PART I

 

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, technical failures, 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 “Risk Factors” in Item 1A of this annual report.

 

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 annual report on Form 10-K to reflect new information, future events or other developments.

 

As used in this annual report, unless otherwise indicated, the terms “we”, “our”, “us”, “the Company” and “CurAegis” refer to CurAegis Technologies, Inc.

  

Item 1.  BUSINESS

 

History and Development of Our Technology  

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 (Circadian User Risk Assessment) division is engaged in the fatigue management business and the Aegis division is engaged in the power and hydraulic business.

 

The Company develops and markets advanced technologies in the areas of power, safety, wellness and hydraulic power. The Company is focused on the commercialization of a wellness and safety system (the CURA System including the myCadian watch) and a uniquely designed hydraulic pump that will be smaller, lighter and more efficient than current technology. The Company has not had any significant revenue-producing operations.  

  

The Company has created the CURA System to market products that reduce fatigue risk in the workplace and help individuals manage their sleep and improve alertness. The CURA System consists of the following:

 

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the myCadian watch and app,

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real-time alertness monitoring,

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the Group Wellness Index and

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the Z-Coach Wellness Program.

 

The Aegis hydraulic pump technology has been designed to bring to the marketplace a unique concept in hydraulic pumps and motors that will be:

 

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smaller and lighter than conventional pumps and motors,

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more efficient,

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as reliable,

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price competitive, and

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unique in its ability to scale larger, allowing more powerful pumps and motors.

 

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

   

 

CURA Division: the myCadian ™ watch, the CURA™ System, and Z-Coach™ e-learning 

The Company’s CURA division is developing a proprietary technology and suite of products designed to (i) measure the decrease in a person’s alertness and (ii) to train individuals on how to improve alertness levels. The CURA™ System and the myCadian™ watch enable the user and third parties to anticipate and avert undesired or disastrous situations caused by the degradation of alertness. With the information provided from the CURA™ software analytics, employees can work with Z-Coach, our proprietary sleep training and education solution to correct sleep issues and improve overall wellness.   

 

CurAegis has been engaged in validation testing with a number of sleep study experts and neurologists in connection with the introduction of our new technologies. The Company believes a solutions approach can be created to indicate a “degradation of alertness” and thus give immediate and important information to the user and other parties. These degradations can be caused by drowsiness, alcohol or other drugs, sickness, psychological problems and thought distractions. Action taken upon a warning of a change in alertness will lead to a better and safer environment. The myCadian™ watch paired with the CURA™ System is a real-time alertness and monitoring system that addresses sleep and fatigue management solutions. This is especially important when an individual’s alertness is essential in properly performing tasks, fulfilling responsibilities and averting disasters.  The Company has filed for patent protection for these inventions.

  

The myCadian™ watch is a wearable device developed using physiological monitoring hardware and our proprietary CURA™ software that predicts and detects a degradation of alertness in a user and reveals sleep and fatigue problems. The CURA™ System will include:

 

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a proprietary tool that combines signal processing and pattern recognition to guide users and third parties about the alertness of the wearer,

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a risk assessment that identifies the degradation of alertness potentially affecting the wearer’s ability to perform tasks,

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a comprehensive assessment for wellness, alertness and sleep,

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real-time reporting that distills complex data into actionable information on mobile and desktop platforms,

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predictive reporting for a user to take action when alertness begins to wane, before fatigue becomes dangerous,

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flexible settings to provide employers a customized CURA tool within existing safety definitions and to create protocols for a unique environment, and

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pricing that makes it affordable across a broad-based workforce.

 

The Company estimates the possible market opportunity for the CURA System and the myCadian watch at approximately 700 million users worldwide.

 

The Z-Coach tool is a critical component of the CURA System and was originally created by highly respected fatigue management scientists. We acquired Z-Coach in September 2015. Z-Coach learning topics include: Risks and Costs of Fatigue, Fundamentals of Sleep, Fatigue Mitigation and Countermeasures. Z-Coach participants gain an awareness of the dangers inherent in the lack of sleep and learn to utilize lifestyle tools to make changes to improve their health, mood, productivity and safety.

 

The first Z-Coach module, Z-Coach Aviation, was designed for aviation professionals, from flight and ground crews, to scheduling, dispatch, administration and management. Z-Coach Aviation was first offered for sale in the first quarter of 2016.  During 2016, the Company completed the design of the Z-Coach Pro module which will be marketed to a broad range of organizations for fatigue learning and mitigation as well as modules tailored to the trucking and busing industry. Future versions of the Z-Coach learning modules will include training for first responders, 911 operations and other municipal employee groups as well as to medical industries. These industry-specific Z-Coach modules will be included in the launch of the CURA™ System and the myCadian watch.  

 

Aegis Division: Hydraulic Pump  

The development of the Aegis hydraulic pump has taken on added significance in light of U.S. government emissions regulations for off road diesel engines. To help achieve these standards, companies are attempting to run diesel engines, and their hydraulic pumps, at lower rotational speeds. This requires larger displacement hydraulic pumps to be installed to compensate for the decrease in rotational speed. Among other advantages, the Aegis hydraulic pump technology allows a larger displacement pump to fit into the same or smaller footprint than that of existing pumps. This enables manufacturers to keep the current equipment layout without the need for expensive modifications to accommodate larger hydraulic pumps. 

  

 

Since 2012, we have invested in software, test equipment and personnel to enhance our development efforts and began a design of the hydraulic pump to improve the overall performance while maintaining the advantages we have in size and weight. We have built an internal testing facility, which would have otherwise required third party testing fees and support. Our engineering and design team has progressively made adjustments to the sealing technology and each change has resulted in an improvement in the measured efficiency of the pump. We have filed for patent protection for our novel non-rotating group pump concept, and we are also working on additional patents as a result of engineering breakthroughs in our design process.  

   

We will continue to design modifications to enhance the overall pump technology. Although there is still much to be done, we continue to be extremely encouraged by our testing.

 

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.

      

Competition, Industry and Market Acceptance  

Competition in both the wearable device market and the hydraulic device market is, and is expected to remain, intense. The competition ranges from development stage companies to major domestic and international companies, many of which have financial, technical, marketing, sales, manufacturing, distribution and other resources significantly greater than ours. As we commercialize our technologies and begin to sell product, we expect to compete on the basis of performance, uniqueness of design, reliability, and price. There can be no assurance that our technologies and products will not be rendered obsolete by developments in competing technologies that are currently under development or that may be developed in the future or that our competitors could market competing products that obtain market acceptance more rapidly than ours.

  

We believe that the technologies we are developing have significant advantages relative to similar products manufactured in the worldwide wearable device and hydraulic device marketplaces. With respect to our mechanical device technologies, we believe that our development efforts represent a paradigm shift with respect to presently known technology. With respect to our wearable device technology, we believe that our development efforts are focused on a market that is seeking a better solution to predicting an individual’s level of alertness. Although we have not yet generated revenues from the commercialization of our technologies, we are focusing our efforts toward those areas where we believe we can get to market quickly and successfully.

 

Patents, Trade Secrets and Trademarks 

Our ability to compete effectively depends in part on our ability to maintain the proprietary nature of our technology, products and manufacturing processes. We principally rely upon patent, trademark, trade secrets and contract law to establish and protect our proprietary rights. Despite our efforts to protect our proprietary information, there can be no assurance that others will not either develop the same or similar information independently or obtain access to our proprietary information. In addition, there can be no assurance that we would prevail if we asserted our intellectual property rights against third parties, or that third parties will not successfully assert infringement claims against us in the future.

 

We currently hold patents and have a number of patent applications in process in various countries including the United States, Australia, Canada, Europe, Japan, China, India and South Korea.

 

All key employees are required to enter into agreements providing for confidentiality and the assignment of rights to inventions made by them while employed by us. These agreements also contain certain noncompetition and non-solicitation provisions effective during the employment term and for varying periods thereafter depending on position and location. There can be no assurance that we will be able to enforce these agreements. All of our employees agree to abide by the terms of a Code of Ethics policy that provides for the confidentiality of certain information received during the course of their employment.

 

Trademarks are an important aspect of our business. The following are our registered trademarks: CurAegis^®, myCadian™, CurAegis™, CURA™ and Z-Coach™.

 

 

Website 

Our website address is www.CurAegis.com. We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and, if applicable, amendments to those reports, available on the investor information portion of our website. The reports are free of charge and are available as soon as reasonably practicable after they are filed with the Securities and Exchange Commission. We have posted our Corporate Governance guidelines, Board committee charters and Code of Ethics to the investor information portion of our website. This information is available in print to any shareholder upon request. All requests for these documents should be made to our chief financial officer by calling (585) 254-1100.

  

Engineering, Research and Development 

For the years ended December 31, 2017 and 2016, the Company spent approximately $1,500,000 and $1,700,000 on product engineering, design, development and testing on its technology and products.

 

Employees  

As of December 31, 2017, we employed a total of 24 permanent and temporary employees, 11 of which are primarily devoted to engineering and development, and 13 focused on sales, marketing and administration. All of these individuals are employed in the U.S. None of our employees is represented by a labor union.

 

Executive Officers 

Our executive officers as of December 31, 2017, were as follows:

 

Richard A. Kaplan, age 72, has served as chief executive officer and as a director since October, 2010. From 2000 to 2010, Mr. Kaplan was the chief executive officer of Pictometry International Corp., a visual information systems company that experienced exponential growth under his leadership. Previously, Mr. Kaplan led and developed a number of other successful businesses in industries including retail floor covering, advertising and marketing, computer software, real estate development and human resource development.

 

Mr. Kaplan currently is on the boards of two companies: Caldwell Manufacturing and Viggi Corporation. He has also been very active in the community in academic institutions and charitable organizations, including present roles on the Board of Trustees at Rochester Institute of Technology (“RIT”), Nazareth College, and the University of Rochester Medical Center as well as directorships at Venture Creations (an RIT business incubator), Camp Good Days and Special Times, Rochester’s Child, Rochester Broadway Theatre League, George Eastman House, the Center for Governmental Research and others.

 

Mr. Kaplan’s business success and contributions within the community have been recognized by multiple awards, including the prestigious Herbert W. Vanden Brul Entrepreneurial Award presented by the RIT E. Philip Saunders College of Business in April 2007. Mr. Kaplan was also designated the “Businessperson of the Year” in 2007. In 2012, he was inducted into the Rochester Business Hall of Fame. 

 

Mr. Kaplan has an extensive background in economics, accounting, management and executive leadership. He is regularly sought out by startups, universities and other organizations for which he has done private consulting and guest lecturing on marketing, economics and organizational development. He attended Rochester Institute of Technology and the University of Buffalo where he majored in accounting and minored in economics.

 

Keith E. Gleasman, age 70, is a co-founder of the Company and has served as president and as a director since the company’s inception in September 1996. From 2005 to 2010 he held the title of chief technology officer. From 1985 to 1988, Mr. Gleasman was the vice president of sales for the Power Systems Division at Gleason Works.

 

Mr. Gleasman is a co-inventor on a notable number of the Company’s patents. His strengths include his extensive marketing and sales executive experience, in addition to his design and development knowledge. His particular expertise has been in the area of defining and demonstrating the products to persons across all levels of the automotive industry, race crew members, educators and students. He has spent virtually his entire career involved with inventing and manufacturing new and creative mechanical components for the automotive industry, working closely with his father, Vernon E. Gleasman.

 

Mr. Gleasman earned his B.S. degree from Ashland University in Ashland, Ohio.

 

Kathleen A. Browne, age 62, has served as chief financial officer, corporate secretary and principal accounting officer since April 2015. From 2007 to 2015, Ms. Browne was the sole owner of a professional services and consulting business. Ms. Browne provided consulting services to the company from April 2015 through August 2015 and joined the Company in September 2015. From 2007 to 2015 she served as chief financial officer in several development stage businesses including: U-Vend, Inc. and NaturalNano, Inc. Ms. Browne also served as the Controller and Chief Accountant for Paychex (2001-2004) and W. R. Grace (1996-2001). Ms. Browne spent thirteen years in public accounting with PricewaterhouseCoopers.

 

Ms. Browne is a CPA with a degree in accounting from St. John Fisher College in Rochester, NY.

 

 

Item 1A.  RISK FACTORS

 

We face a variety of risks inherent in perfecting our technologies to production-ready models and in our efforts to commercialize these technologies to generate revenues and profits. Below are certain significant risks that could adversely affect us and our prospects. Because of the following risks and uncertainties, our past financial performance should not be considered as an indicator of future performance.

 

We are a company focused on developing new technology and have not yet generated significant revenues.

 

We have a limited operating history and have not generated significant revenues since our founding in 1996. If revenue-generating sales and/or licenses of our technologies do not materialize or do not materialize on a timely basis, we will be compelled to seek additional equity financing or to incur debt to sustain operations which could have a material adverse effect on our business, financial condition and results of operations.

 

The results of research and development efforts may be uncertain and there can be no assurance of the commercial success of our technologies 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 be 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 design or quality of our products. Unanticipated problems in developing products and 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 and service introductions are delayed or not successful, we may not be able to achieve an acceptable return, if any, on our research and development efforts.  Even if our resulting products are technologically successful, they may not achieve market acceptance or compete effectively with our competitors’ products.

 

More specifically, our efforts to develop the CURA System, a wearable device consisting of hardware and software designed to measure a degradation of alertness in a person’s ability to perform a task or job, may not be technologically successful.   As of today, we have developed features including our CURA Score alertness monitoring, sleep tracking, manager dashboard interface, panic button, and Z-Coach fatigue management training.  We are working on software errors associated with these product features.  Other areas of development that we are pursuing or plan to pursue include a group wellness index, a man-down system for use with our panic button, and nutrition and wellness training programs, although there can be no assurance that we will do so or that we will be able to successfully develop these product features.

 

Our efforts to develop 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 technologically successful.

 

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 products or 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.  

 

We have only recently entered into the fatigue management business and we cannot predict our future results from operations of that business.

 

We entered the fatigue management business in October 2014. We have been developing and testing our initial fatigue management product and consequently there are currently no revenues from this line of business. Given our lack of operating history in this line of business, it is difficult to predict our future results. Investors should consider the risks and uncertainties that we may encounter as a pre-revenue-stage company in a new and unproven market. These uncertainties include:

 

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our ability to design and engineer products having the desired technological features in a cost-efficient manner,

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consumer demand for, and acceptance of products utilizing our technologies,

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our ability to demonstrate the benefits of our products and services to end users, and

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our ability to raise additional capital when needed on commercially acceptable terms.

 

 

Because we have not begun the production of our products, we cannot be certain of the cost to make these products, if and at what point meaningful production would begin and therefore we cannot be sure whether we can profitably produce and sell our products.

 

We are in the process of developing and producing limited quantities of products based on our present technology, and therefore we have not yet generated meaningful product sales. While we believe that we have a reasonable understanding of the approximate cost it will take to manufacture our products at varying production volumes, such costs are only estimates. Our business strategy assumes that our cost to manufacture our products will decrease as production volumes increase, but there can be no assurances that such cost savings will be realized at all or in the amounts that we assume. If we are unable to decrease our cost to manufacture as production volumes increase, we may not be as successful generating profit margins that we expect, which could adversely affect our financial condition or business. 

 

If we are unable to adequately protect our intellectual property, our anticipated competitive advantage may disappear.

 

Our success will be determined in part by our ability to retain and obtain United States and foreign patent protection for our technology. Because of the substantial length of time and expense associated with developing new technology, we place considerable importance on patent protection. We intend to continue to rely on a combination of patent protection, technical measures, and nondisclosure agreements with our employees, suppliers and customers to establish and protect the ideas, concepts and documentation of technology developed by us. Our ability to compete and the ability of our business to grow could suffer if these intellectual property rights are not adequately protected. There can be no assurance that our patent applications will result in patents being issued or that current or future patents will afford protection against competitors. We rely on a combination of patents, trademarks and contractual rights to establish and protect our intellectual property. Failure of our patents, trademarks, non-disclosure agreements and other measures to provide protection of our technology and our intellectual property rights could enable our competitors to more effectively compete with us and have an adverse effect on our business, financial condition and results of operations. In addition, our trade secrets and proprietary know-how may otherwise become known or be independently discovered by others. No guarantee can be given that others will not independently develop substantially equivalent proprietary information or techniques, or otherwise gain access to our proprietary technology. In addition, we may be required to litigate in the future to enforce our intellectual property rights, or to defend against claims of infringement or invalidity. Any such litigation could result in substantial costs and diversion of resources and could have a material adverse effect on our business, financial condition or results of operations, and there can be no assurances of the success of any such litigation.

 

Although we believe that our technology does not and will not infringe upon the patents or violate the proprietary rights of others, it is possible such infringement or violation has occurred or may occur which could have a material adverse effect on our business.

 

Our business is heavily reliant upon patented and patentable technology. We are not aware of any infringement by us. In the event that products we sell are determined or alleged to infringe upon the patents or proprietary rights of others, we could be required to modify our products or obtain a license for the manufacture and/or sale of such products. In such event, there can be no assurance that we would be able to do so in a timely manner, upon acceptable terms and conditions, or at all, and the failure to do any of the foregoing could have a material adverse effect upon our business. Moreover, there can be no assurance that we will have the financial or other resources necessary to enforce or defend a patent infringement or proprietary rights violation action. In addition, if our products or proposed products are determined or alleged to infringe or likely to infringe upon the patents or proprietary rights of others, we could be subject to injunctive relief and, under certain circumstances, become liable for damages, which could also have a material adverse effect on our business and our financial condition.  

 

If we fail to retain our key personnel and attract and retain additional qualified personnel, we might not be able to pursue our growth strategy.

 

Our future success depends upon the continued service of our management team and engineering staff who possess longstanding industry relationships and technical knowledge of our technology, products and operations. The loss of any of our key employees could negatively impact our ability to pursue our growth strategy and conduct operations. Although we believe that our relationship with these individuals is positive, there can be no assurance that the services of these individuals will continue to be available to us in the future.

 

 

Future growth in our business could make it difficult to manage our resources.

 

If we are successful in executing our business plan, we will place a significant strain on our business operations, management, and financial resources. Significant growth in our business may require us to expand our production capabilities, improve our operational, financial and information systems, and to effectively grow and manage our employee base. There can be no assurance that we will be able to successfully manage any substantial expansion of our business, including attracting and retaining qualified personnel. Any failure to properly manage our future growth could negatively impact our business and operating results.

 

We cannot predict our future capital needs and we may not be able to secure additional financing.

 

To date we have relied on sales of our equity securities and debt financing to finance our operations. We will need to raise additional funds in the future to fund our working capital needs, to fund more aggressive expansion of our business, to complete development, testing and marketing of our products, or to make strategic acquisitions or investments. We will require additional equity or debt financings, collaborative arrangements with corporate partners or funds from other sources for these purposes. No assurance can be given that necessary funds will be available for us to finance our development on acceptable terms, if at all. Furthermore, such additional financings may involve substantial dilution of our stockholders or may require that we relinquish rights to certain of our technologies or products. In addition, we may experience operational difficulties and delays due to working capital restrictions. If adequate funds are not available from operations or additional sources of financing, we may have to delay or scale back our growth plans. 

 

There is currently a limited public market for our Common Stock, which may result in volatility and negatively impacting our trading price, and potentially causing investors to have difficulty when trying to sell the Common Stock issuable upon conversion of their Shares.

 

We are not required to meet certain quantitative and qualitative listing standards established by stock exchanges for the protection of investors. The market for our Common Stock is extremely limited, meaning that at any time and from time to time, there may not be enough sellers in the market to fill purchase orders and/or enough buyers in the market to fill sell orders for transactions where a given price is stipulated (i.e. “limit orders”). Such orders, therefore, may expire unfilled. Our Common Stock is volatile, meaning that purchase and/or sell orders for a numerically small number of shares (e.g. 500) may have a disproportionate positive or negative impact on the trading price at any time during any given trading day but especially, during the first and the last half-hour of trading. The market for our Common Stock is disproportionately influenced by market makers (i.e. broker/dealers) who agree to buy a limited number of shares of our Common Stock (e.g. 500 share blocks) during the course of a given trading day at various specified prices (the “bid”) who may negatively affect the trading price by periodically “lowering the bid” for our Common Stock without regard to company performance and/or disclosure of material events regarding our activities.

  

Our Common Stock is deemed to be a “penny stock,” which may make it more difficult for investors to sell their shares due to suitability requirements.

 

Unless the trading price for our Common Stock is $5.00 or more, the stock is classified as a “penny stock” by the Securities and Exchange Commission. This classification means that broker/dealers are required to determine whether our stock is a “suitable” investment for their customers, required to disclose to the customer certain bids, offers and quotations in our stock at least two days before executing a transaction and additionally are required to deliver certain information regarding the risks generally associated with penny stocks (e.g. lack of liquidity, volatility and the potential that the investor will lose his entire investment) at least two days prior to executing a penny stock transaction. These requirements may reduce the number of individuals who otherwise may purchase our Common Stock in the open market.

 

We may issue additional shares of capital stock in the future, which could cause dilution to all shareholders.

 

As of December 31, 2017, we are authorized to issue up to 400,000,000 shares of our Common Stock, of which a total of 129,893,000 shares are outstanding or are reserved for future issuance due to the exercise of outstanding stock options, warrants or the conversion of convertible debt or preferred stock. As of December 31, 2017, we have the authority to issue an additional 270,107,000 shares of Common Stock without obtaining shareholder approval.

 

 

We are authorized to issue up to 100,000,000 shares of our Preferred Stock, of which a total of 44,861,221 shares have been issued and are outstanding. As of December 31, 2017, our board has the authority to approve the issuance of an additional 55,138,799 shares of Preferred Stock subject to the approval of the holders of the outstanding Preferred Stock.   

 

In the future, we may need to raise additional capital through the issuance of equity securities to finance our operations. Prior issuances of stock have resulted in substantial dilution to our shareholders, and such dilution may continue if we are required to finance our business with additional sales of our stock. Any issuance of additional shares of our Common Stock or Preferred Stock will dilute the percentage ownership interest of all shareholders and may dilute the book value per share of the Common Stock issuable upon conversion of the Shares.

 

The exercise of our outstanding options and warrants and conversion of our preferred stock may depress our stock price.

 

As of December 31, 2017, we had outstanding stock options and warrants to purchase an aggregate of approximately 14,897,000 shares of our Common Stock at exercise prices ranging from $0.20 to $5.00 per share. In addition, we had 45,531,000 shares of Preferred Stock (including the impact of accrued dividends) with stated values ranging from $0.20 to $0.50 per share, convertible into shares of our Common Stock at a 1:1 ratio. To the extent that these securities are converted into Common Stock, dilution to our shareholders will occur, which may result in a decrease in the market price of our Common Stock.

 

Certain investors in our equity securities have significant voting power over management and corporate transactions.

 

As of December 31, 2017, we have one principal shareholder who controls approximately 43% of our outstanding voting securities. This principal shareholder and one other together control approximately 53% of our outstanding voting securities. If these shareholders act together, they will be able to exert significant control over our management and affairs requiring shareholder approval, including approval of significant corporate transactions.

  

We do not anticipate paying dividends in the foreseeable future, and the lack of dividends may have a negative effect on the stock price.

 

We have never declared or paid any cash dividends on our stock. We currently intend to retain our future earnings to support operations and to commercialize our products and, therefore, do not anticipate paying any cash dividends on our capital stock in the foreseeable future.

 

We cannot predict our future capital needs and we may not be able to secure additional financing.

 

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

 

The terms of any future financing arrangements may restrict our operations.

 

In the future, we may enter into financing arrangements with financial institutions or other lenders. These financing arrangements would likely require us to satisfy many financial covenants that could limit our ability to incur other indebtedness, pay dividends or engage in certain other types of transactions in the future. 

 

 

Our ability to realize potential value from our net operating loss carry-forwards is highly speculative and subject to numerous material uncertainties.

 

As part of our business strategy we plan to explore whether there are opportunities to realize potential value from our net operating loss carry-forwards (“NOL Strategy”). Our net operating loss carry-forwards permit us to apply our net operating losses from prior fiscal years to taxable income in future years in order to reduce our tax liability.  As we have incurred losses since our inception, we are unable to realize value from our net operating loss carry-forwards unless we become profitable, either through the commercialization of the products we are developing or through the acquisition of a profitable company. The success of a NOL Strategy will be predicated on maintaining the value of and utilizing all or substantially all of our net operating loss carry-forwards to offset future taxable income of our company or any acquired company. This strategy would be adversely affected if we are unable to realize value from, or otherwise preserve and utilize, our net operating loss carry-forwards, including for any of the following reasons, none of which we have explored or researched as of December 31, 2017:

 

	●	Past Ownership Changes.  In the event that we are deemed to have undergone an “ownership change” as defined in Section 382(g)(1) of the Internal Revenue Code (the “Code”), our net operating loss carry-forwards generated prior to the ownership change would be subject to annual limitations, which could reduce, eliminate, or defer the utilization of these losses.  Generally, an “ownership change” occurs if the percentage of the stock owned by one or more “5-percent shareholders” (as that term is defined for purposes of Section 382 of the Code) has increased by more than 50 percentage points over the lowest percentage of stock owned by those shareholders at any time during the “testing period”, which is generally the preceding three-year period.
	●	Future Ownership Changes.  Even if an ownership change has not occurred in the past, there is still the potential for an ownership change to occur under Section 382 of the Code as a result of future changes in stock ownership.  For example, our issuance of additional stock in the future will result in additional ownership change.
	●	Equity Structure Shift.  Certain equity structure shifts, including certain reorganization type-transactions, public offerings, and similar transactions that give rise to a change in the ownership of the Company may result in a limitation or prohibition on the use of the net operating loss carry-forwards.  Additionally, the IRS has viewed an acquisition of an ownership percentage in a company that is represented by certain equity instruments, including certain preferred stock, debt instruments, or stock options, as indicative of a transfer of a beneficial ownership interest in a company under Section 382 of the Code.  Accordingly, when those instruments are issued, there could be an unintended ownership change that results in a limitation or prohibition on the use of the net operating loss carry-forwards.
	●	De Facto Liquidation.  In order to preserve our net operating loss carry-forwards, there must not be a “de facto liquidation” of the Company. The IRS has interpreted a “de facto liquidation” to include sales or the discontinuation of the current business of a company.

 

In light of the significant uncertainties inherent in the forward-looking statements made by us, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved.  Important factors could affect our results and could cause results to differ materially from those expressed in our forward-looking statements. Such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law

 

Item 1B.  UNRESOLVED STAFF COMMENTS

 Not Applicable.

  

Item 2.  PROPERTIES

We occupy a facility located at 1999 Mount Read Blvd., Rochester, New York. The facility consists of approximately 13,650 square feet with executive and engineering offices, conference rooms, manufacturing and assembly space, testing and lifts facilities. We currently occupy this space through a lease agreement. In October 2014, we extended our lease for a three-year renewal term through May 31, 2018. The current rental rate is $6,256 per month ($75,070 per annum), for the remainder of the lease term. In addition, we are required to pay a proportionate share of yearly real estate taxes and yearly common area operating costs. The lease agreement has a three-year renewal option with a 9% rate increase at the renewal period.

 

 

We believe that, given our present circumstances, the facility located at Mount Read Blvd. is sufficient to meet our anticipated plant requirements for the next twelve months. This situation could change if we were to receive orders requiring volume production of one or more of our technologies and we were to elect to fill any such orders ourselves.

  

 Item 3.  LEGAL PROCEEDINGS

 There are no litigation matters, actions and/or proceedings to which we are a party or to which our properties are subject.

 

Item 4.  MINE SAFETY DISCLOSURES

Not Applicable.  

 

 

PART II

 

Item 5.  MARKET FOR COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Market Information  

 

Our common stock is traded on the over-the-counter market which is an alternative stock exchange listing for companies that either choose not to be listed on a U.S. stock exchange or do not meet the relevant listing requirements. The over-the-counter market and the broker-dealers’ activities in the market are regulated by the Financial Industry Regulatory Authority (“FINRA”), the U.S. Securities and Exchange Commission (“SEC”) and various state regulators.

 

Our common stock is regularly quoted on the OTC Link System, an inter-dealer quotation system, operated by OTC Markets Group Inc. OTC Markets Group has developed the OTC Market Tiers in order to bring increased clarity, transparency and disclosure to the OTC market. Quotations for our common stock within the OTC Market Tiers are found on the OTCQB which is limited to companies whose quoted equity is registered with the SEC and that are current in their reporting requirements.

 

The following table presents the range of high and low bid prices for our common stock for each quarter during the last two calendar years. The source of the high and low bid price information is the OTCQB. The market represented by the OTCQB is extremely limited, is heavily influenced by market makers and the price for our common stock quoted on the OTCQB is not necessarily a reliable indication of the value of our common stock. We also believe that the price of our common stock is significantly impacted by short-selling. Quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

 

2017		High				Low
1st Quarter		$	1.91			$	0.64
2nd Quarter		$	1.20			$	0.67
3rd Quarter		$	0.91			$	0.52
4th Quarter		$	0.74			$	0.25

 

2016		High				Low
1st Quarter		$	0.55			$	0.33
2nd Quarter		$	0.60			$	0.26
3rd Quarter		$	0.64			$	0.37
4th Quarter		$	0.70			$	0.32

 

 

Holders of Common Stock  

As of December 31, 2017, we had approximately 325 shareholders of record of our common stock. As of December 31, 2017, we had 48,979,546 common shares issued and outstanding.

 

Dividend Policy on Common Stock  

We have not paid any dividends on our common stock since the inception of the Company. The declaration or payment of dividends, if any, on our common stock is within the discretion of the board of directors and will depend upon our earnings, capital requirements, financial condition and other relevant factors. Given our current financial condition, the board of directors does not anticipate payment of any dividends on our common stock in the foreseeable future. 

 

The declaration and payment of dividends on our common stock is limited by provisions of the New York Business Corporation Law which permits the payment of dividends only, if after the dividends are paid, a company’s net assets are at least equal to its stated capital. Payment of dividends on our common stock is also subordinated to the requirement that we pay all current and accumulated dividends on our Class A and Class B Preferred Shares prior to the payment of any dividends on our common stock.  

 

 

Securities Authorized for Issuance under Equity Compensation Plans as of December 31, 2017:

 

Plan Category		Number of securities to be issued upon exercise of outstanding options, warrants and rights				Weighted average exercise price of outstanding options, warrants and rights				Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in col. )
Equity compensation plans approved by security holders			9,682,000	(1)		$	0.54				3,283,000
Equity compensation plans not approved by security holders			1,223,000	(2)		$	1.04	(3)		None
Total			10,905,000			$	0.59				3,283,000

 

(1)	Represents the aggregate number of common stock options outstanding under the 2011 and 2016 Stock Option Plans, as well as other stock options granted to certain executive officers and non-management directors. There have been no grants of common stock options under the 2016 Stock Option Plan.
(2)	Represents common stock warrants issued to certain business, engineering, financial, and technical consultants.
(3)	Excludes the impact of 1,750,000 unvested warrants with no determined exercise price.

 

Unregistered Sales of Equity Securities and Use of Proceeds 

The Company issued a total of $2,285,000 of 6% Senior Convertible Promissory Notes and Warrants ("2017 Convertible Notes") to accredited investors during the year ended December 31, 2017. The 2017 Convertible Notes were offered and sold without registration under the Securities Act of 1933 pursuant to Rule 506(c) of Regulation D under the Securities Act of 1933. The offering was made only to “accredited investors” as defined in Rule 501(a) of Regulation D under the Securities Act of 1933. Subsequent to December 31, 2017 and up to the filing of this Form 10K, the Company issued an additional $1,175,000 of 2017 Convertible Notes.

 

Reports to Shareholders  

We furnish our shareholders with an annual report containing audited financial statements and such other periodic reports as we may determine to be appropriate or as may be required by law. We comply with periodic reporting, proxy solicitation and certain other requirements of the Securities Exchange Act of 1934.

 

Transfer Agent and Registrar  

Continental Stock Transfer & Trust Company has been appointed as our Transfer Agent and Registrar for our common stock and for our preferred stock. Continental’s mailing address is One State Street, New York, New York 10004, and the main telephone number is (212) 509-4000.

 

 

Item 6.  SELECTED FINANCIAL DATA

 

As a smaller reporting company, we are not required to include information otherwise required by this Item.  

 

 

Item 7.  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 “Risk Factors” in Item 1A of this annual report.

 

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 annual report on Form 10-K to reflect new information, future events or other developments.

 

The following discussion and analysis should be read in conjunction with the accompanying Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10-K.

 

Overall Business Strategy 

 

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 (Circadian User Risk Assessment) division is engaged in the fatigue management business, and the Aegis division is engaged in the power and hydraulic business.

 

The Company develops and markets advanced technologies in the areas of safety, wellness and power. The Company is focused on the commercialization of a wellness and safety system (the CURA System and the myCadian watch) and a uniquely designed hydraulic pump that will be smaller, lighter and more efficient than current technology. The Company has not had any significant revenue-producing operations.  

   

The Company has created the CURA System to market products that reduce fatigue risk in the workplace and help individuals manage their sleep and improve alertness. The CURA System consists of the following capabilities:

 

●

the myCadian watch and app,

●

real-time alertness monitoring,

●

the Group Wellness Index, and

●

the Z-Coach Wellness Program.

 

The Aegis hydraulic pump technology has been designed to bring to the marketplace a unique concept in hydraulic pumps and motors that will be:

 

●

smaller and lighter than conventional pumps and motors,

●

more efficient,

●

as reliable,

●

price competitive, and

●

unique in its ability to scale larger, allowing more powerful pumps and motors.

 

It is important to note, regarding both the CURA and Aegis products, that the cycle time from the initiation of the sales process to revenue realization can be highly variable especially for a start-up entity. In addition to the activities to be undertaken by us to implement our plan of operation detailed below, 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. 

 

CURA Division: the myCadian ™ watch, the CURA System, and Z-Coach e-learning 

The Company’s CURA division is developing a proprietary technology and suite of products designed to (i) measure the decrease in a person’s alertness and (ii) to train individuals on how to improve alertness levels. The CURA System and the myCadian watch will enable the user and third parties to anticipate and avert undesired or disastrous situations caused by the degradation of alertness. With the information provided from the CURA software analytics, employees can work with Z-Coach, our proprietary sleep training and education solution, to correct sleep issues and improve overall wellness.  

 

CurAegis has engaged sleep study experts and neurologists to assist with the analysis and validation of our new technologies. The Company believes a solutions approach can be created to indicate a “degradation of alertness” and thus give immediate and important information to the user and other parties. Action taken upon a warning of a change in alertness will lead to a better and safer environment. The myCadian watch paired with the CURA software is designed to be a real-time alertness and emergency monitoring system that addresses sleep and fatigue management solutions. This is especially important when an individual’s alertness is essential in properly performing tasks, fulfilling responsibilities and averting disasters.  The Company has filed for patent protection for these inventions.   

 

The myCadian watch is a wearable device developed using physiological monitoring hardware and our proprietary CURA software and is designed to predict and detect a degradation of alertness in a user and reveal sleep and fatigue problems. The CURA System will include:

 

●

a proprietary tool that combines signal processing and pattern recognition to guide users and third parties about the alertness of the wearer,

●

a risk assessment that identifies the degradation of alertness potentially affecting the wearer’s ability to perform tasks,

●

a comprehensive assessment for wellness, alertness and sleep,

●

real-time reporting that distills complex data into actionable information on mobile and desktop platforms,

●

predictive reporting for a user to take action when alertness begins to wane - before fatigue becomes dangerous,

●

flexible settings to provide employers a customized tool within existing safety definitions and to create protocols for a unique environment, and

●

pricing that makes it affordable across a broad-based workforce.

 

Management is developing marketing and sales programs in support of the CURA sales launch to begin in 2018.

 

The Company has invested in controlled clinical studies at the Sleep and Chronobiology Laboratory at the University of Colorado-Boulder and at the University of Rochester Medical Center. These studies have been used to validate our actigraphy data collection as well as calibrate our proprietary technologies and algorithms. 

 

The Z-Coach tool is a critical component of the CURA System and was created by highly respected fatigue management scientists. We acquired Z-Coach in 2015. Z-Coach learning topics include: Risks and Costs of Fatigue, Fundamentals of Sleep, Fatigue Mitigation and Countermeasures. Z-Coach participants gain an awareness of the dangers inherent in the lack of sleep and learn to utilize lifestyle tools to make changes to improve their health, mood, productivity and safety.

 

The Z-Coach modules have been designed for a range of industry professionals, including aviation, trucking and busing industry and for corporate workers. These Z-Coach modules are a key component to the CURA™ System and the myCadian watch.  

 

 

Aegis Division: Hydraulic Pump

The development of our hydraulic pump has taken on added significance in light of U.S. government emissions regulations for off road diesel engines. To help achieve these standards, companies are attempting to run diesel engines, and their hydraulic pumps, at lower rotational speeds. This requires larger displacement hydraulic pumps to be installed to compensate for the decrease in rotational speed. Among other advantages, the Aegis hydraulic technology allows a larger displacement pump to fit into the same or smaller footprint than that of existing pumps. This enables manufacturers to keep the current equipment layout without the need for expensive modifications to accommodate larger hydraulic pumps.  

 

Our Aegis engineering team has completed a production prototype and is working with leaders in the pump industry to align the prototype capability with specific customer applications. The Company reached significant milestones during the fourth quarter of 2017 in the design and testing of this production prototype. The Company is currently evaluating market opportunities that could result in a licensing agreement with a market leader in the hydraulic industry. Engineering testing, design and expansion of functionalities will continue during 2018.

 

We have invested in software, test equipment and personnel to enhance our development efforts and began a design of the hydraulic pump to improve the overall performance while maintaining the advantages we have in size and weight. We have built our own testing facility, which would have otherwise taken place at a third-party testing facility. Our engineer and design team has progressively made adjustments to the valve and piston technology and each change has resulted in an improvement in the measured efficiency of the pump. We have filed for patent protection for our novel non-rotating group pump concept, and we are also working on additional patents as a result of engineering breakthroughs in our design process.   

 

The Company submitted the Aegis hydraulic pump for testing at the Fluid Power Institute at the Milwaukee School of Engineering (“MSOE”). The MSOE research laboratories provide custom in-depth testing, systems analysis solutions, and evaluations. The Aegis pump evaluated by MSOE was our test pump, not a production prototype, thus the tested unit was not completely optimized. The MSOE test results demonstrated that our pump can achieve the high speed and pressure levels needed and should result in greater efficiencies and power density than current axial piston hydraulic pumps in the market. We also believe the testing at MSOE confirmed our test stand accuracy and the mathematical models used in our design development.

 

 

Results of Operations for the years ended December 31, 2017 and 2016

 

Revenue, Cost of Revenue and Loss on Revenue

 

		For the year ended December 31,								Variance
		2017				2016
Revenue		$	39,000			$	26,000			$	13,000
Cost of revenue			161,000				127,000				34,000
Loss on revenue		$	(122,000	)		$	(101,000	)		$	(21,000	)

 

The Company recorded $39,000 in revenue during the year ended December 31, 2017. Revenue from Z-Coach stand-alone sales aggregated $28,000 and $26,000 for the years ended December 31, 2017 and 2016, respectively. During the year ended December 31, 2017, the Company recognized $11,000 in revenue generated from CURA System pilot programs delivered in the fourth quarter of 2017. The Company did not have revenue from the CURA System in the year ended December 31, 2016.

 

The Z-Coach modules have been designed for a range of industry professionals, including aviation, trucking and busing industry and for corporate workers. The Company began offering the Z-Coach Aviation program in the first quarter of 2016. Z-Coach provides fatigue safety training over a twelve month subscription period. The user has unlimited access to this 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. 

 

During the year ended December 31, 2017, one hundred and forty-eight Z-Coach Aviation subscriptions were sold to eight customers resulting in total customer sales of $12,000. As of December 31, 2017, and December 31, 2016, the Company has deferred revenue of $5,000 and $22,000, respectively attributed to Z-Coach subscription revenue that will be recognized ratably as our performance obligations are satisfied.

 

 

The Company recorded $161,000 and $127,000 in cost of revenue during the year ended December 31, 2017 and December 31, 2016, respectively. The cost of revenue includes: (i) software amortization and hosting fees incurred to provide the Z-Coach product to subscribers and (ii) product costs incurred in the delivery of pilot programs shipped in the fourth quarter of 2017 related to the CURA System. Software amortization is based upon the straight-line amortization of the capitalized software over an estimated useful life of 36 months.

 

Engineering and Development Costs and Expenses

 

		For the year ended December 31,								Variance
		2017				2016				Incr (decr)
Wages and benefits		$	849,000			$	829,000			$	20,000
Professional fee and advisors			236,000				584,000				(348,000	)
Parts and shop supplies			267,000				180,000				87,000
Computer and software maintenance			56,000				48,000				8,000
Depreciation and amortization			43,000				55,000				(12,000	)
Other costs and expenses			18,000				22,000				(4,000	)
			1,469,000				1,718,000				(249,000	)
Stock based compensation			33,000				27,000				6,000
Total Engineering and Development		$	1,502,000			$	1,745,000			$	(243,000	)

 

Engineering and development expenses for the year ended December, 31, 2017 amounted to $1,502,000 as compared to $1,745,000 in the year ended December 31, 2016. Non-cash stock-based compensation attributable to stock options for the year ended December 31, 2017 was $33,000, compared to $27,000 for the year ended December 31, 2016.  The Company continued to invest in the CURA and Aegis product development efforts in 2017. The decrease in engineering and development costs since 2016 is primarily attributed to software costs incurred for the CURA System that was developed by an outside consulting firm. The increase in parts and shop supplies reflects the internal costs to build, test and produce a working prototype of the Aegis hydraulic pump.

 

 

General and Administrative Costs and Expenses

 

		For the year ended December 31,								Variance
		2017				2016				Incr (decr)
Wages and benefits		$	1,564,000			$	1,183,000			$	381,000
Professional fees and advisors			506,000				342,000				164,000
Facilities and occupancy			152,000				151,000				1,000
Insurance			76,000				80,000				(4,000	)
Conferences and travel			118,000				95,000				23,000
Shareholder support			67,000				48,000				19,000
Depreciation and amortization			10,000				11,000				(1,000	)
Other costs and expenses			130,000				121,000				9,000
			2,623,000				2,031,000				592,000
Stock based compensation			126,000				118,000				8,000
Total General and Administrative		$	2,749,000			$	2,149,000			$	600,000

 

 

General and administrative expense for the year ended December 31, 2017 amounted to $2,749,000 compared to $2,149,000 in the year ended December 31, 2016. Non-cash stock-based compensation expense for the year ended December 31, 2017 was $126,000 compared to $118,000 for the year ended December 31, 2016. Excluding the non-cash stock-based compensation expense, general and administrative expense for the year ended December 31, 2017 amounted to $2,623,000 compared to $2,031,000 in the year ended December 31, 2016. The increase of $592,000 of spending in 2017 is attributed to headcount increases in our sales and operations teams and increases in professional fees and advisors reflecting the investment in the CURA and Aegis business and product development efforts.  

 

 

Impairment loss

 

During the year ended December 31, 2017 we recorded an impairment charge of $357,000 reflecting the write off of previously capitalized software development costs associated with CURA software that was deemed non-recoverable upon future commercialization of the CURA system. No impairment charges were recorded in the year ended December 31, 2016.

 

Other Income and Expense

 

		For the year ended December 31,								Variance
		2017				2016
Interest expense		$	(765,000	)		$	(129,000	)		$	(636,000	)
Gain on debt extinguishment			70,000				-				70,000
Other income (expense)			2,000				(38,000	)			40,000
		$	(693,000	)		$	(167,000	)		$	(526,000	)

 

During the year ended December 31, 2017, the Company recognized $230,000 in interest expense on the 6% convertible notes and $535,000 of amortization on debt discount classified as interest expense related to convertible notes. As of December 31, 2017, the company has $5,825,000 in face value of 6% convertible notes outstanding.

 

The Company recognized a gain of $70,000 on the extinguishment of debt on November 30, 2017, resulting from changes to the conversion and exercise price on the 2017 Convertible Notes then outstanding. The 2017 Convertible Notes outstanding on November 30, 2017, in the aggregate amount of $2,450,000, were re-issued to reflect a reduction of the conversion price on the notes from $0.50 per share to $0.333 per share. The exercise price of the underlying warrants was also reduced from $0.50 per share to $0.333 per share. The amendment and reissuance of these 2017 Convertible Notes has been accounted for as an extinguishment and re-issuance of the replacement notes and warrants and resulted in a non-cash gain in the results of operations for the year ended December 31, 2017.

 

Net Loss for the years ended December 31, 2017 and 2016

 

The net loss for the year ended December 31, 2017 was $5,423,000, compared with a net loss in the year ended December 31, 2016 of $4,162,000. The net loss attributable to common stockholders for the year ended December 31, 2017 was $5,671,000 as compared to $5,295,000 for the year ended December 31, 2016. The weighted average basic and diluted common shares outstanding amounted to 48,032,000 and 46,119,000 for each of the years ended December 31, 2017 and 2016, respectively. Basic and diluted loss per common share for each of the year ended December 31, 2017 and 2016 were $0.12 and $0.11 respectively.

 

Preferred stock dividends accrued totaled $248,000 in each of the years ended December 31, 2017 and 2016.

 

During the year ended December 31, 2016, in connection with the issuance of the 6,042,000 shares of Series C-3 Preferred stock, the Company valued the non-cash beneficial conversion feature associated with the right to convert the shares into common stock on a one-for-one basis. The fair value of our common stock on the date of issuance was compared to the effective conversion price, and in order to measure the value of the non-cash beneficial conversion feature inherent to the convertible preferred shares. This beneficial conversion feature of $885,000 is reflected in the statement of operations for the year ended December 31, 2016. 

 

Liquidity and Capital Resources  

 

As of December 31, 2017, cash totaled $194,000, a net decrease of $1,815,000 since the beginning of the year. During the year ended December 31, 2017 we used $4,222,000 of cash in operating activities. A net loss of $5,423,000 was adjusted for $1,161,000 in non-cash expenses for depreciation, amortization, stock-based compensation, non-cash gain on debt extinguishment, and impairment loss and $40,000 in changes in working capital components. During 2017, the Company recorded an impairment charge of $357,000 reflecting the write off of previously capitalized software development costs associated with CURA software that was deemed non-recoverable upon future commercialization of the CURA system.  No impairment charges were recorded in the year ended December 31, 2016.  The increase in cash used in operations in 2017 compared to 2016 was driven by the increase in the net loss. In 2016, the net loss of $4,162,000 was adjusted for $454,000 in non-cash expenses for depreciation, amortization and stock-based compensation and $105,000 in changes in components of working capital.

  

 

The Company invested $420,000 in capitalized software and property and equipment in the year ended December 31, 2017 compared to the investment of $94,000 in the year ended December 31, 2016. 

 

During the year ended December 31, 2017, the Company generated $2,835,000 in cash from financing activities resulting from the issuance of $2,825,000 in 2017 Convertible Notes and $10,000 in proceeds received upon the exercise of a common stock warrant. During the year ended December 31, 2016, net proceeds of $1,495,000 were generated from the issuance of Series C-3 convertible preferred shares and $2,972,000 from issuance of 2016 Convertible Notes and Warrants.   

 

Current Cash Outlook and Management Plans 

  

As of December 31, 2017, we have cash on hand of $194,000, negative working capital of $69,000, a stockholders’ deficit of $3,408,000 and an accumulated deficit of $80,841,000. During the year ended December 31, 2017 we raised $2,825,500 in gross proceeds through the issuance of 6% convertible notes and warrants. The proceeds from this private placement have been used to support the ongoing development and marketing of our core technologies and product initiatives.

 

Management estimates that the 2018 cash needs, based on its current development and product plans, will range from $4.5 to $5.0 million. As of December 31, 2017, 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 continues to use its best efforts to develop financing opportunities to fund the development and commercialization of the CURA and Aegis products.

 

Subsequent to December 31, 2017, the board of directors increased the limit on the 2017 Convertible Notes from $4 million to $5 million. 

 

Since inception, we have financed our operations by the sale of our securities and debt financings. We need to raise additional funds to meet our working capital needs, to fund expansion of our business, to complete development, testing and marketing of our products, or to make strategic acquisitions or investments. No assurance can be given that necessary funds will be available for us to finance our development on acceptable terms, if at all. Furthermore, such additional financings may involve dilution to our shareholders or may require that we relinquish rights to certain of our technologies or products. In addition, we may 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 growth plans. 

 

The Company’s ability to fund its current and future commitments from its available cash depends on a number of factors. These factors include the Company’s ability to (i) launch and generate sales from the CURA division; (ii) generate revenue from the licensing or sale of our hydraulic technologies or; (iii) decrease engineering and development and administrative expenses. If these and other factors are not met, the Company 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  

The Company has two sources of revenue: (i) from the sale of CURA System products and (ii) from stand-alone Z-Coach subscriptions. Revenue from the sale of CURA System products is recognized upon the shipment of myCadian devices to a customer and upon the company’s satisfaction of all performance obligations as described in customer agreements. The Z-Coach Program provides fatigue training over an annual subscription period of twelve months. The Z-Coach Program 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 our performance obligations are satisfied and when collection is reasonably assured. 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 December 31, 2017, and December 31, 2016, 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. We elected to adopt the alternative method of calculating the historical pool of windfall tax benefits as permitted by FASB ASC 718-10-65. This is a simplified method to determine the pool of windfall tax benefits that is used in determining the tax effects of stock compensation in the results of operations and cash flow reporting for awards that were outstanding as of the adoption of FASB ASC 718-10.

  

FASB ASC 505-50, “Equity-Based Payments to Non-Employees,” requires all share-based payments to non-employees, including grants of stock options, to be recognized in the consolidated financial statements as compensation expense over the service period of the consulting arrangement or until performance conditions are expected to be met. Using a Black-Scholes valuation model, we periodically reassess the fair value of non-employee options as service conditions are met, which generally aligns with the vesting period of the options, and we adjust the expense recognized in the consolidated financial statements accordingly.

 

FASB ASC 718-20 requires that modifications of the terms or conditions of equity awards be treated as an exchange of the original award for a new award.  Incremental compensation cost is measured as the excess, if any, of the fair value of the modified award over the fair value of the original award immediately before its terms are modified. 

 

Safe Harbor

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, technical failures, 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.

 

 

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 annual report on Form 10-K to reflect new information, future events or other developments.

 

Recent Accounting Pronouncements

 

See Note 2 to the Company’s consolidated financial statements for discussion of recently issued, but not yet effective, accounting pronouncements.

 

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 technology 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.

 

 

 

 

Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a smaller reporting company, we are not required to include information otherwise required by this Item.  

 

 

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

 

CURAEGIS TECHNOLOGIES, INC.

 

Contents

Financial Statements

 

 

	PAGE
Report of Independent Registered Public Accounting Firm	26
Consolidated Balance Sheets as of December 31, 2017 and 2016	27
Consolidated Statements of Operations for each of the years ended December 31, 2017 and December 31, 2016	28
Consolidated Statements of Changes in Stockholders’ (Deficit) Equity for each of the years ended December 31, 2017 and 2016	29
Consolidated Statements of Cash Flows for each of the years ended December 31, 2017 and December 31, 2016	30
Notes to Consolidated Financial Statements	31

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

 

 

To the Board of Directors and Shareholders

CurAegis Technologies, Inc.

 

Opinion on the Financial Statements 

We have audited the accompanying consolidated balance sheets of CurAegis Technologies, Inc. and its subsidiaries (the “Company”) as of December 31, 2017 and 2016, the related consolidated statements of operations, changes in stockholders’ (deficit) equity and cash flows for the years then ended, and the related notes to the consolidated financial statement (collectively, the financial statements). In our opinion, the financial statements presented fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform an audit of the Company’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits include performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

  

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company's losses from operations raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

/s/ Freed Maxick CPAs, P.C.

 

We have served as the Company’s auditor since 2011.

 

Buffalo, New York
March 16, 2018

 

 

CURAEGIS TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

 

 

See notes to consolidated financial statements.

 

 

CURAEGIS TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

See notes to consolidated financial statements. 

 

 

CURAEGIS TECHNOLOGIES, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY

 

 

See notes to consolidated financial statements.

 

 

CURAEGIS TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

                                   

See notes to consolidated financial statements.

 

 

CURAEGIS TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2017

 

  

Item 9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

 

Item 9A.   CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

Richard A. Kaplan, our chief executive officer and Kathleen A. Browne our principal accounting officer, as of December 31, 2017, has informed the board of directors that, based upon their evaluation of the Company’s disclosure controls and procedures as of the end of the period covered by this annual report (Form 10-K), such disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports we submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to management (including the chief executive officer) as appropriate, to allow timely decisions regarding required disclosure.

 

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining an adequate System of internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements. Our internal control over financial reporting is supported by a program of appropriate reviews by management, written policies and guidelines, careful selection and training of qualified personnel, and a written code of conduct adopted by our board of directors, applicable to all Company directors and all officers, consultants and employees.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections or any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The audit committee of our board of directors meets with our independent registered public accounting firm and management periodically to discuss internal control over financial reporting, auditing and financial reporting matters. The audit committee reviews with our independent registered public accountants the scope and the results of the audit effort. The audit committee’s report can be found in the definitive proxy statement issued in connection with the Company’s 2018 annual meeting of shareholders.

 

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in the 2013 “Internal Control—Integrated Framework”. Based upon its assessment, management concluded that as of December 31, 2017 internal control over financial reporting is effective.

 

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

 

This report shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.   

 

 

Item 9B.   OTHER INFORMATION

 

None  

 

 

PART III

 

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

The information required herein is incorporated by reference to the Proxy Statement to be filed in connection with the 2018 annual meeting of shareholders. Information regarding our Executive Officers is found in Part I, Item 1 of this report.

 

 

Item 11. EXECUTIVE COMPENSATION

 

The information required herein is incorporated by reference to the Proxy Statement to be filed in connection with the 2018 annual meeting of shareholders.

 

 

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The information required herein is incorporated by reference to the Proxy Statement to be filed in connection with the 2018 annual meeting of shareholders.

 

 

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

The information required herein is incorporated by reference to the Proxy Statement to be filed in connection with the 2018 annual meeting of shareholders.

 

 

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

The information required herein is incorporated by reference to the Proxy Statement to be filed in connection with the 2018 annual meeting of shareholders.

  

 

 

 

PART IV

 

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

The list of exhibits required by this Item is incorporated in this Item by reference to the exhibit index attached after the signature page to this report. 

 

 

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, INC.
Dated: March 16, 2018	By:	/s/ Richard A. Kaplan
		Richard A. Kaplan,
		Chief Executive Officer

 

Dated: March 16, 2018	By:	/s/ Kathleen A. Browne
		Kathleen A. Browne,
		Chief Financial and Accounting Officer

 

 

POWER OF ATTORNEY

 

KNOW ALL BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Richard A. Kaplan and Kathleen A, Browne, or either of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and any documents related to this report and filed pursuant to the Securities and Exchange Act of 1934, as amended and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Dated: March 16, 2018	By:	/s/ Richard A. Kaplan   Richard A. Kaplan, Chief Executive Officer and Director
Dated: March 16, 2018	By:	/s/ Kathleen A. Browne Kathleen A. Browne Chief Financial and Accounting Officer
Dated: March 16, 2018	By:	/s/ Keith E. Gleasman   Keith E. Gleasman, President and Director
Dated: March 16, 2018	By:	/s/ Thomas F. Bonadio Thomas F. Bonadio, Director
Dated: March 16, 2018	By:	/s/ William W. Destler William W. Destler, Director
Dated: March 16, 2018	By:	/s/ Asher J. Flaum   Asher J. Flaum, Director
Dated: March 16, 2018	By:	/s/ John W. Heinricy John W. Heinricy, Director
Dated: March 16, 2018	By:	/s/ Thomas J. Labus Thomas J. Labus, Director
Dated: March 16, 2018	By:	/s/ Charles N. Mills Charles N. Mills, Director
Dated: March 16, 2018	By:	/s/ E. Philip Saunders E. Philip Saunders, Director
Dated: March 16, 2018	By:	/s/ Gary A. Siconolfi Gary A. Siconolfi, Director

 

 

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.
3.10	Certificate of Amendment of Certificate of Incorporation of CurAegis Technologies, Inc., dated June 16, 2016, changing the name to CurAegis Technologies, Inc., incorporated by reference to Exhibit 3.1 to Form 8-K filed with the Securities and Exchange Commission on August 11, 2016

 

10.1	Stock Option Agreement dated December 31, 2010 between the company and Richard A. Kaplan, incorporated by reference to current report (Form 8-K) filed October 6, 2010*

 

10.2	Employment Agreement dated October 4, 2010 between the company and Richard A. Kaplan, incorporated by reference to current report (Form 8-K) filed October 6, 2010*

 

10.3	Stock Option Agreement dated October 18, 2010 between the company and Robert W. Fishback, incorporated by reference to current report (Form 8-K) filed October 22, 2010*

 

10.4	2011 Stock Option Plan and template agreements to be used to grant options thereunder, incorporated by reference to Annual Report (Form 10-K) filed March 29, 2011*

 

10.5	Agreement dated December 13, 2010 between Heinrocket Inc. as Consultant and CurAegis, Inc., incorporated by reference to Annual Report (Form 10-K) filed March 29, 2011*

 

10.6

Securities Purchase Agreement by and among CurAegis, Inc., a New York corporation, B. Thomas Golisano, and each purchaser listed on the Schedule of Purchasers attached thereto, dated September 23, 2011, incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on September 26, 2011

 

 

10.7	Form of Warrant to Purchase Common Stock of CurAegis, Inc., incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on September 26, 2011

  

10.8	Form of Directors Subscription Agreement, incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on September 26, 2011

 

10.9	Investors’ Rights Agreement by and between CurAegis, Inc., a New York corporation, B. Thomas Golisano, Charles T. Graham, and David Still, dated September 23, 2011, incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on September 26, 2011

 

10.10

Letter Agreement between CurAegis, Inc. and SCIRE Corporation, incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on December 5, 2013*

 

10.11

Securities Purchase Agreement by and among CurAegis, Inc., B. Thomas Golisano, and each purchaser listed on the Schedule of Purchasers attached thereto, dated March 28, 2014, incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on March 28, 2014

 

10.12

Amended and Restated Investors’ Rights Agreement by and between CurAegis, Inc., B. Thomas Golisano, Charles T. Graham, and David Still, dated March 28, 2014, incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on March 28, 2014

 

10.13

Letter Agreement between CurAegis, Inc. and SCIRE Corporation, incorporated by reference to the Annual Report on Form 10-K filed March 3, 2015*

 

10.14	First Amendment to the CurAegis, Inc. 2011 Stock Option Plan, incorporated by reference to the Annual Report on Form 10-K filed March 3, 2015*
10.15	Compensation Agreement, dated March 3, 2016, between Kathleen A. Browne and CurAegis Technologies, Inc., incorporated by reference to Exhibit 10.1 to Form 10-Q filed with the Securities and Exchange Commission on May 12, 2016*
10.16	Letter Agreement, dated March 24, 2016, between CurAegis Technologies, Inc. and Richard A. Kaplan, incorporated by reference to Exhibit 4.1 to Form 8-K filed with the Securities and Exchange Commission on March 25, 2016*
10.17	Securities Purchase Agreement, dated August 25, 2016, between CurAegis Technologies, Inc. and the investors listed therein, incorporated by reference to Exhibit 4.1 to Form 8-K filed with the Securities and Exchange Commission on September 1, 2016
10.18	Form of Convertible Promissory Note, incorporated by reference to Exhibit 4.2 to Form 8-K filed with the Securities and Exchange Commission on September 1, 2016
10.19	Form of Common Stock Purchase Warrant, incorporated by reference to Exhibit 4.3 to Form 8-K filed with the Securities and Exchange Commission on September 1, 2016
10.20	Form of Securities Purchase Agreement, dated May 31, 2017, 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 July 14, 2017
10.21	Form of 2017 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 July 14, 2017
10.22	Form of Common Stock Purchase Warrant, incorporated by reference to Exhibit 4.3 to CurAegis Technologies, Inc. Current Report on Form 8-K filed with the Securities and Exchange Commission on July 14, 2017
10.23	Form of Non-Plan Nonqualified Stock Option Agreement, incorporated by reference to Exhibit 4.10 to CurAegis Technologies, Inc. Registration Statement on Form S-8 filed with the Securities and Exchange Commission on August 29, 2017
10.24	Form of First Amendment to Non-Plan Nonqualified Stock Option Agreement, incorporated by reference to Exhibit 4.11 to CurAegis Technologies, Inc. Registration Statement on Form S-8 filed with the Securities and Exchange Commission on August 29, 2017
10.25	Form of Non-Plan Stock Option Agreement, incorporated by reference to Exhibit 4.12 to CurAegis Technologies, Inc. Registration Statement on Form S-8 filed with the Securities and Exchange Commission on August 29, 2017

  

 

10.26	Amendment to Securities Purchase Agreement, made as of August 4, 2017, incorporated by reference to Exhibit 10.1 to CurAegis Technologies, Inc. Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 13, 2017
10.27	Amendment to Employment Agreement, dated November 10, 2017, between CurAegis Technologies, Inc., and Richard A. Kaplan, incorporated by reference to Exhibit 10.2 to CurAegis Technologies, Inc. Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 13, 2017
10.28	Amendment No. 2 to Securities Purchase Agreement, made as of November 30, 2017, 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 December 6, 2017
10.29	Amendment No. 3 to Securities Purchase Agreement, made as of February 21, 2018, 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 February 26, 2018
21	Subsidiaries of the registrant
	Ice Surface Development, Inc. (New York)
	Iso-Torque Corporation (New York)
23.1	Consent of Independent Registered Public Accounting Firm
24	Power of Attorney (included on the signature page to this report)
31.1	Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Executive Officer

 

31.2	Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Accounting Officer
32	Section 1350 Certification of Chief Executive Officer and Principal Accounting Officer
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.INS	XBRL Instance Document
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase
101.SCH	XBRL Taxonomy Extension Schema Linkbase

 

* Management contract or compensatory plan or arrangement.

 

54