Delaware
|
98-0204758
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common stock par value $0.0001 per share
|
DCAR
|
The Nasdaq Stock Market
|
Large accelerated filer
|
|
☐
|
|
Accelerated filer
|
|
☐
|
Non-accelerated filer
|
|
☑
|
|
Smaller reporting company
|
|
☑
|
|
|
|
|
Emerging
growth company
|
|
☐
|
|
|
PageNo.
|
PART I – FINANCIAL INFORMATION
|
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Part II – OTHER INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
DropCar, Inc., and Subsidiaries
|
||
Condensed
Consolidated Balance Sheets
|
||
(Unaudited)
|
||
|
|
|
|
June
30,
|
December
31,
|
|
2019
|
2018
|
|
|
|
ASSETS
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
Cash
|
$3,448,501
|
$4,303,480
|
Accounts
receivable, net
|
395,146
|
295,626
|
Prepaid expenses
and other current assets
|
367,068
|
328,612
|
Total current
assets
|
4,210,715
|
4,927,718
|
|
|
|
Property and
equipment, net
|
30,787
|
39,821
|
Capitalized
software costs, net
|
548,652
|
659,092
|
Operating lease
right-of-use asset
|
6,619
|
-
|
Other
assets
|
3,525
|
3,525
|
|
|
|
TOTAL
ASSETS
|
$4,800,298
|
$5,630,156
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
Accounts payable
and accrued expenses
|
$2,028,818
|
$2,338,560
|
Deferred
revenue
|
303,744
|
253,200
|
Lease
liability
|
960
|
-
|
Total current
liabilities
|
2,333,522
|
2,591,760
|
|
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY:
|
|
|
Preferred stock,
$0.0001 par value, 5,000,000 shares authorized
|
|
|
Series seed
preferred stock, 842,405 shares authorized, zero issued and
outstanding
|
-
|
-
|
Series A preferred
stock, 1,963,877 shares authorized, zero issued and
outstanding
|
-
|
-
|
Convertible Series
H, 8,500 shares designated, 8 shares issued and
outstanding
|
-
|
-
|
Convertible Series
H-1, 9,488 shares designated zero shares issued and
outstanding
|
-
|
-
|
Convertible Series
H-2, 3,500 shares designated zero shares issued and
outstanding
|
-
|
-
|
Convertible Series
H-3, 8,461 shares designated 2,189 shares issued and
outstanding
|
-
|
-
|
Convertible Series
H-4, 30,000 shares designated 5,028 and 26,619 shares issued and
outstanding as of June 30, 2019 and December 31, 2018,
respectively
|
1
|
3
|
Common stock,
$0.0001 par value; 100,000,000 shares authorized, 4,042,713 and
1,633,394 issued and outstanding as of June 30, 2019 and December
31, 2018, respectively
|
404
|
163
|
Additional paid in
capital
|
35,146,753
|
32,791,951
|
Accumulated
deficit
|
(32,680,382)
|
(29,753,721)
|
|
|
|
TOTAL
STOCKHOLDERS' EQUITY
|
2,466,776
|
3,038,396
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$4,800,298
|
$5,630,156
|
DropCar,
Inc., and Subsidiaries
|
||||
Condensed Consolidated Statements of
Operations
|
||||
(Unaudited)
|
||||
|
|
|
|
|
|
For the Three
Months
Ended June
30,
|
For the Six
Months
Ended June
30,
|
||
|
2019
|
2018
|
2019
|
2018
|
|
|
(Restated)
|
|
(Restated)
|
|
|
|
|
|
SERVICE
REVENUES
|
$1,246,544
|
$1,873,997
|
$2,345,987
|
$3,566,072
|
|
|
|
|
|
COST
OF REVENUE
|
1,115,787
|
2,528,781
|
2,242,832
|
4,824,562
|
|
|
|
|
|
GROSS
PROFIT (LOSS)
|
130,757
|
(654,784)
|
103,155
|
(1,258,490)
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
Research and
development
|
48,330
|
63,971
|
117,312
|
178,132
|
Selling, general
and administrative expenses
|
945,388
|
3,341,601
|
2,718,485
|
6,252,398
|
Depreciation and
amortization
|
98,967
|
84,177
|
206,716
|
163,409
|
TOTAL
OPERATING EXPENSES
|
1,092,685
|
3,489,749
|
3,042,513
|
6,593,939
|
|
|
|
|
|
OPERATING
LOSS
|
(961,928)
|
(4,144,533)
|
(2,939,358)
|
(7,852,429)
|
|
|
|
|
|
Other income
(expense), net
|
10,973
|
718
|
12,697
|
(1,081,499)
|
|
|
|
|
|
LOSS
FROM CONTINUING OPERATIONS
|
(950,955)
|
(4,143,815)
|
(2,926,661)
|
(8,933,928)
|
|
|
|
|
|
DISCONTINUED
OPERATIONS
|
|
|
|
|
Income from
operations of discontinued component
|
-
|
151,565
|
-
|
460,943
|
INCOME
FROM DISCONTINUED OPERATIONS
|
-
|
151,565
|
-
|
460,943
|
|
|
|
|
|
Income
taxes
|
-
|
-
|
-
|
-
|
|
|
|
|
|
NET
LOSS
|
$(950,955)
|
$(3,992,250)
|
$(2,926,661)
|
$(8,472,985)
|
|
|
|
|
|
Deemed dividend on
exchange of warrants
|
-
|
(316,861)
|
-
|
(316,861)
|
|
|
|
|
|
NET
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
$(950,955)
|
$(4,309,111)
|
$(2,926,661)
|
$(8,789,846)
|
|
|
|
|
|
LOSS
PER SHARE FROM CONTINUING OPERATIONS:
|
|
|
|
|
Basic
|
$(0.24)
|
$(3.12)
|
$(0.96)
|
$(7.65)
|
Diluted
|
$(0.24)
|
$(3.12)
|
$(0.96)
|
$(7.65)
|
EARNINGS
PER SHARE FROM DISCONTINUED OPERATIONS:
|
|
|
|
|
Basic
|
$-
|
$0.11
|
$-
|
$0.39
|
Diluted
|
$-
|
$0.11
|
$-
|
$0.39
|
NET
LOSS PER SHARE:
|
|
|
|
|
Basic
|
$(0.24)
|
$(3.24)
|
$(0.96)
|
$(7.53)
|
Diluted
|
$(0.24)
|
$(3.24)
|
$(0.96)
|
$(7.53)
|
WEIGHTED
AVERAGE SHARES OUTSTANDING
|
|
|
|
|
Basic
|
3,954,152
|
1,328,654
|
3,040,993
|
1,167,432
|
Diluted
|
3,954,152
|
1,328,654
|
3,040,993
|
1,167,432
|
DropCar Inc., and
Subsidiaries
|
||||||||||||||||||||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
EQUITY
|
||||||||||||||||||||||||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series Seed
|
Series A
|
Series H
|
Series H-3
|
Series H-4
|
|
|
Additional
|
|
|
|||||
|
Preferred Stock
|
Preferred Stock
|
Preferred Stock
|
Preferred Stock
|
Preferred Stock
|
Common Stock
|
Paid-in
|
Accumulated
|
|
||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
(Deficit)
|
Total
|
Balances,
January 1, 2019
|
-
|
-
|
-
|
-
|
8
|
-
|
2,189
|
-
|
26,619
|
3
|
1,633,394
|
163
|
32,791,951
|
(29,753,721)
|
3,038,396
|
Issuance of
common stock for cash net of costs of $15,000
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
478,469
|
48
|
1,984,953
|
-
|
1,985,001
|
Exercise of
warrants
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
277,778
|
28
|
16,639
|
-
|
16,667
|
Conversion of
Series H-4 preferred stock into common stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(21,591)
|
(2)
|
1,412,420
|
141
|
(139)
|
-
|
-
|
Stock based
compensation for options issued to employees
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(19,361)
|
-
|
(19,361)
|
Stock based
compensation for restricted stock units issued to
employees
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
289,842
|
-
|
289,842
|
Stock based
compensation for common stock issued to service
providers
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
116,666
|
12
|
222,188
|
-
|
222,200
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,975,706)
|
(1,975,706)
|
Balance, March
31, 2019
|
-
|
-
|
-
|
-
|
8
|
-
|
2,189
|
-
|
5,028
|
1
|
3,918,727
|
392
|
35,286,073
|
(31,729,427)
|
3,557,039
|
Issuance of
common stock upon vesting of restricted stock
units
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
244,644
|
24
|
(24)
|
-
|
-
|
Common stock
reserved and retired for excess tax benefits from stock based
compensation
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(120,658)
|
(12)
|
(183,321)
|
-
|
(183,333)
|
Stock based
compensation for options issued to employees
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
44,025
|
-
|
44,025
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(950,955)
|
(950,955)
|
Balance, June
30, 2019
|
-
|
$-
|
-
|
$-
|
8
|
$-
|
2,189
|
$-
|
5,028
|
$1
|
4,042,713
|
$404
|
$35,146,753
|
$(32,680,382)
|
$2,466,776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
January 1, 2018
|
275,691
|
$27
|
611,944
|
$61
|
-
|
$-
|
-
|
$-
|
-
|
$-
|
374,285
|
$37
|
$5,115,158
|
$(9,604,897)
|
$(4,489,614)
|
Issuance of
common stock for cash
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
10,057
|
1
|
299,999
|
-
|
300,000
|
Conversion of
debt into common stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
136,785
|
14
|
3,682,488
|
-
|
3,682,502
|
Interest on
lock-up shares in relation to convertible debt
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
85,571
|
9
|
672,135
|
-
|
672,144
|
Exchange of
shares in connection with Merger
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
490,422
|
49
|
9,792,174
|
-
|
9,792,223
|
Conversion of
outstanding Preferred Stock in connection with
Merger
|
(275,691)
|
(27)
|
(611,944)
|
(61)
|
-
|
-
|
-
|
-
|
-
|
-
|
147,939
|
15
|
73
|
-
|
-
|
Issuance of
Series H preferred stock in connection with
Merger
|
-
|
-
|
-
|
-
|
8
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Issuance of
Series H-3 preferred stock in connection with
Merger
|
-
|
-
|
-
|
-
|
-
|
-
|
2,189
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Issuance of
Series H-4 preferred stock and warrants in private placement, net
of costs of $101,661
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
25,472
|
3
|
-
|
-
|
5,898,336
|
-
|
5,898,339
|
Stock based
compensation for options issued to employees
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
17,210
|
-
|
17,210
|
Stock based
compensation for restricted stock units issued to
employees
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
275,528
|
-
|
275,528
|
Stock based
compensation for common stock issued to service
providers
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
56,929
|
6
|
447,144
|
-
|
447,150
|
Series H-4
preferred stock and warrants issued to service
provider
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1,371
|
-
|
-
|
-
|
-
|
-
|
-
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(4,480,735)
|
(4,480,735)
|
Balance, March
31, 2018 (Restated)
|
-
|
-
|
-
|
-
|
8
|
-
|
2,189
|
-
|
26,843
|
3
|
1,301,988
|
131
|
26,200,245
|
(14,085,632)
|
12,114,747
|
Conversion of
accrued interest into common stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
4,518
|
|
159,584
|
|
159,584
|
Stock based
compensation for options issued to employees
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
67,306
|
-
|
67,306
|
Stock based
compensation for restricted stock units issued to
employees
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
808,808
|
-
|
808,808
|
Stock based
compensation for common stock issued to service
providers
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
3,333
|
-
|
31,800
|
-
|
31,800
|
Deemed
dividend on exchange of merger warrants to Series I warrants and
common stock
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
48,786
|
5
|
316,856
|
(316,861)
|
-
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(3,992,250)
|
(3,992,250)
|
Balance, June
30, 2018 (Restated)
|
-
|
$-
|
-
|
$-
|
8
|
$-
|
2,189
|
$-
|
26,843
|
$3
|
1,358,625
|
$136
|
$27,584,599
|
$(18,394,743)
|
$9,189,995
|
|
For the Six Months
Ended June 30,
|
|
|
2019
|
2018
|
|
|
(Restated)
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
Net
loss
|
$(2,926,661)
|
$(8,472,985)
|
Income from
discontinued operations
|
-
|
(460,943)
|
Loss from
continuing operations
|
(2,926,661)
|
(8,933,928)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
Depreciation and
amortization
|
210,048
|
163,409
|
Amortization of
debt discount
|
-
|
176,000
|
Loss of disposition
of asset
|
3,641
|
-
|
Stock based
compensation
|
638,119
|
1,647,802
|
Non-cash interest
expense
|
-
|
696,013
|
Amortization of
operating lease right-of-use asset
|
16,421
|
-
|
Changes in
operating assets and liabilities:
|
|
|
Accounts
receivable
|
(99,520)
|
(102,789)
|
Prepaid expenses
and other assets
|
(47,886)
|
(503,690)
|
Accounts payable
and accrued expenses
|
(411,156)
|
(79,850)
|
Lease
liabilities
|
(12,650)
|
-
|
Deferred
revenue
|
50,544
|
(13,908)
|
|
|
|
NET
CASH USED IN OPERATING ACTIVITIES - CONTINUING
OPERATIONS
|
(2,579,100)
|
(6,950,941)
|
NET
CASH USED IN OPERATING ACTIVITIES - DISCONTINUED
OPERATIONS
|
-
|
(1,131,108)
|
NET
CASH USED IN OPERATING ACTIVITIES
|
(2,579,100)
|
(8,082,049)
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
Purchase of
property and equipment
|
-
|
(43,108)
|
Capitalization of
software costs
|
(94,489)
|
(208,143)
|
Proceeds from sale
of fixed asset
|
275
|
-
|
|
|
|
NET
CASH USED IN INVESTING ACTIVITIES - CONTINUING
OPERATIONS
|
(94,214)
|
(251,251)
|
NET
CASH PROVIDED BY INVESTING ACTIVITIES - DISCONTINUED
OPERATIONS
|
-
|
3,997,483
|
NET
CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES
|
(94,214)
|
3,746,232
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
Proceeds from the
sale of common stock, net
|
1,985,001
|
300,000
|
Common stock
reserved and retired in connection with excess tax benefits
paid
|
(183,333)
|
-
|
Proceeds from the
sale of Series H-4 preferred stock
|
-
|
6,000,000
|
Financing costs
from the sale of Series H-4 preferred stock and
warrants
|
-
|
(101,661)
|
Proceeds from
issuance of common stock in connection with exercise of K
warrants
|
16,667
|
-
|
|
|
|
NET
CASH PROVIDED BY FINANCING ACTIVITIES - CONTINUING
OPERATIONS
|
1,818,335
|
6,198,339
|
NET
CASH USED IN FINANCING ACTIVITIES - DISCONTINUED
OPERATIONS
|
-
|
(22,424)
|
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
1,818,335
|
6,175,915
|
|
|
|
Net increase
(decrease) in cash
|
(854,979)
|
1,840,098
|
|
|
|
Cash,
beginning of period
|
4,303,480
|
372,011
|
|
|
|
Cash,
end of period
|
$3,448,501
|
$2,212,109
|
|
|
|
SUPPLEMENTAL
CASH FLOW INFORMATION:
|
|
|
Stock based
compensation included in accounts payable and accrued
expenses
|
$106,137
|
$-
|
Issuance
of common stock for accrued stock based compensation
|
$4,724
|
$-
|
Assets
acquired under operating leases
|
$23,040
|
$-
|
|
|
|
NON-CASH
FINANCING ACTIVITIES:
|
|
|
Stock issued to
WPCS Shareholder in the merger, net of cash received of
4,947,023
|
$-
|
$4,845,200
|
Series H-4 offering
cost paid in H-4 shares and warrants
|
$-
|
$568,648
|
Stock issued for
convertible note payable
|
$-
|
$3,682,502
|
Stock issued for
accrued interest on convertible note payable
|
$-
|
$159,584
|
|
Three Months
Ended June 30,
|
Six Months Ended
June 30,
|
||
|
2019
|
2018
|
2019
|
2018
|
Subscription
services
|
$796,917
|
$1,282,961
|
$1,458,381
|
$2,639,556
|
Services
on-demand
|
449,627
|
591,036
|
887,606
|
926,516
|
Total revenues
(1)(2)
|
$1,246,544
|
$1,873,997
|
$2,345,987
|
$3,566,072
|
|
Three Months
Ended June 30,
|
Six Months Ended
June 30,
|
||
|
2019
|
2018
|
2019
|
2018
|
B2C
|
$889,707
|
$1,622,065
|
$1,653,684
|
$3,080,589
|
B2B
|
356,837
|
251,932
|
692,303
|
485,483
|
Total
revenues
|
$1,246,544
|
$1,873,997
|
$2,345,987
|
$3,566,072
|
|
As of June
30,
|
|
|
2019
|
2018
|
Common stock
equivalents:
|
|
|
Common stock
options
|
380,396
|
202,058
|
Series A, H-1, H-3,
H-4, I, J and Merger common stock purchase warrants
|
585,306
|
585,307
|
Series H, H-3, and
H-4 Convertible Preferred Stock
|
338,069
|
2,739,225
|
Restricted shares
(unvested)
|
-
|
244,643
|
Totals
|
1,303,771
|
3,771,233
|
|
As of
|
|
|
June 30,
2019
|
December 31,
2018
|
Customer
A
|
44%
|
58%
|
Customer
B
|
39%
|
23%
|
|
For the three months ended June 30,
|
For the six months ended June 30,
|
||
|
2019
|
2018
|
2019
|
2018
|
Customer
A
|
10%
|
-
|
12%
|
-
|
|
For the Three
Months Ended June 30, 2018
|
For the Six
Months Ended June 30, 2018
|
|
|
|
Revenues
|
$4,466,370
|
$7,648,849
|
Cost
of revenues
|
3,601,403
|
5,927,679
|
Gross
profit
|
864,967
|
1,721,170
|
|
|
|
Selling,
general and administrative expenses
|
626,886
|
1,116,686
|
Depreciation
and amortization
|
86,098
|
142,943
|
Total
Operating Expenses
|
712,984
|
1,259,629
|
|
|
|
Operating
income
|
151,983
|
461,541
|
|
|
|
Interest
expense, net
|
(418)
|
(598)
|
|
|
|
Net
income from discontinued operations
|
$151,565
|
$460,943
|
|
As of
|
|
|
June 30,
2019
|
December 31,
2018
|
Software
|
$1,418,765
|
$1,324,275
|
Accumulated
amortization
|
(870,113)
|
(665,183)
|
Total
|
$548,652
|
$659,092
|
Year
|
Amortization Expense
|
2019
(remaining six months)
|
$183,219
|
2020
|
254,859
|
2021
|
104,969
|
2022
|
5,605
|
Total
amortization expense
|
$548,652
|
|
Shares Underlying Options
|
Weighted Average Exercise Price
|
Weighted
average
Remaining
Contractual
Life(years)
|
Aggregate
Intrinsic
Value
|
Outstanding
at December 31, 2018
|
302,772
|
$18.30
|
7.20
|
$-
|
Granted
|
99,072
|
2.32
|
|
-
|
Forfeited
|
(21,448)
|
13.09
|
|
|
Outstanding
at June 30, 2019
|
380,396
|
$14.43
|
7.35
|
$-
|
|
Three Months
ended June 30,
|
Six Months ended
June 30,
|
||
|
2019
|
2018
|
2019
|
2018
|
Research and
development
|
$3,758
|
$5,005
|
$7,475
|
$6,710
|
Selling, general
and administrative
|
146,404
|
902,909
|
630,644
|
1,641,092
|
Total
|
$150,162
|
$907,914
|
$638,119
|
$1,647,802
|
|
For the six months ended June 30,
|
|
|
2019
|
2018
|
Fair
value of common stock
|
$2.32
|
$$10.92 - $13.26
|
Expected
volatility
|
151.76%
|
118.10% -118.83%
|
Dividend
yield
|
$-
|
$-
|
Risk-free
interest
|
2.70%
|
2.87% -3.00%
|
Expected
life (years)
|
5.5
|
5.33
|
|
Number of Warrants
|
Weighted Average Exercise Price
|
Weighted Average Remaining Contractual Life (Years)
|
Outstanding
at December 31, 2018
|
863,084
|
$6.00
|
2.51
|
Exercised,
K Warrants
|
(277,778)
|
0.06
|
-
|
Outstanding
at June 30, 2019
|
585,306
|
$9.79
|
3.20
|
|
For the Three
Months Ended June 30, 2018
|
For the Six
Months Ended June 30, 2018
|
|
|
|
Revenues
|
$4,466,370
|
$7,648,849
|
Cost
of revenues
|
3,601,403
|
5,927,679
|
Gross
profit
|
864,967
|
1,721,170
|
|
|
|
Selling,
general and administrative expenses
|
626,886
|
1,116,686
|
Depreciation
and amortization
|
86,098
|
142,943
|
Total
Operating Expenses
|
712,984
|
1,259,629
|
|
|
|
Operating
income
|
151,983
|
461,541
|
|
|
|
Interest
expense, net
|
(418)
|
(598)
|
|
|
|
Net
income from discontinued operations
|
$151,565
|
$460,943
|
Exhibit
|
|
Number
|
Description
|
31.1*
|
Certification
of the President and Chief Executive Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
31.2*
|
Certification
of the Chief Financial Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
|
|
|
32.1*
|
Certification
of the President and Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
|
32.2*
|
Certification
of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
101*
|
The
following financial information from this Quarterly Report on Form
10-Q for the period ended June 30, 2019, formatted in XBRL
(Extensible Business Reporting Language): (i) the Condensed
Consolidated Statements of Operations; (ii) the Condensed
Consolidated Balance Sheets; (iii) the Condensed Consolidated
Statements of Changes in Shareholders’ Equity; (iv) the
Condensed Consolidated Statements of Cash Flows; and (v) the Notes
to Condensed Consolidated Financial Statements, tagged as blocks of
text.
|
|
DropCar,
Inc.
|
|
|
|
|
Date:
August 14, 2019
|
By:
|
/s/
Spencer Richardson
|
|
|
Spencer
Richardson
|
|
|
Chief
Executive Officer
(Principal
Executive Officer)
|
|
|
|
Date:
August 14, 2019
|
By:
|
/s/
Mark Corrao
|
|
|
Mark
Corrao
|
|
|
Chief
Financial Officer
(Principal
Financial and Accounting Officer)
|
|
/s/
Spencer
Richardson
|
|
Spencer
Richardson
Chief
Executive Officer
|
|
/s/
Mark Corrao
|
|
Mark
Corrao
Chief
Financial Officer
|
|
/s/
Spencer
Richardson
|
|
Spencer
Richardson
Chief
Executive Officer
|
|
/s/
Mark Corrao
|
|
Mark
Corrao
Chief
Financial Officer
|
Document And Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Aug. 09, 2019 |
|
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
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 | |
Entity Common Stock, Shares Outstanding | 0 |
Consolidated Statement of Operations - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Income Statement [Abstract] | ||||
SERVICE REVENUES | $ 1,246,544 | $ 1,873,997 | $ 2,345,987 | $ 3,566,072 |
COST OF REVENUE | 1,115,787 | 2,528,781 | 2,242,832 | 4,824,562 |
GROSS PROFIT (LOSS) | 130,757 | (654,784) | 103,155 | (1,258,490) |
OPERATING EXPENSES | ||||
Research and development | 48,330 | 63,971 | 117,312 | 178,132 |
Selling, general and administrative expenses | 945,388 | 3,341,601 | 2,718,485 | 6,252,398 |
Depreciation and amortization | 98,967 | 84,177 | 206,716 | 163,409 |
TOTAL OPERATING EXPENSES | 1,092,685 | 3,489,749 | 3,042,513 | 6,593,939 |
OPERATING LOSS | (961,928) | (4,144,533) | (2,939,358) | (7,852,429) |
Interest income (expense), net | 10,973 | 718 | 12,697 | (1,081,499) |
LOSS FROM CONTINUING OPERATIONS | (950,955) | (4,143,815) | (2,926,661) | (8,933,928) |
Income taxes | 0 | 0 | 0 | 0 |
DISCONTINUED OPERATIONS | ||||
Income from operations of discontinued component | 0 | 151,565 | 0 | 460,943 |
INCOME FROM DISCONTINUED OPERATIONS | 0 | 151,565 | 0 | 460,943 |
NET LOSS | (950,955) | (3,992,250) | (2,926,661) | (8,472,985) |
Deemed dividend on exchange of warrants | 0 | (316,861) | 0 | (316,861) |
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ (950,955) | $ (4,309,111) | $ (2,926,661) | $ (8,789,846) |
LOSS PER SHARE FROM CONTINUING OPERATIONS: | ||||
Basic | $ (0.24) | $ (3.12) | $ (0.96) | $ (7.65) |
Diluted | (0.24) | (3.12) | (0.96) | (7.65) |
(LOSS) EARNINGS PER SHARE FROM DISCONTINUED OPERATIONS: | ||||
Basic | 0.00 | 0.11 | 0.00 | 0.39 |
Diluted | 0.00 | 0.11 | .00 | 0.39 |
NET LOSS PER SHARE: | ||||
Basic | (0.24) | (3.24) | (0.96) | (7.53) |
Diluted | $ (0.24) | $ (3.24) | $ (0.96) | $ (7.53) |
WEIGHTED AVERAGE SHARES OUTSTANDING | ||||
Basic | 3,954,152 | 1,328,654 | 3,040,993 | 1,167,432 |
Diluted | 3,954,152 | 1,328,654 | 3,040,993 | 1,167,432 |
Consolidated Statements of Cash Flows (Parenthetical) - USD ($) |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Statement of Cash Flows [Abstract] | ||
Cash acquired from acquisition | $ 4,947,023 | $ 4,947,023 |
The Company |
6 Months Ended |
---|---|
Jun. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
The Company | The Company is a provider of automotive vehicle support, fleet logistics, and concierge services for both consumers and the automotive industry. Its cloud-based Enterprise Vehicle Assistance and Logistics (“VAL”) platform and mobile application (“app”) assists consumers and automotive-related companies to reduce the costs, hassles and inefficiencies of owning a car, or fleet of cars, in urban centers.
In July 2018, the Company launched its Mobility Cloud platform which provides automotive-related businesses with a 100% self-serve SaaS version of its VAL platform to manage their own operations and drivers, as well as customer relationship management (“CRM”) tools that enable their clients to schedule and track their vehicles for service pickup and delivery. The Company’s Mobility Cloud also provides access to private application programming interfaces (“APIs”) which automotive-businesses can use to integrate the Company’s logistics and field support directly into their own applications and processes natively, to create more seamless client experiences. The Company earned de minimus revenues from Mobility Cloud in 2019. The Company did not earn 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, the Company began assessing demand for a Self-Park Spaces monthly parking plan whereby consumers could designate specific garages for their vehicles to be stored at a base monthly rate, with personal 24/7 access for picking up and returning their vehicle directly, and the option to pay a la carte on a per hour basis for a driver to perform functions such as picking up and returning their vehicle to their front door. This model aligns more directly with how the Company has structured the enterprise Business-to-Business (“B2B”) side of its business, where an interaction with a vehicle on behalf of its drivers typically generates new revenue. The Company consumer Self-Park Spaces plan combined with its on-demand hourly valet service are the only consumer plans offered from September 1, 2018 onwards. Subscriber plans prior to this date continued to receive service on a prorated basis through the end of August 2018. Additionally, the Company is scaling back its DropCar 360 Services on Demand Service (“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. The scaling back of these services and the discontinuation of the Company’s monthly parking with front door valet (“Steve”) service resulted in a decrease in revenue.
To date, the Company operates primarily in the New York metropolitan area. In May, June, and August 2018, the Company expanded operations with its B2B business in San Francisco, Washing DC, and Los Angeles, respectively. These three new market expansions are with an OEM customer.
Merger and Exchange Ratio
On January 30, 2018, DC Acquisition Corporation (“Merger Sub”), a wholly-owned subsidiary of WPCS International Incorporated (“WPCS”), completed its merger with and into DropCar, Inc. (“Private DropCar”), with Private DropCar surviving as a wholly owned subsidiary of WPCS. This transaction is referred to as the “Merger.” The Merger was effected pursuant to an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), dated September 6, 2017, by and among WPCS, Private DropCar and Merger Sub.
As a result of the Merger, each outstanding share of Private DropCar share capital (including shares of Private DropCar share capital issued upon the conversion of outstanding convertible debt) automatically converted into the right to receive approximately 0.3273 shares of WPCS’s common stock, par value $0.0001 per share (the “Exchange Ratio”).
Following the closing of the Merger, holders of WPCS’s common stock immediately prior to the Merger owned approximately 22.9% on a fully diluted basis, and holders of Private DropCar common stock immediately prior to the Merger owned approximately 77.1% on a fully diluted basis, of WPCS’s common stock.
The Merger has been accounted for as a reverse acquisition under the acquisition method of accounting where Private DropCar is considered the accounting acquirer and WPCS is the acquired company for financial reporting purposes. Private DropCar was determined to be the accounting acquirer based on the terms of the Merger Agreement and other factors, such as relative voting rights and the composition of the combined company’s board of directors and senior management, which was deemed to have control. The pre-acquisition financial statements of Private DropCar became the historical financial statements of WPCS following the Merger. The historical financial statements, outstanding shares and all other historical share information have been adjusted by multiplying the respective share amount by the Exchange Ratio as if the Exchange Ratio had been in effect for all periods presented.
Immediately following the Merger, the combined company changed its name from WPCS International Incorporation to DropCar, Inc. The combined company following the Merger may be referred to herein as “the combined company,” “DropCar,” or the “Company.”
Discontinued Operations
On December 24, 2018, the Company completed the sale of WPCS International – Suisun City, Inc., a California corporation (the “Suisun City Operations”), its wholly-owned subsidiary, pursuant to the terms of a stock purchase agreement, dated December 10, 2018 (the “Purchase Agreement”) by and between the Company and World Professional Cabling Systems, LLC, a California limited liability company (the “Purchaser”). Upon the closing of the sale, the Purchaser acquired all of the issued and outstanding shares of common stock, no par value per share, of Suisun City Operations, for an aggregate purchase price of $3,500,000. The sale of Suisun City Operations represented a strategic shift that has had a major effect on the Company’s operations, and therefore, is presented as discontinued operations in the 2018 condensed consolidated statement of operations.
Trading of Company’s stock
The Company’s shares of common stock listed on The Nasdaq Capital Market, previously trading through the close of business on January 30, 2018 under the ticker symbol “WPCS,” commenced trading on The Nasdaq Capital Market, on a post-Reverse Stock Split adjusted basis, under the ticker symbol “DCAR” on January 31, 2018.
On September 25, 2018, the Company received a notification letter from The Nasdaq Stock Market ("Nasdaq") informing the Company that for the last 30 consecutive business days, the bid price of the Company’s securities had closed below $1.00 per share, which is the minimum required closing bid price for continued listing on The Nasdaq Capital Market pursuant to Listing Rule 5550(a)(2). In order to regain compliance, on March 8, 2019, the Company filed a certificate of amendment to its amended and restated certificate of incorporation with the Secretary of State of the State of Delaware to effect a one-for-six reverse stock split of its outstanding shares of common stock. On March 26, 2019, the Company received a notification letter from The Nasdaq Stock Market informing it that it had regained compliance with Listing Rule 5550(a)(2). As a result of the reverse stock split, every six shares of the Company’s outstanding pre-reverse split common stock were combined and reclassified into one share of common stock. Unless otherwise noted, all share and per share data included in these financial statements retroactively reflect the 1-for-6 reverse stock split.
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Liquidity and Going Concern |
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Jun. 30, 2019 | |
Liquidity And Going Concern Abstract | |
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 June 30, 2019, the Company has an accumulated deficit of $32.7 million and has experienced net losses each year since its inception. The Company anticipates that it will continue to incur net losses into the foreseeable future and will need to raise additional capital to continue. The Company’s cash is not sufficient to fund its operations for a 12 month period from the date of these financial statements. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
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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Basis of Presentation and Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation and Summary of Significant Accounting Policies | Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements were prepared using generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, these unaudited condensed consolidated financial statements do not include all information or notes required by generally accepted accounting principles for annual financial statements and should be read in conjunction with the Company’s annual consolidated financial statements included within the Company’s Form 10-K for the fiscal year ended December 31, 2018, as filed with the SEC on April 3, 2019 and subsequently amended on April 12, 2019.
The preparation of the unaudited condensed consolidated financial statements in conformity with these accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements; and the reported amounts of expenses during the reported period. Ultimate results could differ from the estimates of management. The unaudited condensed consolidated financial statements include the accounts of DropCar, Inc. and subsidiaries, all of which are wholly owned. All significant intercompany transactions and balances have been eliminated in consolidation.
In the opinion of management, the unaudited condensed consolidated financial statements included herein contain all adjustments necessary to present fairly the Company's financial position and the results of its operations and cash flows for the interim periods presented. Such adjustments are of a normal recurring nature. The results of operations for the three and six months ended June 30, 2019 may not be indicative of results for the full year.
Significant Accounting Policies
In February 2016, the FASB issued Accounting Standards Codification (ASC) 842, Leases, which requires lessees to recognize most leases on their balance sheets as a right-of-use asset with a corresponding lease liability. Lessor accounting under the standard is substantially unchanged. Additional qualitative and quantitative disclosures are also required. The Company adopted the standard effective January 1, 2019 using the cumulative-effect adjustment transition method, which applies the provisions of the standard at the effective date without adjusting the comparative periods presented. The Company adopted all practical expedients and elected the following accounting policies related to this standard:
Right-of-use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date for leases exceeding 12 months. Minimum lease payments include only the fixed lease component of the agreement.
The Company’s operating leases do not provide an implicit rate that can readily be determined. Therefore, the Company uses a discount rate based on its incremental borrowing rate.
Operating lease expense is recognized on a straight-line basis over the lease term and is included in cost of sales and general and administrative expenses. Amortization expense for finance (capital) leases is recognized on a straight-line basis over the lease term and is included in cost of sales or general and administrative expenses, while interest expense for finance leases is recognized using the effective interest method.
Adoption of this standard resulted in the recognition of operating lease right-of-use assets of approximately $23,000 (including a reclassification from Prepaid expenses of a prepaid lease approximating $9,500) and corresponding lease liabilities of approximately $13,500 on the consolidated balance sheet as of January 1, 2019. The standard did not materially impact operating results or liquidity. Disclosures related to the amount, timing and uncertainty of cash flows arising from leases are included in Note 8, Leases.
In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for nonemployee share-based payment transactions. The amendments specify that Topic 718 applies to all share- based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The guidance was adopted effective January 1, 2019, and the adoption of this ASU did not have a material effect on its consolidated financial statements.
Aside from the adoption of ASU 2016-02, as described above, there have been no other material changes to the significant accounting policies or recent accounting pronouncements previously disclosed in DropCar, Inc.'s 2018 annual consolidated financial statements included in the Company's Form 10-K for the fiscal year ended December 31, 2018.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“US GAAP”) requires management to make estimates and assumptions that affect amounts reported therein. Generally, matters subject to estimation and judgement include amounts related to accounts receivable realization, asset impairments, useful lives of property and equipment and capitalized software costs, deferred tax asset valuation allowances, and operating expense accruals. Actual results could differ from those estimates.
Revenue Recognition
The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, codified as ASC 606: Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers.
Revenue from contracts with customers is recognized when, or as, the Company satisfies its performance obligations by transferring the promised goods or services to the customers. A good or service is transferred to a customer when, or as, the customer obtains control of that good or service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied over time is recognized by measuring the Company’s progress in satisfying the performance obligation in a manner that depicts the transfer of the goods or services to the customer. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time that the Company determines the customer obtains control over the promised good or service. The amount of revenue recognized reflects the consideration the Company expects to be entitled to in exchange for those promised goods or services (i.e., the “transaction price”). In determining the transaction price, the Company considers multiple factors, including the effects of variable consideration. Variable consideration is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainties with respect to the amount are resolved. In determining when to include variable consideration in the transaction price, the Company considers the range of possible outcomes, the predictive value of its past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside of the Company’s influence, such as the judgment and actions of third parties.
The Company’s contracts are generally designed to provide cash fees to the Company on a monthly basis or an agreed upfront rate based upon demand services. The Company’s performance obligation is satisfied over time as the service is provided continuously throughout the service period. The Company recognizes revenue evenly over the service period using a time-based measure because the Company is providing a continuous service to the customer. Contracts with minimum performance guarantees or price concessions include variable consideration and are subject to the revenue constraint. The Company uses an expected value method to estimate variable consideration for minimum performance guarantees and price concessions.
Monthly Subscriptions
The Company offers a selection of subscriptions and on-demand services which include parking, valet, and access to other services. The contract terms are on a month-to-month subscription contract with fixed monthly or contract term fees. These subscription services include a fixed number of round-trip deliveries of the customer’s vehicle to a designated location. The Company allocates the purchase price among the performance obligations which results in deferring revenue until the service is utilized or the service period has expired.
On Demand Valet and Parking Services
The Company offers to consumers certain on demand services through its mobile application. The customer is billed at an hourly rate upon completion of the services. Revenue is recognized when the Company had satisfied all performance obligations which is upon completion of the service.
DropCar 360 Services on Demand Service
The Company offers to consumers certain services upon request including vehicle inspection, maintenance, car washes or to fill up with gas. The customers are charged a fee in addition to the cost of the third-party services provided. Revenue is recognized on a gross basis when the Company had satisfied all performance obligations which is upon completion of the service.
On Demand Business-To-Business
The Company also has contracts with car dealerships, car share programs and others in the automotive industry transporting vehicles. Revenue is recognized at the point in time all performance obligations are satisfied which is when the Company provides the delivery service of the vehicles.
Disaggregated Revenues
The following table presents our revenues from contracts with customers disaggregated by revenue source.
The following presents our revenues from B2C and B2B customers.
Employee Stock-Based Compensation
The Company recognizes all employee share-based compensation as an expense in the financial statements. Equity-classified awards principally related to stock options, restricted stock units (“RSUs”) and equity-based compensation, are measured at the grant date fair value of the award. The Company determines grant date fair value of stock option awards using the Black-Scholes option-pricing model. The fair value of RSUs are determined using the closing price of the Company’s common stock on the grant date. For service-based vesting grants, expense is recognized ratably over the requisite service period based on the number of options or shares. Stock-based compensation is reversed for forfeitures in the period of forfeiture.
Income (Loss) Per Share
Basic income (loss) per share is computed by dividing net loss attributable to common shareholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period. In periods when the Company has income, the Company calculates basic earnings per share using the two-class method, if required, pursuant to ASC 260 Earnings Per Share. The two-class method was required effective with the issuance of convertible preferred stock in the past because this class of stock qualified as a participating security, giving the holder the right to receive dividends should dividends be declared on common stock. Under the two-class method, earnings for a period are allocated on a pro rata basis to the common stockholders and to the holders of convertible preferred stock based on the weighted average number of common shares outstanding and number of shares that could be issued upon conversion. 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.
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 condensed consolidated statement of operations as incurred. Total research and development expenses were $48,330 and $63,971 for the three months ended June 30, 2019 and 2018, respectively. Total research and development expenses were $117,312 and $178,132 for the six months ended June 30, 2019 and 2018, respectively.
Recently Issued Accounting Standards
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial position or results of operations upon adoption.
In August 2018, the FASB issued ASU 2018-13, Changes to Disclosure Requirements for Fair Value Measurements, which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements, and is effective for the Company beginning January 1, 2020. The Company is currently evaluating the impact this standard will have on the Company’s consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses” to improve information on credit losses for financial assets and net investment in leases that are not accounted for at fair value through net income. ASU 2016-13 replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses. In April 2019 and May 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” and ASU No. 2019-05, “Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief” which provided additional implementation guidance on the previously issued ASU. Management has not yet completed its assessment of the impact of the new standards on the Company’s financial statements. The Company is currently evaluating the effect the adoption of these ASUs will have on its condensed consolidated financial statements. These ASUs are effective for the Company in the first quarter of 2020.
The Company is currently evaluating the impact of the pending adoption of the new standard on its consolidated financial statements and intends to adopt the standard on January 1, 2020.
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Concentrations |
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Risks and Uncertainties [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Concentrations | Accounts Receivable
The Company’s concentration of accounts receivable are as follows:
Revenue Recognition
The concentration of revenue recognition for the three and six months ended June 30, 2019 and 2018, respectively are as follows:
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Discontinued Operations and Disposition of Operating Segment |
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DropCar Operating Services OnDemand [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations and Disposition of Operating Segment | On December 24, 2018, the Company completed the sale of WPCS International – Suisun City, Inc., a California corporation, its wholly-owned subsidiary, pursuant to the terms of a stock purchase agreement, dated December 10, 2018 by and between the Company and World Professional Cabling Systems, LLC, a California limited liability company. Upon the closing of the sale, the Purchaser acquired all of the issued and outstanding shares of common stock, no par value per share, of Suisun City Operations, for an aggregate purchase price of $3,500,000.
The operations and cash flows of the Suisun City Operations are presented as discontinued operations. The operating results of the Suisun City Operations for the three and six months ended June 30, 2018 were as follows:
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Capitalized Software |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capitalized Software | Capitalized software consists of the following as of:
Minimum future amortization expense for capitalized software from June 30, 2019 is as follows:
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Convertible Notes Payable |
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Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
Convertible Notes Payable | During the year ended December 31, 2017, the Company issued convertible notes totaling $4,840,000 and warrants to acquire 146,358 shares of common stock at an exercise price of $59.04 per share in connection with the convertible notes (the “Notes”). The Notes all had a maturity date of one year from the date of issuance, and accrued interest at a rate of 6% per annum, compounded annually. The Notes were convertible at $35.40 per share and, including accrued interest, were converted into 141,303 shares of common stock in connection with the Merger.
In connection with the Merger, the holders of the Notes entered into lock-up agreements pursuant to which they have agreed not to sell the 85,573 shares of common stock received upon conversion of the Notes in connection with the Merger. The length of the lock-up period was up to 120 days. In accordance with ASC 815-40-15-6, the Company considers the lock-up agreements contingent options exchanged in a contemplated business combination. The lock-up agreements are considered “lock-up options” that are issued and accounted for upon the Merger. For the three and six months ended June 30, 2018, the Company recorded $0 and $672,144 as interest expense in relation to the lock-up agreements in the accompanying 2018 consolidated statement of operations.
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Leases |
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Jun. 30, 2019 | |
Leases [Abstract] | |
Leases | The Company has various operating lease agreements with initial terms up to three years, all of which relate to vehicles. The Company’s office lease is on a month-to-month basis and so is not recognized on the balance sheet. Some leases include options to purchase, terminate or extend for one or more years. These options are included in the lease term when it is reasonably certain that the option will be exercised.
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating right-of-use lease assets and lease liabilities on the consolidated balance sheets, totaling $6,619 and $960 at June 30, 2019, respectively, including $7,544 of operating right-of-use assets previously prepaid at lease commencement.
The Company’s weighted-average remaining lease term relating to its operating leases is 0.68 years and weighted-average remaining payments for operating lease liabilities is 0.50 years, with a weighted-average discount rate of 6.00%.
Operating lease expense is recognized on a straight-line basis over the lease term within selling, general and administrative expenses on the Company’s condensed consolidated statement of operations. The Company incurred lease expense of $8,258 and $12,459 for the three months ended June 30, 2019 and 2018, respectively. The Company incurred lease expense of $16,421 and $27,457 for the six months ended June 30, 2019 and 2018, respectively. The Company made cash payments of $18,250 for operating leases for the six months ended June 30, 2019.
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Commitments & Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |
Commitments & Contingencies | Lease Agreements
The Company leases office space in New York City on a month-to-month basis, with a condition of a 60 day notice to terminate. For the three months ended June 30, 2019 and 2018, rent expense for the Company’s New York City office was $10,800 and $40,341, respectively. For the six months ended June 30, 2019 and 2018, rent expense for the Company’s New York City office was $33,700 and $69,341, respectively. The Company has taken the short term lease exception and not recorded a lease liability or right-of-use asset for this lease.
Litigation
The Company is subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business that it believes are incidental to the operation of its business. While the outcome of these claims cannot be predicted with certainty, management does not believe that the outcome of any of these legal matters will have a material adverse effect on its results of operations, financial positions or cash flows.
In February 2018, DropCar was served an Amended Summons and Complaint in the Supreme Court of the City of New York, Bronx county originally served solely on an individual, a former DropCar customer, for injuries sustained by plaintiffs alleging such injuries were caused by either the customer, a DropCar valet operating the customer’s vehicle or an unknown driver operating customer’s vehicle. DropCar to date has cooperated with the NYC Police Department and no charges have been brought against any employee of DropCar. DropCar has referred the matter to its insurance carrier. In June 2019, the Company reached a settlement covering all disputes in relation to the summons and complaint which was covered and paid for by the Company’s insurance carrier
Other
As of December 31, 2018, the Company had accrued approximately $232,000 for the settlement of multiple employment disputes. During the six months ended June 30, 2019, approximately $88,000 of this amount was settled upon payment. For the six months ended June 30, 2019 and 2018, $11,000 and $30,000, respectively, was expensed and accrued for settlements. As of June 30, 2019, approximately $155,000 remains accrued for the settlement of employment disputes. As of June 30, 2019, the Company has entered into multiple settlement agreements with former employees for which it has agreed to make monthly settlement payments which will extend through December 31, 2019.
On March 23, 2018, DropCar was made aware of an audit being conducted by the New York State Department of Labor (“DOL”) regarding a claim filed by an employee. The DOL is investigating whether DropCar properly paid overtime for which DropCar has raised several defenses. In addition, the DOL is conducting its audit to determine whether the Company owes spread of hours pay (an hour’s pay for each day an employee worked or was scheduled for a period over ten hours in a day). If the DOL determines that monies are owed, the DOL will seek a backpay order, which management believes will not, either individually or in the aggregate, have a material adverse effect on DropCar’s business, consolidated financial position, results of operations or cash flows. As of June 30, 2019, the Company has accrued approximately $60,000 in relation to these matters.
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Stockholders' Equity | Common Stock
On March 26, 2019, the Company entered into a Securities Purchase Agreement with certain existing investors, pursuant to which the Company sold, in a registered public offering by the Company directly to the investors an aggregate of 478,469 shares of common stock, par value $0.0001 per share, at an offering price of $4.18 per share for proceeds of $1,985,001 net of offering expenses of $15,000.
During the six months ended June 30, 2019, the Company issued 1,412,420 shares of common stock from the conversion of 21,591 shares of Series H-4 Convertible Preferred stock.
During the six months ended June 30, 2019, the Company granted 116,666 shares of common stock to a service provider and recorded $222,200 stock based compensation as a part of general and administrative expense in the Company’s consolidated statements of operations.
During the six months ended June 30, 2019, the Company issued 277,778 shares of common stock from the exercise of Series K warrants and received cash proceeds of $16,667.
Preferred Stock
In accordance with the Certificate of Incorporation, there are 5,000,000 authorized preferred shares at a par value of $0.0001.
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.
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 Seed
On January 30, 2018, the Company converted 275,691 shares of Series Seed Preferred Stock into 45,949 shares of common stock in connection with the Merger.
Series A
On January 30, 2018, the Company converted 611,944 shares of Series A Preferred Stock into 101,991 shares of common stock in connection with the Merger.
Series H Convertible Preferred Stock
On January 30, 2018, in accordance with the Merger the Company issued 8 shares of Series H Convertible Preferred Stock.
Under the terms of the Series H Certificate of Designation, each share of Series H Preferred Stock has a stated value of $154 and is convertible into shares of the Company’s Common Stock, equal to the stated value divided by the conversion price of $36.96 per share (subject to adjustment in the event of stock splits or dividends). The Company is prohibited from effecting the conversion of the Series H Preferred Stock to the extent that, as a result of such conversion, the holder would beneficially own more than 9.99%, in the aggregate, of the issued and outstanding shares of the Company’s common stock calculated immediately after giving effect to the issuance of shares of common stock upon such conversion.
Series H-1 and H-2 Convertible Preferred Stock
The Company has designated 9,488 Series H-1 Preferred Stock and designated 3,500 Series H-2 Preferred Stock, none of which are outstanding.
Series H-3 Convertible Preferred Stock
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 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 $138 and is convertible into shares of common stock, equal to the stated value divided by the conversion price of $33.12 per share (subject to adjustment in the event of stock splits and dividends). The Company is prohibited from effecting the conversion of the Series H-3 Shares to the extent that, as a result of such conversion, the holder or any of its affiliates would beneficially own more than 9.99%, in the aggregate, of the issued and outstanding shares of common stock calculated immediately after giving effect to the issuance of shares of common stock upon the conversion of the Series H-3 Shares.
Series H-4 Convertible Preferred Stock
On March 8, 2018, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with investors pursuant to which the Company issued to the investors an aggregate of 25,472 shares of the Company’s newly designated Series H-4 Convertible Preferred Stock, par value $0.0001 per share (the “Series H-4 Shares”) convertible into 424,533 shares of common stock of the Company, and warrants to purchase 424,533 shares of common stock of the Company, with an exercise price of $15.60 per share, subject to adjustments (the “Warrants”). The purchase price per Series H-4 Share and warrant was $235.50, equal to (i) the closing price of the Common Stock on the Nasdaq Capital Market on March 7, 2018, plus $0.125 multiplied by (ii) 100. The aggregate purchase price for the Series H-4 Shares and Warrants was approximately $6.0 million. Subject to certain ownership limitations, the Warrants are immediately exercisable from the issuance date and are exercisable for a period of five years from the issuance date.
On March 8, 2018, the Company filed the Certificate of Designations, Preferences and Rights of the Series H-4 Convertible Preferred Stock (the “Certificate of Designation”) with the Secretary of State of the State of Delaware, establishing and designating the rights, powers and preferences of the Series H-4 Convertible Preferred Stock (the “Series H-4 Stock”). The Company designated up to 30,000 shares of Series H-4 Stock and each share has a stated value of $235.50 (the “Stated Value”). Each share of Series H-4 Stock is convertible at any time at the option of the holder thereof, into a number of shares of Common Stock determined by dividing the Stated Value by the conversion price of $3.60 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.
The holders of Series H-4 Stock are entitled to certain anti-dilution adjustments if the Company issues shares of its common stock at a lower price per share than the applicable conversion price of the Series H-4 Stock. If any such dilutive issuance occurs prior to the conversion of the Series H-4 Stock, the conversion price will be adjusted downward to a price equal to the issuance (subject to a floor of $2.82 per share). On August 31, 2018, the Company entered into an agreement with certain investors to exercise Series H-4 warrants and issue Series J warrants which resulted in a reduced conversion price of $3.60 per share for the Series H-4 Stock. See “Exercise of Series H-4 Warrants and Issuance of Series J Warrants” below.
If at any time (i) the volume weighted average price (“VWAP”) of the Common Stock exceeds $35.10 for not less than ten (10) consecutive Trading Days (the “Mandatory Exercise Measuring Period”); (ii) the daily average number of shares of Common Stock traded during the Mandatory Exercise Measuring Period equals or exceeds 25,000; and (iii) no equity conditions failure has occurred as of such date, then the Company shall have the right to require the holder to exercise all or any portion of the Series H-4 Warrants still unexercised for a cash exercise.
During the period ended June 30, 2019, investors converted 21,591 shares of Series H-4 Stock into 1,412,420 shares of Common Stock.
Stock Based Compensation
Service Based Restricted Stock Units
On February 28, 2018, the Company issued 244,643 restricted stock units (“RSUs”) to two members of management. On March 26, 2019, the Board of Directors, with the consent of the grantees, agreed to amend the vesting period for the RSUs issued on February 28, 2018 to vest in full on May 17, 2019. The RSUs were valued using the fair market value of the Company’s closing stock price on the date of grant totaling $3,243,966, which was amortized over the original vesting period. On June 6, 2019, the Company issued 244,643 shares of common stock upon vesting of the RSUs. Upon vesting, the Company paid $183,333 of personal withholding taxes for the grantees and reserved 120,658 shares of common stock as consideration for the cash paid which was immediately retired.
Employee and Non-employee Stock Options
The following table summarizes stock option activity during the six months ended June 30, 2019:
At June 30, 2019, unamortized stock compensation for stock options was approximately $193,839, with a weighted-average recognition period of 1.61 years.
Share Based Compensation
The following table sets forth total non-cash stock-based compensation for common stock, RSUs and options issued to employees and non-employees by operating statement classification for the three and six months ended June 30, 2019 and 2018:
Stock option pricing model
The fair value of the stock options granted during the six months ended June 30, 2019, was estimated at the date of grant using the Black-Scholes options pricing model with the following assumptions:
Warrants
Service Based Warrants
On March 8, 2018, in connection with the financing discussed above, the Company issued 1,371 Series H-4 Shares and 22,850 common stock warrants to a service provider. The Company valued these warrants using the Black-Scholes option pricing model with the following inputs: exercise price of $15.60; fair market value of underlying stock of $13.20; expected term of 5 years; risk free rate of 2.63%; volatility of 120.63%; and dividend yield of 0%. For the period ended March 31, 2018, the Company recorded the fair market value of the Series H-4 Shares and warrants as an increase and decrease to additional paid in capital in the amount of $568,648 as these services were provided in connection with the sale of the Series H-4 shares.
Warrant Exchange
On April 19, 2018, the Company entered into separate Warrant Exchange Agreements (the “Exchange Agreements”) with the holders (the “Merger Warrant Holders”) of existing warrants issued in the Merger (the “Merger Warrants”) to purchase shares of Common Stock, pursuant to which, on the closing date, the Merger Warrant Holders exchanged each Merger Warrant for 1/18 of a share of Common Stock and 1/12 of a warrant to purchase a share of Common Stock (collectively, the “Series I Warrants”). The Series I Warrants have an exercise price of $13.80 per share. In connection with the Exchange Agreements, the Company issued an aggregate of (i) 48,786 new shares of common stock and (ii) Series I Warrants to purchase an aggregate of 73,178 shares of common stock. The Company valued the (a) stock and warrants issued in the amount of $972,368, (b) the warrants retired in the amount of $655,507, and (c) recorded the difference as deemed dividend in the amount of $316,861. The warrants were valued using the Black-Scholes option-pricing model on the date of the exchange using the following assumptions: (a) fair value of common stock $10.32, (b) expected volatility of 103% and 110%, (c) dividend yield of $0, (d) risk-free interest rate of 2.76% and 2.94%, (e) expected life of 3 years and 4.13 years.
If at any time (i) the volume weighted average price (“VWAP”) of the Common Stock exceeds $27.60 for not less than the Mandatory Exercise Measuring Period; (ii) the daily average number of shares of Common Stock traded during the Mandatory Exercise Measuring Period equals or exceeds 25,000; and (iii) no equity conditions failure has occurred as of such date, then the Company shall have the right to require the holder to exercise all or any portion of the Series I Warrants still unexercised for a cash exercise.
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.
If at any time (i) the VWAP of the Common Stock exceeds $9.00 for not less than the Mandatory Exercise Measuring Period; (ii) the daily average number of shares of Common Stock traded during the Mandatory Exercise Measuring Period equals or exceeds 25,000; and (iii) no equity conditions failure has occurred as of such date, then the Company shall have the right to require the holder to exercise all or any portion of the Series J Warrants still unexercised for a cash exercise.
On September 4, 2018, the Company received executed Repricing Offer Letters from a majority of the Holders, which resulted in the issuance of 260,116 shares of the Company’s common stock and Series J Warrants to purchase up to 260,116 shares of the Company’s common stock. The Company received gross proceeds of $936,423 from the exercise of the Series H-4 Warrants pursuant to the terms of the Repricing Offer Letter.
On September 5, 2018, the Company received a request from Nasdaq to amend its Series H-4 Warrants to provide that the Series H-4 Warrants may not be exercised until the Company has obtained stockholder approval of the issuance of Common Stock underlying the Series H-4 Warrants pursuant to the applicable rules and regulations of Nasdaq. In response to the request, on September 10, 2018, the Company entered into an amendment (the “Warrant Amendment”) with the holders of the Series H-4 Stock to provide for stockholder approval as described above prior to the exercise of the Series H-4 Warrants. On November 15, 2018, the Company obtained such stockholder approval.
The Company considers the warrant amendment for the Reduced Exercise Price and issuance of the Series J Warrants to be of an equity nature as the amendment and issuance allowed the warrant holders to exercise warrants and receive a share of common stock and warrant which, represents an equity for equity exchange. Therefore, the change in the fair value before and after the modification and the fair value of the Series J warrants will be treated as a deemed dividend in the amount of $1,019,040. The cash received upon exercise in excess of par is accounted through additional paid in capital.
The Company valued the deemed dividend as the sum of: (a) the difference between the fair value of the modified award and the fair value of the original award at the time of modification of $129,476, and (b) the fair value of the Series J Warrants in the amount of $889,564. The warrants were valued using the Black-Scholes option-pricing model on the date of the modification and issuance using the following assumptions: (a) fair value of common stock $3.90, (b) expected volatility of 144.3%, (c) dividend yield of 0%, (d) risk-free interest rate of 2.77% and 2.78%, (e) expected life of 4.51 years and 5 years.
At the March 8, 2018 closing, the Company issued Series H-4 Warrants that entitled the holders to purchase, in aggregate, up to 447,383 shares of its common stock. As referenced above, on September 4, 2018, the Company received executed Repricing Offer Letters from a majority of the investors resulting in the exercise of Series H-4 Warrants to purchase 260,116 shares of common stock. The Series H-4 Warrants were initially exercisable at an exercise price equal to $15.60 per share. On November 15, 2018, the Company obtained shareholder approval to reduce the exercise price from $15.60 per share to $3.60 per share for 187,267 Series H-4 Warrants. The Company considers the modification to the warrant exercise price to be of an equity nature. Therefore, the change in the fair value before and after the modification is accounted for as a deemed dividend in the amount of $63,760.
Issuance of Pre-Funded Series K Warrants
On November 14, 2018, the Company entered into a securities purchase agreement with an investor, pursuant to which the Company agreed to issue and sell, in a registered direct offering, a Pre-Funded Series K Warrant (the “Series K Warrant) to purchase 277,778 shares of common stock, in lieu of shares of common stock to the extent that the purchase of common stock would cause the beneficial ownership of the purchaser to exceed 9.99% of the Company’s common stock. The Pre-Funded Series K Warrants were sold at an offering price of $3.54 per share for gross proceeds of $983,329, are immediately exercisable for $0.06 per share of common stock and do not have an expiration date.
During the six months ended June 30, 2019, the Company issued 277,778 shares of common stock from the exercise of Series K warrants and received cash proceeds of $16,667.
A summary of the Company’s warrants to purchase common stock activity is as follows:
The warrants expire through the years 2020-2024.
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Related Parties |
6 Months Ended |
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Jun. 30, 2019 | |
Related Party Transactions [Abstract] | |
Related Parties | On July 11, 2018, the Company entered into a consulting agreement (the “Consulting Agreement”) with Ascentaur, LLC (“Ascentaur”). Sebastian Giordano is the Chief Executive Officer of Ascentaur. Mr. Giordano has served on the board of directors of the Company since February 2013 and served as the Company’s Interim Chief Executive Officer from August 2013 through April 2016 and as the Company’s Chief Executive Officer from April 2016 through January 2018.
Pursuant to the terms of the Consulting Agreement, Ascentaur has agreed to provide advisory services with respect to the strategic development and growth of the Company, including advising the Company on market strategy and overall Company strategy, advising the Company on the sale of the Company’s Suisun City Operations, providing assistance to the Company in identifying and recruiting prospective employees, customers, business partners, investors and advisors that offer desirable administrative, financing, investment, technical, marketing and/or strategic expertise, and performing such other services pertaining to the Company’s business as the Company and Ascentaur may from time to time mutually agree. The term of the Consulting Agreement commenced on July 11, 2018 and will continue until April 9, 2019 or until terminated in accordance with the terms of the Consulting Agreement. During the three and six months ended June 30, 2019, the Company recorded $27,067 and $30,400, respectively, as general and administrative related to this consulting agreement. As of June 30, 2019, the balance in accounts payable was $0.
During the six months ended June 30, 2019, the Company sold Alpha Capital Anstalt, a significant shareholder, as part of a registered public offering, 299,043 shares of common stock for $1,235,000, net of offering expenses of $15,000. Additionally, during the six months ended June 30, 2019. Alpha Capital Anstalt was issued of 277,778 shares of common stock upon its exercise of Series K warrants with cash proceeds to the Company of $16,667.
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Subsequent Events |
6 Months Ended |
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Jun. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events |
On July 30, 2019, the Company’s compensation committee approved the grant of shares of restricted stock in an amount equal to $260,000, the number of shares to be determined based on the closing price of the Company’s common stock on the date of grant. One half of the shares shall vest on July 31, 2019 and the remaining shares shall vest in two equal quarterly installments over the following six-month period. The grant is for services rendered for the period from February 1, 2019 through January 31, 2020. As of and for the three and six months ended June 30, 2019, the Company recorded $106,137 as general and administrative expense and accrued expense related to the grant. |
Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Use of Estimates | The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“US GAAP”) requires management to make estimates and assumptions that affect amounts reported therein. Generally, matters subject to estimation and judgement include amounts related to accounts receivable realization, asset impairments, useful lives of property and equipment and capitalized software costs, deferred tax asset valuation allowances, and operating expense accruals. Actual results could differ from those estimates. |
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Revenue Recognition | The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, codified as ASC 606: Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers.
Revenue from contracts with customers is recognized when, or as, the Company satisfies its performance obligations by transferring the promised goods or services to the customers. A good or service is transferred to a customer when, or as, the customer obtains control of that good or service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied over time is recognized by measuring the Company’s progress in satisfying the performance obligation in a manner that depicts the transfer of the goods or services to the customer. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time that the Company determines the customer obtains control over the promised good or service. The amount of revenue recognized reflects the consideration the Company expects to be entitled to in exchange for those promised goods or services (i.e., the “transaction price”). In determining the transaction price, the Company considers multiple factors, including the effects of variable consideration. Variable consideration is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainties with respect to the amount are resolved. In determining when to include variable consideration in the transaction price, the Company considers the range of possible outcomes, the predictive value of its past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside of the Company’s influence, such as the judgment and actions of third parties.
The Company’s contracts are generally designed to provide cash fees to the Company on a monthly basis or an agreed upfront rate based upon demand services. The Company’s performance obligation is satisfied over time as the service is provided continuously throughout the service period. The Company recognizes revenue evenly over the service period using a time-based measure because the Company is providing a continuous service to the customer. Contracts with minimum performance guarantees or price concessions include variable consideration and are subject to the revenue constraint. The Company uses an expected value method to estimate variable consideration for minimum performance guarantees and price concessions.
Monthly Subscriptions
The Company offers a selection of subscriptions and on-demand services which include parking, valet, and access to other services. The contract terms are on a month-to-month subscription contract with fixed monthly or contract term fees. These subscription services include a fixed number of round-trip deliveries of the customer’s vehicle to a designated location. The Company allocates the purchase price among the performance obligations which results in deferring revenue until the service is utilized or the service period has expired.
On Demand Valet and Parking Services
The Company offers to consumers certain on demand services through its mobile application. The customer is billed at an hourly rate upon completion of the services. Revenue is recognized when the Company had satisfied all performance obligations which is upon completion of the service.
DropCar 360 Services on Demand Service
The Company offers to consumers certain services upon request including vehicle inspection, maintenance, car washes or to fill up with gas. The customers are charged a fee in addition to the cost of the third-party services provided. Revenue is recognized on a gross basis when the Company had satisfied all performance obligations which is upon completion of the service.
On Demand Business-To-Business
The Company also has contracts with car dealerships, car share programs and others in the automotive industry transporting vehicles. Revenue is recognized at the point in time all performance obligations are satisfied which is when the Company provides the delivery service of the vehicles.
Disaggregated Revenues
The following table presents our revenues from contracts with customers disaggregated by revenue source.
The following presents our revenues from B2C and B2B customers.
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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.
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Income (Loss) Per Share | Basic income (loss) per share is computed by dividing net loss attributable to common shareholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period. In periods when the Company has income, the Company calculates basic earnings per share using the two-class method, if required, pursuant to ASC 260 Earnings Per Share. The two-class method was required effective with the issuance of convertible preferred stock in the past because this class of stock qualified as a participating security, giving the holder the right to receive dividends should dividends be declared on common stock. Under the two-class method, earnings for a period are allocated on a pro rata basis to the common stockholders and to the holders of convertible preferred stock based on the weighted average number of common shares outstanding and number of shares that could be issued upon conversion. 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.
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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 condensed consolidated statement of operations as incurred. Total research and development expenses were $48,330 and $63,971 for the three months ended June 30, 2019 and 2018, respectively. Total research and development expenses were $117,312 and $178,132 for the six months ended June 30, 2019 and 2018, respectively.
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Recently Issued Accounting Standards | From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial position or results of operations upon adoption.
In August 2018, the FASB issued ASU 2018-13, Changes to Disclosure Requirements for Fair Value Measurements, which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements, and is effective for the Company beginning January 1, 2020. The Company is currently evaluating the impact this standard will have on the Company’s consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses” to improve information on credit losses for financial assets and net investment in leases that are not accounted for at fair value through net income. ASU 2016-13 replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses. In April 2019 and May 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” and ASU No. 2019-05, “Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief” which provided additional implementation guidance on the previously issued ASU. Management has not yet completed its assessment of the impact of the new standards on the Company’s financial statements. The Company is currently evaluating the effect the adoption of these ASUs will have on its condensed consolidated financial statements. These ASUs are effective for the Company in the first quarter of 2020.
The Company is currently evaluating the impact of the pending adoption of the new standard on its consolidated financial statements and intends to adopt the standard on January 1, 2020.
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Summary of Significant Accounting Policies (Tables) |
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Disaggregation of revenue | The following table presents our revenues from contracts with customers disaggregated by revenue source.
The following presents our revenues from B2C and B2B customers.
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Schedule of antidilutive securities excluded from computation of earnings per share |
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Concentrations (Tables) |
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Risks and Uncertainties [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedules of concentration of risk, by risk factor | Accounts Receivable
The Company’s concentration of accounts receivable are as follows:
Revenue Recognition
The concentration of revenue recognition for the three and six months ended June 30, 2019 and 2018, respectively are as follows:
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Discontinued Operations and Disposition of Operating Segment (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DropCar Segment [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of discontinued operations |
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Capitalized Software (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of capitalized computer software, net |
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Minimum future amortization expense for capitalized software |
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Stockholders' Equity (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of share-based compensation, stock options, activity |
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Schedule of share-based compensation |
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Schedule of share-based payment award, stock options, valuation assumptions |
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Schedule of common stock warrant activity |
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Liquidity and Going Concern (Details Narrative) - USD ($) |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Liquidity And Going Concern Abstract | ||
Accumulated deficit | $ (32,680,382) | $ (29,753,721) |
Summary of Significant Accounting Policies (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Revenues from contracts with customers | $ 1,246,544 | $ 1,873,997 | $ 2,345,987 | $ 3,566,072 |
Subscription Services [Member] | ||||
Revenues from contracts with customers | 796,917 | 1,282,961 | 1,458,381 | 2,639,556 |
Services On-Demand [Member] | ||||
Revenues from contracts with customers | 449,627 | 591,036 | 887,606 | 926,516 |
B2C [Member] | ||||
Revenues from contracts with customers | 889,707 | 1,622,065 | 1,653,684 | 3,080,589 |
B2B [Member] | ||||
Revenues from contracts with customers | $ 356,837 | $ 251,932 | $ 692,303 | $ 485,483 |
Summary of Significant Accounting Policies (Details 1) - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Antidilutive securities excluded from computation of earnings per share | 1,303,771 | 3,771,233 |
Common Stock Options [Member] | ||
Antidilutive securities excluded from computation of earnings per share | 380,396 | 202,058 |
Series A, H-1, H-3, H-4, I, J and Merger Common Stock Purchase Warrants | ||
Antidilutive securities excluded from computation of earnings per share | 585,306 | 585,307 |
Series H, H-3, and H-4 Convertible Preferred Stock [Member] | ||
Antidilutive securities excluded from computation of earnings per share | 338,069 | 2,739,225 |
Restricted Shares (Unvested) [Member] | ||
Antidilutive securities excluded from computation of earnings per share | 0 | 244,643 |
Summary of Significant Accounting Policies (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
Accounting Policies [Abstract] | |||||
Accumulated deficit | $ (32,680,382) | $ (32,680,382) | $ (29,753,721) | ||
Research and development costs, net | $ 48,330 | $ 63,971 | $ 117,312 | $ 178,132 |
Concentrations (Details) |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
[1] | Jun. 30, 2019 |
Jun. 30, 2018 |
[1] | Dec. 31, 2018 |
|||
Accounts Receivable [Member] | Customer A [Member] | |||||||||
Concentration risk, percentage | 44.00% | 58.00% | |||||||
Accounts Receivable [Member] | Customer B [Member] | |||||||||
Concentration risk, percentage | 39.00% | 23.00% | |||||||
Sales Revenue, Net [Member] | Customer A [Member] | |||||||||
Concentration risk, percentage | 10.00% | 12.00% | |||||||
|
Discontinued Operations and Disposition of Operating Segment (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
DropCar Operating Subscription Services [Member] | ||||
Revenues | $ 4,466,370 | $ 7,648,849 | ||
Cost of revenues | 3,601,403 | 5,927,679 | ||
Gross profit | 864,967 | 1,721,170 | ||
Selling, general and administrative expenses | 626,886 | 1,116,686 | ||
Depreciation and amortization | 86,098 | 142,943 | ||
Total operating expenses | 712,984 | 1,259,629 | ||
Operating income | 151,983 | 461,541 | ||
Interest expense, net | (418) | (598) | ||
Net income from discontinued operations | $ 0 | $ 151,565 | $ 0 | $ 460,943 |
Capitalized Software (Details) - USD ($) |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Software | $ 1,418,765 | $ 1,324,275 |
Accumulated amortization | (870,113) | (665,183) |
Total | $ 548,652 | $ 659,092 |
Capitalized Software (Details 1) |
6 Months Ended |
---|---|
Jun. 30, 2019
USD ($)
| |
Goodwill and Intangible Assets Disclosure [Abstract] | |
2019 (remaining six months) | $ 183,219 |
2020 | 254,859 |
2021 | 104,969 |
2022 | 5,605 |
Total amortization expense | $ 548,652 |
Convertible Notes Payable (Details Narrative) - USD ($) |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Debt Disclosure [Abstract] | ||
Interest expense | $ 0 | $ 672,144 |
Leases (Details Narrative) - USD ($) |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Leases [Abstract] | ||
Operating right-of-use lease assets | $ 6,619 | $ 0 |
Lease liabilities | $ 960 | $ 0 |
Weighted-average remaining lease term | 6 months | |
Weighted-average discount rate | 6.00% |
Commitments & Contingencies (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Commitments and Contingencies Disclosure [Abstract] | ||||
Rent expense | $ 10,800 | $ 40,341 | $ 33,700 | $ 69,341 |
Stockholders' Equity (Details) |
6 Months Ended |
---|---|
Jun. 30, 2019
USD ($)
$ / shares
shares
| |
Stockholders' Equity Note [Abstract] | |
Stock options outstanding, beginning | shares | 302,772 |
Stock options granted | shares | 99,072 |
Stock options forfeited | shares | (21,448) |
Stock options outstanding, ending | shares | 380,396 |
Weighted average exercise price outstanding, beginning | $ / shares | $ 18.30 |
Weighted average exercise price granted | $ / shares | 2.32 |
Weighted average exercise price forfeited | $ / shares | 13.09 |
Weighted average exercise price outstanding, ending | $ / shares | $ 14.43 |
Weighted average remaining contractual life, beginning | 7 years 2 months 12 days |
Weighted average remaining contractual life, ending | 7 years 4 months 6 days |
Aggregate intrinsic value outstanding, beginning | $ | $ 0 |
Aggregate intrinsic value outstanding, ending | $ | $ 0 |
Stockholders' Equity (Details 1) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Stock based compensation | $ 150,162 | $ 907,914 | $ 638,119 | $ 1,647,802 |
Research and Development | ||||
Stock based compensation | 3,758 | 5,005 | 7,475 | 6,710 |
Selling, General and Administrative | ||||
Stock based compensation | $ 146,404 | $ 902,909 | $ 630,644 | $ 1,641,092 |
Stockholders' Equity (Details 2) - $ / shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Fair value of common stock | $ 2.32 | |
Expected volatility | 151.76% | |
Dividend yield | 0.00% | 0.00% |
Risk-free interest | 2.70% | |
Expected life (years) | 5 years 6 months | 5 years 3 months 29 days |
Minimum [Member] | ||
Fair value of common stock | $ 10.92 | |
Expected volatility | 118.10% | |
Risk-free interest | 2.87% | |
Maximum [Member] | ||
Fair value of common stock | $ 13.26 | |
Expected volatility | 118.83% | |
Risk-free interest | 3.00% |
Stockholders' Equity (Details 3) |
6 Months Ended |
---|---|
Jun. 30, 2019
$ / shares
shares
| |
Stockholders' Equity Note [Abstract] | |
Warrants outstanding, beginning | shares | 863,084 |
Warrants exercised | shares | (277,778) |
Warrants outstanding, ending | shares | 585,306 |
Weighted average exercise price outstanding, beginning | $ / shares | $ 6.00 |
Weighted average exercise price exercised | $ / shares | .06 |
Weighted average exercise price outstanding, ending | $ / shares | $ 9.79 |
Weighted average remaining contractual life, beginning | 2 years 6 months 4 days |
Weighted average remaining contractual life, ending | 3 years 2 months 12 days |
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