Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Apr. 01, 2019 | Jun. 30, 2018 | |
Document And Entity Information | |||
Entity Registrant Name | Surge Holdings, Inc. | ||
Entity Central Index Key | 0001392694 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity a Well-known Seasoned Issuer | No | ||
Entity a Voluntary Filer | No | ||
Entity's Reporting Status Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Entity Ex Transition Period | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 12,683,757 | ||
Entity Common Stock, Shares Outstanding | 88,046,391 | ||
Trading Symbol | SURG | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2018 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 444,612 | $ 1,274,160 |
Accounts receivable, less allowance for doubtful accounts of $17,000 and none, respectively | 206,679 | 5,525 |
Note receivable | 190,000 | |
Lifeline revenue due from USAC | 850,966 | 1,170,569 |
Customer phone supply | 1,356,701 | 520,165 |
Prepaid expenses | 10,862 | |
Due from related party | 19,000 | |
Total current assets | 3,059,820 | 2,989,419 |
Property and Equipment, less accumulated depreciation of $13,782 and $127,015, respectively | 30,990 | 25,962 |
Intangible assets less accumulated amortization of $319,375 | 65,269 | |
Goodwill | 866,782 | |
Other long-term assets | 61,457 | 61,457 |
Total assets | 4,084,318 | 3,076,838 |
Current liabilities: | ||
Accounts payable and accrued expenses - others | 3,104,234 | 1,696,348 |
Accounts payable and accrued expenses - related party | 149,901 | |
Payable - Telecom Operations Center - current | 334,939 | |
Credit card liability | 394,840 | |
Loss contingency | 70,000 | |
Deferred revenue | 50,000 | |
Derivative liability | 51,058 | |
Advance from related party | 389,502 | |
Note payable - related party | 344,241 | |
Notes payable and current portion of long-term debt, net | 582,500 | 435,000 |
Total current liabilities | 4,792,035 | 2,810,528 |
Long-term debt less current portion - related party | 680,000 | |
Trade payables - long term | 600,516 | 883,550 |
Total liabilities | 6,072,551 | 3,694,078 |
Commitments and contingencies | ||
Stockholders' deficit: | ||
Common stock: $0.001 par value; 500,000,000 shares authorized; 88,046,391 shares and 152,555,416 shares issued and outstanding at December 31, 2018 and 2017, respectively | 88,047 | 152,555 |
Additional paid in capital | 333,623 | (155,555) |
Accumulated deficit | (2,423,546) | (617,240) |
Total stockholders' deficit | (1,988,233) | (617,240) |
Total liabilities and stockholders' deficit | 4,084,318 | 3,076,838 |
Series A Preferred [Member] | ||
Stockholders' deficit: | ||
Preferred stock, value | 13,000 | 3,000 |
Total stockholders' deficit | 13,000 | 3,000 |
Series C Convertible Preferred Stock [Member] | ||
Stockholders' deficit: | ||
Preferred stock, value | $ 643 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Allowance for doubtful accounts | $ 17,000 | |
Accumulated depreciation of property and equipment | 13,782 | 127,015 |
Accumulated amortization of intangible assets | $ 319,375 | |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 88,046,391 | 152,555,416 |
Common stock, shares outstanding | 88,046,391 | 152,555,416 |
Series A Preferred [Member] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 100,000,000 | 100,000,000 |
Preferred stock, shares issued | 13,000,000 | 3,000,000 |
Preferred stock, shares outstanding | 13,000,000 | 3,000,000 |
Series C Convertible Preferred Stock [Member] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 643,366 | 0 |
Preferred stock, shares outstanding | 643,366 | 0 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Statement [Abstract] | ||
Revenue | $ 15,244,155 | $ 13,459,980 |
Cost of revenue | 8,570,240 | 8,096,076 |
Gross profit | 6,673,915 | 5,363,904 |
Cost and expenses | ||
Depreciation and amortization | 149,642 | 6,939 |
Selling, general and administrative | 8,059,742 | 5,152,680 |
Total costs and expenses | 8,209,384 | 5,159,619 |
Operating profit (loss) | (1,535,469) | 204,285 |
Other income (expense): | ||
Interest expense | (140,457) | (24,021) |
Change in fair value of derivative liability | (4,105) | |
Change in fair value of LTC cryptocurrency | (95,387) | |
Gain on sale of assets | 273,453 | |
Gain on settlement of liabilities | 43,117 | 2,587,600 |
Total other expense (income) | 76,621 | 2,563,579 |
Net income (loss) before provision for income taxes | (1,458,848) | 2,767,864 |
Provision for income taxes | 82,230 | |
Net income (loss) | $ (1,541,078) | $ 2,767,864 |
Net loss per common share, basic and diluted | $ (0.02) | $ 0.04 |
Weighted average common shares outstanding - basic and diluted | 81,566,892 | 76,183,385 |
Consolidated Statement of Stock
Consolidated Statement of Stockholders' Deficit - USD ($) | Series A Preferred [Member] | Series C Preferred [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Members' Equity [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2016 | $ (3,379,915) | $ (3,379,915) | |||||
Balance, shares at Dec. 31, 2016 | |||||||
Issuance of common shares to facilitate the reverse merger agreement | $ 152,555 | (152,555) | |||||
Issuance of common shares to facilitate the reverse merger agreement, shares | 152,555,416 | ||||||
Issuance of Series A Preferred shares to facilitate the reverse merger agreement | $ 3,000 | (3,000) | |||||
Issuance of Series A Preferred shares to facilitate the reverse merger agreement, shares | 3,000,000 | ||||||
Members' contributions | 124,811 | 124,811 | |||||
Members' withdrawals | (130,000) | (130,000) | |||||
Reclassification of undistributed members' earnings to accumulated deficit | 2,767,864 | 2,767,864 | |||||
Net income loss | 617,240 | (617,240) | 2,767,864 | ||||
Balance at Dec. 31, 2017 | $ 3,000 | $ 152,555 | (155,555) | (617,240) | (617,240) | ||
Balance, shares at Dec. 31, 2017 | 3,000,000 | 152,555,416 | |||||
Recapitalization in reverse merger | $ 10,000 | $ 79,889 | (3,687,835) | (265,228) | (3,863,174) | ||
Recapitalization in reverse merger, shares | 10,000,000 | 79,888,784 | |||||
Issuance of common stock and options for services rendered | $ 528 | 157,380 | $ 157,908 | ||||
Issuance of common stock and options for services rendered, shares | 528,000 | 48,000 | |||||
Issuance of common stock for settlement of accounts payable | $ 1,207 | 249,328 | $ 250,535 | ||||
Issuance of common stock for settlement of accounts payable, shares | 1,206,741 | ||||||
Issuance of common stock for settlement of debt and accrued interest | $ 2,609 | 597,303 | 599,912 | ||||
Issuance of common stock for settlement of debt and accrued interest, shares | 2,608,981 | ||||||
Issuance of Series C Preferred Stock for conversion of promissory note and accrued interest | $ 48 | 3,024,856 | 3,024,904 | ||||
Issuance of Series C Preferred Stock for conversion of promissory note and accrued interest, shares | 48,400 | ||||||
Issuance of Series C Preferred Stock in exchange for Common Stock | $ 595 | $ (148,741) | 148,146 | ||||
Issuance of Series C Preferred Stock in exchange for Common Stock, shares | 594,966 | (148,741,531) | |||||
Net income loss | (1,541,078) | (1,541,078) | |||||
Balance at Dec. 31, 2018 | $ 13,000 | $ 643 | $ 88,047 | $ 333,623 | $ (2,423,546) | $ (1,988,233) | |
Balance, shares at Dec. 31, 2018 | 13,000,000 | 643,366 | 88,046,391 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Operating activities | ||
Net income (loss) | $ (1,541,078) | $ 2,767,864 |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Amortization and depreciation | 149,642 | 6,939 |
Stock-based compensation | 157,907 | |
Change in fair value of LTC cryptocurrency coins | 63,487 | |
Change in fair value of derivative liability | 4,105 | |
Gain on settlement of liabilities | (43,117) | (2,587,600) |
Loss on settlement of debt | 14,667 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (102,815) | 664 |
Lifeline revenue due from USAC | 319,603 | (33,296) |
Customer phone supply | (836,536) | 288,335 |
LTC Cryptocurrency Coins | (96,992) | |
Prepaid expenses | 40,465 | |
Deferred revenue | (171,500) | |
Loss contingency | 120,000 | |
Accounts payable and accrued expenses | 925,140 | (2,802,704) |
Net cash provided by (used in) operating activities | (1,015,614) | 227,802 |
Investing activities | ||
Net cash received in business combination | 243,768 | |
Advances under note receivable | (190,000) | |
Purchase of fixed assets | (331,803) | |
Net cash used in investing activities | (278,035) | |
Financing activities | ||
Capital contributions - net | (3,155) | |
Due from related party - net | 17,554 | (19,000) |
Note payable - net | (31,250) | 285,000 |
Line of credit - advances | 1,441,029 | |
Line of credit - repayments | (1,441,029) | |
Loan repayments - related party | ||
Loan proceeds under related party financing arrangement | 1,653,500 | 1,271,242 |
Loan repayments under related party financing arrangement | (1,175,703) | (927,000) |
Net cash provided by financing activities | 464,101 | 607,087 |
Net (decrease) increase in cash and cash equivalents | (829,548) | 834,889 |
Cash and cash equivalents, beginning of period | 1,274,160 | 439,271 |
Cash and cash equivalents, end of period | 444,612 | 1,274,160 |
Cash paid for interest and income taxes: | ||
Interest | 10,580 | 3,052 |
Income taxes | 82,230 | |
Non-cash investing and financing activities: | ||
Acquisition of customer phones through related party note payable | 35,000 | |
Debt acquired in business combination | 300,000 | |
Exchange of Common Stock for Series C Preferred Stock | 148,741 | |
Liabilities settled in Common Stock | 3,875,352 | |
Trade payables under a vendor settlement arrangement | $ 412,866 |
Basis of Presentation and Busin
Basis of Presentation and Business | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Business | 1 BASIS OF PRESENTATION AND BUSINESS Basis of presentation The accompanying consolidated financial statements include the accounts of Surge Holdings, Inc. (āSurgeā), formerly Ksix Media Holdings, Inc., incorporated in Nevada on August 18, 2006, and its wholly owned subsidiaries, Ksix Media, Inc. (āMediaā), incorporated in Nevada on November 5, 2014, Ksix, LLC (āKSIXā), a Nevada limited liability company that was formed on September 14, 2011, Surge Blockchain, LLC (āBlockchainā), formerly Blvd. Media Group, LLC (āBLVDā), a Nevada limited liability company that was formed on January 29, 2009, DigitizeIQ, LLC (āDIQā) an Illinois limited liability company that was formed on July 23, 2014 Surge Cryptocurrency Mining, Inc. (āCryptoā), formerly North American Exploration, Inc. (āNAEā), a Nevada corporation that was incorporated on August 18, 2006, Surge Logics Inc (āLogicsā), an Nevada corporation that was formed on October 2, 2018 and True Wireless, Inc., an Oklahoma corporation (formerly True Wireless, LLC) (āTWā), (collectively the āCompanyā or āweā). All significant intercompany balances and transactions have been eliminated in consolidation. Recent Developments As reported on Form 8-K filed with the SEC on April 16, 2018, on April 11, 2018, the Company closed the merger transaction (the āMergerā) that was the subject of that certain Agreement and Plan of Reorganization (the āMerger Agreementā) with True Wireless, Inc., an Oklahoma corporation (āTWā) dated as of April 11, 2018. At closing, in accordance with the Merger Agreement, TW merged with and into TW Acquisition Corporation, a Nevada corporation (āMerger Subā), a wholly-owned subsidiary of Surge Holdings, Inc. (the āMergerā), with TW being the surviving corporation. As a result of the Merger, TW became a wholly-owned subsidiary of the Company. As a result of the controlling financial interest of the former members of TW, for financial statement reporting purposes, the merger between the Company and TW has been treated as a reverse acquisition with TW deemed the accounting acquirer and the Company deemed the accounting acquiree under the acquisition method of accounting in accordance with section 805-10-55 of the FASB Accounting Standards Codification. The reverse acquisition is deemed a capital transaction and the net assets of TW (the accounting acquirer) are carried forward to the Company (the legal acquirer and the reporting entity) at their carrying value before the acquisition. The acquisition process utilizes the capital structure of the Company and the assets and liabilities of TW which are recorded at their historical cost. The equity of the Company is the historical equity of TW retroactively restated to reflect the number of shares issued by the Company in the transaction. See Note 4. Business description The Companyās current focus is the provision of financial and telecommunications services to the financially underserved (i.e. persons who have little or no access credit) within the population. The Company provides a suite of services which are primarily marketed through small retail establishments which are utilized by members of its target market. Historically, the Companyās principal business has been digital advertising and lead generation through two of its wholly owned subsidiariesāDIQ, which is a full-service digital advertising agency specializing in survey generation and landing page optimization specifically designed for mass tort action lawsuits and KSIX, which is an Internet marketing company and has an advertising network designed to create revenue streams for its affiliates and to provide advertisers with increased measurable audience. KSIX has an online advertising network that works directly with advertisers and other networks to promote advertiser campaigns and manage offer tracking, reporting and distribution. Commencing in 2018, the Companyās focus has significantly expanded to include the pursuit of the following business models: Surge Telecom True Wireless SurgePhone SafeHomePhone The SurgePhone Volt 5XLās SurgePays Visa Surge Money Order SurgePays Portal Surge Digital Assets Surge Cryptocurrency The Surge Utility Token TokenSpinner Surge Digital Media Surge Logics Lead generation Pay-per-call Media buying A call center Centercom Global, S.A. de C.V. On January 17, 2019, the Company announced the completion of an agreement to acquire a 40% equity ownership of Centercom Global, S.A. de C.V. (āCentercomā). Centercom is a dynamic operations center currently providing Surge sales support, customer service, IT infrastructure design, graphic media, database programming, software development, revenue assurance, lead generation, and other various operational support services for SURG. Centercom also provides call center support for various third-party clients. The Companyās primary initiatives for Centercom are: ā Assisting in on-boarding SurgePays Portal into over 40,000 retail locations and subsequent ongoing white glove support ā Aggressively marketing new āFree Wireless Serviceā program to substantially grow customer base while enhancing customer service ā Launch SurgePays Reloadable Visa Card by end of 1 st ā Support the Companyās IT infrastructure including database management ā Upsell-related FinTech products to our existing customer base to increase revenue |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
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. |
Liquidity
Liquidity | 12 Months Ended |
Dec. 31, 2018 | |
Liquidity | |
Liquidity | 3 LIQUIDITY The Company had a loss from operations of approximately $1.5 million for the year ended December 31, 2018. As of December 31, 2018, we had cash and working capital deficit of approximately $445,000 and $1,732,000, respectively. Management made a decision to achieve certain goals in order to ramp up revenue in 2019 and beyond that negatively affected revenue in 2018. By implementing this process, six key achievements were successfully reached in 2018. One, we have developed and rolled out our SurgePhone wireless and SurgePays Debit card. Two, we have completed work on our second generation SurgePays Fintech software, which has now been released. Three, we have organized our human resources to support the significant growth which is a major goal for fiscal year 2019. Four, we have put in place important cost controls, including our relations with our Operations Center to support our growth in a cost-effective manner. Five, we have had ongoing productive negotiations with trade organizations to support the rapid scaling and roll-out of our products and services. Six, we have significantly restructured our balance sheet to be an effective platform for growth. These factors, among others, were addressed by management in determining whether the Company could continue as a going concern. The Company projects that it should be cash flow positive by the end of fiscal year 2019 from ongoing operations by the combination of increased cash flow from its current subsidiaries, as well as restructuring our current debt burden. The Company has executed an agreement with a FINRA licensed broker, as well as several institutional investors, to bring in equity investments to pay down existing debt obligations, cover short term shortfalls, and complete proposed acquisitions. While the Company believes in the viability of managementās strategy to generate sufficient revenue, control costs and the ability to raise additional funds if necessary, there can be no assurances to that effect. While management believes it is more likely than not the Company has the ability to continue as a going concern, this is dependent upon the ability to further implement the business plan, generate sufficient revenues and to control operating expenses. Additionally, if necessary, management believes that both related parties (management and members of the Board of Directors of the Company) and potential external sources of debt and/or equity financing will be obtained based on managementās history of being able to raise capital from both internal and external sources coupled with current favorable market conditions. Therefore, the accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. |
Merger Agreement
Merger Agreement | 12 Months Ended |
Dec. 31, 2018 | |
Business Combinations [Abstract] | |
Merger Agreement | 4 MERGER AGREEMENT As discussed in Note 1, the Company closed the merger transaction (the āMergerā) that was the subject of that certain Agreement and Plan of Reorganization (the āMerger Agreementā) with True Wireless, Inc., an Oklahoma corporation (āTWā) dated as of April 11, 2018. At closing, in accordance with the Merger Agreement, TW merged with and into TW Acquisition Corporation, a Nevada corporation (āMerger Subā), a wholly-owned subsidiary of Surge Holdings, Inc. (the āMergerā), with TW being the surviving corporation. As a result of the Merger, TW became a wholly-owned subsidiary of the Company. Pursuant to the terms of the Merger Agreement, TW, Inc. merged into Acquisition Sub in a transaction where TW, Inc. was the surviving company and become a wholly-owned subsidiary of the Company. The transaction was structured as a tax-free reverse triangular merger. In addition to the 12,000,000 shares of Company Common Stock and $500,000 cash which has been previously paid to the shareholders of TW, at the closing of the merger transaction, the shareholders of TW received the following as additional merger consideration: ā 152,555,416 shares of newly-issued Company Common Stock, which will give the shareholders of TW, on a proforma basis, a 69.5% interest in the Companyās total Common Shares. ā An additional number of shares of Company Common Stock, if any, necessary to vest 69.5% of the aggregate issued and outstanding Common Stock in the shareholders of TW at the Closing. ā A Promissory Note in the original face amount of $3,000,000, bearing interest at 3% per annum maturing on December 31, 2018. ā 3,000,000 shares of newly-issued Company Series A Preferred Stock Following the closing of the merger transaction the Companyās investment in TW consisted of the following: Shares Amount Consideration paid prior to Closing: Cash paid $ 500,000 Common stock issued 12,000,000 1,200,000 Total consideration paid 12,000,000 $ 1,700,000 Consideration paid at Closing: Common stock to be issued at closing (1) 152,555,416 $ 60,683,006 Series A Preferred Stock to be issued at closing 3,000,000 120,000 Note payable due December 31, 2018 3,000,000 Total consideration to be paid $ 63,803,006 Total consideration $ 65,503,006 (1) The Common Shares issued at closing of the Merger Transaction were valued at approximately $0.40 per share. Following the closing of the transaction, TWās financial statements as of the Closing will be consolidated with the Consolidated Financial Statements of the Company. The following presents the unaudited pro-forma combined results of operations of the Company with the TW Business as if the entities were combined on January 1, 2017. Year Ended Year Ended December 31, 2018 December 31, 2017 Revenues, net $ 15,684,032 $ 14,889,852 Net income (loss) $ (1,541,078 ) $ 787,568 Net income (loss) per share $ (0.02 ) $ 0.01 Weighted average number of shares outstanding 81,566,892 76,183,385 The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the acquisitions been completed as of January 1, 2017 or to project potential operating results as of any future date or for any future periods. The Company consolidated TW as of the closing date of the agreement, and the results of operations of the Company include that of TW. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | 5 PROPERTY AND EQUIPMENT Property and equipment stated at cost, less accumulated depreciation, consisted of the following: December 31, 2018 December 31, 2017 Computer Equipment $ 15,263 $ 93,865 Furniture and Fixtures 7,996 34,916 Leasehold Improvements 25,513 24,196 48,772 152,977 Less: Accumulated Depreciation (13,782 ) (127,015 ) $ 30,990 $ 25,962 Depreciation expense was $112,990 and $6,939 for the years ended December 31, 2018 and 2017, respectively. |
Cryptocurrency Asset Sale
Cryptocurrency Asset Sale | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Cryptocurrency Asset Sale | 6 CRYPTOCURRENCY ASSET SALE In December 2018, the Company executed an agreement with a related party for the sale of Cryptocurrency assets for proceeds of $891,192. In exchange for the purchased assets with a net book value of $523,743, the related party would assume the liabilities of the entity consisting of accounts payable of $40,235 and outstanding debt and accrued interest of $808,600. The Company recognized a gain on sale totaling $273,453. |
Credit Card Liability
Credit Card Liability | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Credit Card Liability | 7 CREDIT CARD LIABILITY The Company previously utilized a credit card issued in the name of DIQ to pay for certain of its trade obligations. During the year ended December 31, 2018, the Company utilized a credit card issued in the name of Surge Holdings, Inc. to pay certain trade obligations totaling $55,185. At December 31, 2018 and 2017, the Companyās total credit card liability was $394,840 and $0, respectively. |
Notes Payable - Related Party
Notes Payable - Related Party | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Notes Payable - Related Party | 8 NOTES PAYABLE ā RELATED PARTY As of December 31, 2018 and 2017, notes payable due to a related party consists of: December 31, 2018 December 31, 2017 Note payable to SMDMM Funding LLC; interest at 8% per annum; due on demand 1 $ - $ 344,241 Promissory note payable ā to SMDMM Funding LLC; interest at 6% per annum 2 680,000 - 680,000 344,241 Current portion of long-term debt ā related party - 344,241 Long-term debt less current portion ā related party $ 680,000 $ - SMDMM Funding, LLC is owned by the Companyās chief executive officer. Accrued interest owed to SMDMM Funding, LLC was $10,718 and $1,711 at December 31, 2018 and 2017, respectively. 1 During the year ended December 31, 2018, an additional $133,500 was advanced to the Company. The Company repaid the outstanding balance and accrued interest of $477,74 and $574, respectively, prior to year-end. 2 In December 2018, the Company executed a promissory note payable agreement with SMDMM for a principal sum up to $1.0 million at an annual interest rate of 6%, due on December 27, 2021. The Company drew advances on the note totaling $760,000. As part of the Cryptocurrency transaction discussed in Note 6 above, $80,000 of the outstanding balance under the promissory note was assumed by the purchaser. As part of the Cryptocurrency transaction discussed in Note 5 above, a total of $808,600 of outstanding balance under related party debt was assumed by the purchaser. |
Notes Payable and Long-Term Deb
Notes Payable and Long-Term Debt | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Notes Payable and Long-Term Debt | 9 NOTES PAYABLE AND LONG-TERM DEBT As of December 31, 2018 and 2017, notes payable and long-term debt consists of: December 31, 2018 December 31, 2017 Note payable to former officer due in four equal annual installments of $25,313 on April 28 of each year; past due in 2016 and 2017; accruing interest at 6% per annum since April 28, 2016 on the past due portion $ 70,000 $ - Notes payable to seller of DigitizeIQ, LLC due as noted below 1 485,000 - Convertible note payable to River North Equity LLC dated July 13, 2016 with interest at 10% per annum; due April 13, 2017; convertible into common stock 2 27,500 - Unsecured demand notes to an unaffiliated third-party company bearing interest at 6.49% 3 - 435,000 $ 582,500 $ 435,000 1 Notes due seller of DigitizeIQ, LLC ā A second non-interest-bearing Promissory Note made payable to the Seller in the amount of $250,000, which was due on January 12, 2016; (Balance at December 31, 2018 - $235,000) ā A third non-interest-bearing Promissory Note made payable to the Seller in the amount of $250,000, which was due on March 12, 2016 and remains unpaid as of December 31, 2018. The Company is renegotiating the terms of the notes. The notes bear interest at 5% per annum when in default (after the due date). The notes were non-interest bearing until due. Accordingly, a debt discount at 5% per annum was calculated for the notes and was amortized to interest expense until the due date of the notes. 2 The Company has entered into a number of agreements with RNE wherein RNE has agreed to invest up to $3,000,000 in the common stock of the Company. These agreements require an effective Registration Statement to be on file by the Company and would allow the Company to require RNE to purchase the Companyās common stock at 90% of the lowest trading price of the Companyās common stock during the previous five trading days. The Company has not yet filed a Registration Statement with the SEC. 3 Unsecured Demand Note ā In December 2018, the Company issued 433,981 shares of its common stock in settlement of debt and accrued interest of $107,500 and $8,190, respectively. In addition, the Company wrote-off the derivative liability of $34,556 related to the note. The fair value of the shares on day of issuance was $164,913 and the Company recorded a loss on extinguishment of debt of $14,667. Derivative liability The Company has determined that the conversion feature embedded in the notes referred to above that contain a potential variable conversion amount constitutes a derivative which has been bifurcated from the note and recorded as a derivative liability, with a corresponding discount recorded to the associated debt. The excess of the derivative value over the face amount of the note, if any, is recorded immediately to interest expense at inception. As noted above, the Company reached an agreement with a debt holder to convert outstanding debt and interest into shares of common stock. As a result, the Company wrote-off the existing derivative liability of $34,556. The estimated fair value of the derivative instruments was valued using the Black-Scholes option pricing model, using the following assumptions during the year ended December 31, 2018: Estimated dividends None Expected volatility 113.72 % Risk free interest rate 3.13 % Expected term .01-36 months |
Line of Credit
Line of Credit | 12 Months Ended |
Dec. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Line of Credit | 10 LINE OF CREDIT On January 25, 2018 the Company obtained a $500,000 line of credit (LOC) with a Bank. The LOC bears interest at 5% per annum and is secured by essentially all of the Companyās assets. The note is personally guaranteed by the majority owner of the Company. On December 21, 2018, the Company and the bank agreed to increase the LOC to $1,000,000 at an interest rate of 6% per annum. of December 31, 2018, the outstanding balance on the LOC was $0. |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2018 | |
Equity [Abstract] | |
Stockholders' Equity | 11 STOCKHOLDERSā EQUITY Preferred Stock Series āAā Preferred Stock The Company, pursuant to the consent of the Board of Directors filed a Certificate of Designation with the Nevada Secretary of State which designated 10,000,000 shares of the Companyās authorized preferred stock as Series āAā Preferred Stock, par value $0.001. The Series āAā Preferred Stock has the following attributes: ā Ranks senior only to any other class or series of designated and outstanding preferred shares of the Company; ā Bears no dividend; ā Has no liquidation preference, other than the ability to convert to common stock of the Company; ā The Company does not have any rights of redemption; ā Voting rights equal to ten shares of common stock for each share of Series āAā Preferred Stock; ā Entitled to same notice of meeting provisions as common stock holders; ā Protective provisions require approval of 75% of the Series āAā Preferred Shares outstanding to modify the provisions or increase the authorized Series āAā Preferred Shares; and ā Each one Series āAā Preferred Shares can be converted into ten common share at the option of the holder. On April 11, 2018, the Company issued 3,000,000 shares of Series A Preferred Stock as consideration for the True Wireless, Inc. merger. As discussed in Note 1, the equity of the Company is the historical equity of TW retroactively restated to reflect the number of shares issued by the Company in the transaction. These preferred shares were recorded as a retroactive 2017 transaction as incentive to complete the merger. Upon close of the merger, the Company recorded 10,000,000 shares of Series A Preferred Stock as a part of the recapitalization transaction for services previously rendered by the Companyās former Chief Executive Officer and Chairman of the Board of Directors. As of December 31, 2018 and 2017, there were 13,000,000 and 3,000,000 shares of Series A issued and outstanding, respectively. Series āCā Convertible Preferred Stock On June 22, 2018, the Board of Directors approved a Certificate of Designation for Company Series C Convertible Preferred stock, which was filed with the Secretary of State of the State of Nevada on that date. The Certificate of Designations approved the creation of a new series of preferred stock consisting of 1,000,000 shares of Series C Convertible Preferred Stock par value $0.001 (āSeries C Preferred Stockā) with an original issue price of $100.00 per share. The Series āCā Preferred Stock has the following attributes: ā Ranks junior only to any other class or series of designated and outstanding preferred shares of the Company; ā Bears a dividend per share of Series C Preferred Stock equal to the per share amount (as converted), and in the same form as, the dividend payable to the holders of the Common Stock; ā With respect to such liquidation, dissolution or winding up, the holders of Series C Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of Junior Securities but after distribution of such assets among, or payment thereof to holders of any Senior Preferred Stock, an amount equal to the Series C Original Issue Price for each share of Series C Preferred Stock plus an amount equal to all declared but unpaid dividends on Series C Preferred Stock; ā The Company does not have any rights of redemption; ā Voting rights equal to 250 shares of common stock for each share of Series āCā Preferred Stock; ā Entitled to same notice of meeting provisions as common stock holders; ā Protective provisions require approval of 75% of the Series āCā Preferred Shares outstanding to modify the provisions or increase the authorized Series āCā Preferred Shares; and ā Each one Series āCā Preferred Shares can be converted into ten common share at the option of the holder. As noted above, each share of Series C Preferred Stock is convertible into 250 shares of Company Common Stock (the same conversion rate utilized in the exchange transaction), but is only convertible on the first to occur of the following events: (i) The Volume Weighted Average Price (āVWAPā) of the Companyās Common Stock during any then consecutive trading days is at least $2.00 per share; or (ii) June 30, 2019. On June 29, 2018, each of Kevin Brian Cox (āCoxā), the Companyās Chief Executive Officer, and Thirteen Nevada LLC (ā13ā) entered into separate Exchange Agreements with the Company whereby the Shareholders agreed to exchange an aggregate of 148,741,531 shares of previously issued Company Common Stock for an aggregate of 594,966 shares of newly-issued Company Series C Convertible Preferred Stock. The calculation of weighted average shares was retroactively restated in order to properly account for the above noted share exchange. During the year ended December 31, 2018, the Company issued 48,400 shares of Series C Preferred in exchange for the conversion of a note payable of $3,000,000 and accrued interest of $24,952. As of December 31, 2018 and 2017, there were 643,366 and 0 shares of Series C issued and outstanding, respectively. Common Stock On March 8, 2018, the Company granted a consultant 48,000 restricted shares for services rendered. On April 11, 2018, the Company issued 152,555,416 shares of Common Stock as consideration for the True Wireless, Inc. merger. As discussed in Note 1, the equity of the Company is the historical equity of TW retroactively restated to reflect the number of shares issued by the Company in the transaction. These common shares were recorded as a retroactive 2017 transaction as incentive to complete the merger. On April 25, 2018, the Company issued an aggregate of 480,000 shares of Common Stock to two consultants valued at $0.27 per share. In July 2018, the Company issued an aggregate of 1,156,587 shares of Common Stock valued at $0.20 per share to nine parties in settlement of certain disputes between TW and Benson Communications, S.A. de C.V. The settlement had been previously reached on September 29, 2017. As noted above in Note 8, in August 2018, Company reached a settlement with the debt holder and issued 2,175,000 in full settlement of the outstanding debt totaling $435,000. During the year ended December 31, 2018, the Company recorded total stock-based compensation expense of approximately $146,000 in relation to shares issued for services. As of December 31, 2018 and 2017, there were 88,046,391 and 152,555,416 shares of Common Stock issued and outstanding, respectively. Stock Warrants On March 8, 2018, the Company granted its Chief Financial Officer 50,000 warrants to purchase the Companyās common stock with an exercise price of $0.41 per share, a term of 5 years, and a vesting period of 1 year. The warrants have an aggregated fair value of approximately $14,700 that was calculated using the Black-Scholes option-pricing model based on the assumptions below. December 31, 2018 Risk-free interest rate 2.03 % Expected life of grants 1.5 years Expected volatility of underlying stock 173.02 % Dividends 0 % The estimated warrant life was determined based on the āsimplified method,ā giving consideration to the overall vesting period and the contractual terms of the award. During the years ended December 31, 2018, the Company recorded total stock-based compensation expense related to the warrants of approximately $11,800. The unrecognized compensation expense at December 31, 2018 was approximately $2,900. Unit Subscription Agreement - Warrants During January 2018, the Company entered into Unit subscription agreements with seven unrelated companies and individuals. Each Unit was priced at $0.20 and contained: (a) one share of common stock restricted in accordance with Rule 144; and (b) one-half Warrant to purchase an additional share of common stock restricted in accordance with Rule 144 for $0.50 for a period of three years after the close of the offering. For total consideration of $460,000, Units representing 2,300,000 common shares and 1,150,000 3-year $0.50 warrants were issued. The warrants were classified as equity since they have a fixed exercise price and do not have a provision for modification. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | 12 RELATED PARTY TRANSACTIONS The Companyās former chief executive officer has advanced the Company various amounts on a non-interest-bearing basis, which is being used for working capital. The advance has no fixed maturity. As of December 31, 2018 and 2017, the outstanding balance due was $389,502 and $0, respectively. For the years ended December 31, 2018 and 2017, outsourced management services fees of $1,020,000 was paid to Axia Management, LLC (āAxiaā) as compensation for services provided. These costs are included in Selling, general and administrative expenses in the Statement of Operations. Axia is owned by the majority owner of the Company. At December 31, 2018 and 2017, the Company had trade payables to Axia of $66,535 and $55,400, respectively. For the years ended December 31, 2018 and 2017, the Company purchased telecom services and access to wireless networks from 321 Communications in the amount of $1,016,393 and $1,639,655, respectively. These costs are included in Cost of revenue in the Statement of Operations. The majority owner of the Company is a minority owner of 321 Communications. At December 31, 2018 and 2017, the Company had trade payables to 321 Communications of $52,161 and $132,404, respectively. The Company contracted with CenterCom Global, S.A. de C.V. At December 31, 2018 and 2017, the Company had trade payables to CenterCom Global of $175,000 and $150,000, respectively. See Note 5 for long-term debt due to related parties. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 13 COMMITMENTS AND CONTINGENCIES On November 1, 2013, The Federal Communications Commission (āFCCā) issued a Notice of Apparent Liability for Forfeiture to the Company for requesting and/or receiving support for ineligible subscriber lines between the months of October 2012 and May 2013 and proposed a monetary forfeiture of $5,501,285. The Company has annual compliance audits with FCC approved audit firms that have found no compliance deficiencies. Management believes the proposed monetary forfeiture is without merit and if anything should result from this notice, the amount would not materially affect the financial position of the Company. In October 2018, the Company signed an agreement with Pastime Foods (āPastimeā) in order to expand the Companyās distribution network for its SurgePays portal. The agreement will initiate distribution and sales to over 15,000 convenience and retail locations with a long-term target of greater than 40,000 locations. According to the agreement, Pastime commits to selling more than an average required minimum of $1,500 of monthly sales revenue per location. The Company will fund the initial placement costs and expenses with a total initial advance of $190,000 as well as fees of $10,000. Any advances will be offset by the sharing of distribution revenues for shipments paid by retailers directly to Pastime and the Company. The sharing percentage will be 100% of the net distribution profit until the advances have been covered. As of December 31, 2018, the outstanding receivable due to the Company pursuant to the agreement is $190,000 and is shown as Note Receivable on the consolidated balance sheet. In November 2018, the Company entered into a settlement agreement with West Publishing Corporation (āWestā) to remedy an outstanding civil action filed by West. Pursuant to the agreement, the Company will pay West the principal amount of $125,000 plus interest accruing at the annual rate of 7%. The Company will make monthly principal payments as follows: January 7, 2019 $ 20,000 February 7, 2019 25,000 March 7, 2019 25,000 $ 70,000 |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 14 INCOME TAXES Deferred Tax Assets On December 22, 2017, the Tax Cuts and Jobs Act (the āTax Reform Billā) was signed into law. Prior to the enactment of the Tax Reform Bill, the Company measured its deferred tax assets at the federal rate of 34%. The Tax Reform Bill reduced the federal tax rate to 21% resulting in the re-measurement of the deferred tax asset as of December 31, 2017. Beginning January 1, 2018, the lower tax rate of 21% will be used to calculate the amount of any federal income tax due on taxable income earned during 2018. For the periods from inception through the date of conversion to a C corporation in April 2018, the Company reported its income under True Wireless LLC, a limited liability company. As a result, the Companyās income for federal and state income tax purposes were reportable on the tax returns of the individual partners. Accordingly, no recognition has been made for federal or state income taxes in the accompanying financial statements of the Company through the date of conversion. At December 31, 2018, the Company has available for U.S. federal income tax purposes a net operating loss (āNOLā) carry-forwards of approximately $1.5 million that may be used to offset future taxable income through the fiscal year ending December 31, 2038. If not used, these NOLs may be subject to limitation under Internal Revenue Code Section 382 should there be a greater than 50% ownership change as determined under the regulations. The Company plans on undertaking a detailed analysis of any historical and/or current Section 382 ownership changes that may limit the utilization of the net operating loss carryovers. No tax benefit has been reported with respect to these net operating loss carry-forwards in the accompanying consolidated financial statements since the Company believes that the realization of its net deferred tax asset of approximately $290,000 was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by a valuation allowance of $290,000. Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon future generation for taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all the information available, Management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. The valuation allowance increased by approximately $290,000 for the year ended December 31, 2018. The Company evaluated the provisions of ASC 740 related to the accounting for uncertainty in income taxes recognized in an enterpriseās financial statements. ASC 740 prescribes a comprehensive model for how a company should recognize, present, and disclose uncertain positions that the Company has taken or expects to take in its tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as āunrecognized benefits.ā A liability is recognized (or amount of net operating loss carry forward or amount of tax refundable is reduced) for unrecognized tax benefit because it represents an enterpriseās potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740. If applicable, interest costs related to the unrecognized tax benefits are required to be calculated and would be classified as āOther expenses ā Interest expenseā in the statement of operations. Penalties would be recognized as a component of āGeneral and administrative.ā No material interest or penalties on unpaid tax were recorded during the year ended December 31, 2018. As of December 31, 2018 and 2017, no liability for unrecognized tax benefits was required to be reported. The Company does not expect any significant changes in its unrecognized tax benefits in the next year. Components of deferred tax assets are as follows: December 31, 2018 Net deferred tax assets ā Non-current: Expected income tax benefit from NOL carry-forwards $ 291,359 Less valuation allowance (291,359 ) Deferred tax assets, net of valuation allowance $ - Income Tax Provision in the Consolidated Statements of Operations A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes is as follows: For the Year Ended December 31, 2018 Federal statutory income tax rate 21.0 % Change in valuation allowance on net operating loss carry-forwards (21.0 )% Effective income tax rate 0.0 % |
Segment Information
Segment Information | 12 Months Ended |
Dec. 31, 2018 | |
Segment Reporting [Abstract] | |
Segment Information | 15 SEGMENT INFORMATION Operating segments are defined as components of an enterprise about which separate financial information is available and evaluated regularly by the chief operating decision maker, or decisionāmaking group, in deciding how to allocate resources and in assessing performance. The Companyās chief operating decision maker is its Chief Executive Officer. The Company evaluated performance of its operating segments based on revenue and operating profit (loss). Segment information for the years ended December 31, 2018 and 2017 and as of December 31, 2018 and 2017, are as follows: Surge TW Total Year ended December 31, 2018 Revenue $ 2,445,468 $ 12,798,687 $ 15,244,155 Cost of revenue (1,864,727 ) (6,705,513 ) (8,570,240 ) Gross margin 580,741 6,093,174 6,673,915 Costs and expenses (2,558,156 ) (5,651,228 ) (8,209,384 ) Operating income (loss) (1,977,415 ) 441,946 (1,535,469 ) Year ended December 31, 2017 Revenue $ - $ 13,459,980 $ 13,459,980 Cost of revenue - (8,096,076 ) (8,096,076 ) Gross margin - 5,363,904 5,363,904 Costs and expenses - (5,159,619 ) (5,159,619 ) Operating income - 204,285 204,285 December 31, 2018 Total assets $ 947,550 $ 3,136,768 $ 4,084,318 Total liabilities 2,694,258 3,378,293 6,072,551 December 31, 2017 Total assets $ - $ 1,176,094 $ 1,176,094 Total liabilities - 3,076,838 3,076,838 |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | 15 SUBSEQUENT EVENTS Effective February 15, 2019, the Companyās Board of Directors appointed Anthony P. Nuzzo, Jr. as President of the Company replacing Kevin Brian Cox. Mr. Cox will continue to serve the Company as its Chief Executive Officer and Chairman of the Board. Mr. Nuzzo will continue to also serve as the Companyās Chief Operating Officer. On February 15, 2019, Carter Matzinger elected to exchange outstanding non-interest bearing debt totaling $389,502 owed by the Company into 6,232 shares of Preferred Stock. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | 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 | 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 | 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 | 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 | 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 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 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 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 | 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 | 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 | 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 | 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 | 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 Advertising costs are expensed as incurred in accordance with ASC 720-35 āAdvertising Costsā |
Share-Based Compensation | 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 | 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 | 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 | 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 | 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 | Reclassifications Certain prior period amounts have been reclassified to conform to the current yearās presentation. |
Recent Accounting Pronouncements | 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. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Schedule of Change in Level 3 Financial Instrument | 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 |
Schedule of Estimated Fair Value of Derivative Instruments Assumptions | 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 |
Merger Agreement (Tables)
Merger Agreement (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Business Combinations [Abstract] | |
Schedule of Merger Transaction Investment | Following the closing of the merger transaction the Companyās investment in TW consisted of the following: Shares Amount Consideration paid prior to Closing: Cash paid $ 500,000 Common stock issued 12,000,000 1,200,000 Total consideration paid 12,000,000 $ 1,700,000 Consideration paid at Closing: Common stock to be issued at closing (1) 152,555,416 $ 60,683,006 Series A Preferred Stock to be issued at closing 3,000,000 120,000 Note payable due December 31, 2018 3,000,000 Total consideration to be paid $ 63,803,006 Total consideration $ 65,503,006 (1) The Common Shares issued at closing of the Merger Transaction were valued at approximately $0.40 per share. |
Schedule of Unaudited Pro-forma Combined Results of Operations | The following presents the unaudited pro-forma combined results of operations of the Company with the TW Business as if the entities were combined on January 1, 2017. Year Ended Year Ended December 31, 2018 December 31, 2017 Revenues, net $ 15,684,032 $ 14,889,852 Net income (loss) $ (1,541,078 ) $ 787,568 Net income (loss) per share $ (0.02 ) $ 0.01 Weighted average number of shares outstanding 81,566,892 76,183,385 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Property and equipment stated at cost, less accumulated depreciation, consisted of the following: December 31, 2018 December 31, 2017 Computer Equipment $ 15,263 $ 93,865 Furniture and Fixtures 7,996 34,916 Leasehold Improvements 25,513 24,196 48,772 152,977 Less: Accumulated Depreciation (13,782 ) (127,015 ) $ 30,990 $ 25,962 |
Notes Payable - Related Party (
Notes Payable - Related Party (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Notes Payable Related Party | As of December 31, 2018 and 2017, notes payable due to a related party consists of: December 31, 2018 December 31, 2017 Note payable to SMDMM Funding LLC; interest at 8% per annum; due on demand 1 $ - $ 344,241 Promissory note payable ā to SMDMM Funding LLC; interest at 6% per annum 2 680,000 - 680,000 344,241 Current portion of long-term debt ā related party - 344,241 Long-term debt less current portion ā related party $ 680,000 $ - 1 During the year ended December 31, 2018, an additional $133,500 was advanced to the Company. The Company repaid the outstanding balance and accrued interest of $477,74 and $574, respectively, prior to year-end. 2 In December 2018, the Company executed a promissory note payable agreement with SMDMM for a principal sum up to $1.0 million at an annual interest rate of 6%, due on December 27, 2021. The Company drew advances on the note totaling $760,000. As part of the Cryptocurrency transaction discussed in Note 5 above, $80,000 of the outstanding balance under the promissory note was assumed by the purchaser. |
Notes Payable and Long-Term D_2
Notes Payable and Long-Term Debt (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Notes Payable and Long-Term Debt | As of December 31, 2018 and 2017, notes payable and long-term debt consists of: December 31, 2018 December 31, 2017 Note payable to former officer due in four equal annual installments of $25,313 on April 28 of each year; past due in 2016 and 2017; accruing interest at 6% per annum since April 28, 2016 on the past due portion $ 70,000 $ - Notes payable to seller of DigitizeIQ, LLC due as noted below 1 485,000 - Convertible note payable to River North Equity LLC dated July 13, 2016 with interest at 10% per annum; due April 13, 2017; convertible into common stock 2 27,500 - Unsecured demand notes to an unaffiliated third-party company bearing interest at 6.49% 3 - 435,000 $ 582,500 $ 435,000 1 Notes due seller of DigitizeIQ, LLC ā A second non-interest-bearing Promissory Note made payable to the Seller in the amount of $250,000, which was due on January 12, 2016; (Balance at December 31, 2018 - $235,000) ā A third non-interest-bearing Promissory Note made payable to the Seller in the amount of $250,000, which was due on March 12, 2016 and remains unpaid as of December 31, 2018. The Company is renegotiating the terms of the notes. The notes bear interest at 5% per annum when in default (after the due date). The notes were non-interest bearing until due. Accordingly, a debt discount at 5% per annum was calculated for the notes and was amortized to interest expense until the due date of the notes. 2 The Company has entered into a number of agreements with RNE wherein RNE has agreed to invest up to $3,000,000 in the common stock of the Company. These agreements require an effective Registration Statement to be on file by the Company and would allow the Company to require RNE to purchase the Companyās common stock at 90% of the lowest trading price of the Companyās common stock during the previous five trading days. The Company has not yet filed a Registration Statement with the SEC. 3 Unsecured Demand Note ā In December 2018, the Company issued 433,981 shares of its common stock in settlement of debt and accrued interest of $107,500 and $8,190, respectively. In addition, the Company wrote-off the derivative liability of $34,556 related to the note. The fair value of the shares on day of issuance was $164,913 and the Company recorded a loss on extinguishment of debt of $14,667. |
Schedule of Estimated Fair Value Assumptions Used in Black-Scholes Option Pricing Model | The estimated fair value of the derivative instruments was valued using the Black-Scholes option pricing model, using the following assumptions during the year ended December 31, 2018: Estimated dividends None Expected volatility 113.72 % Risk free interest rate 3.13 % Expected term .01-36 months |
Stockholder's Equity (Tables)
Stockholder's Equity (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Equity [Abstract] | |
Schedule of Assumption Used Value of Options | December 31, 2018 Risk-free interest rate 2.03 % Expected life of grants 1.5 years Expected volatility of underlying stock 173.02 % Dividends 0 % |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Monthly Principal Payments | In November 2018, the Company entered into a settlement agreement with West Publishing Corporation (āWestā) to remedy an outstanding civil action filed by West. Pursuant to the agreement, the Company will pay West the principal amount of $125,000 plus interest accruing at the annual rate of 7%. The Company will make monthly principal payments as follows: January 7, 2019 $ 20,000 February 7, 2019 25,000 March 7, 2019 25,000 $ 70,000 |
Income Taxes - (Tables)
Income Taxes - (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of Components of Deferred Tax Assets | Components of deferred tax assets are as follows: December 31, 2018 Net deferred tax assets ā Non-current: Expected income tax benefit from NOL carry-forwards $ 291,359 Less valuation allowance (291,359 ) Deferred tax assets, net of valuation allowance $ - |
Schedule of Effective Income Tax Rate | A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes is as follows: For the Year Ended December 31, 2018 Federal statutory income tax rate 21.0 % Change in valuation allowance on net operating loss carry-forwards (21.0 )% Effective income tax rate 0.0 % |
Segment Information (Tables)
Segment Information (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Segment Reporting [Abstract] | |
Schedule of Operating Segments | The Company evaluated performance of its operating segments based on revenue and operating profit (loss). Segment information for the years ended December 31, 2018 and 2017 and as of December 31, 2018 and 2017, are as follows: Surge TW Total Year ended December 31, 2018 Revenue $ 2,445,468 $ 12,798,687 $ 15,244,155 Cost of revenue (1,864,727 ) (6,705,513 ) (8,570,240 ) Gross margin 580,741 6,093,174 6,673,915 Costs and expenses (2,558,156 ) (5,651,228 ) (8,209,384 ) Operating income (loss) (1,977,415 ) 441,946 (1,535,469 ) Year ended December 31, 2017 Revenue $ - $ 13,459,980 $ 13,459,980 Cost of revenue - (8,096,076 ) (8,096,076 ) Gross margin - 5,363,904 5,363,904 Costs and expenses - (5,159,619 ) (5,159,619 ) Operating income - 204,285 204,285 December 31, 2018 Total assets $ 947,550 $ 3,136,768 $ 4,084,318 Total liabilities 2,694,258 3,378,293 6,072,551 December 31, 2017 Total assets $ - $ 1,176,094 $ 1,176,094 Total liabilities - 3,076,838 3,076,838 |
Basis of Presentation and Bus_2
Basis of Presentation and Business (Details Narrative) | Dec. 31, 2018USD ($) |
Money order business | $ 20,000,000,000 |
January 17, 2019 [Member] | Centercom Global, S.A. de C.V [Member] | |
Ownership percentage | 40.00% |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Cash insured by FDIC | $ 250,000 | |
Concentration of credit risk percentage | 10.00% | 10.00% |
Cash equivalents | ||
Bad debt expense | 0 | 0 |
Cost of revenue | 8,570,240 | 8,096,076 |
Deferred revenues | 50,000 | |
Advertising costs | $ 559,333 | $ 427,151 |
Potentially dilutive common stock equivalents | 50,000 | 0 |
Computer and Office Equipment [Member] | Minimum [Member] | ||
Property and equipment useful life | 3 years | |
Computer and Office Equipment [Member] | Maximum [Member] | ||
Property and equipment useful life | 5 years | |
Office Furniture [Member] | ||
Property and equipment useful life | 7 years | |
Customer Phone Supply [Member] | ||
Cost of revenue | $ 1,170,295 | $ 1,473,956 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Schedule of Change in Level 3 Financial Instrument (Details) | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Accounting Policies [Abstract] | |
Balance, beginning | |
Additions - Merger transaction | 59,141 |
Additions & disposals - net | (12,188) |
Change in fair value recognized in operations | 4,105 |
Balance, ending | $ 51,058 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Schedule of Estimated Fair Value of Derivative Instruments Assumptions (Details) | 12 Months Ended |
Dec. 31, 2018 | |
Estimated Dividends [Member] | |
Fair value assumptions, measurement input, percentages | 0.00% |
Expected Volatility [Member] | |
Fair value assumptions, measurement input, percentages | 113.72% |
Risk free Interest Rate [Member] | |
Fair value assumptions, measurement input, percentages | 3.13% |
Expected Term [Member] | Minimum [Member] | |
Fair value assumptions, measurement input, term | 4 days |
Expected Term [Member] | Maximum [Member] | |
Fair value assumptions, measurement input, term | 36 months |
Liquidity (Details Narrative)
Liquidity (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Liquidity | |||
Income (loss) from operations | $ 1,500,000 | ||
Cash | 444,612 | $ 1,274,160 | $ 439,271 |
Working capital deficit | $ 1,732,000 |
Merger Agreement (Details Narra
Merger Agreement (Details Narrative) - USD ($) | Apr. 11, 2018 | Dec. 31, 2018 | Dec. 31, 2017 |
Cash | $ 243,768 | ||
Common stock issued, par value | $ 0.40 | $ 0.001 | $ 0.001 |
True Wireless Shareholders [Member] | |||
Voting interest in the company by TW shareholders | 69.50% | ||
Promissory note, face amount included in merger consideration | $ 3,000,000 | ||
Promissory note, interest percentage | 3.00% | ||
Promissory note maturing date | Dec. 31, 2018 | ||
True Wireless Shareholders [Member] | Prior To Closing [Member] | |||
Cash | $ 500,000 | ||
True Wireless Shareholders [Member] | Common Stock [Member] | |||
Shares issued to TW shareholders under merger agreement | 152,555,416 | ||
Voting interest in the company by TW shareholders | 69.50% | ||
True Wireless Shareholders [Member] | Common Stock [Member] | Prior To Closing [Member] | |||
Shares issued to TW shareholders under merger agreement | 12,000,000 | ||
True Wireless Shareholders [Member] | Series A Preferred [Member] | |||
Shares issued to TW shareholders under merger agreement | 3,000,000 |
Merger Agreement - Schedule of
Merger Agreement - Schedule of Merger Transaction Investment (Details) - USD ($) | Apr. 11, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Cash paid | $ 243,768 | |||
True Wireless, Inc., [Member] | ||||
Total consideration paid | $ 1,700,000 | |||
Note payable due December 31, 2018 | 3,000,000 | |||
Total consideration to be paid | 63,803,006 | |||
Total consideration | $ 65,503,006 | |||
True Wireless, Inc., [Member] | Common Stock [Member] | ||||
Stock issued, shares | [1] | 152,555,416 | ||
Stock issued, value | [1] | $ 60,683,006 | ||
True Wireless, Inc., [Member] | Series A Preferred [Member] | ||||
Stock issued, shares | 3,000,000 | |||
Stock issued, value | $ 120,000 | |||
True Wireless, Inc., [Member] | Prior To Closing [Member] | ||||
Cash paid | $ 500,000 | |||
Stock issued, shares | 12,000,000 | |||
True Wireless, Inc., [Member] | Prior To Closing [Member] | Common Stock [Member] | ||||
Stock issued, shares | 12,000,000 | |||
Stock issued, value | $ 1,200,000 | |||
[1] | The Common Shares issued at closing of the Merger Transaction were valued at approximately $0.40 per share. |
Merger Agreement - Schedule o_2
Merger Agreement - Schedule of Unaudited Pro-forma Combined Results of Operations (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Business Combinations [Abstract] | ||
Revenues, net | $ 15,684,032 | $ 14,889,852 |
Net income (loss) | $ (1,541,078) | $ 787,568 |
Net income (loss) per share | $ (0.02) | $ 0.01 |
Weighted average number of shares outstanding | 81,566,892 | 76,183,385 |
Property and Equipment (Details
Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 112,990 | $ 6,939 |
Property and Equipment - Schedu
Property and Equipment - Schedule of Property and Equipment (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Property, Plant and Equipment [Abstract] | ||
Computer Equipment | $ 15,263 | $ 93,865 |
Furniture and Fixtures | 7,996 | 34,916 |
Leasehold Improvements | 25,513 | 24,196 |
Property and equipment, gross | 48,772 | 152,977 |
Less: Accumulated Depreciation | (13,782) | (127,015) |
Property and equipment. net | $ 30,990 | $ 25,962 |
Cryptocurrency Asset Sale (Deta
Cryptocurrency Asset Sale (Details Narrative) | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Debt Disclosure [Abstract] | |
Proceeds of sale of Cryptocurrency assets | $ 891,192 |
Payments of assets | 523,743 |
Accounts payable | 40,235 |
Outstanding debt and accrued interest | 808,600 |
Gain on sale of Assets | $ 273,453 |
Credit Card Liability (Details
Credit Card Liability (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Debt Disclosure [Abstract] | ||
Trade obligations | $ 55,185 | |
Credit card liability | $ 394,840 |
Notes Payable - Related Party_2
Notes Payable - Related Party (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Advance received | $ 133,500 | |
Outstanding balance and accrued interest | 808,600 | |
Due advances on notes payable | 680,000 | $ 344,241 |
SMDMM Funding, LLC [Member] | ||
Accrued interest | 10,718 | 1,711 |
Outstanding balance and accrued interest | 47,774 | $ 574 |
Promissory note of annual payments | $ 80,000 | |
Promissory note, interest percentage | 6.00% | |
Debt due date | Dec. 27, 2021 | |
Due advances on notes payable | $ 760,000 | |
SMDMM Funding, LLC [Member] | Maximum [Member] | ||
Promissory note of annual payments | $ 1,000,000 |
Notes Payable - Related Party -
Notes Payable - Related Party - Schedule of Notes Payable Related Party (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 | |
Notes payable - related party gross | $ 680,000 | $ 344,241 | |
Less current portion - related party | 344,241 | ||
Notes payable - related party | 680,000 | ||
Notes Payable to SMDMM Funding, LLC [Member] | |||
Notes payable - related party gross | [1] | 344,241 | |
Promissory Note Payable to SMDMM Funding, LLC [Member] | |||
Notes payable - related party gross | [2] | $ 680,000 | |
[1] | During the year ended December 31, 2018, an additional $133,500 was advanced to the Company. The Company repaid the outstanding balance and accrued interest of $477,74 and $574, respectively, prior to year-end. | ||
[2] | In December 2018, the Company executed a promissory note payable agreement with SMDMM for a principal sum up to $1.0 million at an annual interest rate of 6%, due on December 27, 2021. The Company drew advances on the note totaling $760,000. As part of the Cryptocurrency transaction discussed in Note 5 above, $80,000 of the outstanding balance under the promissory note was assumed by the purchaser. |
Notes Payable - Related Party_3
Notes Payable - Related Party - Schedule of Notes Payable Related Party (Details) (Parenthetical) | Dec. 31, 2018 | Dec. 31, 2017 |
Notes Payable to SMDMM Funding, LLC [Member] | ||
Note payable interest rate per annum | 8.00% | |
Notes Payable to SMDMM Funding, LLC [Member] | ||
Note payable interest rate per annum | 8.00% | |
Promissory Note Payable to SMDMM Funding, LLC [Member] | ||
Note payable interest rate per annum | 6.00% | 6.00% |
Notes Payable and Long-Term D_3
Notes Payable and Long-Term Debt (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | |
Aug. 31, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Derivative liability | $ 34,556 | ||
Loss on debt settlement | 14,667 | ||
River North Equity, LLC [Member] | |||
Debt discount, amount | $ 23,190 | ||
Maximum invest of common stock value | $ 3,000,000 | ||
Percentage of lowest of daily weighted average price | 90.00% | ||
Notes [Member] | |||
Debt bearing interest per annum | 5.00% | ||
Debt discount, percentage | 5.00% | ||
Second Non Interest Bearing Promissory Note Payable [Member] | |||
Payable in equal monthly installments | $ 235,000 | ||
Second Non Interest Bearing Promissory Note Payable [Member] | Seller [Member] | |||
Payable in equal monthly installments | $ 250,000 | ||
Debt instrument matures date | Jan. 12, 2016 | ||
Third Non Interest Bearing Promissory Note Payable [Member] | Seller [Member] | |||
Payable in equal monthly installments | $ 250,000 | ||
Debt instrument matures date | Mar. 12, 2016 | ||
Unsecured Demand Note [Member] | |||
Number of common shares issued | 2,175,000 | ||
Number of common stock settlement of debt | 433,981 | ||
Settlement amount | $ 107,500 | ||
Accrued interest | 8,190 | ||
Derivative liability | 34,556 | ||
Fair value of shares issuance | 164,913 | ||
Loss on debt settlement | $ 14,667 |
Notes Payable and Long-Term D_4
Notes Payable and Long-Term Debt - Schedule of Notes Payable and Long-Term Debt (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 | |
Notes Payable To Former Officer [Member] | |||
Long term debt gross | $ 70,000 | ||
Notes Payable To Seller of DigitizeIQ, LLC [Member] | |||
Long term debt gross | [1] | 485,000 | |
Convertible Note Payable To River North Equity LLC [Member] | |||
Long term debt gross | [2] | 27,500 | |
Unsecured Demand Note [Member] | |||
Long term debt gross | [3] | 435,000 | |
Notes Payable and Long Term Debt [Member] | |||
Long term debt gross | $ 582,500 | $ 435,000 | |
[1] | Notes due seller of DigitizeIQ, LLC includes a series of notes as follows: A second non-interest-bearing Promissory Note made payable to the Seller in the amount of $250,000, which was due on January 12, 2016; (Balance at December 31, 2018 - $235,000) A third non-interest-bearing Promissory Note made payable to the Seller in the amount of $250,000, which was due on March 12, 2016 and remains unpaid as of December 31, 2018. The Company is renegotiating the terms of the notes. The notes bear interest at 5% per annum when in default (after the due date). The notes were non-interest bearing until due. Accordingly, a debt discount at 5% per annum was calculated for the notes and was amortized to interest expense until the due date of the notes. | ||
[2] | Convertible note payable to River North Equity, LLC ("RNE") - The Company evaluated the embedded conversion for derivative treatment and recorded an initial derivative liability and debt discount of $23,190. The debt discount is fully amortized. The Company has entered into a number of agreements with RNE wherein RNE has agreed to invest up to $3,000,000 in the common stock of the Company. These agreements require an effective Registration Statement to be on file by the Company and would allow the Company to require RNE to purchase the Company's common stock at 90% of the lowest trading price of the Company's common stock during the previous five trading days. The Company has not yet filed a Registration Statement with the SEC. | ||
[3] | Unsecured Demand Note - In August 2018, the Company reached a settlement with the debt holder and issued 2,175,000 common shares in full settlement of the outstanding debt. In December 2018, the Company issued 433,981 shares of its common stock in settlement of debt and accrued interest of $107,500 and $8,190, respectively. In addition, the Company wrote-off the derivative liability of $34,556 related to the note. The fair value of the shares on day of issuance was $164,913 and the Company recorded a loss on extinguishment of debt of $14,667. |
Notes Payable and Long-Term D_5
Notes Payable and Long-Term Debt - Schedule of Notes Payable and Long-Term Debt (Details) (Parenthetical) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Notes Payable To Former Officer [Member] | ||
Payable in equal monthly installments | $ 25,313 | |
Debt bearing interest per annum | 6.00% | |
Debt instrument matures date | Apr. 28, 2016 | |
Convertible Note Payable To River North Equity LLC [Member] | ||
Debt bearing interest per annum | 10.00% | |
Debt instrument matures date | Apr. 13, 2017 | |
Unsecured Demand Note [Member] | ||
Debt bearing interest per annum | 6.49% |
Notes Payable and Long-Term D_6
Notes Payable and Long-Term Debt - Schedule of Estimated Fair Value Assumptions Used in Black-Scholes Option Pricing Model (Details) | 12 Months Ended |
Dec. 31, 2018 | |
Estimated Dividends [Member] | |
Fair value assumptions, measurement input, percentages | 0.00% |
Expected Volatility [Member] | |
Fair value assumptions, measurement input, percentages | 113.72% |
Risk free Interest Rate [Member] | |
Fair value assumptions, measurement input, percentages | 3.13% |
Expected Term [Member] | Minimum [Member] | |
Fair value assumptions, measurement input, term | 4 days |
Expected Term [Member] | Maximum [Member] | |
Fair value assumptions, measurement input, term | 36 months |
Line of Credit (Details Narrati
Line of Credit (Details Narrative) - USD ($) | Dec. 21, 2018 | Jan. 25, 2018 | Dec. 31, 2018 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Line of credit, obtained value | $ 500,000 | ||
Line of credit, interest rate | 6.00% | 5.00% | |
Line of credit, increased value | $ 1,000,000 | ||
Line of credit, outstanding | $ 0 |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) | Jun. 29, 2018 | Jun. 22, 2018 | Apr. 25, 2018 | Apr. 11, 2018 | Mar. 08, 2018 | Aug. 31, 2018 | Jul. 31, 2018 | Jan. 31, 2018 | Dec. 31, 2018 | Dec. 31, 2017 |
Number of shares issued for services rendered | 48,000 | |||||||||
Common stock issued, par value | $ 0.40 | $ 0.001 | $ 0.001 | |||||||
Number of shares on settlement of debt | 2,175,000 | |||||||||
Settlement of debt, value | $ 435,000 | |||||||||
Stock based compensation expense | $ 146,000 | |||||||||
Common stock, shares issued | 88,046,391 | 152,555,416 | ||||||||
Common stock, shares outstanding | 88,046,391 | 152,555,416 | ||||||||
Unrecognized compensation expense | $ 2,900 | |||||||||
Series A Preferred [Member] | ||||||||||
Preferred stock, shares authorized | 100,000,000 | 100,000,000 | ||||||||
Preferred stock, par value | $ 0.001 | $ 0.001 | ||||||||
Percentage of preferred shares outstanding to modify provisions | 75.00% | |||||||||
Preferred stock, shares issued | 13,000,000 | 3,000,000 | ||||||||
Preferred stock, shares outstanding | 13,000,000 | 3,000,000 | ||||||||
Stock issued | ||||||||||
Number of shares issued for services rendered | ||||||||||
Number of shares on settlement of debt | ||||||||||
Series C Preferred [Member] | ||||||||||
Preferred stock, shares authorized | 1,000,000 | |||||||||
Preferred stock, par value | $ 0.001 | |||||||||
Percentage of preferred shares outstanding to modify provisions | 75.00% | |||||||||
Share issued price per shares | $ 100 | |||||||||
Preferred stock voting method, description | Voting rights equal to 250 shares of common stock for each share of Series āCā Preferred Stock. | |||||||||
Weighted average price, per share | $ 2 | |||||||||
Common shares in exchange for convertible note payable, shares | 48,400 | |||||||||
Common shares in exchange for convertible note payable | $ 3,000,000 | |||||||||
Accrued interest | $ 24,952 | |||||||||
Common Stock [Member] | ||||||||||
Share issued price per shares | $ 0.20 | |||||||||
Stock issued | 1,156,587 | |||||||||
Chief Executive Officer [Member] | Series A Preferred [Member] | ||||||||||
Preferred stock shares issued upon conversion | 10,000,000 | |||||||||
True Wireless Shareholders [Member] | Series A Preferred [Member] | ||||||||||
Stock issued under merger agreement | 3,000,000 | |||||||||
True Wireless Shareholders [Member] | Common Stock [Member] | ||||||||||
Stock issued under merger agreement | 152,555,416 | |||||||||
Two Consultants [Member] | Common Stock [Member] | ||||||||||
Stock issued | 480,000 | |||||||||
Common stock issued, par value | $ .27 | |||||||||
Chief Financial Officer [Member] | ||||||||||
Warrant purchase for common stock | 50,000 | |||||||||
Warrants exercise price per share | $ 0.41 | |||||||||
Warrant terms | 5 years | |||||||||
Warrant vesting period | 1 year | |||||||||
Fair value of warrant | $ 14,700 | |||||||||
Unit Subscription Agreement [Member] | ||||||||||
Warrants exercise price per share | $ 0.50 | |||||||||
Warrant terms | 3 years | |||||||||
Individual purchase of warrants value | $ 460,000 | |||||||||
Offered individual purchase of warrants | 2,300,000 | |||||||||
Purchase of warrants | 1,150,000 | |||||||||
Common Stock [Member] | ||||||||||
Stock issued | (148,741,531) | |||||||||
Number of shares issued for services rendered | 48,000 | 528,000 | ||||||||
Number of shares on settlement of debt | ||||||||||
Warrants exercise price per share | $ 0.50 | |||||||||
Share price | $ .20 | |||||||||
Common Stock [Member] | Exchange Agreement [Member] | ||||||||||
Stock issued | 148,741,531 | |||||||||
Series C Convertible Preferred Stock [Member] | ||||||||||
Preferred stock, shares issued | 643,366 | 0 | ||||||||
Preferred stock, shares outstanding | 643,366 | 0 | ||||||||
Series C Convertible Preferred Stock [Member] | Exchange Agreement [Member] | ||||||||||
Stock issued | 594,966 | |||||||||
Warrants [Member] | ||||||||||
Stock based compensation expense | $ 11,800 |
Stockholder's Equity - Schedule
Stockholder's Equity - Schedule of Assumption Used Value of Options (Details) - Warrants [Member] | 12 Months Ended |
Dec. 31, 2018 | |
Risk-free interest rate | 2.03% |
Expected life of grants | 1 year 6 months |
Expected volatility of underlying stock | 173.02% |
Dividends | 0.00% |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Advance from related party | $ 389,502 | |
Axia [Member] | ||
Management service fees | 1,020,000 | 1,020,000 |
Trade payables | 66,535 | 55,400 |
321 Communications [Member] | ||
Trade payables | 52,161 | 132,404 |
Communication Expenses | 1,016,393 | 1,639,655 |
CenterCom [Member] | ||
Trade payables | 175,000 | 150,000 |
Communication Expenses | $ 2,129,546 | $ 976,678 |
Commitments and Contingencies_2
Commitments and Contingencies (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | |||
Nov. 30, 2018 | Oct. 31, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Nov. 01, 2013 | |
Proposed monetary forfeiture | $ 5,501,285 | ||||
Revenues, per location | $ 15,244,155 | $ 13,459,980 | |||
Initial placement costs and expenses | $ 190,000 | ||||
Value funded for fees | $ 10,000 | ||||
Distribution of profit net, percentage | 100.00% | ||||
Distribution of profit, description | The sharing percentage will 100% of the net distribution profit until the advances have been covered. | ||||
Note receivable, outstanding | 190,000 | ||||
Repayment of debt | $ 55,000 | ||||
West Publishing Corporation [Member] | |||||
Repayment of debt | $ 125,000 | ||||
Note payable interest rate per annum | 7.00% | ||||
Sales Revenue, Net [Member] | Minimum [Member] | |||||
Revenues, per location | $ 1,500 |
Commitments and Contingencies -
Commitments and Contingencies - Schedule of Monthly Principal Payments (Details) | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Periodic Payment, Principal | $ 70,000 |
January 7, 2019 [Member] | |
Periodic Payment, Principal | 20,000 |
February 7, 2019 [Member] | |
Periodic Payment, Principal | 25,000 |
March 7, 2019 [Member] | |
Periodic Payment, Principal | $ 25,000 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | Dec. 22, 2017 | Dec. 31, 2018 |
Income Tax Disclosure [Abstract] | ||
Income tax examination description | On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Reform Bill") was signed into law. Prior to the enactment of the Tax Reform Bill, the Company measured its deferred tax assets at the federal rate of 34%. The Tax Reform Bill reduced the federal tax rate to 21% resulting in the re-measurement of the deferred tax asset as of December 31, 2017. Beginning January 1, 2018, the lower tax rate of 21% will be used to calculate the amount of any federal income tax due on taxable income earned during 2018. | |
Federal income tax rate | 34.00% | 21.00% |
Net operating loss carry-forwards | $ 1,500,000 | |
Deferred tax assets | 290,000 | |
Deferred tax assets valuation allowance | 290,000 | |
Increase in valuation alllowance | $ 290,000 |
Income Taxes - Schedule of Comp
Income Taxes - Schedule of Components of Deferred Tax Assets (Details) | Dec. 31, 2018USD ($) |
Income Tax Disclosure [Abstract] | |
Expected income tax benefit from NOL carry-forwards | $ 291,359 |
Less valuation allowance | (291,359) |
Deferred tax assets, net of valuation allowance |
Income Taxes - Schedule of Effe
Income Taxes - Schedule of Effective Income Tax Rate (Details) | Dec. 22, 2017 | Dec. 31, 2018 |
Income Tax Disclosure [Abstract] | ||
Federal statutory income tax rate | 34.00% | 21.00% |
Change in valuation allowance on net operating loss carry-forwards | (21.00%) | |
Effective income tax rate | 0.00% |
Segment Information - Schedule
Segment Information - Schedule of Operating Segments (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Revenue | $ 15,244,155 | $ 13,459,980 |
Cost of revenue | (8,570,240) | (8,096,076) |
Gross margin | 6,673,915 | 5,363,904 |
Costs and expenses | 8,209,384 | 5,159,619 |
Operating income (loss) | (1,535,469) | 204,285 |
Total assets | 4,084,318 | 3,076,838 |
Total liabilities | 6,072,551 | 3,694,078 |
Surge [Member] | ||
Revenue | 2,445,468 | |
Cost of revenue | (1,864,727) | |
Gross margin | 580,741 | |
Costs and expenses | (2,558,156) | |
Operating income (loss) | (1,977,415) | |
Total assets | 947,550 | |
Total liabilities | 2,694,258 | |
True Wireless, Inc., [Member] | ||
Revenue | 12,798,687 | 13,459,980 |
Cost of revenue | (6,705,513) | (8,096,076) |
Gross margin | 6,093,174 | 5,363,904 |
Costs and expenses | (5,651,228) | (5,159,619) |
Operating income (loss) | 441,946 | 204,285 |
Total assets | 3,136,768 | 1,176,094 |
Total liabilities | $ 3,378,293 | $ 3,076,838 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - Subsequent Event [Member] - Carter Matzinger [Member] | Feb. 15, 2019USD ($)shares |
Exchange of outstanding non-interest bearing debt | $ | $ 389,502 |
Number of shares exchange for debt | shares | 6,232 |