| Summary of Significant Accounting Policies | 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The Companyās
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America (āUS GAAPā) and include the accounts of the Company and its wholly-owned subsidiaries. All material
intercompany balances and transactions have been eliminated in consolidation. Use of Estimates and Assumptions
and Critical Accounting Estimates and Assumptions The preparation
of financial statements in conformity with U.S. GAAP 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 dates of the financial statements
and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Risks and Uncertainties The Company operates
in an industry that is subject to intense competition and change in consumer demand. The Companyās operations are subject
to significant risk and uncertainties including financial and operational risks including the potential risk of business failure. The Company has
experienced, and in the future expects to continue to experience, variability in sales and earnings. The factors expected to contribute
to this variability include, among others, (i) the cyclical nature of the industry, (ii) general economic conditions in the various
local markets in which the Company competes, including a potential general downturn in the economy, and (iii) the volatility of
prices in connection with the Companyās distribution of the product. These factors, among others, make it difficult to project
the Companyās operating results on a consistent basis. Concentration of Credit Risk Financial instruments
that potentially expose the Company to credit risk consist of cash and cash equivalents, and accounts receivable. The Company is
exposed to credit risk on its cash and cash equivalents in the event of default by the financial institutions to the extent account
balances exceed the amount insured by the FDIC, which is $250,000. Accounts receivables potentially subject the Company to
concentrations of credit risk. Company closely monitors extensions of credit. Estimated credit losses have been recorded in the
consolidated financial statements. Recent credit losses have been within management's expectations. No customer accounted for more
than 10% of revenues in 2018 or 2017. Cash and Cash Equivalents The Company considers
all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. The Company held no cash
equivalents at December 31, 2018 and 2017. The Company minimizes
its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance
at times may exceed federally insured limits. Accounts receivable and allowance
for doubtful accounts Accounts receivable
are generally due thirty days from the invoice date. The Company has a policy of reserving for uncollectible accounts based on
their best estimate of the amount of profitable credit losses in its existing accounts receivable. The Company extends credit to
its customers based on an evaluation of their financial condition and other factors. The Company generally does not require collateral
or other security to support accounts receivable. The Company performs ongoing credit evaluations of its customers and maintains
an allowance for potential bad debts if required. The Company determines
whether an allowance for doubtful accounts is required by evaluation of specific accounts where information indicates the customer
may have an inability to meet financial obligations. In these cases, the Company uses assumptions and judgment, based on the best
available facts and circumstances, to record a specific allowance for those customers against amounts due to reduce the receivable
to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional information is received.
The amounts calculated are analyzed to determine the total amount of the allowance. The Company may also record a general allowance
as necessary. Direct write-offs
are taken in the period when the Company has exhausted their efforts to collect overdue and unpaid receivables or otherwise evaluate
other circumstances that indicate that the Company should abandon such efforts. For the years ended December 31, 2018 and 2017,
the Company reported $0 and $0 of bad debt expense, respectively. Customer Phone Supply Customer phone supply
consists of cellular telephones provided to eligible customers in accordance with Federal Communications Commission rules outlined
in the Communications Act of 1934, as amended. These telephones are amortized to Cost of Sales over a 12-month period from the
date put into service. The amount amortized into Cost of Revenues was $1,170,295 and $1,473,956 for the years ended December 31,
2018 and 2017, respectively. Property and equipment Property and equipment
and software development costs are stated at cost, less accumulated depreciation. Depreciation is recorded using the straight-line
method over the estimated useful lives of the respective assets. Leasehold improvements are amortized over the life of the lease
if it is shorter than the estimated useful life. Maintenance and repairs are charged to operations when incurred. Betterments and
renewals are capitalized. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated
depreciation account are relieved, and any gain or loss is included in operations. Computer and office equipment is generally three
to five years and office furniture is generally seven years. Fair value measurements The
Company adopted the provisions of ASC Topic 820, ā Fair Value Measurements and Disclosures The
estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable
and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature
of these instruments. The carrying amounts of our short and long term credit obligations approximate fair value because the effective
yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances
of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk. ASC
820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on
the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may
be used to measure fair value:
ā Level 1 ā quoted prices in active markets for identical assets or liabilities.
ā Level 2 ā quoted prices for similar assets and liabilities in active markets or inputs that are observable.
ā Level 3 ā inputs that are unobservable (for example cash flow modeling inputs based on assumptions). The
derivative liability in connection with the conversion feature of the convertible debt, classified as a Level 3 liability, is the
only financial liability measure at fair value on a recurring basis. The
change in the Level 3 financial instrument is as follows:
2018
Balance, January 1, 2018 $ -
Additions ā Merger transaction 59,141
Additions & disposals - net (12,188 )
Change in fair value recognized in operations 4,105
Balance, December 31, 2018 $ 51,058 The estimated fair
value of the derivative instruments was valued using the Black-Scholes option pricing model, using the following assumptions as
of December 31, 2018:
2018
Estimated dividends None
Expected volatility 113.72 %
Risk free interest rate 3.13 %
Expected term .01-36 months LTC cryptocurrency coins are valued
at current quoted rates and are therefore a Level 1 input. Convertible
Instruments The
Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815 āDerivatives
and Hedging Activitiesā Business combinations We allocate the
fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated
fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities
is recorded as goodwill. Such valuations
require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates
in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired
technology, and trade names from a market participant perspective, useful lives and discount rates. Managementās estimates
of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as
a result, actual results may differ from estimates. Deferred Revenues The Company records
deferred revenues when it receives payments or issues invoices in advance of transferring control of promised goods or services
to a customer. The advance consideration received from a customer is deferred until the Company provides the customer that product
or service. At December 31, 2018, the deferred revenues totaled $50,000. There were no deferred revenues at December
31, 2017. Revenue recognition The Company adopted
ASC 606 effective January 1, 2018 using the modified retrospective method which would require a cumulative effect adjustment for
initially applying the new revenue standard as an adjustment to the opening balance of retained earnings and the comparative information
would not require to be restated and continue to be reported under the accounting standards in effect for those periods. Based on the Companyās
analysis the Company did not identify a cumulative effect adjustment for initially applying the new revenue standards. The Company
principally generates revenue through providing product, services and licensing revenue. The adoption of
ASC 606 represents a change in accounting principle that will more closely align revenue recognition with the delivery of the Companyās
services and will provide financial statement readers with enhanced disclosures. In accordance with ASC 606, revenue is recognized
when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the
Company expects to be entitled to receive in exchange for these services. To achieve this core principle, the Company applies the
following five steps:
1) Identify the contract with a customer A contract with
a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each partyās rights
regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial
substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred
is probable based on the customerās intent and ability to pay the promised consideration. The Company applies judgment in
determining the customerās ability and intention to pay, which is based on a variety of factors including the customerās
historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.
2) Identify the performance obligations in the contract Performance obligations
promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being
distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily
available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the
services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services,
the Company must apply judgment to determine whether promised services are capable of being distinct and distinct in the context
of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation.
3) Determine the transaction price The transaction
price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the
customer. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration
that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending
on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Companyās
judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. None of the
Companyās contracts as of December 31, 2018 contained a significant financing component.
4) Allocate the transaction price to performance obligations in the contract If the contract
contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. However,
if a series of distinct services that are substantially the same qualifies as a single performance obligation in a contract with
variable consideration, the Company must determine if the variable consideration is attributable to the entire contract or to a
specific part of the contract. For example, a bonus or penalty may be associated with one or more, but not all, distinct services
promised in a series of distinct services that forms part of a single performance obligation. Contracts that contain multiple performance
obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling
price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation
or to a distinct service that forms part of a single performance obligation. The Company determines standalone selling price based
on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through
past transactions, the Company estimates the standalone selling price taking into account available information such as market
conditions and internally approved pricing guidelines related to the performance obligations.
5) Recognize revenue when or as the Company satisfies a performance obligation The Company satisfies
performance obligations either over time or at a point in time. Revenue is recognized at the time the related performance obligation
is satisfied by transferring a promised service to a customer. Advertising
costs Advertising
costs are expensed as incurred in accordance with ASC 720-35 āAdvertising Costsā Share-based compensation The Company recognizes
compensation expense for all equityābased payments in accordance with ASC 718 ā Compensation ā Stock Compensation. Restricted stock awards are granted
at the discretion of the Company. These awards are restricted as to the transfer of ownership and generally vest over the requisite
service periods, typically over a four-year period (vesting on a straightāline basis). The fair value of a stock award is
equal to the fair market value of a share of Company stock on the grant date. The fair value of
option awards is estimated on the date of grant using the BlackāScholes option valuation model. The BlackāScholes option
valuation model requires the development of assumptions that are input into the model. These assumptions are the expected stock
volatility, the riskāfree interest rate, the expected life of the option, the dividend yield on the underlying stock and
the expected forfeiture rate. Expected volatility is calculated based on the historical volatility of the Companyās Common
stock over the expected option life and other appropriate factors. The expected option term is computed using the āsimplifiedā
method as permitted under the provisions of ASC 718-10-S99. The Company uses the simplified method to calculate expected term of
share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable
basis upon which to estimate expected term. Riskāfree interest rates are calculated based on continuously compounded riskāfree
rates for the appropriate term. The dividend yield is assumed to be zero as the Company has never paid or declared any cash dividends
on the Common stock of the Company and does not intend to pay dividends on the Common stock in the foreseeable future. The expected
forfeiture rate is estimated based on historical experience. Determining the
appropriate fair value model and calculating the fair value of equityābased payment awards requires the input of the subjective
assumptions described above. The assumptions used in calculating the fair value of equityābased payment awards represent
managementās best estimates, which involve inherent uncertainties and the application of managementās judgment. As
a result, if factors change and the Company uses different assumptions, the equityābased compensation could be materially
different in the future. In addition, the Company is required to estimate the expected forfeiture rate and recognize expense only
for those shares expected to vest. If the actual forfeiture rate is materially different from the Companyās estimate, the
equityābased compensation could be significantly different from what the Company has recorded in the current period. Earnings (loss) per common share Basic net income
(loss) per common share is computed by dividing net loss attributable to stockholders by the weighted-average number of shares
of common stock outstanding during the period. Diluted net income (loss) per common share is determined using the weighted-average
number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. At December
31, 2018 and 2017, there were 50,000 and zero potentially dilutive common stock equivalents, respectively. Basic and diluted earnings
(loss) per share are the same for each of the periods presented since there was a loss for the year ended December 31, 2018 and
the common stock equivalents are thus antidilutive. Income taxes We use the asset
and liability method of accounting for income taxes in accordance with Accounting Standards Codification (āASCā) Topic
740, āIncome Taxesā. Through December
23, 2014, KSIX and BLVD operated as limited liability companies and all income and losses were passed through to the owners. Through
October 12, 2015, DIQ operated as a limited liability company and all income and losses were passed through to its owner. Subsequent
to the acquisition dates, these limited liability companies were owned by Surge and became subject to income tax. Through April 1,
2018, TW operated as a limited liability company and all income and losses were passed through to the owners. In order to facilitate
the merger discussed above, TW converted from a limited liability company to a C-Corp. ASC Topic 740-10-30
clarifies the accounting for uncertainty in income taxes recognized in an enterpriseās financial statements and prescribes
a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken
or expected to be taken in a tax return. ASC Topic 740-10-40 provides guidance on de-recognition, classification, interest and
penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the
reporting periods presented. Contingencies Certain conditions
may exist as of the date financial statements are issued, which may result in a loss to the Company, but which will only be resolved
when one or more future events occur or fail to occur. Company management and its legal counsel assess such contingencies related
to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings. The Companyās
legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the
amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that
a liability has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in
the Companyās financial statements. If the assessment indicates that a potentially material loss contingency is not probable
but is reasonably possible, or if probable but cannot be estimated, then the nature of the contingent liability, together with
an estimate of the range of possible loss if determinable would be disclosed. Related Parties The Company follows
subtopic ASC 850-10 for the identification of related parties and disclosure of related party transactions. Pursuant to Section
850-10-20, the related parties include: (a) affiliates of the Company (āAffiliateā means, with respect to any specified
person, any other person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under
common control with such person, as such terms are used in and construed under Rule 405 under the Securities Act); (b) entities
for which investments in their equity securities would be required, absent the election of the fair value option under the Fair
Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity; (c) trusts for
the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management;
(d) principal owners of the Company; (e) management of the Company; (f) other parties with which the Company may deal if one party
controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting
parties might be prevented from fully pursuing its own separate interests; and (g) other parties that can significantly influence
the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties
and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully
pursuing its own separate interests. Reclassifications Certain
prior period amounts have been reclassified to conform to the current yearās presentation. Recent accounting pronouncements In February 2016,
the Financial Accounting Standards Board (āFASBā) issued ASU No. 2016-02, ā Leases (Topic 842) Leases, Topic 842: Targeted
Improvement, In May 2017, the
FASB issued ASU 2017-09, ā CompensationāStock Compensation (Topic 718): Scope of Modification Accounting,ā
In July 2017, the
FASB issued ASU 2017-11, ā Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives
and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite
Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling
Interests with a Scope Exceptionā In December 2017,
the Securities and Exchange Commission (ā SEC Bulletin The SEC has provided
in the Bulletin that in situations where the accounting is incomplete for certain effects of the Tax Act, a measurement period
which begins in the reporting period that includes the enactment of the Tax Act and ends when the entity has obtained, prepared
and analyzed the information is needed in order to complete the accounting requirements. The measurement period shall not exceed
one year from enactment. In June 2018, the
FASB issued Accounting Standards Update (ASU) No. 2018-07, Compensation ā Stock Compensation (Topic718): Improvements
to Nonemployee Share-Based Payment Accounting Revenue from Contracts with Customers In August 2018,
the FASB issued ASU 2018-13, āFair Value Measurement (Topic 820): Disclosure FrameworkāChanges to the Disclosure
Requirements for Fair Value Measurementā. Management does
not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect
on the accompanying consolidated financial statements. |
