CURAEGIS TECHNOLOGIES, INC. 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.
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Aegis Division: Hydraulic Pump
During 2019, the Company initiated discussions with investment advisors to
evaluate the possible monetization of the Aegis technologies. On
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
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
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
Engineering and development expenses decreased during the three months ended
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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
General and administrative expense decreased during the three months ended
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
Net Income/ Loss for the three months ended
The net income for the three months ended
The weighted average basic and diluted common shares outstanding for the quarter
ended
Basic and diluted income per common share for the three-month period ended
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Results of Operations for the nine months ended
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
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
Engineering and development expenses decreased during the nine months ended
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
General and administrative expense decreased during the nine months ended
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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
In accordance with ASC 420, for the nine months ended
Net Loss for the nine months ended
The net loss for the nine months ended
The weighted average basic and diluted common shares outstanding for the nine
months ended
Basic and diluted loss per common share for the nine-month periods ended
Liquidity and Capital Resources
During the nine months ended
During the nine months ended
Current Cash Outlook and Management Plans
As of
Management estimates that the 2020 cash needs will run between
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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
Stock-Based Compensation
FASB ASC 718-10 requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense over the requisite service period (generally the vesting period) in the consolidated financial statements based on their fair values on the grant date. The impact of forfeitures that may occur prior to vesting is also estimated and considered in the amount recognized. In addition, the realization of tax benefits in excess of amounts recognized for financial reporting purposes will be recognized as a financing activity in accordance with FASB ASC 718-10.
No tax benefits were attributed to the stock-based compensation expense because a valuation allowance was maintained for substantially all net deferred tax assets.
Impact of Inflation
Inflation has not had a significant impact on our operations to date and we are currently unable to determine the extent inflation may impact our operations in future periods.
Quarterly Fluctuations
Since we are currently focused on developing our technologies for commercialization and we have not yet engaged in significant revenue producing operations, we do not have any meaningful quarterly fluctuations that impact our financial performance.
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