10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2020

OR

☐ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                      to                     

Commission File No. 000-24455

CURAEGIS TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

New York
(State or other jurisdiction of incorporation or organization) 16-1509512
(I.R.S. Employer Identification No.)

350 Linden Oaks Rochester, New York 14625
(Address of principal executive offices and Zip Code)

(585) 254-1100
(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by checkmark 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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).

Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☒
			Emerging growth company ☐

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 checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class	Number of Shares Outstanding at August 11, 2020
Common Stock, $0.01 par value	51,452,810

CURAEGIS TECHNOLOGIES, INC.

INDEX 

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of June 30, 2020 (Unaudited) and December 31, 2019	3
	Condensed Consolidated Statement of Operations – Three- and Six-Month Periods Ended June 30, 2020 and June 30, 2019 (Unaudited)	4
	Condensed Consolidated Statement of Changes in Stockholders’ Deficiency – Three- and Six-Month Periods Ended June 30, 2020 and June 30, 2019 (Unaudited)	5
	Condensed Consolidated Statement of Cash Flows – Three- and Six- Month Periods Ended June 30, 2020 and June 30, 2019 (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Mine Safety Disclosures	24
Item 5.	Other Information	24
Item 6.	Exhibits	25
SIGNATURE PAGE		26
EXHIBITS
	Exhibit 31.1
	Exhibit 31.2
	Exhibit 32

CURAEGIS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2020 (Unaudited)			December 31, 2019
ASSETS
Current Assets:
Cash	$	68,000		$	18,000
Prepaid expenses		9,000			2,000
Total current assets		77,000			20,000
Right to use asset (net)		169,000			193,000
Property and equipment (net)		32,000			38,000
Total non-current assets		201,000			231,000
Total Assets	$	278,000		$	251,000
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Liability for inventory	$	1,740,000		$	1,764,000
Demand notes		650,000			650,000
Promissory notes		425,000			425,000
Accounts payable		361,000			420,000
Accrued interest		735,000			509,000
Current right-to-use obligation		67,000			64,000
Other current liabilities		40,000			36,000
Accrued wages and benefits		127,000			50,000
Total current liabilities		4,145,000			3,918,000
Non-current right-to-use obligation		99,000			126,000
Paycheck Protection Program loan	228,000				-
Senior convertible notes (net)		9,514,000			8,410,000
Total Liabilities		13,986,000			12,454,000
Commitments and other matters
Stockholders' Deficiency:
Preferred stock, $.01 par value, 100,000,000 shares authorized
Series C, voting, convertible, no dividend, shares issued and outstanding at June 30, 2020 and December 31, 2019: 15,687,500 and 15,687,500, respectively		157,000			157,000
Series C-2, voting, convertible, no dividend, shares issued and outstanding at June 30, 2020 and December 31, 2019: 24,500,000 and 24,500,000, respectively		245,000			245,000
Series C-3, voting, convertible, no dividend, shares issued and outstanding at June 30, 2020 and December 31, 2019: 3,238,000 and 3,238,000, respectively		32,000			32,000
Class A, non-voting, convertible, cumulative dividend $.40 per share per annum, shares issued and outstanding at June 30, 2020 and December 31, 2019: 468,221 and 468,221, respectively		5,000			5,000
Class B, non-voting, convertible, cumulative dividend $.50 per share per annum, shares issued and outstanding at June 30, 2020 and December 31, 2019: 67,500 and 67,500, respectively		1,000			1,000
Common stock, $.01 par value, 400,000,000 shares authorized; shares issued and outstanding at June 30, 2020 and December 31, 2019: 51,415,310 and 50,979,964 respectively		514,000			510,000
Additional paid-in capital		78,337,000			78,272,000
Accumulated deficit		(92,999,000	)		(91,425,000	)
Total Stockholders' Deficiency		(13,708,000	)		(12,203,000	)
Total Liabilities and Stockholders' Deficiency	$	278,000		$	251,000

See notes to condensed consolidated financial statements.

3

 CURAEGIS TECHNOLOGIES, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2020			2019			2020			2019
Revenue and Cost of revenue:
CURA revenue	$	2,000		$	2,000		$	5,000		$	9,000
Cost of revenue		12,000			3,000			13,000			9,000
Loss on revenue		(10,000	)		(1,000	)		(8,000	)		-
Costs and expenses:
Recovery on inventory reserve		(7,000	)		-			(23,000	)		-
Engineering and development		65,000			218,000			156,000			549,000
General and administrative		313,000			443,000			656,000			987,000
Total costs and expenses		371,000			661,000			789,000			1,536,000
Loss from operations		(381,000	)		(662,000	)		(797,000	)		(1,536,000	)
Non-operating expense:
Interest expense		(341,000	)		(304,000	)		(678,000	)		(578,000	)
Other (expense) income		(99,000	)		1,000			(99,000	)		1,000
Non-operating expense		(440,000	)		(303,000	)		(777,000	)		(577,000	)
Loss before income taxes		(821,000	)		(965,000	)		(1,574,000	)		(2,113,000	)
Income taxes		-			-			-			-
Net loss		(821,000	)		(965,000	)		(1,574,000	)		(2,113,000	)
Preferred stock dividends		55,000			54,000			109,000			108,000
Net loss attributable to common stockholders	$	(876,000	)	$	(1,019,000	)	$	(1,683,000	)	$	(2,221,000	)
Net loss per common share attributable to common stockholders
Basic and Diluted	$	(0.02	)	$	(0.02	)	$	(0.03	)	$	(0.04	)
Weighted average number of shares of common stock
Basic and Diluted		51,379,000			50,478,000			51,263,000			50,456,000

See notes to condensed consolidated financial statements.

4

CURAEGIS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

(Unaudited) 

									For the Three and Six Months Ended June 30. 2020
	Class C Preferred Stock				Class C-2 Preferred Stock				Class C-3 Preferred Stock				Class A Preferred Stock				Class B Preferred Stock				Common Stock				Additional Paid			Accumulated			Total Stockholders'
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		in Capital			Deficit			Deficiency
Balance At December 31, 2019		15,687,500	$	157,000		24,500,000	$	245,000		3,238,000	$	32,000		468,221	$	5,000		67,500	$	1,000		50,979,964	$	510,000	$	78,272,000		$	(91,425,000	)	$	(12,203,000	)
Stock-based compensation																									$	39,000						39,000
Common shares issued for interest																						94,772	$	1,000	$	16,000						17,000
Common shares issued with convertible notes																						112,500	$	1,000	$	9,000						10,000
Net Loss																												$	(753,000	)		(753,000	)
Balance at March 31, 2020		15,687,500		157,000		24,500,000		245,000		3,238,000		32,000		468,221		5,000		67,500		1,000		51,187,236		512,000		78,336,000			(92,178,000	)		(12,890,000	)
Stock-based compensation																										(28,000	)					(28,000	)
Common shares issued for interest																						123,074		1,000		20,000						21,000
Common shares issued with convertible notes																						105,000		1,000		9,000						10,000
Net Loss																													(821,000	)		(821,000	)
Balance at June 30, 2020		15,687,500	$	157,000		24,500,000	$	245,000		3,238,000	$	32,000		468,221	$	5,000		67,500	$	1,000		51,415,310	$	514,000	$	78,337,000		$	(92,999,000	)	$	(13,708,000	)
									For the Three and Six Months Ended June 30, 2019
Balance At December 31, 2018		15,687,500	$	157,000		24,500,000	$	245,000		3,268,000	$	33,000		468,221	$	5,000		67,500	$	1,000		50,364,549	$	504,000	$	77,725,000		$	(87,149,000	)	$	(8,479,000	)
Stock-based compensation																									$	59,000						59,000
Common shares issued for interest																						35,996			$	8,000						8,000
Warrants issued with convertible note																									$	63,000						63,000
Net Loss																												$	(1,148,000	)		(1,148,000	)
Balance at March 31, 2019		15,687,500		157,000		24,500,000		245,000		3,268,000		33,000		468,221		5,000		67,500		1,000		50,400,545		504,000		77,855,000			(88,297,000	)		(9,497,000	)
Stock-based compensation																										45,000						45,000
Common shares issued for interest																						39,156				10,000						10,000
Common shares issued with convertible notes																						90,000		1,000		11,000						12,000
Warrants issued with convertible note																										2,000						2,000
Net Loss																													(965,000	)		(965,000	)
Balance at June 30, 2019		15,687,500	$	157,000		24,500,000	$	245,000		3,268,000	$	33,000		468,221	$	5,000		67,500	$	1,000		50,529,701	$	505,000	$	77,923,000		$	(89,262,000	)	$	(10,393,000	)

See notes to condensed consolidated financial statements.

5

 CURAEGIS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Six Months Ended June 30,
	2020			2019
Cash flows from operating activities:
Net loss	$	(1,574,000	)	$	(2,113,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount reported as interest		400,000			351,000
Depreciation and amortization		39,000			72,000
Stock-based compensation		11,000			104,000
Interest paid in shares		38,000			18,000
Changes in working capital items:
Prepaid expenses		(7,000	)		21,000
Liability for inventory		(24,000	)		15,000
Accounts payable		(55,000	)		134,000
Accrued interest		188,000			144,000
Other current liabilities		4,000			-
Accrued wages and benefits		77,000			12,000
Net cash used in operating activities		(903,000	)		(1,242,000	)
Cash flows from financing activities:
Proceeds from issuance of senior convertible notes		725,000			800,000
Proceeds from Paycheck Protection Program loan		228,000			-
Proceeds from issuance of unsecured promissory notes		-			425,000
Net cash provided by financing activities		953,000			1,225,000
Net increase (decrease) in cash		50,000			(17,000	)
Cash at January 1		18,000			53,000
Cash at June 30	$	68,000		$	36,000
Supplemental Disclosures:
Cash used for payment of interest expense	$	13,000		$	64,000
Debt discount related to issuance of convertible notes	$	21,000		$	65,000
Common shares issued in payment of interest expense	$	38,000		$	18,000
Right to used asset	$	-		$	257,000

See notes to condensed consolidated financial statements.

6

CURAEGIS TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION 

CurAegis Technologies, Inc. (“CurAegis”, “the Company”) was incorporated as a New York business corporation in September 1996 under the name Torvec, Inc. The Company’s name was changed to CurAegis Technologies, Inc. in 2016 in connection with the establishment of its two business divisions. The CURA division is engaged in the fatigue management business and the Aegis division is engaged in the development of technologies for the power and hydraulic industry.

The Company is focused on the commercialization of a wellness and safety system (the CURA System) and a uniquely designed hydraulic pump that will be smaller, lighter, less expensive and more efficient than current technology. The Company has not had any significant revenue-producing operations.  

The Company has created the CURA app to offer products that reduce fatigue risk in the workplace and help individuals manage their sleep and improve alertness. The CURA System consists of a real-time alertness measurement and the Z-Coach wellness program. 

The Aegis hydraulic pump technology brings to the hydraulic industry a unique technology that is: smaller, lighter and less expensive, and more efficient than conventional pumps and motors. During 2019, the Company initiated discussions with investment advisors and certain hydraulics companies to evaluate the possible monetization of the Aegis technologies.  On April 8, 2020, the Company reported that it had initiated a temporary suspension of this evaluation process. This decision was linked to the COVID-19 pandemic which adversely impacted and is expected to continue to adversely impact the Company’s ability to generate industry interest in the Aegis technologies. Recent updates with interested parties have indicated that companies in the hydraulics industry are currently focused on internal processes, technology, and employees.

It is important to note that the cycle time from the initiation of the sales process to revenue realization can be highly variable especially as a start-up entity. In addition to the activities to be undertaken to implement our plan of operations, we may expand and/or refocus our activities depending upon future circumstances and developments.

Current Cash Outlook and Management Plans

As of June 30, 2020, we had cash on hand of $68,000, negative working capital of $4,296,000, an accumulated deficit of $92,999,000 and a stockholders' deficiency of $13,708,000. During the six months ended June 30, 2020 we raised $725,000 in proceeds through the issuance of convertible notes and $235,000 from the Paycheck Protection Program (PPP) loan and US Small Business Administration - Economic Injury Disaster Loans (SBA EIDL) grant. The proceeds from these sources have been used to support the ongoing development and marketing of our core technologies and product initiatives.

Management estimates that the 2020 cash needs will run between $1.7 and $2 million, based upon the cash used in operations in the six months ended June 30, 2020. As of June 30, 2020, the Company’s cash on hand is not sufficient to cover the Company’s future working capital requirements. This raises substantial doubt as to the Company’s ability to continue as a going concern. Management will continue to use its best efforts to develop financing opportunities to fund the development and commercialization of the CURA and Aegis products.

Since inception, we have financed our operations by the sale of our securities and debt financings. We need to raise additional funds to meet our working capital needs, to fund expansion of our business, to complete development, testing and marketing of our products, or to make strategic acquisitions or investments. No assurance can be given that necessary funds will be available for us on acceptable terms, if at all. Furthermore, additional financings will involve dilution to our shareholders or may require that we relinquish rights to certain of our technologies or products. In addition, we will experience operational difficulties and delays due to working capital restrictions. If adequate funds are not available from additional sources of financing, we will have to delay or scale back our plans. 

The Company’s ability to fund its current and future commitments from its available cash depends on its ability to launch and generate sales from the CURA app. If the Company cannot generate revenue from the CURA app, it would need to raise funds in order to meet its working capital needs and pursue its growth strategy. Although there can be no such assurances, management believes that sources for these additional funds will be available through either current or future investors.   

7

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  

Basis of Presentation: The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U. S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8-03 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Accordingly, the condensed consolidated financial statements do not include all information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the Company’s management, all adjustments considered necessary for a fair presentation (consisting of normal recurring adjustments) have been included. The results for interim periods are not necessarily indicative of what the results will be for the fiscal year. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2019 contained in the Company’s 2019 Annual Report on Form 10-K filed with the SEC.

Consolidation: The condensed consolidated financial statements include the accounts of the Company, our wholly owned subsidiary Iso-Torque Corporation, and our majority-owned subsidiary, Ice Surface Development, Inc. (56% owned). As of June 30, 2020, each of the subsidiaries is non-operational.

Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. These estimates are subject to a high degree of judgment and potential change. Actual results could differ from those estimates.  

Reclassifications: Certain reclassifications may have been made to prior year balances to conform to the current year’s presentation.

Cash: We maintain cash at financial institutions that periodically may exceed federally insured amounts. We have a corporate credit card program through JPMorgan Chase Bank, N.A. In connection with this, the Company granted a security interest to the bank to act as collateral for the activity within the corporate card program, up to $5,000. 

Inventory: Inventory is stated at the lower of cost or net realizable value with cost determined using the average cost method. Inventory on hand at June 30, 2020 and December 31, 2019 has been fully reserved. 

Depreciation and amortization: Depreciation and amortization are computed using the straight-line method.   Depreciation and amortization expense for the three and six months ended June 30, 2020 and 2019 are as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2020		2019		2020		2019
Right-to use building	$	17,000	$	25,000	$	33,000	$	52,000
Software amortization		-		2,000		-		6,000
Property and equipment		3,000		7,000		6,000		14,000
	$	20,000	$	34,000	$	39,000	$	72,000

Right to use building asset:  ASU No. 2016-02, “Leases,” requires a lessee to recognize on its balance sheet the assets and liabilities related to long-term leases that were classified as operating leases under previous guidance. An asset is recognized when the Company can retain the economic benefits and control of the underlying asset. A corresponding liability is recognized related to the Company's obligation to make lease payments over the term of the lease. The standard became effective for the Company on January 1, 2019. The Company utilized the modified retrospective approach to measure the right to use operating lease agreement associated with the office building used for our business operations. The adoption of this accounting standard did not impact our consolidated loss from operations and had no impact on cash flows.

Software, Property and Equipment: Capitalized software, property and equipment are stated at cost. Estimated useful lives for capitalized software is 3 years and for property and equipment is 5 to 7 years. Betterments, renewals and significant repairs that extend the life of the assets are capitalized. Other repairs and maintenance costs are expensed when incurred. When disposed, the cost and accumulated depreciation applicable to assets retired are removed from the accounts and the gain or loss on disposition is recognized in non-operating income (expense). 

Whenever events or circumstances indicate, our long-lived assets including any intangible assets with finite useful lives are tested for impairment by using the estimated future cash flows directly associated with, and that are expected to arise as a direct result of, the use of the assets. If the carrying amount exceeds the estimated undiscounted cash flows, impairment may be indicated. The carrying amount is compared to the estimated discounted cash flows and if there is an excess such amount is recorded as impairment.

Fair Value of Financial Instruments: As defined by U.S. GAAP, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A hierarchy for ranking the quality and reliability of the information is used to determine fair values. Assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:  

Level 1: Quoted market prices in active markets for identical assets or liabilities

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data

Level 3: Unobservable inputs that are not corroborated by market data  

8

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The Financial Accounting Standards Board’s (“FASB”) guidance for the disclosure about fair value of financial instruments requires disclosure of an estimate of the fair value of certain financial instruments. The fair value of financial instruments pursuant to FASB’s guidance for the disclosure about fair value of financial instruments approximated their carrying values at June 30, 2020 and December 31, 2019. The carrying amount of cash, prepaid expenses, accounts payable, accrued expenses, demand and promissory notes approximates their fair value due to their short maturity. The senior convertible and demand notes can be converted into common stock with an underlying value of $3,345,000 as of June 30, 2020 based on the trading price on that date. 

Revenue Recognition and Deferred Revenue: The Company accounts for revenue in accordance with FASB ASC 606, "Revenue from Contracts with Customers" and all related amendments. For contracts where performance obligations are satisfied at a point in time, the Company recognizes revenue when the product is shipped to the customer. For contracts where the performance obligation is satisfied over time, as in the Z-Coach sales, the Company recognizes revenue over the subscription period.  Revenue from the sale of the Company's products is recognized net of cash discounts, sales returns and allowances. 

The Company's revenue is derived primarily from domestic customers. For the three- and six-month periods ended June 30, 2020 net revenue from products transferred over time amounted to $2,000 and $5,000 respectively. One customer accounted for 100% of total Z-Coach subscription sales made during the three- and six-month periods ended June 30, 2020. Our collection terms provide customers standard terms of net 30 days. Future performance obligations are reflected in deferred revenue.

CURA revenue is recognized (a) upon receipt of payment at the point of sale of the CURA app, (b) upon the delivery of myCadian products and (c) upon the Company’s performance of all obligations as described in customer agreements. The Z-Coach program provides fatigue training over an annual subscription period of twelve months and allows the user unlimited access during the annual subscription period. Customers are billed at the acceptance of the subscription, and revenue is recognized ratably over the subscription period as performance obligations are satisfied and when collection is reasonably assured.

Engineering and Development: Engineering and development costs and patent expenses are charged to operations as incurred. Engineering and development include personnel-related costs, materials and supplies, depreciation and consulting services.

General and Administrative: Patent costs for the three months ended June 30, 2020 and 2019 amounted to $14,000 and $11,000 respectively and are included in general and administrative expenses. Patent costs for the six months ended June 30, 2020 and 2019 amounted to $17,000 and $21,000 respectively

Stock-based Compensation: FASB Accounting Standards Codification (“ASC”) 718-10 requires all share-based payments be recognized as expense over the service period (generally the vesting period) based on the fair value on the grant date. The realization of tax benefits in excess of amounts recognized for financial reporting purposes are recognized as a financing activity in accordance with ASC 718-10. No tax benefits were attributed to the stock-based compensation expense because a valuation allowance was maintained for substantially all net deferred tax assets.   

Income Taxes: We account for income taxes using the asset and liability method, the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting and the tax basis of our assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. A valuation allowance related to deferred tax assets is recorded when it is more likely than not that some portion or all the deferred tax assets will not be realized.  

We account for uncertain tax positions using a more-likely-than-not recognition threshold based on the technical merits of the tax position taken. Tax benefits that meet the more-likely-than-not recognition threshold should be measured as the largest amount of tax benefits, determined on a cumulative probability basis, which is more likely than not to be realized upon ultimate settlement in the financial statements. It is our policy to recognize interest and penalties related to income tax matters as general and administrative expenses. As of June 30, 2020, and December 31, 2019, there were no accrued interest or penalties related to uncertain tax positions.

Loss per Common Share: FASB’s ASC 260-10 (“Earnings Per Share”) requires the presentation of basic earnings per share, which is based on weighted average common stock outstanding, and dilutive earnings per share, which gives effect to options, warrants and convertible securities in periods when they are dilutive. At June 30, 2020 and 2019, we excluded 111,296,260 and 99,159,056 potential common shares, respectively, relating to convertible preferred stock, convertible notes, future share rights issued with the demand notes, options and warrants outstanding from the diluted net loss per common share calculation because their inclusion would be anti-dilutive. We excluded 625,000 warrants from the diluted net loss per common share calculation at June 30, 2020 and 2019 as the conditions for their vesting are not time-based.  

9

NOTE 3 – INVENTORY AND VENDOR LIABILITY

	June 30, 2020			December 31, 2019
Raw materials	$	1,641,000		$	1,665,000
Finished goods		69,000			69,000
		1,710,000			1,734,000
Less: Reserve		(1,710,000	)		(1,734,000	)
Inventory (net)	$	-		$	-
Liability for inventory	$	1,740,000		$	1,764,000

During 2017, the Company initiated a purchase order with a third-party vendor to manufacture and assemble the myCadian watch. In connection with this agreement, the Company agreed to a cancellation charge for products purchased on behalf of the Company in the instance that the purchase order is subsequently modified, delayed or cancelled. The Company has recorded a reserve for all inventory and components.

During the three-and six-month periods ended June 30, 2020, the Company recovered $17,000 and $24,000 respectively, upon the sale of certain raw material and component parts. Management will continue to evaluate this reserve in future reporting periods.

NOTE 4 - DEMAND NOTE  

On July 23, 2019, the Company entered into a credit facility with a commercial bank for up to $1,500,000 in advances to support working capital needs of the business. The demand notes issued in connection with this commercial bank are supported by individual co-borrowing agreements from certain accredited investors. In connection with this credit agreement, the Company entered into a general security agreement that provides the bank a continuing security interest in all the Company's personal property and fixtures. 

The co-borrowers participating in this credit facility received 30,000 common shares for each $100,000 in principal co-borrowed. The fair market value of these shares was estimated on the date of the note issuance and is reflected as debt issuance costs. The co-borrowers were also granted the right to purchase common shares up to the amount co-borrowed, at a price per share determined based on the closing price of the Company’s common stock one day prior to the agreement. The fair market value of these future rights is reflected as debt issuance costs in the results of operations. The price per share for these future share purchase rights is fixed at the higher of the closing price of the Company’s common stock one day prior to the co-borrowing arrangement or $0.15 per share. Each co-borrower has the right to purchase these common shares until the indebtedness is paid in full or within five business days after the consummation of the sale of the Company’s Aegis division.

As of June 30, 2020, the Company had issued $650,000 in demand notes and issued 195,000 shares of common stock in connection with the co-borrowing demand notes. The common shares issued in connection with the co-borrowing demand notes were valued at $21,000 on the date of issuance and were reported as debt issuance costs. Coincident with the issuance of these notes, these co-borrowers also received the right to purchase up to 4,333,333 shares of the Company’s common stock at a fixed price of $0.15 per share. The fair market value of these future share rights was estimated at $276,000 on the date of the issuance of the notes utilizing the Black Scholes valuation model and were reported as debt issuance costs.  

Advances drawn under this facility have been issued as demand notes with an adjustable interest rate set at the bank’s prime rate, which was 3.25% as of June 30, 2020. The Company recognized $5,000 in interest expense on the demand notes during the three months ended June 30, 2020. The Company recognized $13,000 in interest expense on the demand notes during the six months ended June 30, 2020.

The common shares issued with these demand notes are being offered and sold in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933 (“Securities Act”), as amended, and Rule 506 of Regulation D as promulgated by the United States Securities and Exchange Commission thereunder. The shares of the Company’s Common Stock will not be registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

NOTE 5 – PAYCHECK PROTECTION PROGRAM LOAN 

On April 20, 2020 the Company received a $227,700 loan under the Small Business Administration (SBA) Paycheck Protection Program (the “PPP”). The note was issued under the Coronavirus Aid, Relief, and Economic Security (CARES) Act which, according to guidance from the SBA and U.S. Department of Treasury, provides for certain loan forgiveness based on a calculation of the Company’s payroll expenses and qualified rent and utilities payments made within twenty-four weeks after the disbursement of the loan. The loan has an interest rate of 1% per annum and payments of interest and principal begin 6 months after the date of disbursement. The term of the note is 24 months.

NOTE 6 - SENIOR CONVERTIBLE NOTES  

At June 30, 2020, the Company had $11,035,000 in convertible notes outstanding which have been presented net of unamortized debt discounts of $1,521,000, resulting in a carrying value of $9,514,000. As of December 31, 2019, the Company had $10,310,000 in convertible notes outstanding, presented net of unamortized debt discounts of $1,900,000 resulting in a carrying value of $8,410,000.

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Scheduled maturities on the Company’s convertible notes is as follows: $2,990,000 in the twelve months ending December 31, 2021, $2,775,000 in the twelve months ending in December 31, 2022; $3,395,000 in the twelve months ending December 31, 2023, $1,150,000 in the twelve months ending December 31, 2024 and $725,000 thereafter.

Included in the face value of convertible notes outstanding at June 30, 2020 and December 31, 2019, is $2,402,000 and $2,477,000 respectively in convertible notes payable to various directors of the Company. Also included in the face value of the convertible notes are $1,795,000 and $1,170,000 as of June 30, 2020 and December 31, 2019, respectively, in convertible notes payable to an investor that is deemed an affiliate.

	Total			2019 6% Notes			JULY 2018 Notes			2018 Notes			2017 6% Notes			2016 6% Notes
Face value December 31, 2019	$	10,310,000		$	650,000		$	1,675,000		$	625,000		$	4,370,000		$	2,990,000
Notes issued		725,000			725,000			-			-			-			-
Face value June 30, 2020	$	11,035,000		$	1,375,000		$	1,675,000		$	625,000		$	4,370,000		$	2,990,000
Debt discount December 31, 2019	$	(1,900,000	)	$	(3,000	)	$	(353,000	)	$	(185,000	)	$	(362,000	)	$	(997,000	)
Debt discount issued		(21,000	)		(21,000	)		-			-			-			-
Amortization reported as interest		400,000			13,000			41,000			23,000			55,000			268,000
Debt discount June 30, 2020	$	(1,521,000	)	$	(11,000	)	$	(312,000	)	$	(162,000	)	$	(307,000	)	$	(729,000	)
Senior Convertible Notes (net)	$	9,514,000		$	1,364,000		$	1,363,000		$	463,000		$	4,063,000		$	2,261,000

2019 Convertible Notes

In April 2019, the board of directors authorized the issuance of up to $2.5 million in 6% Convertible Promissory Notes (the “2019 Convertible Notes”) in connection with the May 28, 2019 Securities Purchase Agreement (the “2019 SPA”). The 2019 Convertible Notes mature on the earlier of: five days after the sale of substantially all the assets of the Aegis division or five years from the date of issuance.

The conversion rate of the notes is fixed at the greater of: $0.15 per share and the closing market price of the Company’s common stock on the trading day immediately prior to the issuance of the note. Investors receive 30,000 shares of common stock for each $100,000 investment in the 2019 Convertible Notes. The notes were offered in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933 as amended (the "Securities Act") and Rule 506(c) of Regulation D as promulgated by the Securities and Exchange Commission. The offering was available only to “accredited investors” as defined in Rule 501(a) of Regulation D under the Securities Act.  

During the three- and six- month periods ended June 30, 2020, the Company issued $165,000 and $725,000, respectively, in new notes and allocated $5,000 and $21,000, respectively, of the proceeds to debt discount based on the estimated fair value of the common shares issued on the date of investment. During the three- and six-month periods ended June 30, 2020, the Company recorded $24,000 and $46,000 in interest expense which includes amortization of debt discount. During the three- and six-month periods ended June 30, 2019; the Company recorded $23,000 and $46,000, respectively which includes amortization of debt discount.

JULY 2018 Convertible Notes 

In July 2018, the board of directors authorized the issuance of up to $2.5 million in non-interest bearing Senior Convertible Promissory Notes and Warrants (the “JULY 2018 Convertible Notes”) in connection with the July 24, 2018 Securities Purchase Agreement (the “JULY 2018 SPA”). The JULY 2018 Convertible Notes have a five-year maturity. In April 2019, the Company’s board approved a resolution to complete this offering.

The conversion rate of the notes was fixed at $0.25 per share as determined at the close of business on July 24, 2018. Investors in this offering were granted warrants to purchase common shares equal to 10% or 25% of the number of shares issuable upon the conversion of the notes based upon the amount of their investment. The warrants have a fixed exercise price of $0.25 and a ten-year term from the date of issuance. The notes were offered in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933 as amended (the "Securities Act") and Rule 506(c) of Regulation D as promulgated by the Securities and Exchange Commission. The offering was available only to “accredited investors” as defined in Rule 501(a) of Regulation D under the Securities Act.   

During the three and six month periods ended June 30, 2020 the Company recorded $21,000 and $41,000 respectively in interest expense which reflects the amortization of debt discount.  During the three- and six-month periods ended June 30, 2019 the Company recorded $19,000 and $32,000 respectively in interest expense which reflects the amortization of debt discount.  

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2018 Convertible Notes 

In May 2018, the board of directors authorized the issuance of up to $1 million in non-interest bearing Senior Convertible Promissory Notes and Warrants (the “2018 Convertible Notes”) in connection with the May 8, 2018 Securities Purchase Agreement (the “2018 SPA”). The 2018 Convertible Notes have five-year maturity. On July 19, 2018, the Company’s board approved a resolution to complete this offering.

The conversion rate of the notes was fixed at $0.25 per share as determined at the close of business on May 8, 2018. Investors in this offering were granted warrants to purchase common stock equal to 10% or 25% of the number of shares issuable upon the conversion of the notes based upon the amount of their investment. The warrants have a fixed exercise price of $0.25 and a ten-year term from the date of issuance. The notes were offered in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933 as amended (the "Securities Act") and Rule 506(c) of Regulation D as promulgated by the Securities and Exchange Commission. The offering was available only to “accredited investors” as defined in Rule 501(a) of Regulation D under the Securities Act.  

During the three and six month periods ended June 30, 2020 the Company recorded $12,000 and $23,000 respectively in interest expense which reflects the amortization of debt discount. During the three-and six-month periods ended June 30, 2019 the Company recorded $11,000 and $22,000 respectively in interest expense which reflects the amortization of debt discount.

2017 Convertible Notes 

The board of directors authorized the issuance of up to $5 million in 6% Senior Convertible Promissory Notes and Warrants (the “2017 Convertible Notes”) in connection with the May 31, 2017 Securities Purchase Agreement (as amended, the “2017 SPA”). The 2017 Convertible Notes have a five-year maturity and a fixed annual interest rate of 6%. Investors in this offering were granted warrants to purchase warrants equal to 10% or 25% of the number of shares issuable upon the conversion of the notes based upon the amount of their investment. 

The conversion rate of the 2017 Notes was originally set at $0.50 per share and subsequently modified in November 2018 to $0.333 per share. The exercise price of related warrants issued in connection with the 2017 Notes was also subsequently modified in November 2018 to $0.333 per share. The 2017 Convertible Notes were offered in a private placement exempt from registration under Section 4(a)(2) of the Securities Act and Rule 506(c) of Regulation D as promulgated by the Securities and Exchange Commission. The offering was available only to “accredited investors” as defined in Rule 501(a) of Regulation D under the Securities Act.

During the three-and six- month periods ended June 30, 2020 the Company recorded $93,000 and $185,000, respectively, in interest expense including amortization of debt discount. During the three-and six- month periods ended June 30, 2019 the Company recorded $91,000 and $171,000, respectively, in interest expense including amortization of debt discount. 

2016 Convertible Notes

During 2016, the board of directors authorized, and the Company issued, $3 million in 6% Senior Convertible Promissory Notes and Warrants (the “2016 Convertible Notes”) in connection with the August 25, 2016 Securities Purchase Agreement (the “2016 SPA”). The 2016 Convertible Notes have five-year maturity dates ranging from August 2021 through December 2021 and a fixed annual interest rate of 6%.

The conversion rate of the notes was fixed at $0.25 per share as determined at the close of business on August 25, 2016. The investors were granted warrants to purchase an aggregate number of shares of common stock equal to 10% of the number of shares issuable upon the conversion of the notes. The warrants have a fixed exercise price of $0.25 and a ten-year term from the date of issuance. The notes were offered in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1934, as amended and Rule 506(c) of Regulation D as promulgated by the Securities and Exchange Commission. The offering was available only to “accredited investors” as defined in Rule 501(a) of Regulation D under the Securities Act of 1933.  

During the three-and six- month periods ended June 30, 2020 the Company recorded $180,000 and $357,000, respectively, in interest expense including amortization of debt discount. During the three-and six- month periods ended June 30, 2019 the Company recorded $172,000 and $342,000, respectively, in interest expense including amortization of debt discount. 

NOTE 7 - UNSECURED SUBORDINATED PROMISSORY NOTES 

The Company had $425,000 in unsecured subordinated promissory notes payable to a board member as of June 30, 2020 and December 31, 2019. These notes bear interest at a rate of 6% per annum and have a maturity date of October 15, 2020. During the three- and six- months ended June 30, 2020, the Company recognized interest expense of $6,000 and $12,000, respectively, on these notes. During the three- and six- months ended June 30, 2019, the Company recognized interest expense of $6,000 and $7,000, respectively, on these notes. Interest accrued and outstanding on the promissory notes was $27,000 and $15,000 as of June 30, 2020 and December 31, 2019, respectively.   

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NOTE 8 - RIGHT TO USE BUILDING ASSET 

The FASB issued ASU No. 2016-02, “Leases,” which requires a lessee to recognize in its balance sheet the assets and liabilities related to long-term leases that were classified as operating leases under previous guidance. An asset is recognized related to the right to use the underlying asset and a liability is recognized related to the obligation to make lease payments over the term of the lease. The standard became effective for the Company January 1, 2019.  As of January 1, 2019, the Company utilized the modified retrospective approach to measure the right to use operating lease agreement associated with the office building. The adoption of this accounting standard did not impact our consolidated loss from operations and had no impact on cash flows.

Upon adoption, the Company determined the present value of future lease costs at $257,000, which included monthly rental, common area costs, and taxes. The Company assumed an incremental borrowing rate of 6% as the building lease agreement did not include an implicit rate. On September 1, 2019, the Company vacated this property at the request of the landlord and relocated to a new office. The Company terminated the lease obligation without penalty or liability for unused periods associated with the original lease obligation and as such, the Company did not incur an impairment as a result of this change in lease term. Operating lease costs for the three-and six- month periods ended June 30, 2019 for the terminated lease obligation was $30,000 and $60,000, respectively.

On August 1, 2019, the Company entered into an operating lease obligation for office space located at 350 Linden Oaks in Rochester New York. The Company determined the present value of future lease costs at the inception of the lease was $212,000. The Company assumed an incremental borrowing rate of 6% as the building lease agreement did not include an implicit rate. The lease has a termination date of December 30, 2022. Operating lease costs for the three- and six-month periods ended June 30, 2020 were $15,000 and $31,000, respectively. Future maturing lease obligations as follows: $35,000 for the remainder of 2020; $66,000 in 2021 and $66,000 in 2022. Total future lease payments are $179,000 including imputed interest of $13,000.

NOTE 9 - PROPERTY AND EQUIPMENT 

At June 30, 2020 and December 31, 2019 property and equipment consist of the following:

	June 30, 2020			December 31, 2019
Office equipment	$	199,000		$	199,000
Shop equipment		132,000			132,000
Gross Property and equipment		331,000			331,000
Less accumulated depreciation		(299,000	)		(293,000	)
Net property and equipment	$	32,000		$	38,000

NOTE 10 - BUSINESS SEGMENTS  

The Company has two operating business segments. The CURA business operates in the fatigue management industry and the Aegis business is focused in the power and hydraulic industry.

Segment information for the three months ending June 30, 2020 for the Company’s business segments follows: 

	CURA			Aegis			Corporate			Total
Revenue	$	2,000		$	-		$	-		$	2,000
Loss on revenue		(10,000	)		-			-			(10,000	)
Total costs and expenses		129,000			(13,000	)		255,000			371,000
Loss from operations		(139,000	)		13,000			(255,000	)		(381,000	)
Non-operating expense		-			-			(440,000	)		(440,000	)
Net loss	$	(139,000	)	$	13,000		$	(695,000	)	$	(821,000	)
Stock based compensation	$	17,000		$	(37,000	)	$	(8,000	)	$	(28,000	)
Depreciation and amortization	$	-		$	2,000		$	18,000		$	20,000
Assets at June 30, 2020	$	-		$	32,000		$	246,000		$	278,000

Segment information for the six months ending June 30, 2020 for the Company’s business segments follows: 

	CURA			Aegis			Corporate			Total
Revenue	$	5,000		$	-		$	-		$	5,000
Loss on revenue		(8,000	)		-			-			(8,000	)
Total costs and expenses		183,000			52,000			554,000			789,000
Loss from operations		(191,000	)		(52,000	)		(554,000	)		(797,000	)
Non-operating expense		-			-			(777,000	)		(777,000	)
Net loss	$	(191,000	)	$	(52,000	)	$	(1,331,000	)	$	(1,574,000	)
Stock based compensation	$	40,000		$	(33,000	)	$	3,000		$	11,000
Depreciation and amortization	$	-		$	5,000		$	34,000		$	39,000
Assets at June 30, 2020	$	-		$	32,000		$	246,000		$	278,000

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Segment information for the three months ending June 30, 2019 for the Company’s business segments follows: 

	CURA			Aegis			Corporate			Total
Revenue	$	2,000		$	-		$	-		$	2,000
Loss on revenue		(1,000	)		-			-			(1,000	)
Total costs and expenses		(176,000	)		(150,000	)		(335,000	)		(661,000	)
Loss from operations		(177,000	)		(150,000	)		(335,000	)		(662,000	)
Non-operating expense		-			-			(303,000	)		(303,000	)
Net loss	$	(177,000	)	$	(150,000	)	$	(638,000	)	$	(965,000	)
Stock based compensation	$	6,000		$	5,000		$	34,000		$	45,000
Depreciation and amortization	$	3,000		$	5,000		$	26,000		$	34,000
Assets at June 30, 2019	$	6,000		$	45,000		$	246,000		$	297,000

Segment information for the six months ending June 30, 2019 for the Company’s business segments follows: 

	CURA			Aegis			Corporate			Total
Revenue	$	9,000		$	-		$	-		$	9,000
Margin (loss on revenue)		-			-			-			-
Total costs and expenses		(515,000	)		(319,000	)		(702,000	)		1,536,000
Loss from operations		(515,000	)		(319,000	)		(702,000	)		(1,536,000	)
Non-operating expense		-			-			(577,000	)		(577,000	)
Net loss	$	(515,000	)	$	(319,000	)	$	(1,279,000	)	$	(2,113,000	)
Stock based compensation	$	14,000		$	13,000		$	77,000		$	104,000
Depreciation and amortization	$	9,000		$	10,000		$	53,000		$	72,000
Assets at June 30, 2019	$	6,000		$	45,000		$	246,000		$	297,000

NOTE 11 - PREFERRED and COMMON STOCK  

Common Stock 

We have authorized 400,000,000 shares of common stock, with a par value of $0.01 per share. 

During the three- and six-month periods ended June 30, 2020 the Company issued 123,074 and 217,846 shares of common stock in payment of interest on the Company’s 2016, 2017 and 2019 Convertible Notes. During the three- and six-month periods ended June 30, 2019 the Company issued 39,156 and 75,152 shares of common stock in payment of interest on the Company’s 2016, 2017 and 2019 Convertible Notes. 

Preferred Stock 

Our certificate of incorporation permits the Company to issue up to 100,000,000 shares of $.01 par value preferred stock.

Class A Preferred Stock    

At June 30, 2020 and December 31, 2019 there were 468,221 outstanding shares of Class A Preferred stock, of which 8,709 shares resulted from the settlement of dividends due to conversion, and those shares no longer accrue dividends. The value of dividends payable upon the conversion of the remaining 459,512 outstanding shares of Class A Preferred stock was $2,805,000 at June 30, 2020 and $2,713,000 at December 31, 2019.  

In the event of a liquidation, dissolution and winding up of the Company, and subject to the liquidation rights and privileges of our Class C Preferred stockholders, Class A Preferred stockholders and Class B stockholders have a liquidation preference with respect to all accumulated and unsettled dividends. The value of the Class A Preferred stockholders’ liquidation preference was $2,805,000 and $2,713,000 at June 30, 2020 and December 31, 2019, respectively. In the event of liquidation, dissolution or winding up of the Company, unpaid accumulated dividends on the Class A Preferred are payable in Class A Preferred at a rate of 1 share of Class A Preferred for each $4.00 of dividends. 

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Class B Preferred Stock  

At June 30, 2020 and December 31, 2019, there were 67,500 outstanding shares of Class B Preferred stock. The value of dividends payable upon the conversion of the outstanding shares of Class B Preferred stock was $504,000 at June 30, 2020 and $488,000 at December 31, 2019.  

In the event of liquidation, dissolution and winding up of the Company, and subject to the liquidation rights and privileges of our Class C Preferred stockholders, our Class A Preferred stockholders and our Class B Preferred stockholders have a liquidation preference with respect to all accumulated and unsettled dividends. In the event of a liquidation, dissolution or winding up of the Company, unpaid accumulated dividends on the Class B Preferred are payable in Class B Preferred shares at a rate of 1 share of Class B Preferred for each $5.00 of dividends. 

Series C Preferred Stock  

At June 30, 2020 and December 31, 2019, there were 15,687,500 shares of Series C Preferred stock outstanding. The value of the Series C Preferred stockholders’ liquidation preference was $6,275,000 at June 30, 2020 and at December 31, 2019.

The Series C Preferred shares have a liquidation preference at their stated value per share of $0.40 that is senior to our common stock, and the Company’s Class A Non-Voting Cumulative Convertible Preferred Shares and Class B Non-Voting Cumulative Convertible Preferred Shares. The liquidation preference is payable upon a liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, or upon a deemed liquidation of the Company.

The Series C Preferred shares have no right to receive dividends and have no redemption right. The Series C Preferred shares vote with the common stock on an as-converted basis. 

Series C-2 Preferred Stock   

At June 30, 2020 and December 31, 2019, there were 24,500,000 shares of Preferred C-2 stock outstanding. The value of the Series C-2 Preferred stockholders’ liquidation preference was $4,900,000 at June 30, 2020 and December 31, 2019. 

The Series C-2 Preferred Shares are not entitled to receive preferred dividends and have no redemption right, but are entitled to participate, on an as converted basis; with holders of outstanding shares of common stock in dividends and distributions on liquidation after all preferred shares have received payment in full of any preferred dividends or liquidation preferences. The Series C-2 Preferred Shares vote with the common stock on an as-converted basis. We may not, without approval of the holders of at least two-thirds of the Series C-2 Preferred Shares, (i) create any class or series of stock that is pari passu or senior to the Series C-2 Preferred Shares, (ii) create any class or series of stock that would share in the liquidation preference of the Series C-2 Preferred Shares or that is entitled to dividends payable other than in common stock or Series C-2 Preferred Shares of its own series, (iii) acquire any equity security or pay any dividend, except dividends on a class or series of stock that is junior to the Series C Preferred Shares, payable in such junior stock, (iv) reissue any Series C-2 Preferred Shares, (v) declare or pay any dividend that would impair the payment of the liquidation preference of the Series C-2 Preferred Shares, (vi) authorize or issue any additional Preferred Shares, (vii) change the Certificate of Incorporation to adversely affect the rights of the holders of the Series C-2 Preferred Shares, or (viii) authorize, commit to or consummate any liquidation, dissolution or winding up in which the liquidation preference of the Series C-2 Preferred Shares would not be paid in full.   

Series C-3 Preferred Stock

At June 30, 2020 and December 31, 2019, there were 3,238,000 shares of Preferred C-3 stock outstanding.

NOTE 12 - STOCK OPTIONS   

2016 Stock Option Plan   The shareholders approved the 2016 Stock Option Plan (the “2016 Plan”) which provides for the grant of up to 3,000,000 common stock options to provide equity incentives to directors, officers, employees and consultants. Two types of options may be granted under the 2016 Plan: non-qualified stock options and incentive stock options. As of June 30, 2020, there are 342,500 options available for future grant under the 2016 Plan.

2011 Stock Option Plan    The shareholders approved the 2011 Stock Option Plan (the “2011 Plan”) which provides for the grant of up to 3,000,000 common stock options to provide equity incentives to directors, officers, employees and consultants. Two types of options may be granted under the 2011 Plan: non-qualified stock options and incentive stock options. As of June 30, 2020, there are 316,000 options available for future grant under the 2011 Plan.

Under the 2016 and 2011 Stock Option Plans, non-qualified stock options may be granted to our officers, directors, employees and outside consultants. Incentive stock options may be granted only to our employees, including officers and directors who are also employees. In the case of incentive stock options, the exercise price may not be less than such fair market value and in the case of an employee who owns more than 10% of our common stock, the exercise price may not be less than 110% of such market price. Options generally are exercisable for ten years from the date of grant, except that the exercise period for an incentive stock option granted to an employee who owns more than 10% of our stock may not be greater than five years.

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During the six months ended June 30, 2020 the Company granted 2,100,000 stock options to certain employees, board members and a consultant. No stock option grants were made during the six months ended June 30, 2019.

Summary   For the three- month period ended June 30, 2020, the Company recognized a net credit to stock compensation of $28,000 and for the six months ended June 30, 2020, the Company recognized stock compensation expense of $11,000. The Company recorded $80,000 in forfeitures in the second quarter of 2020 and $106,000 in forfeitures during the six months ended June 30, 2020 reflecting employee turnover during these periods.

As of June 30, 2020, there was $154,000 of total unrecognized compensation costs related to outstanding stock options, which are expected to be recognized over a weighted average of 1 year.

The weighted average grant date fair value of stock options issued during the six months ended June 30, 2020 was $0.10 per share. The weighted average grant date fair value of stock options vested during the six months ended June 30, 2020 and June 30, 2019 was $64,000 and $74,000, respectively.  

The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

	2020			2019
Expected term (years)		6.3			-
Expected forfeiture rate		0	%		-
Risk-free rate		1.3	%		-
Volatility		179	%		-
Dividend yield		0.0	%		-

The average risk-free interest rate is based on the U.S. treasury security rate in effect as of the grant date. We determined expected volatility using the historical closing stock price. The expected life was generally determined using the simplified method as we do not believe we have enough historical stock option exercise experience on which to base the expected term.

The following summarizes the activity of our outstanding stock options for the six months ended June 30, 2020:

				Weighted		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Shares			Price		Term (years)		Value
Outstanding at January 1, 2020		10,740,500		$	0.50		2.6	$	-
Granted		2,100,000			.10
Exercised		-			-
Canceled or expired		(1,099,000	)		.57
Outstanding at June 30, 2020		11,741,500		$	0.42		3.1	$	-
Exercisable at June 30, 2020		7,415,000		$	0.52		2.3	$	-

During the six months ended June 30, 2020, 1,099,000 options were canceled due to employee turnover, no options expired unexercised and no options were exercised. During the six months ended June 30, 2019, no options expired unexercised, and no options were canceled, or exercised. As of June 30, 2020, the exercise prices on outstanding stock options ranged from $.07 per share to $1.58 per share.

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NOTE 13 - WARRANTS 

The following summarizes the activity of our outstanding warrants for the six months ended June 30, 2020:

	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Term			Aggregate Intrinsic Value
Outstanding at January 1, 2020		7,731,707			0.45	(A)		6.2	(B)	$	33,000
Granted		-			-
Exercised		-			-
Canceled or expired		(100,000	)		2.50
Outstanding at June 30, 2020		7,631,707			0.42	(A)		6.1	(B)	$	41,000
Exercisable at June 30, 2020		7,006,707		$	0.46			6.1	(C)	$	40,000

(A)	The weighted average exercise price for warrants outstanding as of June 30, 2020 and 2019 excludes 1,750,000 warrants in each period with no determined exercise price.
(B)	The weighted average remaining contractual term for warrants outstanding as of June 30, 2020 and 2019 excludes 743,500 warrants with no expiration date.
(C)	The weighted average remaining contractual term for warrants exercisable as of June 30, 2020, and 2019 excludes 118,500 warrants with no expiration date.

NOTE 14 - RELATED PARTY TRANSACTIONS  

As of June 30, 2020, and December 31, 2019, the Company had $2,402,000 and $2,477,000, respectively, in principal amounts of senior convertible notes outstanding that were held by various members of our board of directors. These notes represent 9,338,228 of potential shares of common stock at June 30, 2020 and 9,388,378 of potential shares of common stock at December 31, 2019. Underlying warrants issued and outstanding in connection with these notes represent 1,184,273 and 1,239,288 of potential shares of common stock at June 30, 2020 and December 31, 2019. The Company had $191,000 and $164,000 at June 30, 2020 and December 31, 2019, respectively in accrued interest on convertible notes due to board members. 

As of June 30, 2020 and December 31, 2019, the Company had outstanding $1,795,000 and $1,170,000, respectively, in principal amount of a senior convertible note held by an investor that is deemed an affiliate.  These notes represent 8,846,667 of potential shares of common stock at June 30, 2020 and 4,680,000 of potential shares at December 31, 2019.  Underlying warrants issued and outstanding in connection with these notes represent 468,000 of potential shares of common stock at June 30, 2020 and at December 31, 2019.  The Company had $131,000 and $88,000, respectively in accrued interest on convertible notes due to this investor at June 30, 2020 and December 31, 2019.

As of June 30, 2020 and December 31, 2019, the Company had unsecured subordinated promissory notes outstanding of $425,000 payable to a board member. As of June 30, 2020, the Company had $27,000 in accrued interest on the promissory notes. These notes earn interest at 6% per annum and have a maturity date of October 15, 2020.   

NOTE 15 - SUBSEQUENT EVENTS 

Issuance of 2019 Convertible Notes & Shares

Subsequent to June 30, 2020, the Company issued $125,000 in 2019 convertible notes and 37,500 shares of common stock to an investor in connection with their investment in the 2019 Convertible Notes.

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

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This report contains certain forward-looking statements that are based on the beliefs of management as well as assumptions made by and information currently available to management. The statements contained in this report relating to matters that are not historical facts are forward-looking statements that involve risks and uncertainties, including, but not limited to, future demand for our products and services, the successful commercialization of our products, general domestic and global economic conditions, government and environmental regulations, competition and customer strategies, changes in our business strategy or development plans, capital deployment, business disruptions, including those caused by fires, raw material supplies, environmental regulations, and other risks and uncertainties, certain of which are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those forward-looking statements set forth herein. When used in this report, the words “anticipate”, “believe”, “estimate” or “expect” or words of similar import are intended to identify forward-looking statements. For further discussion of certain of the matters described above and other risks and uncertainties, see below and in “Risk Factors” in Item 1A of our 2019 annual report on Form 10-K.

Undue reliance should not be placed on our forward-looking statements. Except as required by law, we disclaim any obligation to update any factors or to publicly announce the results of any revisions to any of the forward-looking statements contained in this quarterly report on Form 10-Q to reflect new information, future events or other developments.

The following discussion and analysis should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q.

Impact of COVID-19 Outbreak

During the first quarter of 2020, the World Health Organization declared a novel coronavirus (COVID-19) outbreak as a public health emergency.  There have been mandates from international, federal, state and local authorities requiring forced closures of various businesses, schools and other facilities and organizations.  While the closures and limitations on movement, domestically and internationally, are expected to be temporary, if the outbreak continues on its current trajectory the duration of the supply chain disruption could reduce the availability, or result in delays, of material or supplies to or from the Company, which in turn could materially interrupt the Company's business operations.  Given the speed and frequency of continuously evolving developments with respect to this pandemic, the Company cannot reasonably estimate the magnitude of the impacts to its results of operations.

Overall Business Strategy  

The Company has two business divisions; the CURA (Circadian User Risk Assessment) division which is engaged in the fatigue management business and the Aegis division which is engaged in the development of technologies in the power and hydraulic industry. The Company is focused on the commercialization of a wellness and safety system (the myCadian system) and a uniquely designed hydraulic pump that will be smaller, lighter, less expensive and more efficient than current technology. The Company has not had significant revenue-producing operations.  

It is important to note, that the cycle time from the initiation of the sales process to revenue realization can be highly variable especially as a start-up entity. In addition to the activities to be undertaken to implement our plan of operations, we may expand and/or refocus our activities depending upon future circumstances and developments.

CURA Division: the myCadian system

The Company’s CURA division has developed a proprietary technology and algorithms designed to (i) identify and measure a user's individual circadian rhythm and (ii) to provide users with actionable information on alertness, wellness and overall health.  The myCadian system will enable the user to anticipate and avert undesired or disastrous situations caused by the degradation of alertness. With the information provided from the software analytics, users can work with Z-Coach our proprietary sleep training and education solution to correct sleep issues and improve overall wellness.   

The myCadian platform is designed to predict and detect a degradation of alertness in a user. The myCadian platform initially supports IOS devices and over time will be expanded to include android based devices. The myCadian system will include:

● a risk assessment that identifies the degradation of alertness that may affect a wearer’s ability to perform tasks,

● predictive reporting for a user to act when alertness begins to wane, before fatigue becomes dangerous,

● flexible settings to provide employers a customized tool using their defined safety criteria and to create protocols for action and

● the Z-Coach wellness program.

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Aegis Division: Hydraulic Pump   

During 2019, the Company initiated discussions with investment advisors to evaluate the possible monetization of the Aegis technologies.  On April 8, 2020, the Company reported that it had initiated a temporary suspension of this evaluation process. This decision was linked to the COVID-19 pandemic which adversely impacted and is expected to continue to adversely impact the Company’s ability to generate industry interest in the Aegis technologies. Recent updates with interested parties have indicated that companies in the hydraulics industry are currently focused on internal processes, technology, and employees.

The Aegis hydraulic pump technology brings to the hydraulic pumps and motors industry a unique technology that is: smaller, lighter and less expensive, is more efficient and as reliable as conventional pumps and motors. The Company has completed a production prototype and had achieved significant milestones in the design and testing of this prototype. We have filed for patent protection for our novel non-rotating group pump concept.  

In addition to the activities to be undertaken to implement our plan of operation detailed above, we may expand and/or refocus our marketing activities depending upon future circumstances and developments. Information regarding the Company and all of our inventions, including regular updates on technological and business developments, can be found on our website, www.CurAegis.com. The website and its contents are not incorporated by reference into this report.

Results of Operations for the three months ended June 30, 2020 and 2019

Revenue, Cost of Revenue and Margin

	For the three months ended June 30,						Variance
	2020			2019			Incr (decr)
CURA revenue	$	2,000		$	2,000		$	-
Cost of revenue		12,000			3,000			9,000
Loss on revenue	$	(10,000	)	$	(1,000	)	$	9,000

The Company recorded zero and $1,000 in Z-Coach sales during the three months ended June 30, 2020 and 2019, respectively resulting in revenue of $2,000 in each period. As of each of June 30, 2020, and December 31, 2019, the Company has deferred revenue of $4,000 attributed to Z-Coach subscription revenue that will be recognized ratably as our performance obligations are satisfied. The 2019 cost of revenue recorded for three-month period included software amortization, which is fully amortized and no longer expensed. The 2020 cost of revenue recorded for the three-month period includes $1,000 for Z-Coach and $12,000 related to promotion and design for app development. The Z-Coach training module provides fatigue safety training over a twelve-month subscription period and the user has unlimited access to the tool during the subscription period. Customers are billed at the acceptance of the subscription and revenue is recognized ratably over the subscription period as our performance obligations are satisfied and when collection is reasonably assured. 

Engineering and Development Costs and Expenses

	For the three months ended June 30,					Variance
	2020			2019		Incr (decr)
Wages and benefits	$	90,000		$	165,000	$	(75,000	)
Professional fee and advisors		-			34,000		(34,000	)
Facilities		8,000			-		8,000
Computer and software maintenance		1,000			5,000		(4,000	)
Depreciation and amortization		3,000			6,000		(3,000	)
		102,000			210,000		(108,000	)
Stock based compensation		(37,000	)		8,000		(45,000	)
Total Engineering and Development	$	65,000		$	218,000	$	(153,000	)

Engineering and development expenses decreased during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 reflecting the reduction in headcount, professional fees, and computer and software expenses. These cost reductions reflect the temporary suspension of the Company’s efforts to monetize the Aegis technologies, as previously reported, as a result of the Covid-19 pandemic. Engineering headcount was six and seven professionals as of June 30, 2020 and June 30, 2019, respectively.

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General and Administrative Costs and Expenses

	For the three months ended June 30,				Variance
	2020		2019		Incr (decr)
Wages and benefits	$	134,000	$	235,000	$	(101,000	)
Professional fees and advisors		57,000		55,000		2,000
Facilities and occupancy		20,000		38,000		(18,000	)
Insurance		23,000		23,000		-
Sales and marketing		41,000		-		41,000
Patents		14,000		11,000		3,000
Computer and software maintenance		5,000		5,000		-
Shareholder		4,000		5,000		(1,000	)
Travel		-		9,000		(9,000	)
Other costs and expenses		7,000		25,000		(18,000	)
		305,000		406,000		(101,000	)
Stock based compensation		8,000		37,000		(29,000	)
Total General and Administrative	$	313,000	$	443,000	$	(130,000	)

General and administrative expense decreased during the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to staff reductions and the recognition of stock compensation forfeitures related to employee turnover. The second quarter of 2020 includes $41,000 in outside marketing efforts related to the software development of the fatigue management product. General and administrative headcount was three and eight at June 30, 2020 and 2019, respectively.

Non-operating Expense

	For the three months ended June 30,						Variance
	2020			2019			Incr (decr)
Interest expense	$	(341,000	)	$	(304,000	)	$	37,000
Accrued severance		(106,000	)		-			106,000
Other income		7,000			1,000			6,000
	$	(440,000	)	$	(303,000	)	$	137,000

Interest expense increased by $37,000 for the three months ended June 30, 2020 compared to the prior year quarter. The Company has $11,035,000 in face value of convertible notes outstanding compared to $10,310,000 at December 31, 2019. During the three months ended June 30, 2020, the Company recognized $341,000 in interest expense on the convertible, demand and promissory notes which includes $200,000 of amortization on debt discount that is classified as interest expense. The increase in interest expense since 2019 reflects $725,000 of new 2019 convertible notes with an interest rate of 6% per annum, interest on $650,000 of demand notes with a variable interest rate of 3.25% that were issued in the third quarter of 2019, and amortization of debt discount on the 2018 and July 2018 convertible notes issued in the first half of 2019. The 2020 interest expense also reflects $6,000 in interest recognized on 6% unsecured promissory notes. During the three months ended June 30, 2019 the Company recognized $304,000 in interest expense on the convertible notes including $186,000 of amortization on debt discount classified as interest expense related to the convertible notes.

In accordance with ASC 420, the Company recognized accrual for one-time termination benefit costs in connection with two employees whose employment with the Company will terminate at the beginning of third quarter of 2020. These costs will be paid over the coming six-month period through January 2021.

Net Loss for the three months ended June 30, 2020 and 2019

The net loss for the three months ended June 30, 2020 was $821,000, compared with a net loss in the three months ended June 30, 2019 of $965,000. The net loss attributable to common stockholders for the second quarter of 2020 was $876,000 as compared to $1,019,000 for the second quarter of 2019.

The weighted average basic and diluted common shares outstanding for the three month periods ended June 30, 2020 and 2019 amounted to 51,379,000 and 50,478,000, respectively.

Basic and diluted loss per common share for the three-month periods ended June 30, 2020 and 2019 was $0.02 in each period. Preferred stock dividends of $55,000 and $54,000 was recorded in the three-month periods ended June 30, 2020 and 2019, respectively.

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Results of Operations for the six months ended June 30, 2020 and 2019

Revenue, Cost of Revenue and Margin

	For the six months ended June 30,					Variance
	2020			2019		Incr (decr)
CURA revenue	$	5,000		$	9,000	$	(4,000	)
Cost of revenue		13,000			9,000		4,000
Loss on revenue	$	(8,000	)	$	-	$	(8,000	)

The Company recorded $5,000 and $1,000 in Z-Coach sales during the six months ended June 30, 2020 and 2019, respectively resulting in revenue of $5,000 and $9,000, respectively. The 2019 cost of revenue recorded for three-month period included software amortization, which is fully amortized and no longer expensed. The 2020 cost of revenue recorded for the three-month period includes $1,000 for Z-Coach and $12,000 related to promotion and design for app development. The Z-Coach training module provides fatigue safety training over a twelve-month subscription period and the user has unlimited access to the tool during the subscription period. Customers are billed at the acceptance of the subscription and revenue is recognized ratably over the subscription period as our performance obligations are satisfied and when collection is reasonably assured. 

Engineering and Development Costs and Expenses

	For the six months ended June 30,					Variance
	2020			2019		Incr (decr)
Wages and benefits	$	162,000		$	330,000	$	(168,000	)
Professional fee and advisors		1,000			163,000		(162,000	)
Facilities		16,000					16,000
Computer and software maintenance		4,000			12,000		(8,000	)
Depreciation and amortization		6,000			13,000		(7,000	)
Other costs and expenses		-			12,000-		(12,000	)
		189,000			530,000		(341,000	)
Stock based compensation		(33,000	)		19,000		(52,000	)
Total Engineering and Development	$	156,000		$	549,000	$	(393,000	)

Engineering and development expenses decreased during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to the decrease in headcount, professional fees, and computer and software expenses. These cost reductions reflect the temporary suspension of the Company’s efforts to monetize the Aegis technologies, as previously reported, as a result of the Covid-19 pandemic.  Engineering headcount was six and seven professionals as of June 30, 2020 and June 30, 2019, respectively.

General and Administrative Costs and Expenses

	For the six months ended June 30,				Variance
	2020		2019		Incr (decr)
Wages and benefits	$	298,000	$	485,000	$	(187,000	)
Professional fees and advisors		142,000		142,000		-
Facilities and occupancy		42,000		79,000		(37,000	)
Insurance		41,000		43,000		(2,000	)
Sales and marketing		41,000		62,000		(21,000	)
Patents		17,000		21,000		(4,000	)
Travel		6,000		16,000		(10,000	)
Computer and software maintenance		10,000		13,000		(3,000	)
Shareholder		10,000		11,000		(1,000	)
Other costs and expenses		6,000		30,000		(24,000	)
		613,000		902,000		(289,000	)
Stock based compensation		43,000		85,000		(42,000	)
Total General and Administrative	$	656,000	$	987,000	$	(331,000	)

General and administrative expense decreased during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to: headcount decreases, lower facility costs resulting from the relocation of office space in the third quarter of 2019 and reduced spending for patent and travel costs. The first half of 2019 included $62,000 in outside marketing efforts related to the CURA product. General and administrative headcount was three and eight at June 30, 2020 and 2019, respectively.

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Non-operating Expense

	For the six months ended June 30,						Variance
	2020			2019			Incr (decr)
Interest expense	$	(678,000	)	$	(578,000	)	$	100,000
Accrued severance		(106,000	)		-			106,000
Other income		7,000			1,000			6,000
		(777,000	)		(577,000	)		(200,000	)

Interest expense increased by $100,000 for the six months ended June 30, 2020 compared to the prior year period. The Company has $11,035,000 in face value of convertible notes outstanding compared to $10,310,000 at December 31, 2019. During the six months ended June 30, 2020, the Company recognized $678,000 in interest expense on the convertible, demand and promissory notes which includes $400,000 of amortization on debt discount that is classified as interest expense. The increase in interest expense since 2019 reflects the issuance of $725,000 face value of new 2019 convertible notes with an interest rate of 6% per annum, interest on $650,000 of demand notes with a variable interest rate of 3.25% at quarter-end which were issued in the third quarter of 2019, and amortization of debt discount on the 2019 and July 2018 notes issued in the first half of 2019. The 2020 interest expense includes $13,000 in interest recognized on 6% unsecured promissory notes. During the six months ended June 30, 2019 the Company recognized $304,000 in interest expense on the convertible notes including $186,000 of amortization on debt discount classified as interest expense related to the convertible notes.

In accordance with ASC 420, as of June 30, 2020 the Company recognized accrual for one-time termination benefits costs in connection with two employees whose employment with the Company will terminate at the beginning of third quarter of 2020. These costs will be paid over the coming six-month period through January 2021.

Net Loss for the six months ended June 30, 2020 and 2019

The net loss for the six months ended June 30, 2020 was $1,574,000, compared with a net loss in the six months ended June 30, 2019 of $2,113,000. The net loss attributable to common stockholders for the first half of 2020 was $1,683,000 as compared to $2,221,000 for the first half of 2019.

The weighted average basic and diluted common shares outstanding for the six months ended June 30, 2020 amounted to 51,263,000 and 50,456,000, respectively.

Basic and diluted loss per common share for the six-month periods ended June 30, 2020 and 2019 was $0.03 and $0.04, respectively. Preferred stock dividends of $109,000 and $108,000 was recorded in the six-month periods ended June 30, 2020 and 2019, respectively.

Liquidity and Capital Resources   

During the six months ended June 30, 2020 we used $903,000 of cash in operating activities. A net loss of $1,574,000 was adjusted for $488,000 in non-cash expenses for: amortization of debt discount, depreciation and amortization, the non-cash expense recognized for stock-based compensation and common shares issued in connection with interest expense associated with convertible notes issued in the quarter. The Company reported $168,000 in changes in working capital components during the six months ended June 30, 2020.  The decrease in cash used operations in the first half of 2020 compared to the first half of 2019 was driven primarily by the decrease in the net loss from operations. 

During the second quarter of 2020, the Company received the proceeds from two federally funded programs offered to small businesses as a result of the Covid-19 pandemic. On April 20, 2020 the Company received a $227,700 loan under the Small Business Administration Paycheck Protection Program (the “PPP”). The Company also received a $7,000 grant from the U. S. Small Business Administration in connection with its Economic Injury Disaster Loan (EIDL) program.

During the six months ended June 30, 2020, the Company received proceeds of $725,000 from the issuance of senior convertible notes. During the six months ended June 30, 2019, the Company received proceeds of $800,000 from the issuance of senior convertible debt and $425,000 in proceeds from the issuance of unsecured promissory notes.

Current Cash Outlook and Management Plans    

As of June 30, 2020, we had cash on hand of $68,000, negative working capital of $4,281,000, stockholders' deficiency of $13,708,000 and an accumulated deficit of $92,999,000. During the six months ended June 30, 2020 we raised $725,000 in proceeds through the issuance of convertible notes. The proceeds from these private placements have been used to support the ongoing development and marketing of our core technologies and product initiatives.

22

Management estimates that the 2020 cash needs will run between $1.7 and $2.0 million, based upon the cash used in operations in the three months ended June 30, 2020. As of June 30, 2020, the Company’s cash on hand is not sufficient to cover the Company’s future working capital requirements. This raises substantial doubt as to the Company’s ability to continue as a going concern. Management will continue to use its best efforts to develop financing opportunities to fund the development and commercialization of the CURA and Aegis products.

Since inception, we have financed our operations by the sale of our securities and debt financings. We need to raise additional funds to meet our working capital needs, to fund expansion of our business, to complete development, testing and marketing of our products, or to make strategic acquisitions or investments. No assurance can be given that necessary funds will be available for us to finance our development on acceptable terms, if at all. Furthermore, additional financings will involve dilution to our shareholders or may require that we relinquish rights to certain of our technologies or products. In addition, we will experience operational difficulties and delays due to working capital restrictions. If adequate funds are not available from additional sources of financing, we will have to delay or scale back our plans. 

The Company’s ability to fund its current and future commitments from its available cash depends on its ability to launch and generate sales from the CURA app. If the Company cannot generate revenue from the CURA app, it would need to raise funds in order to meet its working capital needs and pursue its growth strategy. Although there can be no such assurances, management believes that sources for these additional funds will be available through either current or future investors.   

Critical Accounting Policies   

Revenue Recognition and Deferred Revenue: The Company accounts for revenue in accordance with FASB ASC 606, "Revenue from Contracts with Customers" and all related amendments. For contracts where performance obligations are satisfied at a point in time, the Company recognizes revenue when the product is shipped to the customer. For contracts where the performance obligation is satisfied over time, as in the Z-Coach sales, the Company recognizes revenue over the subscription period.  Revenue from the sale of the Company's products is recognized net of cash discounts, sales returns and allowances. Our collection terms provide customers standard terms of net 30 days. Future performance obligations are reflected in deferred revenue.

Income Taxes

We account for income taxes using the asset and liability method, the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting and the tax basis of our assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. A valuation allowance related to deferred tax assets is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

We account for uncertain tax positions using a more-likely-than-not recognition threshold based on the technical merits of the tax position taken. Tax benefits that meet the more-likely-than-not recognition threshold should be measured as the largest amount of tax benefits, determined on a cumulative probability basis, which is more likely than not to be realized upon ultimate settlement in the financial statements. It is our policy to recognize interest and penalties related to income tax matters as general and administrative expenses. As of June 30, 2020 and December 31, 2019, there were no accrued interest or penalties related to uncertain tax positions.

Stock-Based Compensation  

FASB ASC 718-10 requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense over the requisite service period (generally the vesting period) in the consolidated financial statements based on their fair values on the grant date. The impact of forfeitures that may occur prior to vesting is also estimated and considered in the amount recognized. In addition, the realization of tax benefits in excess of amounts recognized for financial reporting purposes will be recognized as a financing activity in accordance with FASB ASC 718-10.  

No tax benefits were attributed to the stock-based compensation expense because a valuation allowance was maintained for substantially all net deferred tax assets.  

Impact of Inflation   

Inflation has not had a significant impact on our operations to date and we are currently unable to determine the extent inflation may impact our operations in future periods.  

Quarterly Fluctuations   

Since we are currently focused on developing our technologies for commercialization and we have not yet engaged in significant revenue producing operations, we do not have any meaningful quarterly fluctuations that impact our financial performance.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

Item 4. CONTROLS AND PROCEDURES

Disclosure controls and procedures  

Evaluation of Disclosure Controls and Procedures 

The Chief Executive Officer and our Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded, as of June 30, 2020, that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of the end of such period, are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in Internal Control Over Financial Reporting 

There have been no significant changes in our internal control over financial reporting during the three months ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings 

None.

Item 1A. Risk Factors 

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.  There have been no material changes in the Company's risk factors from those disclosed in Part I, Item 1A. of the Company's Annual Report on for 10-K for the fiscal year ended December 31, 2019 with the exception of the following item:

The results of engineering and development efforts may be uncertain and there can be no assurance of the commercial success of our technology or future products.

The development of our products and services is complex and costly.  Some products currently under development or future product developments, including specific product features or functions, may not technologically successful.  In addition, the cost and length of our product development may be greater than we anticipate, and we may experience delays in future product development or problems in the design or quality of our products. Unanticipated problems in developing products or services could also divert substantial research and development resources, which may impair our ability to develop products and services and could substantially increase our costs.   If new or enhanced product or service introductions are delayed or not successful, we may not be able to achieve an acceptable return, if any, on our product development efforts.  Even if our resulting products are technologically successful, they may not achieve market acceptance or compete effectively with our competitor's products.  Our efforts to develop the CURA software platform, designed to measure a degradation of alertness in a person's ability to perform a task or job, may not be technologically successful.  We continue to design and refine the myCadian software focused on optimizing the user experience.

Our efforts to develop and monetize our Aegis hydraulic pump, an innovative hydraulic pump that is smaller, lighter, and more efficient and cost-competitive than other such pumps in the market, may not be successful.  We have experienced and expect to continue to experience a decrease in industry interest in the Aegis technologies as a result of the COVID-19 pandemic, which has caused, among other things, companies in the hydraulics industry to shift focus to their internal processes, technologies, and employees during the pandemic-related pause in the worldwide economy. As a result, we initiated a temporary suspension of our pursuit of the monetization of our Aegis pump and motor technologies.

The timetable for our product development may be longer than we anticipate and we may experience delays in future product development or may elect not to pursue such development.  Even if one or more of our resulting product features is technologically successful, it may not achieve market acceptance or compete effectively with our competitors' technologies. In addition, there can be no assurance that our patent applications will result in patents being issued or that current or additional patents will afford protection against competitors.

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

The Company issued $125,000 of 2019 Convertible Notes during the period from July 1, 2020 through the filing of this quarterly report on Form 10-Q. 

Item 3. Defaults Upon Senior Securities 

None.

Item 4. Mine Safety Disclosures 

Not Applicable.

Item 5. Other Information

None.

24

Item 6. Exhibits

The following Exhibits, as applicable, are attached to this Quarterly Report (Form 10-Q). The Exhibit Index is found on the page immediately succeeding the signature page and the Exhibits follow on the pages immediately succeeding the Exhibit Index.

3.1	Certificate of Incorporation, incorporated by reference to Form 10-SB/A, Registration Statement, registering Company’s $.01 par value common stock under section 12(g) of the Securities Exchange Act of 1934.
3.2	Certificate of Amendment to the Certificate of Incorporation dated August 30, 2000, incorporated by reference to Form SB-2 filed October 19, 2000.
3.3	Certificate of Correction dated March 22, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2002.
3.4	By-laws as amended on January 24, 2002, incorporated by reference to Form 10-KSB filed for fiscal year ended December 31, 2002.
3.5	Certificate of Amendment to the Certificate of Incorporation dated October 21, 2004 setting forth terms and conditions of Class B Preferred, incorporated by reference to Form 10-QSB filed for fiscal quarter ended December 31, 2004.
3.6	Certificate of Amendment to the Certificate of Incorporation dated January 26, 2007 increasing authorized common shares from 40,000,000 to 400,000,000, incorporated by reference to Form 10-K filed for fiscal year ended December 31, 2006.
3.7	Certificate of Amendment to the Certificate of Incorporation dated September 21, 2011 setting forth terms and conditions of Class C Preferred, incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on September 26, 2011.
3.8	Certificate of Amendment to the Certificate of Incorporation of CurAegis, Inc., dated March 28, 2014 setting forth terms and conditions of Series C-2 Preferred, incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on March 28, 2014.
3.9	Certificate of Amendment to the Certificate of Incorporation of CurAegis, Inc., dated February 29, 2016 setting forth terms and conditions of Series C-3 Preferred, incorporated by reference to Exhibit 3.9 of Form 10-K filed for the fiscal year ended December 31, 2015.
10.1	Form of Securities Purchase Agreement made and entered into as of May 28, 2019, incorporated by reference to Exhibit 4.1 to CurAegis Technologies, Inc. Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2019.
10.2	Form of 6% Senior Convertible Promissory Note, incorporated by reference to Exhibit 4.2 to CurAegis Technologies, Inc. Current Report on Form 8-K filed with the Securities and Exchange Commission on June 3, 2019.
10.3	Employment Letter Agreement, dated March 24, 2020, incorporated by reference to Exhibit 10.1 to CurAegis Technologies, Inc. Current Report on Form 8-K filed with the Securities and Exchange Commission on March 25, 2020.
10.4	Consulting Agreement, Outsourced Finance Services, dated June 1, 2020
31.1	Rule 13a-14(a)/15d-14(a) Certifications – CEO
31.2	Rule 13a-14/15d-14 Certifications – CFO
32	Section 1350 Certifications
100	XBRL-related documents
	None.
101	The following materials from CurAegis Technologies, Inc.’s Quarterly Report on Form 10-Q for the six month period ended June 30, 2020, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations for the three and six month periods ended June 30, 2020 and 2019 (ii) Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019, (iii) Condensed Consolidated Statements of Cash Flows for the six month periods ended June 30, 2020 and 2019, (iv) Condensed Consolidated Statements of Stockholders’ Deficiency for the six month periods ended June 30, 2020 and 2019 and (v) Notes to Condensed Consolidated Financial Statements*
	* Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

25

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CURAEGIS TECHNOLOGIES, INC.
Dated: August 11, 2020	By:	/s/ James R. Donnelly
		James R. Donnelly
		Chief Executive Officer

Dated: August 11, 2020	By:	/s/ Jason Burke
		Jason Burke
		Chief Financial and Accounting Officer

26

EX-10.4

Exhibit 10.4

Appendix A: Statement of Work (SOW)

SOW Number: 01

Services

This Statement of Work (SOW 01), effective June 1, 2020 (SOW 01 Effective Date), is governed by the terms of the Master Service Agreement (“Agreement”) made between Positive Venture Group Inc., 501 – 1400 St. Laurent Blvd., Ottawa, Ontario, K1K 4H4, Canada (“Positive”) and CurAegis Technologies Inc., 350 Linden Oaks, Rochester, New York, USA. 14625. (“You” or “Client”) and is effective as of June 1, 2020 (“Agreement Effective Date”).

1. Term

June 1, 2020 – May 31, 2021 (the “SOW 01 Term”)

2. Positive Responsibilities

Under this SOW, Positive will undertake the following activities (the “Services”):

2.1.   Assign Positive Venture Hub (Hub) to You to provide Outsourced Finance Services to CurAegis Technologies Inc. The Hub shall work with You to deliver the following services:

2.1.1. Transition Services:

2.1.1.1. Situation Assessment (half day);

2.1.1.2. Set-up on NetSuite “FaaS LE – SmallBiz OneWorld”, Pricing Category 3 (less than $20,000,000,00 USD Revenue), including:

2.1.1.2.1. Two (2) Client Restricted NetSuite User(s);

2.1.1.2.1.1. Should You require additional NetSuite Users, there will be an added cost of $100 per user to the Charges outlined below, as preapproved by You.

2.1.1.2.2. Standard Industry Chart of Accounts | Accounts Payable | Accounts Receivable; and

2.1.1.2.3. Bank Accounts | Organizations | Income Statement and Balance Sheet Reporting.

2.1.1.3. Data Migration:

2.1.1.3.1. Vendors | Customers | AR and AP Balances;

2.1.1.3.2. Trial Balance Uploads for current fiscal year (monthly intervals) | Prepaid and Accrual Items | Deferred Revenue Balances; (no transactional data uploads are included currently)

2.1.1.3.3. Other liability and equity balances; and

2.1.1.3.4. Please note this SOW is for one [1] Legal Entities.

2.1.1.4. Connections and Integrations:

2.1.1.4.1. Expensify integration for up to 15 users

2.1.1.4.2. Note, the services outlined in this SOW 01 do not include any additional integrations or connectors other than those outlined above. Should CurAegis Technologies Inc. identify the need for additional integrations or connectors during the term of this SOW, an Amendment will be created to reflect the costs associated, as mutually agreed between You and Positive.

2.1.2. Monthly Outsourced Finance Services:

2.1.2.1. Accounts Receivable Processing;

2.1.2.2. Accounts Payable Processing;

2.1.2.3. Payroll Administration Processing;

2.1.2.4. Cash Management Processes;

2.1.2.4.1. Including Week/ bi-weekly | Cash Flow review

2.1.2.5. Harmonized Sales Tax and other regulatory filings;

2.1.2.6. Month-end Accounting Process; and

2.1.2.7. Standard monthly Financial Reporting and Review (Income Statement and Balance Sheet).

3. Completion Criteria

The following milestones shall deem completion of Outsourced Finance activities:

3.1. Completion of Transition Services;

3.1.1. Trial Balance data uploaded to system for current and previous fiscal year only (additional years is not in scope).

3.2. Initiation of a Monthly Outsourced Finance Services;

3.3. Monthly Review of Financial Statements; Monthly close completed business Day 15;

3.4. Completion of Quarterly Close; Quarter close completed by business Day 15;

3.5. Completion of Annual Close.

4. Deliverables and Materials

4.1. Initial transition and setup;

4.2. Annual Unaudited Financial Statements;

4.3. Accurate and Timely Payroll records;

4.4. Accurate Accounts Receivable and Accounts Payable Documentation;

4.5. Accurate and timely HST Tax Filings;

4.6. Monthly and quarterly financial statements; and

4.7. Annual Service Review conducted 60 days before Contract Renewal Term.

5. Positive Responsibilities

Under this SOW, Positive will undertake the following activities (the “Services”):

5.1. Positive will assign “You” a CFO to provide C-Level Financial Advisory Services to CurAegis Technologies Inc. The CFO shall work with CurAegis Technologies Inc.’s Management to:

5.1.1. Perform a situation assessment (needs, wants, priorities) of CurAegis Technologies Inc. related to the Services Positive can provide.

5.1.2. Establish and enhance the cash flow forecast reporting and processes.

5.1.3. Strengthen and support the financial accounting and reporting processes.

5.1.4. Augment strategic plan and associated processes (5-year plan, remodeled quarterly).

5.1.5. Establish or augment Board governance and meeting cadence.

5.1.6. Establish or augment Management cadence and goal setting.

5.1.7. Support financing and funding (grants) activities and inorganic transactions (e.g. M&A).

5.1.8. Identify and execute other value-add introductions and activities beneficial to You.

5.1.9. Act as a virtual CFO including:

5.1.9.1. Participate in the management cadence including sales and Executive meetings.

5.1.9.2. Participate in the reporting and meeting cadence for investors and the Board of Directors.

5.1.9.3. Support monthly, quarterly and annual financial statement and reporting preparation and interface with external Auditors/Accountants.

5.1.9.4. Support monthly finance operations, including billing, collections, payments, payroll and banking and cash flow management activities.

5.1.9.5. Support strategic and annual planning processes.

5.1.9.6. Support compensation planning and structures.

5.1.9.7. Participate in the management activities as necessary including meeting with customers, meeting with investors, supplier management, review of contracts, review of accounting conclusions, policies and procedures etc.

5.1.9.8. Support annual tax and payroll filing compliance, including Scientific Research and Experimental Development (SRED) Claims.

5.1.9.9. Support tax planning with the CEO and Advisors.

5.1.10. Act as a support for the CEO on financial and other matters.

5.1.11. Other general participation on the management team.

5.1.12. Act as an interface with the Board to ensure appropriate governance processes are in place.

6. Completion Criteria

The following milestones shall deem completion of CFO activities:

6.1. Completion of a situation assessment for You, including a list of recommended priorities.

6.2. Establishment of a cash flow report and process.

6.3. Completion of monthly, quarterly and annual financial statements and associated Audit/Review.

6.3.1. Including deliverables and/or work effort related to SEC and Regulatory reporting (ex. 10Q, 10K, etc.)

6.4. Deliver an annual budget and long-term (5-year) strategic plan, and associated Key Performance Indicator (KPI) metrics, as required.

6.5. Support the creation of investor presentations to support financings, as required.

6.6. Support the preparation and submissions of grant applications for non-dilutive financing, as required.

6.7. Support the preparation of a Calendar Wheel for Board and Committees (e.g. Audit, Compensation).

6.8. Provide recommendations on the management cadence and support associated meetings.

6.9. Support the completion of Fiscal tax and payroll filings, including SRED Claims. Please note, this does not include Corporate Tax Filings.

7. Deliverable Materials

The following deliverables shall be delivered during the performance of CFO activities:

7.1. Situation assessment.

7.2. Cash flow forecast.

7.3. Monthly, quarterly and annual financial statements

7.4. Annual budget and associated Company/management KPIs.

7.5. Long-term (5-year) strategic plan financial report.

7.6. Investor presentations to support financing.

7.7. Grant materials.

7.8. Support annual tax and payroll filings.

7.8.1. Please note, this does not include the full preparation of complete Corporate Tax Filings, foreign tax filings or provincial, state or local excise tax filings outside the province of Ontario, which will generally be handled by a third party tax advisor as facilitated by You or Positive.

7.8.2. Documented recommendations on operational processes.

8. Positive Responsibilities

Under this SOW, Positive will undertake the following activities (the “Services”):

8.1. Positive will assign “You” a member of the Financial Planning & Analysis team to provide FP & A Services to CurAegis Technologies Inc. The FP&A team shall work with CurAegis Technologies Inc.’s Management to:

8.1.1. Perform a situation assessment (needs, wants, priorities) of CurAegis Technologies Inc. related to the FP&A Services Positive can provide.

8.1.2. Establish or enhance business model:

8.1.2.1. Monthly reporting and forecast updates.

8.1.2.2. Support for KPI reporting.

8.1.2.3. Quarterly rolling plans.

8.1.2.4. Annual Budgets and monthly-year plans.

9. Completion Criteria

The following milestones shall deem completion of activities:

9.1. FP&A Service activities:

9.1.1. Provide monthly forecast and reporting package.

9.1.2. Support quarterly rolling plans.

9.1.3. Provide annual budget.

10. Deliverable Materials

The following deliverables shall be delivered during the performance of the activities.

10.1. FP&A deliverables:

10.1.1. Business Model.

10.1.2. Forecast and reports.

10.1.3. Quarterly rolling plan.

10.1.4. Annual budget.

11. Outsourced Finance Scope and Specifications

11.1. Process Areas in Scope

The Service supports the below standard process areas. Certain process areas of the Service support particular functionalities:

11.1.1. Record to Report – General Ledger;

11.1.2. Design to Build – Product/Service Item Configuration;

11.1.3. Procure to Pay / Return to Debit; and

11.1.4. Order to Cash / Return to Credit.

11.2. Organizational Structure – Subsidiary Management

This SOW includes subsidiary management and consolidation and the following organizational structure will be implemented:

Subsidiary Name	Parent Subsidiary	Operations	Base Currency
[INSERT SUBSIDIARY ENTITY NAME]	[INSERT PARENT ENTITY NAME]	Canada	CAD
[INSERT SUBSIDIARY ENTITY NAME]	[INSERT PARENT ENTITY]	Canada	CAD
[INSERT SUBSIDIARY ENTITY NAME]	[INSERT PARENT ENTITY]	USA	USD

11.2.1. Assumptions:

11.2.1.1. A single consistent Chart of Accounts (“COA”) for parent and all subsidiaries will be configured. Individual accounts within the COA can be limited to only one subsidiary.

11.2.1.2. Each subsidiary (unless otherwise identified) is 100% owned by the parent.

11.2.1.3. All subsidiaries have the same fiscal year end (12/31).

11.2.1.4. All subsidiaries will be configured with the user interface in English.

11.3. Currency

This SOW includes multi-currency functionality:

11.3.1. Definition of multiple foreign currencies – USD, CAD, etc.

11.3.2. Currency exchange rate table and open transaction revaluation; and

11.3.3. Exchange rate integration feature.

11.4. Process Area Configuration Detail

This SOW includes the following basic process area configuration and setup activities:

11.4.1. Record to Report (Included Activities):

11.4.1.1. Departments Segment (50 max) - replicated across books;

11.4.1.2. Classes Segment (50 max) - replicated across books;

11.4.1.3. Single Chart of Accounts (300 max);

11.4.1.4. Subsidiaries (2 max);

11.4.1.5. Accounting Periods - 12 Calendar Month;

11.4.1.6. Multiple Currencies & Exchange Rates; and

11.4.1.7. Up to 1 Budget, segmented by department & subsidiary.

11.4.2. Design to Build (Included Activities)

Items will be used to facilitate GL impact of AP and AR transactions:

11.4.2.1. Item Master to include the following items types (max 500);

11.4.2.2. Item Type;

11.4.2.3. Non-Inventory;

11.4.2.4. Service; and

11.4.2.5. Discount/Markup.

11.4.3. Procure to Pay / Return to Debit (Included Activities):

11.4.3.1. Vendor Master;

11.4.3.2. Employee Master;

11.4.3.3. Purchase Requests/Orders;

11.4.3.4. Vendor Bills;

11.4.3.5. Amortization Schedules (up to 5 schedules);

11.4.3.6. Vendor Bill Payments;

11.4.3.7. Vendor Credits; and

11.4.3.8. Expense Reports.

11.4.4. Order to Cash / Return to Credit (Included Activities):

11.4.4.1. Customer Master;

11.4.4.2. Sales Orders;

11.4.4.3. Customer Invoice;

11.4.4.4. Customer Payments; and

11.4.4.5. Credits Memo.

11.5. General Configuration Scope Detail

11.5.1. This SOW includes the following general configuration and setup activities:

11.5.1.1. Personalization of Company Information, Rename Records/Transactions, Auto- Generated Numbers and Preferences; and

11.5.1.2. Installation of NetSuite Leading Practice dashboards, without modification.

11.5.2. This SOW includes the following general configuration/personalization of the following UI forms:

11.5.2.1. Customer Form;

11.5.2.2. Employee Form;

11.5.2.3. Item Form(s);

11.5.2.4. Vendor Form

11.5.2.5. Sales Order Form;

11.5.2.6. Invoice Form;

11.5.2.7. Purchase Order Form; and

11.5.2.8. Vendor Bill Form.

11.5.3. Assumptions:

11.5.3.1. Positive will create up to twenty-five (25) total custom fields for use on the above Custom Forms;

11.5.3.2. Positive will create up to five (5) custom saved searches; and

11.5.3.3. Positive will create up to five (5) custom reports.

11.5.4. This SOW includes the following general configuration/personalization of the following printed forms:

11.5.4.1. Check;

11.5.4.2. Invoice;

11.5.4.3. Purchase Order

11.5.4.4. Sales Order; and

11.5.4.5. Credit Memo.

11.5.5. This SOW includes the following preconfigured roles (please note: our standard SOW includes one “Account Reviewer” preconfigured role, other roles used as additional users and may be purchased for an additional fee, as mutually agreed between You and Positive).

11.5.5.1. CEO (Hands Off);

11.5.5.2. Accountant Reviewer;

11.5.5.3. Purchasing Manager;

11.5.5.4. Sales Rep;

11.5.5.5. Sales Manager; and

11.5.5.6. Positive will create up to five (5) customized roles as required for the client.

11.6. Data Migration Scope Detail:

11.6.1. Import Services;

11.6.1.1. Positive will import the following data from Customer’s legacy systems into NetSuite.

11.6.1.2. Customer will be responsible for the necessary data encryption, data extraction, data consolidation and data cleansing work required for all data migration.

11.6.1.3. Positive will provide Customer with templates for each data type to be migrated and will advise Customer on best practices for data consolidation and data planning.

11.6.2. List Data Imports.

The following tables list the entity/objects in scope for data migration, quantity limits, and the party responsible for data extraction, integrity and imports.

Entity		Import Method	Responsibility for Extraction	Responsibility for Data Integrity	Responsibility for Data Import	Responsibility for Reconciliation
	Max # of Records
Chart of Accounts	300	CSV	You	You	Positive	You
Employees	100	CSV	You	You	Positive	You
Vendors	250	CSV	You	You	Positive	You
Customers	250	CSV	You	You	Positive	You
Contacts	250	CSV	You	You	Positive	You
Items	500	CSV	You	You	Positive	You

Transaction Data Import

Entity/Object	Max # of Records	Import Method	Responsibility for Extraction	Responsibility for Data Integrity	Responsibility for Data Import	Responsibility for Reconciliation
Opening Balance	1 CoA	CSV	You	You	Positive	You
Historical Transactions/Trial Balances	Current Year	CSV	You	You	Positive	You
Open AP	250 records	CSV	You	You	Positive	You
Open AR	250 records	CSV	You	You	Positive	You

11.6.2.1. Should you require import of historical data over and above what is outlined in 5.6.2., there will be an additional cost, as preapproved between You and Positive.

11.7. User Enablement Scope Detail

11.7.1. Positive will train a super user on functional processes that are designated as in scope. This is a “train the trainer” approach; classroom training sessions for the entire customer user base will not be provided. These training services will include:

11.7.1.1. Development of a training plan; and

11.7.1.2. Remote live sessions for process areas identified.

11.7.2. Training Plan and Deliver:

11.7.2.1. Positive will collaborate with You on the creation of a training plan that will be used as the basis for the delivery of the end user training; and

11.7.2.2. Total NetSuite training is not to exceed 5 hours. Supplementary training can be acquired at an additional hourly rate.

11.7.3. Project Team:

11.7.3.1. You are responsible for providing and ensuring Your committed participation of resources required during the Onboarding Project. Positive resources are not necessarily dedicated to any single project and may be engaged across many projects for various customers.

11.7.4. Project Roles and Responsibilities:

11.7.4.1. It is important to understand this is a list of project roles, not individuals required to complete the Project. Depending on the size of the engagement, a single individual may take responsibility for any number of roles or a single role may require more than one individual.

11.7.4.1.1. Sponsor - Responsible for providing Customer resources needed for a successful implementation and promote process change where necessary.

11.7.4.1.2. Project Manager - Responsible for the oversight of Customer resources, schedules and deliverables.

11.7.4.1.3. Business Process Owner - Responsible for review and acceptance processes and identification of any exceptions.

12. Fees

This SOW 01 will be conducted on a monthly services basis. Positive will provide estimates for the Services as described in the following schedule:

Resource Name	Service	Estimated No. of months	Rate per month USD$	Total USD$
Positive  Venture Hub	NetSuite onboarding	1 month (June  2020) Onboarding to be initiated June 8	$ 15,000.00 Bill to be submitted June 15	$ 15,000.00
Positive  Venture Hub	Outsourced Finance Services	11 months (July 2020 - May 2021)	$ 11,500	$ 126,500.00
	CFO	11 months (July 2020 - May 2021)
	FP&A	11 months (July 2020 - May 2021)
TOTAL		12 months		$141,500.00

Positive will invoice CurAegis Technologies Inc. on a monthly basis in advance on the first day of each month for services provided. Payments are due Net 15. While Positive estimates that these services be delivered over a 12-month period, this contract can be revisited each quarter to ensure that each side is receiving value for the time spent. Positive is committed to the pricing schedule above for the initial term of the contract unless there is a substantial inorganic change to the business, at which time Positive will approach CureAegis with a proposal and discussion about a modified fee structure.

This Agreement shall be automatically renewed for successive one (1) year terms thereafter (each a “Renewal Term”) until and unless either Party provides the other Party with sixty (60) days prior written notice to the end of the Initial Term or the Renewal Term, provided that You may not terminate this SOW in the first six (6) months of the SOW 01 Term if the Services include a subscription to NetSuite or other Third-Party Software. Due to the significant investments being made by Positive in the initial months of the SOW # Term, should You wish to terminate the SOW # services within the first six (6) months of the initial term of this SOW, You shall pay Positive additional fees equal to twenty-five percent (25%) of the remaining Services otherwise payable in the SOW # Term.

The above fees are based on your annual revenues being less than $20,000,000.00 USD and is for one (1) Legal Entities. We regularly review your financial statements with you; when you exceed the $20,000,000.00 USD Annual Revenue threshold, we will review our pricing grid with you and will invoke a Project Change Request (“PCR”) as outlined in Appendix A-1. In the event You decide to use Services for additional Legal Entities, we will also issue a PCR to adjust the fees. In the event transaction volumes for any of the activities increase by more than ten percent (10%) from above, we will also issue a PCR to adjust the fees.

Any estimate given by Positive of any charge whether for planning or any other purpose is only an estimate. As these are estimated amounts, actual charges may differ, and we may adjust the mix of hours and rates shown above without a Project Change Request (PCR) as described in Appendix A: Project Change Control Procedure, as long as the Total Services Charges are not exceeded.

13. Third-Party Software

13.1. As part of the Service, Positive is sublicensing the following Third-Party Software to Client:

• NetSuite “FaaS LE – SmallBiz OneWorld”, Pricing Category 3 (less than $20,000,000.00 USD Revenue) (“NetSuite Service”).

13.2. Client’s use of the NetSuite Service is subject to the following terms and conditions:

a. Client has a limited, non-exclusive, non-transferable right to access and use the NetSuite account solely in the course of receiving the Services from Positive, and not for the Client’s general internal business use;

b. Client shall look solely to Positive for any issues or claims regarding the Services (including without limitation the NetSuite Service);

c. The NetSuite Service shall not be used to store, maintain, process or transmit protected health information (as defined by applicable law), and the NetSuite Service will not be used in any manner that would require NetSuite or the Service to be compliant with the United States Health Insurance Portability and Accountability Act of 1996, as amended and supplemented;

d. All rights, title and interest in and to all intellectual property rights in the NetSuite Service are reserved by NetSuite and its licensors; and

e. All usages of the NetSuite Service by any Client users is subject to NetSuite’s standard Terms of Service.

A - 1: Project Change Control Procedure

The following process will be followed if a change to this SOW is required.

(1) Positive and you may determine that it is necessary to exceed the number of estimated hours for the Services as stated in above. In such event, you may authorize additional hours and funding by the written request of your SOW signatory. The request must reference the SOW number. Through the end of the calendar year (i.e., December 31) during which this SOW is originally executed, additional hours, funding, and End-Date extension may only be requested in writing, at the originally contracted hourly rate, specified in SOW Section 4, Fees. All Changes require a Project Change Request as detailed below.

(2) A Project Change Request (PCR) will be the vehicle for communicating change. The PCR must describe the change, the rationale for the change and the effect the change will have on the project.

(3) A PCR must be signed by authorized representatives from both parties to authorize implementation of the change. Until a change is agreed to in writing, both parties will continue to act in accordance with the latest agreed version of the SOW.

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, James R. Donnelly, Chief Executive Officer of CURAEGIS TECHNOLOGIES, INC., hereby certifies that:

1. I have reviewed this quarterly report on Form 10-Q of CURAEGIS TECHNOLOGIES, INC.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 11, 2020	/s/ James R. Donnelly
	James R. Donnelly
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Jason Burke, Principal Accounting Officer of CURAEGIS TECHNOLOGIES, INC., hereby certifies that:

1. I have reviewed this quarterly report on Form 10-Q of CURAEGIS TECHNOLOGIES, INC.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 11, 2020	/s/ Jason Burke
	Jason Burke
	Chief Financial and Accounting Officer

EX-32

EXHIBIT 32

Certificate pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of CURAEGIS TECHNOLOGIES, INC. (“CURAEGIS TECHNOLOGIES, INC.”) on Form 10-Q for the period ending June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), James R. Donnelly, chief executive officer and Jason Burke, principal accounting officer, of CURAEGIS TECHNOLOGIES, INC. certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of CURAEGIS TECHNOLOGIES, INC.

August 11, 2020	/s/ James R. Donnelly
	James R. Donnelly
	Chief Executive Officer
August 11, 2020	/s/ Jason Burke Jason Burke Chief Financial and Accounting Officer

 Issuer Statement

A signed original of this written statement required by Section 906 has been provided to CURAEGIS TECHNOLOGIES, INC., and will be retained by CURAEGIS TECHNOLOGIES, INC. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2020	Aug. 11, 2020
Document Information [Line Items]
Entity Registrant Name	CurAegis Technologies, Inc.
Entity Central Index Key	0001063197
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding (in shares)		51,452,810
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Jun. 30, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Jun. 30, 2020	Dec. 31, 2019
Current Assets:
Cash	$ 68,000	$ 18,000
Prepaid expenses	9,000	2,000
Total current assets	77,000	20,000
Right to use asset (net)	169,000	193,000
Property and equipment (net)	32,000	38,000
Total non-current assets	201,000	231,000
Total Assets	278,000	251,000
Current Liabilities:
Liability for inventory	1,740,000	1,764,000
Demand notes	650,000	650,000
Promissory notes	425,000	425,000
Accounts payable	361,000	420,000
Accrued interest	735,000	509,000
Current right-to-use obligation	67,000	64,000
Other current liabilities	40,000	36,000
Accrued wages and benefits	127,000	50,000
Total current liabilities	4,145,000	3,918,000
Non-current right-to-use obligation	99,000	126,000
Paycheck Protection Program loan	228,000
Senior convertible notes (net)	9,514,000	8,410,000
Total Liabilities	13,986,000	12,454,000
Commitments and other matters
Stockholders' Deficiency:
Common stock, $.01 par value, 400,000,000 shares authorized; shares issued and outstanding at June 30, 2020 and December 31, 2019: 51,415,310 and 50,979,964 respectively	514,000	510,000
Additional paid-in capital	78,337,000	78,272,000
Accumulated deficit	(92,999,000)	(91,425,000)
Total Stockholders' Deficiency	(13,708,000)	(12,203,000)
Total Liabilities and Stockholders' Deficiency	278,000	251,000
Preferred Class C [Member]
Stockholders' Deficiency:
Preferred stock, value	157,000	157,000
Series C2 Preferred Stock [Member]
Stockholders' Deficiency:
Preferred stock, value	245,000	245,000
Series C3 Preferred Stock [Member]
Stockholders' Deficiency:
Preferred stock, value	32,000	32,000
Preferred Class A [Member]
Stockholders' Deficiency:
Preferred stock, value	5,000	5,000
Preferred Class B [Member]
Stockholders' Deficiency:
Preferred stock, value	$ 1,000	$ 1,000

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Jun. 30, 2020	Dec. 31, 2019
Preferred stock, shares authorized (in shares)	100,000,000	100,000,000
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	400,000,000	400,000,000
Common stock, shares issued (in shares)	51,415,310	50,979,964
Common stock, shares outstanding (in shares)	51,415,310	50,979,964
Preferred Class C [Member]
Preferred stock, cumulative dividend per share (in dollars per share)	$ 0	$ 0
Preferred stock, shares issued (in shares)	15,687,500	15,687,500
Preferred stock, shares outstanding (in shares)	15,687,500	15,687,500
Series C2 Preferred Stock [Member]
Preferred stock, cumulative dividend per share (in dollars per share)	$ 0	$ 0
Preferred stock, shares issued (in shares)	24,500,000	24,500,000
Preferred stock, shares outstanding (in shares)	24,500,000	24,500,000
Series C3 Preferred Stock [Member]
Preferred stock, cumulative dividend per share (in dollars per share)	$ 0	$ 0
Preferred stock, shares issued (in shares)	3,238,000	3,238,000
Preferred stock, shares outstanding (in shares)	3,238,000	3,238,000
Preferred Class A [Member]
Preferred stock, cumulative dividend per share (in dollars per share)	$ 0.40	$ 0.40
Preferred stock, shares issued (in shares)	468,221	468,221
Preferred stock, shares outstanding (in shares)	468,221	468,221
Preferred Class B [Member]
Preferred stock, cumulative dividend per share (in dollars per share)	$ 0.50	$ 0.50
Preferred stock, shares issued (in shares)	67,500	67,500
Preferred stock, shares outstanding (in shares)	67,500	67,500

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenue and Cost of revenue:
CURA revenue	$ 2,000	$ 2,000	$ 5,000	$ 9,000
Cost of revenue	12,000	3,000	13,000	9,000
Loss on revenue	(10,000)	(1,000)	(8,000)
Costs and expenses:
Recovery on inventory reserve	(17,000)		(24,000)
Engineering and development	65,000	218,000	156,000	549,000
General and administrative	313,000	443,000	656,000	987,000
Total costs and expenses	371,000	661,000	789,000	1,536,000
Loss from operations	(381,000)	(662,000)	(797,000)	(1,536,000)
Non-operating expense:
Interest expense	(341,000)	(304,000)	(678,000)	(578,000)
Other (expense) income	(99,000)	1,000	(99,000)	1,000
Non-operating expense	(440,000)	(303,000)	(777,000)	(577,000)
Loss before income taxes	(821,000)	(965,000)	(1,574,000)	(2,113,000)
Income taxes
Net loss	(821,000)	(965,000)	(1,574,000)	(2,113,000)
Preferred stock dividends	55,000	54,000	109,000	108,000
Net loss attributable to common stockholders	$ (876,000)	$ (1,019,000)	$ (1,683,000)	$ (2,221,000)
Net loss per common share attributable to common stockholders
Basic and Diluted (in dollars per share)	$ (0.02)	$ (0.02)	$ (0.03)	$ (0.04)
Weighted average number of shares of common stock
Basic and Diluted (in shares)	51,379,000	50,478,000	51,263,000	50,456,000

XML

Condensed Consolidated Statements of Changes in Stockholders' Deficiency (Unaudited) - USD ($)	3 Months Ended				6 Months Ended
	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2020	Jun. 30, 2019
Preferred Stock [Member] | Series C Preferred Stock [Member]
Balance (in shares)	15,687,500	15,687,500	15,687,500	15,687,500	15,687,500	15,687,500
Balance	$ 157,000	$ 157,000	$ 157,000	$ 157,000	$ 157,000	$ 157,000
Stock-based compensation
Common shares issued for interest (in shares)
Common shares issued for interest
Common shares issued (in shares)
Common shares issued
Net Loss
Stock-based compensation
Warrants issued with convertible note
Balance (in shares)	15,687,500	15,687,500	15,687,500	15,687,500	15,687,500	15,687,500
Balance	$ 157,000	$ 157,000	$ 157,000	$ 157,000	$ 157,000	$ 157,000
Preferred Stock [Member] | Series C2 Preferred Stock [Member]
Balance (in shares)	24,500,000	24,500,000	24,500,000	24,500,000	24,500,000	24,500,000
Balance	$ 245,000	$ 245,000	$ 245,000	$ 245,000	$ 245,000	$ 245,000
Stock-based compensation
Common shares issued for interest (in shares)
Common shares issued for interest
Common shares issued (in shares)
Common shares issued
Net Loss
Stock-based compensation
Warrants issued with convertible note
Balance (in shares)	24,500,000	24,500,000	24,500,000	24,500,000	24,500,000	24,500,000
Balance	$ 245,000	$ 245,000	$ 245,000	$ 245,000	$ 245,000	$ 245,000
Preferred Stock [Member] | Series C3 Preferred Stock [Member]
Balance (in shares)	3,238,000	3,238,000	3,268,000	3,268,000	3,238,000	3,268,000
Balance	$ 32,000	$ 32,000	$ 33,000	$ 33,000	$ 32,000	$ 33,000
Stock-based compensation
Common shares issued for interest (in shares)
Common shares issued for interest
Common shares issued (in shares)
Common shares issued
Net Loss
Stock-based compensation
Warrants issued with convertible note
Balance (in shares)	3,238,000	3,238,000	3,268,000	3,268,000	3,238,000	3,268,000
Balance	$ 32,000	$ 32,000	$ 33,000	$ 33,000	$ 32,000	$ 33,000
Preferred Stock [Member] | Preferred Class A [Member]
Balance (in shares)	468,221	468,221	468,221	468,221	468,221	468,221
Balance	$ 5,000	$ 5,000	$ 5,000	$ 5,000	$ 5,000	$ 5,000
Stock-based compensation
Common shares issued for interest (in shares)
Common shares issued for interest
Common shares issued (in shares)
Common shares issued
Net Loss
Stock-based compensation
Warrants issued with convertible note
Balance (in shares)	468,221	468,221	468,221	468,221	468,221	468,221
Balance	$ 5,000	$ 5,000	$ 5,000	$ 5,000	$ 5,000	$ 5,000
Preferred Stock [Member] | Preferred Class B [Member]
Balance (in shares)	67,500	67,500	67,500	67,500	67,500	67,500
Balance	$ 1,000	$ 1,000	$ 1,000	$ 1,000	$ 1,000	$ 1,000
Stock-based compensation
Common shares issued for interest (in shares)
Common shares issued for interest
Common shares issued (in shares)
Common shares issued
Net Loss
Stock-based compensation
Warrants issued with convertible note
Balance (in shares)	67,500	67,500	67,500	67,500	67,500	67,500
Balance	$ 1,000	$ 1,000	$ 1,000	$ 1,000	$ 1,000	$ 1,000
Common Stock [Member]
Balance (in shares)	51,187,236	50,979,964	50,400,545	50,364,549	50,979,964	50,364,549
Balance	$ 512,000	$ 510,000	$ 504,000	$ 504,000	$ 510,000	$ 504,000
Stock-based compensation
Common shares issued for interest (in shares)	123,074	94,772	39,156	35,996
Common shares issued for interest	$ 1,000	$ 1,000
Common shares issued (in shares)	105,000	112,500	90,000
Common shares issued	$ 1,000	$ 1,000	$ 1,000
Net Loss
Stock-based compensation
Warrants issued with convertible note
Balance (in shares)	51,415,310	51,187,236	50,529,701	50,400,545	51,415,310	50,529,701
Balance	$ 514,000	$ 512,000	$ 505,000	$ 504,000	$ 514,000	$ 505,000
Additional Paid-in Capital [Member]
Balance	78,336,000	78,272,000	77,855,000	77,725,000	78,272,000	77,725,000
Stock-based compensation	(28,000)	39,000	45,000	59,000
Common shares issued for interest	20,000	16,000	10,000	8,000
Common shares issued	9,000	9,000	11,000
Net Loss
Stock-based compensation	(28,000)	39,000	45,000	59,000
Warrants issued with convertible note			2,000	63,000
Balance	78,337,000	78,336,000	77,923,000	77,855,000	78,337,000	77,923,000
Retained Earnings [Member]
Balance	(92,178,000)	(91,425,000)	(88,297,000)	(87,149,000)	(91,425,000)	(87,149,000)
Stock-based compensation
Common shares issued for interest
Common shares issued
Net Loss	(821,000)	(753,000)	(965,000)	(1,148,000)
Stock-based compensation
Warrants issued with convertible note
Balance	(92,999,000)	(92,178,000)	(89,262,000)	(88,297,000)	(92,999,000)	(89,262,000)
Balance	(12,890,000)	(12,203,000)	(9,497,000)	(8,479,000)	(12,203,000)	(8,479,000)
Stock-based compensation	(28,000)	39,000	45,000	59,000
Common shares issued for interest	21,000	17,000	10,000	8,000
Common shares issued	10,000	10,000	12,000
Net Loss	(821,000)	(753,000)	(965,000)	(1,148,000)	(1,574,000)	(2,113,000)
Stock-based compensation	(28,000)	39,000	45,000	59,000
Warrants issued with convertible note			2,000	63,000
Balance	$ (13,708,000)	$ (12,890,000)	$ (10,393,000)	$ (9,497,000)	$ (13,708,000)	$ (10,393,000)

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Cash flows from operating activities:
Net loss	$ (1,574,000)	$ (2,113,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount reported as interest	400,000	351,000
Depreciation and amortization	39,000	72,000
Stock-based compensation	11,000	104,000
Interest paid in shares	38,000	18,000
Changes in working capital items:
Prepaid expenses	(7,000)	21,000
Liability for inventory	(24,000)	15,000
Accounts payable	(55,000)	134,000
Accrued interest	188,000	144,000
Other current liabilities	4,000
Accrued wages and benefits	77,000	12,000
Net cash used in operating activities	(903,000)	(1,242,000)
Cash flows from financing activities:
Proceeds from issuance of senior convertible notes	725,000	800,000
Proceeds from Paycheck Protection Program loan	228,000
Proceeds from issuance of unsecured promissory notes		425,000
Net cash provided by financing activities	953,000	1,225,000
Net increase (decrease) in cash	50,000	(17,000)
Cash at January 1	18,000	53,000
Cash at June 30	68,000	36,000
Supplemental Disclosures:
Cash used for payment of interest expense	13,000	64,000
Debt discount related to issuance of convertible notes	21,000	65,000
Common shares issued in payment of interest expense	38,000	18,000
Right to used asset		$ 257,000

XML

Note 1 - The Company and Basis of Presentation

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

NOTE

1

- THE COMPANY AND BASIS OF PRESENTATION

 

CurAegis Technologies, Inc. (“CurAegis”, “the Company”) was incorporated as a New York business corporation in

September 

1996

under the name Torvec, Inc. The Company's name was changed to CurAegis Technologies, Inc. in

2016

in connection with the establishment of its

two

business divisions. The CURA division is engaged in the fatigue management business and the Aegis division is engaged in the development of technologies for the power and hydraulic industry.

The Company is focused on the commercialization of a wellness and safety system (the CURA System) and a uniquely designed hydraulic pump that will be smaller, lighter, less expensive and more efficient than current technology. The Company has

not

had any significant revenue-producing operations.  

The Company has created the CURA app to offer products that reduce fatigue risk in the workplace and help individuals manage their sleep and improve alertness. The CURA System consists of a real-time alertness measurement and the Z-Coach wellness program. 

The Aegis hydraulic pump technology brings to the hydraulic industry a unique technology that is: smaller, lighter and less expensive, and more efficient than conventional pumps and motors. During

2019,

the Company initiated discussions with investment advisors and certain hydraulics companies to evaluate the possible monetization of the Aegis technologies.  On

April 

8,

2020,

the Company reported that it had initiated a temporary suspension of this evaluation process. This decision was linked to the COVID-

19

pandemic which adversely impacted and is expected to continue to adversely impact the Company's ability to generate industry interest in the Aegis technologies. Recent updates with interested parties have indicated that companies in the hydraulics industry are currently focused on internal processes, technology, and employees.

It is important to note that the cycle time from the initiation of the sales process to revenue realization can be highly variable especially as a start-up entity. In addition to the activities to be undertaken to implement our plan of operations, we

may

expand and/or refocus our activities depending upon future circumstances and developments

.

Current Cash Outlook and Management Plans

As of

June 30, 2020,

we had cash on hand of

$68,000,

negative working capital of

$4,296,000,

an accumulated deficit of

$92,999,000

and a stockholders' deficiency of

$13,708,000.

During the

six

months ended

June 30, 2020

we raised

$725,000

in proceeds through the issuance of convertible notes and

$235,000

from the Paycheck Protection Program (PPP) loan and US Small Business Administration - Economic Injury Disaster Loans (SBA EIDL) grant. The proceeds from these sources have been used to support the ongoing development and marketing of our core technologies and product initiatives.

Management estimates that the

2020

cash needs will run between

$1.7

 and

$2

million, based upon the cash used in operations in the

six

months ended

June 30, 2020.

As of

June 30, 2020,

the Company's cash on hand is

not

sufficient to cover the Company's future working capital requirements. This raises substantial doubt as to the Company's ability to continue as a going concern. Management will continue to use its best efforts to develop financing opportunities to fund the development and commercialization of the CURA and Aegis products.

Since inception, we have financed our operations by the sale of our securities and debt financings. We need to raise additional funds to meet our working capital needs, to fund expansion of our business, to complete development, testing and marketing of our products, or to make strategic acquisitions or investments.

No

assurance can be given that necessary funds will be available for us on acceptable terms, if at all. Furthermore, additional financings will involve dilution to our shareholders or

may

require that we relinquish rights to certain of our technologies or products. In addition, we will experience operational difficulties and delays due to working capital restrictions. If adequate funds are

not

available from additional sources of financing, we will have to delay or scale back our plans. 

The Company's ability to fund its current and future commitments from its available cash depends on its ability to launch and generate sales from the CURA app. If the Company cannot generate revenue from the CURA app, it would need to raise funds in order to meet its working capital needs and pursue its growth strategy. Although there can be

no

such assurances, management believes that sources for these additional funds will be available through either current or future investors.   

XML

Note 2 - Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Significant Accounting Policies [Text Block]

NOTE

2

- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation:

The Company's unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U. S. GAAP”) for interim financial information and in accordance with the instructions to Form

10

-Q and Article

8

-

03

of Regulation S-

X

of the Securities and Exchange Commission (“SEC”). Accordingly, the condensed consolidated financial statements do

not

include all information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the Company's management, all adjustments considered necessary for a fair presentation (consisting of normal recurring adjustments) have been included. The results for interim periods are

not

necessarily indicative of what the results will be for the fiscal year. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended

December 31, 2019

contained in the Company's

2019

Annual Report on Form

10

-K filed with the SEC.

Consolidation:

The condensed consolidated financial statements include the accounts of the Company, our wholly owned subsidiary Iso-Torque Corporation, and our majority-owned subsidiary, Ice Surface Development, Inc. (

56%

owned). As of

June 30, 2020,

each of the subsidiaries is non-operational.

Use of Estimates:

The preparation of financial statements in conformity with generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. These estimates are subject to a high degree of judgment and potential change. Actual results could differ from those estimates.  

Reclassifications:

Certain reclassifications

may

have been made to prior year balances to conform to the current year's presentation.

Cash:

We maintain cash at financial institutions that periodically

may

exceed federally insured amounts. We have a corporate credit card program through JPMorgan Chase Bank, N.A. In connection with this, the Company granted a security interest to the bank to act as collateral for the activity within the corporate card program, up to

$5,000.

Inventory

: Inventory is stated at the lower of cost or net realizable value with cost determined using the average cost method. Inventory on hand at

June 30, 2020

and

December 31, 2019

has been fully reserved. 

Depreciation and amortization: 

Depreciation and amortization are computed using the straight-line method.   Depreciation and amortization expense for the

three

and

six

months ended

June 30, 2020

and

2019

are as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2020		2019		2020		2019
Right-to use building	$	17,000	$	25,000	$	33,000	$	52,000
Software amortization		-		2,000		-		6,000
Property and equipment		3,000		7,000		6,000		14,000
	$	20,000	$	34,000	$	39,000	$	72,000

Right to use building asset: 

ASU

No.

 

2016

-

02,

“Leases,” requires a lessee to recognize on its balance sheet the assets and liabilities related to long-term leases that were classified as operating leases under previous guidance. An asset is recognized when the Company can retain the economic benefits and control of the underlying asset. A corresponding liability is recognized related to the Company's obligation to make lease payments over the term of the lease. The standard became effective for the Company on

January 1, 2019.

The Company utilized the modified retrospective approach to measure the right to use operating lease agreement associated with the office building used for our business operations. The adoption of this accounting standard did

not

impact our consolidated loss from operations and had

no

impact on cash flows.

Software, Property and Equipment:

Capitalized software, property and equipment are stated at cost. Estimated useful lives for capitalized software is

3

years and for property and equipment is

5

to

7

years. Betterments, renewals and significant repairs that extend the life of the assets are capitalized. Other repairs and maintenance costs are expensed when incurred. When disposed, the cost and accumulated depreciation applicable to assets retired are removed from the accounts and the gain or loss on disposition is recognized in non-operating income (expense). 

Whenever events or circumstances indicate, our long-lived assets including any intangible assets with finite useful lives are tested for impairment by using the estimated future cash flows directly associated with, and that are expected to arise as a direct result of, the use of the assets. If the carrying amount exceeds the estimated undiscounted cash flows, impairment

may

be indicated. The carrying amount is compared to the estimated discounted cash flows and if there is an excess such amount is recorded as impairment.

Fair Value of Financial Instruments:

As defined by U.S. GAAP

,

fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A hierarchy for ranking the quality and reliability of the information is used to determine fair values. Assets and liabilities carried at fair value will be classified and disclosed in

one

of the following

three

categories:  

Level

1:

Quoted market prices in active markets for identical assets or liabilities

Level

2:

Observable market-based inputs or unobservable inputs that are corroborated by market data

Level

3:

Unobservable inputs that are

not

corroborated by market data  

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level

1

measurements) and the lowest priority to unobservable inputs (Level

3

measurements). The Financial Accounting Standards Board's (“FASB”) guidance for the disclosure about fair value of financial instruments requires disclosure of an estimate of the fair value of certain financial instruments. The fair value of financial instruments pursuant to FASB's guidance for the disclosure about fair value of financial instruments approximated their carrying values at

June 30, 2020

and

December 31, 2019.

The carrying amount of cash, prepaid expenses, accounts payable, accrued expenses, demand and promissory notes approximates their fair value due to their short maturity. The senior convertible and demand notes can be converted into common stock with an underlying value of

$3,345,000

as of

June 30, 2020

based on the trading price on that date. 

Revenue Recognition and Deferred Revenue:

The Company accounts for revenue in accordance with FASB ASC

606,

 "Revenue from Contracts with Customers" and all related amendments. For contracts where performance obligations are satisfied at a point in time, the Company recognizes revenue when the product is shipped to the customer. For contracts where the performance obligation is satisfied over time, as in the Z-Coach sales, the Company recognizes revenue over the subscription period.  Revenue from the sale of the Company's products is recognized net of cash discounts, sales returns and allowances. 

The Company's revenue is derived primarily from domestic customers. For the

three

- and

six

-month periods ended

June 30, 2020

net revenue from products transferred over time amounted to

$2,000

and

$5,000

respectively. One customer accounted for

100%

of total Z-Coach subscription sales made during the

three

- and

six

-month periods ended

June 30, 2020.

Our collection terms provide customers standard terms of net

30

 days. Future performance obligations are reflected in deferred revenue.

CURA revenue is recognized (a) upon receipt of payment at the point of sale of the CURA app, (b) upon the delivery of myCadian products and (c) upon the Company's performance of all obligations as described in customer agreements. The Z-Coach program provides fatigue training over an annual subscription period of

twelve

months and allows the user unlimited access during the annual subscription period. Customers are billed at the acceptance of the subscription, and revenue is recognized ratably over the subscription period as performance obligations are satisfied and when collection is reasonably assured.

Engineering and Development:

Engineering and development costs and patent expenses are charged to operations as incurred. Engineering and development include personnel-related costs, materials and supplies, depreciation and consulting services.

General and Administrative:

Patent costs for the

three

months ended

June 30, 2020

and

2019

amounted to

$14,000

and

$11,000

respectively and are included in general and administrative expenses. Patent costs for the

six

months ended

June 30, 2020

and

2019

amounted to

$17,000

and

$21,000

respectively

Stock-based Compensation:

FASB Accounting Standards Codification (“ASC”)

718

-

10

requires all share-based payments be recognized as expense over the service period (generally the vesting period) based on the fair value on the grant date. The realization of tax benefits in excess of amounts recognized for financial reporting purposes are recognized as a financing activity in accordance with ASC

718

-

10.

No

tax benefits were attributed to the stock-based compensation expense because a valuation allowance was maintained for substantially all net deferred tax assets.   

Income Taxes:

We account for income taxes using the asset and liability method, the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting and the tax basis of our assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. A valuation allowance related to deferred tax assets is recorded when it is more likely than

not

that some portion or all the deferred tax assets will

not

be realized.  

We account for uncertain tax positions using a more-likely-than-

not

recognition threshold based on the technical merits of the tax position taken. Tax benefits that meet the more-likely-than-

not

recognition threshold should be measured as the largest amount of tax benefits, determined on a cumulative probability basis, which is more likely than

not

to be realized upon ultimate settlement in the financial statements. It is our policy to recognize interest and penalties related to income tax matters as general and administrative expenses. As of

June 30, 2020,

and

December 31, 2019,

there were

no

accrued interest or penalties related to uncertain tax positions.

Loss per Common Share:

FASB's ASC

260

-

10

(“Earnings Per Share”) requires the presentation of basic earnings per share, which is based on weighted average common stock outstanding, and dilutive earnings per share, which gives effect to options, warrants and convertible securities in periods when they are dilutive. At

June 30, 2020

and

2019,

we excluded

111,296,260

and

99,159,056

potential common shares, respectively, relating to convertible preferred stock, convertible notes, future share rights issued with the demand notes, options and warrants outstanding from the diluted net loss per common share calculation because their inclusion would be anti-dilutive. We excluded

625,000

warrants from the diluted net loss per common share calculation at

June 30, 2020

and

2019

as the conditions for their vesting are

not

time-based.

XML

Note 3 - Inventory and Vendor Liability

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Inventory Disclosure [Text Block]

NOTE

3

– INVENTORY AND VENDOR LIABILITY

	June 30, 2020			December 31, 2019
Raw materials	$	1,641,000		$	1,665,000
Finished goods		69,000			69,000
		1,710,000			1,734,000
Less: Reserve		(1,710,000	)		(1,734,000	)
Inventory (net)	$	-		$	-
Liability for inventory	$	1,740,000		$	1,764,000

During

2017,

the Company initiated a purchase order with a

third

-party vendor to manufacture and assemble the myCadian watch. In connection with this agreement, the Company agreed to a cancellation charge for products purchased on behalf of the Company in the instance that the purchase order is subsequently modified, delayed or cancelled. The Company has recorded a reserve for all inventory and components.

During the

three

-and

six

-month periods ended

June 30, 2020,

the Company recovered

$17,000

and

$24,000

respectively, upon the sale of certain raw material and component parts. Management will continue to evaluate this reserve in future reporting periods.

XML

Note 4 - Demand Note

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Long-term Debt [Text Block]

NOTE

4

- DEMAND NOTE

 

On

July 23, 2019,

the Company entered into a credit facility with a commercial bank for up to

$1,500,000

in advances to support working capital needs of the business. The demand notes issued in connection with this commercial bank are supported by individual co-borrowing agreements from certain accredited investors. In connection with this credit agreement, the Company entered into a general security agreement that provides the bank a continuing security interest in all the Company's personal property and fixtures. 

The co-borrowers participating in this credit facility received

30,000

common shares for each

$100,000

in principal co-borrowed. The fair market value of these shares was estimated on the date of the note issuance and is reflected as debt issuance costs. The co-borrowers were also granted the right to purchase common shares up to the amount co-borrowed, at a price per share determined based on the closing price of the Company's common stock

one

day prior to the agreement. The fair market value of these future rights is reflected as debt issuance costs in the results of operations. The price per share for these future share purchase rights is fixed at the higher of the closing price of the Company's common stock

one

day prior to the co-borrowing arrangement or

$0.15

per share. Each co-borrower has the right to purchase these common shares until the indebtedness is paid in full or within

five

business days after the consummation of the sale of the Company's Aegis division.

As of

June 30, 2020,

the Company had issued

$650,000

in demand notes and issued

195,000

shares of common stock in connection with the co-borrowing demand notes. The common shares issued in connection with the co-borrowing demand notes were valued at

$21,000

on the date of issuance and were reported as debt issuance costs. Coincident with the issuance of these notes, these co-borrowers also received the right to purchase up to

4,333,333

shares of the Company's common stock at a fixed price of

$0.15

per share. The fair market value of these future share rights was estimated at

$276,000

on the date of the issuance of the notes utilizing the Black Scholes valuation model and were reported as debt issuance costs.  

Advances drawn under this facility have been issued as demand notes with an adjustable interest rate set at the bank's prime rate, which was

3.25%

as of

June 30, 2020.

The Company recognized

$5,000

in interest expense on the demand notes during the

three

months ended

June 30, 2020.

The Company recognized

$13,000

in interest expense on the demand notes during the

six

months ended

June 30, 2020.

The common shares issued with these demand notes are being offered and sold in a private placement exempt from registration under Section 

4

(a)(

2

) of the Securities Act of

1933

(“Securities Act”), as amended, and Rule 

506

of Regulation D as promulgated by the United States Securities and Exchange Commission thereunder. The shares of the Company's Common Stock will

not

be registered under the Securities Act and

may

not

be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

XML

Note 5 - Paycheck Protection Program Loan

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Long-term Debt [Text Block]

NOTE

4

- DEMAND NOTE

 

On

July 23, 2019,

the Company entered into a credit facility with a commercial bank for up to

$1,500,000

in advances to support working capital needs of the business. The demand notes issued in connection with this commercial bank are supported by individual co-borrowing agreements from certain accredited investors. In connection with this credit agreement, the Company entered into a general security agreement that provides the bank a continuing security interest in all the Company's personal property and fixtures. 

The co-borrowers participating in this credit facility received

30,000

common shares for each

$100,000

in principal co-borrowed. The fair market value of these shares was estimated on the date of the note issuance and is reflected as debt issuance costs. The co-borrowers were also granted the right to purchase common shares up to the amount co-borrowed, at a price per share determined based on the closing price of the Company's common stock

one

day prior to the agreement. The fair market value of these future rights is reflected as debt issuance costs in the results of operations. The price per share for these future share purchase rights is fixed at the higher of the closing price of the Company's common stock

one

day prior to the co-borrowing arrangement or

$0.15

per share. Each co-borrower has the right to purchase these common shares until the indebtedness is paid in full or within

five

business days after the consummation of the sale of the Company's Aegis division.

As of

June 30, 2020,

the Company had issued

$650,000

in demand notes and issued

195,000

shares of common stock in connection with the co-borrowing demand notes. The common shares issued in connection with the co-borrowing demand notes were valued at

$21,000

on the date of issuance and were reported as debt issuance costs. Coincident with the issuance of these notes, these co-borrowers also received the right to purchase up to

4,333,333

shares of the Company's common stock at a fixed price of

$0.15

per share. The fair market value of these future share rights was estimated at

$276,000

on the date of the issuance of the notes utilizing the Black Scholes valuation model and were reported as debt issuance costs.  

Advances drawn under this facility have been issued as demand notes with an adjustable interest rate set at the bank's prime rate, which was

3.25%

as of

June 30, 2020.

The Company recognized

$5,000

in interest expense on the demand notes during the

three

months ended

June 30, 2020.

The Company recognized

$13,000

in interest expense on the demand notes during the

six

months ended

June 30, 2020.

The common shares issued with these demand notes are being offered and sold in a private placement exempt from registration under Section 

4

(a)(

2

) of the Securities Act of

1933

(“Securities Act”), as amended, and Rule 

506

of Regulation D as promulgated by the United States Securities and Exchange Commission thereunder. The shares of the Company's Common Stock will

not

be registered under the Securities Act and

may

not

be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

Paycheck Protection Program CARES Act [Member]

Notes to Financial Statements

Long-term Debt [Text Block]

NOTE

5

–

PAYCHECK PROTECTION PROGRAM LOAN

On

April 20, 2020

the Company received a

$227,700

loan under the Small Business Administration (SBA) Paycheck Protection Program (the “PPP”). The note was issued under the Coronavirus Aid, Relief, and Economic Security (CARES) Act which, according to guidance from the SBA and U.S. Department of Treasury, provides for certain loan forgiveness based on a calculation of the Company's payroll expenses and qualified rent and utilities payments made within

twenty-four

weeks after the disbursement of the loan. The loan has an interest rate of

1%

per annum and payments of interest and principal begin

6

months after the date of disbursement. The term of the note is

24

months.

XML

Note 6 - Senior Convertible Notes

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Debt Disclosure [Text Block]

NOTE

6

- SENIOR CONVERTIBLE NOTES

 

At

June 30, 2020,

the Company had

$11,035,000

in convertible notes outstanding which have been presented net of unamortized debt discounts of

$1,521,000,

resulting in a carrying value of

$9,514,000.

As of

December 31, 2019,

the Company had

$10,310,000

in convertible notes outstanding, presented net of unamortized debt discounts of

$1,900,000

resulting in a carrying value of

$8,410,000.

Scheduled maturities on the Company's convertible notes is as follows:

$2,990,000

in the

twelve

months ending

December 31, 2021,

$2,775,000

in the

twelve

months ending in

December 31, 2022;

$3,395,000

in the

twelve

months ending

December 31, 2023,

$1,150,000

in the

twelve

months ending

December 31, 2024

and

$725,000

thereafter.

Included in the face value of convertible notes outstanding at

June 30, 2020

and

December 31, 2019,

is

$2,402,000

and

$2,477,000

respectively in convertible notes payable to various directors of the Company. Also included in the face value of the convertible notes are 

$1,795,000

and

$1,170,000

as of

June 30, 2020

and

December 31, 2019,

respectively, in convertible notes payable to an investor that is deemed an affiliate.

	Total			2019 6% Notes			JULY 2018 Notes			2018 Notes			2017 6% Notes			2016 6% Notes
Face value December 31, 2019	$	10,310,000		$	650,000		$	1,675,000		$	625,000		$	4,370,000		$	2,990,000
Notes issued		725,000			725,000			-			-			-			-
Face value June 30, 2020	$	11,035,000		$	1,375,000		$	1,675,000		$	625,000		$	4,370,000		$	2,990,000
Debt discount December 31, 2019	$	(1,900,000	)	$	(3,000	)	$	(353,000	)	$	(185,000	)	$	(362,000	)	$	(997,000	)
Debt discount issued		(21,000	)		(21,000	)		-			-			-			-
Amortization reported as interest		400,000			13,000			41,000			23,000			55,000			268,000
Debt discount June 30, 2020	$	(1,521,000	)	$	(11,000	)	$	(312,000	)	$	(162,000	)	$	(307,000	)	$	(729,000	)
Senior Convertible Notes (net)	$	9,514,000		$	1,364,000		$	1,363,000		$	463,000		$	4,063,000		$	2,261,000

2019

Convertible Notes

In

April 2019,

the board of directors authorized the issuance of up to

$2.5

million in

6%

Convertible Promissory Notes (the

“2019

Convertible Notes”) in connection with the

May 28, 2019

Securities Purchase Agreement (the

“2019

SPA”). The

2019

Convertible Notes mature on the earlier of:

five

days after the sale of substantially all the assets of the Aegis division or

five

years from the date of issuance.

The conversion rate of the notes is fixed at the greater of:

$0.15

per share and the closing market price of the Company's common stock on the trading day immediately prior to the issuance of the note. Investors receive

30,000

shares of common stock for each

$100,000

investment in the

2019

Convertible Notes. The notes were offered in a private placement exempt from registration under Section

4

(a)(

2

) of the Securities Act of

1933

 as amended (the "Securities Act") and Rule

506

(c) of Regulation D as promulgated by the Securities and Exchange Commission. The offering was available only to “accredited investors” as defined in Rule

501

(a) of Regulation D under the Securities Act.  

During the

three

- and

six

- month periods ended

June 30, 2020,

the Company issued

$165,000

and

$725,000,

respectively, in new notes and allocated

$5,000

and

$21,000,

respectively, of the proceeds to debt discount based on the estimated fair value of the common shares issued on the date of investment. During the

three

- and

six

-month periods ended

June 30, 2020,

the Company recorded

$24,000

and

$46,000

in interest expense which includes amortization of debt discount. During the

three

- and

six

-month periods ended

June 30, 2019;

the Company recorded

$23,000

and

$46,000,

respectively which includes amortization of debt discount.

JULY 2018

Convertible Notes

In

July 2018,

the board of directors authorized the issuance of up to 

$2.5

million in non-interest bearing Senior Convertible Promissory Notes and Warrants (the

“JULY 2018

Convertible Notes”) in connection with the

July 24, 2018

Securities Purchase Agreement (the

“JULY 2018

SPA”). The

JULY 2018

Convertible Notes have a

five

-year maturity. In

April 2019,

the Company's board approved a resolution to complete this offering.

The conversion rate of the notes was fixed at

$0.25

per share as determined at the close of business on

July 24, 2018.

Investors in this offering were granted warrants to purchase common shares equal to

10%

or

25%

of the number of shares issuable upon the conversion of the notes based upon the amount of their investment. The warrants have a fixed exercise price of

$0.25

and a

ten

-year term from the date of issuance. The notes were offered in a private placement exempt from registration under Section

4

(a)(

2

) of the Securities Act of

1933

 as amended (the "Securities Act") and Rule

506

(c) of Regulation D as promulgated by the Securities and Exchange Commission. The offering was available only to “accredited investors” as defined in Rule

501

(a) of Regulation D under the Securities Act.   

During the

three

and

six

month periods ended

June 30, 2020

the Company recorded

$21,000

and

$41,000

respectively in interest expense which reflects the amortization of debt discount.  During the

three

- and

six

-month periods ended

June 30, 2019

the Company recorded

$19,000

and

$32,000

respectively in interest expense which reflects the amortization of debt discount.  

2018

Convertible Notes

In

May 2018,

the board of directors authorized the issuance of up to 

$1

million in non-interest bearing Senior Convertible Promissory Notes and Warrants (the

“2018

Convertible Notes”) in connection with the

May 8, 2018

Securities Purchase Agreement (the

“2018

SPA”). The

2018

Convertible Notes have 

five

-year maturity. On

July 19, 2018,

the Company's board approved a resolution to complete this offering.

The conversion rate of the notes was fixed at

$0.25

per share as determined at the close of business on

May 8, 2018.

Investors in this offering were granted warrants to purchase common stock equal to

10%

or

25%

of the number of shares issuable upon the conversion of the notes based upon the amount of their investment. The warrants have a fixed exercise price of

$0.25

and a

ten

-year term from the date of issuance. The notes were offered in a private placement exempt from registration under Section

4

(a)(

2

) of the Securities Act of

1933

 as amended (the "Securities Act") and Rule

506

(c) of Regulation D as promulgated by the Securities and Exchange Commission. The offering was available only to “accredited investors” as defined in Rule

501

(a) of Regulation D under the Securities Act.  

During the

three

and

six

month periods ended

June 30, 2020

the Company recorded

$12,000

and

$23,000

respectively in interest expense which reflects the amortization of debt discount. During the

three

-and

six

-month periods ended

June 30, 2019

the Company recorded

$11,000

and

$22,000

respectively in interest expense which reflects the amortization of debt discount.

2017

Convertible Notes

The board of directors authorized the issuance of up to

$5

million in

6%

Senior Convertible Promissory Notes and Warrants (the

“2017

Convertible Notes”) in connection with the

May 31, 2017

Securities Purchase Agreement (as amended, the

“2017

SPA”). The

2017

Convertible Notes have a

five

-year maturity and a fixed annual interest rate of

6%.

Investors in this offering were granted warrants to purchase warrants equal to

10%

or

25%

of the number of shares issuable upon the conversion of the notes based upon the amount of their investment. 

The conversion rate of the

2017

Notes was originally set at

$0.50

per share and subsequently modified in

November 2018

to

$0.333

per share. The exercise price of related warrants issued in connection with the

2017

Notes was also subsequently modified in

November 2018

to

$0.333

per share. The

2017

Convertible Notes were offered in a private placement exempt from registration under Section

4

(a)(

2

) of the Securities Act and Rule

506

(c) of Regulation D as promulgated by the Securities and Exchange Commission. The offering was available only to “accredited investors” as defined in Rule

501

(a) of Regulation D under the Securities Act.

During the

three

-and

six

- month periods ended

June 30, 2020

the Company recorded

$93,000

and

$185,000,

respectively, in interest expense including amortization of debt discount. During the

three

-and

six

- month periods ended

June 30, 2019

the Company recorded

$91,000

and

$171,000,

respectively, in interest expense including amortization of debt discount. 

2016

Convertible Notes

During

2016,

the board of directors authorized, and the Company issued, 

$3

million in

6%

Senior Convertible Promissory Notes and Warrants (the

“2016

Convertible Notes”) in connection with the

August 25, 2016

Securities Purchase Agreement (the

“2016

SPA”). The

2016

Convertible Notes have 

five

-year maturity dates ranging from

August 2021

through

December 2021

and a fixed annual interest rate of

6%.

The conversion rate of the notes was fixed at

$0.25

per share as determined at the close of business on

August 25, 2016.

The investors were granted warrants to purchase an aggregate number of shares of common stock equal to

10%

of the number of shares issuable upon the conversion of the notes. The warrants have a fixed exercise price of

$0.25

and a

ten

-year term from the date of issuance. The notes were offered in a private placement exempt from registration under Section

4

(a)(

2

) of the Securities Act of

1934,

as amended and Rule

506

(c) of Regulation D as promulgated by the Securities and Exchange Commission. The offering was available only to “accredited investors” as defined in Rule

501

(a) of Regulation D under the Securities Act of

1933.

 

During the

three

-and

six

- month periods ended

June 30, 2020

the Company recorded

$180,000

and

$357,000,

respectively, in interest expense including amortization of debt discount. During the

three

-and

six

- month periods ended

June 30, 2019

the Company recorded

$172,000

and

$342,000,

respectively, in interest expense including amortization of debt discount. 

XML

Note 7 - Unsecured Subordinated Promissory Notes

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Short-term Debt [Text Block]

NOTE

7

- UNSECURED SUBORDINATED PROMISSORY NOTES

The Company had

$425,000

in unsecured subordinated promissory notes payable to a board member as of

June 30, 2020

and

December 31, 2019.

These notes bear interest at a rate of

6%

per annum and have a maturity date of

October 15, 2020.

During the

three

- and

six

- months ended

June 30, 2020,

the Company recognized interest expense of

$6,000

and

$12,000,

respectively, on these notes. During the

three

- and

six

- months ended

June 30, 2019,

the Company recognized interest expense of

$6,000

and

$7,000,

respectively, on these notes. Interest accrued and outstanding on the promissory notes was

$27,000

and

$15,000

as of

June 30, 2020

and

December 31, 2019,

respectively.   

XML

Note 8 - Right to Use Building Asset

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

NOTE

8

- RIGHT TO USE BUILDING ASSET

 

The FASB issued ASU

No.

 

2016

-

02,

“Leases,” which requires a lessee to recognize in its balance sheet the assets and liabilities related to long-term leases that were classified as operating leases under previous guidance. An asset is recognized related to the right to use the underlying asset and a liability is recognized related to the obligation to make lease payments over the term of the lease. The standard became effective for the Company

January 1, 2019. 

As of

January 1, 2019,

the Company utilized the modified retrospective approach to measure the right to use operating lease agreement associated with the office building. The adoption of this accounting standard did

not

impact our consolidated loss from operations and had

no

impact on cash flows.

Upon adoption, the Company determined the present value of future lease costs at

$257,000,

which included monthly rental, common area costs, and taxes. The Company assumed an incremental borrowing rate of

6%

as the building lease agreement did

not

include an implicit rate. On

September 1, 2019,

the Company vacated this property at the request of the landlord and relocated to a new office. The Company terminated the lease obligation without penalty or liability for unused periods associated with the original lease obligation and as such, the Company did

not

incur an impairment as a result of this change in lease term. Operating lease costs for the

three

-and

six

- month periods ended

June 30, 2019

for the terminated lease obligation was

$30,000

and

$60,000,

respectively.

On

August 1, 2019,

the Company entered into an operating lease obligation for office space located at

350

Linden Oaks in Rochester New York. The Company determined the present value of future lease costs at the inception of the lease was

$212,000.

The Company assumed an incremental borrowing rate of

6%

as the building lease agreement did

not

include an implicit rate. The lease has a termination date of

December 30, 2022.

Operating lease costs for the

three

- and

six

-month periods ended

June 30, 2020

were

$15,000

and

$31,000,

respectively. Future maturing lease obligations as follows:

$35,000

for the remainder of

2020;

$66,000

in

2021

and

$66,000

in

2022.

Total future lease payments are

$179,000

including imputed interest of

$13,000.

XML

Note 9 - Property and Equipment

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

NOTE

9

- PROPERTY AND EQUIPMENT

 

At

June 30, 2020

and

December 31, 2019

property and equipment consist of the following:

	June 30, 2020			December 31, 2019
Office equipment	$	199,000		$	199,000
Shop equipment		132,000			132,000
Gross Property and equipment		331,000			331,000
Less accumulated depreciation		(299,000	)		(293,000	)
Net property and equipment	$	32,000		$	38,000

XML

Note 10 - Business Segments

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

NOTE

10

- BUSINESS SEGMENTS

The Company has

two

operating business segments. The CURA business operates in the fatigue management industry and the Aegis business is focused in the power and hydraulic industry.

Segment information for the

three

months ending

June 30,

20

20

for the Company's business segments follows: 

	CURA			Aegis			Corporate			Total
Revenue	$	2,000		$	-		$	-		$	2,000
Loss on revenue		(10,000	)		-			-			(10,000	)
Total costs and expenses		129,000			(13,000	)		255,000			371,000
Loss from operations		(139,000	)		13,000			(255,000	)		(381,000	)
Non-operating expense		-			-			(440,000	)		(440,000	)
Net loss	$	(139,000	)	$	13,000		$	(695,000	)	$	(821,000	)
Stock based compensation	$	17,000		$	(37,000	)	$	(8,000	)	$	(28,000	)
Depreciation and amortization	$	-		$	2,000		$	18,000		$	20,000
Assets at June 30, 2020	$	-		$	32,000		$	246,000		$	278,000

Segment information for the

six

months ending

June 30,

20

20

for the Company's business segments follows: 

	CURA			Aegis			Corporate			Total
Revenue	$	5,000		$	-		$	-		$	5,000
Loss on revenue		(8,000	)		-			-			(8,000	)
Total costs and expenses		183,000			52,000			554,000			789,000
Loss from operations		(191,000	)		(52,000	)		(554,000	)		(797,000	)
Non-operating expense		-			-			(777,000	)		(777,000	)
Net loss	$	(191,000	)	$	(52,000	)	$	(1,331,000	)	$	(1,574,000	)
Stock based compensation	$	40,000		$	(33,000	)	$	3,000		$	11,000
Depreciation and amortization	$	-		$	5,000		$	34,000		$	39,000
Assets at June 30, 2020	$	-		$	32,000		$	246,000		$	278,000

Segment information for the

three

months ending

June 30,

201

9

for the Company's business segments follows: 

	CURA			Aegis			Corporate			Total
Revenue	$	2,000		$	-		$	-		$	2,000
Loss on revenue		(1,000	)		-			-			(1,000	)
Total costs and expenses		(176,000	)		(150,000	)		(335,000	)		(661,000	)
Loss from operations		(177,000	)		(150,000	)		(335,000	)		(662,000	)
Non-operating expense		-			-			(303,000	)		(303,000	)
Net loss	$	(177,000	)	$	(150,000	)	$	(638,000	)	$	(965,000	)
Stock based compensation	$	6,000		$	5,000		$	34,000		$	45,000
Depreciation and amortization	$	3,000		$	5,000		$	26,000		$	34,000
Assets at June 30, 2019	$	6,000		$	45,000		$	246,000		$	297,000

Segment information for the

six

months ending

June 30,

20

19

for the Company's business segments follows:

	CURA			Aegis			Corporate			Total
Revenue	$	9,000		$	-		$	-		$	9,000
Margin (loss on revenue)		-			-			-			-
Total costs and expenses		(515,000	)		(319,000	)		(702,000	)		1,536,000
Loss from operations		(515,000	)		(319,000	)		(702,000	)		(1,536,000	)
Non-operating expense		-			-			(577,000	)		(577,000	)
Net loss	$	(515,000	)	$	(319,000	)	$	(1,279,000	)	$	(2,113,000	)
Stock based compensation	$	14,000		$	13,000		$	77,000		$	104,000
Depreciation and amortization	$	9,000		$	10,000		$	53,000		$	72,000
Assets at June 30, 2019	$	6,000		$	45,000		$	246,000		$	297,000

XML

Note 11 - Preferred and Common Stock

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

NOTE

1

1

- PREFERRED and COMMON STOCK

Common Stock

 

We have authorized

400,000,000

shares of common stock, with a par value of

$0.01

per share. 

During the

three

- and

six

-month periods ended

June 30, 2020

the Company issued

123,074

and

217,846

shares of common stock in payment of interest on the Company's

2016,

2017

and

2019

Convertible Notes. During the

three

- and

six

-month periods ended

June 30, 2019

the Company issued

39,156

and

75,152

shares of common stock in payment of interest on the Company's

2016,

2017

and

2019

Convertible Notes. 

Preferred Stock

 

Our certificate of incorporation permits the Company to issue up to

100,000,000

shares of

$.01

par value preferred stock.

Class A Preferred Stock   

 

At

June 30, 2020

and

December 31, 2019 

there were

468,221

outstanding shares of Class A Preferred stock, of which

8,709

shares resulted from the settlement of dividends due to conversion, and those shares

no

longer accrue dividends. The value of dividends payable upon the conversion of the remaining

459,512

outstanding shares of Class A Preferred stock was

$2,805,000

at

June 30, 2020

and

$2,713,000

at

December 31, 2019.  

In the event of a liquidation, dissolution and winding up of the Company, and subject to the liquidation rights and privileges of our Class C Preferred stockholders, Class A Preferred stockholders and Class B stockholders have a liquidation preference with respect to all accumulated and unsettled dividends. The value of the Class A Preferred stockholders' liquidation preference was

$2,805,000

and

$2,713,000

at

June 30, 2020

and

December 31, 2019,

respectively. In the event of liquidation, dissolution or winding up of the Company, unpaid accumulated dividends on the Class A Preferred are payable in Class A Preferred at a rate of

1

share of Class A Preferred for each

$4.00

of dividends.

Class B Preferred Stock

 

At

June 30, 2020

and

December 31, 2019,

there were

67,500

outstanding shares of Class B Preferred stock. The value of dividends payable upon the conversion of the outstanding shares of Class B Preferred stock was

$504,000

at

June 30, 2020

and

$488,000

at

December 31, 2019.  

In the event of liquidation, dissolution and winding up of the Company, and subject to the liquidation rights and privileges of our Class C Preferred stockholders, our Class A Preferred stockholders and our Class B Preferred stockholders have a liquidation preference with respect to all accumulated and unsettled dividends. In the event of a liquidation, dissolution or winding up of the Company, unpaid accumulated dividends on the Class B Preferred are payable in Class B Preferred shares at a rate of

1

share of Class B Preferred for each

$5.00

of dividends. 

Series C Preferred Stock

 

At

June 30, 2020

and

December 31, 2019,

there were

15,687,500

shares of Series C Preferred stock outstanding. The value of the Series C Preferred stockholders' liquidation preference was

$6,275,000

at

June 30, 2020

and at

December 31, 2019.

The Series C Preferred shares have a liquidation preference at their stated value per share of

$0.40

that is senior to our common stock, and the Company's Class A Non-Voting Cumulative Convertible Preferred Shares and Class B Non-Voting Cumulative Convertible Preferred Shares. The liquidation preference is payable upon a liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, or upon a deemed liquidation of the Company.

The Series C Preferred shares have

no

right to receive dividends and have

no

redemption right. The Series C Preferred shares vote with the common stock on an as-converted basis. 

Series C-

2

Preferred Stock

   

At

June 30, 2020

and

December 31, 2019,

there were

24,500,000

shares of Preferred C-

2

stock outstanding. The value of the Series C-

2

Preferred stockholders' liquidation preference was

$4,900,000

at

June 30, 2020

and

December 31, 2019. 

The Series C-

2

Preferred Shares are

not

entitled to receive preferred dividends and have

no

redemption right, but are entitled to participate, on an as converted basis; with holders of outstanding shares of common stock in dividends and distributions on liquidation after all preferred shares have received payment in full of any preferred dividends or liquidation preferences. The Series C-

2

Preferred Shares vote with the common stock on an as-converted basis. We

may

not,

without approval of the holders of at least

two

-thirds of the Series C-

2

Preferred Shares, (i) create any class or series of stock that is pari passu or senior to the Series C-

2

Preferred Shares, (ii) create any class or series of stock that would share in the liquidation preference of the Series C-

2

Preferred Shares or that is entitled to dividends payable other than in common stock or Series C-

2

Preferred Shares of its own series, (iii) acquire any equity security or pay any dividend, except dividends on a class or series of stock that is junior to the Series C Preferred Shares, payable in such junior stock, (iv) reissue any Series C-

2

Preferred Shares, (v) declare or pay any dividend that would impair the payment of the liquidation preference of the Series C-

2

Preferred Shares, (vi) authorize or issue any additional Preferred Shares, (vii) change the Certificate of Incorporation to adversely affect the rights of the holders of the Series C-

2

Preferred Shares, or (viii) authorize, commit to or consummate any liquidation, dissolution or winding up in which the liquidation preference of the Series C-

2

Preferred Shares would

not

be paid in full.   

Series C-

3

Preferred Stock

At

June 30, 2020

and

December 31, 2019,

there were

3,238,000

shares of Preferred C-

3

stock outstanding.

XML

Note 12 - Stock Options

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

NOTE

1

2

- STOCK OPTIONS

 

2016

Stock Option Plan   

The shareholders approved the

2016

Stock Option Plan (the

“2016

Plan”) which provides for the grant of up to

3,000,000

common stock options to provide equity incentives to directors, officers, employees and consultants. Two types of options

may

be granted under the

2016

Plan: non-qualified stock options and incentive stock options. As of

June 30, 2020,

there are

342,500

options available for future grant under the

2016

Plan.

2011

Stock Option Plan

    The shareholders approved the

2011

Stock Option Plan (the

“2011

Plan”) which provides for the grant of up to

3,000,000

common stock options to provide equity incentives to directors, officers, employees and consultants. Two types of options

may

be granted under the

2011

Plan: non-qualified stock options and incentive stock options. As of

June 30, 2020,

there are

316,000

options available for future grant under the

2011

Plan.

Under the

2016

and

2011

Stock Option Plans, non-qualified stock options

may

be granted to our officers, directors, employees and outside consultants. Incentive stock options

may

be granted only to our employees, including officers and directors who are also employees. In the case of incentive stock options, the exercise price

may

not

be less than such fair market value and in the case of an employee who owns more than

10%

of our common stock, the exercise price

may

not

be less than

110%

of such market price. Options generally are exercisable for

ten

years from the date of grant, except that the exercise period for an incentive stock option granted to an employee who owns more than

10%

of our stock

may

not

be greater than

five

years.

During the

six

months ended

June 30, 2020

the Company granted

2,100,000

stock options to certain employees, board members and a consultant.

No

stock option grants were made during the

six

months ended

June 30, 2019.

Summary

   For the

three

- month period ended

June 30, 2020,

the Company recognized a net credit to stock compensation of

$28,000

and for the

six

months ended

June 30, 2020,

the Company recognized stock compensation expense of

$11,000.

The Company recorded

$80,000

in forfeitures in the

second

quarter of

2020

and

$106,000

in forfeitures during the

six

months ended

June 30, 2020

reflecting employee turnover during these periods.

As of

June 30, 2020,

there was

$154,000

of total unrecognized compensation costs related to outstanding stock options, which are expected to be recognized over a weighted average of

1

year.

The weighted average grant date fair value of stock options issued during the

six

months ended

June 30, 2020

was

$0.10

per share. The weighted average grant date fair value of stock options vested during the

six

months ended

June 30, 2020

and

June 30, 2019

was

$64,000

and

$74,000,

respectively.  

The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

	2020			2019
Expected term (years)		6.3			-
Expected forfeiture rate		0	%		-
Risk-free rate		1.3	%		-
Volatility		179	%		-
Dividend yield		0.0	%		-

The average risk-free interest rate is based on the U.S. treasury security rate in effect as of the grant date. We determined expected volatility using the historical closing stock price. The expected life was generally determined using the simplified method as we do

not

believe we have enough historical stock option exercise experience on which to base the expected term.

The following summarizes the activity of our outstanding stock options for the

six

months ended

June 30, 2020:

				Weighted		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Shares			Price		Term (years)		Value
Outstanding at January 1, 2020		10,740,500		$	0.50		2.6	$	-
Granted		2,100,000			.10
Exercised		-			-
Canceled or expired		(1,099,000	)		.57
Outstanding at June 30, 2020		11,741,500		$	0.42		3.1	$	-
Exercisable at June 30, 2020		7,415,000		$	0.52		2.3	$	-

During the

six

months ended

June 30, 2020,

1,099,000

options were canceled due to employee turnover,

no

options expired unexercised and

no

options were exercised. During the

six

months ended

June 30, 2019,

no

options expired unexercised, and

no

options were canceled, or exercised. As of

June 30, 2020,

the exercise prices on outstanding stock options ranged from

$.07

per share to

$1.58

per share.

XML

Note 13 - Warrants

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Stockholders Equity Note Warrants Or Rights [Text Block]

NOTE

1

3

- WARRANTS

 

The following summarizes the activity of our outstanding warrants for the

six

months ended

June 30, 2020:

	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Term			Aggregate Intrinsic Value
Outstanding at January 1, 2020		7,731,707			0.45	(A)		6.2	(B)	$	33,000
Granted		-			-
Exercised		-			-
Canceled or expired		(100,000	)		2.50
Outstanding at June 30, 2020		7,631,707			0.42	(A)		6.1	(B)	$	41,000
Exercisable at June 30, 2020		7,006,707		$	0.46			6.1	(C)	$	40,000

(A)	The weighted average exercise price for warrants outstanding as of June 30, 2020 and 2019 excludes 1,750,000 warrants in each period with no determined exercise price.
(B)	The weighted average remaining contractual term for warrants outstanding as of June 30, 2020 and 2019 excludes 743,500 warrants with no expiration date.
(C)	The weighted average remaining contractual term for warrants exercisable as of June 30, 2020, and 2019 excludes 118,500 warrants with no expiration date.

XML

Note 14 - Related Party Transactions

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

NOTE

1

4

- RELATED PARTY TRANSACTIONS

 

As of

June 30, 2020,

and

December 31, 2019,

the Company had

$2,402,000

and

$2,477,000,

respectively, in principal amounts of senior convertible notes outstanding that were held by various members of our board of directors. These notes represent

9,338,228

of potential shares of common stock at

June 30, 2020

and

9,388,378

of potential shares of common stock at

December 31, 2019.

Underlying warrants issued and outstanding in connection with these notes represent

1,184,273

and

1,239,288

of potential shares of common stock at

June 30, 2020

and

December 31, 2019.

The Company had

$191,000

and

$164,000

at

June 30, 2020

and

December 31, 2019,

respectively in accrued interest on convertible notes due to board members. 

As of

June 30, 2020

and

December 31, 2019,

the Company had outstanding

$1,795,000

and

$1,170,000,

respectively, in principal amount of a senior convertible note held by an investor that is deemed an affiliate.  These notes represent

8,846,667

of potential shares of common stock at

June 30, 2020

and

4,680,000

of potential shares at

December 31, 2019. 

Underlying warrants issued and outstanding in connection with these notes represent

468,000

of potential shares of common stock at

June 30, 2020

and at

December 31, 2019. 

The Company had

$131,000

and

$88,000,

respectively in accrued interest on convertible notes due to this investor at

June 30, 2020

and

December 31, 2019.

As of

June 30, 2020

and

December 31, 2019,

the Company had unsecured subordinated promissory notes outstanding of

$425,000

payable to a board member. As of

June 30, 2020,

the Company had

$27,000

in accrued interest on the promissory notes. These notes earn interest at

6%

per annum and have a maturity date of

October 15, 2020.   

XML

Note 15 - Subsequent Events

6 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Subsequent Events [Text Block]

NOTE

1

5

 - SUBSEQUENT EVENTS

Issuance of

2019

Convertible Notes & Shares

Subsequent to

June 30, 2020,

the Company issued

$125,000

in

2019

convertible notes and

37,500

shares of common stock to an investor in connection with their investment in the

2019

Convertible Notes.

XML

Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2020

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation:

The Company's unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U. S. GAAP”) for interim financial information and in accordance with the instructions to Form

10

-Q and Article

8

-

03

of Regulation S-

X

of the Securities and Exchange Commission (“SEC”). Accordingly, the condensed consolidated financial statements do

not

include all information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the Company's management, all adjustments considered necessary for a fair presentation (consisting of normal recurring adjustments) have been included. The results for interim periods are

not

necessarily indicative of what the results will be for the fiscal year. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended

December 31, 2019

contained in the Company's

2019

Annual Report on Form

10

-K filed with the SEC.

Consolidation, Policy [Policy Text Block]

Consolidation:

The condensed consolidated financial statements include the accounts of the Company, our wholly owned subsidiary Iso-Torque Corporation, and our majority-owned subsidiary, Ice Surface Development, Inc. (

56%

owned). As of

June 30, 2020,

each of the subsidiaries is non-operational.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates:

The preparation of financial statements in conformity with generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. These estimates are subject to a high degree of judgment and potential change. Actual results could differ from those estimates.  

Reclassification, Comparability Adjustment [Policy Text Block]

Reclassifications:

Certain reclassifications

may

have been made to prior year balances to conform to the current year's presentation.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash:

We maintain cash at financial institutions that periodically

may

exceed federally insured amounts. We have a corporate credit card program through JPMorgan Chase Bank, N.A. In connection with this, the Company granted a security interest to the bank to act as collateral for the activity within the corporate card program, up to

$5,000.

Inventory, Policy [Policy Text Block]

Inventory

: Inventory is stated at the lower of cost or net realizable value with cost determined using the average cost method. Inventory on hand at

June 30, 2020

and

December 31, 2019

has been fully reserved. 

Depreciation, Depletion, and Amortization [Policy Text Block]

Depreciation and amortization: 

Depreciation and amortization are computed using the straight-line method.   Depreciation and amortization expense for the

three

and

six

months ended

June 30, 2020

and

2019

are as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2020		2019		2020		2019
Right-to use building	$	17,000	$	25,000	$	33,000	$	52,000
Software amortization		-		2,000		-		6,000
Property and equipment		3,000		7,000		6,000		14,000
	$	20,000	$	34,000	$	39,000	$	72,000

Lessee, Leases [Policy Text Block]

Right to use building asset: 

ASU

No.

 

2016

-

02,

“Leases,” requires a lessee to recognize on its balance sheet the assets and liabilities related to long-term leases that were classified as operating leases under previous guidance. An asset is recognized when the Company can retain the economic benefits and control of the underlying asset. A corresponding liability is recognized related to the Company's obligation to make lease payments over the term of the lease. The standard became effective for the Company on

January 1, 2019.

The Company utilized the modified retrospective approach to measure the right to use operating lease agreement associated with the office building used for our business operations. The adoption of this accounting standard did

not

impact our consolidated loss from operations and had

no

impact on cash flows.

Software Property And Equipment [Policy Text Block]

Software, Property and Equipment:

Capitalized software, property and equipment are stated at cost. Estimated useful lives for capitalized software is

3

years and for property and equipment is

5

to

7

years. Betterments, renewals and significant repairs that extend the life of the assets are capitalized. Other repairs and maintenance costs are expensed when incurred. When disposed, the cost and accumulated depreciation applicable to assets retired are removed from the accounts and the gain or loss on disposition is recognized in non-operating income (expense). 

Whenever events or circumstances indicate, our long-lived assets including any intangible assets with finite useful lives are tested for impairment by using the estimated future cash flows directly associated with, and that are expected to arise as a direct result of, the use of the assets. If the carrying amount exceeds the estimated undiscounted cash flows, impairment

may

be indicated. The carrying amount is compared to the estimated discounted cash flows and if there is an excess such amount is recorded as impairment.

Fair Value Measurement, Policy [Policy Text Block]

Fair Value of Financial Instruments:

As defined by U.S. GAAP

,

fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A hierarchy for ranking the quality and reliability of the information is used to determine fair values. Assets and liabilities carried at fair value will be classified and disclosed in

one

of the following

three

categories:  

Level

1:

Quoted market prices in active markets for identical assets or liabilities

Level

2:

Observable market-based inputs or unobservable inputs that are corroborated by market data

Level

3:

Unobservable inputs that are

not

corroborated by market data  

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level

1

measurements) and the lowest priority to unobservable inputs (Level

3

measurements). The Financial Accounting Standards Board's (“FASB”) guidance for the disclosure about fair value of financial instruments requires disclosure of an estimate of the fair value of certain financial instruments. The fair value of financial instruments pursuant to FASB's guidance for the disclosure about fair value of financial instruments approximated their carrying values at

June 30, 2020

and

December 31, 2019.

The carrying amount of cash, prepaid expenses, accounts payable, accrued expenses, demand and promissory notes approximates their fair value due to their short maturity. The senior convertible and demand notes can be converted into common stock with an underlying value of

$3,345,000

as of

June 30, 2020

based on the trading price on that date. 

Revenue from Contract with Customer [Policy Text Block]

Revenue Recognition and Deferred Revenue:

The Company accounts for revenue in accordance with FASB ASC

606,

 "Revenue from Contracts with Customers" and all related amendments. For contracts where performance obligations are satisfied at a point in time, the Company recognizes revenue when the product is shipped to the customer. For contracts where the performance obligation is satisfied over time, as in the Z-Coach sales, the Company recognizes revenue over the subscription period.  Revenue from the sale of the Company's products is recognized net of cash discounts, sales returns and allowances. 

The Company's revenue is derived primarily from domestic customers. For the

three

- and

six

-month periods ended

June 30, 2020

net revenue from products transferred over time amounted to

$2,000

and

$5,000

respectively. One customer accounted for

100%

of total Z-Coach subscription sales made during the

three

- and

six

-month periods ended

June 30, 2020.

Our collection terms provide customers standard terms of net

30

 days. Future performance obligations are reflected in deferred revenue.

CURA revenue is recognized (a) upon receipt of payment at the point of sale of the CURA app, (b) upon the delivery of myCadian products and (c) upon the Company's performance of all obligations as described in customer agreements. The Z-Coach program provides fatigue training over an annual subscription period of

twelve

months and allows the user unlimited access during the annual subscription period. Customers are billed at the acceptance of the subscription, and revenue is recognized ratably over the subscription period as performance obligations are satisfied and when collection is reasonably assured.

In Process Research and Development, Policy [Policy Text Block]

Engineering and Development:

Engineering and development costs and patent expenses are charged to operations as incurred. Engineering and development include personnel-related costs, materials and supplies, depreciation and consulting services.

Selling, General and Administrative Expenses, Policy [Policy Text Block]

General and Administrative:

Patent costs for the

three

months ended

June 30, 2020

and

2019

amounted to

$14,000

and

$11,000

respectively and are included in general and administrative expenses. Patent costs for the

six

months ended

June 30, 2020

and

2019

amounted to

$17,000

and

$21,000

respectively

Share-based Payment Arrangement [Policy Text Block]

Stock-based Compensation:

FASB Accounting Standards Codification (“ASC”)

718

-

10

requires all share-based payments be recognized as expense over the service period (generally the vesting period) based on the fair value on the grant date. The realization of tax benefits in excess of amounts recognized for financial reporting purposes are recognized as a financing activity in accordance with ASC

718

-

10.

No

tax benefits were attributed to the stock-based compensation expense because a valuation allowance was maintained for substantially all net deferred tax assets.   

Income Tax, Policy [Policy Text Block]

Income Taxes:

We account for income taxes using the asset and liability method, the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting and the tax basis of our assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. A valuation allowance related to deferred tax assets is recorded when it is more likely than

not

that some portion or all the deferred tax assets will

not

be realized.  

We account for uncertain tax positions using a more-likely-than-

not

recognition threshold based on the technical merits of the tax position taken. Tax benefits that meet the more-likely-than-

not

recognition threshold should be measured as the largest amount of tax benefits, determined on a cumulative probability basis, which is more likely than

not

to be realized upon ultimate settlement in the financial statements. It is our policy to recognize interest and penalties related to income tax matters as general and administrative expenses. As of

June 30, 2020,

and

December 31, 2019,

there were

no

accrued interest or penalties related to uncertain tax positions.

Earnings Per Share, Policy [Policy Text Block]

Loss per Common Share:

FASB's ASC

260

-

10

(“Earnings Per Share”) requires the presentation of basic earnings per share, which is based on weighted average common stock outstanding, and dilutive earnings per share, which gives effect to options, warrants and convertible securities in periods when they are dilutive. At

June 30, 2020

and

2019,

we excluded

111,296,260

and

99,159,056

potential common shares, respectively, relating to convertible preferred stock, convertible notes, future share rights issued with the demand notes, options and warrants outstanding from the diluted net loss per common share calculation because their inclusion would be anti-dilutive. We excluded

625,000

warrants from the diluted net loss per common share calculation at

June 30, 2020

and

2019

as the conditions for their vesting are

not

time-based.

XML

Note 2 - Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Depreciation and Amortization [Table Text Block]

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2020		2019		2020		2019
Right-to use building	$	17,000	$	25,000	$	33,000	$	52,000
Software amortization		-		2,000		-		6,000
Property and equipment		3,000		7,000		6,000		14,000
	$	20,000	$	34,000	$	39,000	$	72,000

XML

Note 3 - Inventory and Vendor Liability (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	June 30, 2020			December 31, 2019
Raw materials	$	1,641,000		$	1,665,000
Finished goods		69,000			69,000
		1,710,000			1,734,000
Less: Reserve		(1,710,000	)		(1,734,000	)
Inventory (net)	$	-		$	-
Liability for inventory	$	1,740,000		$	1,764,000

XML

Note 6 - Senior Convertible Notes (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Convertible Debt [Table Text Block]

	Total			2019 6% Notes			JULY 2018 Notes			2018 Notes			2017 6% Notes			2016 6% Notes
Face value December 31, 2019	$	10,310,000		$	650,000		$	1,675,000		$	625,000		$	4,370,000		$	2,990,000
Notes issued		725,000			725,000			-			-			-			-
Face value June 30, 2020	$	11,035,000		$	1,375,000		$	1,675,000		$	625,000		$	4,370,000		$	2,990,000
Debt discount December 31, 2019	$	(1,900,000	)	$	(3,000	)	$	(353,000	)	$	(185,000	)	$	(362,000	)	$	(997,000	)
Debt discount issued		(21,000	)		(21,000	)		-			-			-			-
Amortization reported as interest		400,000			13,000			41,000			23,000			55,000			268,000
Debt discount June 30, 2020	$	(1,521,000	)	$	(11,000	)	$	(312,000	)	$	(162,000	)	$	(307,000	)	$	(729,000	)
Senior Convertible Notes (net)	$	9,514,000		$	1,364,000		$	1,363,000		$	463,000		$	4,063,000		$	2,261,000

XML

Note 9 - Property and Equipment (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Property, Plant and Equipment [Table Text Block]

	June 30, 2020			December 31, 2019
Office equipment	$	199,000		$	199,000
Shop equipment		132,000			132,000
Gross Property and equipment		331,000			331,000
Less accumulated depreciation		(299,000	)		(293,000	)
Net property and equipment	$	32,000		$	38,000

XML

Note 10 - Business Segments (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	CURA			Aegis			Corporate			Total
Revenue	$	2,000		$	-		$	-		$	2,000
Loss on revenue		(10,000	)		-			-			(10,000	)
Total costs and expenses		129,000			(13,000	)		255,000			371,000
Loss from operations		(139,000	)		13,000			(255,000	)		(381,000	)
Non-operating expense		-			-			(440,000	)		(440,000	)
Net loss	$	(139,000	)	$	13,000		$	(695,000	)	$	(821,000	)
Stock based compensation	$	17,000		$	(37,000	)	$	(8,000	)	$	(28,000	)
Depreciation and amortization	$	-		$	2,000		$	18,000		$	20,000
Assets at June 30, 2020	$	-		$	32,000		$	246,000		$	278,000

	CURA			Aegis			Corporate			Total
Revenue	$	5,000		$	-		$	-		$	5,000
Loss on revenue		(8,000	)		-			-			(8,000	)
Total costs and expenses		183,000			52,000			554,000			789,000
Loss from operations		(191,000	)		(52,000	)		(554,000	)		(797,000	)
Non-operating expense		-			-			(777,000	)		(777,000	)
Net loss	$	(191,000	)	$	(52,000	)	$	(1,331,000	)	$	(1,574,000	)
Stock based compensation	$	40,000		$	(33,000	)	$	3,000		$	11,000
Depreciation and amortization	$	-		$	5,000		$	34,000		$	39,000
Assets at June 30, 2020	$	-		$	32,000		$	246,000		$	278,000

	CURA			Aegis			Corporate			Total
Revenue	$	2,000		$	-		$	-		$	2,000
Loss on revenue		(1,000	)		-			-			(1,000	)
Total costs and expenses		(176,000	)		(150,000	)		(335,000	)		(661,000	)
Loss from operations		(177,000	)		(150,000	)		(335,000	)		(662,000	)
Non-operating expense		-			-			(303,000	)		(303,000	)
Net loss	$	(177,000	)	$	(150,000	)	$	(638,000	)	$	(965,000	)
Stock based compensation	$	6,000		$	5,000		$	34,000		$	45,000
Depreciation and amortization	$	3,000		$	5,000		$	26,000		$	34,000
Assets at June 30, 2019	$	6,000		$	45,000		$	246,000		$	297,000

	CURA			Aegis			Corporate			Total
Revenue	$	9,000		$	-		$	-		$	9,000
Margin (loss on revenue)		-			-			-			-
Total costs and expenses		(515,000	)		(319,000	)		(702,000	)		1,536,000
Loss from operations		(515,000	)		(319,000	)		(702,000	)		(1,536,000	)
Non-operating expense		-			-			(577,000	)		(577,000	)
Net loss	$	(515,000	)	$	(319,000	)	$	(1,279,000	)	$	(2,113,000	)
Stock based compensation	$	14,000		$	13,000		$	77,000		$	104,000
Depreciation and amortization	$	9,000		$	10,000		$	53,000		$	72,000
Assets at June 30, 2019	$	6,000		$	45,000		$	246,000		$	297,000

XML

Note 12 - Stock Options (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	2020			2019
Expected term (years)		6.3			-
Expected forfeiture rate		0	%		-
Risk-free rate		1.3	%		-
Volatility		179	%		-
Dividend yield		0.0	%		-

Share-based Payment Arrangement, Option, Activity [Table Text Block]

				Weighted		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Shares			Price		Term (years)		Value
Outstanding at January 1, 2020		10,740,500		$	0.50		2.6	$	-
Granted		2,100,000			.10
Exercised		-			-
Canceled or expired		(1,099,000	)		.57
Outstanding at June 30, 2020		11,741,500		$	0.42		3.1	$	-
Exercisable at June 30, 2020		7,415,000		$	0.52		2.3	$	-

XML

Note 13 - Warrants (Tables)

6 Months Ended

Jun. 30, 2020

Notes Tables

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

	Shares			Weighted Average Exercise Price			Weighted Average Remaining Contractual Term			Aggregate Intrinsic Value
Outstanding at January 1, 2020		7,731,707			0.45	(A)		6.2	(B)	$	33,000
Granted		-			-
Exercised		-			-
Canceled or expired		(100,000	)		2.50
Outstanding at June 30, 2020		7,631,707			0.42	(A)		6.1	(B)	$	41,000
Exercisable at June 30, 2020		7,006,707		$	0.46			6.1	(C)	$	40,000

XML

Note 1 - The Company and Basis of Presentation (Details Textual)	6 Months Ended
	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Mar. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Number of Operating Segments	2
Cash and Cash Equivalents, at Carrying Value, Ending Balance	$ 68,000			$ 18,000
Working Capital	(4,296,000)
Retained Earnings (Accumulated Deficit), Ending Balance	(92,999,000)			(91,425,000)
Stockholders' Equity Attributable to Parent, Ending Balance	(13,708,000)	$ (10,393,000)	$ (12,890,000)	$ (12,203,000)	$ (9,497,000)	$ (8,479,000)
Proceeds From Convertible Debt, Gross	725,000
Proceeds from Issuance of Unsecured Debt	228,000
Minimum [Member]
Cash Needed During the Year to Fund Current and Future Commitments	1,700,000
Maximum [Member]
Cash Needed During the Year to Fund Current and Future Commitments	2,000,000
Paycheck Protection Program and US Small Business Association Economic Injury Disaster Loan Grant [Member]
Proceeds from Issuance of Unsecured Debt	$ 235,000

XML

Note 2 - Summary of Significant Accounting Policies (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Revenue from Contract with Customer, Including Assessed Tax	$ 2,000	$ 2,000	$ 5,000	$ 9,000
Patent Cost	14,000	$ 11,000	17,000	$ 21,000
Excess Tax Benefit from Share-based Compensation, Operating Activities			0
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued, Total	$ 0		$ 0		$ 0
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares)			111,296,260	99,159,056
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares)			625,000	625,000
Z-Coach Aviation Wellness Program Annual Subscription [Member]
Deferred Revenue Arrangement, Subscription Period (Month)			1 year
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Customer One [Member]
Concentration Risk, Percentage	100.00%		100.00%
Transferred over Time [Member]
Revenue from Contract with Customer, Including Assessed Tax	$ 2,000		$ 5,000
Senior Convertible Promissory Notes [Member]
Long-term Debt, Fair Value	3,345,000		$ 3,345,000
Minimum [Member]
Property, Plant and Equipment, Useful Life (Year)			5 years
Maximum [Member]
Property, Plant and Equipment, Useful Life (Year)			7 years
Computer Software, Intangible Asset [Member]
Finite-Lived Intangible Asset, Useful Life (Year)			3 years
Commercial Paper [Member] | Collateral Pledged [Member]
Debt Instrument, Collateral Amount	$ 5,000		$ 5,000
Subsidiaries [Member]
Equity Method Investment, Ownership Percentage	56.00%		56.00%

XML

Note 2 - Summary of Significant Accounting Policies - Depreciation and Amortization (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Depreciation and amortization	$ 20,000	$ 34,000	$ 39,000	$ 72,000
Right-to-use Building [Member]
Depreciation and amortization	17,000	25,000	33,000	52,000
Software Development [Member]
Depreciation and amortization		2,000		6,000
Property and Equipment [Member]
Depreciation and amortization	$ 3,000	$ 7,000	$ 6,000	$ 14,000

XML

Note 3 - Inventory and Vendor Liability (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Inventory (Recovery) Write-down	$ (17,000)		$ (24,000)

XML

Note 3 - Inventory and Vendor Liability - Inventory (Details) - USD ($)	Jun. 30, 2020	Dec. 31, 2019
Raw materials	$ 1,641,000	$ 1,665,000
Finished goods	69,000	69,000
Inventory, Gross, Total	1,710,000	1,734,000
Less: Reserve	(1,710,000)	(1,734,000)
Inventory (net)
Liability for inventory	$ 1,740,000	$ 1,764,000

XML

Note 4 - Demand Note (Details Textual)		3 Months Ended			6 Months Ended
	Jul. 23, 2019 USD ($) $ / shares	Jun. 30, 2020 USD ($) $ / shares shares	Mar. 31, 2020 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($) $ / shares shares	Dec. 31, 2019 USD ($)
Long-term Debt, Gross		$ 11,035,000			$ 11,035,000	$ 10,310,000
Stock Issued During Period, Value, New Issues		10,000	$ 10,000	$ 12,000
Credit Facility with Co-borrowers [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 1,500,000
Debt Instrument, Convertible, Number of Equity Instruments	30,000
Debt Instrument, Convertible, Threshold Amount Needed to Invest to Convert a Specified Number of Equity Instruments	$ 100,000
Debt Instrument, Convertible, Conversion Price (in dollars per share) | $ / shares	$ 0.15
Debt Instrument, Term, Number of Days after Substantial Sale of Aegis Division (Day)	5 days
Long-term Debt, Gross		650,000			$ 650,000
Stock Issued in Connection with Debt Issuance, Shares (in shares) | shares					195,000
Stock Issued During Period, Value, New Issues					$ 21,000
Interest Expense, Debt, Total		$ 5,000			$ 13,000
Credit Facility with Co-borrowers [Member] | Prime Rate [Member]
Long-term Debt, Percentage Bearing Variable Interest, Percentage Rate		3.25%			3.25%
Credit Facility with Co-borrowers [Member] | Rights Related to Credit Facility with Co-borrowers [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares) | shares		4,333,333			4,333,333
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares		$ 0.15			$ 0.15
Warrants and Rights Outstanding		$ 276,000			$ 276,000

XML

Note 5 - Paycheck Protection Program Loan (Details Textual) - USD ($)		6 Months Ended
	Apr. 20, 2020	Jun. 30, 2020	Jun. 30, 2019
Proceeds from Issuance of Unsecured Debt		$ 228,000
Paycheck Protection Program CARES Act [Member]
Proceeds from Issuance of Unsecured Debt	$ 227,700

XML

Note 6 - Senior Convertible Notes (Details Textual)				3 Months Ended		6 Months Ended		12 Months Ended
	Jul. 24, 2018 USD ($) $ / shares	May 08, 2018 USD ($) $ / shares	Aug. 25, 2016 USD ($) $ / shares	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Dec. 31, 2019 USD ($) $ / shares	Dec. 31, 2017 USD ($) $ / shares	Nov. 30, 2018 $ / shares
Long-term Debt, Gross				$ 11,035,000		$ 11,035,000		$ 10,310,000
Debt Instrument, Unamortized Discount, Total				1,521,000		1,521,000		1,900,000
Proceeds from Convertible Debt						725,000
Increase in Unamortized Debt Discount Due to Issuance						21,000
Warrants Related to the 2017 Convertible Notes [Member]
Percentage of Shares Issuable Upon Conversion of the Promissory Notes, Below Investment Threshold									10.00%
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares										$ 0.333
Percentage of Shares Issuable Upon the Conversion of the Promissory Notes									25.00%
Warrants Related to the 2016 Convertible Notes [Member]
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares			$ 0.25
Warrants and Rights Outstanding, Term (Year)			10 years
Percentage of Shares Issuable Upon the Conversion of the Promissory Notes			10.00%
Convertible Notes [Member]
Long-term Debt, Gross				11,035,000		11,035,000		10,310,000
Debt Instrument, Unamortized Discount, Total				1,521,000		1,521,000		1,900,000
Long-term Debt, Total				9,514,000		9,514,000		8,410,000
Long-Term Debt, Maturity, Year One				2,990,000		2,990,000
Long-term Debt, Maturities, Repayments of Principal in Year Two				2,775,000		2,775,000
Long-term Debt, Maturities, Repayments of Principal in Year Three				3,395,000		3,395,000
Long-Term Debt, Maturity, Year Four				1,150,000		1,150,000
Long-Term Debt, Maturities Repayments of Principal, After Year Four				725,000		725,000
Convertible Notes [Member] | Investor [Member]
Long-term Debt, Total				2,402,000		2,402,000		2,477,000
Convertible Notes [Member] | Affiliated Entity [Member]
Long-term Debt, Total				1,795,000		$ 1,795,000		$ 1,170,000
Debt Instrument, Convertible, Number of Equity Instruments						8,846,667		4,680,000
The 2019 Convertible Notes [Member]
Long-term Debt, Gross				1,375,000		$ 1,375,000		$ 650,000
Debt Instrument, Unamortized Discount, Total				11,000		11,000		3,000
Amount of Senior Convertible Promissory Notes Authorized to Issue in Private Placement								$ 2,500,000
Debt Instrument, Interest Rate, Stated Percentage								6.00%
Debt Instrument, Term, Number of Days after Substantial Sale of Aegis Division (Day)								5 days
Debt Instrument, Term (Year)								5 years
Debt Instrument, Convertible, Conversion Price (in dollars per share) | $ / shares								$ 0.15
Debt Instrument, Convertible, Number of Equity Instruments								30,000
Debt Instrument, Convertible, Threshold Amount Needed to Invest to Convert a Specified Number of Equity Instruments								$ 100,000
Proceeds from Convertible Debt				165,000		725,000
Increase in Unamortized Debt Discount Due to Issuance				5,000		21,000
Interest Expense, Debt, Total				24,000	$ 23,000	46,000	$ 46,000
July 2018 Convertible Notes [Member]
Long-term Debt, Gross				1,675,000		1,675,000		1,675,000
Debt Instrument, Unamortized Discount, Total				312,000		312,000		353,000
Amount of Senior Convertible Promissory Notes Authorized to Issue in Private Placement	$ 2,500,000
Debt Instrument, Term (Year)	5 years
Debt Instrument, Convertible, Conversion Price (in dollars per share) | $ / shares	$ 0.25
Proceeds from Convertible Debt
Increase in Unamortized Debt Discount Due to Issuance
Interest Expense, Debt, Total				21,000	19,000	41,000	32,000
Warrants Related to July 2018 Convertible Notes [Member]
Percentage of Shares Issuable Upon Conversion of the Promissory Notes, Below Investment Threshold	10.00%
Percentage of Shares Issuable Upon Conversion of the Promissory Notes, Above Investment Threshold	25.00%
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares	$ 0.25
Warrants and Rights Outstanding, Term (Year)	10 years
The 2018 Convertible Notes [Member]
Long-term Debt, Gross				625,000		625,000		625,000
Debt Instrument, Unamortized Discount, Total				162,000		162,000		185,000
Amount of Senior Convertible Promissory Notes Authorized to Issue in Private Placement		$ 1,000,000
Debt Instrument, Term (Year)		5 years
Debt Instrument, Convertible, Conversion Price (in dollars per share) | $ / shares		$ 0.25
Proceeds from Convertible Debt
Increase in Unamortized Debt Discount Due to Issuance
Interest Expense, Debt, Total				12,000	11,000	23,000	22,000
Warrants Related to the 2018 Convertible Notes [Member]
Percentage of Shares Issuable Upon Conversion of the Promissory Notes, Below Investment Threshold		10.00%
Percentage of Shares Issuable Upon Conversion of the Promissory Notes, Above Investment Threshold		25.00%
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share) | $ / shares		$ 0.25
Warrants and Rights Outstanding, Term (Year)		10 years
The 2017 Convertible Notes [Member]
Long-term Debt, Gross				4,370,000		4,370,000		4,370,000
Debt Instrument, Unamortized Discount, Total				307,000		307,000		362,000
Debt Instrument, Interest Rate, Stated Percentage									6.00%
Debt Instrument, Term (Year)									5 years
Debt Instrument, Convertible, Conversion Price (in dollars per share) | $ / shares									$ 0.50	$ 0.333
Proceeds from Convertible Debt
Increase in Unamortized Debt Discount Due to Issuance
Interest Expense, Debt, Total				93,000	91,000	185,000	171,000
The 2017 Convertible Notes [Member] | Maximum [Member]
Amount of Senior Convertible Promissory Notes Authorized to Issue in Private Placement									$ 5,000,000
The 2016 Convertible Notes [Member]
Long-term Debt, Gross				2,990,000		2,990,000		2,990,000
Debt Instrument, Unamortized Discount, Total				729,000		729,000		$ 997,000
Debt Instrument, Interest Rate, Stated Percentage			6.00%
Debt Instrument, Term (Year)			5 years
Debt Instrument, Convertible, Conversion Price (in dollars per share) | $ / shares			$ 0.25
Proceeds from Convertible Debt
Increase in Unamortized Debt Discount Due to Issuance
Interest Expense, Debt, Total				$ 180,000	$ 172,000	$ 357,000	$ 342,000
The 2016 Convertible Notes [Member] | Maximum [Member]
Amount of Senior Convertible Promissory Notes Authorized to Issue in Private Placement			$ 3,000,000

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Note 6 - Senior Convertible Notes - Schedule of Senior Convertible Notes Outstanding (Details) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Face value		$ 10,310,000
Notes issued		725,000
Face value	$ 11,035,000	11,035,000
Debt discount		(1,900,000)
Debt discount issued		(21,000)
Amortization reported as interest		400,000	$ 351,000
Debt discount	(1,521,000)	(1,521,000)
Senior Convertible Notes (net)	9,514,000	9,514,000		$ 8,410,000
The 2019 Convertible Notes [Member]
Face value		650,000
Notes issued	165,000	725,000
Face value	1,375,000	1,375,000
Debt discount		(3,000)
Debt discount issued	(5,000)	(21,000)
Amortization reported as interest		13,000
Debt discount	(11,000)	(11,000)
Senior Convertible Notes (net)	1,364,000	1,364,000
July 2018 Convertible Notes [Member]
Face value		1,675,000
Notes issued
Face value	1,675,000	1,675,000
Debt discount		(353,000)
Debt discount issued
Amortization reported as interest		41,000
Debt discount	(312,000)	(312,000)
Senior Convertible Notes (net)	1,363,000	1,363,000
The 2018 Convertible Notes [Member]
Face value		625,000
Notes issued
Face value	625,000	625,000
Debt discount		(185,000)
Debt discount issued
Amortization reported as interest		23,000
Debt discount	(162,000)	(162,000)
Senior Convertible Notes (net)	463,000	463,000
The 2017 Convertible Notes [Member]
Face value		4,370,000
Notes issued
Face value	4,370,000	4,370,000
Debt discount		(362,000)
Debt discount issued
Amortization reported as interest		55,000
Debt discount	(307,000)	(307,000)
Senior Convertible Notes (net)	4,063,000	4,063,000
The 2016 Convertible Notes [Member]
Face value		2,990,000
Notes issued
Face value	2,990,000	2,990,000
Debt discount		(997,000)
Debt discount issued
Amortization reported as interest		268,000
Debt discount	(729,000)	(729,000)
Senior Convertible Notes (net)	$ 2,261,000	$ 2,261,000

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Note 7 - Unsecured Subordinated Promissory Notes (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Short-term Debt, Total	$ 425,000		$ 425,000		$ 425,000
Unsecured Subordinated Promissory Notes [Member]
Short-term Debt, Total	$ 425,000		$ 425,000		425,000
Debt Instrument, Interest Rate, Stated Percentage	6.00%		6.00%
Interest Expense, Debt, Total	$ 6,000	$ 6,000	$ 12,000	$ 7,000
Interest Payable	$ 27,000		$ 27,000		$ 15,000

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Note 8 - Right to Use Building Asset (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019	Aug. 01, 2019	Jan. 01, 2019
Office Building with Terminated Lease Obligation [Member]
Operating Lease, Liability, Total							$ 257,000
Lessee, Operating Lease, Discount Rate					6.00%
Operating Lease, Cost		$ 30,000		$ 60,000
Office Located in 350 Linden Oaks in Rochester New York [Member]
Operating Lease, Liability, Total						$ 212,000
Lessee, Operating Lease, Discount Rate						6.00%
Operating Lease, Cost	$ 15,000		$ 31,000
Lessee, Operating Lease, Liability, to be Paid, Remainder of Fiscal Year	35,000		35,000
Lessee, Operating Lease, Liability, to be Paid, Year One	66,000		66,000
Lessee, Operating Lease, Liability, to be Paid, Year Two	66,000		66,000
Lessee, Operating Lease, Liability, to be Paid, Total	179,000		179,000
Lessee, Operating Lease, Liability, Undiscounted Excess Amount	$ 13,000		$ 13,000

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Note 9 - Property and Equipment - Property and Equipment (Details) - USD ($)	Jun. 30, 2020	Dec. 31, 2019
Office equipment	$ 199,000	$ 199,000
Shop equipment	132,000	132,000
Gross Property and equipment	331,000	331,000
Less accumulated depreciation	(299,000)	(293,000)
Net property and equipment	$ 32,000	$ 38,000

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Note 10 - Business Segments (Details Textual)	6 Months Ended
	Jun. 30, 2020
Number of Operating Segments	2

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Note 10 - Business Segments - Operation by Segments (Details) - USD ($)	3 Months Ended				6 Months Ended
	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Revenue	$ 2,000		$ 2,000		$ 5,000	$ 9,000
Loss on revenue	(10,000)		(1,000)		(8,000)
Total costs and expenses	371,000		661,000		789,000	1,536,000
Loss from operations	(381,000)		(662,000)		(797,000)	(1,536,000)
Non-operating expense	(440,000)		(303,000)		(777,000)	(577,000)
Net loss	(821,000)	$ (753,000)	(965,000)	$ (1,148,000)	(1,574,000)	(2,113,000)
Stock-based compensation	(28,000)		45,000		11,000	104,000
Depreciation and amortization	20,000		34,000		39,000	72,000
Assets	278,000		297,000		278,000	297,000	$ 251,000
Total costs and expenses	(371,000)		(661,000)		(789,000)	(1,536,000)
Operating Segments [Member] | CURA Division [Member]
Revenue	2,000		2,000		5,000	9,000
Loss on revenue	(10,000)		(1,000)		(8,000)
Total costs and expenses	129,000		176,000		183,000	(515,000)
Loss from operations	(139,000)		(177,000)		(191,000)	(515,000)
Non-operating expense
Net loss	(139,000)		(177,000)		(191,000)	(515,000)
Stock-based compensation	17,000		6,000		40,000	14,000
Depreciation and amortization			3,000			9,000
Assets			6,000			6,000
Total costs and expenses	(129,000)		(176,000)		(183,000)	515,000
Operating Segments [Member] | Aegis Division [Member]
Revenue
Loss on revenue
Total costs and expenses	(13,000)		150,000		52,000	(319,000)
Loss from operations	13,000		(150,000)		(52,000)	(319,000)
Non-operating expense
Net loss	13,000		(150,000)		(52,000)	(319,000)
Stock-based compensation	(37,000)		5,000		(33,000)	13,000
Depreciation and amortization	2,000		5,000		5,000	10,000
Assets	32,000		45,000		32,000	45,000
Total costs and expenses	13,000		(150,000)		(52,000)	319,000
Corporate, Non-Segment [Member]
Revenue
Loss on revenue
Total costs and expenses	255,000		335,000		554,000	(702,000)
Loss from operations	(255,000)		(335,000)		(554,000)	(702,000)
Non-operating expense	(440,000)		(303,000)		(777,000)	(577,000)
Net loss	(695,000)		(638,000)		(1,331,000)	(1,279,000)
Stock-based compensation	(8,000)		34,000		3,000	77,000
Depreciation and amortization	18,000		26,000		34,000	53,000
Assets	246,000		246,000		246,000	246,000
Total costs and expenses	$ (255,000)		$ (335,000)		$ (554,000)	$ 702,000

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Note 11 - Preferred and Common Stock (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Common stock, shares authorized (in shares)	400,000,000		400,000,000		400,000,000
Common stock, par value (in dollars per share)	$ 0.01		$ 0.01		$ 0.01
Preferred stock, shares authorized (in shares)	100,000,000		100,000,000		100,000,000
Preferred Stock, Par or Stated Value Per Share (in dollars per share)	$ 0.01		$ 0.01		$ 0.01
Preferred Class A [Member]
Preferred stock, shares outstanding (in shares)	468,221		468,221		468,221
Preferred Stock, Shares Outstanding, Not Accruing Dividends (in shares)	8,709		8,709		8,709
Preferred Stock, Shares Outstanding, Accruing Dividends (in shares)	459,512		459,512
Dividends Payable	$ 2,805,000		$ 2,805,000		$ 2,713,000
Preferred Stock, Liquidation Preference, Value	$ 2,805,000		$ 2,805,000		$ 2,713,000
Preferred Stock, Liquidation Preference Per Share (in dollars per share)	$ 4		$ 4
Preferred Class B [Member]
Preferred stock, shares outstanding (in shares)	67,500		67,500		67,500
Dividends Payable	$ 504,000		$ 504,000		$ 488,000
Preferred Stock, Liquidation Preference Per Share (in dollars per share)	$ 5		$ 5
Series C Preferred Stock [Member]
Preferred stock, shares outstanding (in shares)	15,687,500		15,687,500		15,687,500
Preferred Stock, Liquidation Preference, Value	$ 6,275,000		$ 6,275,000		$ 6,275,000
Preferred Stock, Liquidation Preference Per Share (in dollars per share)	$ 0.40		$ 0.40
Series C2 Preferred Stock [Member]
Preferred stock, shares outstanding (in shares)	24,500,000		24,500,000		24,500,000
Preferred Stock, Liquidation Preference, Value	$ 4,900,000		$ 4,900,000		$ 4,900,000
Series C3 Preferred Stock [Member]
Preferred stock, shares outstanding (in shares)	3,238,000		3,238,000		3,238,000
The 2016, 2017 and 2019 Convertible Notes [Member]
Stock Issued During Period, Shares, Interest (in shares)	123,074	39,156	217,846	75,152

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Note 12 - Stock Options (Details Textual) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2016	Dec. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in shares)		2,100,000
Reversal of Allocated Share-based Compensation Expense	$ 28,000
Share-based Payment Arrangement, Expense		$ 11,000
Increase (Decrease) in Allocated Share-based Compensation Expense, Forefitures	80,000	106,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total	$ 154,000	$ 154,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)		1 year
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value (in dollars per share)		$ 0.10
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value		$ 64,000	$ 74,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period (in shares)		1,099,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period (in shares)		0	0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period (in shares)		0	0
Share-based Payment Arrangement, Option, Exercise Price Range, Lower Range Limit (in dollars per share)		$ 0.07
Share-based Payment Arrangement, Option, Exercise Price Range, Upper Range Limit (in dollars per share)		$ 1.58
Stock Option Plan 2016 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in shares)				3,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in shares)	342,500	342,500
Stock Option Plan 2011 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in shares)					3,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in shares)	316,000	316,000
Share-based Compensation Arrangement by Share-based Payment Award, Percentage of Outstanding Stock Maximum		10.00%
Share-based Compensation Arrangement by Share-based Payment Award, Discount from Market Price, Offering Date		110.00%
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period (Year)		10 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in shares)		2,100,000	0

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Note 12 - Stock Options - Stock Options Valuation Assumptions (Details)	3 Months Ended	6 Months Ended
	Mar. 31, 2019	Jun. 30, 2020
Expected term (years) (Year)		6 years 109 days
Expected forfeiture rate		0.00%
Risk-free rate		1.30%
Volatility		179.00%
Dividend yield		0.00%

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Note 12 - Stock Options - Share-based Compensation, Stock Options, Activity (Details) - USD ($)	6 Months Ended		12 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Dec. 31, 2019
Outstanding shares (in shares)	10,740,500
Outstanding - weighted average exercise price (in dollars per share)	$ 0.50
Outstanding - weighted average remaining contractual term (Year)	3 years 36 days		2 years 219 days
Outstanding - aggregate intrinsic value
Shares, granted (in shares)	2,100,000
Weighted average exercise price, granted (in dollars per share)	$ 0.10
Shares, exercised (in shares)	0	0
Weighted average exercise price, exercised (in dollars per share)
Shares, canceled or expired (in shares)	(1,099,000)
Weighted average exercise price, canceled or expired (in dollars per share)	$ 0.57
Outstanding shares (in shares)	11,741,500		10,740,500
outstanding - weighted average exercise price (in dollars per share)	$ 0.42		$ 0.50
Shares, exercisable (in shares)	7,415,000
Weighted average exercise price, exercisable (in dollars per share)	$ 0.52
Exercisable- weighted average remaining contractual term (Year)	2 years 109 days
Exercisable-aggregate intrinsic value

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Note 13 - Warrants (Details Textual) - shares	Jun. 30, 2020	Dec. 31, 2019	Jun. 30, 2019
Class of Warrant or Right, Outstanding (in shares)	7,631,707	7,731,707
Warrants without Expiration Date, Outstanding (in shares)	743,500		743,500
Warrants without Expiration Date, Exercisable (in shares)	118,500		118,500
Warrants Not Determined, Exercise Price [Member]
Class of Warrant or Right, Outstanding (in shares)	1,750,000		1,750,000

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Note 13 - Warrants - Summary of Outstanding Warrants (Details) - USD ($)		6 Months Ended	12 Months Ended
		Jun. 30, 2020	Dec. 31, 2019
Shares outstanding (in shares)		7,731,707
Outstanding, weighted average exercise price (in dollars per share)	[1]	$ 0.45
Outstanding, weighted average remaining contractual term (Year)	[2]	6 years 36 days	6 years 73 days
Outstanding, aggregate intrinsic value		$ 41,000	$ 33,000
Shares granted (in shares)
Granted, weighted average exercise price (in dollars per share)
Shares exercised (in shares)
Exercised, weighted average exercise price (in dollars per share)
Shares canceled or expired (in shares)		(100,000)
Canceled or expired, weighted average exercise price (in dollars per share)		$ 2.50
Shares outstanding (in shares)		7,631,707	7,731,707
Outstanding, weighted average exercise price (in dollars per share)	[1]	$ 0.42	$ 0.45
Shares exercisable (in shares)		7,006,707
Exercisable, weighted average exercise price (in dollars per share)		$ 0.46
Exercisable, weighted average remaining contractual term (Year)	[3]	6 years 36 days
Exercisable, aggregate intrinsic value		$ 40,000

[1] The weighted average exercise price for warrants outstanding as of June 30, 2020 and 2019 excludes 1,750,000 warrants in each period with no determined exercise price.

[2] The weighted average remaining contractual term for warrants outstanding as of June 30, 2020 and 2019 excludes 743,500 warrants with no expiration date.

[3] The weighted average remaining contractual term for warrants exercisable as of June 30, 2020, and 2019 excludes 118,500 warrants with no expiration date.

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Note 14 - Related Party Transactions (Details Textual)	6 Months Ended		12 Months Ended
	Jun. 30, 2020 USD ($) shares	Jun. 30, 2020 USD ($) shares	Dec. 31, 2019 USD ($) shares
Short-term Debt, Total	$ 425,000	$ 425,000	$ 425,000
Unsecured Subordinated Promissory Notes [Member]
Interest Payable	27,000	27,000	15,000
Short-term Debt, Total	$ 425,000	$ 425,000	$ 425,000
Debt Instrument, Interest Rate, Stated Percentage	6.00%	6.00%
Six Members of the Board of Directors [Member] | Warrants Related to the Convertible Notes [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares) | shares	1,184,273	1,184,273	1,239,288
Six Members of the Board of Directors [Member] | Convertible Notes [Member]
Notes Payable, Related Parties	$ 2,402,000	$ 2,402,000	$ 2,477,000
Debt Instrument, Convertible, Number of Equity Instruments	9,338,228		9,388,378
Interest Payable	$ 191,000	$ 191,000	$ 164,000
Affiliated Entity [Member] | Warrants Related to the Convertible Notes [Member]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in shares) | shares	468,000	468,000	468,000
Interest Payable	$ 131,000	$ 131,000	$ 88,000
Affiliated Entity [Member] | Convertible Notes [Member]
Notes Payable, Related Parties	1,795,000	$ 1,795,000	$ 1,170,000
Debt Instrument, Convertible, Number of Equity Instruments		8,846,667	4,680,000
Chief Executive Officer [Member] | Unsecured Subordinated Promissory Notes [Member]
Interest Payable	$ 27,000	$ 27,000
Debt Instrument, Interest Rate, Stated Percentage	6.00%	6.00%

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Note 15 - Subsequent Events (Details Textual) - USD ($)		3 Months Ended	6 Months Ended
	Aug. 14, 2020	Jun. 30, 2020	Jun. 30, 2020
Proceeds from Convertible Debt			$ 725,000
The 2019 Convertible Notes [Member]
Proceeds from Convertible Debt		$ 165,000	$ 725,000
Subsequent Event [Member] | The 2019 Convertible Notes [Member]
Proceeds from Convertible Debt	$ 125,000
Stock Issued During Period, Shares, New Issues (in shares)	37,500