Datacentrex, Inc. 10-Q

Item 1. Financial Statements. Thumzup Media Corporation September 30, 2021 Index to the Condensed Financial Statements Condensed Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020 3 Condensed Statements of Operations for the Three and Nine Months ended September 30, 2021 (unaudited) 4 Condensed Statements of Shareholder’s Equity for the Three and Nine Months Ended September 30, 2021 (unaudited) 5 Condensed Statement of Cash Flows for the Nine Months ended September 30, 2021 (unaudited) 6 Notes to the Condensed Financial Statements (unaudited) 7 2 Thumzup Media Corporation Balance Sheets (Unaudited) September 30, December 31, 2021 2020 (unaudited) ASSETS Current assets Cash and cash equivalents $ 243,914 $ 101,317 Restricted cash 83,500 100,000 Prepaid expenses and other current assets 104,543 10,000 Total current assets 431,957 211,317 Property and equipment, net 5,253 — Intangible asset, trademarks 2,098 — Other assets 18,093 — TOTAL ASSETS $ 457,401 $ 211,317 LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) Accrued liabilities $ 53,346 $ 2,004 Senior Secured Convertible Promissory Notes 215,000 215,000 Total current liabilities 268,346 217,004 Total liabilities 268,346 217,004 Stockholders' equity (deficit) Common stock, $ 0.001 par value, 100,000,000 shares authorized; 5,754,500 and 5,000,000 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively 5,755 5,000 Additional paid-in capital 718,746 ( 5,000 ) Accumulated deficit ( 535,445 ) ( 5,687 ) Total stockholders' equity (deficit) 189,055 ( 5,687 ) TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) $ 457,401 $ 211,317 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) The Three and Nine Months Ending September 30, 2021 Three Months Nine Months Total revenue $ — $ — Operating expenses: Sales and marketing 1,882 4,003 Research and development 268,115 474,445 General and administrative 19,448 37,071 Depreciation expense 720 1,196 Total operating expenses 290,165 516,715 (Loss) income from operations ( 290,165 ) ( 516,715 ) Other income (expenses) Interest (expense) ( 5,829 ) ( 13,043 ) Total other income (expenses) ( 5,829 ) ( 13,043 ) Net income (loss) before income taxes ( 295,994 ) ( 529,758 ) Provision for income taxes — — Net (loss) $ ( 295,994 ) $ ( 529,758 ) Earnings per common share - Basic and diluted $ ( 0.06 ) $ ( 0.09 ) Weighted average common shares outstanding -Basic and diluted 5,367,274 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 Shareholders’ Equity (Deficit) (Unaudited) Additional Total Common Stock Paid-in Accumulated Retained Earnings/ Shares Amount Capital Deficit ( Deficit) Balance at October 27, 2020 (date of inception) — $ — $ — $ — $ — — Issuance of Founders' common stock 5,000,000 5,000 ( 5,000 ) — — Net Loss ( 5,687 ) ( 5,687 ) Balance at December 31, 2020 5,000,000 $ 5,000 $ ( 5,000 ) $ ( 5,687 ) $ ( 5,687 ) Common stock issued for advisory 30,000 30 ( 30 ) — Common Stock issued for investment 463,500 464 463,036 463,500 Net Loss ( 101,248 ) ( 102,627 ) Balance at March 31, 2021 5,493,500 $ 5,494 $ 458,006 $ ( 106,935 ) $ 355,186 Common stock issued for investment 261,000 261 260,739 261,000 Net Loss ( 132,515 ) — 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 ) $ 189,055 The accompanying unaudited notes are an integral part of these financial statements and should be read in conjunction with these unaudited financial statements. 5 Thumzup Media Corporation Statement of Cash Flows (Unaudited) For The Nine Months Ending September 30, 2021 September 30, 2021 Cash flows from operating activities Net loss $ ( 529,758 ) Depreciation expense 1,196 Adjustments to reconcile net loss to net cash used in operating activities: Prepaid expenses ( 94,543 ) Other assets 7,214 Accounts payable and accrued expenses 51,342 Net cash used in operating activities ( 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 issuance of Senior Secured Convertible Promissory Notes 724,500 Net cash provided by financing activities 724,500 Net increases in cash and restricted cash 142,597 Cash and restricted cash at the beginning of the year 101,317 Cash and restricted cash at the end of the year $ 243,914 Supplemental disclosures of cash flow information: Cash paid for interest $ — Cash paid for income taxes $ — 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 Financial Statements (Unaudited) September 30, 2021 Note 1 - Business Organization and Nature of Operations Thumzup Media Corporation (“Thumzup” or “Company”) was incorporated October 27, 2020, under the laws of the State of Nevada, and its headquarters is located in Carson City, Nevada. The Company is a pre-revenue software company dedicated to building an influencer community around its mobile app (“App”). Once fully developed, the App will generate scalable word-of-mouth product posts and recommendations for advertiser on social media and is designed to connect advertisers with individuals who are willing to promote their products online. The Thumzup App will enable 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 accounts. For the advertiser, the Thumzup system enables brands to get real people to promote their products to their friends, rather than displaying banner ads that people are tuning out. The Company is an “emerging growth company” as that term is used in the Jumpstart our Business Startups Act of 2012, and as such, have 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 furnished 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. The Company’s restricted cash consists of cash the Company is contractually obligated to maintain in accordance with the terms of its November 19, 2020, Note Purchase and Security Agreement (See note 4). The Company initially deposited $100,000 of the financing proceeds into an escrow with an attorney selected by the note Holders (See Note 4) to be used solely for costs associated with registering the Company’s shares issuable upon conversion of the notes. After legal and escrow costs, the balance may be used by the Company for general corporate purposes. As of September 30, 2021, and December 31, 2020, the Company’s cash and cash equivalents consisted of $243,914 and $101,317, respectively, and $83,500 and $100,000, respectively, in restricted cash. 7 Prepaid Expenses The Company’s prepaid expenses consists primarily of fees paid to legal counsel and accountants to assist in the registration of the Company’s common stock with the United States Securities Commission (“SEC”). 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, 2021 was $1,196. Intangible assets Intangible assets represent costs incurred in the pursuit of the acquisition of Trademarks. Upon successful completion of the registration of our Trademarks, the Company will amortize using a straight-line method consistent with the expected future cash flows related to the intangible asset. Amortized intangible assets are reviewed for impairment whenever events or changes in circumstances exist that indicate the carrying amount of an asset may not be recoverable. When indicators of impairment exist, an estimate of undiscounted net cash flows is used in measuring whether the carrying amount of the asset or related asset group is recoverable. Measurement of the amount of impairment, if any, is based upon the difference between the asset or asset group’s carrying value and fair value. Fair value is determined through various valuation techniques, including market and income approaches as considered necessary. No impairment has been recorded as of September 30, 2021 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, 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. 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 September 30, 2021 and December 31, 2020 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 nine months ending September 30, 2021, the Company recognized no interest and penalties. 8 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 pre-revenue, software and services company that relies on short-term debt and equity funding for its operations. At September 30, 2021 and December 31, 2020, the Company had a cash balance of $ 243,914 and $ 101,317 , and the Company used $573,356 to fund operating activities for the nine months ended September 30, 2021. The Company may need to raise additional funding and manage expenses in order to continue as a going concern. 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, 2021 and accrue interest at eight (8%) per annum. Accrued interest maybe 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’s founding shareholders stock (“Founders’ Stock”) is pledged as additional collateral to secure the terms and covenants of the Agreement and the other Financing Agreements. The Founders’ Stock is held in escrow with legal counsel selected by the Senior Note holders (“Holders”). The founding shareholders (“Founders”) have agreed to take no salaries, consulting fees, loans or payment of any kind from the Company until after full satisfaction of each of the following conditions: (1) registration of the shares underlying the Senior Notes with the SEC” on Form S-1; (2) obtaining a trading symbol from FINRA or its successor; (3) listing of the Company’s shares of common stock (“Common Stock”) for trading on OTCQB or a national securities exchange such as Nasdaq; (4) completing an equity raise of at least $3 million at a pre-money valuation for the Company of at least $10 million; and (5) timely having made all periodic and other filings required of a “reporting” company with the SEC for a period of not less than 12 months. 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, at $0.001 par value per share 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 shall be equal to $0.11 cents 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. Note 5 – Shareholders’ Equity The Company is authorized to issue 100 million shares of common stock $0.001 per share. As September 30, 2021 and December 31, 2020, the Company had 5,754,500 and 5,000,000 shares issued and outstanding. The shares were issued as follows: 3,500,000 shares to Robert Steele (Founder and CEO) and 1,500,000 shares to Daniel Lupinelli (Founder). The Founders’ common stock is pledged as collateral on the Senior Secured Convertible Promissory Notes (See Note 4). The Founders have agreed to take no salaries, consulting fees, loans or payment of any kind from the Company until after full satisfaction of each of the following conditions: (i) registration of the shares underlying the senior secured convertible promissory notes with the United States Securities Commission (“SEC”) on Form S-1; (ii) obtaining a trading symbol from FINRA or its successor,; (iii) listing of the Company’s shares of common stock for trading on OTCQB or a national securities exchange such as Nasdaq; (iv) completing an equity raise of at least $3 million at a pre-money valuation for the Company of at least $10 million; and (v) timely having made all periodic and other filings required of a “reporting” company with the SEC for a period of not less than 12 months. The Company issued 30,000 shares of common stock to its legal counsel in January 2021, 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 (par value $0.001 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 the nine months ended September 30, 2021. Note 6 – Contingencies On March 11, 2020, the World Health Organization declared the outbreak of a respiratory disease caused by a new coronavirus a pandemic. First identified in late 2019 and now known as COVID-19, the outbreak has impacted hundreds of thousands of individuals worldwide. In response, many countries have implemented measures to combat the outbreak that have impacted global business operations. As of the date of issuance of the financial statements, the Company’s operations have not been significantly impacted, but the Company continues to monitor the situation. No impairments were recorded as of the balance sheet date; however, due to significant uncertainty surrounding the situation, management's judgment regarding this could change in the future. In addition, while the Company’s results of operations, cash flows, and financial condition could be negatively impacted, the extent of the impact cannot be reasonably estimated at this time. Note 7 – Subsequent Events The Company has evaluated subsequent events from the balance sheet date through the date which the financial statements were available to be issued and determined there are no other events to disclose. 10