Filing summary
Issuer and period: The supplied filing is Thumzup Media Corporation’s Form 10-Q for the quarter ended September 30, 2021, not a filing identified as Datacentrex, Inc. Thumzup, incorporated in October 2020, describes itself as a pre-revenue software company developing an influencer-marketing mobile app. The financial statements are unaudited.
Financial results and liquidity
- Revenue: $0 for both the three and nine months ended September 30, 2021; margins are not meaningful.
- Losses: Third-quarter operating expenses were $290,165 and net loss was $295,994 ($0.06 per share). Nine-month operating expenses were $516,715 and net loss was $529,758 ($0.09 per share). Research and development accounted for $268,115 in the quarter and $474,445 year to date.
- Cash flow: Nine-month operating cash use was $573,356; investing cash use was $8,547. The cash-flow statement reports $724,500 of financing inflows and a $142,597 increase in cash and restricted cash.
- Liquidity: At September 30, cash and cash equivalents were $243,914, with $83,500 restricted; together these totaled $327,414. Current assets were $431,957, against current liabilities of $268,346.
- Debt and equity: The balance sheet reports $215,000 of senior secured convertible notes, due November 21, 2021, bearing 8% interest. Stockholders’ equity was $189,055, versus a $5,687 deficit at December 31, 2020. Shares outstanding were 5,754,500 at September 30 and October 22.
Changes and notable items
- The company had no revenue and had not established profitable operations. It was formed in October 2020, so the filing does not provide a comparable prior-year operating period.
- From December 31, 2020, cash and cash equivalents increased from $101,317 to $243,914, restricted cash decreased from $100,000 to $83,500, and total liabilities increased from $217,004 to $268,346. Equity moved from a deficit to positive equity, principally alongside reported share issuances and losses.
- The notes are convertible at $0.11 per share, subject to a lower-price adjustment if qualifying shares or convertible securities are issued below that price. Founders’ shares and company intellectual property secure the notes. The filing describes repayment at 130% of principal plus accrued interest if the company elects to prepay.
- Management stated that the company’s disclosure controls and procedures were not effective. No material legal proceedings or subsequent events were reported. Management said COVID-19 had not significantly affected operations as of issuance, while noting future effects could not be estimated.
Outlook, risks, and contingencies
There is no revenue or earnings guidance. Management said additional funding through loans or common-stock sales may be needed and that there is no assurance it can raise capital or achieve profitability. The filing states that recurring losses and dependence on external financing raise substantial doubt about the company’s ability to continue as a going concern. Key stated risks include access to capital, debt management, revenue generation, competition, general economic conditions, COVID-19, and retaining management and technical capabilities.
Important facts to verify
- Issuer mismatch: Confirm whether this Thumzup filing is the intended document; the request metadata names Datacentrex, Inc.
- Financing classification: The cash-flow statement labels $724,500 as proceeds from senior notes, while the equity note says 724,500 shares were sold for $724,500 and the notes describe $215,000 of senior notes. Reconcile the financing source and cash-flow classification.
- Liquidity figures: MD&A refers to $327,414 of cash including restricted cash, while the balance sheet separately reports $243,914 cash and $83,500 restricted cash. Confirm the distinction when assessing available liquidity.
- Debt maturity and conversion: Verify repayment, extension, or conversion status of the $215,000 notes due November 21, 2021, including accrued interest and potential dilution.
- Control remediation and funding runway: Track progress addressing ineffective disclosure controls and assess cash burn, restricted funds, and the company’s ability to secure additional financing.