Datacentrex, Inc. 10-K/A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Sections of this Form 10-K, including the Management’s Discussion and Analysis or Plan of Operation, contain “forward-looking statements”. These forward-looking statements are subject to risks and uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. You should not unduly rely on these statements. Forward-looking statements involve assumptions and describe our plans, strategies, and expectations. You can generally identify a forward-looking statement by words such as “may,” “will,” “should,” “would,” “could,” “plans,” “goal,” “potential,” “expect,” “anticipate,” “estimate,” “believe,” “intent,” “project,” and similar words and variations thereof. INTRODUCTION The Company was incorporated on October 27, 2020, under the laws of the State of Nevada. Its headquarters are located in Los Angeles, CA. The Company has never been the subject of any bankruptcy or receivership. The Company has never engaged in any material reclassification, merger, or consolidation of the Company. The Company has not acquired or disposed of any material amount of assets except in the normal course of business. In February 2022, the Company was admitted to the Over-The-Counter Venture Market quotation system (OTCQB) under the symbol TZUP. Thumzup® Products and Services The Company operates in a single business segment which is social media marketing. The Thumzup® App works on both iPhone and Android mobile operating systems and connects brands and people who use and love these brands. For the Advertiser, Thumzup® incentivizes real people to become content Creators and post authentic valuable posts on social media about the Advertiser and its products. The Company seeks to capitalize on industry-wide gig economy and business democratization trends. Immense value and opportunity have been created through the democratization of ride sharing, hospitality, finance and other industries. The Thumzup® tools are designed to facilitate this democratization trend for the consumer and the Advertiser within the online advertising space. The Company has built the technology to support an influencer and “gig” economy community around its Thumzup® App. This technology and community are designed to generate scalable authentic product posts and recommendations for Advertisers on social media. It is designed to connect Advertisers with individuals who are willing to tell their friends about the Advertisers’ products online and offline. Emerging Growth Company We are an emerging growth company under the JOBS Act. We shall continue to be deemed an emerging growth company until the earliest of: (a) the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1.07 billion (as such amount is indexed for inflation every five years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more; (b) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective IPO registration statement; (c) the date on which such issuer has, during the previous three-year period, issued more than $1.0 billion in nonconvertible debt; or (d) the date on which such issuer is deemed to be a ‘large accelerated filer’, as defined in section 240.12b-2 of title 17, Code of Federal Regulations, or any successor thereto.’ The Section 107 of the JOBS Act provides that we may elect to utilize the extended transition period for complying with new or revised accounting standards and such election is irrevocable if made. As such, we have made the election to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. 30 We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. OVERVIEW We were formed in October 2020 and have not yet established profitable operations. For the year ended December 31, 2022, we incurred a net loss of $1,221,765, primarily due to software research and development expenses of $567,408, marketing expenses of $224,088, and general and administrative expenses of $418,940. For the year ended December 31, 2021, we incurred $857,255 in net losses primarily due to $716,524 in software research and development expenses, $21,257 in marketing expenses, $102,698 in general and administrative expenses, $17,486 in interest expense and $1,736 in depreciation expense. 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 software and services company that relies primarily on equity funding for its operations. The Company generated its first revenues during December 2021. As of December 31, 2022 and 2021, the Company had a cash balance of $1,155,343 and $424,445, respectively. The Company used $1,083,960 and $813,211 in cash for operating activities during years ending December 31, 2022 and 2021, respectively. The Company expects that it will need to raise additional funding and manage expenses in order to continue as a going concern. No assurances can be given that it will be able to raise funds on acceptable terms or at all. RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2022 and 2021 For the Fiscal Year ended 31-Dec-22 31-Dec-21 $ Change %Change Revenues $ 2,421 $ 2,446 $ (25 ) (0.99 )% Operating Expenses 1,213,035 842,215 370,820 44.03 % Loss from Operations (1,210,614 ) (839,769 ) (370,845 ) 44.15 % Other Income (Expense) (11,151 ) (17,486 ) 6,335 (36.23 )% Net Income (Loss) Applicable to Common Stockholders $ (1,221,765 ) $ (857,255 ) $ (364,510 ) 42.52 % 31 Revenues The Company generated revenues of $2,421 and $2,446 for the years ended December 31, 2022 and 2021, respectively, a decrease of $25. The Company updated its revenue recognition policy for the year ended December 31, 2022, resulting in the Company reporting net revenue, which caused revenue to remain materially the same despite a significant increase in advertiser activity during fiscal year 2022. Operating expenses For the years ended December 31, 2022 and 2021, the Company incurred operating expenses of $1,213,035 and $842,215, respectively, an increase of $370,820. The increase in operating expenses was caused by costs of revenues increasing by $439 from $0 during the year ended December 31, 2021 to $439 during the year ended December 31, 2022, marketing expenses increasing $202,831 from $21,257 during the year ended December 31, 2021 to $224,088 during the year ended December 31, 2022, general and administrative expenses increasing $316,242 from $102,698 during the year ended December 31, 2021 to $418,940 during the year ended December 31, 2022, depreciation expenses increasing $424 from $1,736 during the year ended December 31, 2021 to $2,160 during the year ended December 31, 2022, offset by a decrease in software research development expenses of $149,116 from $716,524 during the year ended December 31, 2021 to $567,408 during the year ended December 31, 2022. The decline in software research and development expenses is attributable to the Company focusing on gaining adoption, while the increases in the remaining operating expenses was caused by the Company expanding operations in fiscal year 2022 to accelerate the platform’s growth. Net Loss from operations The Company realized a net loss from operations of $1,210,614 and $839,769 for the years ended December 31, 2022 and 2021, respectively, an increase of $370,845 for the reasons stated above. Other expenses For the years ended December 31, 2022 and 2021, the Company had $11,151 and $17,486 in interest expense, respectively, related to debt notes. Net Loss applicable to common shareholders The Company realized a net loss applicable to shareholders of $1,221,765 and $857,255 for the years ended December 31, 2022 and 2021, respectively, an increase of $364,510 for the reasons stated above. Liquidity and capital resources As of December 31, 2022 and 2021, the Company had cash in the amount of $1,155,343 and $424,445, respectively. As of December 31, 2022 and 2021, the Company had stockholders’ equity of $1,069,440 and $179,845, respectively. The Company’s accumulated deficit was $2,084,707 and $862,942 as of December 31, 2022 and 2021, respectively. The Company used net cash in operations of $1,083,960 and $813,211 for the years ending December 31, 2022 and 2021, respectively. Net cash used in investing activities for years ending December 31, 2022 and 2021 was $0 and $6,449, respectively, used to purchase computer equipment. Net cash provided by financing activities was $1,814,858 for the year ended December 31, 2022, comprised of proceeds from the sale of common and preferred stock of approximately $737,000 and $1,260,000, respectively, offset by costs incurred for equity sales of $149,137 and subscriptions receivable of $33,000. Net cash provided by financing activities was $1,042,788 net of offering costs of $106,713 for the year ended December 31, 2021. 32 Inflation The Company’s results of operations have not been affected by inflation and management cannot predict the impact, if any, inflation might have on its operations in the future. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).