10-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

(Mark One)

[ X ]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018

OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-34643

DROPCAR, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization) 1412 Broadway, Suite 2105 New York, New York (Address of principal executive offices) 98-0204758 (I.R.S. Employer Identification No.) 10018 (Zip Code)

Registrant’s telephone number, including area code (646) 342-1595

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class	Name of each exchange on which registered
Common Stock, $0.0001 Par Value Per Share	The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Exchange Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ☐   No ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes  ☐    No ☑

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☑   No  ☐

 Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   ☑    No   ☐

 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one).

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☑	Smaller reporting company ☑
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐ No  ☑

The aggregate market value of the registrant’s voting and non-voting common stock held by non-affiliates of the registrant (without admitting that any person whose shares are not included in such calculation is an affiliate) computed by reference to the price at which the common stock was last sold, or the average bid and asked price of the common stock, as of the last business day of the registrant’s most recently completed second fiscal quarter was $5,724,980.

As of March 27, 2019 there were 3,440,258 shares of registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

EXPLANATORY NOTE

The registrant is filing this Amendment No. 1 on Form 10-K/A (“Form 10-K/A”) to its Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as filed with the Securities and Exchange Commission on April 3, 2019 (the “Original Filing”) solely for the purposes of (i) including the information required by Item 12 of Part III and (ii) furnishing Exhibit 101 (Interactive Data File), which in each instance was not included in the Original Filing. Except as expressly set forth above, this 10-K/A does not, and does not purport to, amend, update, or restate the information in any other item of the Original Filing. Nothing within this 10-K/A has re-stated or altered the financials contained in the Original Filing in any manner.

In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, new certifications by the registrant’s principal executive officer and principal financial officer are filed as exhibits to this Form 10-K/A.

1

PART IV

ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Security Ownership of Certain Beneficial Owners and Management

The following table shows certain information as of March 27, 2019 with respect to the beneficial ownership of common stock by: (i) each person the Company believes beneficially holds more than 5% of the outstanding shares of common stock based solely on the Company’s review of filings with the Securities and Exchange Commission (the “SEC”); (ii) each director; (iii) each named executive officer; and (iv) all current directors and executive officers as a group. Unless otherwise noted below, the address of each beneficial owner listed in the table is c/o DropCar, Inc., 1412 Broadway, Suite 2105, New York, New York 10018. All beneficial ownership information reflects the Company’s 1-for-6 reverse stock split that was effected on March 8, 2019.

We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws.

Applicable percentage ownership is based on 3,440,258 share of common stock outstanding at March 27, 2019. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed outstanding shares of common stock underlying preferred stock, stock options, restricted stock units and warrants held by that person that are currently exercisable or convertible or will be exercisable or convertible within sixty days of March 27, 2019. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person.

Name and Address of Beneficial Owner	Number of Shares Owned	Percentage of Class
Named Executive Officers and Director
Spencer Richardson(1)	316,889	8.72%
Mark Corrao	0	*
David Newman(2)	315,221	8.67%
Sebastian Giordano(3)	49,412	1.42%
Zvi Joseph(4)	2,032	*
Solomon Mayer(5)	2,032	*
Joshua Silverman(6)	18,963	*
Greg Schiffman(7)	2,032	*
Paul Commons	0	*
David Allen(8)	24,791	*
Robert Roller(9)	14,997	*
All Current Executive Officers and Directors as a Group(10)	706,581	18.17%
Greater than 5% Shareholders
Iroquois Capital Management(11)	565,505	14.13%
MintFunds, LLC(12)	342,821	9.96%
Alpha Capital Anstalt(13)	295,060	8.03%

2

1.

Mr. Richardson’s total includes 122,035 shares of common stock, options to purchase 72,533 shares of common stock that are exercisable within 60 days of March 27, 2019 and 122,321 restricted stock units that are exercisable within 60 days of March 27, 2019.

2.

Mr. Newman’s total includes 120,367 shares of common stock, options to purchase 72,533 shares of common stock that are exercisable within 60 days of March 27, 2019 and 122,321 restricted stock units that are exercisable within 60 days of March 27, 2019.

3.

Mr. Giordano’s total includes options to purchase 49,412 shares of common stock that are exercisable within 60 days of March 27, 2019.

4.

Mr. Joseph’s total includes options to purchase 2,032 shares of common stock that are exercisable within 60 days of March 27, 2019.

5.

Mr. Mayer’s total includes options to purchase 2,032 shares of common stock that are exercisable within 60 days of March 27, 2019.

6.

Mr. Silverman’s total includes 14,789 shares of common stock, options to purchase 3,047 shares of common stock that are exercisable within 60 days of March 27, 2019 and warrants to purchase 1,127 shares of common stock that are exercisable within 60 days of March 27, 2019.

7.

Mr. Schiffman’s total includes options to purchase 2,032 shares of common stock that are exercisable within 60 days of March 27, 2019.

8.

Mr. Allen’s total includes options to purchase 24,791 shares of common stock that are exercisable within 60 days of March 27, 2019.

9.

Mr. Roller’s total includes options to purchase 14,997 shares of common stock that are exercisable within 60 days of March 27, 2019.

10.

Includes all equity beneficially owned by current executive officers and directors (8 individuals), but does not include equity beneficially owned by Mr. Commons, Mr. Roller or Mr. Allen, whose service with us terminated on February 28, 2019, December 24, 2018 and January 30, 2018, respectively.

11.

Based on a Schedule 13G/A filed on February 14, 2019, which information has been updated to reflect the 1-for-6 reverse stock split that was effected on March 8, 2019. The principal business address of the beneficial owner is 205 East 42nd Street, 20th Floor, New York, New York 10017. Iroquois Master Fund (“IMF”) is a private investment fund. Iroquois Capital Management LLC (“Iroquois Capital”) is an investment adviser that provides investment advisory services to IMF. Iroquois Capital Investment Group LLC (“ICIG”) is a private investment fund. Richard Abbe shares authority and responsibility for the investments made on behalf of IMF with Kimberly Page, each of whom is a director of IMF. Mr. Abbe is the President of Iroquois Capital and has sole authority and responsibility for investments made on behalf of ICIG. Mr. Abbe is also managing member of Kensington Investment Partners LLC.

Beneficial ownership for IMF includes 1,491 shares of common stock, 200,960 shares of common stock issuable upon conversion of preferred stock and warrants to obtain 102,030 shares of common stock which are exercisable within 60 days of March 27, 2019. Beneficial ownership for ICIG includes 1,491 shares of common stock, 200,960 shares of common stock issuable upon conversion of preferred stock and warrants to obtain 57,446 shares of common stock which are exercisable within 60 days of March 27, 2019. Beneficial ownership for Kensington Investment Partners LLC includes warrants to obtain 1,127 shares of common stock which are exercisable within 60 days of March 27, 2019.

3

The shares and percentage included in the table report the number of shares that would be issuable without giving effect to the 9.99% blocker included in the preferred stock and warrants.

12.

Based on a Schedule 13G/A filed on April 5, 2019, by MintFunds, LLC, a Puerto Rico limited liability company (“MintFunds”), and Guy Gentile, who serves as the CEO and sole owner of MintFunds. The principal business address of the beneficial owner is located at Elizabeth Avenue & Bay Street, Nassau, Bahamas. Beneficial ownership includes sole voting and dispositive power over 342,821 shares.

13.

Based on a Schedule 13G filed on May 24, 2018 and on information known to the Company as of December 31, 2018, all of which information has been updated to reflect the 1-for-6 reverse stock split that was effected on March 8, 2019. The principal business address of the beneficial owner is Lettstrasse 32, FL-9490 Vaduz, Furstentums, Liechtenstein. Konrad Ackerman is the Director of Alpha Capital Anstalt.  Beneficial ownership includes 62,391 shares of common stock, 152,615 shares of common stock issuable upon conversion of preferred stock and warrants to obtain 80,054 shares of common stock.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information about the Company’s Amended and Restated 2014 Equity Incentive Plan (as amended, the “2014 Plan”):

Plan Category	(a)Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted average exercise price of outstanding options, warrants and rights	Number of securities available for future issuance under equity compensation plans excluding securities reflected in column (a)
Equity compensation plan approved by security holders	547,416	$ 18.30	159,213
Total	547,416	$ 18.30	159,213

4

PART IV

ITEM 15 – EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)(3) Exhibits

The following is a list of exhibits filed as part of this Annual Report on Form 10-K.

Exhibit
Number	Description
2.1	Agreement and Plan of Merger and Reorganization, dated September 6, 2017, by and among WSP International Incorporated, DC Acquisition Corporation, and the Company (incorporated by reference from Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 6, 2017).
2.2	Amendment No. 3 to Agreement and Plan of Merger, dated December 4, 2017, by and among WSP International Incorporated, DC Acquisition Corporation, and the Company (incorporated by reference from Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 6, 2017).
2.3	Form of Support Agreement, dated as of September 6, 2017, by and between the Company and certain stockholders named therein (incorporated by reference from Exhibit 2.2 to the Company’s Current Report on Form 8-K filed with the SEC on December 6, 2017).
2.4	Form of Support Agreement, dated as of September 6, 2017, by and between the Company and certain stockholders named therein (incorporated by reference from Exhibit 2.3 to the Company’s Current Report on Form 8-K filed with the SEC on December 6, 2017).
2.5	Form of Support Agreement, dated as of September 6, 2017, by and between the Company and certain stockholders named therein (incorporated by reference from Exhibit 2.4 to the Company’s Current Report on Form 8-K filed with the SEC on December 6, 2017).

5

3.1	Amended and Restated Certificate of Incorporation of the Company, as amended, dated March 8, 2019.
3.2	Amended and Restated Bylaws of the Registrant, as amended on July 26, 2018 (incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 1, 2018).
4.1	Form of Series K Common Stock Purchase Warrant (incorporated by reference from Exhibit 4.4 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2018).
4.2	Form of Warrant to Purchase Common Stock (incorporated by reference from Exhibit 4.1 to the Company’s Current Report on Form 8-K/A filed with the SEC on September 10, 2018).
4.3	Form of Warrant Amendment to Series H-4 Warrant (incorporated by reference from Exhibit 4.2 to the Company’s Current Report on Form 8-K/A filed with the SEC on September 10, 2018).
4.4	Form of Series I Warrant to Purchase Common Stock (incorporated by reference from Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 20, 2018).
4.5	Form of Warrant to Purchase Common Stock of WPCS International Incorporated (incorporated by reference from Exhibit 10.2 of the Company’s Current Report on Form 8-K filed December 22, 2016).
4.6	Form of Warrant to Purchase Common Stock (incorporated by reference from Exhibit 10.2 of the Company’s Current Report on Form 8-K filed April 4, 2017).
10.1	Stock Purchase Agreement, dated as of December 10, 2018, between DropCar, Inc. and World Professional Cabling Systems, LLC (incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K filed December 14, 2018).
10.2	Form of Securities Purchase Agreement, dated as of November 14, 2018, between DropCar, Inc. and Alpha Capital Anstalt (incorporated by reference from Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q filed November 14, 2018).

6

10.3	Securities Purchase Agreement, dated December 21, 2016, between WPCS International Incorporated and each purchaser identified therein (incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K filed December 22, 2016).
10.4	Registration Rights Agreement, dated December 21, 2016, by and among WPCS International Incorporated and the investors listed therein (incorporated by reference from Exhibit 10.3 of the Company’s Current Report on Form 8-K filed December 22, 2016).
10.5	Securities Purchase Agreement, dated March 30, 2017 (incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K filed April 4, 2017).
10.6	Registration Rights Agreement, dated March 30, 2017, by and among WPCS International Incorporated and the purchasers listed therein (incorporated by reference from Exhibit 10.3 of the Company’s Current Report on Form 8-K filed April 4, 2017).
10.7	Final form of the Repricing Offer Letter, dated December 4, 2017, from WPCS International Incorporated to each of Iroquois Master Fund, Iroquois Capital Investment Group, LLC and American Capital Management, LLC (incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K filed December 6, 2017).
10.8†	Form of Indemnification Agreement, by and between the Company and each of its directors and officers (incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K filed February 5, 2018.).
10.9†	Separation Agreement, dated January 30, 2018, by and between the Company and Sebastian Giordano (incorporated by reference from Exhibit 10.2 of the Company’s Current Report on Form 8-K filed February 5, 2018).
10.10†	Separation Agreement, dated January 30, 2018, by and between the Company and David Allen (incorporated by reference from Exhibit 10.3 of Company’s Current Report on Form 8-K filed February 5, 2018).
10.11†	Employment Agreement, by and between the Company and Spencer Richardson, dated as of September 6, 2017 (incorporated by reference from Exhibit 10.4 of the Company’s Current Report on Form 8-K filed February 5, 2018).

7

10.12†	Employment Agreement, by and between the Company and David Newman, dated as of September 6, 2017 (incorporated by reference from Exhibit 10.5 of the Company’s Current Report on Form 8-K filed February 5, 2018).
10.13†	Employment Agreement, by and between the Company and Paul Commons, dated as of January 22, 2018 (incorporated by reference to Exhibit 10.6 of Company’s Current Report on Form 8-K filed February 5, 2018).
10.14	Securities Purchase Agreement, dated March 8, 2018, between the Company and the purchasers named therein (incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K filed March 9, 2018).
10.15	Registration Rights Agreement, dated March 8, 2018, by and among the Company and the purchasers named therein (incorporated by reference from Exhibit 10.2 of the Company’s Current Report on Form 8-K filed March 9, 2018).
10.16	Form of Warrant Exchange Agreement (incorporated by reference from Exhibit 10.1 of Company’s Current Report on Form 8-K filed April 20, 2018).
10.17†	Consulting Agreement, dated as of July 11, 2018, by and between the Company and Ascentaur, LLC (incorporated by reference from Exhibit 10.1 of the Company’s Current Report on Form 8-K filed July 13, 2018).
23.1	Consent of EisnerAmper LLP (incorporated by reference from Exhibit 23.1 of the Company's Annual Report on Form 10-K filed on April 3, 2019).
31.1*	Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Executive Officer
31.2*	Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Financial And Accounting Officer
32.1*	Section 1350 Certification of Principal Executive Officer and Principal Financial Officer (This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference).
101*	Interactive Data Files of Financial Statements and Notes.

* Filed herewith.

† Management contract or compensatory plan or arrangement.

8

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	DROPCAR, INC.
Date: April 12, 2019	By:	/s/ Spencer Richardson
		Spencer Richardson
		(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated below and on the dates indicated.

Signature	Title	Date
/s/ Spencer Richardson	Chief Executive Officer	April 12, 2019
Spencer Richardson	(Principal Executive Officer)
/s/ Mark Corrao	Chief Financial Officer	April 12, 2019
Mark Corrao	(Principal Financial Officer)
/s/ Joshua Silverman	Chairman of the Board of Directors	April 12, 2019
Joshua Silverman
/s/ Sebastian Giordano
Sebastian Giordano	Director	April 12, 2019
/s/ David Newman
David Newman	Director, Chief Business Development Officer	April 12, 2019
/s/ Zvi Joseph
Zvi Joseph	Director	April 12, 2019
/s/ Solomon Mayer
Solomon Mayer	Director	April 12, 2019
/s/ Greg Schiffman
Greg Schiffman	Director	April 12, 2019

9

EX-31.1

Exhibit 31.1

CERTIFICATIONS UNDER SECTION 302

I, Spencer Richardson, certify that:

1. I have reviewed this annual report on Form 10-K/A of DropCar, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 12, 2019

/s/ Spencer Richardson

Spencer Richardson

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS UNDER SECTION 302

I, Mark Corrao, certify that:

1. I have reviewed this annual report on Form 10-K/A of DropCar, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 12, 2019

/s/ Mark Corrao

Mark Corrao

Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATIONS UNDER SECTION 906

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of DropCar, Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

Amendment No. 1 to the Annual Report for the year ended December 31, 2018 (the “Form 10-K/A”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-K/A fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: April 12, 2019                                        /s/ Spencer Richardson

Spencer Richardson

Chief Executive Officer

(Principal Executive Officer)

Dated: April 12, 2019                                        /s/ Mark Corrao

Mark Corrao

Chief Financial Officer

(Principal Financial and Accounting Officer)

XML

Document And Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2018	Mar. 27, 2019	Jun. 30, 2018
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY
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
Entity Shell Company	false
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Trading Symbol	DCAR
Entity Common Stock, Shares Outstanding		3,440,258
Entity Public Float			$ 5,724,980

XML

Consolidated Balance Sheets - USD ($)	Dec. 31, 2018	Dec. 31, 2017
CURRENT ASSETS:
Cash	$ 4,303,480	$ 372,011
Accounts receivable, net	295,626	187,659
Prepaid expenses and other current assets	328,612	51,532
Total current assets	4,927,718	611,202
Property and equipment, net	39,821	5,981
Capitalized software costs, net	659,092	589,584
Other assets	3,525	3,000
TOTAL ASSETS	5,630,156	1,209,767
CURRENT LIABILITIES:
Accounts payable and accrued expenses	2,338,560	1,820,731
Deferred revenue	253,200	236,433
Accrued interest	0	135,715
Total current liabilities	2,591,760	2,192,879
Convertible note payable, net of debt discount	0	3,506,502
TOTAL LIABILITIES	2,591,760	5,699,381
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock	0	27
Common stock, $0.0001 par value; 16,666,667 shares authorized, 1,633,394 and 374,285 issued and outstanding as of December 31, 2018 and 2017, respectively	980	225
Additional paid in capital	32,791,131	5,114,158
Accumulated deficit	(29,753,721)	(9,604,897)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)	3,038,396	(4,489,614)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	5,630,156	1,209,767
Series Seed Preferred Stock [Member]
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock	0	61
Series A Preferred Stock [Member]
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock	0	0
Series H Preferred Stock [Member]
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock	0	0
Series H-1 Preferred Stock [Member]
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock	0	0
Series H-2 Preferred Stock [Member]
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock	0	0
Series H-3 Preferred Stock [Member]
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock	3	0
Series H-4 Preferred Stock [Member]
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock	$ 163	$ 37

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2018	Dec. 31, 2017
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	25,000,000	25,000,000
Common stock, shares issued	2,245,711	9,800,364
Common stock, shares outstanding	2,245,711	9,800,364
Series Seed Preferred Stock [Member]
Preferred stock, shares authorized	275,691	275,691
Preferred stock, shares issued	0	275,691
Preferred stock, shares outstanding	0	275,691
Series A Preferred Stock [Member]
Preferred stock, shares authorized	642,728	642,728
Preferred stock, shares issued	0	611,944
Preferred stock, shares outstanding	0	611,944
Series H Preferred Stock [Member]
Preferred stock, shares authorized	8,500	8,500
Preferred stock, shares issued	8	0
Preferred stock, shares outstanding	8	0
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	0
Preferred stock, shares outstanding	2,189	0
Series H-4 Preferred Stock [Member]
Preferred stock, shares authorized	30,000	30,000
Preferred stock, shares issued	26,619	0
Preferred stock, shares outstanding	26,619	0

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Consolidated Statement of Operations - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Income Statement [Abstract]
NET REVENUES	$ 6,077,667	$ 4,285,514
COST OF REVENUES	7,863,673	4,543,456
GROSS LOSS	(1,786,006)	(257,942)
OPERATING EXPENSES
Research and development	322,269	90,075
Selling, general and administrative expenses	11,350,406	5,747,969
Depreciation and amortization	354,657	218,660
TOTAL OPERATING EXPENSES	12,027,332	6,056,704
OPERATING LOSS	(13,813,338)	(6,314,646)
Interest expense, net	(1,081,226)	(1,326,160)
LOSS FROM CONTINUING OPERATIONS	(14,894,564)	(7,640,806)
DISCONTINUED OPERATIONS
Income from operations of discontinued component	315,119	0
Loss on sale of component	(4,169,718)	0
LOSS ON DISCONTINUED OPERATIONS	(3,854,599)	0
NET LOSS	(18,749,163)	(7,640,806)
Deemed dividend on exchange of warrants	(1,399,661)	0
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS	(20,148,824)	(7,640,806)
AMOUNTS ATTRIBUTABLE TO COMMON STOCKHOLDERS
Loss from continuing operations	(16,294,225)	(7,640,806)
Loss from discontinued operations	(3,854,599)	0
NET LOSS	$ (20,148,824)	$ (7,640,806)
NET LOSS PER COMMON SHARE, BASIC AND DILUTED
Continuing operations	$ (12.04)	$ (23.61)
Discontinued operations	(2.85)	0.00
NET LOSS PER COMMON SHARE, BASIC AND DILUTED	$ (14.89)	$ (23.61)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED	1,352,826	323,633

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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]	Subscription Receivable [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Beginning balance, shares at Dec. 31, 2016	275,691	530,065	0	0	0	272,720
Beginning balance, amount at Dec. 31, 2016	$ 27	$ 53	$ 0	$ 0	$ 0	$ 27	$ (69,960)	$ 2,117,237	$ (1,964,091)	$ 83,293
Issuance of Series A Preferred stock, shares		73,845
Issuance of Series A Preferred stock, amount		$ 7					69,960	150,001		219,968
Issuance of Series A Preferred stock for services, shares		8,034
Issuance of Series A Preferred stock for services, amount		$ 1						24,999		25,000
Fair value of warrants issued with convertible notes								2,138,931		2,138,931
Issuance of common stock to officers, shares						101,565
Issuance of common stock to officers, amount						$ 10		546,090		546,100
Stock based compensation								137,900		137,900
Net loss									(7,640,806)	(7,640,806)
Ending balance, shares at Dec. 31, 2017	275,691	611,944	0	0	0	374,285
Ending balance, amount at Dec. 31, 2017	$ 27	$ 61	$ 0	$ 0	$ 0	$ 37	0	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
Conversion of accrued interest into common stock, shares						4,518
Conversion of accrued interest into common stock, amount								159,584		159,584
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		9,792,139		9,792,188
Conversion of outstanding Preferred Stock in connection with merger, shares	(275,691)	(611,944)				147,939
Conversion of outstanding Preferred Stock in connection with merger, amount	$ (27)	$ (61)				$ 15		73
Issuance of Series H-3 preferred stock in connection with merger, shares			8	2,189
Issuance of Series H-4 preferred stock and warrants in private placement, net of costs, shares					26,843
Issuance of Series H-4 preferred stock and warrants in private placement, net of costs, amount					$ 3			5,898,336		5,898,339
Issuance of common shares in connection with exercise of H-4 warrants, shares						260,116
Issuance of common shares in connection with exercise of H-4 warrants, amount						$ 26		936,397		936,423
Issuance of Pre-Funded Series K Warrants net of costs of $15,000, amount								968,329		968,329
Stock based compensation for options issued to employees								434,555		434,555
Stock based compensation for restricted stock units issued to employees								2,954,124		2,954,124
Stock based compensation for common stock issued to service providers, amount						60,262
Stock based compensation for common stock issued to service providers, shares						$ 6		478,979		478,985
Deemed dividend on exchange of merger warrants to Series I warrants and common stock, shares						48,786
Deemed dividend on exchange of merger warrants to Series I warrants and common stock, amount						$ 5		316,856		(316,861)
Deemed dividend on modification of H-4 Warrants and issuance of Series J Warrants								1,019,040	(1,019,040)
Deemed dividend on modification of H-4 Warrants								63,760	(63,760)
Conversion of preferred stock into common stock, shares					(224)	14,653
Conversion of preferred stock into common stock, amount						$ 1		(1)
Net loss									(18,749,163)	(18,749,163)
Ending balance, shares at Dec. 31, 2018	0	0	8	2,189	26,619	1,633,394
Ending balance, amount at Dec. 31, 2018	$ 0	$ 0	$ 0	$ 0	$ 3	$ 163	$ 0	$ 32,791,951	$ (29,753,721)	$ 3,038,396

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Statements of Cash Flows - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (18,749,163)	$ (7,640,806)
Loss from discontinued operations and disposal	(3,854,599)	0
Loss from continuing operations	(14,894,564)	(7,640,806)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	359,654	218,660
Bad debt provision	0	42,057
Amortization of debt discount	176,000	1,190,633
Stock based compensation	3,793,555	709,000
Non-cash interest expense	696,013	0
Changes in operating assets and liabilities:
Accounts receivable	(107,967)	(168,006)
Prepaid expenses and other current assets	(208,349)	(32,915)
Accounts payable and accrued expenses	460,829	1,172,306
Accrued interest	0	135,715
Deferred income	16,767	155,157
NET CASH USED IN OPERATING ACTIVITIES - CONTINUING OPERATIONS	(9,708,097)	(4,218,199)
NET CASH USED IN OPERATING ACTIVITIES - DISCONTINUED OPERATIONS	(858,821)	0
NET CASH USED IN OPERATING ACTIVITIES	(10,566,918)	(4,218,199)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(43,109)	(6,600)
Capitalization of software costs	(419,892)	(251,324)
Cash received upon acquisition	4,947,023	0
Proceeds from sale of component, net of cash relinquished	1,995,634	0
Increase in other assets	(525)	0
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES - CONTINUING OPERATIONS	6,479,131	(257,924)
NET CASH USED IN INVESTING ACTIVITIES - DISCONTINUED OPERATIONS	(33,576)	0
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	6,445,555	(257,924)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of common stock	300,000	0
Proceeds from the sale of Series H-4 preferred stock and warrants	6,000,000	0
Financing costs from the sale of Series H-4 preferred stock and warrants	(101,661)	0
Proceeds from issuance of common stock in connection with exercise of H-4 warrants	936,423	0
Proceeds from the sale of Series K Warrants	983,333	0
Financing costs from the sale of Series K warrants	(15,000)	0
Proceeds from issuance of Series A Preferred Stock and subscription receivable	0	219,968
Proceeds from issuance of convertible notes and warrants	0	4,840,000
Offering costs - Convertible Notes	0	(263,200)
NET CASH PROVIDED BY FINANCING ACTIVITIES - CONTINUING OPERATIONS	8,103,095	4,796,768
NET CASH USED IN FINANCING ACTIVITIES - DISCONTINUED OPERATIONS	(50,263)	0
NET CASH PROVIDED BY FINANCING ACTIVITIES	8,052,832	4,796,768
Net increase in cash	3,931,469	320,645
Cash, beginning of period	372,011	51,366
Cash, end of period	4,303,480	372,011
NON-CASH FINANCING ACTIVITIES:
Fair value of stock warrants issued with convertible notes	0	2,138,931
Fair value of common stock sold to founders	0	684,000
Accrued offering costs	0	122,000
Accrued capitalized software costs	0	108,979
Stock issued to WPCS Shareholder in the merger net of cash received of $4,947,023	4,845,200	0
Liabilities assumed in connection with the sale of component	568,468	0
Series H-4 offering cost paid in H-4 shares and warrants	3,682,502	0
Stock issued for convertible note payable	159,584	0
Stock issued for accrued interest on convertible note payable	1,399,656	0
Deemed dividends on warrant issuances and modification	$ 1,399,632	$ 0

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The Company

12 Months Ended

Dec. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

The Company

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 10, 2018, the Company signed a definitive agreement with a private corporation and completed the sale on December 24, 2018 of 100% of the Suisun City Operations, its wholly owned subsidiary, for a total cash consideration of $3.5 million. The sale of Suisun City Operations represented a strategic shift that has had a major effect on the Company’s operations, and therefore, was presented as discontinued operations in the 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).

Basis of Presentation and Principles of Consolidation

These consolidated financial statements of Dropcar, Inc., a Delaware corporation, are prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”) and include the accounts of its wholly-owned subsidiaries. All significant intercompany transactions and amounts have been eliminated. The results of businesses acquired and disposed of are included in the consolidated financial statements from the date of the acquisition or up to the date of disposal, respectively. During the year, the Company completed a reverse merger with WPCS International Incorporated, the parent company of WPCS International – Suisun City, Inc. (the “Suisun City Operations”), a wholly-owned subsidiary. Subsequently, the Company completed the sale of the wholly-owned Suisun City Operations and is reported in discontinued operations. See Note 3 to the financial statements for further details.

Acquisition Accounting

The fair value of WPCS assets acquired and liabilities assumed was based upon management’s estimates assisted by an independent third-party valuation firm. As of December 31, 2018, the acquisition accounting was completed and there were no further adjustments to the assumptions. Critical estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from customer relationships and the trade name, present value and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

The purchase price allocation of $9.8 million was as follows:

Fair value of equity consideration, 506,423 WPCS common shares	$	9,792,000
Liability assumed: notes payable		158,000
Total purchase price consideration	$	9,950,000
Tangible assets
Net working capital (1)	$	6,664,000
Deferred revenue		(2,300,000	)
Property and equipment		376,000
Intangible assets (2)
Customer contracts		1,200,000
Trade name		600,000
Goodwill		3,410,000
Total allocation of purchase price consideration	$	9,950,000

(1) Net working capital consisted of cash of $4,947,000; accounts receivable and contract assets of $3,934,000; other assets of $317,000; accounts payable and accrued liabilities of $2,534,000.

(2) The useful lives related to the acquired customer relationships and trade name were expected to be approximately 10 years.

DropCar Operating

DropCar Operating 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, DropCar Operating 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. DropCar Operating’s Mobility Cloud also provides access to private application programming interfaces (“APIs”) which automotive-businesses can use to integrate DropCar Operating’s logistics and field support directly into their own applications and processes natively, to create more seamless client experiences. The Company has not earned any revenues from Mobility Cloud in 2018.

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, DropCar Operating 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 DropCar Operating 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.

Concentrations

Accounts Receivable

The Company’s concentration of accounts receivable are as follows:

	As of December 31,
	2018			2017
Customer A		58	%		21	%
Customer B		23	%		15	%

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Liquidity and Going Concern

12 Months Ended

Dec. 31, 2018

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 December 31, 2018, the Company has an accumulated deficit of $29.8 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 March 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 Form 10-K.

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.

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with 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 intangibles, property and equipment, 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 December 31, 2018 and 2017, the accounts receivable reserve was approximately $2,000 and $40,000, respectively.

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. The Company adopted ASC 606 effective January 1, 2018, using modified retrospective basis and the cumulative effect was immaterial to the financial statements.

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.

DropCar Operating 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

DropCar Operating 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

DropCar Operating 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

DropCar Operating 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

DropCar Operating 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 provide the delivery service of the vehicles.

Disaggregated Revenues

The following table presents our revenues from contracts with customers disaggregated by revenue source.

	Years ended December 31,
	2018		2017
DropCar Operating Subscription Services	$	4,409,037	$	3,446,651
DropCar Operating Services On-Demand		1,668,630		838,863
Total Revenue(1)(2)	$	6,077,667	$	4,285,514

(1) Represents revenues recognized by type of services.

(2) All revenues are generated in the United States.

The following presents our revenues from B2C and B2B customers.

	Years ended December 31,
	2018		2017
DropCar Operating B2C	$	5,019,002	$	3,829,423
DropCar Operating B2B		1,058,665		456,091
DropCar Operating Revenue	$	6,077,667	$	4,285,514

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 intangible 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 years ended December 31, 2018 and 2017.

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 December 31, 2018 and 2017, 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. Although in the normal course of business the Company is required to make estimates and assumptions for certain tax items which cannot be fully determined at period end, the Company did not identify items for which the income tax effects of the Tax Act have not been completed as of December 31, 2018 and, therefore, considers its accounting for the tax effects of the Tax Act on its deferred tax assets and liabilities to be complete as of December 31, 2018.

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, convertible notes and accounts payable due to their short-term nature.

Loss Per Share

Basic 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 December 31,
	2018		2017
Common stock equivalents:
Common stock options		302,773		-
Series A, H-1, H-3, H-4, I, J, K and Merger common stock purchase warrants		863,084		-
Series H, H-3, and H-4 Convertible Preferred Stock		10,502,883		-
Restricted shares (unvested)		244,643
Convertible notes		-		136,789
Series seed preferred stock		-		45,949
Series A preferred stock		-		101,991
Totals		11,913,383		284,729

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 $0.3 million and $0.1 million for the years ended December 31, 2018 and 2017, respectively.

Adoption of New Accounting Standards 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. Under the new standard, revenue is recognized at the time a good or service is transferred to a customer for the amount of consideration for which the entity expects to be entitled for that specific good or service. Entities may use a full retrospective approach or on a prospective basis and report the cumulative effect as of the date of adoption. The Company adopted the new standard on January 1, 2018, using prospective basis and the cumulative effect was immaterial to the financial statements. The new standard also requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts.

In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features. These amendments simplify the accounting for certain financial instruments with down round features. The amendments require companies to disregard the down round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. The adoption of this standard on January 1, 2018, did not have a material effect on the Company’s financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The new guidance dictates that, when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, it should be treated as an acquisition or disposal of an asset. The guidance was adopted as of January 1, 2018, and did not have a material effect on the Company’s 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 February 2016, the Financial Accounting Standards Board (FASB) established Accounting Standards Codification (ASC) Topic 842, Leases, as subsequently amended, by issuing Accounting Standards Update (ASU) No. 2016-02, which requires lessees to now recognize operating leases on the balance sheet and disclose key information about leasing arrangements. The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

The new standard is effective for the Company on January 1, 2019, with early adoption permitted. The Company expects to adopt the new standard on its effective date. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either: (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. The Company expects to adopt the new standard on January 1, 2019 and use the effective date as the date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019.

The new standard provides a number of optional practical expedients in transition. The Company expects to elect the ‘package of practical expedients’, which permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company does not expect to elect the use-of- hindsight or the practical expedient pertaining to land easements; the latter not being applicable to the Company.

The Company expects that this standard will have an immaterial effect on its financial statements. While the Company continues to assess all of the effects of adoption, it currently believes the most significant effects relate to: (1) the recognition of new ROU assets and lease liabilities on its balance sheet for its operating leases; (2) providing significant new disclosures about its leasing activities. The Company does not expect a significant change in its leasing activities between now and adoption.

On adoption, the Company currently expects to recognize additional lease liabilities between and corresponding ROU assets of less than $15,000 each based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases.

The new standard also provides practical expedients for an entity’s ongoing accounting. The Company currently expect to elect the short-term lease recognition exemption for its corporate office leases and garage leases. This means, for those leases that qualify, the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition.

The Company also currently expects to elect the practical expedient to not separate lease and non-lease components for all of its 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 Company will adopt ASU 2018-07 effective January 1, 2019, and the adoption of this ASU will not have a material effect on its consolidated financial statements.

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.

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Discontinued Operations and Disposition of Operating Segment

12 Months Ended

Dec. 31, 2018

Discontinued Operations And Disposition Of Operating Segment

Discontinued Operations and Disposition of Operating Segment

On December 10, 2018, the Company signed a definitive agreement with a private corporation and completed the sale on December 24, 2018, of 100% of the corporate capital of Suisun City Operations, a wholly owned subsidiary of Dropcar, Inc, for a total cash consideration of $3.5 million. The Company recognized the following loss on sale of component on the date of sale:

Sales price	$	3,500,000
Commissions and various transaction costs		(332,220	)
Net sales proceeds		3,167,780
Carrying amounts of assets, net of liabilities		7,337,498	*
Loss on sale of Suisun City Operations	$	(4,169,718	)

* The carrying amounts of assets included cash of $1,504,366; accounts receivable and contract asset of $4,177,568; prepaid expenses and other current assets of $57,486; property and equipment of $295,206; intangibles and goodwill of $5,048,247; carrying amounts of liabilities included accounts payable and accrued liabilities of $3,688,831 and loans of $56,544.

The operations and cash flows of the Suisun City Operations were eliminated from ongoing operations following its sale. The operating results of the Suisun City Operations for the year ended December 31, 2018 were as follows:

Revenues	$	13,730,252
Cost of revenues		10,836,754
Gross profit		2,893,498
Selling, general and administrative expenses		2,285,661
Depreciation and amortization		287,830
Total Operating Expenses		2,573,491
Interest expense, net		4,888
Net income from discontinued operations	$	315,119

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Capitalized Software

12 Months Ended

Dec. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Capitalized Software

Capitalized software costs consists of the following as of December 31, 2018 and 2017:

	As of December 31,
	2018			2017
Software	$	1,324,275		$	904,383
Accumulated amortization		(665,183	)		(314,799	)
Total	$	659,092		$	589,584

Amortization expense for the years ended December 31, 2018 and 2017, was $350,385 and $218,660, respectively.

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Convertible Notes Payable

12 Months Ended

Dec. 31, 2018

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 year ended December 31, 2018, the Company recorded $672,144 as interest expense in relation to the lock-up agreements in the accompanying consolidated statement of operations.

At December 31, 2018 and December 31, 2017, the aggregate carrying value of the Notes was $0 and $3,506,502, respectively.

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and 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 years ended December 31, 2018 and 2017, rent expense for the Company’s New York City office was $158,000 and $53,000, respectively.

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.

On February 9, 2016, a DropCar employee was transporting a customer’s vehicle when the vehicle caught fire. On November 22, 2016, an insurance company (as subrogee of the vehicle’s owner) filed for indemnification and subrogation against the Company in the Supreme Court of the State of New York County of New York. Management believes that it is not responsible for the damage caused by the vehicle fire and that the fire was not due to any negligence on the part of the DropCar. In 2018, the parties reached a settlement the case was closed.

Other

As of January 1, 2017, the Company had accrued approximately $160,000 for the potential settlement of multiple employment disputes. During the year ended December 31, 2017, approximately $137,000 of this amount was settled upon payment. An additional $73,000 was expensed and accrued for potential settlements during the year ended December 31, 2017. As of December 31, 2017, the Company had accrued approximately $96,000 for the settlement of multiple employment disputes. During the year ended December 31, 2018, approximately $70,000 of this amount was settled upon payment. An additional $207,000 was expensed and accrued for settlements during the year ended December 31, 2018. As of December 31, 2018, approximately $232,000 remains accrued for the settlement of employment disputes. As of December 31, 2018, 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 the year ended December 31, 2019.

At December 31, 2018, the Company has approximately $19,370,000 of operating loss carryforwards for both federal and New York state tax purposes that may be applied against future taxable income. The Company also has approximately $18,140,000 of unused operating loss carryforwards for New York City purposes. The net operating loss carryforwards will begin to expire in the year 2036 if not utilized prior to that date. There is no provision for income taxes because the Company has historically incurred operating losses and maintains a full valuation allowance against its net deferred tax assets. The valuation allowance increased by approximately $4,851,000 and $2,173,000 during the years 2018 and 2017, respectively, and was approximately $7,911,000 and $3,060,000 at December 31, 2018 and 2017, respectively.

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 December 31, 2018, the Company has accrued approximately $200,000 in relation to these matters.

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Income Taxes

12 Months Ended

Dec. 31, 2018

Income Taxes

Income Taxes

The Company files corporate income tax returns in the United States (federal) and in New York. The Company is subject to federal, state and local income tax examinations by tax authorities from inception.

At December 31, 2018, the Company has approximately $15,554,000 of operating loss carryforwards for both federal and New York state tax purposes that may be applied against future taxable income. The Company also has approximately $14,591,000 of unused operating loss carryforwards for New York City purposes. The net operating loss carryforwards will begin to expire in the year 2036 if not utilized prior to that date. There is no provision for income taxes because the Company has historically incurred operating losses and maintains a full valuation allowance against its net deferred tax assets. The valuation allowance increased by approximately $3,639,000 and $2,173,000 during the years 2018 and 2017, respectively, and was approximately $6,699,000 and $3,060,000 at December 31, 2018 and 2017, respectively.

A reconciliation of the statutory U.S. Federal rate to the Company's effective tax rate is as follows:

	December 31,
	2018			2017
Federal income tax benefit at statutory rate		21.00	%		34.00	%
State income tax, net of federal benefits		7.80	%		11.35	%
Permanent items		(9.88	)%		(4.09	)%
Impact of tax law change		-	%		(12.46	)%
Other		0.49	%		(0.36	)%
Change in valuation allowance		(19.41	)%		(28.44	)%
Provision for income taxes		-			-

The tax effect of temporary differences that gave rise to significant portion of the deferred tax assets were as follows:

	December 31,
	2018			2017
Net operating loss carryforwards - Federal	$	3,266,000		$	1,968,000
Net operating loss carryforwards - State		2,142,000			1,273,000
Stock based compensation		1,335,000			-
Capitalized Software		(182,000	)		(204,000	)
Settlement reserve		122,000			8,000
Fixed Asset Depreciation		1,000			-
Allowance for doubtful accounts		15,000			15,000
Valuation allowance		(6,699,000	)		(3,060,000	)
Net deferred tax assets	$	-		$	-

On December 22, 2017, the Tax Cuts and Jobs Act (“The Act”), was signed into law by President Trump. The Act includes a number of provisions, including the lowering of the U.S. corporate tax rate from 35 percent to 21 percent, effective January 1, 2018 and the establishment of a territorial-style system for taxing foreign-source income of domestic multinational corporations. In December 2017, the SEC issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Act (“SAB118”), which allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment. The Company remeasured its deferred tax assets and liabilities as of December 31, 2017, applying the reduced corporate income tax rate and recorded a provisional decrease to the deferred tax assets of $1,228,000, with a corresponding adjustment to the valuation allowance. In the fourth quarter of 2018, we completed our analysis to determine the effect of the Tax Act and there were no material adjustments as of December 31, 2018.

The federal and state net operating loss may be subject to the limitations provided in the Internal Revenue Code (“IRC”) Sections 382 and 383. The net operating loss and tax credit carryforwards are subject to review by the Internal Revenue Service in accordance with the provisions of Section 382 of the Internal Revenue Code. Under this Internal Revenue Code section, substantial changes in the Company’s ownership may limit the amount of net operating loss carryforwards that could be utilized annually in the future to offset the Company’s taxable income. Specifically, this limitation may arise in the event of a cumulative change in ownership of the Company of more than 50% within a three-year period. Any such annual limitation may significantly reduce the utilization of the Company’s net operating loss carryforwards before they expire. The closing of the Company’s merger alone or together with transactions that have occurred or that may occur in the future, may trigger an ownership change pursuant to Section 382, which could limit the amount of net operating loss carryforwards that could be utilized annually in the future to offset the Company’s taxable income, if any. Any such limitation as the result of the Company’s additional sales of common stock by the Company could have a material adverse effect on the Company’s results of operations in future years.

There are no liabilities from unrecognized tax benefits included in the Company's consolidated balance sheets as of December 31, 2018 and 2017, and therefore the Company has not incurred any penalties or interest.

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Stockholders' Equity

12 Months Ended

Dec. 31, 2018

Stockholders' Equity Note [Abstract]

Stockholders' Equity

Common Stock

On January 18, 2018, the Company sold 10,057 shares of common stock for proceeds of $300,000.

On January 30, 2018, the Company converted $3,682,502, the net carrying value of the principal balance of $4,840,000 convertible notes payable, into 136,785 shares of common stock just prior to the Merger.

On April 19, 2018, the Company entered into separate Warrant Exchange Agreements with the holders of existing warrants issued in the Merger 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. 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 (a) the 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. See below under “Warrants” for further details.

During the year ended December 31, 2018, the Company converted $159,584 of accrued interest related to the convertible notes into 4,518 shares of common stock.

During the year ended December 31, 2018, the Company granted 3,333 shares of common stock to a service provider and recorded $31,800 as general and administrative expense in the Company’s consolidated statements of operations.

On September 4, 2018, the Company issued 260,116 shares of common stock from the exercise of Series H-4 Warrants.

On December 17, 2018, the Company issued 14,653 shares of common stock from the conversion of 37 shares of Series H-4 Convertible Preferred Stock. 

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 45,949 shares of Series Seed Preferred Stock into common stock in connection with the Merger.

Series A

On January 30, 2018, the Company converted 611,994 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 provision.

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 1 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 $3,696 and is convertible into shares of the Company’s common stock (“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 9,486 Series H-1 Preferred Stock and designated 3,498 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 $3,312 and is convertible into shares of common stock, equal to the stated value divided by the conversion price of $5.52 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 2,547,200 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.

On November 15, 2018, the initial conversion price of Series H-4 Shares was adjusted upon obtaining stockholder approval in accordance with Nasdaq rules and regulations which resulted in the 25,475 Series H-4 Shares being convertible into 10,535,880 shares of common stock of the Company.

On December 17, 2018, an investor converted 224 shares of Series H-4 into 87,920 shares of Common Stock.

Stock Based Compensation

Amended and Restated 2014 Equity Incentive Plan

The Company has one equity incentive plan, the 2014 Equity Incentive Plan (the “Plan”), with 706,629 shares of common stock reserved for issuance. As of December 31, 2018, there were 159,213 shares available for grant under the Company’s equity plan. The Plan was amended in 2018 to increase the number of shares of common stock available for issuance thereunder by 285,417, which amendment was approved by the Company’s stockholders on November 15, 2018.

Service Based Restricted Stock Units

On February 28, 2018, the Company issued 244,643 restricted stock units (“RSUs”) to two members of management. The RSUs revised vesting date was extended to May 17, 2019 (see Note 11). 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 vesting period.

At December 31, 2018, unamortized stock compensation for the RSUs was $289,842, which will be recognized over the next three months.

Service Based Common Stock

On January 30, 2018 the Company issued 213,707 and 35,558 and shares of common stock to Alpha Capital Anstalt and Palladium Capital Advisors, respectively, in connection with the Merger. For the Alpha Capital Anstalt issuance, the Company recorded 90% of the issuance or 192,336 common shares as cost of capital raise and 10% of the issuance or 21,371 common shares as advisory services. The merger costs in the amount of $1,510,722 was recorded as a reduction to additional paid in capital and the advisory service costs in the amount of $167,858 was recorded as general and administrative expense in the consolidated statement of operations. For the Palladium Capital Advisors issuance, the Company recorded $279,327 as general and administrative expense in the consolidated statement of operations.

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 year ended December 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.

Consulting Agreement

The Company entered into a two-month consulting agreement with a vendor to receive public relations services beginning on December 24, 2018. The compensation terms are $20,000 cash payment and 33,333 shares of common stock. In accordance with ASC 505, the shares were valued as of December 31, 2018, the reporting date. The Company recorded $6,982 as sales and marketing expense in the consolidated statement of operations for the year ended December 31, 2018. The Company paid the cash upon entering the agreement and will issue the shares of common stock upon completion of the contract term. The contracts total value is accrued ratably over the two-month service period from December 24, 2018 through February 24, 2019, and the Company will issue the shares upon completion of the services.

Modification Expense

The Company modified 60,516 options that were subject to expiration within 90 days following the sale of Suisun City Operations for WPCS employees. The Company extended the expiration date in accordance with the options’ original terms. The Company recorded a modification expense related to the extension of the expiration date and recorded $74,109 as a selling, general and administrative expense for the year ended December 31, 2018 as part of discontinued operations in the consolidated statement of operations. The expense was based on the change in the fair value before and after the modification using the Black-Scholes option-pricing model on the date of the modification using the following assumptions: pre-modification (a) exercise prices of $28.56 to $633.60, (b) fair value of common stock $2.40, (c) expected volatility of 231%, (d) dividend yield of 0%, (e) risk-free interest rate of 2.45%, (f) expected life of 0.25 years; and post-modification (a) exercise prices of $285.56 to $633.60, (b) fair value of common stock $2.40, (c) expected volatility of 152%, (d) dividend yield of 0%, (e) risk-free interest rate of 2.62% to 2.69%, (f) expected life of 6.02 years to 8.35 years.

Employee and Non-employee Stock Options

The following table summarizes stock option activity during the years ended December 31, 2018 and 2017:

	Shares Underlying Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2017		-		$	-		-		-
Granted		-			-		-		-
Outstanding at December 31, 2017		-			-		-		-
Acquired in Merger		133,711			36.42		3.88		-
Granted		214,239			5.58		9.72		-
Forfeited		(45,178	)		11.64		-		-
Outstanding at December 31, 2018		302,772		$	18.3		7.20		-

At December 31, 2018, unamortized stock compensation for stock options was approximately $249,219, with a weighted-average recognition period of 2.08 years.

At December 31, 2018, outstanding options to purchase 266,394 shares of common stock were exercisable with a weighted-average exercise price per share of $19.08.

The following table sets forth total non-cash stock-based compensation for common stock, RSUs, options and warrants issued to employees and non-employees by operating statement classification for the years ended December 31, 2018 and 2017:

	Year ended December 31,
	2018		2017
Research and development	$	12,636	$	-
Selling, general and administrative		3,780,919		708,998
Stock-based compensation from discontinued operations		74,109		-
Total	$	3,867,664	$	708,998

Stock option pricing model

The fair value of the stock options granted during the year ended December 31, 2018, was estimated at the date of grant using the Black-Scholes options pricing model with the following assumptions:

Fair value of common stock	$1.62-$13.26
Expected volatility	118.10% - 151.79%
Dividend yield	0%
Risk-free interest	2.79% - 3.00%
Expected life (years)	5.13 - 5.50

No options were granted during the year ended December 31, 2017.

Warrants

Merger Warrants

The warrants to purchase common stock (the “Merger Warrants”) issued in connection with the convertible debt in 2017 are fully vested and exercisable for five years through November 14, 2021. The warrants were valued using the Black-Scholes option-pricing model with the following inputs: exercise price of $59.04; fair market value of underlying stock of $16.68 and $17.40; expected term of 5 years; risk free rate of 1.61%, 1.70%, and 2.01%; volatility of 161%, 147%, and 150%; and a dividend yield of 0.00%. The company accounted for these warrants as debt discount the Company recorded amortization of $176,000 and $1,190,663 for the years ended December 31, 2018 and 2017, respectively.

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 (a) the 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.

A summary of the Company’s warrants to purchase common stock is as follows:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)
January 1, 2017		-		$	-		-
Granted, Merger Warrants		146,358			59.04		4.50
Outstanding, December 31, 2017		146,358			59.04		4.50
Acquired, H-1 warrants		50,744			29.04		1.55
Acquired, H-3 warrants		14,001			33.12		3.25
Granted, H-4 warrants		447,383			3.60		4.18
Granted, I warrants		73,178			13.80		2.30
Granted, Reload warrants		260,116			6.00		2.60
Granted, K warrants		277,778			0.06		*
Exercised, H-4 warrants		(260,116	)		3.60		-
Retired, Merger Warrants		(146,358	)		59.04		-
Outstanding, December 31, 2018		863,084		$	6.00		2.51

* The Series K warrants do not have an expiration date.

The warrants expire through the years 2020-2024, except for the Series K Warrant which has no expiration date.

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Related Parties

12 Months Ended

Dec. 31, 2018

Related Parties

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 year ended December 31, 2018, the Company recorded $147,754 as general and administrative related to this consulting agreement. As of December 31, 2018, approximately $51,000 was paid in cash and approximately $97,000 is recorded as accounts payable. Of this amount, Ascentaur received $90,000 in relation to the sale of Suisun City Operations (see Note 3).

During 2018 and 2017, the Company has entered into various financial transactions with Alpha Capital Anstalt through the issuance of $1,350,000 convertible notes in 2017, issued 213,707 shares of common stock in connection with the merger on January 30, 2018 for merger related services and cost of providing capital, issued 11,093 Series A Preferred Stock for $2,612,500 in the March 8, 2018 PIPE transaction, and was issued 277,778 Series K prefunded common stock warrants on November 14, 2018 for proceeds of approximately $983,000.

Palladium Capital Advisors has provided investment banking services in connection with the merger on January 30, 2018 and received 35,558 shares of common stock for merger related services, received 1,371 Series H-4 preferred shares and warrants in the March 8, 2018 PIPE transaction for advisory services and .

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Subsequent Events

12 Months Ended

Dec. 31, 2018

Subsequent Events [Abstract]

Subsequent Events

The Company has analyzed its operations subsequent to December 31, 2018 and noted the following subsequent events:

On January 10, 2019, the Company entered into a consulting agreement for investor relation services in which the Company agreed to issue 75,000 shares of the Company’s common stock. On January 28, 2019, the Board of Directors issued 75,000 shares of common stock in accordance with this agreement.

On January 25, 2019, the Company entered into a consulting agreement for investor relation services in which the Company agreed to issue 8,333 shares of the Company’s common stock. On January 28, 2019, the Board of Directors issued 8,333 shares of common stock in accordance with this agreement.

On January 30, 2019, the Company issued 49,536 options each to the CEO and Chief Business Development Officer, 99,072 options in the aggregate, which vest over 720 days with one-eighth (1/8) shares vesting every 90 days, to purchase shares of the Company’s common stock at $2.3124, the closing price of the Company’s common stock on January 30, 2019. The options were issued in accordance with the CEO’s and Chief Business Officer’s employment agreements.

On January 30, 2019, the Company received $4,010 in cash proceeds upon the exercise of 66,667 Series K Warrants and issued 66,667 shares of common stock.

On February 23, 2019, the board of directors approved the issuance of 33,333 shares of common stock in accordance with the December 24, 2018 consulting agreement (see Note 9, “Consulting Agreement”).

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 the Company’s outstanding shares of common stock. 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.

On March 12, 2019, the Company received $12,667 in cash proceeds upon the exercise of 211,111 Series K Warrants and issued 211,111 shares of common stock.

On March 26, 2019, the Board of Directors, with the consent of the Chief Executive Officer (“CEO”)and Chief Business Officer, agreed to amend the vesting period for the RSUs issued on February 28, 2018 to vest in full on May 17, 2019 (see Note 9).

On March 26, 2019, the Company entered into a Securities Purchase Agreement with certain existing investors, pursuant to which the Company agreed to issue and sell, 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 gross proceeds of approximately $2.0 million before the deduction of offering expenses.

Subsequent to the year ended December 31, 2018, the Company issued 1,412,420 shares of common stock upon the conversion of 21,591 Series H-4 Shares.

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Restatements of Previously Issued Condensed Consolidated Financial Statements

12 Months Ended

Dec. 31, 2018

Restatements Of Previously Issued Condensed Consolidated Financial Statements

Restatements of Previously Issued Condensed Consolidated Financial Statements

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 6), and ii) shares of common stock issued to Alpha Capital Anstalt and Palladium Capital Advisors (see Note 9, 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 Sheets at the periods ended March 31, 2018, June 30, 2018, and September 30, 2018, had the adjustments been made in the corresponding quarters:  

	March 31, 2018
	As reported			Adjustment			As restated
Additional paid in capital	$	25,080,301		$	1,119,294		$	26,199,595
Accumulated deficit	$	(12,966,338	)	$	(1,119,294	)	$	(14,085,632	)

	June 30, 2018
	As reported			Adjustment			As restated
Additional paid in capital	$	26,464,626		$	1,119,294		$	27,583,920
Accumulated deficit	$	(17,275,449	)	$	(1,119,294	)	$	(18,394,743	)

	September 30, 2018
	As reported			Adjustment			As restated
Additional paid in capital	$	29,207,669		$	1,119,294		$	30,326,963
Accumulated deficit	$	(21,623,262	)	$	(1,119,294	)	$	(22,742,556	)

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
Selling, general and administrative expense	$	3,067,608		$	447,150		$	3,514,758
Total operating expenses	$	3,203,685		$	447,150		$	3,650,835
Operating loss	$	(2,951,188	)	$	(447,150	)	$	(3,398,338	)
Interest income (expense), net	$	(410,253	)	$	(672,144	)	$	(1,082,397	)
Net loss	$	(3,361,411	)	$	(1,119,294	)	$	(4,480,735	)
Net loss attributable to common stockholders	$	-		$	-		$	-
Net loss per common shares, basic and diluted	$	(3.35	)	$	(1.11	)	$	(4.46	)

The following tables sets forth the effects of the adjustments on affected items within the Company’s previously reported Condensed Consolidated Interim Statements of Operations for the six months ended June 30, 2018 and nine months ended September 30, 2018, had the adjustments been made in the appropriate quarter: 

	Six Months Ended June 30, 2018
	As reported			Adjustment			As restated
Selling, general and administrative expense	$	7,101,731		$	447,150		$	7,548,881
Total operating expenses	$	7,406,418		$	447,150		$	7,853,568
Operating loss	$	(6,943,738	)	$	(447,150	)	$	(7,390,888	)
Interest income (expense), net	$	(409,953	)	$	(672,144	)	$	(1,082,097	)
Net loss	$	(7,353,691	)	$	(1,119,294	)	$	(8,472,985	)
Net loss attributable to common stockholders	$	(7,670,552	)	$	(1,119,294	)	$	(8,789,985	)
Net loss per common shares, basic and diluted	$	(6.57	)	$	(0.96	)	$	(7.53	)

	Nine Months Ended September 30, 2018
	As reported			Adjustment			As restated
Selling, general and administrative expense	$	10,426,604		$	447,150		$	10,873,754
Total operating expenses	$	10,905,941		$	447,150		$	11,353,091
Operating loss	$	(10,269,338	)	$	(447,150	)	$	(10,716,488	)
Interest income (expense), net	$	(413,076	)	$	(672,144	)	$	(1,085,220	)
Net loss	$	(10,682,464	)	$	(1,119,294	)	$	(11,801,758	)
Net loss attributable to common stockholders	$	(12,018,365	)	$	(1,119,294	)	$	(13,137,659	)
Net loss per common shares, basic and diluted	$	(9.52	)	$	(0.89	)	$	(10.41	)

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Use Of Estimates

The preparation of consolidated financial statements in conformity with 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 intangibles, property and equipment, 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 December 31, 2018 and 2017, the accounts receivable reserve was approximately $2,000 and $40,000, respectively.

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. The Company adopted ASC 606 effective January 1, 2018, using modified retrospective basis and the cumulative effect was immaterial to the financial statements.

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.

DropCar Operating 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

DropCar Operating 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

DropCar Operating 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

DropCar Operating 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

DropCar Operating 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 provide the delivery service of the vehicles.

Disaggregated Revenues

The following table presents our revenues from contracts with customers disaggregated by revenue source.

	Years ended December 31,
	2018		2017
DropCar Operating Subscription Services	$	4,409,037	$	3,446,651
DropCar Operating Services On-Demand		1,668,630		838,863
Total Revenue(1)(2)	$	6,077,667	$	4,285,514

(1) Represents revenues recognized by type of services.

(2) All revenues are generated in the United States.

The following presents our revenues from B2C and B2B customers.

	Years ended December 31,
	2018		2017
DropCar Operating B2C	$	5,019,002	$	3,829,423
DropCar Operating B2B		1,058,665		456,091
DropCar Operating Revenue	$	6,077,667	$	4,285,514

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 intangible 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 years ended December 31, 2018 and 2017.

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 December 31, 2018 and 2017, 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. Although in the normal course of business the Company is required to make estimates and assumptions for certain tax items which cannot be fully determined at period end, the Company did not identify items for which the income tax effects of the Tax Act have not been completed as of December 31, 2018 and, therefore, considers its accounting for the tax effects of the Tax Act on its deferred tax assets and liabilities to be complete as of December 31, 2018.

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, convertible notes and accounts payable due to their short-term nature.

Loss Per Share

Basic 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 December 31,
	2018		2017
Common stock equivalents:
Common stock options		302,773		-
Series A, H-1, H-3, H-4, I, J, K and Merger common stock purchase warrants		863,084		-
Series H, H-3, and H-4 Convertible Preferred Stock		10,502,883		-
Restricted shares (unvested)		244,643
Convertible notes		-		136,789
Series seed preferred stock		-		45,949
Series A preferred stock		-		101,991
Totals		11,913,383		284,729

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 $0.3 million and $0.1 million for the years ended December 31, 2018 and 2017, respectively.

Adoption of New Accounting Standards

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. Under the new standard, revenue is recognized at the time a good or service is transferred to a customer for the amount of consideration for which the entity expects to be entitled for that specific good or service. Entities may use a full retrospective approach or on a prospective basis and report the cumulative effect as of the date of adoption. The Company adopted the new standard on January 1, 2018, using prospective basis and the cumulative effect was immaterial to the financial statements. The new standard also requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts.

In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features. These amendments simplify the accounting for certain financial instruments with down round features. The amendments require companies to disregard the down round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. The adoption of this standard on January 1, 2018, did not have a material effect on the Company’s financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The new guidance dictates that, when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, it should be treated as an acquisition or disposal of an asset. The guidance was adopted as of January 1, 2018, and did not have a material effect on the Company’s 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 February 2016, the Financial Accounting Standards Board (FASB) established Accounting Standards Codification (ASC) Topic 842, Leases, as subsequently amended, by issuing Accounting Standards Update (ASU) No. 2016-02, which requires lessees to now recognize operating leases on the balance sheet and disclose key information about leasing arrangements. The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

The new standard is effective for the Company on January 1, 2019, with early adoption permitted. The Company expects to adopt the new standard on its effective date. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either: (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. The Company expects to adopt the new standard on January 1, 2019 and use the effective date as the date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019.

The new standard provides a number of optional practical expedients in transition. The Company expects to elect the ‘package of practical expedients’, which permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company does not expect to elect the use-of- hindsight or the practical expedient pertaining to land easements; the latter not being applicable to the Company.

The Company expects that this standard will have an immaterial effect on its financial statements. While the Company continues to assess all of the effects of adoption, it currently believes the most significant effects relate to: (1) the recognition of new ROU assets and lease liabilities on its balance sheet for its operating leases; (2) providing significant new disclosures about its leasing activities. The Company does not expect a significant change in its leasing activities between now and adoption.

On adoption, the Company currently expects to recognize additional lease liabilities between and corresponding ROU assets of less than $15,000 each based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases.

The new standard also provides practical expedients for an entity’s ongoing accounting. The Company currently expect to elect the short-term lease recognition exemption for its corporate office leases and garage leases. This means, for those leases that qualify, the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition.

The Company also currently expects to elect the practical expedient to not separate lease and non-lease components for all of its 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 Company will adopt ASU 2018-07 effective January 1, 2019, and the adoption of this ASU will not have a material effect on its consolidated financial statements.

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.

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The Company (Tables)

12 Months Ended

Dec. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of recognized identified assets acquired and liabilities assumed

Fair value of equity consideration, 506,423 WPCS common shares	$	9,792,000
Liability assumed: notes payable		158,000
Total purchase price consideration	$	9,950,000
Tangible assets
Net working capital (1)	$	6,664,000
Deferred revenue		(2,300,000	)
Property and equipment		376,000
Intangible assets (2)
Customer contracts		1,200,000
Trade name		600,000
Goodwill		3,410,000
Total allocation of purchase price consideration	$	9,950,000

Concentration of accounts receivable

	As of December 31,
	2018			2017
Customer A		58	%		21	%
Customer B		23	%		15	%

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Disaggregation of revenue

	Years ended December 31,
	2018		2017
DropCar Operating Subscription Services	$	4,409,037	$	3,446,651
DropCar Operating Services On-Demand		1,668,630		838,863
Total Revenue(1)(2)	$	6,077,667	$	4,285,514

	Years ended December 31,
	2018		2017
DropCar Operating B2C	$	5,019,002	$	3,829,423
DropCar Operating B2B		1,058,665		456,091
DropCar Operating Revenue	$	6,077,667	$	4,285,514

Schedule of antidilutive securities excluded from computation of earnings per share

	As of December 31,
	2018		2017
Common stock equivalents:
Common stock options		302,773		-
Series A, H-1, H-3, H-4, I, J, K and Merger common stock purchase warrants		863,084		-
Series H, H-3, and H-4 Convertible Preferred Stock		10,502,883		-
Restricted shares (unvested)		244,643
Convertible notes		-		136,789
Series seed preferred stock		-		45,949
Series A preferred stock		-		101,991
Totals		11,913,383		284,729

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Discontinued Operations and Disposition of Operating Segment (Tables)

12 Months Ended

Dec. 31, 2018

Discontinued Operations And Disposition Of Operating Segment Tables Abstract

Schedule of discontinued operations

Sales price	$	3,500,000
Commissions and various transaction costs		(332,220	)
Net sales proceeds		3,167,780
Carrying amounts of assets, net of liabilities		7,337,498	*
Loss on sale of Suisun City Operations	$	(4,169,718	)

Revenues	$	13,730,252
Cost of revenues		10,836,754
Gross profit		2,893,498
Selling, general and administrative expenses		2,285,661
Depreciation and amortization		287,830
Total Operating Expenses		2,573,491
Interest expense, net		4,888
Net income from discontinued operations	$	315,119

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Capitalized Software (Tables)

12 Months Ended

Dec. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of capitalized computer software, net

	As of December 31,
	2018			2017
Software	$	1,324,275		$	904,383
Accumulated amortization		(665,183	)		(314,799	)
Total	$	659,092		$	589,584

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Income Taxes Tables Abstract

Schedule of effective income tax rate renconciliation

	December 31,
	2018			2017
Federal income tax benefit at statutory rate		21.00	%		34.00	%
State income tax, net of federal benefits		7.80	%		11.35	%
Permanent items		(9.88	)%		(4.09	)%
Impact of tax law change		-	%		(12.46	)%
Other		0.49	%		(0.36	)%
Change in valuation allowance		(19.41	)%		(28.44	)%
Provision for income taxes		-			-

Deferred tax assets

	December 31,
	2018			2017
Net operating loss carryforwards - Federal	$	3,266,000		$	1,968,000
Net operating loss carryforwards - State		2,142,000			1,273,000
Stock based compensation		1,335,000			-
Capitalized Software		(182,000	)		(204,000	)
Settlement reserve		122,000			8,000
Fixed Asset Depreciation		1,000			-
Allowance for doubtful accounts		15,000			15,000
Valuation allowance		(6,699,000	)		(3,060,000	)
Net deferred tax assets	$	-		$	-

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Stockholders' Equity (Tables)

12 Months Ended

Dec. 31, 2018

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 January 1, 2017		-		$	-		-		-
Granted		-			-		-		-
Outstanding at December 31, 2017		-			-		-		-
Acquired in Merger		133,711			36.42		3.88		-
Granted		214,239			5.58		9.72		-
Forfeited		(45,178	)		11.64		-		-
Outstanding at December 31, 2018		302,772		$	18.3		7.20		-

Schedule of share-based compensation

	Year ended December 31,
	2018		2017
Research and development	$	12,636	$	-
Selling, general and administrative		3,780,919		708,998
Stock-based compensation from discontinued operations		74,109		-
Total	$	3,867,664	$	708,998

Schedule of share-based payment award, stock options, valuation assumptions

Fair value of common stock	$1.62-$13.26
Expected volatility	118.10% - 151.79%
Dividend yield	0%
Risk-free interest	2.79% - 3.00%
Expected life (years)	5.13 - 5.50

Schedule of common stock warrant activity

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)
January 1, 2017		-		$	-		-
Granted, Merger Warrants		146,358			59.04		4.50
Outstanding, December 31, 2017		146,358			59.04		4.50
Acquired, H-1 warrants		50,744			29.04		1.55
Acquired, H-3 warrants		14,001			33.12		3.25
Granted, H-4 warrants		447,383			3.60		4.18
Granted, I warrants		73,178			13.80		2.30
Granted, Reload warrants		260,116			6.00		2.60
Granted, K warrants		277,778			0.06		*
Exercised, H-4 warrants		(260,116	)		3.60		-
Retired, Merger Warrants		(146,358	)		59.04		-
Outstanding, December 31, 2018		863,084		$	6.00		2.51

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Restatements of Previously Issued Condensed Consolidated Financial Statements (Tables)

12 Months Ended

Dec. 31, 2018

Segment Reporting [Abstract]

Schedule of restatements

The following tables sets forth the effects of the adjustments on affected items within the Company’s previously reported Condensed Consolidated Interim Balance Sheets at the periods ended March 31, 2018, June 30, 2018, and September 30, 2018, had the adjustments been made in the corresponding quarters:  

	March 31, 2018
	As reported			Adjustment			As restated
Additional paid in capital	$	25,080,301		$	1,119,294		$	26,199,595
Accumulated deficit	$	(12,966,338	)	$	(1,119,294	)	$	(14,085,632	)

	June 30, 2018
	As reported			Adjustment			As restated
Additional paid in capital	$	26,464,626		$	1,119,294		$	27,583,920
Accumulated deficit	$	(17,275,449	)	$	(1,119,294	)	$	(18,394,743	)

	September 30, 2018
	As reported			Adjustment			As restated
Additional paid in capital	$	29,207,669		$	1,119,294		$	30,326,963
Accumulated deficit	$	(21,623,262	)	$	(1,119,294	)	$	(22,742,556	)

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
Selling, general and administrative expense	$	3,067,608		$	447,150		$	3,514,758
Total operating expenses	$	3,203,685		$	447,150		$	3,650,835
Operating loss	$	(2,951,188	)	$	(447,150	)	$	(3,398,338	)
Interest income (expense), net	$	(410,253	)	$	(672,144	)	$	(1,082,397	)
Net loss	$	(3,361,411	)	$	(1,119,294	)	$	(4,480,735	)
Net loss attributable to common stockholders	$	-		$	-		$	-
Net loss per common shares, basic and diluted	$	(3.35	)	$	(1.11	)	$	(4.46	)

The following tables sets forth the effects of the adjustments on affected items within the Company’s previously reported Condensed Consolidated Interim Statements of Operations for the six months ended June 30, 2018 and nine months ended September 30, 2018, had the adjustments been made in the appropriate quarter: 

	Six Months Ended June 30, 2018
	As reported			Adjustment			As restated
Selling, general and administrative expense	$	7,101,731		$	447,150		$	7,548,881
Total operating expenses	$	7,406,418		$	447,150		$	7,853,568
Operating loss	$	(6,943,738	)	$	(447,150	)	$	(7,390,888	)
Interest income (expense), net	$	(409,953	)	$	(672,144	)	$	(1,082,097	)
Net loss	$	(7,353,691	)	$	(1,119,294	)	$	(8,472,985	)
Net loss attributable to common stockholders	$	(7,670,552	)	$	(1,119,294	)	$	(8,789,985	)
Net loss per common shares, basic and diluted	$	(6.57	)	$	(0.96	)	$	(7.53	)

	Nine Months Ended September 30, 2018
	As reported			Adjustment			As restated
Selling, general and administrative expense	$	10,426,604		$	447,150		$	10,873,754
Total operating expenses	$	10,905,941		$	447,150		$	11,353,091
Operating loss	$	(10,269,338	)	$	(447,150	)	$	(10,716,488	)
Interest income (expense), net	$	(413,076	)	$	(672,144	)	$	(1,085,220	)
Net loss	$	(10,682,464	)	$	(1,119,294	)	$	(11,801,758	)
Net loss attributable to common stockholders	$	(12,018,365	)	$	(1,119,294	)	$	(13,137,659	)
Net loss per common shares, basic and diluted	$	(9.52	)	$	(0.89	)	$	(10.41	)

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The Company (Details)	12 Months Ended
	Dec. 31, 2018 USD ($)
Fair value of equity consideration, 4,685,164 common shares	$ 9,792,000
Liability assumed: notes payable	158,000
Total purchase price consideration	9,950,000
Tangible assets
Net working capital	6,664,000
Deferred revenue	(2,300,000)
Property and equipment	376,000
Intangible assets
Goodwill	3,410,000
Customer Contracts [Member]
Intangible assets
Business combination, recognized finite-lived intangibles	1,200,000
Trade Names [Member]
Intangible assets
Business combination, recognized finite-lived intangibles	$ 600,000

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The Company (Details 1) - Accounts Receivable [Member]	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Customer A [Member]
Concentration risk, percentage	58.00%	21.00%
Customer B [Member]
Concentration risk, percentage	23.00%	15.00%

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Summary of Significant Accounting Policies (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Revenues from contracts with customers	$ 6,077,667	$ 4,285,514
DropCar Operating Subscription Services [Member]
Revenues from contracts with customers	4,409,037	3,446,651
DropCar Operating Services OnDemand [Member]
Revenues from contracts with customers	1,668,630	838,863
DropCar Operating B2C [Member]
Revenues from contracts with customers	5,019,002	1,058,665
DropCar Operating B2B [Member]
Revenues from contracts with customers	$ 3,829,423	$ 456,091

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Summary of Significant Accounting Policies (Details 1) - shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Antidilutive securities excluded	11,913,383	284,729
Common stock options
Antidilutive securities excluded	302,773	0
Series A H1 H3 H4 I and Merger common stock purchase warrants [Member]
Antidilutive securities excluded	863,084	0
Series H H3 and H4 Convertible Preferred Stock [Member]
Antidilutive securities excluded	10,502,883	0
Restricted Stock [Member]
Antidilutive securities excluded	244,643	0
Series Seed Preferred Stock [Member]
Antidilutive securities excluded	0	136,789
Series A Preferred Stock [Member]
Antidilutive securities excluded	0	45,949
Convertible Debt Securities [Member]
Antidilutive securities excluded	0	101,991

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Summary of Significant Accounting Policies (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018
Accounting Policies [Abstract]
Accumulated deficit	$ (29,753,721)	$ (9,604,897)	$ (22,742,556)	$ (18,394,743)	$ (14,085,632)
Federal statutory income tax rate, percent	21.00%	34.00%
Research and development expenses	$ 322,269	$ 90,075

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Discontinued Operations and Disposition of Operating Segment (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Discontinued Operations And Disposition Of Operating Segment Details Abstract
Sales price	$ 3,500,000
Commissions and various transaction costs	(332,220)
Net sales proceeds	3,167,780
Carrying amounts of assets, net of liabilities	7,337,498
Loss on sale of Suisun City Operations	(4,169,718)	$ 0
Revenues	13,730,252
Cost of revenues	10,836,754
Gross profit	2,893,498
Selling	2,285,661
Depreciation and amortization	287,830
Total Operating Expenses	2,573,491
Interest expense, net	4,888
Net income from discontinued operations	$ 315,119	$ 0

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Capitalized Software (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
Software	$ 1,324,275	$ 904,383
Accumulated amortization	(665,183)	(314,799)
Total	$ 659,092	$ 589,584

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Capitalized Software (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 350,385	$ 218,660

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Convertible Notes Payable (Details Narrative) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Debt Disclosure [Abstract]
Convertible notes payable, noncurrent	$ 0	$ 3,506,502

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Commitments (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Commitments and Contingencies Disclosure [Abstract]
Rent expense	$ 158,000	$ 53,000

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Income Taxes (Details)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Income Taxes Details Abstract
Federal income tax benefit at statutory rate	21.00%	34.00%
State income tax, net of federal benefits	7.80%	11.35%
Permanent items	(9.88%)	(4.09%)
Impact of tax law change	0.00%	(12.46%)
Other	0.49%	(0.36%)
Change in valuation allowance	(19.41%)	(28.44%)
Provision for income taxes	0.00%	0.00%

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Income Taxes (Details 1) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Income Taxes Details 1Abstract
Net operating loss carryforwards - Federal	$ 3,266,000	$ 1,968,000
Net operating loss carryforwards - State	2,142,000	1,273,000
Stock based compensation	1,335,000	0
Capitalized Software	(182,000)	(204,000)
Settlement reserve	122,000	8,000
Fixed Asset Depreciation	1,000	0
Allowance for doubtful accounts	15,000	15,000
Valuation allowance	(6,699,000)	(3,060,000)
Net deferred tax assets	$ 0	$ 0

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Stockholders' Equity (Details) - $ / shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Stockholders' Equity Note [Abstract]
Stock options outstanding, beginning	0	0
Stock options acquired in merger	133,711
Stock options granted	214,239
Stock options forfeited	(45,178)
Stock options outstanding, ending	302,772	0
Weighted average exercise price outstanding, beginning	$ 0.00	$ 0.00
Weighted average exercise price acquired in merger	36.42	0.00
Weighted average exercise price granted	5.58
Weighted average exercise price forfeited	11.64
Weighted average exercise price outstanding, ending	$ 18.30	$ 0.00
Weighted average remaining contractual life acquired in merger	3 years 10 months 17 days
Weighted average remaining contractual life granted	9 years 8 months 19 days
Weighted average remaining contractual life, ending	7 years 2 months 12 days

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Stockholders' Equity (Details 1) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Non-cash stock-based compensation	$ 3,867,664	$ 708,998
Research and development
Non-cash stock-based compensation	12,636	0
Selling, general and administrative
Non-cash stock-based compensation	3,780,919	708,998
Stock-based compensation from discontinued operations [Member]
Non-cash stock-based compensation	$ 74,109	$ 0

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Stockholders' Equity (Details 2)	12 Months Ended
	Dec. 31, 2018 $ / shares
Dividend yield	0.00%
Minimum [Member]
Fair value of common stock	$ 1.62
Expected volatility	111.81%
Risk-free interest	2.79%
Expected life (years)	5 years 1 month 17 days
Maximum [Member]
Fair value of common stock	$ 13.26
Expected volatility	151.79%
Risk-free interest	3.00%
Expected life (years)	5 years 6 months

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Stockholders' Equity (Details 3) - $ / shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Warrants outstanding, beginning	146,358	0
Warrants outstanding, ending	863,084	146,358
Weighted average exercise price outstanding, beginning	$ 59.04	$ 0.00
Weighted average exercise price outstanding, ending	$ 6.00	$ 59.04
Weighted Average Remaining Contractual Life (years)	2 years 6 months 4 days	4 years 6 months
Acquired H1 Warrants [Member]
Warrants acquired	50,744
Weighted average exercise price acquired	$ 29.04
Weighted Average Remaining Contractual Life (years)	1 year 6 months 18 days
Acquired H3 Warrants [Member]
Warrants acquired	14,001
Weighted average exercise price acquired	$ 33.12
Weighted Average Remaining Contractual Life (years)	3 years 3 months
Granted H4 warrants [Member]
Warrants granted	447,383
Weighted average exercise price granted	$ 3.60
Weighted Average Remaining Contractual Life (years)	4 years 2 months 5 days
Granted I warrants [Member]
Warrants granted	73,178
Weighted average exercise price granted	$ 13.80
Weighted Average Remaining Contractual Life (years)	2 years 3 months 18 days
Granted Reload warrants [Member]
Warrants granted	260,116
Weighted average exercise price granted	$ 6.00
Weighted Average Remaining Contractual Life (years)	2 years 7 months 6 days
Granted K warrants [Member]
Warrants granted	277,778
Weighted average exercise price granted	$ 0.06
Exercised H-4 warrants [Member]
Warrants granted	(260,116)
Weighted average exercise price granted	$ 3.60
Retired Merger Warrants [Member]
Warrants retired	(146,358)
Weighted average exercise price Retired	$ 59.04
Granted Merger Warrants [Member]
Warrants outstanding, beginning	146,358
Warrants acquired		146,358
Warrants outstanding, ending		146,358
Weighted average exercise price granted		$ 59.04
Weighted Average Remaining Contractual Life (years)		4 years 6 months

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Stockholders' Equity (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Conversion of accrued interest into common stock, amount	$ 159,584
Stock based compensation for common stock issued to service provider, amount		$ 25,000
Unamortized stock compensation, options	$ 249,219
Unamortized stock compensation, period of recognition	2 years 29 days
Series H-4 offering cost paid in H-4 shares and warrants	$ 0	108,979
Stock based compensation for RSUs and options issued to employees and non-employees	3,793,555	$ 709,000
Selling, General and Administrative Expenses [Member]
Stock based compensation for common stock issued to service provider, amount	31,800
Restricted Stock Units (RSUs) [Member]
Unamortized stock compensation, restricted stock units	$ 289,842
Common Stock [Member]
Conversion of accrued interest into common stock, shares	4,518

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Restatements of Previously Issued Condensed Consolidated Financial Statements (Details) - USD ($)	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Additional paid in capital		$ 30,326,963	$ 27,583,920	$ 26,199,595
Accumulated deficit	$ (29,753,721)	(22,742,556)	(18,394,743)	(14,085,632)	$ (9,604,897)
As Reported
Additional paid in capital		29,207,669	26,464,626	25,080,301
Accumulated deficit		(21,623,262)	(17,275,449)	(12,966,338)
Adjustment
Additional paid in capital		1,119,294	1,119,294	1,119,294
Accumulated deficit		$ (1,119,294)	$ (1,119,294)	$ (1,119,294)

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Restatements of Previously Issued Condensed Consolidated Financial Statements (Details 1) - USD ($)	3 Months Ended	6 Months Ended	9 Months Ended	12 Months Ended
	Mar. 31, 2018	Jun. 30, 2018	Sep. 30, 2018	Dec. 31, 2018	Dec. 31, 2017
Selling, general and administrative expense	$ 3,514,758	$ 7,548,881	$ 10,873,754	$ 11,350,406	$ 5,747,969
Total operating expenses	3,650,835	7,853,568	11,353,091	12,027,332	6,056,704
Operating loss	(3,398,338)	(7,390,888)	(10,716,488)	(13,813,338)	(6,314,646)
Interest income (expense), net	(1,082,397)	(1,082,097)	(1,085,220)	(1,081,226)	(1,326,160)
Net loss	(4,480,735)	(8,472,985)	(11,801,758)	(18,749,163)	(7,640,806)
Net loss attributable to common stockholders	$ 0	$ (8,789,985)	$ (13,137,659)	$ (20,148,824)	$ (7,640,806)
Net loss per common shares, basic and diluted	$ (4.46)	$ (7.53)	$ (10.41)	$ (14.89)	$ (23.61)
As Reported
Selling, general and administrative expense	$ 3,067,608	$ 7,101,731	$ 10,426,604
Total operating expenses	3,203,685	7,406,418	10,905,941
Operating loss	(2,951,188)	(6,943,738)	(10,269,338)
Interest income (expense), net	(410,253)	(409,953)	(413,076)
Net loss	(3,361,411)	(7,353,691)	(10,682,464)
Net loss attributable to common stockholders	$ 0	$ (7,670,552)	$ (12,018,365)
Net loss per common shares, basic and diluted	$ (3.35)	$ (6.57)	$ (9.52)
Adjustment
Selling, general and administrative expense	$ 447,150	$ 447,150	$ 447,150
Total operating expenses	447,150	447,150	447,150
Operating loss	(447,150)	(447,150)	(447,150)
Interest income (expense), net	(672,144)	(672,144)	(672,144)
Net loss	(1,119,294)	(1,119,294)	(1,119,294)
Net loss attributable to common stockholders	$ 0	$ (1,119,294)	$ (1,119,294)
Net loss per common shares, basic and diluted	$ (1.11)	$ (0.96)	$ (0.89)