Filing summary
Entity and period: The supplied filing is Thumzup Media Corporation’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2022. It does not appear to be a Datacentrex, Inc. filing. The cover page lists California as the incorporation jurisdiction, while the notes say the company was incorporated in Nevada.
Business context
Thumzup is an early-stage social-media marketing software company. Its app connects advertisers with users who are paid to post about products; Instagram was its initial platform. The company said the app launched in limited capacity in November 2021. As of the filing, it reported more than 104 creators paid and more than 1,145 posts made.
Financial results and liquidity
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | 2022: $1,632; 2021: $0 | 2022: $6,524; 2021: $0 |
| Operating expenses | 2022: $294,567; 2021: $290,165 | 2022: $790,083; 2021: $516,715 |
| Operating loss | 2022: $292,935; 2021: $290,165 | 2022: $783,559; 2021: $516,715 |
| Net loss | 2022: $292,935; 2021: $295,994 | 2022: $792,445; 2021: $529,758 |
| Loss per common share | 2022: $0.05; 2021: $0.06 | 2022: $0.13; 2021: $0.09 |
- Quarterly cost of revenue was $1,900 against $1,632 revenue. Nine-month cost of revenue was $1,900 against $6,524 revenue. The filing does not present a separate gross-margin measure.
- Research and development was $412,477 for the first nine months of 2022, down from $474,445 in 2021. Sales and marketing rose to $130,107 from $4,003, and general and administrative expense rose to $243,979 from $37,071.
- At September 30, cash was $1,099,761, current assets were $1,223,599, current liabilities were $32,256, and stockholders’ equity was $1,194,436. The balance sheet reports no remaining senior secured convertible notes; the $215,000 year-end note balance was converted during September.
- Operating cash use was $851,984 for the nine months, versus $573,356 in 2021. Financing provided $1,527,300, including $737,000 from common stock sales and $790,000 from Series A preferred stock sales. Cash increased by $675,316 to $1,099,761.
- Accumulated deficit reached $1,655,388. The company reported no cash paid for interest or income taxes.
Changes, outlook, and risks
- Revenue began after the app’s late-2021 release but remained nominal. Nine-month net loss increased by $262,687 year over year, while quarterly net loss was slightly lower than in 2021.
- In September, holders converted notes and accrued interest into 777,663 common shares and 95,596 Series A preferred shares, eliminating the reported note balance. The company also issued 17,558 Series A shares for $790,000 and sold common shares during the year, increasing the common share count to 7,106,333 at September 30.
- Series A shares are initially convertible into 15 common shares each and carry a stated $3.50 dividend per share, payable in cash or in kind at the company’s election. These terms may affect dilution and future cash needs.
- Management stated that, as of November 7, cash was sufficient for the next 12 months, while also anticipating additional capital to expand sales, creator acquisition, and technology development. Separately, the financial statements say substantial doubt exists about the company’s ability to continue as a going concern, citing losses, early-stage operations, and dependence on additional financing.
- Subsequent events included $150,000 of Series A proceeds from October 1 through November 7, a CEO employment agreement at $5,000 per month effective October 1, and authorization for possible forward or reverse stock splits. The filing provides no firm revenue or profitability guidance.
- Risks described include inability to raise capital or generate revenue, competition, economic conditions, attracting and retaining management, regulatory compliance, and uncertain effects from COVID-19 and the Russia-Ukraine conflict. Management reported no material lawsuit and said disclosure controls were effective at a reasonable assurance level.
Important facts to verify
- Confirm the filing is for the intended issuer: the document identifies Thumzup Media Corporation, not Datacentrex, Inc.
- Reconcile the cover-page incorporation jurisdiction with the Nevada incorporation statement in the notes.
- Review Series A conversion, dividend, and any applicable voting or priority terms, along with the impact of possible stock splits and future equity issuance.
- Assess the company’s cash runway against operating cash burn and the going-concern warning; the stated 12-month runway depends on management’s estimate and financing assumptions.
- Verify customer, advertiser, and creator growth and whether the app can convert its limited activity into material recurring revenue.