Advanzeon Solutions, Inc. - Quarter Report: 2018 September (Form 10-Q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

OR

For the Transition period from ________ to ______.

Commission File Number: 1-9927

ADVANZEON SOLUTIONS, INC.

(Exact name of Registrant as specified in its charter)

813-517-8484

(Registrant’s telephone number including area code)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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 (Check one).

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 April 12, 2019, the Registrant had outstanding 67,361,656 shares of its $0.01 par value Common Stock.

ADVANZEON SOLUTIONS, INC.

TABLE OF CONTENTS

ADVANZEON SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS

September 30, 2018 (unaudited) and December 31, 2017

ASSETS

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

ADVANZEON SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS

September 30, 2018 (unaudited) and December 31, 2017

LIABILITIES AND STOCKHOLDERS’ DEFICIENCY

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

ADVANZEON SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Nine Month Periods Ended September 30, 2018 and 2017 (unaudited)

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

ADVANZEON SOLUTIONS, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY

September 30, 2018 (unaudited) and December 31, 2017

* See Note 14 for additional information regarding par value adjustment

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

ADVANZEON SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Month Periods Ended September 30, 2018 and 2017 (unaudited)

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

ADVANZEON SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements include the accounts of Advanzeon Solutions, Inc and its wholly owned subsidiary, and its respective subsidiaries (collectively referred to herein as, the “Company,” “Advanzeon,” “we”, “us,” or “our”).

In the opinion of management, the accompanying unaudited financial statements contain all adjustments necessary to present fairly the Company’s financial position as of September 30, 2018, the changes therein for the three and nine month periods then ended and the results of operations for the three and nine month periods ended September 30, 2018 and 2017.

The financial statements included in the Form 10-Q are presented in accordance with the requirements of the Form and do not include all of the disclosures required by accounting principles general accepted in the United States of America. For additional information, reference is made to the Company’s annual report on Form 10-K for the year ended December 31, 2017. The results of operations for the nine-month periods ended September 30, 2018 and 2017 are not necessarily indicative of operating results for the full year.

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 minor reclassifications of prior period amounts have been made to conform to the current period 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 is considered by management as particularly susceptible to material change in the next year. Other significant estimates relate to stock-based compensation, warrants and beneficial conversion features.

ADVANZEON SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounts Receivable - Accounts receivable is carried at its 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.

Revenue Recognition - Revenue is recognized when billed, which is approximately when the testing service is performed or CPAP machine is shipped.

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 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 September 30, 2018 and December 31, 2017 are as follows:

ADVANZEON SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the nine months ended September 30, 2018, there have been 20 additional convertible-promissory notes totaling $1,066,923 and $801,933 was reclassified from accounts payable to loans payable related party. One previous $50,000 convertible-promissory note was converted into stock.

Cost of Revenues - Cost of revenues consist of sleep testing expenses, supplies, service fees, and product shipping.

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 2017 and 2018 include only state income taxes.

Management has evaluated our tax positions taken or to be taken on income tax returns that remain subject to examination (i.e., tax years 2013 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 to our non-employee directors, note holders and certain consultants 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.

Other current assets consists of the following at September 30, 2018 and December 31, 2017:

In 2018, $24,616 of prepaid expenses was reclassified to miscellaneous receivable. The remaining $309,893 in miscellaneous receivable is legal settlement income.

ADVANZEON SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property and equipment, net, consists of the following at September 30, 2018 and December 31, 2017:

Depreciation expense for the nine month periods ended September 30, 2018 and 2017 is $449 and $0, respectively.

The Company has received financing from Management of the Company as well as from members of our Board of Directors. These individuals are deemed to be related parties to the Company and their indebtedness must be disclosed separately.

As of September 30, 2018 and December 31, 2017, there are the following related party notes payable:

During the first quarter of 2018, $910,010 was reclassified from accounts payable to loans payable related party. During the nine month period ended September 30, 2018 the Company wrote off the due to shareholder balance and accrued interest totaling $7,771,140 as disclosed in Note 10.

As of September 30, 2018, and December 31, 2017, the balance was as follows:

During the nine months ended September 30, 2018, there have been 20 additional convertible-promissory notes totaling $1,066,923. One previous $50,000 convertible-promissory note was converted into stock.

ADVANZEON SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Break-out of debt between the parent company and our subsidiary PVMS is as follows:

At PVMS, the total of notes issued year-to-date and their dollar values were as follows:

All notes are short-term in nature, one-year maturity date. All debt issued has a stated interest rate of 12% per year.

At PVMS, the total of notes converted to stock for the nine months ended September 30, 2018 and their dollar values were as follows:

Contingent Liability consisted of 3 items:

ADVANZEON SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2018 and December 31, 2017, the balance of this indebtedness is as follows:

In 2018, we have reclassified the Legal Settlement Payable of $39,995 to Accounts Payable.

As of September 30, 2018, the balance of accrued interest on this indebtedness is as follows:

During the second quarter of 2018, a total of $4,771,140 was written off to extinguishment of loan due to shareholder. The remaining balance of $246,568 was reclassified as accrued interest payable (non-related party).

As of September 30, 2018 and December 31, 2017, the balance of other accrued liabilities is as follows:

In 2018, other accrued liabilities of $1,053,270 has been reclassified to its proper categories; $696,989 has been reclassified to accrued interest-non-related party, $196,260 to loan payable related party, $150,000 to accrued board of directors fees, $10,021 was a reversal of the December 31, 2017 year-end accrual of wages, subcontractor fees, and commissions.

ADVANZEON SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

An expired promissory note and the accrued interest were written off to extinguishment of loan due to shareholder due in accordance with Florida Law 95.11 (2)(b) on the expiration of debt. The principal amount of $3,000,000 and accrued interest of $4,771,140 was written off.

We lease certain office space under an operating lease that expires on September 30, 2019. The Tampa office lease contains an annual escalation clause and a provision for payment of real estate taxes, insurance, and maintenance and repair expenses. Total rental expense for the lease for the nine month periods ended September 30, 2018 and 2017 is $74,367 and $78,652, respectively.

During the nine month period ended September 30, 2018, the Company issued 2,000,000 shares of common stock for a legal settlement. The shares were issued at a value of $0.12 per share or for a total value of $240,000. In addition, the Company issued 1,597,971 shares for the conversion of a promissory note of $50,000 and accrued interest of $1,231. The stock was issued at a value of $0.03 per share. We relied on Section 4(a)(1) of the Securities Act of 1933, as amended, as the exception from registration under the Act.

During the nine month period ended September 30, 2017, no stock was sold or issued.

Except as disclosed in Item 1, all of the legal proceedings for the nine months ended September 30, 2018, is disclosed in our annual report on Form10-K filed on January 29, 2019.

On May 15, 2018, the Company was awarded $269,750 during the final settlement of litigation in connection with overpaid fees owed to the Company. In addition the Company was awarded $70,000 related to use of a trademark in a mediation settlement. As referred to in Note 3, $309,893 of these awarded settlements are still outstanding as of September 30, 2018.

On September 28, 2018 the Company filed a Certificate of Correction, which can be found as Exhibit 3 within the Form 10-K report filed. Within this exhibit the Company decreased the par value of the Preferred Stock from $50 per share to $.001 per share.

ADVANZEON SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In accordance with ASC Topic 855, “Subsequent Events”, the Company evaluated subsequent events through April 24, 2019, the date these financial statements were available to be issued. During their evaluation, the following subsequent event was identified.

The Company entered into various convertible debt agreements totaling $635,000.

On March 21, 2019, the Company issued 200,000 shares of its common stock to its Securities Exchange Commission counsel, who elected to take common stock in the Company as partial payment of his legal fees.

Additionally on March 29, 2019, the Company issued 500,000 shares of its common stock to an existing shareholder and warrant holder, who elected to exercise his warrants to purchase 500,000 shares of the Company’s common stock for $15,000. The warrants were issued during May of 2017.

ADVANZEON SOLUTIONS, INC.  

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

The following information should be read in conjunction with the financial statements and notes thereto and in conjunction with Managements’ Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

This report includes forward-looking statements, the realization of which may be affected by certain important factors.

Overview

The Company through its wholly-owned subsidiary Pharmacy Value Management Solutions, Inc. administers and operates a medically-driven sleep apnea program branded SleepMaster Solutions™ (“SMS”). Management believes that SMS is the largest provider of these combined services in the nation. We are in all 50 states and provide a turnkey solution designed to effectively keep drivers on the road with no down time, compliant with DOT regulations, improve their health, and significantly decrease legal liability risk for the employer. We are vertically integrated, and we provide a “Program” of services that addresses all the needs of a corporate transportation system, union or other driver-related organizations. We believe we are the only company capable of providing the full range of needed services in a timely manner.

Our services start with the identification of the target population and the potential risk the client currently has. We can do this through our SMS Program, which includes the ability to screen every driver to identify if signs and symptoms of sleep apnea are present. We can then take this data and provide the employer with a list of those drivers that should be tested and the statistical likelihood of the percentage of those drivers who will test positive for obstructive sleep apnea (OSA). Together with the employer/union, SMS provides a realistic time frame, actual total cost, and process for testing all drivers who need to be tested. For those drivers testing positive for OSA, we then provide the appropriate treatment such that the driver will meet the DOT requirements and remain on the road. We monitor 365 days per year driver’s usage of the treatment device according to DOT standards and we report that usage to all stakeholders as required/permitted. We utilize mathematical algorithms to determine if the driver is predicatively meeting the annual DOT requirements for usage. Using those predictive algorithms, we reach out to those drivers and provide case management, encouragement designed to solve problems such that the driver increases usage, if necessary, and remains compliant.

SMS constructed its model based upon the foregoing principles. The SMS Program includes all processes attended in sleep apnea screening, testing, treatment, monitoring and overall management of commercial drivers’ as well as their employers’ needs. We have successfully established relationships with national health care clinic providers, all with certified medical examiner (“CME”) status. These clinics total almost 1,000 throughout the U.S. We also have both formal and informal relationships with employers; municipalities; a significant veteran’s group; union and non-union driving organizations; suppliers of home sleep testing equipment and a variety of OSA treatment devices; and, a national network of telemedicine sleep specialists covering all 50 states. We have an internal medical team for governance and protocol purposes and a customer service department that interfaces directly with our drivers. We also have a marketing team that regularly interfaces with our existing accounts and markets our services to potential new accounts. Our services are performed utilizing a best medical practices model and an efficient, cost-effective delivery system. We obtain the required equipment on a per order basis from a durable medical equipment distributor.

ADVANZEON SOLUTIONS, INC.

Revenue is recognized when billed, which is approximately when the testing service is performed or CPAP machine is shipped.

In the past, the commercial transportation industry, and industry in general, did not fully appreciate OSA as a health/liability issue. Today, more and more companies have begun to identify OSA as a major health and liability concern. Part of this realization has been occasioned by the number of successful lawsuits initiated on account of drivers accused of having accidents caused, in part, by their having OSA (sleep apnea). Several years ago, the Company identified this health problem and an industry trend toward more attention being devoted to issues involving OSA. We took steps to address what we saw as a national healthcare epidemic, and in the process, we constructed a nationwide virtual system for the screening, testing and treatment of OSA. We believe we are the only nationwide, medically-driven company that actively engages and promotes to industry a national screening, testing and treatment program targeting OSA.

The United States government has provided impetus to certain employers and unions to start paying more attention to OSA by passing legislation requiring that commercial interstate drivers (including truckers, airline pilots and railway conductors) be examined for a respiratory dysfunction (sleep apnea) as a condition of their maintaining their commercial license. That, notwithstanding, however, the challenge we faced, and continue to face, is getting employers, associations, municipalities and unions (collectively, “employers”) to fully realize the health and economic value to them for actively promoting an internal OSA program to their employees and/or members (collectively, “employees”) which consists of providing our services to their employees on an employer-paid basis – no cost to the employee. Therefore, once we have made our initial contact with an employer who is willing to pay for all or a part of our SMS services, our job is to then assist them in implementing a comprehensive OSA program and, either directly or indirectly, promoting same to their employees. We have found that while many companies wholeheartedly embrace the need to address OSA from a management perspective, others, while recognizing the problem, are not yet ready to actually promote such a program, internally, from a cost perspective. They are oftentimes not willing to enter into a formal contract for our services, preferring an informal relationship whereby they agree that while they will pay for the services we rendered to their employees, they will not engage in the active promotion of the program. The result is that unless we convince the employers to make their employees aware of such coverage, the employees often remain unaware of the fact that their employer is providing them with such a benefit. It is, therefore, our responsibility, and our cost, to work with each such employer, generally through their human resources staff to provide the design and necessary materials needed to implement and monitor an effective OSA benefit program. This requires an active marketing effort on our part both before the relationship is solidified, and consistently thereafter. As a result of our limited financial resources, while we have now successfully established a significant number of these relationships, there still remains the task of continuing our marketing efforts to fully realize the economic benefit of those relationships. We are confident that our continued efforts will ultimately provide a meaningful revenue stream in tandem with the growth of our patient population.

ADVANZEON SOLUTIONS, INC.  

During the three months ended September 30, 2018, the Company continued its marketing/sales efforts with respect to the agreements and relationships it established in the prior quarter and pursued establishing relationships with additional municipalities and employers of commercial drivers. We also pursued our relationship with one of the nation’s largest healthcare providers in terms of having our program made available to their patients, on a preferred vendor basis, through their clinics, nationwide (they report having approximately 700 clinics nationwide). The Company also successfully entered into relationships with (i) one additional municipality; (ii) a County school district within another municipality; and (iii) four corporations, all authorizing us to bill them directly for providing sleep apnea services to their employees who came to us either on a clinic referral basis or directly. Additionally, we continued our marketing efforts with our Teamsters account. We also focused attention on establishing a more robust revenue stream from existing patient accounts utilizing the Company’s CPAP treatment program in terms of (i) regularly supplying those patients with certain replacement supplies for their CPAP machines; and (ii) monitoring our commercial driver patients’ DOT compliance requirements in terms of their CPAP utilization. Our CPAP utilization monitoring program generates revenue based upon automatic monthly credit card payments by each patient being monitored.

While our marketing/sales efforts during this quarter were restricted, as anticipated, by financial constraints, we were still able to move the relationships established in Q2 forward, enter into additional similar type relationships and enhance our equipment supply and monitoring programs such that, on a going-forward basis, management believes that they will ultimately provide a meaningful revenue stream in tandem with the growth of our patient population.

Sources of Revenue

Three month periods ended September 30, 2018 and 2017

A quantitative summary of our revenues by source category for the three month periods ended September 30, 2018 and 2017:

ADVANZEON SOLUTIONS, INC.  

Results of Operations

OSA services decreased to $99,083 in 2018 from $125,007 in 2017 due to approximately $35,000 in discounts given for services.

Cost of revenues decrease to $46,028 in 2018 from $68,739 in 2017. The difference in amounts is a result of the timing of services performed to generate revenues during the periods.

General and administrative expense

General and administrative expense in total for the three month periods ended September 30, 2018 and 2017 was as follows:

We evaluate expenses at the Parent company level as well as at our PVMS subsidiary. Expenses at the Parent company level include overhead and the cost of being a public entity. Expenses at PVMS are solely related to the OSA services segment. A breakdown of these expenses for the three month periods ended September 30, 2018 and 2017 is as follows:

Parent Company Level

Explanations of variations by line item follow:

Travel expense increased over the comparable period as a result of timing of travel taken during the periods.

ADVANZEON SOLUTIONS, INC.  

Professional Fees decreased by $64,228. In January 2018, we hired an outside accountant for PVMS, whom we pay $7,000 per month. The decrease is a result of $42,600 paid during the three-month period ended September 30, 2017 that was no longer used in the three-month period ending September 30, 2018.

Board of Director’s fees accrue at the rate of $37,500 for each fiscal quarter.

PVMS Subsidiary Level

Explanations of variations by line item follow:

Payroll related expenses increased $11,516. As the Company began to expand operations it hired two additional personnel and began paying commission.

Travel expense was $58,355 higher due to the fact that our CEO traveled extensively on business development and the sales force is constantly traveling to visit existing and potential clinics. The sales force and supporting staff or personnel were not fully intact during 2017.

Professional Fees increased $10,026. In 2018, we hired an outside accountant for PVMS, whom we pay $7,000 per month. There was also a consultant hired and paid $6,000 to improve social media activities.

Other Income (Expense) decreased by $121,864. This was mainly due to 2017 miscellaneous expenses being improperly coded at year-end. Most of these expenses relate to Travel and related expense.

ADVANZEON SOLUTIONS, INC.

Interest expense

Interest expense in total for the three month periods ended September 30, 2018 and 2017 was as follows:

A breakdown of the interest expense for the three month periods ended September 30, 2018 and 2017 is as follows:

Sources of Revenue

Nine month periods ended September 30, 2018 and 2017

A quantitative summary of our revenues by source category for the nine month periods ended September 30, 2018 and 2017:

Results of Operations

OSA services decreased to $449,650 in 2018 from $460,699 in 2017 due to approximately $35,000 in discounts given for services during the quarter, but with the discounts excluded the sales went up by approximately $6,000 due to the continued growth in the number of contracts that the Company had due to an enhanced marketing effort.

Cost of revenues increased to $280,372 in 2018 from $191,770 in 2017. The difference in amounts is a result of the timing of services performed to generate revenue during the periods.

ADVANZEON SOLUTIONS, INC.

General and administrative expense

General and administrative expense in total for the nine month periods ended September 30, 2018 and 2017 was as follows:

We evaluate expenses at the Parent company level as well as at our PVMS subsidiary. Expenses at the Parent company level include overhead and the cost of being a public entity. Expenses at PVMS are solely related to the OSA services segment. A breakdown of these expenses for the nine month periods ended September 30, 2018 and 2017 is as follows:

Parent Company Level

Explanations of variations by line item follow:

Travel expense increased over the comparable period as a result of timing of travel taken during the periods.

ADVANZEON SOLUTIONS, INC.

Professional Fees decreased $165,421. The decrease is a result of $130,000 paid during the nine-month period ended September 30, 2017 that was no longer used in the nine-month period ending September 30, 2018

Director’s fees accrue at the rate of $37,500 for each fiscal quarter.

PVMS Subsidiary Level

Explanations of variations by line item follow:

Payroll related expenses increased $60,788. As the Company began to expand operations it hired two additional personnel and began paying commission.

Travel expense was $89,611 higher due to the fact that our CEO traveled extensively on business development and the sales force is constantly traveling to visit existing and potential clinics. The sales force and supporting staff or personnel were not fully intact during 2017.

Professional Fees increased $53,482. In January 2018 we hired an outside accountant for PVMS, whom we pay $7,000 per month. For the period January through March 2018 the fee was prorated to $11,000. There were also 2 consultants hired and paid $21,000 to improve social media and miscellaneous.

Dues and Subscriptions comprised, in part, an annual payment to a national organization of $25,000.

Other Income (Expense) decreased by $310,380. This was mainly due to 2017 miscellaneous expenses being properly coded at year-end. Most of these expenses relate to travel and related expense.

ADVANZEON SOLUTIONS, INC.

Interest expense

Interest expense in total for the nine month periods ended September 30, 2018 and 2017 was as follows:

A breakdown of the interest expense for the nine month periods ended September 30, 2018 and 2017 is as follows:

ADVANZEON SOLUTIONS, INC.

Financial Condition

Liquidity and Capital Resources

During the nine month periods ended September 30, 2018, we funded our operations from revenues and $1,079,223 in private borrowings. We will continue to fund our operations from these sources until we are able to produce operating revenue sufficient to cover our cost structure. In the event we are not able to secure such funding, our operations will be adversely affected.

Short Term: We funded our operations with revenues from sales and private borrowings.

Item 3. Quantitative and Qualitative Disclosures about Market Risk: As a smaller reporting company we are not required to make any disclosure.

Item 4. Controls and Procedures

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; (iii) provide reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and (iv) provide reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because changes in conditions may occur or the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2018. This evaluation was based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, Internal Control-Integrated Framework. Based upon such assessment, our CFO concluded that, as of September 30, 2018, our internal controls over financial reporting were not optimally effective in the specific areas described in the paragraphs below.

As of September 30, 2018, our CFO identified the following specific material weaknesses in the Company’s internal controls over its financial reporting processes:

ADVANZEON SOLUTIONS, INC.

As a result of our retaining the services of an Outside Accountant in January 2018 and appointing an internal Company employee to interface with the Outside Accountant, we have instituted the following policies and procedures designed to address the material weaknesses cited above.

The Company plans to further augment its addressing of material weaknesses, on an as-needed basis, by hiring additional accounting personnel once its initial corrective steps have been fully implemented, tested and found to be effective.

ADVANZEON SOLUTIONS, INC.

PART II-OTHER INFORMATION

Item 1. Legal Proceedings

With the exception of the matter set forth below, all of the legal proceedings for the nine month periods ended September 30, 2018, is disclosed in our annual report on Form 10-K filed on January 29, 2019.

In a related matter to the Katzman litigation, on January 10, 2017, the Company brought an action against Melanie Damian et al. Case number 17-CA-00252, Thirteenth Judicial Circuit Court, Hillsborough County, FL. The Company alleges abuse of process based upon wrongful collection practices including wrongful garnishment of bank accounts. The matter has been dismissed by mutual consent.

In an action entitled Pharmacy Value Management Services Inc. v. Hartman et al, Case No. 8:17-cv-132-T-35TBM (M.D. Fla.) – a settlement pursuant to the mediation in the matter was reached and executed on March 18, 2018. Pursuant to the settlement Defendants paid the sum of $70,000.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

With the exception of the matter set forth below the sale of unregistered securities for the period were disclosed in our annual report on Form 10-K filed on January 29, 2019.

During the nine month period ended September 30, 2018, the Company issued 2,000,000 shares of common stock for a legal settlement. The shares were issued at a value of $0.12 per share or for a total value of $240,000. In addition, the Company issued 1,597,971 shares for the conversion of a promissory note of $50,000 and accrued interest of $1,231. The stock was issued at a value of $0.03 per share. We relied on Section 4(a)(1) of the Securities Act of 1933, as amended, as the exception from registration under the Act.

Item 3. Exhibits

Documents filed as part of this Report.

Exhibit 31.1 Certification of Clark A. Marcus pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2 Certification of Arnold B. Finestone pursuant to Section302 of the Sarbanes-Oxley Act of 2002

Exhibit 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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.