SUMMARY OF SIGNFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 SUMMARY OF SIGNFICANT ACCOUNTING POLICIES

Established in 1969, Advanzeon Solutions, Inc., (formerly Comprehensive Care Corp.) (“Advanzeon”, “we”, “Parent”, or the “Company”), through its wholly-owned subsidiary Pharmacy Value Management Solutions, Inc., and its wholly-owned subsidiaries during 2015, and partly in 2016, provided managed care services by acting as the administrator for certain administrative service agreements in the behavioral health and substance abuse fields. We primarily offered these services to commercial, Medicare, Medicaid, Children’s Health Insurance Program (“CHIP”) health plans, as well as self-insured companies. Our managed care operations consisted solely of servicing administrative service agreements. Starting in July of 2015, we implemented our comprehensive sleep apnea program, called “SleepMaster Solutions” ™. SleepMaster Solutions (“SMS”) utilizes an administrative system for the convenient identification/testing and therapy of Obstructive Sleep Apnea (“OSA”). We partnered with a national health care provider by initiating a sleep apnea wellness program whereby we screened, tested and when needed, offered a treatment programs for treating this disorder. We also contracted with a union to treat its driver members. Beginning in 2017, our only business was our SMS sleep apnea program.

The Company has elected to not adopt the option available under United States generally accepted accounting principles (“GAAP”) to measure any eligible financial instruments or other items at fair market value at this time. Accordingly, the Company measures all of its assets and liabilities on the historical cost basis of accounting, except as otherwise required by GAAP.

Inter-company accounts and transactions have been eliminated in consolidation. Certain minor reclassifications of prior period amounts have been made to conform to the current year presentation.

Use of Estimates - The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts. Actual results could differ from these estimates. Estimates involved in the determination of an allowance for doubtful accounts receivable and accrued claims payable, including incurred but not reported, are considered by management as particularly susceptible to material change in the next year. Other significant estimates relate to stock-based compensation, valuation of goodwill, warrants and beneficial conversion features.

Accounts Receivable - Accounts and notes receivable are carried net of an allowance at their estimated collectible value. Since customer credit is generally extended on a short-term basis, accounts receivable does not bear interest and are uncollateralized. We manage credit risk and determine necessary allowances by evaluating customers’ credit worthiness before extending credit and periodically for collectability, based primarily on customers’ past credit history and current financial conditions and general economic conditions, results of prior collection efforts, the relative strength of our relationship therewith and, in the event of a dispute, its legal position and the estimated cost of proposed collection proceedings. Management has not established a policy for when to charge off uncollectible accounts receivable or to use external collection agencies and makes such decisions on a case-by-case basis. The maximum losses that the Company would incur if a customer failed to pay would be limited to the carrying value of the receivable after any related allowances provided.

Property and Equipment - Property and equipment (Note 4) is stated at cost less accumulated depreciation. Depreciation and amortization are computed using the straight-line method over the estimated useful lives ranging from 2 to 12 years. Leasehold improvements are amortized over the shorter of the lease term or the asset’s useful life.

Fair Value Measurements - The carrying amounts of cash, accounts receivable and accounts payable approximate their estimated fair value due to the short-term nature of these instruments. Since our other financial liabilities are not traded in an open market, we generally use a present value technique, which is a level 3 input, as defined in GAAP, to measure the estimated fair value of these financial instruments, except for valuing stock options and warrants (see below). The rate used for discounting expected cash flows is a risk-free rate adjusted for systematic and unsystematic risk.

Due to the inherent nature of related party transactions, we have not attempted to estimate the fair value of liabilities payable to related parties of the Company. As such, promissory notes payable with carrying values of $3,019,923, 3,024,923 and $3,057,253, respectively, at December 31, 2017, 2016 and 2015, are excluded from the following table. The carrying amounts and estimated fair values of other financial instruments (all are liabilities) at December 31, 2017, 2016 and 2015, are as follows:

December 31,	2017				2016				2015
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Promissory notes	$	6,318,779	$	—	$	5,228,779	$	—	$	4,232,779	$	—
Convertible debt		372,000		—		372,000		—		372,000		—
Senior promissory notes		1,771,016		—		1,771,016		—		1,771,016		—
	$	8,461,795	$	—	$	7,371,795	$	—	$	6,375,795	$	—

Revenue recognition - Revenue under our contractual agreements to provide pharmacy management services to subscribing members is earned regardless of services actually provided and, therefore, recognized monthly based on the number of qualified members. The information regarding qualified members is supplied by our clients subject to our periodic review of their member eligibility records and other reported information to verify its accuracy and determine the amount of revenue to be recognized.

Cost of Revenues - Costs of revenues consist of two major components: claims costs and healthcare operating expense. Claims costs are recognized in the period in which an eligible member actually receives services and includes an estimate for costs of behavioral health services that have been incurred but not yet reported.

Legal Defense Costs - We accrue an estimate of incurred legal defense costs to be incurred in connection with pending disputes and litigation matters as part of our estimated minimum probable losses (see Note 11).

Income Taxes - We are subject to the income tax jurisdictions of the U.S. and multiple state tax jurisdictions. However, our provisions for income taxes for 2015, 2016, and 2017 include only state income taxes (see Note 15).

Management has evaluated our tax positions taken or to be taken on income tax returns that remain subject to examination (i.e., tax years 2008 and thereafter federally), and has concluded that there have been no uncertain tax positions (as defined in GAAP) taken that require recognition or disclosure in the consolidated financial statements. In the event of any income tax-related interest or penalties are incurred, they would be included in general and administrative expense.

Stock Options and Warrants - We grant stock options and warrants (see Note 12) to our employees, non-employee directors, note holders and certain consultants and clients allowing them to purchase our common stock pursuant to approved terms. The estimated value of the warrants issued with debt instruments is recorded as a discount on notes payable and amortized as interest expense over the term of the notes using the effective interest method.

We use a Black-Scholes valuation model to estimate the fair value of options and warrants on the measurement date and for determining the allocation of the relative values of debt and warrants. In applying the model, we use level 3 inputs, as defined by GAAP, consisting of historical data and management judgment to estimate the expected terms of the instruments. Expected volatility is based on the historical volatility of our traded stock. We do not expect to pay dividends for the period of the expected life of the instruments, and therefore we assume no expected dividend. The assumed risk-free rates used are based on the U.S. Treasury yield curve with the same expected terms as those of the equity instruments at the time of grant.

The following table lists the assumptions utilized in applying the Black-Scholes valuation model for options and warrants.

	2017			2016			2015
Expected volatitily		160	%		160	%		160	%
Expected life (in years) of options		2			3			4
Expected life (in years) of warrants		1/2			2/3			2/3
Risk-free interest rate range, options		1.5	%		1.5	%		1.5	%
Risk-free interest rate range, warrants		1.5	%		1.5	%		1.5	%
Expected divident yield		0	%		0	%		0	%

PER SHARE DATA

For the periods presented, since losses would produce anti-dilution, no diluted loss per common share is presented. The following table sets forth the computation of basic loss per common share (amounts in thousands, except per share data):

	2017			2016			2015
Numerator:
Net loss attributable to common stockholders	$	(5,890,357	)	$	(4,536,099	)	$	(3,562,414	)
Denominator:
Weighted average common shares		63,063,685			63,063,685			63,063,685
Basic loss per share attributable to common stockholders	$	(0.09	)	$	(0.07	)	$	(0.06	)

Recent Accounting Standards Update - During the years ended December 31, 2017, 2016, and 2015, various new ASUs were issued by the Financial Accounting Standards Board (FASB). Management has determined based on their review that the following new ASUs issued prior to or during the fiscal year ended December 31, 2015 and 2014 will be applicable to the Company. As new ASUs are released, Management will assess if they are applicable and, if they are applicable, the effect will be included in the notes to the consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which requires an entity that either enters into a contract with customers to transfer goods or services or enters into a contract for the transfer of nonfinancial assets, except for insurance contracts and lease contracts, to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers” to defer the effective date of ASU 2014-09. Public entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities should apply the guidance to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance earlier as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period or as of an annual reporting period beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance. Management has determined that the adoption of this guidance will have an impact on the financial statements and notes thereto and is determining the impact it will have.

During 2016, the FASB issued ASU 2016-08, ASU 2016-10, and ASU 2016-12, “Revenue from Contracts with Customers,” which provides additional clarification to the original “Revenue from Contracts with Customers” ASU 2014-09. The following is a summary of each ASU.

ASU 2016-08 – Clarifies the implementation guidance of principal versus agent considerations.

ASU 2016-10 – Clarifies the identifying of a performance obligation and the licensing implementation guidance.

ASU 2016-12 – Clarifies the guidance on assessing collectability, presentation of sales tax, noncash consideration, and completed contracts and contract modifications at transition.

The effective date of the ASU is the same as ASU 2014-09, which was deferred in August 2015. For public business entities, certain not-for-profit entities, and certain employee benefit plans, the effective date is for reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The effective date for all other entities is for annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. Management has determined that the adoption of this guidance will have an impact on the financial statements and notes thereto and is determining the impact it will have.

In February 2016, the FASB issued ASU 2016-02, “Leases,” which significantly changes the accounting for a lessee. Under previous guidance, lessees did not have to record a lease it designated as operating on its balance sheet. Under the new guidance, a lessee must record a liability for lease payments (referred to as the lease liability) and an asset for the right to use the leased asset during the lease term (referred to as the right of use asset) for all leases, regardless of whether they are designated as finance or operating leases. If a lessee has a lease with a term of 12 months of less, it may make an accounting policy election (by leased asset class) not to recognize lease assets or lease liabilities. This election generally requires the lessee to recognize lease expense on a straight-line basis over the lease term. ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018 for public entities, not-for-profit entities that have issued (including conduit bond obligors) securities that are traded, listed, or quoted on an exchange or an over-the-counter market, and employee benefit plans that file financial statements with the United States Securities and Exchange Commission (SEC). All other entities must apply the ASU to annual periods beginning after December 15, 2019, and interim periods beginning after December 15, 2020. Any entity may early adopt the ASU. Management has determined that when this guidance is adopted the impact will be properly reflected in the financial statements and notes thereto.