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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.