next stage is to secure those additional orders that we can service, and we believe we will get there. So just want to be clear that we are not currently servicing that sector, but that is one of the -- definitely an exciting sector that we are currently focused on looking at.

So does that answer your question, Michael?

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Michael Peters, - Private Investor [17]

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Yes, it does. And the reason I brought it up as obviously an investor in a company who envisions staying on long-term,. I don't -- I like to find some value in companies that I feel that may strategically -- your stock price is a little depressed right now, and hopefully that will change. But I brought it up because it is a revenue stream that is pretty much direct pay like you said. And the -- and you won't have to worry about insurance companies and all that nonsense that you have to deal with. And it's a huge -- unfortunately, you would like it to be easier for some people to be able to have -- to conceive, but it's a very profitable business that you can probably tap into giving your strategic position and not have to worry about getting paid for your services, which seems to have been a big problem in 2016.

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Seamus Logan, Rennova Health, Inc. - CEO and Interim CFO [18]

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Yes, no, Michael, you're absolutely right. And as you know from my comments, we have done a little diligence on the profile of the customer is very different from a customer in the substance abuse sector. It's usually a -- profile is usually more in keeping with an individual who has waited a little before deciding family or whatever, and they usually are willing to and will and can pay for the task.

So yes, it's a sector we are looking at. It's a sector that provides -- that there is opportunity in, and we look forward to seeing how we move forward over the next period of time.

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Michael Peters, - Private Investor [19]

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Well, thank you, I appreciate it, and we look forward to the upcoming quarters, and thank you again for your time and your response.

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Operator [20]

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And thank you. There no further questions at this time. Please proceed with your presentation or any closing remarks.

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Seamus Logan, Rennova Health, Inc. - CEO and Interim CFO [21]

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I would just like to finish by thanking everybody who has participated. I will say that we do try to keep our shareholders informed. I know sometimes people think that our -- we should have more frequent use announcements. I think that it's important to stress that we are bound by all the SEC and NASDAQ regulations, and we tried to keep to SEC filings and (inaudible) events as opposed to an ongoing stream of news that may not have a lot of meaning behind it. So I appreciate everybody's patience.

With that, we do try to keep people informed on our website, and we will provide any additional presentations that we make or participate and including any information on future conference calls. We will make our information all available on our website. So, again, just thank you all for participating, and thank you all for your support.

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Operator [22]

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Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation and ask that you please disconnect your lines.