SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

SUMMARY OF SIGNFICANT 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 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 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 at 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 is computed using the straight-line method over the estimated useful lives ranging from 2 to 12 years.

Leasehold Improvements - Leasehold improvement (Note 5) is stated at cost less accumulated amortization. Depreciation and amortization 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.

The carrying amounts and estimated fair values of long-term debt at December 31, 2019 and 2018 are as follows:

	2019				2018
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Convertible promissory notes	$	7,564,173	$	—	$	5,299,923	$	—
Short term notes payable		4,788,016		—		4,788,016		—
Loans payable related party		342,670		—		737,023		—
	$	12,694,859	$	—	$	10,824,962	$	—

Revenue Recognition - In accordance with FASB ASC Topic 606, “Revenue from contracts with customers”, the Company recognizes revenue when obligations under the terms of a contract with the customer are satisfied. Generally, this occurs upon shipment of the CPAP to their customer or when the test is performed.

Concentrations - The Company sold products to two customer contracts in 2019 that individually exceeded 10% of the total sales. During the year ended December 31, 2019, total sales related to these customers were $245,741. Amounts receivable from these customers included in accounts receivable at December 31, 2019 were $1,995.

Cost of Revenues - Costs of revenues consist of supplies and operating expense. Supplies are recognized in the period in which a patient actually receives the supplies. 

Right of Use Assets and Lease Liabilities - During the quarter ended March 31, 2019, the Company implemented Accounting Standards Update (ASU) 2016-02, Leases. 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 at the right of use asset) for all leases, regardless of whether they are designated as finance or operating leases. This election requires the lessee to recognize lease expense on a straight-line basis over the lease term. The right of use assets and corresponding right of use liabilities have been recorded using the present value of the leases. See Notes 18 and 19 within the financial statement for additional disclosure on leases.

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 13).

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 2019 and 2018 include only state income taxes (see Note 16).

Management has evaluated our tax positions taken or to be taken on income tax returns that remain subject to examination (i.e., tax years 2017 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 14) to our 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.

	Year ended December 31,
	2019			2018
Expected volatility		160	%		160	%
Expected life (in years) of options		2			2
Expected life (in years) of warrants		1	/2		1	/2
Risk-free interest rate range, options		1.5	%		1.5	%
Risk-free interest rate range, warrants		1.5	%		1.5	%
Expected dividend yield		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:

	Year ended December 31,
	2019			2018
Numerator:
Net income (loss)	$	(3,255,814	)	$	4,829,653
Denominator:
Weighted average common shares		69,161,656			65,362,240
Basic income (loss) per share
attributable to common stockholders	$	(0.05	)	$	0.07

Recent Accounting Standards Update – During 2019 and 2018, the Financial Accounting Standards Board (FASB) issued new Accounting Standards Updates (ASUs) addressing the various accounting and reporting standards. Management has determined based on their review that the ASUs issued during 2019 and 2018 will have no material effect on the Company’s consolidated financial statements. As new ASUs are released, management will assess if they are applicable and if they are applicable, their effect will be included in the notes to the financial statements.