Annual report pursuant to Section 13 and 15(d)

Significant Accounting Policies (Policies)

v3.20.1
Significant Accounting Policies (Policies)
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Nature of Business [Policy Text Block]
Nature of Business
 
The Coretec Group Inc. (the “Group”) (formerly
3DIcon
Corporation) (
“3DIcon”
) was incorporated on
August 11, 1995,
under the laws of the State of Oklahoma as First Keating Corporation. The articles of incorporation were amended
August 1, 2003
to change the name to
3DIcon
Corporation. During
2001,
First Keating Corporation began to focus on the development of
360
-degree holographic technology. From
January 1, 2001,
3DIcon’s
primary activity has been the raising of capital in order to pursue its goal of becoming a significant participant in the development, commercialization and marketing of next generation
3D
display technologies.
 
Coretec Industries, LLC (“Coretec”), a wholly owned subsidiary of the Group (collectively the “Company”), was organized on
June 2, 2015
in the state of North Dakota. Coretec is currently developing, testing, and providing new and/or improved technologies, products, and service solutions for energy-related industries including, but
not
limited to oil/gas, renewable energy, and distributed energy industries. Many of these technologies and products also have application for medical, electronic, photonic, display, and lighting markets among others. Early adoption of these technologies and products is anticipated in markets for energy storage (Li-ion batteries), renewable energy (BIPV), and electronics (Asset Monitoring).
Business Combinations Policy [Policy Text Block]
Reverse Acquisition
 
On
May 31, 2016,
the Group entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with Coretec and
four
Coretec members (the “Members”), which Members held all outstanding membership interests in Coretec. On
September 30, 2016 (
the “Closing Date”), the Group closed the transaction contemplated by the Share Exchange Agreement. Pursuant to the Share Exchange Agreement, the Members agreed to sell all their membership interests in Coretec to the Group in exchange for the Group’s issuance of an aggregate
4,760,872
shares of the Group’s Series B Convertible Preferred Stock to the Members (the “Exchange”). Coretec became a wholly owned subsidiary of the Group and the former Members beneficially owned approximately
65%
of the Group’s common stock on a fully diluted basis on the Closing Date. Upon the closing of the Share Exchange Agreement,
two
of the Group’s Directors resigned and
three
new Directors associated with Coretec were nominated and elected, giving control of the board of directors to former Coretec Members. The
65%
holders of the Group common stock were unable to sell that stock for a period of
one
year under the terms of a lock-up agreement reached between the parties. Victor Keen, the largest shareholder of the Group prior to the reverse acquisition, was also a participant in the lock-up agreement.
Basis of Accounting, Policy [Policy Text Block]
Basis of Presentation
 
Under accounting principles generally accepted in the United States of America (“U.S. GAAP”), the acquisition is treated as a “reverse acquisition” under the purchase method of accounting. The consolidated statements of operations herein reflect the historical results of Coretec prior to the completion of the reverse acquisition since it was determined to be the accounting acquirer, and do
not
include the historical results of operations for
3DIcon
prior to the completion of the acquisition.
3DIcon’s
assets and liabilities were consolidated with the assets and liabilities of Coretec as of the
September 30, 2016
consummation of the acquisition.
Consolidation, Policy [Policy Text Block]
Principles of Consolidation
 
The consolidated balance sheets as of
December 31, 2019
and
2018
and the consolidated statements of operations and cash flows for the years ended
December 31, 2019
and
2018
include the accounts of the Group and its wholly owned subsidiary, Coretec. Intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates, Policy [Policy Text Block]
Use of Estimates
 
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and the disclosure of contingent assets and liabilities. Actual results could differ from the estimates and assumptions used.
Property, Plant and Equipment, Policy [Policy Text Block]
Property and Equipment
 
Property and equipment are recorded at cost. Depreciation is recorded over the estimated useful lives using the straight-line method. Maintenance and repairs are expensed as incurred; major improvements and betterments are capitalized.
 
Estimated useful lives of property and equipment are as follows for the major classes of assets:
 
Asset Description
 
Estimated
Lives (years)
 
Furniture and fixtures
   
7
 
Goodwill and Intangible Assets, Intangible Assets, Policy [Policy Text Block]
Intangible Assets
 
Intangible assets consist primarily of acquired patents. The Company acquired
$1,400,000
of intangible assets in conjunction with the reverse acquisition discussed in Note
1.
Intangible assets with finite lives are amortized on a straight-line basis over their useful lives.
Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]
Goodwill
 
Goodwill was acquired with the reverse acquisition discussed in Note
1.
The Company evaluates the carrying value of goodwill on an annual basis and between annual evaluations if events occur or circumstances change that would more likely than
not
reduce the fair value of goodwill below its carrying amount. When assessing whether goodwill is impaired, management considers
first
a qualitative approach to evaluate whether it is more likely than
not
the fair value of the goodwill is below its carrying amount; if so, management considers a quantitative approach by analyzing changes in performance and market-based metrics as compared to those used at the time of the initial acquisition. For the periods presented,
no
impairment charges were recognized.
Impairment or Disposal of Long-Lived Assets, Including Intangible Assets, Policy [Policy Text Block]
Long-Lived Assets
 
Long-lived assets, such as property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset
may
not
be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company
first
compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is
not
recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and
third
-party independent appraisals, as considered necessary.
Fair Value of Financial Instruments, Policy [Policy Text Block]
Fair Value of Financial Instruments
 
The following methods and assumptions were used to estimate the fair value of each class of financial instrument held by the Company:
 
Current assets and current liabilities
- The carrying value approximates fair value due to the short maturity of these items.
 
Notes payable
- The fair value of the Company's notes payable has been estimated by the Company based upon the liability's characteristics, including interest rates, imbedded instruments and conversion discounts. The carrying value approximates fair value after taking into consideration the liability’s characteristics.
Earnings Per Share, Policy [Policy Text Block]
Basic and Diluted Loss Per Common Share
 
Basic loss per common share is computed by dividing net loss by the weighted average number of vested common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other instruments to issue common stock were exercised or converted into common stock. The following securities are excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive:
 
   
December 31,
 
   
2019
   
201
8
 
Options
   
21,716,557
     
216,557
 
Warrants
   
570,000
     
1,061
 
Series A convertible preferred stock
   
115,000
     
115,000
 
Convertible debt
   
13,11,457
     
289,804,783
 
Total potentially dilutive shares
 
 
35,523,014
   
 
290,137,401
 
Research and Development Expense, Policy [Policy Text Block]
Research and Development
 
Research and development costs are expensed as incurred. Research and development costs amounted to approximately
$80,000
and
$85,000
for the years ended
December 31, 2019
and
2018,
respectively.
Income Tax, Policy [Policy Text Block]
Income Taxes
 
The Company accounts for income taxes under an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than enactments of changes in tax laws or rates. The effect on deferred tax assets and liabilities of a change in tax rates will be recognized as income or expense in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.
 
The Company’s tax benefits are fully offset by a valuation allowance due to the uncertainty that the deferred tax assets would be realized. Management considers the likelihood of changes by taxing authorities in its filed income tax returns and recognizes a liability for or discloses potential changes that management believes are more likely than
not
to occur upon examination by tax authorities. Management has
not
identified any uncertain tax positions in filed income tax returns that require recognition or disclosure in the accompanying consolidated financial statements.
New Accounting Pronouncements, Policy [Policy Text Block]
Recent Accounting Pronouncements
 
The Company has implemented all new accounting pronouncements that are in effect and that
may
materially impact its consolidated financial statements. The Company does
not
believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
 
The following is a summary of recent accounting pronouncements that are relevant to the Company:
 
The FASB has issued ASU
2014
-
12,
Compensation - Stock Compensation
(ASC Topic
718
): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.
This ASU requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should
not
be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after
December 15, 2015.
The adoption of this standard did
not
have a material impact on the Company's consolidated financial position and results of operations.
 
In
February 2016,
the FASB issued accounting standards update (ASU)
No.
2016
-
02,
 
Leases (Topic
842
)
 intended to increase transparency and comparability among companies by requiring most leases to be included on the balance sheet and by expanding disclosure requirements. This is effective for public business entities for fiscal years beginning after
December 15, 2018,
including interim periods within those fiscal years. On
January 1, 2019,
the Company adopted topic
842
using the optional transition method of adoption, under which the new standard was applied to the current period rather than restating the prior periods presented.  The Company made the policy elections to
not
recognize lease assets and lease liabilities with an initial term of
12
months or less. The Company's only
two
leases were short-term leases, consequently, adoption had
no
impact on the consolidated financial statements.
 
The FASB has issued
ASU2014
-
09,
 Revenue from Contracts with Customers.
The ASU supersedes the revenue recognition requirements in FASB ASC
605
- Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. On
July 9, 2015,
the FASB deferred the effective date of ASU
No.
2014
-
09
from annual periods beginning after
December 15, 2016
to annual periods beginning after
December 15, 2017.
The adoption of this standard did
not
have a material impact on the Company’s consolidated financial position and results of operations because the Company currently has
no
revenue.
 
In
January 2017,
the FASB issued ASU
2017
-
04,
Intangibles – Goodwill and Other (Topic
350
): Simplifying the Test for Goodwill Impairment
. This ASU simplifies the subsequent measurement of goodwill by eliminating Step
2
from the goodwill test. Under Step
2,
an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, an entity should measure goodwill impairment and test by comparing the fair value of a reporting unity with its carrying amount. The amendments in this ASU are effective beginning after
December 15, 2019,
however early adoption is permitted beginning
January 1, 2017
and should be applied on a prospective basis. The Company does
not
anticipate that the adoption of this standard will have a material impact on its consolidated financial position and results of operations. 
 
In
June 
2018,
the FASB issued ASU
2018
-
07,
 
Improvements to Nonemployee Share-Based Payment Accounting
, which eliminates the separate accounting model for nonemployee share-based payment awards and generally requires companies to account for share-based payment transactions with nonemployees in the same way as share-based payment transactions with employees. The accounting remains different for attribution, which represents how the equity-based payment cost is recognized over the vesting period, and a contractual term election for valuing nonemployee equity share options. The standard is effective for interim and annual periods beginning after
December 
15,
2018.
We adopted ASU
2018
-
07
on
January 
1,
2019
and the adoption of this standard did
not
have a material impact on our condensed consolidated financial statements. 
 
In
July 2019,
FASB issued ASU
2019
-
07,
Codification Updates to SEC Sections. ASU
2019
-
07
clarifies the disclosure and presentation requirements of a variety of codification topics by more closely aligning them with the SEC disclosure rules and regulations, eliminating redundancies and simplifying application of the codification. ASU
2019
-
07
is effective upon issuance and it did
not
have a material impact to the Company's consolidated financial statements or related disclosures.
Uncertainties, Policy [Policy Text Block]
Uncertainties
 
The Company has realized a cumulative net loss of
$5,443,294
for the period from inception (
June 2, 2015)
to
December 31, 2019,
negative working capital of
$507,983,
and
no
revenues. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a year following the issuance of these consolidated financial statements. The Company has insufficient revenue and capital commitments to fund the development of its planned products and to pay operating expenses.
 
The ability of the Company to continue as a going concern depends on the successful completion of the Company's capital raising efforts to fund the development of its planned products. The Company has raised capital through debt and equity financings. There is
no
assurance that these funds will be sufficient to enable the Company to fully complete its development activities or attain profitable operations. If the Company is unable to obtain additional financing on a timely basis or, notwithstanding any request the Company
may
make, the Company’s debt holders do
not
agree to convert their notes into equity or extend the maturity dates of their notes, the Company
may
have to curtail its development, marketing and promotional activities, which would have a material adverse effect on the Company’s business, financial condition and results of operations, and ultimately the Company could be forced to discontinue its operations and liquidate.
 
In
December 2019,
a novel strain of coronavirus surfaced in Wuhan, China, and has spread around the world, with resulting business and social disruption. The coronavirus was declared a Public Health Emergency of International Concern by the World Health Organization on
January 30, 2020. 
The operations and business results of the Company could be materially adversely affected.  The extent to which the coronavirus
may
impact business activity or investment results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which
may
emerge concerning the severity of the coronavirus and the actions required to contain the coronavirus or treat its impact, among others. 
 
The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplates the continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the consolidated financial statements do
not
necessarily purport to represent realizable or settlement values. The consolidated financial statements do
not
include any adjustments that might result from the outcome of this uncertainty.