Datacentrex, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This quarterly report including this Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words “may”, “could”, “would”, “should”, “believe”, “expect”, “anticipate”, “plan”, “estimate”, “target”, “project”, “intend”, “foresee” and similar expressions. These statements include, among others, statements regarding our expected business outlook, anticipated financial and operating results, our business strategy and means to implement the strategy, our objectives, the amount and timing of capital expenditures, the likelihood of our success in expanding our business, financing plans, budgets, working capital needs and sources of liquidity. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on our management’s beliefs and assumptions, which in turn are based on currently available information. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for our products, the expansion of product offerings geographically or through new marketing applications, the timing and cost of planned capital expenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Forward-looking statements also involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. In addition, even if our actual results are consistent with the forward-looking statements contained in this quarterly report, those results may not be indicative of results or developments in subsequent periods. Many of these factors are beyond our ability to control or predict. Such factors include, but are not limited to, the following: · risks related to the impact of the COVID-19 global pandemic, such as the scope and duration of the outbreak, government actions and restrictive measures implemented in response, material delays and cancellations of projects, and other impacts to the business; · our ability to raise capital when needed and on acceptable terms and conditions; · our ability to manage credit and debt structures from debt holders; · our ability to generate revenues and manage the growth of our business; · competitive pressures; · general economic conditions; · our ability to attract and retain management, and to integrate and maintain technical information and management information systems. · compliance with laws and regulations, including those relating to corporate governance matters and tax matters, as well as any future changes to such laws and regulations. 11 Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the Securities and Exchange Commission (“SEC”), we are under no obligation to publicly update or revise any forward-looking statements, whether as a result of any new information, future events or otherwise. Investors, potential investors and other readers are urged to consider the above-mentioned factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results or performance. INTRODUCTION Thumzup Media Corporation (“Thumzup” or “Company”, “we,”, “us,” or “our”) was incorporated October 27, 2019, under the laws of the State of Nevada, and its headquarters are located in Carson City, Nevada. The Company is a software company, has recently begun to generate revenue and is 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 Thumzup App was launched in November 2021 in a limited capacity. To date our clients have paid more than 75 creators between $5.00 and $10.00 each to post about our initial advertisers. More than 800 posts have been made by our creators. As of July 31, 2022, the Company has sufficient funds to operate for the next twelve months. The Company anticipates raising additional capital to expand sales to new advertisers, expand acquiring new creators and to improve and further develop the technology. 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. OVERVIEW We were formed in October 2020 and have not yet established profitable operations and have generated minimal revenue. For the three and six months ended June 30, 2022 and 2021, we incurred $499,510 and $233,763 in net losses due primarily to software research and development expenses in both periods. 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. 12 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. The Company may need to raise additional funding and manage expenses in order to continue as a going concern. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2022 AND 2021 The following table set forth certain selected unaudited statement of operations data for the three months ended June 30, 2022 and 2021. 2022 2021 Revenues $ 1,398 $ — Operating expenses 272,093 129,601 Loss from operations (270,695 ) (129,601 ) Net loss from continuing operations (275,138 ) (132,515 ) Net loss per common share $ (0.05 ) $ (0.03 ) Revenues The Company recognized $1,398 and $0 of revenue during the three months ended June 30, 2022 and 2021, respectively due to the release of its App during the fourth quarter of 2021, thus, no revenues were recognized in the comparable period of 2021. Operating expenses For the three months ended June 30, 2022, the Company recognized a total of $272,093 in operating expenses. The operating expenses were comprised of $139,952 in software research and development expenses, $50,498 in marketing expenses, $81,103 in general and administrative expenses and $540 in depreciation expense. For the three months ended June 30, 2021, the Company recognized a total of $129,601 in operating expenses. The operating expenses were comprised of $116,742 in software research and development expenses, $1,150 in marketing expenses, $11,349 in general and administrative expenses and $360 in depreciation expense. Other expenses For the three months ended June 30, 2022 the Company had $4,443 in interest expense related to the senior secured convertible promissory notes. For the same period in 2021 the Company recorded interest expense of $2,914 related to the senior secured convertible promissory notes. Net Loss and net loss from operations The Company realized a net loss from operations of $270,695 and $129,601 for the three months ended June 30, 2022 and 2021, respectively. The net loss for the same periods was $275,138 and $132,515, respectively due to minimal revenues recognized and increased operating expenses in 2022 compared to startup operating costs in 2021. 13 SIX MONTHS ENDED JUNE 30, 2022 AND 2021 The following table set forth certain selected unaudited statement of operations data for the six months ended June 30, 2022 and 2021. 2022 2021 Revenues $ 4,892 $ — Operating expenses 495,516 226,550 Loss from operations (490,624 ) (226,550 ) Net loss from continuing operations (499,510 ) (233,764 ) Net loss per common share $ (0.08 ) $ (0.04 ) Revenues The Company recognized $4,892 and $0 of revenue during the six months ended June 30, 2022 and 2021, respectively due to the release of its App during the fourth quarter of 2021, thus, no revenues were recognized in the comparable period of 2021. Operating expenses For the six months ended June 30, 2022, the Company recognized a total of $495,516 in operating expenses. The operating expenses were comprised of $285,998 in software research and development expenses, $65,359 in marketing expenses, $143,079 in general and administrative expenses and $1,080 in depreciation expense. The Company is expanding its advertising and marketing efforts to drive revenues and increased expenses in this area by approximately $63,000 for the six months ending June 30, 2022 compared to the six months ending June 30, 2021. General and administrative expenses increased over the prior year period by approximately $125,000 due to increased legal and accounting of approximately $55,000, increased consulting expenses of approximately $18,000, increased travel costs in capital raise efforts of approximately $10,000, increased transfer agent fees due to active trading for the full six months of 2022 of approximately $9,000, increased administrative contract services to a full-time basis of approximately $21,000 and increased office supplies and software subscriptions of approximately $12,000. For the six months ended June 30, 2021, the Company recognized a total of $226,550 in operating expenses. The operating expenses were comprised of $206,330 in software research and development expenses, $2,121 in marketing expenses, $17,623 in general and administrative expenses and $476 in depreciation expense. Other expenses For the six months ended June 30, 2022 the Company had $8,886 in interest expense related to the senior secured convertible promissory notes. For the same period in 2021 the Company recorded interest expense of $7,214 related to the senior secured convertible promissory notes. Net Loss and net loss from operations The Company realized a net loss from operations of $490,624 and $226,550 for the six months ended June 30, 2022 and 2021, respectively. The net loss for the same periods was $499,510 and $233,764, respectively. 14 Liquidity and capital resources As of June 30, 2022, the Company had cash of $653,856 compared to cash of $424,445 as of December 31, 2021. As of June 30, 2022 and December 31, 2021, the Company had an accumulated deficit of $1,362,452 and $862,942, respectively. For the six months ending June 30, 2022 and 2021, the Company’s operations resulted in net cash used of $474,889 and $263,490, respectively. Net cash used in in investing activities for the six months ended June 30, 2022 and 2021 was $0 and $8,547 used to purchase computer equipment and to acquire intangible assets, Trademark. Net cash provided by financing activities was $704,300 and $724,500 for the six months ended June 30, 2022 and 2021, respectively, due mainly to capital raised from accredited investors in both periods. For the six months ended June 30, 2022, the average monthly cash requirement was $79,148. Cash on hand on June 30, 2022 of $653,856 divided by $79,148 results in roughly eight and a quarter months of cash to operate the Company. If costs stay the same, the Company will have to generate sufficient cashflow from revenues or will need to raise additional capital to operate beyond approximately February 28, 2023. The Company will look to begin ramping revenues in 2022. The Company will also look to conduct an additional offering of securities to provide adequate capital to stay operational and continue to develop revenues toward profitability and sustainability from revenues. 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 3. Quantitative and Qualitative Disclosures about Market Risk The Company is not required to provide the information required by this Item as it is a smaller reporting company. 15