Datacentrex, Inc. 10-Q

Item 1. Financial Statements. Thumzup Media Corporation June 30, 2022 Index to the Condensed Financial Statements Condensed Balance Sheets as of June 30, 2022 (Unaudited) and December 31, 2021 3 Condensed Statements of Operations for the Three and Six Months ended June 30, 2022 and 2021 (unaudited) 4 Condensed Statements of Shareholder’s Equity for the Three and Six Months Ended June 30, 2022 and 2021 (unaudited) 5 Condensed Statements of Cash Flows for the Six Months ended June 30, 2022 and 2021 (unaudited) 6 Notes to the Condensed Financial Statements (unaudited) 7 2 Thumzup Media Corporation Balance Sheets June 30, December 31, 2022 2021 (unaudited) ASSETS Current assets Cash and cash equivalents $ 653,856 $ 424,445 Total current assets 653,856 424,445 Property and equipment, net 3,633 4,713 TOTAL ASSETS $ 657,489 $ 429,158 LIABILITIES & STOCKHOLDERS' EQUITY Accounts payable and accrued liabilities $ 39,473 $ 34,313 Senior Secured Convertible Promissory Notes 215,300 215,000 Total current liabilities 254,773 249,313 Total liabilities 254,773 249,313 Stockholders' equity Common stock, $ 0.001 par value, 100,000,000 shares authorized; 6,315,670 and 6,037,836 shares issued and outstanding, respectively 6,316 6,038 Additional paid-in capital 1,758,852 1,036,749 Accumulated deficit ( 1,362,452 ) ( 862,942 ) Total stockholders' equity 402,716 179,845 TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 657,489 $ 429,158 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) For the Three Months Ended June 30, For the Six Months Ended June 30, 2022 2021 2022 2021 Total revenue $ 1,398 $ — $ 4,892 $ — Operating expenses: Sales and marketing 50,498 1,150 65,359 2,121 Research and development 139,952 116,742 285,998 206,330 General and administrative 81,103 11,349 143,079 17,623 Depreciation expense 540 360 1,080 476 Total operating expenses 272,093 129,601 495,516 226,550 (Loss) income from operations ( 270,695 ) ( 129,601 ) ( 490,624 ) ( 226,550 ) Other income (expenses) Interest (expense) ( 4,443 ) ( 2,914 ) ( 8,886 ) ( 7,214 ) Total other income (expenses) ( 4,443 ) ( 2,914 ) ( 8,886 ) ( 7,214 ) Net income (loss) before income taxes ( 275,138 ) ( 132,515 ) ( 499,510 ) ( 233,764 ) Provision for income taxes — — — — Net (loss) $ ( 275,138 ) $ ( 132,515 ) $ ( 499,510 ) $ ( 233,764 ) Earnings per common share - Basic and diluted $ ( 0.05 ) $ ( 0.03 ) $ ( 0.08 ) $ ( 0.04 ) Weighted average common shares outstanding -Basic and diluted 6,106,675 5,064,558 6,093,703 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 Statements of Stockholders' Equity For the Three Months Ending June 30, 2022 and 2021 Additional Total Common Stock Paid-in Accumulated Stockholders’ Equity Shares Amount Capital Deficit Balance at March 31, 2022 6,120,169 $ 6,121 $ 1,160,166 $ ( 1,087,314 ) $ 78,973 Common stock issued for cash 193,501 193 580,308 — 580,501 Common stock issued for services 2,000 2 18,378 — 18,380 Net Loss - - - ( 275,138 ) ( 275,138 ) Balance at June 30, 2022 6,315,670 $ 6,316 $ 1,758,852 $ ( 1,362,452 ) $ 402,716 Balance at March 31, 2021 5,493,500 $ 5,494 $ 458,006 $ ( 106,935 ) $ 356,564 Common stock issued for cash 261,000 261 260,739 — 261,000 Net Loss - - - ( 132,515 ) ( 132,515 ) Balance at June 30, 2021 5,754,500 $ 5,755 $ 718,745 $ ( 239,451 ) $ 485,049 For the Six Months Ending June 30, 2022 and 2021 Balance at December 31, 2021 6,037,836 $ 6,038 $ 1,036,749 $ ( 862,942 ) $ 179,845 Common stock issued for cash 275,834 276 703,725 — 704,001 Common stock issued for services 2,000 2 18,378 — 18,380 Net Loss - - - ( 499,510 ) ( 499,510 ) Balance at June 30, 2022 6,315,670 $ 6,316 $ 1,758,852 $ ( 1,362,452 ) $ 402,716 Balance at December 31, 2020 5,000,000 $ 5,000 $ ( 5,000 ) $ ( 5,687 ) $ ( 5,687 ) Common stock issued for cash 724,500 725 723,775 — 724,500 Common stock issued for advisory 30,000 30 ( 30 ) — — Net Loss - - - ( 233,764 ) ( 233,764 ) Balance at June 30, 2021 5,754,500 $ 5,755 $ 718,745 $ ( 239,451 ) $ 485,049 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 For The Six Months Ending June 30, (unaudited) 2022 2021 Cash flows from operating activities Net loss $ ( 499,510 ) $ ( 233,764 ) Depreciation expense 1,080 476 Stock issued for services 18,380 — Adjustments to reconcile net loss to net cash used in operating activities: Prepaid expenses — ( 37,416 ) Accounts payable and accrued expenses 5,161 7,214 Net cash used in operating activities ( 474,889 ) ( 263,490 ) 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 sale of common stock 704,000 724,500 Proceeds from loan – related party 300 — Net cash provided by financing activities 704,300 724,500 Net (decrease) increase in cash 229,411 452,463 Cash at the beginning of the period 424,445 201,317 Cash at the end of the period $ 653,856 $ 653,780 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 the Condensed Financial Statements (Unaudited) June 30, 2022 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 software company dedicated to building an influencer community around its 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 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 has recorded nominal revenues during the first six months of 2022 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. 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. 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 June 30, 2022 and December 31, 2021, the Company’s cash and cash equivalents were $653,856 and $424,445, respectively. 7 Prepaid Expenses The Company has no prepaid expenses at June 30, 2022 and December 31, 2021. 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 six months ended June 30, 2022 and 2021 was $1,080 and $476, respectively. Revenue Recognition The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers. The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as we fulfill our obligations under each of our agreements: · identify the contract with a customer; · identify the performance obligations in the contract; · determine the transaction price; · allocate the transaction price to performance obligations in the contract; and · recognize revenue as the performance obligation is satisfied. 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 six months ended June 30, 2022 and 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 an accumulated deficit of approximately $1,362,000 as of June 30, 2022, and at the current corporate tax rate of 21% results in an estimated net operating loss (“NOL”) of $286,020. The Company has no income tax effect due to the recognition of a full valuation allowance on the expected tax benefits of future loss carry forwards based on uncertainty surrounding the realization of such tax assets. 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 beginning revenue, software and services company that has relied on short-term debt and equity funding for its operations. At June 30, 2022 and December 31, 2021, the Company had a cash balance of $ 653,856 and $ 424,445 , respectively, and the Company used $474,889 to fund operating activities for the six months ended June 30, 2022. In June 2022 the Company sold 193,501 shares of its common stock for $3.00 per share and received proceeds of $580,500. 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, 2022 and accrue interest at eight (8%) per year. Accrued interest may be 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 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 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 is $0.11 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, par value $0.001 per share. As June 30, 2022 and December 31, 2021, the Company had 6,315,670 and 6,037,836 shares issued and outstanding, respectively. The initial shares were issued as follows: 3,500,000 shares to Robert Steele (Founder and CEO) and 1,500,000 shares to Danny Lupinelli (Founder). The Founders’ common stock is pledged as collateral on the Senior Secured Convertible Promissory Notes (See Note 4). During the six months ended June 30, 2022, the Company sold 82,333 shares of common stock at $1.50 per share and 193,501 shares of common stock at $3.00 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. The Company issued 2,000 shares of common stock to an outside consultant for services and recognized an expense of $18,380. During the three months ended March 31, 2021, the Company issued 30,000 shares of common stock to its legal counsel at par value per share of $0.001, pursuant to an engagement letter entered into in December 2020, and sold 463,500 shares of common stock at $1.00 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. Note 6 – Contingencies COVID-19 The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company’s customers, service providers and suppliers, all of which are uncertain and cannot be predicted. As of the date of issuance of Company’s financial statements, the extent to which the COVID-19 pandemic may in the future materially impact the Company’s financial condition, liquidity or results of operations is uncertain. 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. We have no basis to evaluate the possible risks of this conflict. 10