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SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (Policies)
 9 Months Ended
Sep. 30, 2018
Accounting Policies [Abstract]  
Principals of Consolidation

Principles of Consolidation

The accompanying consolidated financial statements of Mining Power Group, Inc. (formerly Rich Cigars, Inc.) includes the accounts of Mining Power Group and its subsidiary Northway Mining, LLC, which is controlled and owned 55% by Mining Power Group, Inc.

All of the equity interests in Northway Mining not held by the Company are reflected as non-controlling interests. In the consolidated statements of operations, we allocate net income (loss) attributable to non-controlling interests to arrive at net income (loss) attributable to the Company.
Reclassification

Reclassification

Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations. This change in classification does not materially affect previously reported cash flows from operations or from financing activities in the Statement of Cash Flows and had no effect on the previously reported Statement of Operations for any period. Currently, the Company presents the convertible Series A preferred stock as part of permanent equity instead of the mezzanine section of the balance sheet.
Basis of Presentation

Basis of Presentation

The accompanying financial statements have been prepared by the Company in accordance with Generally Accepted Accounting Principles ("GAAP") in the United States of America. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows have been made for the periods ended September 30, 2018 and 2017. Certain information and footnote disclosures normally included in financial statements are prepared in accordance with U.S. generally accepted accounting principles. The Company suggests these condensed financial statements be read in conjunction with the December 31, 2017 audited financial statements and notes thereto included in the Company's Form 10-K. The results of operations for the period ended September 30, 2018 are not necessarily indicative of the operating results for the full year.
Use of Estimates

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in the consolidated financial statements.
Carrying Value, Recoverability and Impairment of Long-Lived Assets

Carrying Value, Recoverability and Impairment of Long-Lived Assets

The Company’s long-lived assets, which include property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all investments with a maturity date of three months or less when purchased to be cash equivalents. The Company had cash in the amount of $235,843 and $0 at September 30, 2018 and December 31, 2017, respectively.
Accounts Receivable and Allowance for Doubtful Accounts

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer-specific facts and general economic conditions that may affect a client’s ability to pay.

Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company determines when receivables are past due or delinquent based on how recently payments have been received. The Company set up an allowance for doubtful accounts and recorded $57,246 as bad debt expense.
Cryptocurrencies

Cryptocurrencies

 

The Company receives cryptocurrencies from its customers as a form of payment and converts them into cash in less than 3 months from receipt. The Company accounts for its cryptocurrencies as indefinite-lived intangible assets at historical loss less impairment in accordance with ASC 350 Intangibles - Goodwill and Other. As of September 30, 2018 and December 31, 2017, the fair value of cryptocurrencies was $239,016 and $0, respectively, which resulted in impairment loss of $26,028 and $0 for the nine months ended September 30, 2018 and 2017, respectively.
Property and Equipment

Property and Equipment

Property and equipment is recorded at cost. Expenditures for major additions and betterments are capitalized.

Maintenance and repairs are charged to operations as incurred. Depreciation of property and equipment is computed by the straight-line method (after taking into account their respective estimated residual values shown in the table below) over the estimated useful lives of the respective assets.

Fixed Asset   Estimated Useful Life (Years)
Building   39
Improvements   5
Furniture and office equipment   5
Computer Equipment   5
Vehicles   5
     

Upon the sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in statements of operations.

Description  Total Acquisition Cost  Span of Life (years)  Depreciation Expense
    
          
Real Estate  - Land  $102,218    —     $—   
Real Estate - Building   982,682    39    424 
Improvements   171,382    5    2,907 
Office Equipment & Furnitures   80,133    5    805 
Computer Equipment   8,840    5    97 
Vehicles   132,016    5    3,501 
TOTAL:  $1,477,271        $7,734 
Deferred revenue

Deferred revenue

The Company recognizes revenue for subscription hosting service sales over the subscription period. Deferred revenue is recorded for the portion of the subscription period subsequent to each reporting date, for which cash has already been received. As of September 30, 2018 and December 31, 2017, the amount of deferred revenue was $599,238 and $0, respectively.
Loans Payable

Loans Payable

The Company within the acquisition of Northway Mining LLC in August 1, 2018, acquired also certain real estate and vehicles, the unpaid balances on the two properties are guaranteed by mortgages having basic payment terms and conditions as follows: 707 Flats Road payable after 180 days from August 15, 2018, no interest and 2 Flint Mine Road with a 12 months payment period, and a maturity date on September 1, 2019, 5% interest rate. The unpaid balances on vehicles are guaranteed with a lien 72 month maturity since August 24, 2018 and October 5, 2018 respectively. The amount of mortgages as of September 30, 2018 is $714,900 which is payable over a twelve month period. The debt on vehicles is deferred as follows: (a) $42,223 payable within a 12-month period following September 30, 2018 (current portion), and (b) $86,582 payable during 2020 through 2023 (non-current portion), as detailed in the following chart. These loans have a lien on the vehicles, and the interest rate for Community Bank is 5.79% and 1st Bank of Scotia is 7.29%.

 

LENDER  CURRENT  LIABILITIES  LONG TERM LIABILITIES  TOTAL DEBT
   2018  2019  2020  2021  2022  2023
Community Bank  $13,656   $14,366   $13,656   $13,656   $13,656   $13,657   $82,648 
1st Scotia Bank   6,920    7,280    7,989    7,989    7,989    7,989    46,157 
707 Flats Rd.   —      134,900    —      —      —      —      134,900 
Marsan Properties   97,500    482,500    —      —      —      —      580,000 
Total:  $118,077   $639,046   $21,645   $21,645   $21,645   $21,646   $843,705 
Beneficial Conversion Feature

Beneficial Conversion Feature

If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion feature ("BCF"). A Beneficial Conversion Feature is recorded by the Company as a debt discount pursuant to ASC 470-20 Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method.
Embedded Conversion Features

Embedded Conversion Features

The Company evaluates embedded conversion features within convertible debt under ASC 815 Derivatives and Hedging to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 Debt with Conversion and Other Options for consideration of any beneficial conversion features.
Derivative Financial Instruments

Derivative Financial Instruments

Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt, and further, if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.

Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black Scholes option-pricing model.
Fair Value of Financial Instruments

Fair Value of Financial Instruments

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on our principal or, in the absence of a principal, most advantageous market for the specific asset or liability.

U.S. generally accepted accounting principles provide for a three-level hierarchy of inputs to valuation techniques used to measure fair value, defined as follows:

Level 1: Inputs that are quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity can access.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability, including:

● quoted prices for similar assets or liabilities in active markets;

● quoted prices for identical or similar assets or liabilities in markets that are not active;

● inputs other than quoted prices that are observable for the asset or liability; and

● inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 

Level 3: Inputs that are unobservable and reflect management’s own assumptions about the inputs market participants would use in pricing the asset or liability based on the best information available in the circumstances (e.g., internally derived assumptions surrounding the timing and amount of expected cash flows).

 

Our financial instruments consist of cash, accounts receivable, accounts payable, and debt. We have determined that the book value of our outstanding financial instruments as of September 30, 2018 and December 31, 2017, approximates the fair value due to their short-term nature.

 

Items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements consisted of the following items as of September 30, 2018:

  

   Level 1  Level 2  Level 3  Total
            September 30, 2018  December 31, 2017
Derivative Liabilities  $—     $—     $1,862,832   $1,862,832   $4,454,993 

 

The Company reflects the fair value of derivative liabilities using the Black Scholes pricing model. The following chart are the estimated fair values for the Company’s derivative financial instruments and based on the parameters disclosed in our Notes 5 and 6 hereto:

Lenders  September 30, 2018  December 31, 2017
Power Up Lending Group, Ltd  $6,261   $553,851 
Power Up Lending Group, Ltd [2]  $—     $353,071 
Crown Bridge Partners, LLC  $—     $1,679,176 
Kodiak Capital Group, LLC  $—     $680,625 
D&D Capital, Inc  $20,817   $—   
S&E Capital, Inc  $117,050   $—   
Firstfire Global Opportunities Funds, LLC  $390,009   $—   
Eagle Equities  $1,328,695   $1,188,270 
Total  $1,862,832   $4,454,993 
Revenue Recognition

Revenue Recognition

Effective January 1, 2018, the Company adopted the Financial Accounting Standards Board (“FASB”) standard update ASU 2014-09 Revenue from Contracts with Customers (“Topic 606”) which provides a principles-based, five-step approach to measure and recognize revenue from contracts with customers. Revenue is recognized when the following criteria are met:

  ● Identification of the contract, or contracts, with a customer;
  ● Identification of the performance obligations in the contract;
  ● Determination of the transaction price;
  ● Allocation of the transaction price to the performance obligations in the contract; and
  ● Recognition of revenue when, or as, we satisfy performance obligations.

The adoption of this guidance did not have a material impact on the Company’s consolidated statement of operations, cash flows, and balance sheet as of the adoption date or for the nine months ended September 30, 2018 or 2017.

The Company's revenues have been generated primarily through hosting services to third parties. The terms of these agreements generally consist of a deposit and monthly billing cycles covering our services.  

For the nine months ended September 30, 2018, all agreements met the above criteria, or in exceptional cases only, our involvement was to sell to some of the end users at pricing that is consistent with market transactions, thereby allowing for the recognition of revenue on such transactions upon receipt. 

We periodically review for any expected period of substantial involvement under the agreements that provide for non-refundable up-front payments and fees. If applicable, we will adjust the amortization periods when appropriate to reflect changes in assumptions relating to the duration of our expected involvement.

Revenue is recognized in the month the service (mostly hosting) is provided. Deferred Revenues on the Company’s balance sheet reflects the part of invoiced services (mostly hosting) that will be provided after September 30, 2018 for which cash payments have been received.
Income Taxes

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Additionally, the recognition of future tax benefits, such as net operating loss carryforwards, is required to the extent that realization of such benefits is more likely than not. Deferred tax assets and liabilities are determined using enacted tax rates expected to apply to taxable income in the years in which the assets and liabilities are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date.

In the event the future tax consequences of differences between the financial reporting bases and the tax bases of the Company's assets and liabilities result in deferred tax assets, an evaluation of the probability of being able to realize the future benefits indicated by such asset is required. A valuation allowance is provided for the portion of the deferred tax asset when it is more likely than not that some or all of the deferred tax asset will not be realized. In assessing the realizability of the deferred tax assets, management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies.

The Company files income tax returns in the United States New York and Florida States, which are subject to examination by the tax authorities in these jurisdictions. Generally, the statute of limitations related to the Company's federal and state income tax return is three years. The state impact of any federal changes for prior years remains subject to examination for a period up to five years after formal notification to the states.

Management has evaluated tax positions in accordance with ASC 740, Income Taxes, and has not identified any significant tax positions, other than those disclosed. All of the Company's tax years since inception remain subject to examination by Federal and State jurisdictions.
Earnings per Share

Earnings Per Share

Basic net income per common share ("Basic EPS'') excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per common share ("Diluted EPS'') reflects the potential dilution that could occur if stock options or other contracts to issue shares of common stock were exercised or converted into common stock. The computation of Diluted EPS does not assume exercise or conversion of securities that would have an anti-dilutive effect on net income per common share.

 

  

Three Months Ended 

September 30,

 

Nine Months Ended

September 30,

   2018  2017  2018  2017
Numerator            
Net income (loss) applicable to common shareholders  $(936,853)  $(436,295)  $2,410,929   $(785,770)
                     
Denominator                    
Weighted average common shares outstanding, basic   55,215,525    2,789,067    41,328,152    2,722,751 
Convertible preferred stock   953,000,000    —      953,000,000    —   
Convertible promissory notes   8,738,824    —      8,738,824    —   
Weighted average common shares outstanding, diluted   1,016,954,348    2,789,067    1,003,066,976    2,722,751 
Net Income per share - Basic  $(0.02)  $(0.16)  $0.06   $(0.29)
Net Income per shares - Diluted  $(0.02)  $(0.16)  $0.00   $(0.29)