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 September 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 November 12, 2020
Common Stock, $0.01 par value	51,452,810

1

CURAEGIS TECHNOLOGIES, INC.

INDEX 

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of September 30, 2020 (Unaudited) and December 31, 2019	3
	Condensed Consolidated Statement of Operations – Three- and Nine-Month Periods Ended September 30, 2020 and September 30, 2019 (Unaudited)	4
	Condensed Consolidated Statement of Changes in Stockholders’ Deficiency – Three- and Nine-Month Periods Ended September 30, 2020 and September 30, 2019 (Unaudited)	5
	Condensed Consolidated Statement of Cash Flows – Nine- Month Periods Ended September 30, 2020 and September 30, 2019 (Unaudited)	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	26
SIGNATURE PAGE		27
EXHIBITS
	Exhibit 31.1
	Exhibit 31.2
	Exhibit 32

2

CURAEGIS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2020 (Unaudited)			December 31, 2019
ASSETS
Current Assets:
Cash	$	87,000		$	18,000
Prepaid expenses		12,000			2,000
Total current assets		99,000			20,000
Right to use asset (net)		156,000			193,000
Property and equipment (net)		29,000			38,000
Total non-current assets		185,000			231,000
Total Assets	$	284,000		$	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		366,000			420,000
Accrued interest		877,000			509,000
Current right-to-use obligation		67,000			64,000
Other current liabilities		20,000			36,000
Accrued wages and benefits		58,000			50,000
Total current liabilities		4,203,000			3,918,000
Non-current right-to-use obligation		83,000			126,000
PPP loan		228,000			-
Senior convertible notes (net)		9,992,000			8,410,000
Total Liabilities		14,506,000			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 September 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 September 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 September 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 September 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 September 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 September 30, 2020 and December 31, 2019: 51,452,810 and 50,979,964 respectively		515,000			510,000
Additional paid-in capital		77,695,000			78,272,000
Accumulated deficit		(92,872,000	)		(91,425,000	)
Total Stockholders' Deficiency		(14,222,000	)		(12,203,000	)
Total Liabilities and Stockholders' Deficiency	$	284,000		$	251,000

See notes to condensed consolidated financial statements. 

3

 CURAEGIS TECHNOLOGIES, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2020			2019			2020			2019
Revenue and Cost of revenue:
CURA revenue	$	2,000		$	4,000		$	7,000		$	13,000
Cost of revenue		2,000			2,000			15,000			11,000
Gross Profit (Loss)		-			2,000			(8,000	)		2,000
Costs and expenses:
Recovery on inventory reserve		(74,000	)		(13,000	)		(97,000	)		(13,000	)
Engineering and development		98,000			178,000			254,000			727,000
General and administrative (recovery)		(456,000	)		339,000			200,000			1,326,000
Total costs and expenses (income)		(432,000	)		504,000			357,000			2,040,000
Income (Loss) from operations		432,000			(502,000	)		(365,000	)		(2,038,000	)
Non-operating expense:
Interest expense		(352,000	)		(320,000	)		(1,030,000	)		(898,000	)
Debt issuance cost		-			(304,000	)		-			(304,000	)
Vendor penalty		-			(300,000	)		-			(300,000	)
Other (expense) income		47,000			9,000			(52,000	)		10,000
Non-operating expense		(305,000	)		(915,000	)		(1,082,000	)		(1,492,000	)
Income (Loss) before income taxes		127,000			(1,417,000	)		(1,447,000	)		(3,530,000	)
Income taxes		-			-			-			-
Net Income (Loss)		127,000			(1,417,000	)		(1,447,000	)		(3,530,000	)
Preferred stock dividends		54,000			55,000			163,000			163,000
Net loss attributable to common stockholders	$	73,000		$	(1,472,000	)	$	(1,610,000	)	$	(3,693,000	)
Net loss per common share attributable to common stockholders
Basic and Diluted	$	0.00		$	(0.03	)	$	(0.03	)	$	(0.07	)
Weighted average number of shares of common stock
Basic and Diluted		51,447,000			50,776,000			51,325,000			50,565,000

See notes to condensed consolidated financial statements.

4

CURAEGIS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

(Unaudited) 

								For the Three and Nine Months Ended September 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 in			Accumulated			Total Stockholders'
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		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	)
Stock-based compensation																										(645,000	)					(645,000	)
Common shares issued for interest																																-
Common shares issued with convertible notes																						37,500		1,000		3,000						4,000
Net Income																													127,000			127,000
Balance at September 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		51,452,810	$	515,000	$	77,695,000		$	(92,872,000	)	$	(14,222,000	)

5

						For the Three and Nine Months Ended September 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	)
Employeee stock-based compensation																				7,000					7,000
Common shares issued for interest																33,973		1,000		8,000					9,000
Common shares issued with convertible notes																75,000		1,000		6,000					7,000
Common shares issued with demand notes																165,000		1,000		16,000					17,000
Share rights issued with demand notes																				250,000					250,000
Net Loss																						(1,417,000	)		(1,417,000	)
Balance at September 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	50,803,674	$	508,000	$	78,210,000	$	(90,679,000	)	$	(11,520,000	)

See notes to condensed consolidated financial statements.

6

 CURAEGIS TECHNOLOGIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Nine Months Ended September 30,
	2020			2019
Cash flows from operating activities:
Net loss	$	(1,447,000	)	$	(3,530,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount reported as interest		607,000			546,000
Depreciation and amortization		46,000			109,000
Fair market value of share rights issued with demand notes		-			250,000
Stock-based compensation		(634,000	)		111,000
Interest paid in shares		38,000			27,000
Changes in working capital items:
Prepaid expenses		(10,000	)		22,000
Liability for inventory		(24,000	)		315,000
Accounts payable		(57,000	)		73,000
Accrued interest		330,000			210,000
Other current liabilities		(16,000	)		35,000
Accrued wages and benefits		8,000			14,000
Net cash used in operating activities		(1,159,000	)		(1,818,000	)
Cash flows from financing activities:
Proceeds from issuance of senior convertible notes (net)		1,000,000			825,000
Proceeds from demand notes		-			550,000
Proceeds from issuance of unsecured subordinated notes		-			575,000
Proceeds from PPP loan		228,000			-
Cash used in repayment of unsecured promissory notes		-			(150,000	)
Net cash provided by financing activities		1,228,000			1,800,000
Net increase (decrease) in cash		69,000			(18,000	)
Cash at beginning of period		18,000			53,000
Cash at end of period	$	87,000		$	35,000
Supplemental Disclosures:
Cash used for payment of interest expense	$	19,000		$	86,000
Debt discount related to issuance of convertible notes	$	24,000		$	65,000
Common shares issued in payment of interest expense	$	38,000		$	-
Right to use asset	$	156,000		$	212,000

See notes to condensed consolidated financial statements.

7

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 designed to be: smaller, lighter, 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 September 30, 2020, we had cash on hand of $87,000, negative working capital of $4,104,000, an accumulated deficit of $92,872,000 and a stockholders' deficiency of $14,222,000. During the nine months ended September 30, 2020 we raised $1,000,000 in proceeds through the issuance of convertible notes and $235,000 from the PPP loan and 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 nine months ended September 30, 2020. As of September 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.   

8

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 September 30, 2020, each of the subsidiaries are 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 September 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 nine months ended September 30, 2020 and 2019 are as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Right-to use building	$	17,000	$	29,000	$	37,000	$	81,000
Software amortization		-		2,000		-		8,000
Property and equipment		3,000		6,000		9,000		20,000
	$	20,000	$	37,000	$	46,000	$	109,000

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  

9

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 September 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 $2,977,000 as of September 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 nine-month periods ended September 30, 2020 revenue from products transferred over time amounted to $2,000 and $ 7,000 respectively. One customer accounted for 100% of total Z-Coach subscription sales made during the three- and nine-month periods ended September 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.

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

General and Administrative: Patent expenses are charged to operations as incurred. Patent costs for the three months ended September 30, 2020 and 2019 amounted to $0 and $14,000 respectively and are included in general and administrative expenses. Patent costs for the nine months ended September 30, 2020 and 2019 amounted to $17,000 and $35,000 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 September 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 September 30, 2020 and 2019, we excluded 107,992,768 and 104,288,815 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 September 30, 2020 and 2019 as the conditions for their vesting are not time-based.  

10

NOTE 3 – INVENTORY AND VENDOR LIABILITY 

	September 30, 2020			December 31, 2019
Raw materials	$	1,568,000		$	1,665,000
Finished goods		69,000			69,000
		1,637,000			1,734,000
Less: Reserve		(1,637,000	)		(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 nine months ended September 30, 2020, the Company recovered $97,000 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 September 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 September 30, 2020. The Company recognized $5,000 in interest expense on the demand notes during each of the three months ended September 30, 2020 and September 30, 2019. The Company recognized $19,000 and 12,000 in interest expense on the demand notes during the nine months ended September 30, 2020 and September 30, 2019, respectively.

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 PLAN LOAN 

On April 20, 2020 the Company received a $228,000 loan under the Small Business Administration 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 eight 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, with the balance payable over a remaining 18 month period.

NOTE 6 - SENIOR CONVERTIBLE NOTES  

At September 30, 2020, the Company had $11,310,000 in convertible notes outstanding which have been presented net of unamortized debt discounts of $1,318,000, resulting in a carrying value of $9,992,000. As of December 31, 2019, the Company had $10,310,000 in convertible notes outstanding, presented net of unamortized debt discounts of $1,901,000 resulting in a carrying value of $8,409,000.

11

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 $1,000,000 thereafter.

Included in the face value of convertible notes outstanding at September 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 $2,070,000 and $1,170,000 as of September 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		1,000,000			1,000,000			-			-			-			-
Face value September 30, 2020	$	11,310,000		$	1,650,000		$	1,675,000		$	625,000		$	4,370,000		$	2,990,000
Debt discount December 31, 2019	$	(1,901,000	)	$	(3,000	)	$	(354,000	)	$	(185,000	)	$	(362,000	)	$	(997,000	)
Debt discount issued		(24,000	)		(24,000	)		-			-			-			-
Amortization reported as interest		607,000			21,000			62,000			36,000			83,000			405,000
Debt discount September 30, 2020	$	(1,318,000	)	$	(6,000	)	$	(292,000	)	$	(149,000	)	$	(279,000	)	$	(592,000	)
Senior Convertible Notes (net)	$	9,992,000		$	1,644,000		$	1,383,000		$	476,000		$	4,091,000		$	2,398,000

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 nine- month periods ended September 30, 2020, the Company issued $275,000 and $1,000,000, respectively, in new notes and allocated $5,000 and $24,000, 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 nine month periods ended September 30, 2020, the Company recorded $32,000 and $78,000 in interest expense which includes amortization of debt discount. During the three- and nine- month periods ended September 30, 2019, the Company recorded $15,000 and $19,000, in interest expenses 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.   

12

During the three- and nine-month periods ended September 30, 2020 the Company recorded $21,000 and $62,000 respectively in interest expense which reflects the amortization of debt discount.  During the three- and nine-month periods ended September 30, 2019 the Company recorded $20,000 and $52,000 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 nine-month periods ended September 30, 2020 the Company recorded $12,000 and $36,000 respectively in interest expense which reflects the amortization of debt discount. During the three-and nine-month periods ended September 30, 2019 the Company recorded $11,000 and $34,000 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 2019 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 nine- month periods ended September 30, 2020 the Company recorded $94,000 and $279,000, respectively, in interest expense including amortization of debt discount. During the three-and nine- month periods ended September 30, 2019 the Company recorded $92,000 and $264,000, 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 nine- month periods ended September 30, 2020 the Company recorded $182,000 and $539,000, respectively, in interest expense including amortization of debt discount. During the three-and nine- month periods ended September 30, 2019 the Company recorded $174,000 and $516,000, 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 September 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 nine- months ended September 30, 2020, the Company recognized interest expense of $6,000 and $19,000, respectively, on these notes. During the three- and nine- months ended September 30, 2019, the Company recognized interest expense of $4,000 and $10,000, respectively, on these notes. Interest accrued and outstanding on the promissory notes was $34,000 and $15,000 as of September 30, 2020 and December 31, 2019, respectively.

13

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 nine- month periods ended September 30, 2019 for the terminated lease obligation was $19,000 and $80,000, 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 nine-month periods ended September 30, 2020 were $15,000 and $46,000, respectively. Future maturing lease obligations as follows: $17,000 for the remainder of 2020; $67,000 in 2021 and $67,000 in 2022. Total future lease payments are $162,000 including imputed interest of $11,000.

NOTE 9 - PROPERTY AND EQUIPMENT 

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

	September 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		(302,000	)		(293,000	)
Net property and equipment	$	29,000		$	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 September 30, 2020 for the Company’s business segments follows: 

	CURA			Aegis			Corporate			Total
Revenue	$	2,000		$	-		$	-		$	2,000
Gross Profit (Loss)		-			-			-			-
Total costs and expenses		42,000			5,000			(479,000	)		(432,000	)
Income (Loss) from operations		(42,000	)		(5,000	)		479,000			432,000
Non-operating expense (Income)		-			(3,000	)		(302,000	)		(305,000	)
Net income (loss)	$	(42,000	)	$	(8,000	)	$	177,000		$	127,000
Stock based compensation	$	17,000		$	-		$	(662,000	)	$	(645,000	)
Depreciation and amortization	$	-		$	3,000		$	-		$	3,000
Assets at September 30, 2020	$	-		$	29,000		$	255,000		$	284,000

14

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

	CURA			Aegis			Corporate			Total
Revenue	$	7,000		$	-		$	-		$	7,000
Gross Loss		(8,000	)		-			-			(8,000	)
Total costs and expenses		225,000			57,000			75,000			357,000
(Loss) from operations		(233,000	)		(57,000	)		(75,000	)		(365,000	)
Non-operating expense		-			(3,000	)		(1,079,000	)		(1,082,000	)
Net loss	$	(233,000	)	$	(60,000	)	$	(1,154,000	)	$	(1,447,000	)
Stock based compensation	$	57,000		$	(33,000	)	$	(658,000	)	$	(634,000	)
Depreciation and amortization	$	-		$	9,000		$	37,000		$	46,000
Assets at September 30, 2020	$	-		$	29,000			255,000		$	284,000

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

	CURA			Aegis			Corporate			Total
Revenue	$	4,000		$	-		$	-		$	4,000
Gross profit		2,000			-			-			2,000
Total costs and expenses		62,000			127,000			315,000			504,000
Loss from operations		(60,000	)		(127,000	)		(315,000	)		(502,000	)
Non-operating expense		-			-			(915,000	)		(915,000	)
Net loss	$	(60,000	)	$	(127,000	)	$	(1,230,000	)	$	(1,417,000	)
Stock based compensation	$	(12,000	)	$	0		$	19,000		$	7,000
Depreciation and amortization	$	3,000		$	4,000		$	30,000		$	37,000
Assets at September 30, 2019	$	3,000		$	40,000		$	241,000		$	284,000

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

	CURA			Aegis			Corporate			Total
Revenue	$	13,000		$	-		$	-		$	13,000
Gross profit		2,000			-			-			2,000
Total costs and expenses		577,000			446,000			1,017,000	)		2,040,000
Loss from operations		(575,000	)		(446,000	)		(1,017,000	)		(2,038,000	)
Non-operating expense		-			-			(1,492,000	)		(1,492,000	)
Net loss	$	(575,000	)	$	(446,000	)	$	(2,509,000	)	$	(3,530,000	)
Stock based compensation	$	2,000		$	13,000		$	96,000		$	111,000
Depreciation and amortization	$	12,000		$	14,000		$	83,000		$	109,000
Assets at September 30, 2019	$	3,000		$	40,000		$	241,000		$	284,000

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 nine-month periods ended September 30, 2020 the Company issued 0 and 217,846 shares of common stock at payment of interest on the Company’s 2016, 2017 and 2019 Convertible Notes. During the three- and nine-month periods ended September 30, 2019 the Company issued 33,973 and 109,125 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 September 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 $2,851,000 at September 30, 2020 and $2,713,000 at December 31, 2019.  

15

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 $2,851,000 and $2,713,000 at September 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 September 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 $513,000 at September 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 one share of Class B Preferred for each $5.00 of dividends. 

Series C Preferred Stock  

At September 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 September 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 September 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 September 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 September 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 September 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 September 30, 2020, there are 316,000 options available for future grant under the 2011 Plan.

16

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 nine months ended September 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 nine months ended September 30, 2019.

Summary   For the three- and nine- month period ended September 30, 2020, the Company recognized a net credit to stock compensation of $645,000 and $634,000, respectively. The Company recorded $676,000 in forfeitures in the third quarter of 2020 and $782,000 in forfeitures during the nine months ended September 30, 2020 reflecting employee turnover during these periods.

As of September 30, 2020, there was $118,000 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 nine months ended September 30, 2020 was $0.15 per share. The weighted average grant date fair value of stock options vested during the nine months ended September 30, 2020 and September 30, 2019 was $88,000 and $125,000, 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 nine months ended September 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		(6,249,000	)		.40
Outstanding at September 30, 2020		6,591,500		$	0.47		5.1	$	-
Exercisable at September 30, 2020		4,552,000		$	0.61		3.6	$	-

During the nine months ended September 30, 2020, 6,249,000 options were canceled due to employee turnover and expiration of unexercised options, and no options were exercised. During the nine months ended September 30, 2019, 216,750 options were canceled due to employee turnover, no options expired unexercised and no options were exercised. As of September 30, 2020, the exercise prices on outstanding stock options ranged from $.07 per share to $1.58 per share.

17

NOTE 13 - WARRANTS 

The following summarizes the activity of our outstanding warrants for the nine months ended September 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 September 30, 2020		7,631,707			0.42	(A)		5.6	(B)	$	0
Exercisable at September 30, 2020		7,006,707		$	0.46			5.6	(C)	$	0

(A)	The weighted average exercise price for warrants outstanding as of September 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 September 30, 2020 and 2019 excludes 743,500 warrants with no expiration date.
(C)	The weighted average remaining contractual term for warrants exercisable as of September 30, 2020, and 2019 excludes 118,500 warrants with no expiration date.

NOTE 14 - RELATED PARTY TRANSACTIONS  

As of September 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 September 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 September 30, 2020 and December 31, 2019. The Company had $222,000 and $164,000 at September 30, 2020 and December 31, 2019, respectively in accrued interest on convertible notes due to board members. 

As of September 30, 2020 and December 31, 2019, the Company had outstanding $2,070,000 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 10,680,000 of potential shares of common stock at September 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 September 30, 2020 and at December 31, 2019.  The Company had $160,000 and $88,000, respectively in accrued interest on convertible notes due to this investor at September 30, 2020 and December 31, 2019.

As of September 30, 2020 and December 31, 2019, the Company had unsecured subordinated promissory notes outstanding of $425,000 payable to a board member. As of September 30, 2020, the Company had $34,000 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 Convertible Promissory Note

Subsequent to September 30, 2020, the Company issued $50,000 in convertible promissory notes due in 12 months.

Contingent Liability:

Subsequent to September 30, 2020, the Company received a request for arbitration on a total claim of $ 1,948,000, requesting the Company to go through mediation or arbitration. The inventory liability is accrued on the balance sheet as at September 30, 2020.

18

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

The Company has two business divisions: the CURA division, an all-in-one health & fitness app developer solutions platform, and the Aegis division, which is engaged in the development of technologies in the power and hydraulic industry. The Company is focused on providing solutions to challenges faced by health & fitness app developers, and a uniquely designed hydraulic pump that will be smaller, lighter, less expensive and more efficient than current technology.

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 Cardian Platform

The Company’s CURA division has created an all-in-one platform, the Cardian Platform, for health & fitness app developers in order to solve challenges such as the amount of time, effort, resources, and money it takes to develop these apps, cross-platform challenges, data privacy and compliance challenges, challenges concerning features, updates, and maintenance, and more.

The Cardian platform is designed to provide health & fitness app developers with the powerful tools needed to create better and more engaging user experiences cost-efficiently, with a much quicker time to market. The Cardian platform provides:

● Simple, Cross-Platform Tools: Standardized access to health & fitness data across all platforms - whether Apple Health, Google Fit, or Samsung Health. Request user health data in iOS or Android. Customize for tailored experiences & setup automated rules & feature updates.

● Faster Time to Market: Simple setup & integration across all platforms to build your product within days - not months. Spend less time on the onboarding process & less time on maintenance. Cardian's onboarding process enables the creation of a seamless user experience with greater conversion and user-retention.

● User Privacy Management: Eliminating the burden and challenge of regulatory compliance - Cardian securely manages all data privacy and compliance concerns for developers.

● 99.9% Uptime Built with Amazon Web Services: Designed for scale, Cardian leverages Amazon Web Services (AWS) boasting a 99.9% uptime and reaching customers around the world. Cardian leverages highly-available, fault-tolerant solutions to ensure we're always able to support developers as they scale from small projects to a large enterprise.

● Pricing that Scales with Businesses: Keep costs low while starting out with usage-based pricing and decide how long data is stored.

19

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 designed to be: smaller, lighter, less expensive, and 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 September 30, 2020 and 2019

Revenue, Cost of Revenue and Margin

	For the three months ended September 30,				Variance
	2020		2019		Incr (decr)
CURA revenue	$	2,000	$	4,000	$	(2,000	)
Cost of revenue		2,000		2,000		-
Gain profit	$	-	$	2,000	$	(2,000	)

The Company recorded $2,000 and $4,000 in Z-Coach sales during the three months ended September 30, 2020 and 2019, respectively in each period. As of September 30, 2020, and December 31, 2019, the Company has deferred revenue of $2,000 and $ 4,000, respectively at each reporting date attributed to Z-Coach subscription revenue that will be recognized ratably as our performance obligations are satisfied. 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 September 30,					Variance
	2020		2019			Incr (decr)
Wages and benefits	$	74,000	$	126,000		$	(52,000	)
Professional fee and advisors		-		61,000			(61,000	)
Facilities		5,000		-			5,000
Computer and software maintenance		2,000		1,000			1,000
Depreciation and amortization		-		5,000			(5,000	)
		81,000		193,000			(112,000	)
Stock based compensation		17,000		(15,000	)		32,000
Total Engineering and Development	$	98,000	$	178,000		$	(80,000	)

Engineering and development expenses decreased during the three months ended September 30, 2020 compared to the three months ended September 30, 2019 reflecting the reduction in wages and professional fees. 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.

20

 General and Administrative Costs and Expenses

	For the three months ended September 30,					Variance
	2020			2019		Incr (decr)
Wages and benefits	$	81,000		$	205,000	$	(124,000	)
Professional fees and advisors		40,000			8,000		32,000
Facilities and occupancy		20,000			35,000		(15,000	)
Insurance		24,000			23,000		1,000
Sales and marketing		22,000			0		22,000
Patents		0			14,000		(14,000	)
Computer and software maintenance		8,000			11,000		(3,000	)
Shareholder		2,000			8,000		(6,000	)
Travel		-			7,000		(7,000	)
Other costs and expenses		9,000			6,000		3,000
		206,000			317,000		(111,000	)
Stock based compensation		(662,000	)		22,000		(684,000	)
Total General and Administrative	$	(456,000	)	$	339,000	$	(795,000	)

General and administrative expense decreased during the three months ended September 30, 2020 compared to the three months ended September 30, 2019 primarily due: staff reductions and from the recognition of stock compensation forfeitures reflecting employee turnover. General and administrative headcount was two and five at September 30, 2020 and 2019, respectively.

Non-operating Expense

	For the three months ended September 30,						Variance
	2020			2019			Incr/(decr)
Interest expense	$	(352,000	)	$	(320,000	)	$	32,000
Debt issuance cost		-			(304,000	)		(304,000	)
Vendor penalty		-			(300,000	)		(300,000	)
Other income		47,000			9,000			(38,000	)
	$	(305,000	)	$	(915,000	)	$	(610,000	)

Interest expense increased by $32,000 for the three months ended September 30, 2020 compared to the prior year quarter. The Company has $11,310,000 in face value of convertible notes outstanding compared to $10,310,000 at December 31, 2019. During the three months ended September 30, 2020, the Company recognized $352,000 in interest expense on the convertible, demand and promissory notes which includes $207,000 of amortization on debt discount that is classified as interest expense. The increase in interest expense since 2019 reflects $1,000,000 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 additional 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 September 30, 2019 the Company recognized $320,000 in interest expense on the convertible notes including $195,000 of amortization on debt discount classified as interest expense related to the convertible notes.

Net Income/ Loss for the three months ended September 30, 2020 and 2019

The net income for the three months ended September 30, 2020 was $127,000, compared with a net loss in the three months ended September 30, 2019 of $1,417,000. The net income attributable to common stockholders for the third quarter of 2020 was $73,000 as compared to a net loss of $1,472,000 for the third quarter of 2019.

The weighted average basic and diluted common shares outstanding for the quarter ended September 30, 2020 amounted to 51,447,000 and 50,776,000 for the three month period ended September 30, 2020 and 2019, respectively.

Basic and diluted income per common share for the three-month period ended September 30, 2020 was $0.00 and basic and diluted loss per common share for three-month period ending September 2019 was $0.03. Preferred stock dividends of $54,000 and $55,000 was recorded in the three-month periods ended September 30, 2020 and 2019, respectively.

21

Results of Operations for the nine months ended September 30, 2020 and 2019

Revenue, Cost of Revenue and Margin

	For the nine months ended September 30,					Variance
	2020			2019		Incr (decr)
CURA revenue	$	7,000		$	13,000	$	(6,000	)
Cost of revenue		15,000			11,000		4,000
Gain profit (Loss)	$	(8,000	)	$	2,000	$	(10,000	)

The Company recorded $7,000 and $13,000 in Z-Coach sales during the nine months ended September 30, 2020 and 2019, respectively in each period. The decrease in revenue during nine months ended September 30, 2020 compared to nine month months ended September 30, 2019 is primarily due to decrease in sales. 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. The Company is presently re-launching its software package after an extensive re-build over the past 6 months.

Engineering and Development Costs and Expenses

	For the nine months ended September 30,					Variance
	2020			2019		Incr (decr)
Wages and benefits	$	236,000		$	456,000	$	(220,000	)
Professional fee and advisors		1,000			224,000		(223,000	)
Facilities		21,000			12,000		9,000
Computer and software maintenance		6,000			13,000		(7,000	)
Depreciation and amortization		6,000			18,000		(12,000	)
		270,000			723,000		(453,000	)
Stock based compensation		(16,000	)		4,000		(20,000	)
Total Engineering and Development	$	254,000		$	727,000	$	(473,000	)

Engineering and development expenses decreased during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to the decrease in wages, professional fees, 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.

General and Administrative Costs and Expenses

	For the nine months ended September 30,					Variance
	2020			2019		Incr (decr)
Wages and benefits	$	379,000		$	690,000	$	(311,000	)
Professional fees and advisors		182,000			150,000		32,000
Facilities and occupancy		62,000			114,000		(52,000	)
Insurance		65,000			66,000		(1,000	)
Sales and marketing		63,000			62,000		1,000
Patents		17,000			35,000		(18,000	)
Travel		6,000			23,000		(17,000	)
Computer and software maintenance		18,000			24,000		(6,000	)
Shareholder		12,000			19,000		(7,000	)
Other costs and expenses		15,000			36,000		(21,000	)
		819,000			1,219,000		(400,000	)
Stock based compensation		(619,000	)		107,000		(726,000	)
Total General and Administrative	$	200,000		$	1,326,000	$	(1,126,000	)

General and administrative expense decreased during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to: headcount decreases, lower facility costs resulting from the relocation of office space in the second quarter of 2019 and reduced spending for patent and travel costs. The company also recognized $619,000 in forfeiture of stock-based compensation during the nine months ended September 30, 2020. The 2019 expense included $62,000 in outside marketing efforts related to the CURA product. General and administrative headcount was two and eight at September 30, 2020 and 2019, respectively.

22

Non-operating Expense

	For the nine months ended September 30,						Variance
	2020			2019			Incr/(decr)
Interest expense	$	(1,030,000	)	$	(898,000	)	$	132,000
Debt issuance cost		-			(304,000	)		(304,000	)
Vendor penalty		-			(300,000	)		(300,000	)
Other (expense) income		(52,000	)		10,000			(62,000	)
	$	(1,082,000	)	$	(1,492,000	)	$	(410,000	)

Interest expense increased by $132,000 for the nine months ended September 30, 2020 compared to the prior year period. The Company has $11,310,000 in face value of convertible notes outstanding compared to $10,310,000 at December 31, 2019. During the nine months ended September 30, 2020, the Company recognized $ 1,030,000 in interest expense on the convertible, demand and promissory notes which includes $607,000 of amortization on debt discount that is classified as interest expense. The increase in interest expense since 2019 reflects $1,000,000 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% 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 nine months ended September 30, 2020. The 2020 interest expense includes $19,000 in interest recognized on 6% unsecured promissory notes. During the nine months ended September 30, 2019 the Company recognized $898,000 in interest expense on the convertible notes including $546,000 of amortization on debt discount classified as interest expense related to the convertible notes.

In accordance with ASC 420, for the nine months ended September 30, 2020 the Company recognized $56,000 in one-time termination benefits costs in connection with two employees whose employment with the company terminated during the third quarter of 2020. These costs will be paid over the coming payroll periods through January 2021.

Net Loss for the nine months ended September 30, 2020 and 2019

The net loss for the nine months ended September 30, 2020 was $1,447,000, compared with a net loss in the nine months ended September 30, 2019 of $3,530,000. The net loss attributable to common stockholders for the nine months ended September 30, 2020 was $1,610,000 as compared to $3,693,000 for the nine months of 2019.

The weighted average basic and diluted common shares outstanding for the nine months ended September 30, 2020 and September 30, 2019 amounted to 51,325,000 and 50,565,000, respectively.

Basic and diluted loss per common share for the nine-month periods ended September 30, 2020 and 2019 was $0.03 and $0.07, respectively. Preferred stock dividends of $163,000 was recorded in each of the nine-month periods ended September 30, 2020 and 2019, respectively.

Liquidity and Capital Resources   

During the nine months ended September 30, 2020 the company used $1,159,000 of cash in operating activities. A net loss of $1,447,000 was adjusted for $57,000 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 $231,000 in changes in working capital components during the nine months ended September 30, 2020.  The decrease in cash used in operations in the three quarters of 2020 compared to the three quarters of 2019 was driven primarily by the decrease in the net loss from operations. 

During the nine months ended September 30, 2020, the Company received proceeds of $1,000,000 on the issuance of senior convertible notes. During the nine months ended September 30, 2019, the Company received proceeds of $825,000 in senior convertible debt and $575,000 in proceeds from the issuance of unsecured promissory notes.

Current Cash Outlook and Management Plans

As of September 30, 2020, we had cash on hand of $87,000, negative working capital of $4,104,000, an accumulated deficit of $92,872,000 and a stockholders' deficiency of $14,222,000. During the nine months ended September 30, 2020 we raised $1,000,000 in proceeds through the issuance of convertible notes and $235,000 from the PPP loan and 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 nine months ended September 30, 2020. As of September 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.

23

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.   

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 September 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.

24

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 September 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 September 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 of 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 $275,000 of 2019 Convertible Notes during the three months ended September 30, 2020 and subsequently issued $50,000 in convertible promissory notes 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.

25

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.
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 three month period ended September 30, 2020, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations for the three month periods ended September 30, 2020 and 2019 (ii) Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019, (iii) Condensed Consolidated Statements of Cash Flows for the three month periods ended September 30, 2020 and 2019, (iv) Condensed Consolidated Statements of Stockholders’ Deficiency for the three month periods ended September 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.

26

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: November 13, 2020	By:	/s/ James R. Donnelly
		James R. Donnelly
		Chief Executive Officer

Dated: November 13, 2020	By:	/s/ Jason Burke
		Jason Burke
		Chief Financial and Accounting Officer

27

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: November 13, 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: November 13, 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 September 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), James R. Donnelly, chief executive officer and 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.

November 13, 2020	/s/ James R. Donnelly
	James R. Donnelly
	Chief Executive Officer
November 13, 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	9 Months Ended
	Sep. 30, 2020	Nov. 12, 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	Sep. 30, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Current Assets:
Cash	$ 87,000	$ 18,000
Prepaid expenses	12,000	2,000
Total current assets	99,000	20,000
Right to use asset (net)	156,000	193,000
Property and equipment (net)	29,000	38,000
Total non-current assets	185,000	231,000
Total Assets	284,000	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	366,000	420,000
Accrued interest	877,000	509,000
Current right-to-use obligation	67,000	64,000
Other current liabilities	20,000	36,000
Accrued wages and benefits	58,000	50,000
Total current liabilities	4,203,000	3,918,000
Non-current right-to-use obligation	83,000	126,000
PPP loan	228,000
Senior convertible notes (net)	9,992,000	8,410,000
Total Liabilities	14,506,000	12,454,000
Commitments and other matters
Stockholders' Deficiency:
Common stock, $.01 par value, 400,000,000 shares authorized; shares issued and outstanding at September 30, 2020 and December 31, 2019: 51,452,810 and 50,979,964 respectively	515,000	510,000
Additional paid-in capital	77,695,000	78,272,000
Accumulated deficit	(92,872,000)	(91,425,000)
Total Stockholders' Deficiency	(14,222,000)	(12,203,000)
Total Liabilities and Stockholders' Deficiency	284,000	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	Sep. 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)	51,452,810	50,979,964
Common stock, shares outstanding (in shares)	51,452,810	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		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenue and Cost of revenue:
CURA revenue	$ 2,000	$ 4,000	$ 7,000	$ 13,000
Cost of revenue	2,000	2,000	15,000	11,000
Gross Profit (Loss)		2,000	(8,000)	2,000
Costs and expenses:
Recovery on inventory reserve	(74,000)	(13,000)	(97,000)	(13,000)
Engineering and development	98,000	178,000	254,000	727,000
General and administrative (recovery)	(456,000)	339,000	200,000	1,326,000
Total costs and expenses (income)	(432,000)	504,000	357,000	2,040,000
Income (Loss) from operations	432,000	(502,000)	(365,000)	(2,038,000)
Other (expense) income	47,000	9,000	(52,000)	10,000
Non-operating expense:
Interest expense	(352,000)	(320,000)	(1,030,000)	(898,000)
Debt issuance cost		(304,000)		(304,000)
Vendor penalty		(300,000)		(300,000)
Non-operating expense	(305,000)	(915,000)	(1,082,000)	(1,492,000)
Income (Loss) before income taxes	127,000	(1,417,000)	(1,447,000)	(3,530,000)
Income taxes
Net Income (Loss)	127,000	(1,417,000)	(1,447,000)	(3,530,000)
Preferred stock dividends	54,000	55,000	163,000	163,000
Net loss attributable to common stockholders	$ 73,000	$ (1,472,000)	$ (1,610,000)	$ (3,693,000)
Net loss per common share attributable to common stockholders
Basic and Diluted (in dollars per share)	$ 0	$ (0.03)	$ (0.03)	$ (0.07)
Weighted average number of shares of common stock
Basic and Diluted (in shares)	51,447,000	50,776,000	51,325,000	50,565,000

XML

Condensed Consolidated Statement of Changes in Stockholders' Deficiency (Unaudited) - USD ($)	3 Months Ended						9 Months Ended
	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2020	Sep. 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	15,687,500	15,687,500
Balance	$ 157,000	$ 157,000	$ 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 Income (loss)
Stock-based compensation
Balance (in shares)	15,687,500	15,687,500	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	$ 157,000	$ 157,000
Warrants issued with convertible note
Common shares issued with demand notes (in shares)
Common shares issued with demand notes
Share rights issued with demand notes
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	24,500,000	24,500,000
Balance	$ 245,000	$ 245,000	$ 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 Income (loss)
Stock-based compensation
Balance (in shares)	24,500,000	24,500,000	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	$ 245,000	$ 245,000
Warrants issued with convertible note
Common shares issued with demand notes (in shares)
Common shares issued with demand notes
Share rights issued with demand notes
Preferred Stock [Member] | Series C3 Preferred Stock [Member]
Balance (in shares)	3,238,000	3,238,000	3,238,000	3,268,000	3,268,000	3,268,000	3,238,000	3,268,000
Balance	$ 32,000	$ 32,000	$ 32,000	$ 33,000	$ 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 Income (loss)
Stock-based compensation
Balance (in shares)	3,238,000	3,238,000	3,238,000	3,268,000	3,268,000	3,268,000	3,238,000	3,268,000
Balance	$ 32,000	$ 32,000	$ 32,000	$ 33,000	$ 33,000	$ 33,000	$ 32,000	$ 33,000
Warrants issued with convertible note
Common shares issued with demand notes (in shares)
Common shares issued with demand notes
Share rights issued with demand notes
Preferred Stock [Member] | Preferred Class A [Member]
Balance (in shares)	468,221	468,221	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	$ 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 Income (loss)
Stock-based compensation
Balance (in shares)	468,221	468,221	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	$ 5,000	$ 5,000
Warrants issued with convertible note
Common shares issued with demand notes (in shares)
Common shares issued with demand notes
Share rights issued with demand notes
Preferred Stock [Member] | Preferred Class B [Member]
Balance (in shares)	67,500	67,500	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	$ 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 Income (loss)
Stock-based compensation
Balance (in shares)	67,500	67,500	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	$ 1,000	$ 1,000
Warrants issued with convertible note
Common shares issued with demand notes (in shares)
Common shares issued with demand notes
Share rights issued with demand notes
Common Stock [Member]
Balance (in shares)	51,415,310	51,187,236	50,979,964	50,529,701	50,400,545	50,364,549	50,979,964	50,364,549
Balance	$ 514,000	$ 512,000	$ 510,000	$ 505,000	$ 504,000	$ 504,000	$ 510,000	$ 504,000
Stock-based compensation
Common shares issued for interest (in shares)		123,074	94,772	33,973	39,156	35,996
Common shares issued for interest		$ 1,000	$ 1,000	$ 1,000
Common shares issued (in shares)	37,500	105,000	112,500		90,000
Common shares issued	$ 1,000	$ 1,000	$ 1,000		$ 1,000
Net Income (loss)
Stock-based compensation
Balance (in shares)	51,452,810	51,415,310	51,187,236	50,803,674	50,529,701	50,400,545	51,452,810	50,803,674
Balance	$ 515,000	$ 514,000	$ 512,000	$ 508,000	$ 505,000	$ 504,000	$ 515,000	$ 508,000
Warrants issued with convertible note
Common shares issued upon note conversions (in shares)				75,000
Common shares issued upon note conversions				$ 1,000
Common shares issued with demand notes (in shares)				165,000
Common shares issued with demand notes				$ 1,000
Share rights issued with demand notes
Additional Paid-in Capital [Member]
Balance	78,337,000	78,336,000	78,272,000	77,923,000	77,855,000	77,725,000	78,272,000	77,725,000
Stock-based compensation	(645,000)	(28,000)	39,000	7,000	45,000	59,000
Common shares issued for interest		20,000	16,000	8,000	10,000	8,000
Common shares issued	3,000	9,000	9,000		11,000
Net Income (loss)
Stock-based compensation	(645,000)	(28,000)	39,000	7,000	45,000	59,000
Balance	77,695,000	78,337,000	78,336,000	78,210,000	77,923,000	77,855,000	77,695,000	78,210,000
Warrants issued with convertible note					2,000	63,000
Common shares issued upon note conversions				6,000
Common shares issued with demand notes				16,000
Share rights issued with demand notes				250,000
Retained Earnings [Member]
Balance	(92,999,000)	(92,178,000)	(91,425,000)	(89,262,000)	(88,297,000)	(87,149,000)	(91,425,000)	(87,149,000)
Stock-based compensation
Common shares issued for interest
Common shares issued
Net Income (loss)	127,000	(821,000)	(753,000)	(1,417,000)	(965,000)	(1,148,000)
Stock-based compensation
Balance	(92,872,000)	(92,999,000)	(92,178,000)	(90,679,000)	(89,262,000)	(88,297,000)	(92,872,000)	(90,679,000)
Warrants issued with convertible note
Common shares issued with demand notes
Share rights issued with demand notes
Balance	(13,708,000)	(12,890,000)	(12,203,000)	(10,393,000)	(9,497,000)	(8,479,000)	(12,203,000)	(8,479,000)
Stock-based compensation	(645,000)	(28,000)	39,000	7,000	45,000	59,000
Common shares issued for interest		21,000	17,000	9,000	10,000	8,000
Common shares issued	4,000	10,000	10,000		12,000
Net Income (loss)	127,000	(821,000)	(753,000)	(1,417,000)	(965,000)	(1,148,000)	(1,447,000)	(3,530,000)
Stock-based compensation	(645,000)	(28,000)	39,000	7,000	45,000	59,000
Balance	$ (14,222,000)	$ (13,708,000)	$ (12,890,000)	(11,520,000)	(10,393,000)	(9,497,000)	$ (14,222,000)	$ (11,520,000)
Warrants issued with convertible note					$ 2,000	$ 63,000
Common shares issued upon note conversions				7,000
Common shares issued with demand notes				17,000
Share rights issued with demand notes				$ 250,000

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash flows from operating activities:
Net loss	$ (1,447,000)	$ (3,530,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discount reported as interest	607,000	546,000
Depreciation and amortization	46,000	109,000
Fair market value of share rights issued with demand notes		250,000
Stock-based compensation	(634,000)	111,000
Interest paid in shares	38,000	27,000
Changes in working capital items:
Prepaid expenses	(10,000)	22,000
Liability for inventory	(24,000)	315,000
Accounts payable	(57,000)	73,000
Accrued interest	330,000	210,000
Other current liabilities	(16,000)	35,000
Accrued wages and benefits	8,000	14,000
Net cash used in operating activities	(1,159,000)	(1,818,000)
Cash flows from financing activities:
Proceeds from issuance of senior convertible notes (net)	1,000,000	825,000
Proceeds from demand notes		550,000
Proceeds from issuance of unsecured subordinated notes		575,000
Proceeds from PPP loan	228,000
Cash used in repayment of unsecured promissory notes		(150,000)
Net cash provided by financing activities	1,228,000	1,800,000
Net increase (decrease) in cash	69,000	(18,000)
Cash at beginning of period	18,000	53,000
Cash at end of period	87,000	35,000
Supplemental Disclosures:
Cash used for payment of interest expense	19,000	86,000
Debt discount related to issuance of convertible notes	24,000	65,000
Common shares issued in payment of interest expense	38,000
Right to use asset	$ 156,000	$ 212,000

XML

Note 1 - The Company and Basis of Presentation

9 Months Ended

Sep. 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 designed to be: smaller, lighter, 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

September 30, 2020,

we had cash on hand of

$87,000,

negative working capital of

$4,104,000,

an accumulated deficit of

$92,872,000

and a stockholders' deficiency of

$14,222,000.

During the

nine

months ended

September 30, 2020

we raised

$1,000,000

in proceeds through the issuance of convertible notes and

$235,000

from the PPP loan and 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

nine

months ended

September 30, 2020.

As of

September 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

9 Months Ended

Sep. 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

September 30, 2020,

each of the subsidiaries are 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

September 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

nine

months ended

September 30, 2020

and

2019

are as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Right-to use building	$	17,000	$	29,000	$	37,000	$	81,000
Software amortization		-		2,000		-		8,000
Property and equipment		3,000		6,000		9,000		20,000
	$	20,000	$	37,000	$	46,000	$	109,000

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

September 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

$2,977,000

as of

September 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

nine

-month periods ended

September 30, 2020

revenue from products transferred over time amounted to

$2,000

and $

7,000

respectively. One customer accounted for

100%

of total Z-Coach subscription sales made during the

three

- and

nine

-month periods ended

September 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.

Engineering and Development:

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

General and Administrative:

Patent expenses are charged to operations as incurred. Patent costs for the

three

months ended

September 30, 2020

and

2019

amounted to

$0

and

$14,000

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

nine

months ended

September 30, 2020

and

2019

amounted to

$17,000

and

$35,000

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

September 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

September 30, 2020

and

2019,

we excluded

107,992,768

and

104,288,815

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

September 30, 2020

and

2019

as the conditions for their vesting are

not

time-based.  

XML

Note 3 - Inventory and Vendor Liability

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Inventory Disclosure [Text Block]

NOTE

3

– INVENTORY AND VENDOR LIABILITY

 

	September 30, 2020			December 31, 2019
Raw materials	$	1,568,000		$	1,665,000
Finished goods		69,000			69,000
		1,637,000			1,734,000
Less: Reserve		(1,637,000	)		(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

nine

months ended

September 30, 2020,

the Company recovered

$97,000

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

9 Months Ended

Sep. 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

September 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

September 30, 2020.

The Company recognized

$5,000

in interest expense on the demand notes during each of the

three

months ended

September 30, 2020

and

September 30, 2019.

The Company recognized

$19,000

and

12,000

in interest expense on the demand notes during the

nine

months ended

September 30, 2020

and

September 30, 2019,

respectively.

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 Plan Loan

9 Months Ended

Sep. 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

September 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

September 30, 2020.

The Company recognized

$5,000

in interest expense on the demand notes during each of the

three

months ended

September 30, 2020

and

September 30, 2019.

The Company recognized

$19,000

and

12,000

in interest expense on the demand notes during the

nine

months ended

September 30, 2020

and

September 30, 2019,

respectively.

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 PLAN LOAN 

On

April 20, 2020

the Company received a

$228,000

loan under the Small Business Administration 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

eight

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, with the balance payable over a remaining

18

month period.

XML

Note 6 - Senior Convertible Notes

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Debt Disclosure [Text Block]

NOTE

6

- SENIOR CONVERTIBLE NOTES

 

At

September 30, 2020,

the Company had

$11,310,000

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

$1,318,000,

resulting in a carrying value of

$9,992,000.

As of

December 31, 2019,

the Company had

$10,310,000

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

$1,901,000

resulting in a carrying value of

$8,409,000.

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

$1,000,000

thereafter.

Included in the face value of convertible notes outstanding at

September 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 

$2,070,000

and

$1,170,000

as of

September 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		1,000,000			1,000,000			-			-			-			-
Face value September 30, 2020	$	11,310,000		$	1,650,000		$	1,675,000		$	625,000		$	4,370,000		$	2,990,000
Debt discount December 31, 2019	$	(1,901,000	)	$	(3,000	)	$	(354,000	)	$	(185,000	)	$	(362,000	)	$	(997,000	)
Debt discount issued		(24,000	)		(24,000	)		-			-			-			-
Amortization reported as interest		607,000			21,000			62,000			36,000			83,000			405,000
Debt discount September 30, 2020	$	(1,318,000	)	$	(6,000	)	$	(292,000	)	$	(149,000	)	$	(279,000	)	$	(592,000	)
Senior Convertible Notes (net)	$	9,992,000		$	1,644,000		$	1,383,000		$	476,000		$	4,091,000		$	2,398,000

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

nine

- month periods ended

September 30, 2020,

the Company issued

$275,000

and

$1,000,000,

respectively, in new notes and allocated

$5,000

and

$24,000,

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

nine

month periods ended

September 30, 2020,

the Company recorded

$32,000

and

$78,000

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

three

- and

nine

- month periods ended

September 30, 2019,

the Company recorded

$15,000

and

$19,000,

in interest expenses 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

nine

-month periods ended

September 30, 2020

the Company recorded

$21,000

and

$62,000

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

three

- and

nine

-month periods ended

September 30, 2019

the Company recorded

$20,000

and

$52,000

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

nine

-month periods ended

September 30, 2020

the Company recorded

$12,000

and

$36,000

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

three

-and

nine

-month periods ended

September 30, 2019

the Company recorded

$11,000

and

$34,000

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 2019

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

nine

- month periods ended

September 30, 2020

the Company recorded

$94,000

and

$279,000,

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

three

-and

nine

- month periods ended

September 30, 2019

the Company recorded

$92,000

and

$264,000,

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

nine

- month periods ended

September 30, 2020

the Company recorded

$182,000

and

$539,000,

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

three

-and

nine

- month periods ended

September 30, 2019

the Company recorded

$174,000

and

$516,000,

respectively, in interest expense including amortization of debt discount. 

XML

Note 7 - Unsecured Subordinated Promissory Notes

9 Months Ended

Sep. 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

September 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

nine

- months ended

September 30, 2020,

the Company recognized interest expense of

$6,000

and

$19,000,

respectively, on these notes. During the

three

- and

nine

- months ended

September 30, 2019,

the Company recognized interest expense of

$4,000

and

$10,000,

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

$34,000

and

$15,000

as of

September 30, 2020

and

December 31, 2019,

respectively.

XML

Note 8 - Right to Use Building Asset

9 Months Ended

Sep. 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

nine

- month periods ended

September 30, 2019

for the terminated lease obligation was

$19,000

and

$80,000,

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

nine

-month periods ended

September 30, 2020

were

$15,000

and

$46,000,

respectively. Future maturing lease obligations as follows:

$17,000

for the remainder of

2020;

$67,000

in

2021

and

$67,000

in

2022.

Total future lease payments are

$162,000

including imputed interest of

$11,000.

XML

Note 9 - Property and Equipment

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

NOTE

9

- PROPERTY AND EQUIPMENT

 

At

September 30, 2020

and

December 31, 2019

property and equipment consist of the following:

	September 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		(302,000	)		(293,000	)
Net property and equipment	$	29,000		$	38,000

XML

Note 10 - Business Segments

9 Months Ended

Sep. 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

September 30, 2020

for the Company's business segments follows: 

	CURA			Aegis			Corporate			Total
Revenue	$	2,000		$	-		$	-		$	2,000
Gross Profit (Loss)		-			-			-			-
Total costs and expenses		42,000			5,000			(479,000	)		(432,000	)
Income (Loss) from operations		(42,000	)		(5,000	)		479,000			432,000
Non-operating expense (Income)		-			(3,000	)		(302,000	)		(305,000	)
Net income (loss)	$	(42,000	)	$	(8,000	)	$	177,000		$	127,000
Stock based compensation	$	17,000		$	-		$	(662,000	)	$	(645,000	)
Depreciation and amortization	$	-		$	3,000		$	-		$	3,000
Assets at September 30, 2020	$	-		$	29,000		$	255,000		$	284,000

 

Segment information for the

nine

months ending

September

30,

20

20

for the Company's business segments follows: 

	CURA			Aegis			Corporate			Total
Revenue	$	7,000		$	-		$	-		$	7,000
Gross Loss		(8,000	)		-			-			(8,000	)
Total costs and expenses		225,000			57,000			75,000			357,000
(Loss) from operations		(233,000	)		(57,000	)		(75,000	)		(365,000	)
Non-operating expense		-			(3,000	)		(1,079,000	)		(1,082,000	)
Net loss	$	(233,000	)	$	(60,000	)	$	(1,154,000	)	$	(1,447,000	)
Stock based compensation	$	57,000		$	(33,000	)	$	(658,000	)	$	(634,000	)
Depreciation and amortization	$	-		$	9,000		$	37,000		$	46,000
Assets at September 30, 2020	$	-		$	29,000			255,000		$	284,000

Segment information for the

three

months ending

September 30

,

201

9

for the Company's business segments follows: 

	CURA			Aegis			Corporate			Total
Revenue	$	4,000		$	-		$	-		$	4,000
Gross profit		2,000			-			-			2,000
Total costs and expenses		62,000			127,000			315,000			504,000
Loss from operations		(60,000	)		(127,000	)		(315,000	)		(502,000	)
Non-operating expense		-			-			(915,000	)		(915,000	)
Net loss	$	(60,000	)	$	(127,000	)	$	(1,230,000	)	$	(1,417,000	)
Stock based compensation	$	(12,000	)	$	0		$	19,000		$	7,000
Depreciation and amortization	$	3,000		$	4,000		$	30,000		$	37,000
Assets at September 30, 2019	$	3,000		$	40,000		$	241,000		$	284,000

  

Segment information for the

nine

months ending

September 30

,

20

19

for the Company's business segments follows: 

	CURA			Aegis			Corporate			Total
Revenue	$	13,000		$	-		$	-		$	13,000
Gross profit		2,000			-			-			2,000
Total costs and expenses		577,000			446,000			1,017,000	)		2,040,000
Loss from operations		(575,000	)		(446,000	)		(1,017,000	)		(2,038,000	)
Non-operating expense		-			-			(1,492,000	)		(1,492,000	)
Net loss	$	(575,000	)	$	(446,000	)	$	(2,509,000	)	$	(3,530,000	)
Stock based compensation	$	2,000		$	13,000		$	96,000		$	111,000
Depreciation and amortization	$	12,000		$	14,000		$	83,000		$	109,000
Assets at September 30, 2019	$	3,000		$	40,000		$	241,000		$	284,000

XML

Note 11 - Preferred and Common Stock

9 Months Ended

Sep. 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

nine

-month periods ended

September 30, 2020

the Company issued

0

and

217,846

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

2016,

2017

and

2019

Convertible Notes. During the

three

- and

nine

-month periods ended

September 30, 2019

the Company issued

33,973

and

109,125

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

September 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

$2,851,000

at

September 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

$2,851,000

and

$2,713,000

at

September 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

September 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

$513,000

at

September 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

one

share of Class B Preferred for each

$5.00

of dividends. 

Series C Preferred Stock

 

At

September 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

September 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

September 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

September 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

September 30, 2020

and

December 31, 2019,

there were

3,238,000

shares of Preferred C-

3

stock outstanding.

XML

Note 12 - Stock Options

9 Months Ended

Sep. 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

September 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

September 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

nine

months ended

September 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

nine

months ended

September 30, 2019.

Summary

   For the

three

- and

nine

- month period ended

September 30, 2020,

the Company recognized a net credit to stock compensation of

$645,000

and

$634,000,

respectively. The Company recorded

$676,000

in forfeitures in the

third

quarter of

2020

and

$782,000

in forfeitures during the

nine

months ended

September 30, 2020

reflecting employee turnover during these periods.

As of

September 30, 2020,

there was

$118,000

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

nine

months ended

September 30, 2020

was

$0.15

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

nine

months ended

September 30, 2020

and

September 30, 2019

was

$88,000

and

$125,000,

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

nine

months ended

September 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		(6,249,000	)		.40
Outstanding at September 30, 2020		6,591,500		$	0.47		5.1	$	-
Exercisable at September 30, 2020		4,552,000		$	0.61		3.6	$	-

During the

nine

months ended

September 30, 2020,

6,249,000

options were canceled due to employee turnover and expiration of unexercised options, and

no

options were exercised. During the

nine

months ended

September 30, 2019,

216,750

options were canceled due to employee turnover,

no

options expired unexercised and

no

options were exercised. As of

September 30, 2020,

the exercise prices on outstanding stock options ranged from

$.07

per share to

$1.58

per share.

XML

Note 13 - Warrants

9 Months Ended

Sep. 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

nine

months ended

September 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 September 30, 2020		7,631,707			0.42	(A)		5.6	(B)	$	0
Exercisable at September 30, 2020		7,006,707		$	0.46			5.6	(C)	$	0

(A)	The weighted average exercise price for warrants outstanding as of September 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 September 30, 2020 and 2019 excludes 743,500 warrants with no expiration date.
(C)	The weighted average remaining contractual term for warrants exercisable as of September 30, 2020, and 2019 excludes 118,500 warrants with no expiration date.

XML

Note 14 - Related Party Transactions

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

NOTE

1

4

- RELATED PARTY TRANSACTIONS

 

As of

September 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

September 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

September 30, 2020

and

December 31, 2019.

The Company had

$222,000

and

$164,000

at

September 30, 2020

and

December 31, 2019,

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

As of

September 30, 2020

and

December 31, 2019,

the Company had outstanding

$2,070,000

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

10,680,000

of potential shares of common stock at

September 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

September 30, 2020

and at

December 31, 2019. 

The Company had

$160,000

and

$88,000,

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

September 30, 2020

and

December 31, 2019.

As of

September 30, 2020

and

December 31, 2019,

the Company had unsecured subordinated promissory notes outstanding of

$425,000

payable to a board member. As of

September 30, 2020,

the Company had

$34,000

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

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Subsequent Events [Text Block]

NOTE

1

5

 - SUBSEQUENT EVENTS

Issuance of

Convertible Promissory Note

Subsequent to

September 30, 2020,

the Company issued

$50,000

in convertible promissory notes due in

12

months.

Contingent Liability:

Subsequent to

September 30, 2020,

the Company received a request for arbitration on a total claim of $

1,948,000,

requesting the Company to go through mediation or arbitration. The inventory liability is accrued on the balance sheet as at

September 30, 2020.

XML

Significant Accounting Policies (Policies)

9 Months Ended

Sep. 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

September 30, 2020,

each of the subsidiaries are 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

September 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

nine

months ended

September 30, 2020

and

2019

are as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Right-to use building	$	17,000	$	29,000	$	37,000	$	81,000
Software amortization		-		2,000		-		8,000
Property and equipment		3,000		6,000		9,000		20,000
	$	20,000	$	37,000	$	46,000	$	109,000

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

September 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

$2,977,000

as of

September 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

nine

-month periods ended

September 30, 2020

revenue from products transferred over time amounted to

$2,000

and $

7,000

respectively. One customer accounted for

100%

of total Z-Coach subscription sales made during the

three

- and

nine

-month periods ended

September 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.

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

Engineering and Development:

Engineering and development costs 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 expenses are charged to operations as incurred. Patent costs for the

three

months ended

September 30, 2020

and

2019

amounted to

$0

and

$14,000

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

nine

months ended

September 30, 2020

and

2019

amounted to

$17,000

and

$35,000

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

September 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

September 30, 2020

and

2019,

we excluded

107,992,768

and

104,288,815

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

September 30, 2020

and

2019

as the conditions for their vesting are

not

time-based.  

XML

Note 2 - Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2020

Notes Tables

Depreciation and Amortization [Table Text Block]

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Right-to use building	$	17,000	$	29,000	$	37,000	$	81,000
Software amortization		-		2,000		-		8,000
Property and equipment		3,000		6,000		9,000		20,000
	$	20,000	$	37,000	$	46,000	$	109,000

XML

Note 3 - Inventory and Vendor Liability (Tables)

9 Months Ended

Sep. 30, 2020

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	September 30, 2020			December 31, 2019
Raw materials	$	1,568,000		$	1,665,000
Finished goods		69,000			69,000
		1,637,000			1,734,000
Less: Reserve		(1,637,000	)		(1,734,000	)
Inventory (net)	$	-		$	-
Liability for inventory	$	1,740,000		$	1,764,000

XML

Note 6 - Senior Convertible Notes (Tables)

9 Months Ended

Sep. 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		1,000,000			1,000,000			-			-			-			-
Face value September 30, 2020	$	11,310,000		$	1,650,000		$	1,675,000		$	625,000		$	4,370,000		$	2,990,000
Debt discount December 31, 2019	$	(1,901,000	)	$	(3,000	)	$	(354,000	)	$	(185,000	)	$	(362,000	)	$	(997,000	)
Debt discount issued		(24,000	)		(24,000	)		-			-			-			-
Amortization reported as interest		607,000			21,000			62,000			36,000			83,000			405,000
Debt discount September 30, 2020	$	(1,318,000	)	$	(6,000	)	$	(292,000	)	$	(149,000	)	$	(279,000	)	$	(592,000	)
Senior Convertible Notes (net)	$	9,992,000		$	1,644,000		$	1,383,000		$	476,000		$	4,091,000		$	2,398,000

XML

Note 9 - Property and Equipment (Tables)

9 Months Ended

Sep. 30, 2020

Notes Tables

Property, Plant and Equipment [Table Text Block]

	September 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		(302,000	)		(293,000	)
Net property and equipment	$	29,000		$	38,000

XML

Note 10 - Business Segments (Tables)

9 Months Ended

Sep. 30, 2020

Notes Tables

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

	CURA			Aegis			Corporate			Total
Revenue	$	2,000		$	-		$	-		$	2,000
Gross Profit (Loss)		-			-			-			-
Total costs and expenses		42,000			5,000			(479,000	)		(432,000	)
Income (Loss) from operations		(42,000	)		(5,000	)		479,000			432,000
Non-operating expense (Income)		-			(3,000	)		(302,000	)		(305,000	)
Net income (loss)	$	(42,000	)	$	(8,000	)	$	177,000		$	127,000
Stock based compensation	$	17,000		$	-		$	(662,000	)	$	(645,000	)
Depreciation and amortization	$	-		$	3,000		$	-		$	3,000
Assets at September 30, 2020	$	-		$	29,000		$	255,000		$	284,000

	CURA			Aegis			Corporate			Total
Revenue	$	7,000		$	-		$	-		$	7,000
Gross Loss		(8,000	)		-			-			(8,000	)
Total costs and expenses		225,000			57,000			75,000			357,000
(Loss) from operations		(233,000	)		(57,000	)		(75,000	)		(365,000	)
Non-operating expense		-			(3,000	)		(1,079,000	)		(1,082,000	)
Net loss	$	(233,000	)	$	(60,000	)	$	(1,154,000	)	$	(1,447,000	)
Stock based compensation	$	57,000		$	(33,000	)	$	(658,000	)	$	(634,000	)
Depreciation and amortization	$	-		$	9,000		$	37,000		$	46,000
Assets at September 30, 2020	$	-		$	29,000			255,000		$	284,000

	CURA			Aegis			Corporate			Total
Revenue	$	4,000		$	-		$	-		$	4,000
Gross profit		2,000			-			-			2,000
Total costs and expenses		62,000			127,000			315,000			504,000
Loss from operations		(60,000	)		(127,000	)		(315,000	)		(502,000	)
Non-operating expense		-			-			(915,000	)		(915,000	)
Net loss	$	(60,000	)	$	(127,000	)	$	(1,230,000	)	$	(1,417,000	)
Stock based compensation	$	(12,000	)	$	0		$	19,000		$	7,000
Depreciation and amortization	$	3,000		$	4,000		$	30,000		$	37,000
Assets at September 30, 2019	$	3,000		$	40,000		$	241,000		$	284,000

	CURA			Aegis			Corporate			Total
Revenue	$	13,000		$	-		$	-		$	13,000
Gross profit		2,000			-			-			2,000
Total costs and expenses		577,000			446,000			1,017,000	)		2,040,000
Loss from operations		(575,000	)		(446,000	)		(1,017,000	)		(2,038,000	)
Non-operating expense		-			-			(1,492,000	)		(1,492,000	)
Net loss	$	(575,000	)	$	(446,000	)	$	(2,509,000	)	$	(3,530,000	)
Stock based compensation	$	2,000		$	13,000		$	96,000		$	111,000
Depreciation and amortization	$	12,000		$	14,000		$	83,000		$	109,000
Assets at September 30, 2019	$	3,000		$	40,000		$	241,000		$	284,000

XML

Note 12 - Stock Options (Tables)

9 Months Ended

Sep. 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		(6,249,000	)		.40
Outstanding at September 30, 2020		6,591,500		$	0.47		5.1	$	-
Exercisable at September 30, 2020		4,552,000		$	0.61		3.6	$	-

XML

Note 13 - Warrants (Tables)

9 Months Ended

Sep. 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 September 30, 2020		7,631,707			0.42	(A)		5.6	(B)	$	0
Exercisable at September 30, 2020		7,006,707		$	0.46			5.6	(C)	$	0

XML

Note 1 - The Company and Basis of Presentation (Details Textual)	9 Months Ended
	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Jun. 30, 2020 USD ($)	Mar. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Jun. 30, 2019 USD ($)	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Number of Operating Segments	2
Cash and Cash Equivalents, at Carrying Value, Ending Balance	$ 87,000				$ 18,000
Working Capital	(4,104,000)
Retained Earnings (Accumulated Deficit), Ending Balance	(92,872,000)				(91,425,000)
Stockholders' Equity Attributable to Parent, Ending Balance	(14,222,000)	$ (11,520,000)	$ (13,708,000)	$ (12,890,000)	$ (12,203,000)	$ (10,393,000)	$ (9,497,000)	$ (8,479,000)
Proceeds From Convertible Debt, Gross	1,000,000
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		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenue from Contract with Customer, Including Assessed Tax	$ 2,000	$ 4,000	$ 7,000	$ 13,000
Patent Cost	0	$ 14,000	17,000	$ 35,000
Excess Tax Benefit from Share-based Compensation, Operating Activities			0
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued, Total	$ 0		$ 0
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares)			107,992,768	104,288,815
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares)			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%
Transferred over Time [Member]
Revenue from Contract with Customer, Including Assessed Tax	$ 2,000		$ 7,000
Senior Convertible Promissory Notes [Member]
Long-term Debt, Fair Value	2,977,000		$ 2,977,000
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		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Depreciation and amortization	$ 3,000	$ 37,000	$ 46,000	$ 109,000
Right-to-use Building [Member]
Depreciation and amortization	17,000	29,000	37,000	81,000
Software Development [Member]
Depreciation and amortization		2,000		8,000
Property and Equipment [Member]
Depreciation and amortization	$ 3,000	$ 6,000	$ 9,000	$ 20,000

XML

Note 3 - Inventory and Vendor Liability (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Inventory (Recovery) Write-down	$ (74,000)	$ (13,000)	$ (97,000)	$ (13,000)

XML

Note 3 - Inventory and Vendor Liability - Inventory (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Raw materials	$ 1,568,000	$ 1,665,000
Finished goods	69,000	69,000
Inventory, Gross, Total	1,637,000	1,734,000
Less: Reserve	(1,637,000)	(1,734,000)
Inventory (net)
Liability for inventory	$ 1,740,000	$ 1,764,000

XML

Note 4 - Demand Note (Details Textual)		3 Months Ended				9 Months Ended
	Jul. 23, 2019 USD ($) $ / shares	Sep. 30, 2020 USD ($) $ / shares shares	Jun. 30, 2020 USD ($)	Mar. 31, 2020 USD ($)	Jun. 30, 2019 USD ($)	Sep. 30, 2020 USD ($) $ / shares shares	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)
Long-term Debt, Gross		$ 11,310,000				$ 11,310,000		$ 10,310,000
Stock Issued During Period, Value, New Issues		4,000	$ 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				$ 19,000	$ 12,000
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 Plan Loan (Details Textual) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Proceeds from Issuance of Unsecured Debt	$ 228,000
Paycheck Protection Program CARES Act [Member]
Proceeds from Issuance of Unsecured Debt	$ 228,000

XML

Note 6 - Senior Convertible Notes (Details Textual)				3 Months Ended		9 Months Ended		12 Months Ended
	Jul. 24, 2018 USD ($) $ / shares	May 08, 2018 USD ($) $ / shares	Aug. 25, 2016 USD ($) $ / shares	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($) $ / shares	Dec. 31, 2017 USD ($) $ / shares	Apr. 30, 2019 USD ($)	Nov. 30, 2018 $ / shares
Long-term Debt, Gross				$ 11,310,000		$ 11,310,000		$ 10,310,000
Debt Instrument, Unamortized Discount, Total				1,318,000		1,318,000		1,901,000
Proceeds from Convertible Debt						1,000,000
Increase in Unamortized Debt Discount Due to Issuance						24,000
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				11,310,000		11,310,000		10,310,000
Debt Instrument, Unamortized Discount, Total				1,318,000		1,318,000		1,901,000
Long-term Debt, Total				9,992,000		9,992,000		8,409,000
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				1,000,000		1,000,000
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				2,070,000		$ 2,070,000		$ 1,170,000
Debt Instrument, Convertible, Number of Equity Instruments						10,680,000		4,680,000
The 2019 Convertible Notes [Member]
Long-term Debt, Gross				1,650,000		$ 1,650,000		$ 650,000
Debt Instrument, Unamortized Discount, Total				6,000		6,000		$ 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				275,000		1,000,000
Increase in Unamortized Debt Discount Due to Issuance				5,000		24,000
Interest Expense, Debt, Total				32,000	$ 15,000	78,000	$ 19,000
July 2018 Convertible Notes [Member]
Long-term Debt, Gross				1,675,000		1,675,000		1,675,000
Debt Instrument, Unamortized Discount, Total				292,000		292,000		354,000
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	20,000	62,000	52,000
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				149,000		149,000		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	36,000	34,000
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				279,000		279,000		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				94,000	92,000	279,000	264,000
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				592,000		592,000		$ 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				$ 182,000	$ 174,000	$ 539,000	$ 516,000
The 2016 Convertible Notes [Member] | Maximum [Member]
Amount of Senior Convertible Promissory Notes Authorized to Issue in Private Placement			$ 3,000,000

XML

Note 6 - Senior Convertible Notes - Schedule of Senior Convertible Notes Outstanding (Details) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Face value		$ 10,310,000
Notes issued		1,000,000
Face value	$ 11,310,000	11,310,000
Debt discount		(1,901,000)
Debt discount issued		(24,000)
Amortization reported as interest		607,000	$ 546,000
Debt discount	(1,318,000)	(1,318,000)
Senior Convertible Notes (net)	9,992,000	9,992,000		$ 8,410,000
The 2019 Convertible Notes [Member]
Face value		650,000
Notes issued	275,000	1,000,000
Face value	1,650,000	1,650,000
Debt discount		(3,000)
Debt discount issued	(5,000)	(24,000)
Amortization reported as interest		21,000
Debt discount	(6,000)	(6,000)
Senior Convertible Notes (net)	1,644,000	1,644,000
July 2018 Convertible Notes [Member]
Face value		1,675,000
Notes issued
Face value	1,675,000	1,675,000
Debt discount		(354,000)
Debt discount issued
Amortization reported as interest		62,000
Debt discount	(292,000)	(292,000)
Senior Convertible Notes (net)	1,383,000	1,383,000
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		36,000
Debt discount	(149,000)	(149,000)
Senior Convertible Notes (net)	476,000	476,000
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		83,000
Debt discount	(279,000)	(279,000)
Senior Convertible Notes (net)	4,091,000	4,091,000
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		405,000
Debt discount	(592,000)	(592,000)
Senior Convertible Notes (net)	$ 2,398,000	$ 2,398,000

XML

Note 7 - Unsecured Subordinated Promissory Notes (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 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	$ 4,000	$ 19,000	$ 10,000
Interest Payable	$ 34,000		$ 34,000		$ 15,000

XML

Note 8 - Right to Use Building Asset (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019	Aug. 01, 2019
Office Building with Terminated Lease Obligation [Member]
Operating Lease, Liability, Total	$ 257,000		$ 257,000
Lessee, Operating Lease, Discount Rate					6.00%
Operating Lease, Cost		$ 19,000		$ 80,000
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		46,000
Lessee, Operating Lease, Liability, to be Paid, Remainder of Fiscal Year	17,000		17,000
Lessee, Operating Lease, Liability, to be Paid, Year One	67,000		67,000
Lessee, Operating Lease, Liability, to be Paid, Year Two	67,000		67,000
Lessee, Operating Lease, Liability, to be Paid, Total	162,000		162,000
Lessee, Operating Lease, Liability, Undiscounted Excess Amount	$ 11,000		$ 11,000

XML

Note 9 - Property and Equipment - Property and Equipment (Details) - USD ($)	Sep. 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	(302,000)	(293,000)
Net property and equipment	$ 29,000	$ 38,000

XML

Note 10 - Business Segments (Details Textual)	9 Months Ended
	Sep. 30, 2020
Number of Operating Segments	2

XML

Note 10 - Business Segments - Operation by Segments (Details) - USD ($)	3 Months Ended						9 Months Ended
	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Revenue	$ 2,000			$ 4,000			$ 7,000	$ 13,000
Gross Profit (Loss)				2,000			(8,000)	2,000
Total costs and expenses	(432,000)			504,000			357,000	2,040,000
Income (Loss) from operations	432,000			(502,000)			(365,000)	(2,038,000)
Non-operating expense (Income)	(305,000)			(915,000)			(1,082,000)	(1,492,000)
Net loss	127,000	$ (821,000)	$ (753,000)	(1,417,000)	$ (965,000)	$ (1,148,000)	(1,447,000)	(3,530,000)
Stock based compensation	(645,000)			7,000			(634,000)	111,000
Depreciation and amortization	3,000			37,000			46,000	109,000
Assets	284,000			284,000			284,000	284,000	$ 251,000
Operating Segments [Member] | CURA Division [Member]
Revenue	2,000			4,000			7,000	13,000
Gross Profit (Loss)				2,000			(8,000)	2,000
Total costs and expenses	42,000			62,000			225,000	577,000
Income (Loss) from operations	(42,000)			(60,000)			(233,000)	(575,000)
Non-operating expense (Income)
Net loss	(42,000)			(60,000)			(233,000)	(575,000)
Stock based compensation	17,000			(12,000)			57,000	2,000
Depreciation and amortization				3,000				12,000
Assets				3,000				3,000
Operating Segments [Member] | Aegis Division [Member]
Revenue
Gross Profit (Loss)
Total costs and expenses	5,000			127,000			57,000	446,000
Income (Loss) from operations	(5,000)			(127,000)			(57,000)	(446,000)
Non-operating expense (Income)	(3,000)						(3,000)
Net loss	(8,000)			(127,000)			(60,000)	(446,000)
Stock based compensation				0			(33,000)	13,000
Depreciation and amortization	3,000			4,000			9,000	14,000
Assets	29,000			40,000			29,000	40,000
Corporate, Non-Segment [Member]
Revenue
Gross Profit (Loss)
Total costs and expenses	(479,000)			315,000			75,000	1,017,000
Income (Loss) from operations	479,000			(315,000)			(75,000)	(1,017,000)
Non-operating expense (Income)	(302,000)			(915,000)			(1,079,000)	(1,492,000)
Net loss	177,000			(1,230,000)			(1,154,000)	(2,509,000)
Stock based compensation	(662,000)			19,000			(658,000)	96,000
Depreciation and amortization				30,000			37,000	83,000
Assets	$ 255,000			$ 241,000			$ 255,000	$ 241,000

XML

Note 11 - Preferred and Common Stock (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 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	$ 2,851,000		$ 2,851,000		$ 2,713,000
Preferred Stock, Liquidation Preference, Value	$ 2,851,000		$ 2,851,000		$ 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	$ 513,000		$ 513,000		$ 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)	0	33,973	217,846	109,125

XML

Note 12 - Stock Options (Details Textual) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2020	Sep. 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	$ 645,000	$ 634,000
Increase (Decrease) in Allocated Share-based Compensation Expense, Forefitures	676,000	782,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total	$ 118,000	$ 118,000
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)		$ 0.15
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value		$ 88,000	$ 125,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period (in shares)		6,249,000	216,750
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period (in shares)		0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period (in shares)			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
Stock Option Plan 2011 and 2016 [Member]
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, 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
Stock Option Plan 2011 and 2016 [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Discount from Market Price, Offering Date		110.00%

XML

Note 12 - Stock Options - Stock Options Valuation Assumptions (Details)	9 Months Ended	12 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
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%

XML

Note 12 - Stock Options - Share-based Compensation, Stock Options, Activity (Details) - USD ($)	9 Months Ended		12 Months Ended
	Sep. 30, 2020	Sep. 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)	5 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
Weighted average exercise price, exercised (in dollars per share)
Shares, canceled or expired (in shares)	(6,249,000)
Weighted average exercise price, canceled or expired (in dollars per share)	$ 0.40
Outstanding shares (in shares)	6,591,500		10,740,500
outstanding - weighted average exercise price (in dollars per share)	$ 0.47		$ 0.50
Shares, exercisable (in shares)	4,552,000
Weighted average exercise price, exercisable (in dollars per share)	$ 0.61
Exercisable- weighted average remaining contractual term (Year)	3 years 219 days
Exercisable-aggregate intrinsic value

XML

Note 13 - Warrants (Details Textual) - shares	Sep. 30, 2020	Dec. 31, 2019	Sep. 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

XML

Note 13 - Warrants - Summary of Outstanding Warrants (Details) - USD ($)		9 Months Ended	12 Months Ended
		Sep. 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]	5 years 219 days	6 years 73 days
Outstanding, aggregate intrinsic value		$ 0	$ 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]	5 years 219 days
Exercisable, aggregate intrinsic value		$ 0

[1] The weighted average exercise price for warrants outstanding as of September 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 September 30, 2020 and 2019 excludes 743,500 warrants with no expiration date.

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

XML

Note 14 - Related Party Transactions (Details Textual)	9 Months Ended	12 Months Ended
	Sep. 30, 2020 USD ($) shares	Dec. 31, 2019 USD ($) shares
Short-term Debt, Total	$ 425,000	$ 425,000
Unsecured Subordinated Promissory Notes [Member]
Interest Payable	34,000	15,000
Short-term Debt, Total	$ 425,000	$ 425,000
Debt Instrument, Interest Rate, Stated Percentage	6.00%
Unsecured Subordinated Promissory Notes [Member]
Interest Payable	$ 34,000
Debt Instrument, Interest Rate, Stated Percentage	6.00%
Various 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	1,239,288
Interest Payable	$ 222,000	$ 164,000
Various Members of the Board of Directors [Member] | Convertible Notes [Member]
Notes Payable, Related Parties	$ 2,402,000	$ 2,477,000
Debt Instrument, Convertible, Number of Equity Instruments	9,338,228	9,388,378
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
Interest Payable	$ 160,000	$ 88,000
Affiliated Entity [Member] | Convertible Notes [Member]
Notes Payable, Related Parties	$ 2,070,000	$ 1,170,000
Debt Instrument, Convertible, Number of Equity Instruments	10,680,000	4,680,000

XML

Note 15 - Subsequent Events (Details Textual) - USD ($)		9 Months Ended
	Oct. 01, 2020	Sep. 30, 2020
Proceeds from Convertible Debt		$ 1,000,000
Subsequent Event [Member]
Proceeds from Convertible Debt	$ 50,000
Contractual Obligation, Total	$ 1,948,000