Datacentrex, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS Thumzup Media Corporation September 30, 2022 Index to the Condensed Financial Statements Condensed Balance Sheets as of September 30, 2022 (Unaudited) and December 31, 2021 3 Condensed Statements of Operations for the Three and Nine Months ended September 30, 2022 and 2021 (unaudited) 4 Condensed Statements of Shareholder’s Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited) 5 Condensed Statements of Cash Flows for the Nine Months ended September 30, 2022 and 2021 (unaudited) 6 Notes to the Condensed Financial Statements (unaudited) 7 2 Thumzup Media Corporation Balance Sheets September 30, December 31, 2022 2021 (unaudited) ASSETS Current assets Cash and cash equivalents $ 1,099,761 $ 424,445 Prepaid expenses 123,838 - Total current assets 1,223,599 424,445 Property and equipment, net 3,093 4,713 TOTAL ASSETS $ 1,226,692 $ 429,158 LIABILITIES & STOCKHOLDERS’ EQUITY Accounts payable and accrued liabilities $ 32,256 $ 34,313 Senior Secured Convertible Promissory Notes - 215,000 Total current liabilities 32,256 249,313 Total liabilities 32,256 249,313 Stockholders’ equity Preferred stock, $ 0.001 par value, 24,000,000 shares authorized; no shares issued and outstanding, respectively - - Preferred Series A, $ 0.001 par value, 1,000,000 shares authorized; 113,154 and 0 shares issued and outstanding, respectively 113 - Common stock, $ 0.001 par value, 250,000,000 shares authorized; 7,106,333 and 6,037,836 shares issued and outstanding, respectively 7,106 6,038 Additional paid-in capital 2,842,605 1,036,749 Accumulated deficit ( 1,655,388 ) ( 862,942 ) Total stockholders’ equity 1,194,436 179,845 TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY $ 1,226,692 $ 429,158 The accompanying unaudited notes are an integral part of these financial statements and should be read in conjunction with these unaudited financial statements. 3 Thumzup Media Corporation Statements of Operation (unaudited) 2022 2021 2022 2021 For the Three Months Ended September 30, For the Nine Months Ended September 30, 2022 2021 2022 2021 Total revenue $ 1,632 $ - $ 6,524 $ - Operating expenses: Cost of revenue 1,900 - 1,900 - Sales and marketing 64,748 1,882 130,107 4,003 Research and development 126,479 268,115 412,477 474,445 General and administrative 100,900 19,448 243,979 37,071 Depreciation expense 540 720 1,620 1,196 Total operating expenses 294,567 290,165 790,083 516,715 (Loss) income from operations ( 292,935 ) ( 290,165 ) ( 783,559 ) ( 516,715 ) Other income (expenses) Interest (expense) - ( 5,829 ) ( 8,886 ) ( 13,043 ) Total other income (expenses) - ( 5,829 ) ( 8,886 ) ( 13,043 ) Net income (loss) before income taxes ( 292,935 ) ( 295,994 ) ( 792,445 ) ( 529,758 ) Provision for income taxes - - - - Net (loss) $ ( 292,935 ) $ ( 295,994 ) $ ( 792,445 ) $ ( 529,758 ) Earnings per common share - Basic and diluted $ ( 0.05 ) $ ( 0.06 ) $ ( 0.13 ) $ ( 0.09 ) Weighted average common shares outstanding -Basic and diluted 6,444,547 5,367,274 6,156,567 5,616,704 The accompanying unaudited notes are an integral part of these financial statements and should be read in conjunction with these unaudited financial statements. 4 Thumzup Media Corporation Statement of Stockholders’ Equity September 30, 2022 Additional Total Retained Preferred Series A Common Stock Paid-in Accumulated Earnings/ Shares Amount Shares Amount Capital Deficit Deficit For the Three Months Ended September 30, 2022 and 2021 Balance at June 30, 2022 - $ - 6,315,670 $ 6,316 $ 1,758,852 $ ( 1,362,452 ) $ 402,716 Preferred Series A issued for cash 17,558 18 789,982 790,000 Preferred Series A issued for conversion of notes and accrued interest 95,596 96 157,638 157,733 Common Stock issued for cash 11,000 11 32,989 - 33,000 Common Stock issued for services 2,000 2 18,378 - 18,380 Common Stock issued for conversion of notes and accrued interest 777,663 778 84,765 85,543 Net Loss - ( 1 ) ( 292,935 ) ( 292,935 ) (1 ) (1 ) (1 ) Balance at September 30, 2022 113,154 $ 113 7,106,333 $ 7,106 $ 2,842,604 $ ( 1,655,388 ) $ 1,194,436 Balance at June 30, 2021 - $ - 5,754,500 $ 5,755 $ 718,745 $ ( 239,450 ) $ 485,050 Net Loss - - - - - ( 295,994 ) ( 295,994 ) Balance at September 30, 2021 - $ - 5,754,500 $ 5,755 $ 718,745 $ ( 535,444 ) $ 189,056 For the Nine Months Ending September 30, 2022 and 2021 Balance at December 31, 2021 - $ - 6,037,836 $ 6,038 $ 1,036,749 $ ( 862,942 ) $ 179,845 Preferred Series A issued for cash 17,558 18 789,982 790,000 Preferred Series A issued for conversion of notes and accrued interest 95,596 96 157,638 157,733 Common Stock issued for cash 286,834 286 736,714 737,000 Common Stock issued for services 4,000 4 36,756 36,760 Common Stock issued for conversion of notes and accrued interest 777,663 778 84,765 85,543 Net Loss ( 792,445 ) ( 792,445 ) (1 ) Balance at September 30, 2022 113,154 $ 113 7,106,333 $ 7,106 $ 2,842,604 $ ( 1,655,388 ) $ 1,194,436 Balance at December 31, 2020 - - 5,000,000 $ 5,000 $ ( 5,000 ) $ ( 5,687 ) $ ( 5,687 ) Common stock issued for services 30,000 30 ( 30 ) - - Common stock issued for cash 724,500 725 723,775 - 724,500 Net loss - - ( 529,758 ) ( 529,758 ) 1 1 Balance at September 30, 2021 - $ - 5,754,500 $ 5,755 $ 718,745 $ ( 535,444 ) $ 189,056 The accompanying unaudited notes are an integral part of these condensed unaudited financial statements. 5 Thumzup Media Corporation Statements of Cash Flows For The Nine Months Ending September 30, (unaudited) 2022 2021 Cash flows from operating activities Net loss $ ( 792,445 ) $ ( 529,758 ) Depreciation expense 1,620 1,196 Stock issued for services 36,760 - Interest expense converted to stock 8,886 - Adjustments to reconcile net loss to net cash used in operating activities: Prepaid expenses ( 123,838 ) ( 103,350 ) Other assets - 7,214 Accounts payable and accrued expenses 17,033 51,342 Net cash used in operating activities ( 851,984 ) ( 573,356 ) Cash flows from investing activities Purchase of property and equipment - ( 6,449 ) Purchase of intangible assets, Trademarks - ( 2,098 ) Net cash used in investing activities - ( 8,547 ) Cash flows from financing activities Proceeds from sale of common stock 737,000 724,500 Proceeds from loan – related party 300 - Proceeds from sale of preferred Series A 790,000 - Net cash provided by financing activities 1,527,300 724,500 Net (decrease) increase in cash 675,316 142,597 Cash at the beginning of the period 424,445 101,317 Cash at the end of the period $ 1,099,761 $ 243,914 Supplemental disclosures of cash flow information: Cash paid for interest $ - $ - Cash paid for income taxes $ - $ - Supplemental disclosures of noncash financing activities: Preferred Series A issued for conversion of notes payable $ 157,733 $ - Common stock issued for conversion of notes payable and accrued interest $ 85,543 $ - The accompanying unaudited notes are an integral part of these financial statements and should be read in conjunction with these unaudited financial statements. 6 Thumzup Media Corporation Notes to the Condensed Financial Statements (Unaudited) September 30, 2022 Note 1 - Business Organization and Nature of Operations Thumzup Media Corporation (“Thumzup” or “Company”) was incorporated on October 27, 2020, under the laws of the State of Nevada, and its headquarters is located in Los Angeles. The Company’s primary business is software as a service provider dedicated to connecting businesses with consumers and allowing the business to incentivize consumers to post about their experience on social media. Thumzup mission is to democratize social media marketing by connecting advertisers with non-professional people, who can be paid for their posts about products and services they love through its technology which utilizes a proprietary mobile app (“App”). The App generates scalable word-of-mouth product posts and recommendations for advertisers on social media and is designed to connect advertisers with individuals who are willing to promote their products online. The Thumzup App enables users to select a brand they want to post about on social media. Once the Thumzup user selects the brand and takes a photo (using the App), the App will post the photo and a caption to the user’s social media account(s). As of the date of this filing, Instagram is the Company’s initial social media platform that is being used, due to its wide acceptance and its great functionality using photographs. The Company expects to add other social media platforms in the future. For the advertiser, the Thumzup system enables brands to get real people to promote products to their friends, rather than displaying banner ads that consumers now mostly ignore, or contracting with expensive professional influencers. The Company has recorded nominal revenues during the first nine months of 2022 and continues with the development of enhancements to its App and marketing efforts. The Company is an “emerging growth company” as that term is used in the Jumpstart our Business Startups Act of 2012, and as such, has elected to comply with certain reduced public company reporting requirements. Note 2 – Summary of Significant Accounting Policies Basis of Presentation - Unaudited Interim Financial Information The accompanying unaudited condensed financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited condensed financial statements reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. Use of Estimates The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America, which requires management to use its judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures at the date of the financial statements and the reported amounts of expenses during the reported period. These assumptions and estimates could have a material effect on the financial statements. Actual results may differ materially from those estimates. The Company’s management periodically reviews estimates on an ongoing basis based on information currently available, and changes in facts and circumstances may cause the Company to revise these estimates. Cash and Cash Equivalents Cash and cash equivalents include all cash on hand, demand deposits and short-term investments with original maturities of three months or less when purchased. As of September 30, 2022 and December 31, 2021, the Company’s cash and cash equivalents were $ 1,099,761 and $ 424,445 , respectively. 7 Prepaid Expenses Prepaid expenses consist prepaid professional fees related to a scheduled filing and other receivables of $ 123,838 and $ 0 at September 30, 2022 and December 31, 2021, respectively. Property and Equipment Property and equipment, which consists of computer equipment is recorded at cost and depreciated using the straight-line method over the estimated useful lives. Ordinary repair and maintenance costs are included in general and administrative expenses on our statement of operations. However, expenditures for additions or improvements that significantly extend the useful life of the asset are capitalized in the period incurred. At the time assets are sold or disposed of, the cost and accumulated depreciation are removed from their respective accounts and the related gains or losses are reflected in the statements of operations in gains from sales of property and equipment, net. The estimated useful life for computer equipment is three years. We periodically evaluate the appropriateness of remaining depreciable lives assigned to computer equipment. Depreciation expense for the nine months ended September 30, 2022 and 2021 was $ 1,620 and $ 476 , respectively. Revenue Recognition The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers. The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as we fulfill our obligations under each of our agreements: ● identify the contract with a customer; ● identify the performance obligations in the contract; ● determine the transaction price; ● allocate the transaction price to performance obligations in the contract; and ● recognize revenue as the performance obligation is satisfied. The Company realizes revenue upon the fulfillment of its performance obligations to customers. As of September 30, 2022 and December 31, 2021, the Company had deferred revenue of $ 2,863 and $ 0 , respectively, for contracts under which the customer had paid for and the Company had not yet delivered. Research and Development Costs Research and development expenses primarily consist of outside contractor costs related to engineering, design and development of a working prototype Thumzup TM App. Generally accepted accounting principles define research costs as a planned search or investigation to discover new knowledge with the hope that the results will eventually be useful in creating new products or services or significant improvements in existing products or services. Capitalization of research and development costs for software begins upon the establishment of technological feasibility, which is generally the completion of a working prototype that has been certified as having no critical bugs and is a release candidate. For the nine months ended September 30, 2022 and 2021, research and development costs for software were expensed when incurred as they related to the initial product development stage for our Thumzup TM App. 8 Income Taxes The Company utilizes the asset and liability approach to measure deferred tax assets and liabilities based on temporary differences existing at each balance sheet date using currently enacted tax rates in accordance with ASC 740. ASC 740 considers the differences between financial statement treatment and tax treatment of certain transactions. 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. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rate is recognized as income or expense in the period that includes the enactment date of that rate. The Company has an accumulated deficit of approximately $ 1,655,388 as of September 30, 2022, and at the current corporate tax rate of 21 % results in an estimated net operating loss (“NOL”) of $ 348,000 . The Company has no income tax effect due to the recognition of a full valuation allowance on the expected tax benefits of future loss carry forwards based on uncertainty surrounding the realization of such tax assets. Note 3 – Going Concern The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company was only recently formed, has not yet established profitable operations and has incurred losses since inception. These factors raise substantial doubt about the ability of the Company to continue as a going concern. In this regard, management is proposing to raise additional funds not provided by operations through loans or through sales of its common stock. There is no assurance that the Company will be successful in raising this additional capital or in achieving profitable operations. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. The Company is a beginning revenue, software and services company that has relied on short-term debt and equity funding for its operations. At September 30, 2022 and December 31, 2021, the Company had a cash balance of $ 1,099,761 and $ 424,445 , respectively. The Company used $ 851,984 to fund operating activities for the nine months ended September 30, 2022 and had an accumulated deficit of $ 1,655,388 . During the third quarter ended September 30, 2022, the Company sold 17,558 shares of its Series A Preferred stock and received proceeds of $ 790,000 . Note 4 - Senior Secured Convertible Promissory Notes On November 19, 2020, the Company issued $ 215,000 in Senior Secured Convertible Promissory Notes (“Senior Notes”). The Senior Notes mature on November 21, 2022 and accrue interest at eight ( 8 %) per year. Accrued interest may be paid quarterly or converted in to shares of common stock. The Company’s borrowings are subject to a Note Purchase and Security Agreement (“Agreement”) which, among other things, contains certain covenants. In accordance with the Agreement, the Company secures the Senior Notes with all of the Company’s intellectual property now or hereafter owned or created by or on behalf of the Company’s founding shareholders to operate the Company’s business. The Company may prepay all or any portion of the Senior Notes, after providing 30 days prior written notice, at the Company’s option, pro rata to each Holder, by paying one hundred thirty percent (130%) of (1) the then outstanding principal amount plus (2) accrued and unpaid interest on that principal amount. If pre-payment is offered, the Holders may elect to convert into shares of common stock instead of accepting pre-payment. In the event the Company repays the Senior Notes, a Holder, shall have a right, for a period of 12 months from such repayment date, to acquire up to that number of shares of common stock of the Company that results from dividing the principal amount of prepaid Note by $0.11 per share, which will be adjusted for any stock splits and recapitalizations. At any time while the Senior Notes are outstanding, and at the sole option of a Holder, the Senior Notes may be converted into shares of the common stock of the Company, or any shares of capital stock or other securities of the Company into which such common stock shall hereafter be changed or reclassified. 9 A Holder is not entitled to convert any portion of the Senior Note in excess of that portion of the Senior Note upon conversion of which the sum of (1) the number of shares of common stock beneficially owned by the Holder and its affiliates and (2) the number of conversion shares issuable upon the conversion would result in beneficial ownership by a Holder and its affiliates of more than 4.50 % of the then outstanding shares of Common Stock. The per share conversion price into which principal and interest outstanding will be convertible into shares of common stock hereunder is $ 0.11 per share. The Agreement contains a protection feature (commonly referred to as a “Down Round”); whereupon any issuance by the Company of common stock, or a security that is convertible into common stock, at a price lower than a net receipt to the Company of $ 0.11 per share, then the conversion price will be adjusted to equal the lower price per share. The Company has accounted for the Down Round as a contingent beneficial feature and will record a benefit to a Holder, if and, when a conversion price adjustment occurs. In September 2022 the Company entered into separate exchange agreements with the Holders of the Senior Secured Promissory Notes to allow the conversion of their notes and accrued interest into shares of preferred stock. In September 2022 the Holders of the Senior Secured Promissory Notes exercised their option to convert their notes and accrued interest of $ 85,543 into 777,663 shares of common stock, and $ 157,733 of notes and accrued interest were converted into 95,596 shares of Preferred Series A stock. The balance of the Senior Secured Promissory Notes and the associated accrued interest payable at September 30, 2022 was $ 0 . Note 5 – Shareholders’ Equity Preferred Stock The Company is authorized to issue 25,000,000 shares of preferred stock, par value $ 0.001 per share. On September 26, 2022 the Company submitted a Certificate of Designation to the Secretary of State of Nevada designating 1,000,000 shares of preferred stock as Series A Preferred. Each shareholder shall have the right, at any time and from time to time, at the shareholder’s option to convert any or all of such holder’s shares of Series A Preferred into the number of shares of Common Stock. Each share of Series A Preferred initially converts into 15 shares of Common Stock at a reference rate of $ 3.00 per share of Common Stock subject to adjustments. The holders of Series A Preferred shall be entitled to receive, in cash or in-kind at Company’s election, in an amount equal to $ 3.50 per share. If paid in kind, the dividend shall be in shares of Series A Preferred (the “Dividend Shares”) valued at the $ 45.00 per share of Series A Preferred (the “Purchase Price”) unless the closing price of the Common Stock on the Trading Day prior to the issuance of the dividend is below the Reference Rate, in which case the Dividend Shares shall be valued at the Purchase Price adjusted pursuant to the formula set forth in Section 3 of the Certificate of Designations. During September 2022, the Company entered into a Securities Purchase Agreement with five accredited investors. Pursuant to the Securities Purchase Agreements, the company sold 17,558 Shares of its Series A Preferred at $ 45.00 per preferred share and received gross proceeds of $ 790,000 . During September 2022, the Company issued 95,596 shares of its Series A Preferred upon conversion of the Senior Secured Promissory Notes and the associated accrued interest payable of $ 157,733 . The balance of the Senior Secured Promissory Notes payable at September 30, 2022 and December 31, 2021 was $ 0 and $ 215,000 , respectively. Common Stock The Company is authorized to issue 250,000,000 million shares of common stock, par value $ 0.001 per share. As September 30, 2022 and December 31, 2021, the Company had 7,106,333 and 6,037,836 shares issued and outstanding, respectively. 10 In August 2022, the Company sold 11,000 shares of common stock at $ 3.00 per share to accredited investors within the meaning of the federal securities laws in transactions exempt from registration under the Securities Act of 1933, as amended. During September 2022, the Company issued 777,663 shares of its common stock upon conversion of the Senior Secured Promissory Notes and the associated accrued interest payable of $ 85,543 . The balance of the Senior Secured Promissory Notes payable at September 30, 2022 and December 31, 2021 was $ 0 and $ 215,000 , respectively. During the nine months ended September 30, 2022, the Company sold 82,333 shares of common stock at $ 1.50 per share and 193,501 shares of common stock at $ 2.00 per share to accredited investors within the meaning of the federal securities laws in transactions exempt from registration under the Securities Act of 1933, as amended. The Company issued 2,000 shares of common stock to an outside consultant for services and recognized an expense of $ 18,380 . During the three nine ended September 30, 2021, the Company issued 30,000 shares of common stock to its legal counsel at par value per share of $ 0.001 , pursuant to an engagement letter entered into in December 2020, and sold 724,500 shares of common stock at $ 1.00 per share to accredited investors within the meaning of the federal securities laws in transactions exempt from registration under the Securities Act of 1933, as amended. The Company received proceeds from the sales of $ 724,500 . Note 6 – Contingencies COVID-19 The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company’s customers, service providers and suppliers, all of which are uncertain and cannot be predicted. As of the date of issuance of Company’s financial statements, the extent to which the COVID-19 pandemic may in the future materially impact the Company’s financial condition, liquidity or results of operations is uncertain. Russia-Ukraine conflict The Russian-Ukraine conflict is a global concern. The Company does not have any direct exposure to Russia or Ukraine through its operations, employee base, investments or sanctions. However, if the conflict escalates, it is unknown whether its direct or indirect effects may impact our business. Note 7 – Subsequent Events On October 1, 2022, the Company entered into an employment agreement with Robert Steele for his services as Chief Executive Officer. Under the terms of the employment agreement, Mr. Steele receives a salary of $ 5,000 per month. From October 1 to November 7, 2022, the Company issued 3,335 shares of Series A Preferred stock for cash proceeds of $ 150,000 . On October 31, 2022, a majority of the shareholders of the Company adopted a resolution to increase the Company’s authorized capital from 100,000,000 to 275,000,000 of which consist of 250,000,000 shares of Common Stock and 25,000,000 shares of Preferred Stock. On October 31, 2022, the Board and a majority of the shareholders adopted resolutions to grant discretionary authority to the Board to amend the Articles of Incorporation to effect one or more consolidations of the issued and outstanding shares of Common Stock, pursuant to which the shares of Common Stock would be combined and reclassified into one share of Common Stock at a ratio within the range from 1-for-2 up to 1-for-10 (each, a “Reverse Stock Split”), provided that, the Company shall not effect Reverse Stock Splits that, in the aggregate, exceed 1-for-10 . On October 31, 2022, the Board and a majority of the shareholders adopted resolutions to grant discretionary authority to the Board to amend the Articles of Incorporation to effect one or more forward splits of the issued and outstanding shares of Common Stock, pursuant to which the shares of Common Stock would be increased at a ratio within the range from 2-for-1 up to 10-for-1 (each, a “Forward Stock Split”), provided that, the Company shall not effect Forward Stock Splits that, in the aggregate, exceed 10-for-1. On November 4, 2022, the Company filed a Certificate of Amendment with the Secretary of State of the State of Nevada to authorize 275,000,000 shares of the Company, of which consist of 250,000,000 shares of Common Stock and 25,000,000 shares of Preferred Stock. 11