Commitments & Contingencies
|3 Months Ended|
Mar. 31, 2020
|Commitments and Contingencies Disclosure [Abstract]|
|Commitments & Contingencies||
The Company leases office space in New York City and Buenos Aires, Argentina on a month-to-month basis, with a condition of a 60-day notice to terminate. For the three months ended March 31, 2020 and 2019, rent expense for the Company’s New York City and Buenos Aires offices was approximately $11,347 and $22,900, respectively, and included in loss from discontinued operations.
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.
As of January 1, 2019, the Company had accrued approximately $232,000 for the settlement of multiple employment disputes. During the three months ended March 31, 2019, approximately $39,000 of this amount was settled upon payment. For the three months ended March 31, 2019, $16,000 was expensed and accrued for settlements. As of March 31, 2019, approximately $209,000 remained accrued for the settlement of employment disputes. As of January 1, 2020, approximately $134,000 remained accrued as accounts payable and accrued expenses for the settlement of employment disputes. For the three months ended March 31, 2020, approximately $40,000 was recorded as a reduction in loss from operations of discontinued component for the reversal of previously accrued settlements. Further, approximately $26,000 was settled upon payment. As of March 31, 2020, approximately $68,000 remains accrued as accounts payable and accrued expenses for the settlement of employment disputes.
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. During the three months ended March 31, 2020 and 2019, the Company expensed as loss from operations of discontinued component approximately $0 in relation to these matters. As of March 31, 2020 and December 31, 2019, the Company has accrued as accounts payable and accrued expenses approximately $333,000 in relation to these matters.
The Company was a defendant in a class action lawsuit which resulted in a judgement entered into whereby the Company is required to pay legal fees in the amount of $45,000 to the plaintiff’s counsel. As of and for the year ended December 31, 2019, the Company recorded $45,000 as current liabilities held for sale and loss from operations of discontinued component. As of March 31, 2020, the balance due remains $45,000.
On February 12, 2020, the Company received a notice from the New York State Department of Labor stating it has a negative balance in the experience rating account of approximately $165,000. The notice states the Company may make a voluntary payment of approximately $165,000. The Company does not expect to make this payment which will result in an increase to the future unemployment insurance rates. The Company will need to pay the max rate for a three-year period for not making the payment.
The entire disclosure for commitments and contingencies.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef