Datacentrex, Inc. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 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. 36 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. 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 year ended December 31, 2024 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 operates in a single business segment which is social media marketing and advertising. 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 ordinary people to become paid content Creators and post authentic valuable posts on social media about the Advertiser and its products. The Company seeks to capitalize on nationwide-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 marketing and 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.’ 37 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. OVERVIEW We were formed in October 2020 and have not yet established profitable operations. For the year ended December 31, 2024, we incurred a net loss available to shareholders of $3,999,905 primarily due to software research and development expenses of $244,909, marketing expenses of $1,392,661, and general and administrative expenses of $2,210,775. 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. RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2024 and 2023 For the Fiscal Year ended 31-Dec-24 31-Dec-23 $ Change %Change Revenues $ 741 $ 2,048 $ (1,307 ) (63.82 )% Operating Expenses 3,946,663 2,521,078 1,425,585 56.55 % Loss from Operations (3,999,905 ) (2,519,030 ) (1,426,892 ) 56.64 % Other Income (Expense) (53,983 ) (805,150 ) 751,167 (93.30 )% Net Income (Loss) Applicable to Common Stockholders $ (3,999,905 ) $ (3,324,180 ) $ (675,725 ) 20.33 % Revenues The Company generated revenues of $71 and $2,048 for the years ended December 31, 2024 and 2023, respectively, a decrease of $1,307, as the Company focused on expanding its footprint of listed businesses in fiscal year 2024. Operating expenses For the years ended December 31, 2024 and 2023, the Company incurred operating expenses of $3,946,663 and $2,521,078, respectively, an increase of $1,425,585. The increase in operating expenses was caused by costs of revenues decreasing by $144 from $144 during the year ended December 31, 2023 to $0 during the year ended December 31, 2024, marketing expenses increasing $540,692 from $855,270 during the year ended December 31, 2023 to $1,395,962 during the year ended December 31, 2024, general and administrative expenses increasing $257,987 from $395,624 during the year ended December 31, 2023 to $653,611 during the year ended December 31, 2024, depreciation and amortization expenses increasing $68,919 from $29,398 during the year ended December 31, 2023 to $98,317 during the year ended December 31, 2024, an increase in professional and consulting of $826,310 from $727,554 during the year ended December 31, 2023 to $1,553,864 during the year ended December 31, 2024, offset in part by a decrease in software research development expenses of $268,179 from $513,088 during the year ended December 31, 2023 to $244,909 during the year ended December 31, 2024. 38 Net Loss from operations The Company realized a net loss from operations of $3,945,922 and $2,519,030 for the years ended December 31, 2024 and 2023, respectively, an increase of $1,426,892 for the reasons stated above. Other expenses For the years ended December 31, 2024 and 2023, the Company had $70,444 and $73,498 in interest expense primarily related to preferred stock dividends and liquidated damages, respectively. For the years ended December 31, 2024 and 2023, the Company had a liquidated damages expense of $0 and $731,652, respectively. For the years ended December 31, 2024 and 2023, the Company had a liquidated damages expense of $0 and $731,652, respectively. For the years ended December 31, 2024 and 2023, the Company had interest income of $16,641 and $0, respectively. Net Loss applicable to common shareholders The Company realized a net loss applicable to shareholders of $3,999,905 , and $3,324,180 for the years ended December 31, 2024 and 2023, respectively, an increase of $675,725 for the reasons stated above. Liquidity and capital resources As of December 31, 2024 and 2023, the Company had cash in the amount of $4,680,840 and $259,212, respectively. As of December 31, 2024 and 2023, the Company had stockholders’ equity of $4,767,261 and $349,327, respectively. The Company’s accumulated deficit was $9,691,708 and $5,691,803 as of December 31, 2024 and 2023, respectively. The Company used net cash in operations of $3,485,899 and $2,326,523 for the years ending December 31, 2024 and 2023, respectively. Net cash used in investing activities for years ending December 31, 2024 and 2023 was $211,950 and $176,499, respectively, primarily utilized for capitalized software development, along with the purchase of computer equipment. Net cash provided by financing activities was $8,119,477 for the year ended December 31, 2024, comprised of $7,339,477, $210,000, and $805,000, from the sale of common stock (net offering costs), issuance of related-party notes payable, and the sale of preferred stock, respectively, offset by $210,000 in repayment of related-party notes payable and $25,000 in offering costs for sales of preferred stock. 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. 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).