Datacentrex, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS Thumzup Media Corporation March 31, 2023 Index to the Condensed Financial Statements Condensed Balance Sheets as of March 31, 2023 (Unaudited) and December 31, 2022 3 Condensed Statements of Operations for the Three Months Ended March 31, 2023 and 2022 (unaudited) 4 Condensed Statements of Shareholder’s Equity for the Three Months Ended March 31, 2023 and 2022 (unaudited) 5 Condensed Statements of Cash Flows for the Three Months ended March 31, 2023 and 2022 (unaudited) 6 Notes to the Condensed Financial Statements (unaudited) 7 2 THUMZUP MEDIA CORPORATION CONDENSED BALANCE SHEETS March 31, December 31, 2023 2022 (unaudited) ASSETS Current assets: Cash $ 528,330 $ 1,155,343 Prepaid expenses 2,903 2,903 Total current assets 531,233 1,158,246 Property and equipment, net 2,013 2,553 Capitalized software costs, net 50,421 - Total assets $ 583,667 $ 1,160,799 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued expenses $ 69,532 $ 91,359 Total current liabilities 69,532 91,359 Total liabilities 69,532 91,359 Commitments and contingencies Stockholders’ equity: Preferred stock - 20,000,000 shares authorized: Preferred stock - Series A, $ 0.001 par value, $ 45,000 stated value, 1,000,000 shares authorized; 128,312 and 125,865 shares issued and outstanding, respectively 128 126 Preferred Stock Value Common stock, $ 0.001 par value, 250,000,000 shares authorized; 7,126,336 and 7,108,336 shares issued and outstanding, respectively 7,126 7,108 Additional paid in capital 3,314,340 3,179,913 Subscription receivable - ( 33,000 ) Accumulated deficit ( 2,807,459 ) ( 2,084,707 ) Total stockholders’ equity 514,135 1,069,440 Total liabilities and stockholders’ equity $ 583,667 $ 1,160,799 The accompanying notes are an integral part of these unaudited condensed financial statements. 3 THUMZUP MEDIA CORPORATION CONDENSED STATEMENTS OF OPERATIONS (unaudited) 2023 2022 For the Three Months Ended March 31, 2023 2022 Revenues $ 1,770 $ 3,494 Operating Expenses: Cost of revenues 116 - Sales and marketing 268,717 14,861 Research and development 125,881 146,046 General and administrative 324,954 61,976 Depreciation and amortization 2,407 540 Total Operating Expenses 722,075 223,423 Loss From Operations ( 720,305 ) ( 219,929 ) Other Income (Expense): Interest expense - ( 4,443 ) Total Other Income (Expense) - ( 4,443 ) Net Loss Before Income Taxes ( 720,305 ) ( 224,372 ) Provision for Income Taxes (Benefit) - - Net Loss ( 720,305 ) ( 224,372 ) Dividends on preferred stock ( 2,447 ) - Net Income (Loss) Available to Common Stockholders $ ( 722,752 ) $ ( 224,372 ) Net Income (Loss) Per Common Share: Basic $ ( 0.10 ) $ ( 0.04 ) Diluted $ ( 0.10 ) $ ( 0.04 ) Weighted Average Common Shares Outstanding: Basic 7,118,933 6,093,703 Diluted 7,118,933 6,093,703 The accompanying notes are an integral part of these unaudited condensed financial statements. 4 THUMZUP MEDIA CORPORATION CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022 (unaudited) Shares Amount Shares Amount In Capital Receivable Deficit Total Preferred Stock Additional Series A Common Stock Paid Subscription Accumulated Shares Amount Shares Amount In Capital Receivable Deficit Total Balance at December 31, 2021 - - 6,037,836 $ 6,038 $ 1,036,749 - $ ( 862,942 ) $ 179,845 Common Stock issued for investment - - 82,334 83 123,417 - - 123,500 Net loss - - - - - - ( 224,372 ) $ ( 224,372 ) Balance at March 31, 2022 - 6,120,170 $ 6,121 $ 1,160,166 $ - $ ( 1,087,314 ) $ 78,973 Balance at December 31, 2022 125,865 $ 126 7,108,336 7,108 $ 3,179,913 ( 33,000 ) ( 2,084,707 ) $ 1,069,440 Preferred Series A issued for dividends 2,447 2 - - 2,445 - ( 2,447 ) - Proceeds from stock subscription receivable - - - - - 33,000 - 33,000 Common Stock issued for services - - 18,000 $ 18 $ 131,982 - - 132,000 Net loss - - - - - - ( 720,305 ) $ ( 720,305 ) Balance at March 31, 2023 128,312 $ 128 7,126,336 $ 7,126 $ 3,314,340 $ - $ ( 2,807,459 ) $ 514,135 The accompanying notes are an integral part of these unaudited condensed financial statements. 5 THUMZUP MEDIA CORPORATION CONDENSED STATEMENTS OF CASH FLOWS (unaudited) 2023 2022 For the Three Months Ended March 31, 2023 2022 Cash flows from operating activities: Net loss $ ( 720,305 ) $ ( 224,372 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization expense 2,407 540 Stock issued for services 132,000 - Changes in operating assets and liabilities: Accounts payable and accrued expenses ( 21,827 ) 863 Net cash used in operating activities ( 607,725 ) ( 222,969 ) Cash flows from investing activities: Capitalized software costs ( 52,288 ) - Net cash used in investing activities ( 52,288 ) - Cash flows from financing activities: Proceeds from sale of common stock 33,000 123,500 Proceeds from loan - 300 Net cash provided by financing activities 33,000 123,800 Net (decrease) increase in cash ( 627,013 ) ( 99,169 ) Cash, beginning of year 1,155,343 424,445 Cash, end of year $ 528,330 $ 325,276 Supplemental disclosures of cash flow information: Cash paid during period for interest $ - $ - Cash paid during period for taxes $ - $ - Supplemental disclosure of non-cash investing and financing activities: Preferred Series A shares issued for dividends $ 2,447 $ - The accompanying notes are an integral part of these unaudited condensed financial statements. 6 Thumzup Media Corporation Notes to the Condensed Financial Statements (Unaudited) March 31, 2023 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, California. 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’s 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 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. Significant estimates include estimates used in the valuation allowance related to deferred tax assets and capitalized software costs. Actual results may differ from 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 March 31, 2023 and December 31, 2022, the Company’s cash and cash equivalents consisted of $ 528,330 and $ 1,155,343 , respectively. The Company maintains its cash in banks insured by the Federal Deposit Insurance Corporation in accounts that at times may be in excess of the federally insured limit of $ 250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions. At March 31, 2023 and December 31, 2022, the uninsured balances amounted to $ 278,330 and $ 905,343 , respectively. There is a risk the Company may lose uninsured balances over the FDIC insurance limit. Prepaid Expenses As of March 31, 2023 and December 31, 2022, the Company had $ 2,903 and $ 2,903 in prepaid expenses, respectively. The Company’s prepaid expenses as of December 31, 2022 consisted primarily of fees paid to a consultant for business development services which were rendered in April 2023. 7 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 evaluate the appropriateness of remaining depreciable lives assigned to computer equipment at the end of each fiscal year. Depreciation expense for the three months ended March 31, 2023 and 2022 was $ 540 and $ 540 , respectively. Capitalized Software Development Costs We capitalize certain costs related to the development and enhancement of the Thumzup platform. In accordance with authoritative guidance, we began to capitalize these costs when the technological feasibility was established and preliminary development efforts were successfully completed, management has authorized and committed project funding, and it was probable that the project would be completed and the software would be used as intended. Such costs are amortized when placed in service, on a straight-line basis over the estimated useful life of the related asset, generally estimated to be three years. Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred and recorded in product development expenses on our consolidated statements of operations. Costs incurred for enhancements that were expected to result in additional features or functionality are capitalized and expensed over the estimated useful life of the enhancements, generally seven years. The accounting for these capitalized software costs requires us to make significant judgments, assumptions and estimates related to the timing and amount of recognized capitalized software development costs. For the three months ended March 31, 2023 and 2022, we capitalized $ 52,288 and $ 0 of costs related to the development of software applications, respectively. Amortization of capitalized software costs was $ 1,867 and $ 0 for the three months ended March 31, 2023 and 2022. Capitalized software was $ 50,421 and $ 0 , net of accumulated amortization of $ 1,867 and $ 0 at March 31, 2023 and December 31, 2022, respectively. Revenue Recognition The Company recognizes revenue when services are performed. The Company’s revenues are accounted for under ASC Topic 606, “Revenue From Contracts With Customers” (“ASC 606”). The fees are generally fixed at the point of sale and all consideration from contracts is included in the transaction price. The Company’s contracts do not include multiple performance obligations or material variable consideration. In accordance with ASC 606, the Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company recognizes revenue in accordance with that core principle by applying the following: (i) Identify the contract(s) with a customer; (ii) Identify the performance obligation in the contract; (iii) Determine the transaction price; (iv) Allocate the transaction price to the performance obligations in the contract; and (v) Recognize revenue when (or as) the Company satisfies a performance obligation. We derive our revenue principally from service fees paid by the client for the use of our platform in connection with our advertising technology platform which incentivizes users to leave reviews of our clients. Our sole performance obligation in the transaction is to connect clients with end-users to facilitate the completion of a successful review on the user’s social media accounts. Judgment is required in evaluating the presentation of revenue on a gross versus net basis based on whether we control the service provided to the end-user and are the principal in the transaction (gross), or we arrange for other parties to provide the service to the end-user and are the agent in the transaction (net). We have concluded that we are the agent in our current transactions as we arrange for users to provide the service to the clients and the users post reviews on social media accounts controlled by the users. The assessment of whether we are considered the principal or the agent in a transaction could impact the accounting for these transactions and change the timing and amount of revenue recognized. The percentage fee the Company charges is not variable. 8 Cost of Goods Sold The Company classifies its credit card transaction fees as cost of goods sold. Client Deposits Thumzup’s clients generally prepay to utilize the Company’s technology platform. All client deposits for services are recorded as a client deposit liability upon receipt. Upon a user leaving a qualified review for the client, as defined in Thumzup’s Mobile Terms and Conditions, the Company transfers the fee payable to the user to a user account balances liability account and realizes the fees payable to the Company as revenue. The Company holds all client deposits and user account balances in cash or cash equivalents, including money market accounts. 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 no tax positions as of March 31, 2023 and December 31, 2022 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The Company recognizes any interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. For the three months ending March 31, 2023 and 2022, the Company recognized no interest and penalties. Net Earnings (Loss) Per Common Share The Company computes earnings (loss) per share under ASC subtopic 260-10, Earnings Per Share. Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods, as applicable. Denotes a management contract or compensatory plan. The computation of basic and diluted income (loss) per share, for the three months ended March 31, 2023 and 2022 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period. 9 Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows: Schedule of Potentially Dilutive Securities Excluded From Computation of Basic and Diluted Net Loss Per Share March 31, March 31, 2023 2022 Common shares issuable upon conversion of convertible notes - 2,171,209 Common shares issuable upon conversion of preferred stock 1,924,680 - Total potentially dilutive shares 1,924,680 2,171,209 Recent Accounting Pronouncements In August 2020, the FASB issued ASU 2020-06, which simplifies the guidance on accounting for convertible debt instruments by removing the separation models for: (1) convertible debt with a cash conversion feature; and (2) convertible instruments with a beneficial conversion feature. As a result, the Company will not separately present in equity an embedded conversion feature in such debt. Instead, we will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. We expect the elimination of these models will reduce reported interest expense and increase reported net income for the Company’s convertible instruments falling under the scope of those models before the adoption of ASU 2020-06. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer available. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The adoption of this update did not have a material impact on the Company’s consolidated financial statements and related disclosures. There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows. 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 recognized its first revenues in December 2021. It relies on short-term debt and equity funding for its operations. At March 31, 2023 and December 31, 2022, the Company had a cash balance of $ 528,330 and $ 1,155,343 , respectively, and the Company used $ 607,725 and $ 222,969 to fund operating activities for the three months ending March 31, 2023 and 2022, respectively. The Company may need to raise additional funding and manage expenses in order to continue as a going concern. The Company is currently conducting an offering under Regulation A+, pursuant to an Offering Statement on Form 1-A/A filed on December 23, 2022 and qualified on January 9, 2023, through which the Company is offering up to 2 million shares of common stock at a purchase price of $ 4.50 per share. The Company currently has subscriptions for 74,903 shares for an aggregate subscription amount of $ 333,418.50 in escrow as fully described in the Company’s Form 1-A/A filed on December 23, 2022. The Company will not receive any funds and will not issue any shares of common stock until the transactions are released from escrow. 10 Note 4 – 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 the 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. On March 15, 2023, the Company issued 2,447 Series A Preferred Convertible Voting Shares (“Series A Preferred”) for a dividend per the terms of the Series A Preferred Certificate of Designation. As March 31, 2023 and December 31, 2022, the Company had 128,312 and 125,865 Series A preferred shares issued and outstanding, respectively. Common Stock The Company is authorized to issue 250,000,000 million shares of common stock, par value $ 0.001 per share. As March 31, 2023 and December 31, 2022, the Company had 7,126,336 and 7,108,336 shares issued and outstanding, respectively. During the three months ended March 31, 2023, the Company issued 18,000 shares of common stock valued at $ 132,000 for services rendered. Note 5 – Contingencies 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 6 – Related Party Transactions On November 18, 2022, the Company entered into a Media Relations Services Agreement (the “Media Relations Services Agreement”) with Elev8 New Media, LLC (“Elev8”), of which one of our directors, Robert Haag, is a member. Under the terms of the agreement, the Company will pay Elev8 $ 6,500 per month for six months and the Media Relations Services Agreement will automatically renew into consecutive monthly periods unless either party provides 30 days written notice of cancellation. This price is a discounted rate off Elev8’s normal monthly price of $ 9,500 per month. In addition to the monthly fee, the Company has paid Elev8 an aggregate of $ 20,000 for a social media marketing campaign and an aggregate of $ 15,000 for a marketing plan aimed at garnering more followers for the Company’s social media accounts. 11 On February 22, 2023, Daniel Lupinelli, a 10%+ shareholder of the Company, subscribed to purchase 223 shares of common stock at $ 4.50 per share for a subscription amount of $ 1,003.50 under the Company’s qualified offering under Regulation A+. The subscription amount is currently in escrow and will not be recorded until released. On February 28, 2023, Westside Strategic Partners, LLC, of which one of our Directors, Robert Haag, is the managing member and sole owner, subscribed to purchase 11,150 shares of common stock at $ 4.50 per share for a subscription amount of $ 50,175 under the Company’s qualified offering under Regulation A+. Westside Strategic Partners, LLC will receive 1,115 shares of common stock as bonus shares under the terms of the qualified offering under Regulation A+. The subscription is currently in escrow. On March 15, 2023, Westside Strategic Partners, LLC, of which one of our Directors, Robert Haag, is the managing member and sole owner, received a dividend of 521 shares of Series A Preferred Stock, per the terms of the Company’s Certificate of Designation. Note 7 – Subsequent Events The Company has evaluated subsequent events from the balance sheet date through the date which the financial statements were issued. The Company is currently conducting an offering under Regulation A+, pursuant to an Offering Statement on Form 1-A/A filed on December 23, 2022 and qualified on January 9, 2023, through which the Company is offering up to 2 million shares of common stock at a purchase price of $ 4.50 per share. The Company currently has subscriptions for 74,903 shares for an aggregate subscription amount of $ 333,418.50 in escrow as fully described in the Company’s Form 1-A/A filed on December 23, 2022. The Company will not receive any funds and will not issue any shares of common stock until the transactions are released from escrow. 12