Datacentrex, Inc. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Restatement of Previously Issued Financial Statements As discussed further in Note 2 of our financial statements in Part IV of this amended Annual Report on Form 10-K, we have restated our financial statements for the fiscal year ended December 31, 2022 and our unaudited condensed interim financial information as of and for the fiscal period ended March 31, 2023. Refer to the Explanatory Note preceding Part I, Item 1: Financial Statements and Supplementary Data - Note 2 of our financial statements, for additional details regarding the aforementioned restatement adjustments. For information regarding our controls and procedures, see Part II, Item 9A – Controls and Procedures, of this amended Annual Report on Form 10-K. FORWARD LOOKING STATEMENTS 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 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. 22 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 2023 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. Thumzup® Products and Services The Company specializes in the domain of social media marketing. Thumzup’s flagship product, the Thumzup® App, available on both iPhone and Android operating systems, serves as a symbiotic bridge between brands and their enthusiasts. For advertisers, Thumzup® incentivizes real people, referred to as content creators (“Creators”), to generate 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 various sectors including ride sharing, hospitality, finance and other industries. The Thumzup® suite of tools are designed to facilitate and expedite this democratization trend for consumers and advertisers within the online advertising space. Leveraging advanced technology, the Company has built a community around its Thumzup® App that resonates with the ethos of the influencer and gig economy. This technology and community are designed to generate scalable authentic product posts, endorsements, and recommendations for advertisers on social media. It is designed to connect advertisers with individuals who are willing to tell their friends and family about the advertisers’ products both on 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. 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. 23 OVERVIEW We were formed in October 2020 and have not yet established profitable operations. For the year ended December 31, 2023, we incurred a net loss of $3,384,380, primarily due to software research and development expenses of $513,088, marketing expenses of $855,270, professional and consulting expenses of $727,554, and general and administrative expenses of $395,624. For the year ended December 31, 2022, we incurred a net loss of $1,504,681, primarily due to software research and development expenses of $567,408, marketing expenses of $224,088, and general and administrative expenses of $418,940. 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, 2023 and 2022, the Company had a cash balance of $259,212 and $1,155,343, respectively. The Company used $2,326,523 and $1,083,960 in cash for operating activities during the years ending December 31, 2023 and 2022, 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, 2023 and 2022 For the Fiscal Year ended 31-Dec-23 31-Dec-22 $ Change %Change Revenues $ 2,048 $ 2,421 $ (373 ) (15.41 )% Operating Expenses 2,521,078 1,213,035 1,308,043 107.83 % Loss from Operations (2,519,030 ) (1,210,614 ) (1,308,416 ) 108.08 % Other Income (Expense) (805,150 ) (294,067 ) (511,083 ) 173.80 % Net Income (Loss) Applicable to Common Stockholders $ (3,324,180 ) $ (1,504,681 ) $ (1,819,499 ) 120.92 % Revenues The Company generated revenues of $2,048 and $2,421 for the years ended December 31, 2023 and 2022, respectively, a decrease of $373. 24 Operating expenses For the years ended December 31, 2023 and 2022, the Company incurred operating expenses of $2,521,078 and $1,213,035, respectively, an increase of $1,308,043. The increase in operating expenses was caused by costs of revenues decreasing by $295 from $439 during the year ended December 31, 2022 to $144 during the year ended December 31, 2023, marketing expenses increasing $631,182 from $224,088 during the year ended December 31, 2022 to $855,270 during the year ended December 31, 2023, general and administrative expenses decreasing $23,316 from $418,940 during the year ended December 31, 2022 to $395,624 during the year ended December 31, 2023, depreciation and amortization expenses increasing $27,238 from $2,160 during the year ended December 31, 2022 to $29,398 during the year ended December 31, 2023, an increase in professional and consulting of $727,554 from $0 during the year ended December 31, 2022 to $727,554 during the year ended December 31, 2023, offset in part by a decrease in software research development expenses of $54,320 from $567,408 during the year ended December 31, 2022 to $513,088 during the year ended December 31, 2023. Net Loss from operations The Company realized a net loss from operations of $2,519,030 and $1,210,614 for the years ended December 31, 2023 and 2022, respectively, an increase of $1,308,416 for the reasons stated above. Other expenses For the years ended December 31, 2023 and 2022, the Company had $73,498 and $25,865 in interest expense primarily related to liquidated damages and debt notes, respectively. For the years ended December 31, 2023 and 2022, the Company had a liquidated damages expense of $731,652 and $268,202, respectively. Net Loss applicable to common shareholders The Company realized a net loss applicable to shareholders of $3,324,180, and $1,504,681 for the years ended December 31, 2023 and 2022, respectively, an increase of $1,819,499 for the reasons stated above. Liquidity and capital resources As of December 31, 2023 and 2022, the Company had cash in the amount of $259,212 and $1,155,343, respectively. As of December 31, 2023 and 2022, the Company had stockholders’ equity of $349,327 and $786,524, respectively. The Company’s accumulated deficit was $5,691,803 and $2,367,623 as of December 31, 2023 and 2022, respectively. The Company used net cash in operations of $2,326,523 and $1,083,960 for the years ending December 31, 2023 and 2022, respectively. Net cash used in investing activities for years ending December 31, 2023 and 2022 was $176,499 and $0, respectively, used to purchase computer equipment. Net cash provided by financing activities was $1,606,891 net of offering costs of $17,601 for the year ended December 31, 2023 comprised of $33,000 from subscription receivable and $1,591,492 from the sale of common stock .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. 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).