Document And Entity Information
Document And Entity Information - shares | 3 Months Ended | |
Mar. 31, 2019 | May 15, 2019 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Entity Registrant Name | DropCar, Inc. | |
Entity Central Index Key | 0001086745 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Trading Symbol | DCAR | |
Entity Common Stock, Shares Outstanding | 3,918,727 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
CURRENT ASSETS: | ||
Cash | $ 4,358,633 | $ 4,303,480 |
Accounts receivable, net | 413,413 | 295,626 |
Prepaid expenses and other current assets | 359,193 | 328,612 |
Total current assets | 5,131,239 | 4,927,718 |
Property and equipment, net | 33,319 | 39,821 |
Capitalized software costs, net | 626,599 | 659,092 |
Operating lease right-of-use asset | 14,877 | 0 |
Other assets | 3,525 | 3,525 |
TOTAL ASSETS | 5,809,559 | 5,630,156 |
CURRENT LIABILITIES: | ||
Accounts payable and accrued expenses | 1,972,376 | 2,338,560 |
Deferred revenue | 272,812 | 253,200 |
Lease liability | 7,332 | 0 |
Total current liabilities | 2,252,520 | 2,591,760 |
COMMITMENTS AND CONTINGENCIES | ||
STOCKHOLDERS' EQUITY: | ||
Common stock, $0.0001 par value; 100,000,000 shares authorized, 3,918,727 and 1,633,394 issued and outstanding as of March 31, 2019 and December 31, 2018, respectively | 392 | 163 |
Additional paid in capital | 35,286,073 | 32,791,951 |
Accumulated deficit | (31,729,427) | (29,753,721) |
TOTAL STOCKHOLDERS' EQUITY | 3,557,039 | 3,038,396 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 5,809,559 | 5,630,156 |
Series Seed Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY: | ||
Preferred stock | 0 | 0 |
Series A Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY: | ||
Preferred stock | 0 | 0 |
Series H Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY: | ||
Preferred stock | 0 | 0 |
Series H-1 Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY: | ||
Preferred stock | 0 | 0 |
Series H-2 Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY: | ||
Preferred stock | 0 | 0 |
Series H-3 Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY: | ||
Preferred stock | 0 | 0 |
Series H-4 Preferred Stock [Member] | ||
STOCKHOLDERS' EQUITY: | ||
Preferred stock | $ 1 | $ 3 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2019 | Dec. 31, 2018 |
Preferred stock, par value | $ 0.0001 | $ .0001 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Common stock, par value | $ 0.0001 | $ .0001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 3,918,727 | 1,633,394 |
Common stock, shares outstanding | 3,918,727 | 1,633,394 |
Series Seed Preferred Stock [Member] | ||
Preferred stock, shares authorized | 275,691 | 275,691 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Series A Preferred Stock [Member] | ||
Preferred stock, shares authorized | 642,728 | 642,728 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Series H Preferred Stock [Member] | ||
Preferred stock, shares authorized | 8,500 | 8,500 |
Preferred stock, shares issued | 8 | 8 |
Preferred stock, shares outstanding | 8 | 8 |
Series H-1 Preferred Stock [Member] | ||
Preferred stock, shares authorized | 9,488 | 9,488 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Series H-2 Preferred Stock [Member] | ||
Preferred stock, shares authorized | 3,500 | 3,500 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Series H-3 Preferred Stock [Member] | ||
Preferred stock, shares authorized | 8,461 | 8,461 |
Preferred stock, shares issued | 2,189 | 2,189 |
Preferred stock, shares outstanding | 2,189 | 2,189 |
Series H-4 Preferred Stock [Member] | ||
Preferred stock, shares authorized | 30,000 | 30,000 |
Preferred stock, shares issued | 5,028 | 26,619 |
Preferred stock, shares outstanding | 5,028 | 26,619 |
Consolidated Statement of Opera
Consolidated Statement of Operations - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Income Statement [Abstract] | ||
SERVICE REVENUES | $ 1,099,443 | $ 1,692,075 |
COST OF REVENUE | 1,127,045 | 2,295,781 |
GROSS LOSS | (27,602) | (603,706) |
OPERATING EXPENSES | ||
Research and development | 68,982 | 114,161 |
Selling, general and administrative expenses | 1,773,097 | 2,910,797 |
Depreciation and amortization | 107,749 | 79,232 |
TOTAL OPERATING EXPENSES | 1,949,828 | 3,104,190 |
OPERATING LOSS | (1,977,430) | (3,707,896) |
Interest income (expense), net | 1,724 | (1,082,217) |
LOSS FROM CONTINUING OPERATIONS | (1,975,706) | (4,790,113) |
DISCONTINUED OPERATIONS | ||
Income from operations of discontinued component | 0 | 309,378 |
INCOME FROM DISCONTINUED OPERATIONS | 0 | 309,378 |
NET LOSS | $ (1,975,706) | $ (4,480,735) |
LOSS PER SHARE FROM CONTINUING OPERATIONS: | ||
Basic | $ (0.93) | $ (4.75) |
Diluted | (0.93) | (4.75) |
(LOSS) EARNINGS PER SHARE FROM DISCONTINUED OPERATIONS: | ||
Basic | (0.93) | 0.31 |
Diluted | (0.93) | 0.31 |
NET LOSS PER SHARE: | ||
Basic | (0.93) | (4.44) |
Diluted | $ (0.93) | $ (4.44) |
WEIGHTED AVERAGE SHARES OUTSTANDING | ||
Basic | 2,117,688 | 1,008,058 |
Diluted | 2,117,688 | 1,008,058 |
Consolidated Statement of Chang
Consolidated Statement of Changes in Stockholders' Equity (Deficit) - USD ($) | Series Seed Preferred Stock [Member] | Series A Preferred Stock [Member] | Series H Preferred Stock [Member] | Series H-3 Preferred Stock [Member] | Series H-4 Preferred Stock [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated (Deficit) [Member] | Total |
Beginning balance, shares at Dec. 31, 2017 | 275,691 | 611,944 | 0 | 0 | 0 | 374,285 | |||
Beginning balance, amount at Dec. 31, 2017 | $ 27 | $ 61 | $ 0 | $ 0 | $ 0 | $ 37 | $ 5,115,158 | $ (9,604,897) | $ (4,489,614) |
Issuance of common stock for cash, shares | 10,057 | ||||||||
Issuance of common stock for cash, amount | $ 1 | 299,999 | 300,000 | ||||||
Conversion of debt into common stock, shares | 136,785 | ||||||||
Conversion of debt into common stock, amount | $ 14 | 3,682,488 | 3,682,502 | ||||||
Interest on lock-up shares in relation to convertible debt, shares | 85,571 | ||||||||
Interest on lock-up shares in relation to convertible debt, amount | $ 9 | 672,135 | 672,144 | ||||||
Exchange of shares in connection with Merger, shares | 490,422 | ||||||||
Exchange of shares in connection with Merger, amount | $ 49 | 9,792,174 | 9,792,223 | ||||||
Conversion of outstanding Preferred Stock in connection with merger, shares | (275,691) | (611,944) | 2,197 | 147,939 | |||||
Conversion of outstanding Preferred Stock in connection with merger, amount | $ (27) | $ (61) | $ 15 | 73 | 0 | ||||
Issuance of Series H preferred stock in connection with merger, shares | 8 | ||||||||
Issuance of Series H preferred stock in connection with merger, amount | 0 | ||||||||
Issuance of Series H-3 preferred stock in connection with merger, shares | 2,189 | ||||||||
Issuance of Series H-3 preferred stock in connection with merger, amount | 0 | ||||||||
Issuance of Series H-4 preferred stock and warrants in private placement, net of costs, shares | 25,472 | ||||||||
Issuance of Series H-4 preferred stock and warrants in private placement, net of costs, amount | $ 3 | 5,898,336 | 5,898,339 | ||||||
Stock based compensation for options issued to employees | 17,210 | 17,210 | |||||||
Stock based compensation for restricted stock units issued to employees | 275,528 | 275,528 | |||||||
Stock based compensation for common stock issued to service provider, shares | 56,929 | ||||||||
Stock based compensation for common stock issued to service provider, amount | $ 6 | 447,144 | 447,150 | ||||||
Series H-4 preferred stock and warrants issued to service provider, shares | 1,371 | ||||||||
Series H-4 preferred stock and warrants issued to service provider, amount | 0 | ||||||||
Net loss | (4,480,735) | (4,480,735) | |||||||
Ending balance, shares at Mar. 31, 2018 | 0 | 0 | 8 | 2,189 | 29,040 | 1,301,988 | |||
Ending balance, amount at Mar. 31, 2018 | $ 0 | $ 0 | $ 0 | $ 0 | $ 3 | $ 131 | 26,200,245 | (14,085,632) | 12,114,747 |
Beginning balance, shares at Dec. 31, 2018 | 0 | 0 | 8 | 2,189 | 26,619 | 1,633,394 | |||
Beginning balance, amount at Dec. 31, 2018 | $ 0 | $ 0 | $ 0 | $ 0 | $ 3 | $ 163 | 32,791,951 | (29,753,721) | 3,038,396 |
Issuance of common stock for cash, shares | 478,469 | ||||||||
Issuance of common stock for cash, amount | $ 48 | 1,984,953 | 1,985,001 | ||||||
Exercise of warrants, shares | 277,778 | ||||||||
Exercise of warrants, amount | $ 28 | 16,639 | 16,667 | ||||||
Conversion of Series H-4 preferred stock into common stock, shares | (21,591) | 1,412,420 | |||||||
Conversion of Series H-4 preferred stock into common stock, amount | $ (2) | $ 141 | (139) | 0 | |||||
Stock based compensation for options issued to employees | (19,361) | (19,361) | |||||||
Stock based compensation for restricted stock units issued to employees | 289,842 | 289,842 | |||||||
Stock based compensation for common stock issued to service provider, shares | 116,666 | ||||||||
Stock based compensation for common stock issued to service provider, amount | $ 12 | 222,188 | 222,200 | ||||||
Net loss | (1,975,706) | (1,975,706) | |||||||
Ending balance, shares at Mar. 31, 2019 | 0 | 0 | 8 | 2,189 | 5,028 | 3,918,727 | |||
Ending balance, amount at Mar. 31, 2019 | $ 0 | $ 0 | $ 0 | $ 0 | $ 1 | $ 392 | $ 35,286,073 | $ (31,729,427) | $ 3,557,039 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (1,975,706) | $ (4,480,735) |
Income from discontinued operations | 0 | (309,378) |
Loss from continuing operations | (1,975,706) | (4,790,113) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 109,415 | 255,223 |
Loss of disposition of asset | 3,641 | 0 |
Stock based compensation | 487,957 | 739,888 |
Non-cash interest expense | 0 | 672,144 |
Amortization of operating lease right-of-use asset | 8,163 | 0 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (117,787) | (28,336) |
Prepaid expenses and other current assets | (40,011) | (514,805) |
Accounts payable and accrued expenses | (361,460) | (845,190) |
Lease liabilities | (6,278) | 0 |
Deferred income | 19,612 | 56,983 |
NET CASH USED IN OPERATING ACTIVITIES - CONTINUING OPERATIONS | (1,872,454) | (4,454,206) |
NET CASH USED IN OPERATING ACTIVITIES - DISCONTINUED OPERATIONS | 0 | 22,054 |
NET CASH USED IN OPERATING ACTIVITIES | (1,872,454) | (4,432,152) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property and equipment | 0 | (43,108) |
Capitalization of software costs | (74,336) | (90,661) |
Proceeds from sale of fixed asset | 275 | 0 |
NET CASH USED IN INVESTING ACTIVITIES - CONTINUING OPERATIONS | (74,061) | (133,769) |
NET CASH PROVIDED BY INVESTING ACTIVITIES - DISCONTINUED OPERATIONS | 0 | 2,823,252 |
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES | (74,061) | 2,689,483 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from the sale of common stock | 2,000,001 | 300,000 |
Financing costs from the sale of common stock | (15,000) | 0 |
Proceeds from the sale of Series H-4 preferred stock | 0 | 6,000,000 |
Financing costs from the sale of Series H-4 preferred stock and warrants | 0 | (101,661) |
Proceeds from issuance of common stock in connection with exercise of H-4 warrants | 16,667 | 0 |
NET CASH PROVIDED BY FINANCING ACTIVITIES - CONTINUING OPERATIONS | 2,001,668 | 6,198,339 |
NET CASH USED IN FINANCING ACTIVITIES - DISCONTINUED OPERATIONS | 0 | (9,114) |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 2,001,668 | 6,189,225 |
Net increase in cash | 55,153 | 4,446,556 |
Cash, beginning of period | 4,303,480 | 372,011 |
Cash, end of period | 4,358,633 | 4,818,567 |
NON-CASH FINANCING ACTIVITIES: | ||
Issuance of common stock for accrued stock based compensation | 4,724 | 0 |
Stock issued to WPCS Shareholder in the merger net of cash received of $4,947,023 | 0 | 4,845,200 |
Series H-4 offering cost paid in H-4 shares and warrants | $ 0 | $ 568,648 |
Consolidated Statements of Ca_2
Consolidated Statements of Cash Flows (Parenthetical) | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Statement of Cash Flows [Abstract] | |
Cash acquired from acquisition | $ 4,947,023 |
The Company
The Company | 3 Months Ended |
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
The Company | The Company is a provider of automotive vehicle support, fleet logistics, and concierge services for both consumers and the automotive industry. Its cloud-based Enterprise Vehicle Assistance and Logistics (“VAL”) platform and mobile application (“app”) assists consumers and automotive-related companies to reduce the costs, hassles and inefficiencies of owning a car, or fleet of cars, in urban centers. In July 2018, the Company launched its Mobility Cloud platform which provides automotive-related businesses with a 100% self-serve SaaS version of its VAL platform to manage their own operations and drivers, as well as customer relationship management (“CRM”) tools that enable their clients to schedule and track their vehicles for service pickup and delivery. The Company’s Mobility Cloud also provides access to private application programming interfaces (“APIs”) which automotive-businesses can use to integrate the Company’s logistics and field support directly into their own applications and processes natively, to create more seamless client experiences. The Company did not and has not earned any revenues from Mobility Cloud in 2018 or 2019. On the enterprise side, original equipment manufacturers (“OEMs”), dealers, and other service providers in the automotive space are increasingly being challenged with consumers who have limited time to bring in their vehicles for maintenance and service, making it difficult to retain valuable post-sale service contracts or scheduled consumer maintenance and service appointments. Additionally, many of the vehicle support centers for automotive providers (i.e., dealerships, including body work and diagnostic shops) have moved out of urban areas thus making it more challenging for OEMs and dealers in urban areas to provide convenient and efficient service for their consumer and business clientele. Similarly, shared mobility providers and other fleet managers, such as rental car companies and car share programs, face a similar urban mobility challenge: getting cars to and from service bays, rebalancing vehicle availability to meet demand in fleeting and de- fleeting vehicles to and from dealer lots, auction sites and to other locations. In July 2018, the Company began assessing demand for a Self-Park Spaces monthly parking plan whereby consumers could designate specific garages for their vehicles to be stored at a base monthly rate, with personal 24/7 access for picking up and returning their vehicle directly, and the option to pay a la carte on a per hour basis for a driver to perform functions such as picking up and returning their vehicle to their front door. This model aligns more directly with how the Company has structured the enterprise B2B side of its business, where an interaction with a vehicle on behalf of its drivers typically generates net new revenue. The Company consumer Self-Park Spaces plan combined with its on-demand hourly valet service are the only consumer plans offered from September 1, 2018 onwards. Subscriber plans prior to this date continued to receive service on a prorated basis through the end of August 2018. Additionally, the Company is scaling back its 360 Services for the Consumer portion of the market. As a result of this shift, in August 2018, the Company began to significantly streamline its field teams, operations and back office support tied to its pre-September 1, 2018 consumer subscription plans. To date, the Company operates primarily in the New York metropolitan area. In May 2018, the Company expanded operations with its B2B business in San Francisco. In June 2018, the Company expanded its B2B operations in Washington DC. In August 2018, the Company expanded B2B operations to Los Angeles. These three new market expansions are with a major OEM customer. Merger and Exchange Ratio On January 30, 2018, DC Acquisition Corporation (“Merger Sub”), a wholly-owned subsidiary of WPCS International Incorporated (“WPCS”), completed its merger with and into DropCar, Inc. (“Private DropCar”), with Private DropCar surviving as a wholly owned subsidiary of WPCS. This transaction is referred to as the “Merger.” The Merger was effected pursuant to an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), dated September 6, 2017, by and among WPCS, Private DropCar and Merger Sub. As a result of the Merger, each outstanding share of Private DropCar share capital (including shares of Private DropCar share capital issued upon the conversion of outstanding convertible debt) automatically converted into the right to receive approximately 0.3273 shares of WPCS’s common stock, par value $0.0001 per share (the “Exchange Ratio”). Following the closing of the Merger, holders of WPCS’s common stock immediately prior to the Merger owned approximately 22.9% on a fully diluted basis, and holders of Private DropCar common stock immediately prior to the Merger owned approximately 77.1% on a fully diluted basis, of WPCS’s common stock. The Merger has been accounted for as a reverse acquisition under the acquisition method of accounting where Private DropCar is considered the accounting acquirer and WPCS is the acquired company for financial reporting purposes. Private DropCar was determined to be the accounting acquirer based on the terms of the Merger Agreement and other factors, such as relative voting rights and the composition of the combined company’s board of directors and senior management, which was deemed to have control. The pre-acquisition financial statements of Private DropCar became the historical financial statements of WPCS following the Merger. The historical financial statements, outstanding shares and all other historical share information have been adjusted by multiplying the respective share amount by the Exchange Ratio as if the Exchange Ratio had been in effect for all periods presented. Immediately following the Merger, the combined company changed its name from WPCS International Incorporation to DropCar, Inc. The combined company following the Merger may be referred to herein as “the combined company,” “DropCar,” or the “Company.” Discontinued Operations On December 24, 2018, the Company completed the sale of WPCS International – Suisun City, Inc., a California corporation (the “Suisun City Operations”), its wholly-owned subsidiary, pursuant to the terms of a stock purchase agreement, dated December 10, 2018 (the “Purchase Agreement”) by and between the Company and World Professional Cabling Systems, LLC, a California limited liability company (the “Purchaser”). Upon the closing of the sale, the Purchaser acquired all of the issued and outstanding shares of common stock, no par value per share, of Suisun City Operations, for an aggregate purchase price of $3,500,000. The sale of Suisun City Operations represented a strategic shift that has had a major effect on the Company’s operations, and therefore, is presented as discontinued operations in the 2018 consolidated statement of operations. Trading of Company’s stock The Company’s shares of common stock listed on The Nasdaq Capital Market, previously trading through the close of business on January 30, 2018 under the ticker symbol “WPCS,” commenced trading on The Nasdaq Capital Market, on a post-Reverse Stock Split adjusted basis, under the ticker symbol “DCAR” on January 31, 2018. On September 25, 2018, the Company received a notification letter from The Nasdaq Stock Market ("Nasdaq") informing the Company that for the last 30 consecutive business days, the bid price of the Company’s securities had closed below $1.00 per share, which is the minimum required closing bid price for continued listing on The Nasdaq Capital Market pursuant to Listing Rule 5550(a)(2). In order to regain compliance, on March 8, 2019, the Company filed a certificate of amendment to its amended and restated certificate of incorporation with the Secretary of State of the State of Delaware to effect a one-for-six reverse stock split of its outstanding shares of common stock. On March 26, 2019, the Company received a notification letter from The Nasdaq Stock Market informing it that it had regained compliance with Listing Rule 5550(a)(2). As a result of the reverse stock split, every six shares of the Company’s outstanding pre-reverse split common stock were combined and reclassified into one share of common stock. Unless otherwise noted, all share and per share data included in these financial statements retroactively reflect the 1-for-6 reverse stock split. Unaudited Interim Consolidated Financial Information The accompanying consolidated balance sheet as of March 31, 2019, the consolidated statements of operations for the three months ended March 31, 2019 and 2018, the consolidated statements of cash flows for the three months ended March 31, 2019 and 2018, and the consolidated statements of stockholders’ equity for the three months ended March 31, 2019 and 2018 are unaudited. These financial statements should be read in conjunction with the DropCar, Inc’s 2018 consolidated financial statements included in the Company’s Form 10-K filed on April 3, 2019, as subsequently amended on April 12, 2019. The unaudited interim consolidated financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2019, and the results of its operations for the three months ended March 31, 2019 and 2018, and its cash flows for the three months ended March 31, 2019 and 2018. The financial data and other information disclosed in the notes to the consolidated financial statements related to the three months ended March 31, 2019 and 2018 are unaudited. |
Liquidity and Going Concern
Liquidity and Going Concern | 3 Months Ended |
Mar. 31, 2019 | |
Liquidity And Going Concern | |
Liquidity and Going Concern | The Company has a limited operating history and the sales and income potential of its business and market are unproven. As of March 31, 2019, the Company has an accumulated deficit of $31.7 million and has experienced net losses each year since its inception. The Company anticipates that it will continue to incur net losses into the foreseeable future and will need to raise additional capital to continue. The Company’s cash is not sufficient to fund its operations through the first quarter of 2020. These factors raise substantial doubt about the Company’s ability to continue as a going concern for the twelve months following the date of the filing of this Quarterly Report on Form 10-Q. Management’s plan includes raising funds from outside investors. However, there is no assurance that outside funding will be available to the Company, outside funding will be obtained on favorable terms or will provide the Company with sufficient capital to meet its objectives. These financial statements do not include any adjustments relating to the recoverability and classification of assets, carrying amounts or the amount and classification of liabilities that may be required should the Company be unable to continue as a going concern. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Use of Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“US GAAP”) requires management to make estimates and assumptions that affect amounts reported therein. Generally, matters subject to estimation and judgement include amounts related to accounts receivable realization, asset impairments, useful lives of property and equipment and capitalized software costs, deferred tax asset valuation allowances, and operating expense accruals. Actual results could differ from those estimates. Accounts receivable Accounts receivable are carried at original invoice amount less an estimate made for holdbacks and doubtful receivables based on a review of all outstanding amounts. The Company determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions and set up an allowance for doubtful accounts when collection is uncertain. Customers’ accounts are written off when all attempts to collect have been exhausted. Recoveries of accounts receivable previously written off are recorded as income when received. At March 31, 2019 and December 31, 2018, the accounts receivable reserve was approximately $2,000. Revenue Recognition The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, codified as ASC 606: Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Revenue from contracts with customers is recognized when, or as, the Company satisfies its performance obligations by transferring the promised goods or services to the customers. A good or service is transferred to a customer when, or as, the customer obtains control of that good or service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied over time is recognized by measuring the Company’s progress in satisfying the performance obligation in a manner that depicts the transfer of the goods or services to the customer. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time that the Company determines the customer obtains control over the promised good or service. The amount of revenue recognized reflects the consideration the Company expects to be entitled to in exchange for those promised goods or services (i.e., the “transaction price”). In determining the transaction price, the Company considers multiple factors, including the effects of variable consideration. Variable consideration is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainties with respect to the amount are resolved. In determining when to include variable consideration in the transaction price, the Company considers the range of possible outcomes, the predictive value of its past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside of the Company’s influence, such as the judgment and actions of third parties. The Company’s contracts are generally designed to provide cash fees to the Company on a monthly basis or an agreed upfront rate based upon demand services. The Company’s performance obligation is satisfied over time as the service is provided continuously throughout the service period. The Company recognizes revenue evenly over the service period using a time-based measure because the Company is providing a continuous service to the customer. Contracts with minimum performance guarantees or price concessions include variable consideration and are subject to the revenue constraint. The Company uses an expected value method to estimate variable consideration for minimum performance guarantees and price concessions. Monthly Subscriptions The Company offers a selection of subscriptions and on-demand services which include parking, valet, and access to other services. The contract terms are on a month-to-month subscription contract with fixed monthly or contract term fees. These subscription services include a fixed number of round-trip deliveries of the customer’s vehicle to a designated location. The Company allocates the purchase price among the performance obligations which results in deferring revenue until the service is utilized or the service period has expired. On Demand Valet and Parking Services The Company offers to consumers certain on demand services through its mobile application. The customer is billed at an hourly rate upon completion of the services. Revenue is recognized when the Company had satisfied all performance obligations which is upon completion of the service. DropCar 360 Services The Company offers to consumers certain services upon request including vehicle inspection, maintenance, car washes or to fill up with gas. The customers are charged a fee in addition to the cost of the third-party services provided. Revenue is recognized when the Company had satisfied all performance obligations which is upon completion of the service. On Demand Business-To-Business The Company also has contracts with car dealerships, car share programs and others in the automotive industry transporting vehicles. Revenue is recognized at the point in time all performance obligations are satisfied which is when the Company provides the delivery service of the vehicles. Disaggregated Revenues The following table presents our revenues from contracts with customers disaggregated by revenue source. Three Months Ended March 31, 2019 2018 Subscription Services $ 661,464 $ 1,356,595 Services On-Demand 437,979 335,480 Total Revenues (1)(2) 1,099,443 1,692,075 (1) Represents revenues recognized by type of services. (2) All revenues are generated in the United States. Three Months Ended March 31, 2019 2018 B2C $ 763,977 $ 1,458,524 B2B 335,466 233,551 Total Revenue 1,099,443 1,692,075 The following presents our revenues from B2C and B2B customers. Employee Stock-Based Compensation The Company recognizes all employee share-based compensation as an expense in the financial statements. Equity-classified awards principally related to stock options, restricted stock units (“RSUs”) and equity-based compensation, are measured at the grant date fair value of the award. The Company determines grant date fair value of stock option awards using the Black-Scholes option-pricing model. The fair value of RSUs are determined using the closing price of the Company’s common stock on the grant date. For service-based vesting grants, expense is recognized ratably over the requisite service period based on the number of options or shares. Stock-based compensation is reversed for forfeitures in the period of forfeiture. Property and Equipment The Company accounts for property and equipment at cost less accumulated depreciation. The Company computes depreciation using the straight-line method over the estimated useful lives of the assets. The Company generally depreciates property and equipment over a period of three to seven years. Depreciation for property and equipment commences once they are ready for its intended use. Capitalized Software Costs related to website and internal-use software development are accounted for in accordance with Accounting Standards Codification (“ASC”) Topic 350-50 — Intangibles — Website Development Costs. Such software is primarily related to our websites and mobile apps, including support systems. We begin to capitalize our costs to develop software when preliminary development efforts are successfully completed, management has authorized and committed project funding, it is probable that the project will be completed, and the software will be used as intended. Costs incurred prior to meeting these criteria are expensed as incurred and recorded within General and administrative expenses within the accompanying consolidated statements of operations. Costs incurred for enhancements that are expected to result in additional features or functionality are capitalized. Capitalized costs are amortized over the estimated useful life of the enhancements, generally between two and three years. Impairment of Long-Lived Assets Long-lived assets are primarily comprised of operating lease right-of-use assets, property and equipment, and capitalized software costs. The Company evaluates its Long-Lived Assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset or group of assets may not be recoverable. If these circumstances exist, recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to future undiscounted net cash flows expected to be generated by the asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. There were no impairments to long-lived assets for the three months ended March 31, 2019 and 2018. Income Taxes The Company provides for income taxes using the asset and liability approach. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of March 31, 2019, and December 31, 2018, the Company had a full valuation allowance against deferred tax assets. The Tax Cuts and Jobs Act (the “Tax Act”), enacted on December 22, 2017, among other things, permanently lowered the statutory federal corporate tax rate from 35% to 21%, effective for tax years including or beginning January 1, 2018. Under the guidance of ASC 740, “Income Taxes” (“ASC 740”), the Company revalued its net deferred tax assets on the date of enactment based on the reduction in the overall future tax benefit expected to be realized at the lower tax rate implemented by the new legislation. Fair Value Measurement The Company accounts for financial instruments in accordance with ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below: Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 – Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. Financial instruments with carrying values approximating fair value include cash, accounts receivable, other assets, and accounts payable and accrued expenses due to their short-term nature. Income (Loss) Per Share Basic income (loss) per share is computed by dividing net loss attributable to common shareholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period. Diluted loss per share are computed by assuming that any dilutive convertible securities outstanding were converted, with related preferred stock dividend requirements and outstanding common shares adjusted accordingly. It also assumes that outstanding common shares were increased by shares issuable upon exercise of those stock options for which market price exceeds the exercise price, less shares which could have been purchased by the Company with the related proceeds. In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential shares outstanding would be anti-dilutive. The following securities were excluded from weighted average diluted common shares outstanding because their inclusion would have been antidilutive. As of March 31, 2019 2018 Common stock equivalents: Common stock options 381,412 171,442 Series A, H-1, H-3, H-4, I, J and Merger common stock purchase warrants 585,306 658,486 Series H, H-3, and H-4 Convertible Preferred Stock 2,028,415 2,739,225 Restricted shares (unvested) 244,643 244,643 Totals 3,239,776 3,813,796 Research and development costs, net Costs are incurred in connection with research and development programs that are expected to contribute to future earnings. Such costs include labor, stock-based compensation, training, software subscriptions, and consulting. These amounts are charged to the consolidated statement of operations as incurred. Total research and development expenses were approximately $0.1 million for the three months ended March 31, 2019 and 2018. Adoption of New Accounting Standards In February 2016, the FASB issued Accounting Standards Codification (ASC) 842, Leases, which requires lessees to recognize most leases on their balance sheets as a right-of-use asset with a corresponding lease liability. Lessor accounting under the standard is substantially unchanged. Additional qualitative and quantitative disclosures are also required. The Company adopted the standard effective January 1, 2019 using the cumulative-effect adjustment transition method, which applies the provisions of the standard at the effective date without adjusting the comparative periods presented. The Company adopted the following practical expedients and elected the following accounting policies related to this standard: ● Short-term lease accounting policy election allowing lessees to not recognize right-of-use assets and liabilities for leases with a term of 12 months or less; and ● The option to not separate lease and non-lease components for equipment leases. ● The package of practical expedients applied to all of its leases, including (i) not reassessing whether any expired or existing contracts are or contain leases, (ii) not reassessing the lease classification for any expired or existing leases, and (iii) not reassessing initial direct costs for any existing leases. Adoption of this standard resulted in the recognition of operating lease right-of-use assets of approximately $23,000 (including a reclassification from Prepaid expenses of a prepaid lease approximating $9,500) and corresponding lease liabilities of approximately $13,500 on the consolidated balance sheet as of January 1, 2019. The standard did not materially impact operating results or liquidity. Disclosures related to the amount, timing and uncertainty of cash flows arising from leases are included in Note 8, Leases. In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for nonemployee share-based payment transactions. The amendments specify that Topic 718 applies to all share- based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The guidance was adopted effective January 1, 2019, and the adoption of this ASU did not have a material effect on its consolidated financial statements. Recently Issued Accounting Standards From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial position or results of operations upon adoption. In August 2018, the FASB issued ASU 2018-13, Changes to Disclosure Requirements for Fair Value Measurements, which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements, and is effective for the Company beginning January 1, 2020. The Company is currently evaluating the impact this standard will have on the Company’s consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, |
Concentrations
Concentrations | 3 Months Ended |
Mar. 31, 2019 | |
Risks and Uncertainties [Abstract] | |
Concentrations | Accounts Receivable The Company’s concentration of accounts receivable are as follows: As of March 31, 2019 December 31, 2018 Customer A 50 % 58 % Customer B 34 % 23 % |
Discontinued Operations and Dis
Discontinued Operations and Disposition of Operating Segment | 3 Months Ended |
Mar. 31, 2019 | |
Discontinued Operations And Disposition Of Operating Segment | |
Discontinued Operations and Disposition of Operating Segment | On December 24, 2018, the Company completed the sale of WPCS International – Suisun City, Inc., a California corporation, its wholly-owned subsidiary, pursuant to the terms of a stock purchase agreement, dated December 10, 2018 by and between the Company and World Professional Cabling Systems, LLC, a California limited liability company. Upon the closing of the sale, the Purchaser acquired all of the issued and outstanding shares of common stock, no par value per share, of Suisun City Operations, for an aggregate purchase price of $3,500,000. The operations and cash flows of the Suisun City Operations are presented as discontinued operations. The operating results of the Suisun City Operations for the three months ended March 31, 2018 were as follows: Revenues $ 3,182,479 Cost of revenues 2,326,276 Gross profit 856,203 Selling, general and administrative expenses 489,800 Depreciation and amortization 56,845 Total Operating Expenses 546,645 Interest expense, net 180 Net income from discontinued operations $ 309,378 |
Capitalized Software
Capitalized Software | 3 Months Ended |
Mar. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Capitalized Software | Capitalized software consists of the following as of: March 31, 2019 December 31, 2018 Software $ 1,398,613 $ 1,324,275 Accumulated amortization (772,014 ) (665,183 ) Total $ 626,599 $ 659,092 |
Convertible Notes Payable
Convertible Notes Payable | 3 Months Ended |
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
Convertible Notes Payable | During the year ended December 31, 2017, the Company issued convertible notes totaling $4,840,000 and warrants to acquire 146,358 shares of common stock at an exercise price of $59.04 per share in connection with the convertible notes (the “Notes”). The Notes all had a maturity date of one year from the date of issuance, and accrued interest at a rate of 6% per annum, compounded annually. The Notes were convertible at $35.40 per share and, including accrued interest, were converted into 141,303 shares of common stock in connection with the Merger. In connection with the Merger, the holders of the Notes entered into lock-up agreements pursuant to which they have agreed not to sell the 85,573 shares of common stock received in the Merger. The length of the lock-up period is up to 120 days. For the three months ended March 31, 2018, the Company recorded $672,144 as interest expense in relation to the lock-up agreements in the accompanying 2018 consolidated statement of operations. |
Leases
Leases | 3 Months Ended |
Mar. 31, 2019 | |
Leases [Abstract] | |
Leases | The Company has various operating lease agreements with initial terms up to three years, all of which relate to vehicles. The Company’s office lease is on a month-to-month basis and so is not recognized on the balance sheet. Some leases include options to purchase, terminate or extend for one or more years. These options are included in the lease term when it is reasonably certain that the option will be exercised. The Company determines if an arrangement is a lease at inception. Operating leases are included in operating right-of-use lease assets and lease liabilities on the consolidated balance sheets, totaling $14,877 and $7,332 at March 31, 2019, respectively, including $7,544 of operating right-of-use assets previously prepaid at lease commencement. These assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term using the Company’s secured incremental borrowing rates or implicit rates, when readily determinable. Short-term operating leases, which have an initial term of 12 months or less, are not recorded on the balance sheet. The Company’s operating leases do not provide an implicit rate that can readily be determined. Therefore, the Company uses a discount rate based on its incremental borrowing rate. The Company’s weighted-average remaining lease term relating to its operating leases is 0.66 years and weighted-average remaining payments for operating lease liabilities is 0.32 years, with a weighted-average discount rate of 6.00%. Operating lease expense is recognized on a straight-line basis over the lease term within Selling, general and administrative expenses on the Company’s consolidated statement of operations. The Company incurred lease expense of $8,163 and $14,998 for the three months ended March 31, 2019 and 2018, respectively. The Company made cash payments of $6,452 for operating leases for the three months ended March 31, 2019. The following table presents information about the amount and timing of cash flows arising from the Company’s operating leases as of March 31, 2019. Maturity of Lease Liability 2019 $ 7,420 Total undiscounted operating lease payments 7,420 Less: Imputed interest 88 Present value of operating lease liabilities $ 7,332 |
Commitments & Contingencies
Commitments & Contingencies | 3 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments & Contingencies | Lease Agreements The Company leases office space in New York City on a month-to-month basis, with a condition of a 60 day notice to terminate. For the three months ended March 31, 2019 and 2018, rent expense for the Company’s New York City office was $23,000 and $29,000, respectively. The Company has taken the short term lease exception and not recorded a lease liability or right-of-use asset for this lease. Litigation The Company is subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business that it believes are incidental to the operation of its business. While the outcome of these claims cannot be predicted with certainty, management does not believe that the outcome of any of these legal matters will have a material adverse effect on its results of operations, financial positions or cash flows. In February 2018, DropCar was served an Amended Summons and Complaint in the Supreme Court of the City of New York, Bronx county originally served solely on an individual, a former DropCar customer, for injuries sustained by plaintiffs alleging such injuries were caused by either the customer, a DropCar valet operating the customer’s vehicle or an unknown driver operating customer’s vehicle. DropCar to date has cooperated with the NYC Police Department and no charges have been brought against any employee of DropCar. DropCar has referred the matter to its insurance carrier. Other As of December 31, 2018, the Company had accrued approximately $232,000 for the settlement of multiple employment disputes. During the three months ended March 31, 2019, approximately $39,000 of this amount was settled upon payment. For the three months ended March 31, 2019 and 2018, $16,000 and $0, respectively, was expensed and accrued for settlements. As of March 31, 2019, approximately $209,000 remains accrued for the settlement of employment disputes. As of March 31, 2019, the Company has entered into multiple settlement agreements with former employees for which it has agreed to make monthly settlement payments which will extend through December 31, 2019. On March 23, 2018, DropCar was made aware of an audit being conducted by the New York State Department of Labor (“DOL”) regarding a claim filed by an employee. The DOL is investigating whether DropCar properly paid overtime for which DropCar has raised several defenses. In addition, the DOL is conducting its audit to determine whether the Company owes spread of hours pay (an hour’s pay for each day an employee worked or was scheduled for a period over ten hours in a day). If the DOL determines that monies are owed, the DOL will seek a backpay order, which management believes will not, either individually or in the aggregate, have a material adverse effect on DropCar’s business, consolidated financial position, results of operations or cash flows. As of March 31, 2019, the Company has accrued approximately $180,000 in relation to these matters. |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Mar. 31, 2019 | |
Stockholders' Equity Note [Abstract] | |
Stockholders' Equity | Common Stock On March 26, 2019, the Company entered into a Securities Purchase Agreement with certain existing investors, pursuant to which the Company sold, in a registered public offering by the Company directly to the investors an aggregate of 478,469 shares of common stock, par value $0.0001 per share, at an offering price of $4.18 per share for proceeds of $1,985,001 net of offering expenses of $15,000. During the period ended March 31, 2019, the Company issued 1,412,420 shares of common stock from the conversion of 21,591 shares of Series H-4 Convertible Preferred stock. During the period ended March 31, 2019, the Company granted 116,666 shares of common stock to a service provider and recorded $222,200 stock based compensation as a part of general and administrative expense in the Company’s consolidated statements of operations. During the period ended March 31, 2019, the Company issued 277,778 shares of common stock from the exercise of Series K warrants and received cash proceeds of $16,667. Preferred Stock In accordance with the Certificate of Incorporation, there are 5,000,000 authorized preferred shares at a par value of $ 0.0001. Series Seed On January 30, 2018, the Company converted 275,691 shares of Series Seed Preferred Stock into 45,949 shares of common stock in connection with the Merger. Series A On January 30, 2018, the Company converted 611,944 shares of Series A Preferred Stock into 101,991 shares of common stock in connection with the Merger. Rights and Privileges of Preferred Stock Voting Privileges and Protective Features of Preferred Stock Each holder of outstanding shares of Preferred Stock are entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of such Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. The holders of record of a majority of outstanding Preferred Stock shall be entitled to elect the majority of the directors of the Company. In liquidation, the Preferred Stockholders receive their original purchase price plus any dividends if declared. The outstanding shares of Preferred Stock are convertible at the option of the holder into common shares on a one to one ratio and the conversion ratio is subject to certain anti-dilution provisions. For so long as any shares of Preferred Stock remain outstanding, the vote or written consent of the holders of the majority of the outstanding shares of Preferred Stock is necessary for the Company to conduct certain corporate actions, including but not limited to liquidation, windup or dissolution of the Company; certain amendments to the certificate of incorporation or bylaws of the Company; authorization or issuance of shares of any additional class or series of capital stock unless the same ranks junior to the Preferred Stock with respect to liquidation preference, the payment of dividends and rights of redemption or increase in the authorized number of shares of any series of capital stock; authorize the creation of, or issue, or authorize the issuance of any debt security unless such indebtedness was approved by the Board of Directors, and increase or decrease the authorized number of directors constituting the Board of Directors. Series H Convertible On January 30, 2018, in accordance with the Merger the Company issued 8 shares of Series H Convertible Preferred Stock. Under the terms of the Series H Certificate of Designation, each share of Series H Preferred Stock has a stated value of $616 and is convertible into shares of the Company’s Common Stock, equal to the stated value divided by the conversion price of $36.96 per share (subject to adjustment in the event of stock splits or dividends). The Company is prohibited from effecting the conversion of the Series H Preferred Stock to the extent that, as a result of such conversion, the holder would beneficially own more than 9.99%, in the aggregate, of the issued and outstanding shares of the Company’s common stock calculated immediately after giving effect to the issuance of shares of common stock upon such conversion. Series H-1 and H-2 Convertible The Company has designated 9,488 Series H-1 Preferred Stock and designated 3,500 Series H-2 Preferred Stock, none of which are outstanding. Series H-3 Convertible On January 30, 2018, in accordance with the Merger the Company issued 2,189 shares of Series H-3 Convertible Preferred Stock. Pursuant to the Series H-3 Securities Purchase Agreement, the Company agreed to not issue further common stock or securities convertible into or exercisable or exchangeable for common stock, except upon a change in control of the Company, which occurred upon the Merger. The Company also agreed to cause certain of its officers and directors to agree not to exercise their Company stock options except in connection with a change in control of the Company. Also, pursuant to the Series H-3 Certificate of Designation (as defined below), the holders of the Series H-3 Shares are entitled to elect up to two members of a seven member Board, subject to certain step downs; pursuant to the Series H-3 Securities Purchase Agreement, the Company agreed to effectuate the appointment of the designees specified by the Series H-3 Investors as directors of the Company. On March 30, 2017, the Company filed with the Secretary of State of the State of Delaware a Certificate of Designations, Preferences and Rights with respect to the Series H-3 Shares (the “Series H-3 Certificate of Designation”). Under the terms of the Series H-3 Certificate of Designation, each share of the Series H-3 Shares has a stated value of $552 and is convertible into shares of common stock, equal to the stated value divided by the conversion price of $33.12 per share (subject to adjustment in the event of stock splits and dividends). The Company is prohibited from effecting the conversion of the Series H-3 Shares to the extent that, as a result of such conversion, the holder or any of its affiliates would beneficially own more than 9.99%, in the aggregate, of the issued and outstanding shares of common stock calculated immediately after giving effect to the issuance of shares of common stock upon the conversion of the Series H-3 Shares. Series H-4 Convertible On March 8, 2018, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with investors pursuant to which the Company issued to the Investors an aggregate of 25,472 shares of the Company’s newly designated Series H-4 Convertible Preferred Stock, par value $0.0001 per share (the “Series H-4 Shares”) convertible into 424,533 shares of common stock of the Company, and warrants to purchase 424,533 shares of common stock of the Company, with an exercise price of $15.60 per share, subject to adjustments (the “Warrants”). The purchase price per Series H-4 Share and warrant was $235.50, equal to (i) the closing price of the Common Stock on the Nasdaq Capital Market on March 7, 2018, plus $0.125 multiplied by (ii) 100. The aggregate purchase price for the Series H-4 Shares and Warrants was approximately $6.0 million. Subject to certain ownership limitations, the Warrants are immediately exercisable from the issuance date and are exercisable for a period of five years from the issuance date. On March 8, 2018, the Company filed the Certificate of Designations, Preferences and Rights of the Series H-4 Convertible Preferred Stock (the “Certificate of Designation”) with the Secretary of State of the State of Delaware, establishing and designating the rights, powers and preferences of the Series H-4 Convertible Preferred Stock (the “Series H-4 Stock”). The Company designated up to 30,000 shares of Series H-4 Stock and each share has a stated value of $235.50 (the “Stated Value”). Each share of Series H-4 Stock is convertible at any time at the option of the holder thereof, into a number of shares of Common Stock determined by dividing the Stated Value by the initial conversion price of $2.355 per share, subject to a 9.99% blocker provision. The Series H-4 Stock has the same dividend rights as the Common Stock, and no voting rights except as provided for in the Certificate of Designation or as otherwise required by law. In the event of any liquidation or dissolution of the Company, the Series H-4 Stock ranks senior to the Common Stock in the distribution of assets, to the extent legally available for distribution. During the period ended March 31, 2019, investors converted 21,591 shares of Series H-4 into 1,412,420 shares of Common Stock. Stock Based Compensation Service Based Restricted Stock Units On February 28, 2018, the Company issued 244,643 restricted stock units (“RSUs”) to two members of management. On March 26, 2019, the Board of Directors, with the consent of the grantees, agreed to amend the vesting period for the RSUs issued on February 28, 2018 to vest in full on May 17, 2019. The RSUs were valued using the fair market value of the Company’s closing stock price on the date of grant totaling $3,243,966, which is being amortized over the original vesting period. Employee and Non-employee Stock Options The following table summarizes stock option activity during the three months ended March 31, 2019: Shares Underlying Options Weighted Average Exercise Price Weighted average Remaining Contractual Life (years) Aggregate Intrinsic Value Outstanding at December 31, 2018 302,772 $ 18.30 7.20 $ - Granted 99,072 2.32 9.84 63,802 Forfeited (20,432 ) 13.20 - - Outstanding at March 31, 2019 381,412 $ 14.41 7.60 $ 241,597 At March 31, 2019, unamortized stock compensation for stock options was approximately $238,000, with a weighted-average recognition period of 0.75 years. Share Based Compensation The following table sets forth total non-cash stock-based compensation for RSUs and options issued to employees and non-employees by operating statement classification for the three months ended March 31, 2019 and 2018: Three Months ended March 31, 2019 2018 Research and development $ 3,717 $ 1,613 Selling, general and administrative 484,240 738,275 Total $ 487,957 $ 739,888 Stock option pricing model The fair value of the stock options granted during the three months ended March 31, 2019, was estimated at the date of grant using the Black-Scholes options pricing model with the following assumptions: Fair value of common stock $ 2.32 Expected volatility 151.76 % Dividend yield $ 0 Risk-free interest 2.70 % Expected life (years) 5.5 Warrants Service Based Warrants On March 8, 2018, in connection with the financing discussed above, the Company issued 1,371 Series H-4 Shares and 22,850 common stock warrants to a service provider. The Company valued these warrants using the Black-Scholes option pricing model with the following inputs: exercise price of $15.60; fair market value of underlying stock of $13.20; expected term of 5 years; risk free rate of 2.63%; volatility of 120.63%; and dividend yield of 0%. For the period ended March 31, 2018, the Company recorded the fair market value of the Series H-4 Shares and warrants as an increase and decrease to additional paid in capital in the amount of $568,648 as these services were provided in connection with the sale of the Series H-4 shares. Warrant Exchange On April 19, 2018, the Company entered into separate Warrant Exchange Agreements (the “Exchange Agreements”) with the holders (the “Merger Warrant Holders”) of existing warrants issued in the Merger (the “Merger Warrants”) to purchase shares of Common Stock, pursuant to which, on the closing date, the Merger Warrant Holders exchanged each Merger Warrant for 1/18 of a share of Common Stock and 1/12 of a warrant to purchase a share of Common Stock (collectively, the “Series I Warrants”). The Series I Warrants have an exercise price of $13.80 per share. In connection with the Exchange Agreements, the Company issued an aggregate of (i) 48,786 new shares of common stock and (ii) Series I Warrants to purchase an aggregate of 73,178 shares of common stock. The Company valued the (a) stock and warrants issued in the amount of $972,368, (b) the warrants retired in the amount of $655,507, and (c) recorded the difference as deemed dividend in the amount of $316,861. The warrants were valued using the Black-Scholes option-pricing model on the date of the exchange using the following assumptions: (a) fair value of common stock $10.32, (b) expected volatility of 103% and 110%, (c) dividend yield of $0, (d) risk-free interest rate of 2.76% and 2.94%, (e) expected life of 3 years and 4.13 years. Exercise of Series H-4 Warrants and Issuance of Series J Warrants On August 31, 2018, the Company offered (the “Repricing Offer Letter”) to the holders (the “Holders”) of the Company’s outstanding Series H-4 Warrants to purchase common stock of the Company issued on March 8, 2018 (the “Series H-4 Warrants”) the opportunity to exercise such Series H-4 Warrants for cash at a reduced exercise price of $3.60 per share (the “Reduced Exercise Price”) provided such Series H-4 Warrants were exercised for cash on or before September 4, 2018 (the “End Date”). In addition, the Company issued a “reload” warrant (the “Series J Warrants”) to each Holder who exercised their Series H-4 Warrants prior to the End Date, covering one share for each Series H-4 Warrant exercised during that period. The terms of the Series J Warrants are substantially identical to the terms of the Series H-4 Warrants except that (i) the exercise price is equal to $6.00, (ii) the Series J Warrants may be exercised at all times beginning on the 6-month anniversary of the issuance date on a cash basis and also on a cashless basis, (iii) the Series J Warrants do not contain any provisions for anti-dilution adjustment and (iv) the Company has the right to require the Holders to exercise all or any portion of the Series J Warrants still unexercised for a cash exercise if the volume-weighted average price (as defined in the Series J Warrant) for the Company’s common stock equals or exceeds $9.00 for not less than ten consecutive trading days. On September 4, 2018, the Company received executed Repricing Offer Letters from a majority of the Holders, which resulted in the issuance of 260,116 shares of the Company’s common stock and Series J Warrants to purchase up to 260,116 shares of the Company’s common stock. The Company received gross proceeds of $936,423 from the exercise of the Series H-4 Warrants pursuant to the terms of the Repricing Offer Letter. On September 5, 2018, the Company received a request from Nasdaq to amend its Series H-4 Warrants to provide that the Series H-4 Warrants may not be exercised until the Company has obtained stockholder approval of the issuance of Common Stock underlying the Series H-4 Warrants pursuant to the applicable rules and regulations of Nasdaq. In response to the request, on September 10, 2018, the Company entered into an amendment (the “Warrant Amendment”) with the holders of the Series H-4 Stock to provide for stockholder approval as described above prior to the exercise of the Series H-4 Warrants. On November 15, 2018, the Company obtained such stockholder approval. The Company considers the warrant amendment for the Reduced Exercise Price and issuance of the Series J Warrants to be of an equity nature as the amendment and issuance allowed the warrant holders to exercise warrants and receive a share of common stock and warrant which, represents an equity for equity exchange. Therefore, the change in the fair value before and after the modification and the fair value of the Series J warrants will be treated as a deemed dividend in the amount of $1,019,040. The cash received upon exercise in excess of par is accounted through additional paid in capital. The Company valued the deemed dividend as the sum of: (a) the difference between the fair value of the modified award and the fair value of the original award at the time of modification of $129,476, and (b) the fair value of the Series J Warrants in the amount of $889,564. The warrants were valued using the Black-Scholes option-pricing model on the date of the modification and issuance using the following assumptions: (a) fair value of common stock $3.90, (b) expected volatility of 144.3%, (c) dividend yield of 0%, (d) risk-free interest rate of 2.77% and 2.78%, (e) expected life of 4.51 years and 5 years. At the March 8, 2018 closing, the Company issued Series H-4 Warrants that entitled the holders to purchase, in aggregate, up to 447,383 shares of its common stock. As referenced above, on September 4, 2018, the Company received executed Repricing Offer Letters from a majority of the investors resulting in the exercise of Series H-4 Warrants to purchase 260,116 shares of common stock. The Series H-4 Warrants were initially exercisable at an exercise price equal to $15.60 per share. On November 15, 2018, the Company obtained shareholder approval to reduce the exercise price from $15.60 per share to $3.60 per share for 187,267 Series H-4 Warrants. The Company considers the modification to the warrant exercise price to be of an equity nature. Therefore, the change in the fair value before and after the modification is accounted for as a deemed dividend in the amount of $63,760. Issuance of Pre-Funded Series K Warrants On November 14, 2018, the Company entered into a securities purchase agreement with an investor, pursuant to which the Company agreed to issue and sell, in a registered direct offering, a Pre-Funded Series K Warrant (the “Series K Warrant) to purchase 277,778 shares of common stock, in lieu of shares of common stock to the extent that the purchase of common stock would cause the beneficial ownership of the purchaser to exceed 9.99% of the Company’s common stock. The Pre-Funded Series K Warrants were sold at an offering price of $3.54 per share for gross proceeds of $983,329, are immediately exercisable for $0.06 per share of common stock and do not have an expiration date. During the period ended March 31, 2019, the Company issued 277,778 shares of common stock from the exercise of Series K warrants and received cash proceeds of $16,667. A summary of the Company’s warrants to purchase common stock activity is as follows: Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Contractual Life (years) Outstanding, December 31, 2018 863,084 $ 6.00 2.51 Exercised, K warrants (277,778 ) 0.06 - Outstanding, March 31, 2019 585,306 $ 8.85 3.45 The warrants expire through the years 2020-2024. |
Restatements of Previously Issu
Restatements of Previously Issued Condensed Consolidated Interim Financial Statements (Unaudited) | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Changes and Error Corrections [Abstract] | |
Restatements of Previously Issued Condensed Consolidated Interim Financial Statements (Unaudited) | The Company, while undergoing the audit of its consolidated financial statements for the year ended December 31, 2018, commenced an evaluation of its accounting in connection with the Merger for i) lock-up agreements entered into with the holders of the Notes (see Note 7), and ii) shares of common stock issued to Alpha Capital Anstalt and Palladium Capital Advisors (see Note 10, Service Based Common Stock). These agreements, which management originally deemed to be primarily equity in nature and would not be recognized as compensatory, were recorded as a debit and credit to additional paid in capital. On March 29, 2019, under the authority of the board of directors, the Company determined that these agreements should have been recorded as compensatory in nature which gives rise to an adjustment in the amount of $1,119,294 for the periods ended March 31, 2018, June 30, 2018, and September 30, 2018. Accordingly, the Company will restate those condensed consolidated interim financial statements and include the required disclosures. The following tables sets forth the effects of the adjustments on affected items within the Company’s previously reported Condensed Consolidated Interim Balance Sheet at March 31, 2018, had the adjustments been made in the corresponding quarter and includes a reclassification adjustment for the stock split of $650: March 31, 2018 As reported Adjustment As restated Additional paid in capital $ 25,080,301 $ 1,119,994 $ 26,200,245 Accumulated deficit $ (12,966,338 ) $ (1,119,294 ) $ (14,085,632 ) The following tables sets forth the effects of the adjustments on affected items within the Company’s previously reported Condensed Consolidated Interim Statement of Operations for the three months ended March 31, 2018, had the adjustments been made in the appropriate quarter: Three Months Ended March 31, 2018 As reported Adjustment As Restated Discontinued Operations As Restated Selling, general and administrative expense $ 3,067,308 $ 447,150 $ 3,514,458 $ (603,661 ) $ 2,910,797 Total operating expenses $ 3,203,658 $ 447,150 $ 3,650,808 $ (546,618 ) $ 3,104,190 Operating loss $ (2,951,188 ) $ (447,150 ) $ (3,398,338 ) $ (309,558 ) $ (3,707,896 ) Interest income (expense), net $ (410,253 ) $ (672,144 ) $ (1,082,397 ) $ 180 $ (1,082,217 ) Net loss $ (3,361,441 ) $ (1,119,294 ) $ (4,480,735 ) $ - $ (4,480,735 ) Income from discontinued operations $ - $ - $ - $ 309,378 $ 309,378 Net loss per common shares, basic and diluted $ (3.33 ) $ (1.11 ) $ (4.44 ) $ - $ (4.44 ) |
Related Parties
Related Parties | 3 Months Ended |
Mar. 31, 2019 | |
Related Party Transactions [Abstract] | |
Related Parties | On July 11, 2018, the Company entered into a consulting agreement (the “Consulting Agreement”) with Ascentaur, LLC (“Ascentaur”). Sebastian Giordano is the Chief Executive Officer of Ascentaur. Mr. Giordano has served on the board of directors of the Company since February 2013 and served as the Company’s Interim Chief Executive Officer from August 2013 through April 2016 and as the Company’s Chief Executive Officer from April 2016 through January 2018. Pursuant to the terms of the Consulting Agreement, Ascentaur has agreed to provide advisory services with respect to the strategic development and growth of the Company, including advising the Company on market strategy and overall Company strategy, advising the Company on the sale of the Company’s Suisun City Operations, providing assistance to the Company in identifying and recruiting prospective employees, customers, business partners, investors and advisors that offer desirable administrative, financing, investment, technical, marketing and/or strategic expertise, and performing such other services pertaining to the Company’s business as the Company and Ascentaur may from time to time mutually agree. The term of the Consulting Agreement commenced on July 11, 2018 and will continue until April 9, 2019 or until terminated in accordance with the terms of the Consulting Agreement. During the three months ended March 31, 2019, the Company recorded $30,400 as general and administrative related to this consulting agreement. As of March 31, 2019, the balance in accounts payable was approximately $7,000. During the three months ended March 31, 2019, the Company sold Alpha Capital Anstalt, as part of a registered public offering, 299,043 shares of common stock for $1,235,000, net of offering expenses of $15,000. Additionally, during the three months ended March 31, 2019, Alpha Capital Anstalt was issued of 277,778 shares of common stock upon its exercise of Series K warrants with cash proceeds to the Company of $16,667. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | The Company has evaluated events subsequent to March 31, 2019 to assess the need for potential recognition or disclosure in this report. Such events were evaluated through the date these financial statements were available to be issued. Based upon this evaluation, it was determined that no subsequent events occurred that require recognition or disclosure in the financial statements. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Use of Estimates | The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“US GAAP”) requires management to make estimates and assumptions that affect amounts reported therein. Generally, matters subject to estimation and judgement include amounts related to accounts receivable realization, asset impairments, useful lives of property and equipment and capitalized software costs, deferred tax asset valuation allowances, and operating expense accruals. Actual results could differ from those estimates. |
Accounts Receivable | Accounts receivable are carried at original invoice amount less an estimate made for holdbacks and doubtful receivables based on a review of all outstanding amounts. The Company determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions and set up an allowance for doubtful accounts when collection is uncertain. Customers’ accounts are written off when all attempts to collect have been exhausted. Recoveries of accounts receivable previously written off are recorded as income when received. At March 31, 2019 and December 31, 2018, the accounts receivable reserve was approximately $2,000. |
Revenue Recognition | The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, codified as ASC 606: Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Revenue from contracts with customers is recognized when, or as, the Company satisfies its performance obligations by transferring the promised goods or services to the customers. A good or service is transferred to a customer when, or as, the customer obtains control of that good or service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied over time is recognized by measuring the Company’s progress in satisfying the performance obligation in a manner that depicts the transfer of the goods or services to the customer. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time that the Company determines the customer obtains control over the promised good or service. The amount of revenue recognized reflects the consideration the Company expects to be entitled to in exchange for those promised goods or services (i.e., the “transaction price”). In determining the transaction price, the Company considers multiple factors, including the effects of variable consideration. Variable consideration is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainties with respect to the amount are resolved. In determining when to include variable consideration in the transaction price, the Company considers the range of possible outcomes, the predictive value of its past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside of the Company’s influence, such as the judgment and actions of third parties. The Company’s contracts are generally designed to provide cash fees to the Company on a monthly basis or an agreed upfront rate based upon demand services. The Company’s performance obligation is satisfied over time as the service is provided continuously throughout the service period. The Company recognizes revenue evenly over the service period using a time-based measure because the Company is providing a continuous service to the customer. Contracts with minimum performance guarantees or price concessions include variable consideration and are subject to the revenue constraint. The Company uses an expected value method to estimate variable consideration for minimum performance guarantees and price concessions. Monthly Subscriptions The Company offers a selection of subscriptions and on-demand services which include parking, valet, and access to other services. The contract terms are on a month-to-month subscription contract with fixed monthly or contract term fees. These subscription services include a fixed number of round-trip deliveries of the customer’s vehicle to a designated location. The Company allocates the purchase price among the performance obligations which results in deferring revenue until the service is utilized or the service period has expired. On Demand Valet and Parking Services The Company offers to consumers certain on demand services through its mobile application. The customer is billed at an hourly rate upon completion of the services. Revenue is recognized when the Company had satisfied all performance obligations which is upon completion of the service. DropCar 360 Services The Company offers to consumers certain services upon request including vehicle inspection, maintenance, car washes or to fill up with gas. The customers are charged a fee in addition to the cost of the third-party services provided. Revenue is recognized when the Company had satisfied all performance obligations which is upon completion of the service. On Demand Business-To-Business The Company also has contracts with car dealerships, car share programs and others in the automotive industry transporting vehicles. Revenue is recognized at the point in time all performance obligations are satisfied which is when the Company provides the delivery service of the vehicles. Disaggregated Revenues The following table presents our revenues from contracts with customers disaggregated by revenue source. Three Months Ended March 31, 2019 2018 Subscription Services $ 661,464 $ 1,356,595 Services On-Demand 437,979 335,480 Total Revenues (1)(2) 1,099,443 1,692,075 (1) Represents revenues recognized by type of services. (2) All revenues are generated in the United States. Three Months Ended March 31, 2019 2018 B2C $ 763,977 $ 1,458,524 B2B 335,466 233,551 Total Revenue 1,099,443 1,692,075 The following presents our revenues from B2C and B2B customers. |
Employee Stock-Based Compensation | The Company recognizes all employee share-based compensation as an expense in the financial statements. Equity-classified awards principally related to stock options, restricted stock units (“RSUs”) and equity-based compensation, are measured at the grant date fair value of the award. The Company determines grant date fair value of stock option awards using the Black-Scholes option-pricing model. The fair value of RSUs are determined using the closing price of the Company’s common stock on the grant date. For service-based vesting grants, expense is recognized ratably over the requisite service period based on the number of options or shares. Stock-based compensation is reversed for forfeitures in the period of forfeiture. |
Property and Equipment | The Company accounts for property and equipment at cost less accumulated depreciation. The Company computes depreciation using the straight-line method over the estimated useful lives of the assets. The Company generally depreciates property and equipment over a period of three to seven years. Depreciation for property and equipment commences once they are ready for its intended use. |
Capitalized Software | Costs related to website and internal-use software development are accounted for in accordance with Accounting Standards Codification (“ASC”) Topic 350-50 — Intangibles — Website Development Costs. Such software is primarily related to our websites and mobile apps, including support systems. We begin to capitalize our costs to develop software when preliminary development efforts are successfully completed, management has authorized and committed project funding, it is probable that the project will be completed, and the software will be used as intended. Costs incurred prior to meeting these criteria are expensed as incurred and recorded within General and administrative expenses within the accompanying consolidated statements of operations. Costs incurred for enhancements that are expected to result in additional features or functionality are capitalized. Capitalized costs are amortized over the estimated useful life of the enhancements, generally between two and three years. |
Impairment of Long-Lived Assets | Long-lived assets are primarily comprised of operating lease right-of-use assets, property and equipment, and capitalized software costs. The Company evaluates its Long-Lived Assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset or group of assets may not be recoverable. If these circumstances exist, recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to future undiscounted net cash flows expected to be generated by the asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. There were no impairments to long-lived assets for the three months ended March 31, 2019 and 2018. |
Income Taxes | The Company provides for income taxes using the asset and liability approach. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of March 31, 2019, and December 31, 2018, the Company had a full valuation allowance against deferred tax assets. The Tax Cuts and Jobs Act (the “Tax Act”), enacted on December 22, 2017, among other things, permanently lowered the statutory federal corporate tax rate from 35% to 21%, effective for tax years including or beginning January 1, 2018. Under the guidance of ASC 740, “Income Taxes” (“ASC 740”), the Company revalued its net deferred tax assets on the date of enactment based on the reduction in the overall future tax benefit expected to be realized at the lower tax rate implemented by the new legislation. |
Fair Value Measurements | The Company accounts for financial instruments in accordance with ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below: Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 – Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. Financial instruments with carrying values approximating fair value include cash, accounts receivable, other assets, and accounts payable and accrued expenses due to their short-term nature. |
Income (Loss) Per Share | Basic income (loss) per share is computed by dividing net loss attributable to common shareholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period. Diluted loss per share are computed by assuming that any dilutive convertible securities outstanding were converted, with related preferred stock dividend requirements and outstanding common shares adjusted accordingly. It also assumes that outstanding common shares were increased by shares issuable upon exercise of those stock options for which market price exceeds the exercise price, less shares which could have been purchased by the Company with the related proceeds. In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential shares outstanding would be anti-dilutive. The following securities were excluded from weighted average diluted common shares outstanding because their inclusion would have been antidilutive. As of March 31, 2019 2018 Common stock equivalents: Common stock options 381,412 171,442 Series A, H-1, H-3, H-4, I, J and Merger common stock purchase warrants 585,306 658,486 Series H, H-3, and H-4 Convertible Preferred Stock 2,028,415 2,739,225 Restricted shares (unvested) 244,643 244,643 Totals 3,239,776 3,813,796 |
Research and Development Costs, Net | Costs are incurred in connection with research and development programs that are expected to contribute to future earnings. Such costs include labor, stock-based compensation, training, software subscriptions, and consulting. These amounts are charged to the consolidated statement of operations as incurred. Total research and development expenses were approximately $0.1 million for the three months ended March 31, 2019 and 2018. |
Accounting Standards | Adoption of New Accounting Standards In February 2016, the FASB issued Accounting Standards Codification (ASC) 842, Leases, which requires lessees to recognize most leases on their balance sheets as a right-of-use asset with a corresponding lease liability. Lessor accounting under the standard is substantially unchanged. Additional qualitative and quantitative disclosures are also required. The Company adopted the standard effective January 1, 2019 using the cumulative-effect adjustment transition method, which applies the provisions of the standard at the effective date without adjusting the comparative periods presented. The Company adopted the following practical expedients and elected the following accounting policies related to this standard: ● Short-term lease accounting policy election allowing lessees to not recognize right-of-use assets and liabilities for leases with a term of 12 months or less; and ● The option to not separate lease and non-lease components for equipment leases. ● The package of practical expedients applied to all of its leases, including (i) not reassessing whether any expired or existing contracts are or contain leases, (ii) not reassessing the lease classification for any expired or existing leases, and (iii) not reassessing initial direct costs for any existing leases. Adoption of this standard resulted in the recognition of operating lease right-of-use assets of approximately $23,000 (including a reclassification from Prepaid expenses of a prepaid lease approximating $9,500) and corresponding lease liabilities of approximately $13,500 on the consolidated balance sheet as of January 1, 2019. The standard did not materially impact operating results or liquidity. Disclosures related to the amount, timing and uncertainty of cash flows arising from leases are included in Note 8, Leases. In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for nonemployee share-based payment transactions. The amendments specify that Topic 718 applies to all share- based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The guidance was adopted effective January 1, 2019, and the adoption of this ASU did not have a material effect on its consolidated financial statements. Recently Issued Accounting Standards From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial position or results of operations upon adoption. In August 2018, the FASB issued ASU 2018-13, Changes to Disclosure Requirements for Fair Value Measurements, which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements, and is effective for the Company beginning January 1, 2020. The Company is currently evaluating the impact this standard will have on the Company’s consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Disaggregation of revenue | Three Months Ended March 31, 2019 2018 Subscription Services $ 661,464 $ 1,356,595 Services On-Demand 437,979 335,480 Total Revenues (1)(2) 1,099,443 1,692,075 (1) Represents revenues recognized by type of services. (2) All revenues are generated in the United States. Three Months Ended March 31, 2019 2018 B2C $ 763,977 $ 1,458,524 B2B 335,466 233,551 Total Revenue 1,099,443 1,692,075 |
Schedule of antidilutive securities excluded from computation of earnings per share | As of March 31, 2019 2018 Common stock equivalents: Common stock options 381,412 171,442 Series A, H-1, H-3, H-4, I, J and Merger common stock purchase warrants 585,306 658,486 Series H, H-3, and H-4 Convertible Preferred Stock 2,028,415 2,739,225 Restricted shares (unvested) 244,643 244,643 Totals 3,239,776 3,813,796 |
Concentrations (Tables)
Concentrations (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Risks and Uncertainties [Abstract] | |
Schedules of concentration of risk, by risk factor | As of March 31, 2019 December 31, 2018 Customer A 50 % 58 % Customer B 34 % 23 % |
Discontinued Operations and D_2
Discontinued Operations and Disposition of Operating Segment (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Discontinued Operations And Disposition Of Operating Segment Tables Abstract | |
Schedule of discontinued operations | Revenues $ 3,182,479 Cost of revenues 2,326,276 Gross profit 856,203 Selling, general and administrative expenses 489,800 Depreciation and amortization 56,845 Total Operating Expenses 546,645 Interest expense, net 180 Net income from discontinued operations $ 309,378 |
Capitalized Software (Tables)
Capitalized Software (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of capitalized computer software, net | March 31, 2019 December 31, 2018 Software $ 1,398,613 $ 1,324,275 Accumulated amortization (772,014 ) (665,183 ) Total $ 626,599 $ 659,092 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Leases [Abstract] | |
Maturity of lease liability | Maturity of Lease Liability 2019 $ 7,420 Total undiscounted operating lease payments 7,420 Less: Imputed interest 88 Present value of operating lease liabilities $ 7,332 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Stockholders' Equity Note [Abstract] | |
Schedule of share-based compensation, stock options, activity | Shares Underlying Options Weighted Average Exercise Price Weighted average Remaining Contractual Life (years) Aggregate Intrinsic Value Outstanding at December 31, 2018 302,772 $ 18.30 7.20 $ - Granted 99,072 2.32 9.84 63,802 Forfeited (20,432 ) 13.20 - - Outstanding at March 31, 2019 381,412 $ 14.41 7.60 $ 241,597 |
Schedule of share-based compensation, | Three Months ended March 31, 2019 2018 Research and development $ 3,717 $ 1,613 Selling, general and administrative 484,240 738,275 Total $ 487,957 $ 739,888 |
Schedule of share-based payment award, stock options, valuation assumptions | Fair value of common stock $ 2.32 Expected volatility 151.76 % Dividend yield $ 0 Risk-free interest 2.70 % Expected life (years) 5.5 |
Schedule of common stock warrant activity | Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Contractual Life (years) Outstanding, December 31, 2018 863,084 $ 6.00 2.51 Exercised, K warrants (277,778 ) 0.06 - Outstanding, March 31, 2019 585,306 $ 8.85 3.45 |
Restatements of Previously Is_2
Restatements of Previously Issued Condensed Consolidated Interim Financial Statements (Unaudited) (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Changes and Error Corrections [Abstract] | |
Restatement of previously issued financial statements | March 31, 2018 As reported Adjustment As restated Additional paid in capital $ 25,080,301 $ 1,119,994 $ 26,200,245 Accumulated deficit $ (12,966,338 ) $ (1,119,294 ) $ (14,085,632 ) Three Months Ended March 31, 2018 As reported Adjustment As Restated Discontinued Operations As Restated Selling, general and administrative expense $ 3,067,308 $ 447,150 $ 3,514,458 $ (603,661 ) $ 2,910,797 Total operating expenses $ 3,203,658 $ 447,150 $ 3,650,808 $ (546,618 ) $ 3,104,190 Operating loss $ (2,951,188 ) $ (447,150 ) $ (3,398,338 ) $ (309,558 ) $ (3,707,896 ) Interest income (expense), net $ (410,253 ) $ (672,144 ) $ (1,082,397 ) $ 180 $ (1,082,217 ) Net loss $ (3,361,441 ) $ (1,119,294 ) $ (4,480,735 ) $ - $ (4,480,735 ) Income from discontinued operations $ - $ - $ - $ 309,378 $ 309,378 Net loss per common shares, basic and diluted $ (3.33 ) $ (1.11 ) $ (4.44 ) $ - $ (4.44 ) |
Liquidity and Going Concern (De
Liquidity and Going Concern (Details Narrative) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 |
Liquidity And Going Concern | |||
Accumulated deficit | $ (31,729,427) | $ (29,753,721) | $ (14,085,632) |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Revenues from contracts with customers | $ 1,099,443 | $ 1,639,075 |
Subscription Services [Member] | ||
Revenues from contracts with customers | 661,464 | 1,356,595 |
Services On-Demand [Member] | ||
Revenues from contracts with customers | 437,979 | 335,480 |
B2C [Member] | ||
Revenues from contracts with customers | 763,977 | 1,458,524 |
B2B [Member] | ||
Revenues from contracts with customers | $ 335,466 | $ 233,551 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies (Details 1) - shares | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Antidilutive securities excluded from computation of earnings per share | 3,239,776 | 3,813,796 |
Common Stock Options [Member] | ||
Antidilutive securities excluded from computation of earnings per share | 381,412 | 171,442 |
Series A, H-1, H-3, H-4, I, J and Merger Common Stock Purchase Warrants | ||
Antidilutive securities excluded from computation of earnings per share | 585,306 | 658,486 |
Series H, H-3, and H-4 Convertible Preferred Stock [Member] | ||
Antidilutive securities excluded from computation of earnings per share | 2,028,415 | 2,739,225 |
Restricted Shares (Unvested) [Member] | ||
Antidilutive securities excluded from computation of earnings per share | 244,643 | 244,643 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | |||
Accounts receivable reserve | $ 2,000 | $ 2,000 | |
Accumulated deficit | (31,729,427) | $ (14,085,632) | $ (29,753,721) |
Research and development costs, net | $ 68,982 | $ 114,161 |
Concentrations (Details)
Concentrations (Details) - Accounts Receivable [Member] | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Customer A [Member] | ||
Concentration risk, percentage | 50.00% | 58.00% |
Customer B [Member] | ||
Concentration risk, percentage | 34.00% | 23.00% |
Discontinued Operations and D_3
Discontinued Operations and Disposition of Operating Segment (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Discontinued Operations And Disposition Of Operating Segment Details Abstract | ||
Revenues | $ 3,182,479 | |
Cost of revenues | 2,326,276 | |
Gross profit | 856,203 | |
Selling, general and administrative expenses | 489,800 | |
Depreciation and amortization | 56,845 | |
Total operating expenses | 546,645 | |
Interest expense, net | 180 | |
Net income from discontinued operations | $ 0 | $ 309,378 |
Capitalized Software (Details)
Capitalized Software (Details) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Software | $ 1,398,613 | $ 1,324,275 |
Accumulated amortization | (772,014) | (665,183) |
Total | $ 626,599 | $ 659,092 |
Convertible Notes Payable (Deta
Convertible Notes Payable (Details Narrative) | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Debt Disclosure [Abstract] | |
Interest expense | $ 672,144 |
Leases (Details)
Leases (Details) | Mar. 31, 2019USD ($) |
Leases [Abstract] | |
2019 | $ 7,420 |
Total undiscounted operating lease payments | 7,420 |
Less: imputed interest | 88 |
Present value of operating lease liabilities | $ 7,332 |
Leases (Details Narrative)
Leases (Details Narrative) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Leases [Abstract] | ||
Operating right-of-use lease assets | $ 14,877 | $ 0 |
Lease liabilities | $ 7,332 | $ 0 |
Weighted-average remaining lease term | 7 months 28 days | |
Weighted-average discount rate | 6.00% |
Commitments & Contingencies (De
Commitments & Contingencies (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rent expense | $ 23,000 | $ 29,000 |
Estimated litigation liability | $ 209,000 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) | 3 Months Ended |
Mar. 31, 2019USD ($)$ / sharesshares | |
Stockholders' Equity Note [Abstract] | |
Stock options outstanding, beginning | shares | 302,772 |
Stock options granted | shares | 99,072 |
Stock options forfeited | shares | (20,432) |
Stock options outstanding, ending | shares | 381,412 |
Weighted average exercise price outstanding, beginning | $ / shares | $ 18.30 |
Weighted average exercise price granted | $ / shares | 2.32 |
Weighted average exercise price forfeited | $ / shares | 13.20 |
Weighted average exercise price outstanding, ending | $ / shares | $ 14.41 |
Weighted average remaining contractual life, beginning | 7 years 2 months 12 days |
Weighted average remaining contractual life granted | 9 years 10 months 2 days |
Weighted average remaining contractual life, ending | 7 years 7 months 6 days |
Aggregate intrinsic value outstanding, beginning | $ | $ 0 |
Aggregate intrinsic value granted | $ | 63,802 |
Aggregate intrinsic value forfeited | $ | 0 |
Aggregate intrinsic value outstanding, ending | $ | $ 241,597 |
Stockholders' Equity (Details 1
Stockholders' Equity (Details 1) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Stock based compensation | $ 487,957 | $ 739,888 |
Research and Development | ||
Stock based compensation | 3,717 | 1,613 |
Selling, General and Administrative | ||
Stock based compensation | $ 484,240 | $ 738,275 |
Stockholders' Equity (Details 2
Stockholders' Equity (Details 2) | 3 Months Ended |
Mar. 31, 2019$ / shares | |
Stockholders' Equity Note [Abstract] | |
Fair value of common stock | $ 2.32 |
Expected volatility | 151.76% |
Dividend yield | 0.00% |
Risk-free interest | 2.70% |
Expected life (years) | 5 years 6 months |
Stockholders' Equity (Details 3
Stockholders' Equity (Details 3) | 3 Months Ended |
Mar. 31, 2019$ / sharesshares | |
Stockholders' Equity Note [Abstract] | |
Warrants outstanding, beginning | shares | 863,084 |
Warrants exercised | shares | (277,778) |
Warrants outstanding, ending | shares | 585,306 |
Weighted average exercise price outstanding, beginning | $ / shares | $ 6 |
Weighted average exercise price exercised | $ / shares | 0.06 |
Weighted average exercise price outstanding, ending | $ / shares | $ 8.85 |
Weighted average remaining contractual life, beginning | 2 years 6 months 4 days |
Weighted average remaining contractual life, ending | 3 years 5 months 12 days |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Conversion of Series H-4 preferred stock into common stock, amount | $ 0 | |
Stock based compensation for common stock issued to service provider, amount | 222,200 | $ 447,150 |
Exercise of warrants, amount | 16,667 | |
Unamortized stock compensation, options | $ 238,000 | |
Unamortized stock compensation, period of recognition | 9 months | |
Common Stock [Member] | ||
Conversion of Series H-4 preferred stock into common stock, shares | 1,412,420 | |
Conversion of Series H-4 preferred stock into common stock, amount | $ 141 | |
Stock based compensation for common stock issued to service provider, shares | 116,666 | 56,929 |
Stock based compensation for common stock issued to service provider, amount | $ 12 | $ 6 |
Exercise of warrants, shares | 277,778 | |
Exercise of warrants, amount | $ 28 | |
Series H-4 Preferred Stock [Member] | ||
Conversion of Series H-4 preferred stock into common stock, shares | (21,591) | |
Conversion of Series H-4 preferred stock into common stock, amount | $ (2) |
Restatements of Previously Is_3
Restatements of Previously Issued Condensed Consolidated Interim Financial Statements (Unaudited) (Details) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 |
Additional paid in capital | $ 26,200,245 | ||
Accumulated deficit | $ (31,729,427) | $ (29,753,721) | (14,085,632) |
As Reported | |||
Additional paid in capital | 25,080,301 | ||
Accumulated deficit | (12,966,338) | ||
Adjustment | |||
Additional paid in capital | (1,119,994) | ||
Accumulated deficit | $ (1,119,294) |
Restatements of Previously Is_4
Restatements of Previously Issued Condensed Consolidated Interim Financial Statements (Unaudited) (Details 1) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Selling, general and administrative expenses | $ 1,773,097 | $ 2,910,797 |
Total operating expenses | 1,949,828 | 3,104,190 |
Operating loss | (1,977,430) | (3,707,896) |
Interest income (expense), net | 1,724 | (1,082,217) |
Net loss | (1,975,706) | (4,480,735) |
Income from discontinued operations | $ 0 | $ 309,378 |
Net loss per common shares, basic and diluted | $ (4.44) | |
As Reported | ||
Selling, general and administrative expenses | $ 3,067,308 | |
Total operating expenses | 3,203,658 | |
Operating loss | (2,951,188) | |
Interest income (expense), net | (410,253) | |
Net loss | (3,361,441) | |
Income from discontinued operations | $ 0 | |
Net loss per common shares, basic and diluted | $ (3.33) | |
Adjustment | ||
Selling, general and administrative expenses | $ 447,150 | |
Total operating expenses | 447,150 | |
Operating loss | (447,150) | |
Interest income (expense), net | (672,144) | |
Net loss | (1,119,294) | |
Income from discontinued operations | $ 0 | |
Net loss per common shares, basic and diluted | $ (1.11) | |
As Restated | ||
Selling, general and administrative expenses | $ 3,514,458 | |
Total operating expenses | 3,650,808 | |
Operating loss | (3,398,338) | |
Interest income (expense), net | (1,082,397) | |
Net loss | (4,480,735) | |
Income from discontinued operations | $ 0 | |
Net loss per common shares, basic and diluted | $ (4.44) | |
Discontinued Operations | ||
Selling, general and administrative expenses | $ (603,661) | |
Total operating expenses | (546,618) | |
Operating loss | (309,558) | |
Interest income (expense), net | 180 | |
Net loss | 0 | |
Income from discontinued operations | $ 309,378 | |
Net loss per common shares, basic and diluted | $ 0 |