Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2020

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

-Q and Article

of Regulation S-

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

-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

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

years and for property and equipment is

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

Quoted market prices in active markets for identical assets or liabilities

Level

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

Level

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

measurements) and the lowest priority to unobservable inputs (Level

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

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

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

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.

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

accrued interest or penalties related to uncertain tax positions.

Earnings Per Share, Policy [Policy Text Block]

Loss per Common Share:

FASB's ASC

260

(“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.

CurAegis Technologies, Inc. 10-Q