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
|
|
|
|
|
|
Item
1.
|
Condensed
Consolidated Financial Statements (Unaudited)
|
|
|
Condensed Consolidated Balance Sheets as of September 30,
2019 and December 31, 2018
|
4
|
|
Condensed Consolidated Statements of Operations for the
three and nine months ended September 30, 2019 and
2018
|
5
|
|
Condensed Consolidated Statements of Changes in
Stockholders’ Equity for the three and nine months ended
September 30, 2019 and
2018
|
6
|
|
Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 2019 and 2018
|
7
|
|
Notes
to Condensed Consolidated Financial Statements
|
8
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
|
25
|
|
|
|
Item
3.
|
Quantitative and
Qualitative Disclosures About Market Risk.
|
32
|
|
|
|
Item
4.
|
Controls and
Procedures.
|
32
|
|
|
|
Part II – OTHER INFORMATION
|
|
|
|
|
|
Item
1.
|
Legal
Proceedings.
|
33
|
|
|
|
Item
1A.
|
Risk
Factors.
|
34
|
|
|
|
Item
2.
|
Unregistered Sales
of Equity Securities and Use of Proceeds.
|
36
|
|
|
|
Item
3.
|
Defaults Upon
Senior Securities.
|
36
|
|
|
|
Item
4.
|
Mine
Safety Disclosures.
|
36
|
|
|
|
Item
5.
|
Other
Information.
|
36
|
|
|
|
Item
6.
|
Exhibits.
|
37
|
|
|
|
|
Signatures.
|
38
|
|
September
30,
|
December
31,
|
|
2019
|
2018
|
ASSETS
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
Cash
|
$2,594,888
|
$4,303,480
|
Accounts
receivable, net
|
176,328
|
295,626
|
Prepaid expenses
and other current assets
|
311,567
|
328,612
|
Total current
assets
|
3,082,783
|
4,927,718
|
|
|
|
Property and
equipment, net
|
28,255
|
39,821
|
Capitalized
software costs, net
|
478,129
|
659,092
|
Operating lease
right-of-use asset
|
3,772
|
-
|
Other
assets
|
3,525
|
3,525
|
|
|
|
TOTAL
ASSETS
|
$3,596,464
|
$5,630,156
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
Accounts payable
and accrued expenses
|
$1,528,797
|
$2,338,560
|
Deferred
revenue
|
304,683
|
253,200
|
Total current
liabilities
|
1,833,480
|
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 September 30, 2019 and December 31, 2018,
respectively;
|
1
|
3
|
Common stock,
$0.0001 par value; 100,000,000 shares authorized, 4,061,882 and
1,633,394 issued and outstanding as of September 30, 2019 and
December 31, 2018, respectively
|
406
|
163
|
Additional paid in
capital
|
35,192,968
|
32,791,951
|
Accumulated
deficit
|
(33,430,391)
|
(29,753,721)
|
|
|
|
TOTAL
STOCKHOLDERS' EQUITY
|
1,762,984
|
3,038,396
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$3,596,464
|
$5,630,156
|
|
For the Three
Months Ended
September
30,
|
For the Nine Months
Ended
September
30,
|
||
|
2019
|
2018
|
2019
|
2018
|
|
|
(Restated)
|
|
(Restated)
|
|
|
|
|
|
SERVICE
REVENUES
|
$1,095,320
|
$1,389,134
|
$3,441,307
|
$4,955,206
|
|
|
|
|
|
COST
OF REVENUE
|
963,692
|
1,789,021
|
3,206,524
|
6,613,583
|
|
|
|
|
|
GROSS
PROFIT (LOSS)
|
131,628
|
(399,887)
|
234,783
|
(1,658,377)
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
Research and
development
|
43,690
|
60,299
|
161,002
|
238,431
|
Selling, general
and administrative expenses
|
745,827
|
2,690,991
|
3,464,312
|
8,943,389
|
Depreciation and
amortization
|
95,360
|
94,031
|
302,076
|
257,440
|
TOTAL
OPERATING EXPENSES
|
884,877
|
2,845,321
|
3,927,390
|
9,439,260
|
|
|
|
|
|
OPERATING
LOSS
|
(753,249)
|
(3,245,208)
|
(3,692,607)
|
(11,097,637)
|
|
|
|
|
|
Other income
(expense), net
|
3,240
|
171
|
15,937
|
(1,081,328)
|
|
|
|
|
|
LOSS
FROM CONTINUING OPERATIONS
|
(750,009)
|
(3,245,037)
|
(3,676,670)
|
(12,178,965)
|
|
|
|
|
|
DISCONTINUED
OPERATIONS
|
|
|
|
|
Income (loss) from
operations of discontinued component
|
-
|
(83,736)
|
-
|
377,207
|
INCOME
(LOSS) FROM DISCONTINUED OPERATIONS
|
-
|
(83,736)
|
-
|
377,207
|
|
|
|
|
|
NET
LOSS
|
$(750,009)
|
$(3,328,773)
|
$(3,676,670)
|
$(11,801,758)
|
|
|
|
|
|
Deemed dividend on
exchange of warrants
|
-
|
(1,019,040)
|
-
|
(1,335,901)
|
|
|
|
|
|
NET
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
$(750,009)
|
$(4,347,813)
|
$(3,676,670)
|
$(13,137,659)
|
|
|
|
|
|
LOSS
PER SHARE FROM CONTINUING OPERATIONS:
|
|
|
|
|
Basic
|
$(0.19)
|
$(2.26)
|
$(1.09)
|
$(9.65)
|
Diluted
|
$(0.19)
|
$(2.26)
|
$(1.09)
|
$(9.65)
|
EARNINGS
(LOSS) PER SHARE FROM DISCONTINUED OPERATIONS:
|
|
|
|
|
Basic
|
$-
|
$(0.06)
|
$-
|
$0.30
|
Diluted
|
$-
|
$(0.06)
|
$-
|
$0.30
|
NET
LOSS PER SHARE:
|
|
|
|
|
Basic
|
$(0.19)
|
$(3.03)
|
$(1.09)
|
$(10.41)
|
Diluted
|
$(0.19)
|
$(3.03)
|
$(1.09)
|
$(10.41)
|
WEIGHTED
AVERAGE SHARES OUTSTANDING
|
|
|
|
|
Basic
|
4,050,006
|
1,434,963
|
3,381,026
|
1,262,409
|
Diluted
|
4,050,006
|
1,434,963
|
3,381,026
|
1,262,409
|
|
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
|
Issuance of
common stock upon vesting of restricted stock
units
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
31,646
|
3
|
(3)
|
-
|
-
|
Common stock
reserved and retired for excess tax benefits from stock based
compensation
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(12,477)
|
(1)
|
(9,856)
|
-
|
(9,857)
|
Stock based
compensation for restricted stock units issued to the board of
directors
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
25,000
|
-
|
25,000
|
Stock based
compensation for options issued to employees
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
31,074
|
-
|
31,074
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(750,009)
|
(750,009)
|
Balance,
September 30, 2019
|
-
|
$-
|
-
|
$-
|
8
|
$-
|
2,189
|
$-
|
5,028
|
$1
|
4,061,882
|
$406
|
$35,192,968
|
$(33,430,391)
|
$1,762,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
Issuance of
common shares in connection with exercise of H-4
warrants
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
260,116
|
26
|
936,397
|
-
|
936,423
|
Stock based
compensation for options issued to employees (net of
forfeitures)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(29,960)
|
-
|
(29,960)
|
Stock based
compensation for restricted stock units issued to
employees
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
817,696
|
-
|
817,696
|
Stock based
compensation for common stock issued to service
providers
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
6
|
-
|
6
|
Deemed
dividend on modification of H-4 Warrants and issuance of Series J
warrants
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1,019,034
|
(1,019,040)
|
(6)
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(3,328,773)
|
(3,328,773)
|
Balance,
September 30, 2018 (Restated)
|
-
|
$-
|
-
|
$-
|
8
|
$-
|
2,189
|
$-
|
26,843
|
$3
|
1,618,741
|
$162
|
$30,327,772
|
$(22,742,556)
|
$7,585,381
|
|
For the Nine
Months Ended
September
30,
|
|
|
2019
|
2018
|
|
|
(Restated)
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
Net loss
|
$(3,676,670)
|
$(11,801,758)
|
Income from discontinued
operations
|
-
|
(377,207)
|
Loss from continuing
operations
|
(3,676,670)
|
(12,178,965)
|
Adjustments to reconcile net loss
to net cash used in operating activities:
|
|
|
Depreciation and
amortization
|
307,020
|
257,440
|
Amortization of debt
discount
|
-
|
176,000
|
Loss of disposition of
asset
|
3,695
|
-
|
Stock based
compensation
|
588,056
|
2,435,538
|
Non-cash interest
expense
|
-
|
696,013
|
Amortization of operating lease
right-of-use asset
|
19,268
|
-
|
Changes in operating assets and
liabilities:
|
|
|
Accounts
receivable
|
119,298
|
(4,399)
|
Prepaid expenses and other
assets
|
7,615
|
(335,514)
|
Accounts payable and accrued
expenses
|
(805,038)
|
95,756
|
Lease
liabilities
|
(13,610)
|
-
|
Deferred
revenue
|
51,483
|
(213,218)
|
|
|
|
NET CASH USED IN
OPERATING ACTIVITIES - CONTINUING OPERATIONS
|
(3,398,883)
|
(9,071,349)
|
NET CASH USED IN
OPERATING ACTIVITIES - DISCONTINUED OPERATIONS
|
-
|
(995,250)
|
NET CASH USED IN
OPERATING ACTIVITIES
|
(3,398,883)
|
(10,066,599)
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
Purchase of property and
equipment
|
-
|
(43,108)
|
Capitalization of software
costs
|
(118,462)
|
(340,608)
|
Proceeds from sale of fixed
asset
|
275
|
-
|
|
|
|
NET CASH USED IN
INVESTING ACTIVITIES - CONTINUING OPERATIONS
|
(118,187)
|
(383,716)
|
NET CASH
PROVIDED BY INVESTING ACTIVITIES - DISCONTINUED
OPERATIONS
|
-
|
3,875,529
|
NET CASH (USED
IN) PROVIDED BY INVESTING ACTIVITIES
|
(118,187)
|
3,491,813
|
|
|
|
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
|
(193,190)
|
-
|
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 H-4
warrants
|
16,667
|
936,423
|
|
|
|
NET CASH
PROVIDED BY FINANCING ACTIVITIES - CONTINUING
OPERATIONS
|
1,808,478
|
7,134,762
|
NET CASH USED IN
FINANCING ACTIVITIES - DISCONTINUED OPERATIONS
|
-
|
(36,329)
|
NET CASH
PROVIDED BY FINANCING ACTIVITIES
|
1,808,478
|
7,098,433
|
|
|
|
Net increase (decrease) in
cash
|
(1,708,592)
|
523,647
|
|
|
|
Cash, beginning
of period
|
4,303,480
|
372,011
|
|
|
|
Cash, end of
period
|
$2,594,888
|
$895,658
|
|
|
|
SUPPLEMENTAL
CASH FLOW INFORMATION:
|
|
|
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
|
Deemed dividends on warrant
issuances
|
$-
|
$1,335,872
|
|
Three Months
Ended
September
30,
|
Nine Months
Ended
September
30,
|
||
|
2019
|
2018
|
2019
|
2018
|
Subscription
services
|
$790,021
|
$1,118,544
|
$2,248,403
|
$3,758,099
|
Services
on-demand
|
305,299
|
270,590
|
1,192,904
|
1,197,107
|
Total revenues
(1)(2)
|
$1,095,320
|
$1,389,134
|
$3,441,307
|
$4,955,206
|
|
Three Months
Ended
September
30,
|
Nine Months
Ended
September
30,
|
||
|
2019
|
2018
|
2019
|
2018
|
B2C
|
$861,494
|
$1,164,093
|
$2,515,178
|
$4,244,682
|
B2B
|
233,826
|
225,041
|
926,129
|
710,524
|
Total
revenues
|
$1,095,320
|
$1,389,134
|
$3,441,307
|
$4,955,206
|
|
As of September
30,
|
|
|
2019
|
2018
|
Common stock
equivalents:
|
|
|
Common stock
options
|
380,396
|
156,880
|
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
|
3,726,055
|
|
As of
|
|
|
September 30,
2019
|
December 31,
2018
|
Customer
A
|
34%
|
58%
|
Customer
B
|
31%
|
23%
|
Customer
C
|
12%
|
-%
|
Customer
D
|
10%
|
-%
|
|
For the three months ended
September 30,
|
For the nine months ended
September 30,
|
||
|
2019
|
2018
|
2019
|
2018
|
Customer
A
|
-
|
-
|
10%
|
-
|
|
For the
Three
Months
Ended
September
30,
2018
|
For the
Nine
Months
Ended
September
30,
2018
|
|
|
|
Revenues
|
$3,222,928
|
$10,871,777
|
Cost
of revenues
|
2,649,168
|
8,576,847
|
Gross
profit
|
573,760
|
2,294,930
|
|
|
|
Selling,
general and administrative expenses
|
575,248
|
1,691,934
|
Depreciation
and amortization
|
78,954
|
221,897
|
Total
Operating Expenses
|
654,202
|
1,913,831
|
|
|
|
Operating income
(loss)
|
(80,442)
|
381,099
|
|
|
|
Interest
expense, net
|
(3,294)
|
(3,892)
|
|
|
|
Net
income (loss) from discontinued operations
|
$(83,736)
|
$377,207
|
|
As of
|
|
|
September 30,
2019
|
December 31,
2018
|
Software
|
$1,442,737
|
$1,324,275
|
Accumulated
amortization
|
(964,608)
|
(665,183)
|
Total
|
$478,129
|
$659,092
|
Year
|
Amortization Expense
|
2019
(remaining three months)
|
$91,542
|
2020
|
263,468
|
2021
|
113,578
|
2022
|
9,541
|
Total
amortization expense
|
$478,129
|
|
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 September 30, 2019
|
380,396
|
$14.43
|
7.09
|
$-
|
|
Three Months
ended
September
30,
|
Nine Months
ended
September
30,
|
||
|
2019
|
2018
|
2019
|
2018
|
Research and
development
|
$3,799
|
$2,127
|
$11,274
|
$8,837
|
Selling, general
and administrative
|
(53,862)
|
785,609
|
576,782
|
2,426,701
|
Total
|
$(50,063)
|
$787,736
|
$588,056
|
$2,435,538
|
|
For the three and nine months
ended
September 30,
|
||||
|
2019
|
|
2018
|
||
Fair value of common stock
|
$
|
2.32
|
|
|
$10.92 – $13.26
|
Expected volatility
|
|
151.76%
|
|
|
118.10% - 143.50%
|
Dividend yield
|
$
|
-
|
|
$
|
-
|
Risk-free interest
|
|
2.70%
|
|
|
2.85% - 3.00%
|
Expected life (years)
|
|
5.5
|
|
|
5.125 - 5.33
|
|
Number of Warrants
|
Weighted Average Exercise Price
|
Weighted Average Remaining Contractual Life (Years)
|
Outstanding
and exercisable at December 31, 2018
|
863,084
|
$6.00
|
2.51
|
Exercised,
K Warrants
|
(277,778)
|
0.06
|
-
|
Outstanding
and exercisable at September 30, 2019
|
585,306
|
$8.85
|
2.95
|
|
For the
Three
Months
Ended
September
30,
2018
|
For the
Nine
Months
Ended
September
30,
2018
|
|
|
|
Revenues
|
$3,222,928
|
$10,871,777
|
Cost
of revenues
|
2,649,168
|
8,576,847
|
Gross
profit
|
573,760
|
2,294,930
|
|
|
|
Selling,
general and administrative expenses
|
575,248
|
1,691,934
|
Depreciation
and amortization
|
78,954
|
221,897
|
Total
Operating Expenses
|
654,202
|
1,913,831
|
|
|
|
Operating income
(loss)
|
(80,442)
|
381,099
|
|
|
|
Interest
expense, net
|
(3,294)
|
(3,892)
|
|
|
|
Net
income (loss) from discontinued operations
|
$(83,736)
|
$377,207
|
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 September 30, 2019, formatted in XBRL
(Extensible Business Reporting Language): (i) the Condensed
Consolidated Statements of Operations; (ii) the Condensed
Consolidated Balance Sheets; (iii) the Consolidated Statements of
Changes in Shareholders’ Equity; (iv) the Condensed
Consolidated Statements of Cash Flows; and (v) the Notes to
Consolidated Financial Statements, tagged as blocks of
text.
|
|
DropCar,
Inc.
|
|
|
|
|
Date:
November 14, 2019
|
By:
|
/s/
Spencer Richardson
|
|
|
Spencer
Richardson
|
|
|
Chief
Executive Officer
(Principal
Executive Officer)
|
|
|
|
Date:
November 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
|
The Company |
9 Months Ended |
---|---|
Sep. 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 minimis 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 unaudited 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 August 19, 2019, the Company received a letter from the Listing Qualifications Department of The Nasdaq Stock Market (“Nasdaq”) indicating that the Company no longer complies with the minimum stockholders' equity requirement under Nasdaq Listing Rule 5550(b)(1) for continued listing on The Nasdaq Capital Market because the Company's stockholders' equity of $2,466,776, as reported in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, is below the required minimum of $2,500,000, and as of August 15, 2019, the Company does not meet the alternatives of market value of listed securities or net income from continuing operations.
Based on materials submitted to Nasdaq, on October 21, 2019, the Company was granted an extension to regain compliance with Nasdaq Listing Rule 5550(b)(1) until November 29, 2019.
If the Company's plan to regain compliance with the minimum stockholders' equity standard is not accepted or if it is accepted but the Company does not regain compliance by the end of the extension granted by Nasdaq, or if the Company fails to satisfy another Nasdaq requirement for continued listing, Nasdaq staff could provide notice that the Company's common shares will become subject to delisting. In such event, Nasdaq rules permit the Company to appeal the decision to reject its proposed compliance plan or any delisting determination to a Nasdaq hearings panel. Accordingly, there can be no guarantee that the Company will be able to maintain its Nasdaq listing.
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.
On September 6, 2019, DropCar, Inc. (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).
This notice has no immediate effect on the Company's Nasdaq listing; the Company has 180 calendar days, or until March 4, 2020, to regain compliance. To regain compliance, the closing bid price of the Company’s securities must be at least $1.00 per share for a minimum of ten consecutive business days. If the Company does not regain compliance by March 4, 2020, the Company may be eligible for additional time to regain compliance or if the Company is otherwise not eligible, the Company may request a hearing before a Hearings Panel.
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Consolidated Statement of Operations - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Income Statement [Abstract] | ||||
SERVICE REVENUES | $ 1,095,320 | $ 1,389,134 | $ 3,441,307 | $ 4,955,206 |
COST OF REVENUE | 963,692 | 1,789,021 | 3,206,524 | 6,613,583 |
GROSS PROFIT (LOSS) | 131,628 | (399,887) | 234,783 | (1,658,377) |
OPERATING EXPENSES | ||||
Research and development | 43,690 | 60,299 | 161,002 | 238,431 |
Selling, general and administrative expenses | 745,827 | 2,690,991 | 3,464,312 | 8,943,389 |
Depreciation and amortization | 95,360 | 94,031 | 302,076 | 257,440 |
TOTAL OPERATING EXPENSES | 884,877 | 2,845,321 | 3,927,390 | 9,439,260 |
OPERATING LOSS | (753,249) | (3,245,208) | (3,692,607) | (11,097,637) |
Other income (expense), net | 3,240 | 171 | 15,937 | (1,081,328) |
LOSS FROM CONTINUING OPERATIONS | (750,009) | (3,245,037) | (3,676,670) | (12,178,965) |
DISCONTINUED OPERATIONS | ||||
Income (loss) from operations of discontinued component | 0 | (83,736) | 0 | 377,207 |
INCOME (LOSS) FROM DISCONTINUED OPERATIONS | 0 | (83,736) | 0 | 377,207 |
NET LOSS | (750,009) | (3,328,773) | (3,676,670) | (11,801,758) |
Deemed dividend on exchange of warrants | 0 | (1,019,040) | 0 | (1,335,901) |
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ (750,009) | $ (4,347,813) | $ (3,676,670) | $ (13,137,659) |
LOSS PER SHARE FROM CONTINUING OPERATIONS: | ||||
Basic | $ (0.19) | $ (2.26) | $ (1.09) | $ (9.65) |
Diluted | (0.19) | (2.26) | (1.09) | (9.65) |
(LOSS) EARNINGS PER SHARE FROM DISCONTINUED OPERATIONS: | ||||
Basic | .00 | (0.06) | .00 | .30 |
Diluted | .00 | (0.06) | .00 | .30 |
NET LOSS PER SHARE: | ||||
Basic | (0.19) | (3.03) | (1.09) | (10.41) |
Diluted | $ (0.19) | $ (3.03) | $ (1.09) | $ (10.41) |
WEIGHTED AVERAGE SHARES OUTSTANDING | ||||
Basic | 4,050,006 | 1,434,963 | 3,381,026 | 1,262,409 |
Diluted | 4,050,006 | 1,434,963 | 3,381,026 | 1,262,409 |
Leases (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Dec. 31, 2018 |
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Leases [Abstract] | |||||
Operating right-of-use lease assets | $ 3,772 | $ 3,772 | $ 0 | ||
Weighted-average remaining lease term | 6 months | 6 months | |||
Weighted-average discount rate | 6.00% | 6.00% | |||
Lease expense | $ 2,493 | $ 7,606 | $ 20,757 | $ 35,064 | |
Operating lease payments | $ 21,123 |
Discontinued Operations and Disposition of Operating Segment (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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DropCar Operating Subscription Services [Member] | ||||
Revenues | $ 3,222,928 | $ 10,871,777 | ||
Cost of revenues | 2,649,168 | 8,576,847 | ||
Gross profit | 573,760 | 2,294,930 | ||
Selling, general and administrative expenses | 575,248 | 1,691,934 | ||
Depreciation and amortization | 78,954 | 221,897 | ||
Total operating expenses | 654,202 | 1,913,831 | ||
Operating income (loss) | (80,442) | 381,099 | ||
Interest expense, net | (3,294) | (3,892) | ||
Net income (loss) from discontinued operations | $ 0 | $ (83,736) | $ 0 | $ 377,207 |
Stockholders' Equity (Details 2) - $ / shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
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Fair value of common stock | $ 2.32 | |
Expected volatility | 151.75% | |
Dividend yield | 0.00% | 0.00% |
Risk-free interest | 2.70% | |
Expected life (years) | 5 years 6 months | |
Minimum [Member] | ||
Fair value of common stock | $ 10.92 | |
Expected volatility | 118.10% | |
Risk-free interest | 2.85% | |
Expected life (years) | 5 years 1 month 15 days | |
Maximum [Member] | ||
Fair value of common stock | $ 13.26 | |
Expected volatility | 143.50% | |
Risk-free interest | 3.00% | |
Expected life (years) | 5 years 3 months 29 days |
Capitalized Software |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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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 September 30, 2019 is as follows:
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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 nine months ended September 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 nine months ended September 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 nine months ended September 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.
During the nine months ended September 30, 2019, the Company issued 31,646 shares of common stock to a director and recorded $25,000 stock based compensation as part of general and administrative expenses in the Company’s consolidated statements of operations. Concurrently and upon vesting, the Company paid $9,857 of personal withholding taxes for the grantee and reserved 12,477 shares of common stock as consideration for the cash paid which was immediately retired.
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 nine months ended September 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 and Common Stock
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.
On July 30, 2019, the Company’s compensation committee approved the grant of shares of common 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 vested 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.
On August 27, 2019, the board of directors approved the grant of 164,559 shares of vested common stock determined by the closing price of the Company’s common stock on August 27, 2019. The Company issued 31,646 shares of common stock to one board member; 132,913 vested shares have not been issued because not enough authorized and unissued shares remain in the equity incentive plan. On November 8, 2019, the board of directors modified the terms to convert the grant to a contingent payment payable upon a merger or change in control within twelve months. Upon a merger or change in control, the board of directors will have the option to satisfy the director payments in the form of cash or equity, if available. For the three and nine months ended September 30, 2019, the Company recorded $66,005 and $172,142, respectively, as general and administrative expense related to this grant. From this grant, the Company issued 31,646 shares on August 27, 2019 to one grantee and recognized a total of $25,000 as a credit to additional paid in capital for restricted stock units issued to the board of directors. The balance of the accrual is recorded and carried forward through accrued expenses.
Employee and Non-employee Stock Options
The following table summarizes stock option activity during the nine months ended September 30, 2019:
At September 30, 2019, unamortized stock compensation for stock options was approximately $162,766, with a weighted-average recognition period of 1.32 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 nine months ended September 30, 2019 and 2018:
The Company recorded a reduction in non-cash stock-based compensation expense for the three months ended September 30, 2019 in the amount of $50,063. This was a result of $97,079 expensed for stock-based compensation, and concurrently $147,142 of stock-based compensation was reversed and reclassified as cash based compensation. As per the statement of changes in stockholders’ equity, $56,074 was recorded as additional paid-in capital in connection with share-based compensation during the three months ended September 30, 2019.
Non-cash stock-based compensation for the nine months ended September 30, 2019 was $588,056. As per the statement of changes in stockholders’ equity, $592,780 was recorded as additional paid-in capital in connection with share-based compensation during the nine months ended September 30, 2019. The difference was due to a portion of share-based payment that was recorded as accrued expense at December 31, 2018 and issued during the nine months ended September 30, 2019.
Stock option pricing model
The fair value of the stock options granted during the three and nine months ended September 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 nine months ended September 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 2020-2023.
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Concentrations (Details) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||||
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Sep. 30, 2019 |
[1] | Sep. 30, 2018 |
[1] | Sep. 30, 2019 |
Sep. 30, 2018 |
[1] | Dec. 31, 2018 |
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Accounts Receivable [Member] | Customer A [Member] | |||||||||||
Concentration risk, percentage | 34.00% | 58.00% | |||||||||
Accounts Receivable [Member] | Customer B [Member] | |||||||||||
Concentration risk, percentage | 31.00% | 23.00% | |||||||||
Accounts Receivable [Member] | Customer C [Member] | |||||||||||
Concentration risk, percentage | 12.00% | [1] | |||||||||
Accounts Receivable [Member] | Customer D [Member] | |||||||||||
Concentration risk, percentage | 10.00% | [1] | |||||||||
Sales Revenue, Net [Member] | Customer A [Member] | |||||||||||
Concentration risk, percentage | 10.00% | ||||||||||
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Concentrations (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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
The concentration of revenue for the three and nine months ended September 30, 2019 and 2018, respectively are as follows:
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Liquidity and Basis of Presentation (Details Narrative) - USD ($) |
Sep. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Liquidity And Going Concern Abstract | ||
Accumulated deficit | $ (33,430,391) | $ (29,753,721) |
Stockholders' Equity (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Mar. 31, 2019 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Sep. 30, 2019 |
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Stock based compensation for common stock issued to service provider, amount | $ 222,200 | $ 6 | $ 31,800 | $ 447,150 | |
Exercise of Series K warrants, amount | $ 16,667 | ||||
Unamortized stock compensation, options | $ 162,766 | ||||
Unamortized stock compensation, period of recognition | 1 year 3 months 25 days | ||||
Common Stock [Member] | |||||
Conversion of Series H-4 preferred stock into common stock, shares | 1,412,420 | 1,412,420 | |||
Stock based compensation for common stock issued to service provider, shares | 116,666 | 3,333 | 56,929 | 116,666 | |
Stock based compensation for common stock issued to service provider, amount | $ 12 | $ 6 | $ 222,200 | ||
Exercise of Series K warrants, shares | 277,778 | 277,778 | |||
Exercise of Series K warrants, amount | $ 28 | $ 16,667 | |||
Series H-4 Preferred Stock [Member] | |||||
Conversion of Series H-4 preferred stock into common stock, shares | (21,591) | 21,591 |
Summary of Significant Accounting Policies (Tables) |
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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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Stockholders' Equity (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 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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Summary of Significant Accounting Policies (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
Dec. 31, 2018 |
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Accounting Policies [Abstract] | |||||
Accumulated deficit | $ (33,430,391) | $ (33,430,391) | $ (29,753,721) | ||
Research and development costs, net | $ 43,690 | $ 60,299 | $ 161,002 | $ 238,431 |
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