UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For
the Quarterly Period Ended
FOR THE TRANSITION PERIOD FROM ______ TO _________
Commission
File Number:
(Exact name of registrant as Specified in its Charter)
| 511210 | ||||
| (State or Other Jurisdiction of | (Primary Standard Industrial | (Internal Revenue Service | ||
| Incorporation or Organization) | Classification Code Number) | Employer Identification Number) |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
reporting company | |
| Emerging
growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes ☐
State the number of shares of the issuer’s common stock outstanding, as of the latest practicable date: shares of common stock issued and outstanding as of November 7, 2023.
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Thumzup Media Corporation
September 30, 2023
Index to the Condensed Financial Statements
| 2 |
THUMZUP MEDIA CORPORATION
CONDENSED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (As Restated) | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Capitalized software costs, net | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Liquidated damages and accrued interest | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (See Note 5) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock - shares authorized: | ||||||||
| Preferred stock - Series A, $ par value, $ | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding, respectively | ||||||||
| Additional paid in capital | ||||||||
| Subscriptions receivable | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 3 |
THUMZUP MEDIA CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Operating Expenses: | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Research and development | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Loss From Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income (Expense): | ||||||||||||||||
| Liquidated damages expense | ( | ) | ( | ) | ||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Total Other Income (Expense) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net Loss Before Income Taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for Income Taxes (Benefit) | ||||||||||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Dividends on preferred stock | ( | ) | ( | ) | ||||||||||||
| Net Loss Attributable to Common Stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net Income (Loss) Per Common Share: | ||||||||||||||||
| Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted Average Common Shares Outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 4 |
THUMZUP MEDIA CORPORATIONCONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
(Unaudited)
For the Three Months Ended September 30, 2023 and 2022
| Preferred Stock | Additional | |||||||||||||||||||||||||||||||
| Series A | Common Stock | Paid | Subscriptions | Accumulated | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | In Capital | Receivable | Deficit | Total | |||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
| Preferred Series A issued for dividends | - | |||||||||||||||||||||||||||||||
| Preferred Series A issued for liquidated damages | - | |||||||||||||||||||||||||||||||
| Common stock issued for Reg A+ offering | - | |||||||||||||||||||||||||||||||
| Common stock issued for liquidated damages and accrued interest | - | |||||||||||||||||||||||||||||||
| Common stock issued for services rendered | - | |||||||||||||||||||||||||||||||
| Common Stock offering costs | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Preferred Stock | Additional | |||||||||||||||||||||||||||||||
| Series A | Common Stock | Paid | Subscriptions | Accumulated | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | In Capital | Receivable | Deficit | Total | |||||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Preferred Series A issued for cash | - | |||||||||||||||||||||||||||||||
| Preferred Series A issued for conversion of notes and accrued interest | - | |||||||||||||||||||||||||||||||
| Common Stock issued for cash | - | |||||||||||||||||||||||||||||||
| Common stock issued for services | - | |||||||||||||||||||||||||||||||
| Common stock issued for conversion of notes and accrued interest | - | |||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
For the Nine Months Ended September 30, 2023 and 2022
| Preferred Stock | Additional | |||||||||||||||||||||||||||||||
| Series A | Common Stock | Paid | Subscriptions | Accumulated | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | In Capital | Receivable | Deficit | Total | |||||||||||||||||||||||||
| Balance at December 31, 2022 (as restated) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Preferred Series A issued for dividends | - | |||||||||||||||||||||||||||||||
| Preferred Series A issued for liquidated damages | - | |||||||||||||||||||||||||||||||
| Common Stock issued for services rendered | - | |||||||||||||||||||||||||||||||
| Common Stock issued for Reg A + offering and cash | - | |||||||||||||||||||||||||||||||
| Common Stock offering costs | - | - | ( | ) | $ | ( | ) | |||||||||||||||||||||||||
| Stock subscription receivable received | - | - | ||||||||||||||||||||||||||||||
| Common stock issued for liquidated damages and accrued interest | - | |||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Preferred Stock | Additional | |||||||||||||||||||||||||||||||
| Series A | Common Stock | Paid | Subscriptions | Accumulated | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | In Capital | Receivable | Deficit | Total | |||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
| Preferred Series A issued for cash | - | |||||||||||||||||||||||||||||||
| Preferred Series A issued for conversion of notes and accrued interest | - | |||||||||||||||||||||||||||||||
| Common Stock issued for cash | - | |||||||||||||||||||||||||||||||
| Common stock issued for services | - | |||||||||||||||||||||||||||||||
| Common stock issued for conversion of notes and accrued interest | - | |||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 5 |
THUMZUP MEDIA CORPORATION
CONDENSED STATEMENTS OF CASHFLOWS
(Unaudited)
| For the Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization expense | ||||||||
| Stock issued for services | ||||||||
| Stock issued for loss on settlement of liquidated damages and accrued interest | ||||||||
| Interest expense converted to stock | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | ( | ) | ||||||
| Capitalized software costs | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from sale of common stock | ||||||||
| Proceeds from loan | ||||||||
| Proceeds from sale of preferred stock | ||||||||
| Costs incurred for equity sales | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net (decrease) increase in cash | ( | ) | ||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid during period for interest | $ | $ | ||||||
| Cash paid during period for taxes | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities: | ||||||||
| Preferred Series A shares issued for dividends | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 6 |
Thumzup Media Corporation
Notes to the Condensed Financial Statements (Unaudited)
September 30, 2023
Note 1 - Business Organization and Nature of Operations
Thumzup Media Corporation (“Thumzup” or “Company”) was incorporated on October 27, 2020, under the laws of the State of Nevada, and its headquarters is located in Los Angeles, California. The Company’s primary business is software as a service provider dedicated to connecting businesses with consumers and allowing the business to incentivize consumers to post about their experience on social media. Thumzup’s mission is to democratize social media marketing by connecting advertisers with non-professional people, who can be paid for their posts about products and services they love through its technology which utilizes a proprietary 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 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.
Certain information and disclosures normally included in the notes to the annual consolidated financial statements have been condensed or omitted from these interim unaudited condensed consolidated financial statements. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Amendment No. 2 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2022 as filed and restated with the SEC August 16, 2023 (the “Annual Report”). The December 31, 2022 balance sheet is derived from those restated financial statements.
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. Significant estimates include estimates used in the valuation allowance related to deferred tax assets and capitalized software costs. Actual results may differ from 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 September 30, 2023 and December 31, 2022, the Company’s cash and cash equivalents consisted of $
Prepaid Expenses
As
of September 30, 2023 and December 31, 2022, the Company had $
| 7 |
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 evaluate the appropriateness of remaining depreciable lives assigned
to computer equipment at the end of each fiscal year. Depreciation expense for the three months ended September 30, 2023 and 2022 was
$
Capitalized Software Development Costs
We
capitalize certain costs related to the development and enhancement of the Thumzup platform. In accordance with authoritative guidance,
we began to capitalize these costs when the technological feasibility was established and preliminary development efforts were successfully
completed, management has authorized and committed project funding, and it was probable that the project would be completed and the software
would be used as intended. Such costs are amortized when placed in service, on a straight-line basis over the estimated useful life of
the related asset, generally estimated to be three years. Costs incurred prior to meeting these criteria together with costs incurred
for training and maintenance are expensed as incurred and recorded in product development expenses on our consolidated statements of
operations. Costs incurred for enhancements that were expected to result in additional features or functionality that would generate
additional revenue are capitalized and expensed over the estimated useful life of the enhancements, generally three years. The Company
does not capitalize any testing or maintenance costs. The accounting for these capitalized software costs requires us to make significant
judgments, assumptions and estimates related to the timing and amount of recognized capitalized software development costs. For the nine
months ended September 30, 2023 and 2022, we capitalized $
Revenue Recognition
The Company recognizes revenue when services are performed.
The Company’s revenues are accounted for under ASC Topic 606, “Revenue From Contracts With Customers” (“ASC 606”). The fees are generally fixed at the point of sale and all consideration from contracts is included in the transaction price. The Company’s contracts do not include multiple performance obligations or material variable consideration.
In accordance with ASC 606, the Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company recognizes revenue in accordance with that core principle by applying the following:
| (i) | Identify the contract(s) with a customer; |
| (ii) | Identify the performance obligation in the contract; |
| (iii) | Determine the transaction price; |
| 8 |
| (iv) | Allocate the transaction price to the performance obligations in the contract; and |
| (v) | Recognize revenue when (or as) the Company satisfies a performance obligation. |
We derive our revenue principally from service fees paid by the client for the use of our platform in connection with our advertising technology platform which incentivizes users to leave reviews of our clients. Our sole performance obligation in the transaction is to connect clients with end-users to facilitate the completion of a successful review on the user’s social media accounts.
Judgment is required in evaluating the presentation of revenue on a gross versus net basis based on whether we control the service provided to the end-user and are the principal in the transaction (gross), or we arrange for other parties to provide the service to the end-user and are the agent in the transaction (net). We have concluded that we are the agent in our current transactions as we arrange for users to provide the service to the clients and the users post reviews on social media accounts controlled by the users. The assessment of whether we are considered the principal or the agent in a transaction could impact the accounting for these transactions and change the timing and amount of revenue recognized. The percentage fee the Company charges is not variable.
Cost of Goods Sold
The Company classifies its credit card transaction fees as cost of goods sold.
Client Deposits
Thumzup’s clients generally prepay to utilize the Company’s technology platform. All client deposits for services are recorded as a client deposit liability upon receipt. Upon a user leaving a qualified review for the client, as defined in Thumzup’s Mobile Terms and Conditions, the Company transfers the fee payable to the user to a user account balances liability account and realizes the fees payable to the Company as revenue. The Company holds all client deposits and user account balances in cash or cash equivalents, including money market accounts.
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, 2023 and December 31, 2022 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 three and nine months ending September 30, 2023 and 2022, the Company recognized no interest and penalties.
The Company computes earnings (loss) per share under ASC subtopic 260-10, Earnings Per Share. Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods, as applicable.
| 9 |
Denotes a management contract or compensatory plan. The computation of basic and diluted income (loss) per share, for the three and nine months ended September 30, 2023 and 2022 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.
| September 30, | September 30, | |||||||
| 2023 | 2022 | |||||||
| Common shares issuable upon conversion of convertible notes | ||||||||
| Common shares issuable upon conversion of preferred stock | ||||||||
| Total potentially dilutive shares | ||||||||
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, which simplifies the guidance on accounting for convertible debt instruments by removing the separation models for: (1) convertible debt with a cash conversion feature; and (2) convertible instruments with a beneficial conversion feature. As a result, the Company will not separately present in equity an embedded conversion feature in such debt. Instead, we will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. We expect the elimination of these models will reduce reported interest expense and increase reported net income for the Company’s convertible instruments falling under the scope of those models before the adoption of ASU 2020-06. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer available. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The adoption of this update did not have a material impact on the Company’s consolidated financial statements and related disclosures.
There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
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 recognized its first revenues in December 2021. It relies on short-term debt and equity funding for its operations. At September
30, 2023 and December 31, 2022, the Company had a cash balance of $
The
Company is currently conducting an offering under Regulation A+, pursuant to an Offering Statement on Form 1-A/A filed on December 23,
2022 and qualified on January 9, 2023, through which the Company is offering up to million shares of common stock at a purchase price
of $ per share. As of September 30, 2023, the Company had sold shares under the offering for proceeds of $
| 10 |
Note 4 – Shareholders’ Equity
Preferred Stock
The
Company is authorized to issue shares of preferred stock, par value $ per share. On September 26, 2022 the Company submitted
a Certificate of Designation to the Secretary of State of Nevada designating shares of preferred stock as Series A Preferred
(“Series A Preferred”). Each shareholder shall have the right, at any time and from time to time, at the shareholder’s
option to convert any or all of such holder’s shares of Series A Preferred into the number of shares of Common Stock. Each share
of Series A Preferred initially converts into shares of Common Stock at a reference rate of $
The holders of Series A Preferred shall be entitled to receive dividends, in cash or in-kind at the Company’s election, in an amount equal to $ per share. If paid in kind, the dividend shall be in shares of Series A Preferred (the “Dividend Shares”) valued at the $ per share of Series A Preferred (the “Purchase Price”) unless the closing price of the Common Stock on the Trading Day prior to the issuance of the dividend is below the Reference Rate, in which case the Dividend Shares shall be valued at the Purchase Price adjusted pursuant to the formula set forth in Section 3 of the Certificate of Designations.
On March 15, 2023, the Company issued Series A shares as a dividend per the terms of the Series A Preferred Certificate of Designation.
On June 15, 2023, the Company issued Series A shares as a dividend per the terms of the Series A Preferred Certificate of Designation.
From September 1 to September 14, 2023, the Company entered into waiver agreements pursuant to which the Company issued Series A Dividend Shares for the settlement of certain liquidated damages.
On September 15, 2023, the Company issued Series A shares as a dividend per the terms of the Series A Preferred Certificate of Designation.
As September 30, 2023 and December 31, 2022, the Company had and Series A preferred shares issued and outstanding, respectively.
Common Stock
The Company is authorized to issue million shares of common stock, par value $ per share.
During
the nine months ended September 30, 2023, the Company issued shares of common stock valued at $
During
the nine months ended September 30, 2023, the Company issued shares of common stock for proceeds of $
During
the nine months ended September 30, 2023, the Company issued shares of common stock valued at $
As September 30, 2023 and December 31, 2022, the Company had and shares issued and outstanding, respectively.
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During
the three and nine months ended September 30, 2023, the Company realized losses of $
Note 5 – Contingencies
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. However, if the conflict escalates, it is unknown whether its direct or indirect effects may impact our business.
Note 6 – Related Party Transactions
On
November 18, 2022, the Company entered into a Media Relations Services Agreement (the “Media Relations Services Agreement”)
with Elev8 New Media, LLC (“Elev8”), of which one of our directors, Robert Haag, is a member. Under the terms of the agreement,
the Company will pay Elev8 $
On
February 22, 2023, Daniel Lupinelli, a 10%+ shareholder of the Company, subscribed to purchase shares of common stock at $ per
share for a subscription amount of $
On
February 28, 2023, Westside Strategic Partners, LLC (“Westside”), of which one of our Directors, Robert Haag, is the managing
member and sole owner, subscribed to purchase shares of common stock at $ per share for a subscription amount of $
On March 15, 2023, Westside received a dividend of shares of Series A Preferred Stock, per the terms of the Company’s Certificate of Designation.
On June 15, 2023, Westside received a dividend of shares of Series A Preferred Stock, per the terms of the Company’s Certificate of Designation.
On
June 27, 2023, Westside subscribed to purchase shares of common stock at $ per share for a subscription amount of $
On September 2, 2023, Westside entered into certain Waiver Agreements with the Company pursuant to which Westside was issued an aggregate of and shares of common and Series A Preferred stock, respectively, for the waiver of liquidated damages due under Registration Rights Agreements for failing to file and maintain a registration statement covering the shares.
On September 15, 2023, Westside received a dividend of shares of Series A Preferred Stock, per the terms of the Company’s Certificate of Designation.
Note 7 – Subsequent Events
The Company has evaluated subsequent events from the balance sheet date through the date which the financial statements were issued.
The
Company is currently conducting an offering under Regulation A+, pursuant to an Offering Statement on Form 1-A/A filed on December 23,
2022 and qualified on January 9, 2023, through which the Company is offering up to million shares of common stock at a purchase price
of $ per share. On October 17, 2023, Thumzup closed on subscriptions for shares of common stock for proceeds of $
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| 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; |
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| ● | 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. |
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”) was incorporated on October 27, 2020, under the laws of the State of Nevada, and its headquarters is located in Los Angeles. The Company’s primary business is software as a service provider dedicated to connecting businesses with consumers and allowing the business to incentivize consumers to post about their experience on social media. Thumzup mission is to democratize social media marketing by connecting advertisers with non-professional people, who can be paid for their posts about products and services they love through its technology which utilizes a proprietary 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 account(s). As of the date of this filing, Instagram is the Company’s initial social media platform that is being used, due to its wide acceptance and its great functionality using photographs. The Company expects to add other social media platforms in the future. For the advertiser, the Thumzup system enables brands to get real people to promote products to their friends, rather than displaying banner ads that consumers now mostly ignore, or contracting with expensive professional influencers. The Company has recorded nominal revenues during the first nine months of 2023 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.
OVERVIEW
We were formed in October 2020 and have not yet established profitable operations and have generated minimal revenue. For the three months ended September 30, 2023 and 2022, we incurred $1,067,974 and $292,935 in net losses due primarily to software research and development expenses along with general and administrative expenses in both periods. For the nine months ended September 30, 2023 and 2022, we incurred $2,903,643 and $792,445 in net losses due primarily to software research and development expenses along with general and administrative expenses in both periods.
Thumzup® Products and Services
The Company specializes in the domain of social media marketing. Thumzup’s flagship product, the Thumzup® App, available on both iPhone and Android operating systems, serves as a symbiotic bridge between brands and their enthusiasts. For advertisers, Thumzup® incentivizes real people, referred to as content creators (“Creators”), to generate and post authentic, valuable posts on social media about the advertiser and its products.
The Company seeks to capitalize on industry-wide gig economy and business democratization trends. Immense value and opportunity have been created through the democratization of various sectors including ride sharing, hospitality, finance and other industries. The Thumzup® suite of tools are designed to facilitate and expedite this democratization trend for consumers and advertisers within the online advertising space.
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Leveraging advanced technology, the Company has built a community around its Thumzup® App that resonates with the ethos of the influencer and gig economy. This technology and community are designed to generate scalable authentic product posts, endorsements, and recommendations for advertisers on social media. It is designed to connect advertisers with individuals who are willing to tell their friends and family about the advertisers’ products both on and offline.
Social Media Marketing Software Technology
The Thumzup® mobile App enables Creators, to select from brands advertising on the App and get paid to post about the advertiser on social media. By selecting the brand and capturing an image using the Thumzup® App, Thumzup® Creators can automatically share the content, complete with captions, to their social channels. The advertiser then reviews and approves the post for payment and the Creator can cash out whenever they choose through popular digital payment systems. For the advertiser, the Thumzup® system enables brands to receive genuine user-generated promotions, moving beyond the often-ignored traditional banner ads.
A recent Nielsen report found more than 83% of consumers believe friends and family are the most reliable sources of information about products. According to a Pixlee article, 64% of millennials recommend a product at least once a month, and according to a 2019 Morning Consult survey, 86% of Gen Z and millennials would post content for monetary compensation.
In the past decade, social media platforms like Instagram, Facebook, Twitter, Pinterest, and TikTok have achieved mass worldwide consumer acceptance and created hundreds of billions of dollars in shareholder value. This worldwide viral growth demonstrates the potential of innovative social media platforms like Thumzup®, furnished with the right blend of user experience and value, to captivate Creators and command significant time investments.
The Company is an early-stage entity building a new real-time platform to support the gig economy. The guiding philosophy is simple: empower individuals to monetize their authentic social media engagements. The Thumzup® App is envisioned as a nexus where advertisers can foster direct consumer connections. However, the platform’s success hinges on securing a critical mass of advertisers to ensure its viability and scalability, and to perpetuate Creator engagement. It’s pertinent to note that while the Company is dedicated to this mission, there’s no definitive guarantee of achieving the envisioned outcomes. No assurance can be given that the Company will be able to achieve these results.
The Industry—Online Advertising
Growing at a 16.5% compound annual growth rate (CAGR), the online advertising market is set to grow from $208 billion in 2022 to $354.9 billion in 2026, according to a 2021 Reportlinker.com study. The Company believes that it is developing a new form of social media marketing that does not currently exist, therefore present descriptions of market size and penetration are indirectly applicable. As Thumzup® matures, the Company anticipates other competitors will emerge in this new market, capitalizing on the payment model to non-professional advocates to tell their friends about products they love on social media at the point-of-sale. Currently, “influencer marketing” stands as the most analogous segment to Thumzup®’s niche, witnessing substantial growth with the rise of social media influencers. As social media influencers become more plentiful and proven, advertising spending has increased in this space. We believe major brands recognize that having their happy customers authentically post on social media is valuable.
Most existing paid influencer marketing platforms were designed for professional and semi-professional online personas. Some of these platforms have expanded to accommodate “micro-influencers,” those boasting 5,000 to 30,000 social media followers. In the Company’s opinion, none of these influencer platforms has entered the public consciousness and found mass adoption.
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Recent findings from TapInfluence highlighted that influencer marketing content delivers 11 times higher return on investment than traditional forms of digital marketing, and approximately 66% of marketing firms now deploy influencer marketing according to a 2018 Association of National Advertisers survey. A recent Nielsen report found more than 80% of consumers believe friends and family are the most reliable sources of information about products. Thumzup®’s own data indicates that as an influencer’s total follower count rises, the rate of engagement (likes and comments) with followers decreases. The data showed that those with less than 1,000 followers, also referred to as “nano-influencers,” generally received likes on their posts 8% of the time. There appears to be, in the Company’s view, a clear downward correlation between follower sizes and post likes. Around 66% of marketers now use influencers and nearly half of U.S. marketers plan to increase their influencer budgets according to a 2018 Association of National Advertisers survey. According to a 2019 Morning Consult survey, 86% of Gen Z and millennials would post content for monetary compensation.
The Company has designed Thumzup® “from the ground up” to make it easy for brands and service providers to activate those who may not be professional influencers but are genuinely enthusiastic about the products and services. With a design philosophy echoing Apple’s quintessential simplicity, both the Thumzup® App and its advertiser dashboard seamlessly integrate into existing social media usage patterns, ensuring nearly effortless use.
The Company’s first product—Thumzup® App
The Company specializes in the domain of social media marketing, primarily through its mobile iPhone and Android application called “Thumzup®.” The application connects brands, products, and services to the people who use and love these brands, products, and services. For advertisers, Thumzup® catalyzes authentic user-generated content, from real product reviews and testimonials, by amplifying brand visibility and facilitating a direct, efficient connection with target consumers, ultimately boosting promotions and traffic to their offerings.
The Company is building an influencer and gig economy community around the Thumzup® App. This initiative aims to foster authentic product posts and recommendations on social media. The App and advertiser dashboard are designed to connect advertisers with individuals who are willing to promote their products and services online and offline. At its core, the Thumzup® App aims to simplify and elevate person-to-person advertising, ensuring it’s not only effective, but highly scalable and economic for Thumzup® advertisers.
Intellectual Property
The Company owns the copyrights to the source code for the Thumzup® App on the iPhone iOS and Android operating mobile operating systems as used on the majority of mobile phone and tablet devices. Additionally, the Company owns the copyrighted and proprietary source code for the Thumzup® App’s backend system, responsible for administrating the Thumzup® App, tracking payments and monitoring advertising campaigns.
The distinct Thumzup® thumb logo is a registered trademark owned by Thumzup® Media Corporation with Reg. No. 6,842,424, registered Sep. 13, 2022. On April 13, 2021, the Company filed a trademark application ser. No. 90642789 with the U.S. Patent and Trademark Office (“USPTO”) for the word mark THUMZUP, which was granted registration on June 21, 2022, resulting in reg. no. 6764158. Also on April 13, 2021, the Company filed a trademark application ser. No. 90642848 for the Thumzup® logo, featuring a stylized hand with an upwardly extended thumb. Meta Platforms, Inc. (which owns and operates Facebook and Instagram) initially filed opposition to the logo on June 30, 2022. Thumzup® agreed to not use the logo as a reaction to a post and Meta Platforms, Inc. subsequently withdrew their opposition on August 5, 2022, and it was dismissed without prejudice.
Business Model
Advertisers purchase a campaign on the Thumzup® website. Once the advertiser approves a post for payment, the platform facilitates the payment to the Creator, with monetary amounts that range from $1.00 to $1,000.00 per approved post. The Thumzup® platform enables the advertiser to screen and filter posts so that the advertiser only pays for posts that are commercially valuable, ensuring Creators are rewarded for posts that have images and text that represent the advertiser in a positive manner.
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Per Post Fee Structure: Thumzup® advertisers are charged a ‘Per Post Fee’ model. By way of illustration, if an advertiser purchases 100,000 posts at a rate of $10 per post to Thumzup® Creators, the total cost would be $13.00 per post or $1,300,000. From this, Creators in this illustration would receive a total of $1,000,000 and Thumzup® would retain $300,000 as its service fee. The Thumzup® platform would then facilitate 100,000 endorsed posts for the advertiser from Thumzup® Creators sharing with their followers about their endorsed products on social media.
Value Proposition
The Thumzup® App is designed to generate scalable, genuine social media content for advertisers, bridging the gap between advertisers and individuals who are willing to authentically promote their products online. The Company envisions that many gig economy workers will be ideal candidates to become Creators posting on Thumzup®. Envision a gig economy driver endorsing a diner they’ve just visited or a gig economy freelance designer at a cafe doing a graphic design project from a gig economy site who takes a moment to post about the coffee shop – all via Thumzup®. The Company believes that Thumzup® not only can readily provide supplemental income for this existing pool of gig economy workers, but also ensures advertisers receive quality content worthy of their ad spend.
Regulatory Compliance
The Federal Trade Commission regulates and requires certain disclosures by social media influencers, specifying when disclosure is required, and how the disclosure should be presented. These rules are codified in the Code of Federal Regulations, 16 CFR Part 255. Specifically, the FTC requires that influencers disclose any financial, employment, personal, or family relationship with a brand. Influencers must disclose financial relationships and consideration paid including any money, discounted products or other benefits paid to the influencer. Creators on the Thumzup® platform are being paid to post about Thumzup® advertisers. Thumzup® puts #ad in each post made on its platform to disclose that the creator has been paid to make the post.
The Company does not believe its compliance with existing FTC regulations will have a material effect on capital expenditures, earnings and competitive position of the Company for the current fiscal year and any other material future period.
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 September 30, 2023 and December 31, 2022, the Company had a cash balance of $146,240 and $1,155,343, respectively, and the Company used $1,911,767 and $573,356 to fund operating activities for the nine months ended September 30, 2023 and 2022, respectively. The Company has an accumulated deficit at September 30, 2023 and December 31, 2022 of $5,317,073 and $2,367,623 respectively, and the Company may need to raise additional funding in order to continue as a going concern.
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RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
The following table sets forth certain selected unaudited statement of operations data for the three months ended September 30, 2023 and 2022.
| For the Three Months ended | ||||||||||||||||
| Sept 30, 2023 | Sept 30, 2022 | $ Change | %Change | |||||||||||||
| Revenues | $ | 72 | $ | 1,632 | $ | (1,560 | ) | (95.59 | )% | |||||||
| Operating Expenses | 718,517 | 294,567 | 423,950 | 143.92 | % | |||||||||||
| Loss from Operations | (718,445 | ) | (292,935 | ) | (425,510 | ) | 145.26 | % | ||||||||
| Other Income (Expense) | (392,665 | ) | - | (392,665 | ) | - | % | |||||||||
| Net Income (Loss) Available to Common Stockholders | $ | (1,111110 | ) | $ | (292,935 | ) | $ | (818,175 | ) | 279.30 | % | |||||
Revenues
The Company generated revenues of $72 and $1,632 for the three months ended September 30, 2023 and 2022, respectively, a decrease of $1,560. The Company updated its revenue recognition policy for the year ended December 31, 2022, resulting in the Company reporting net revenue, which caused revenue to decrease despite a significant increase in platform activity during the three months ended September 30, 2023.
Operating expenses
For the three months ended September 30, 2023 and 2022, the Company incurred operating expenses of $718,517 and $294,567, respectively, an increase of $423,950. The increase in operating expenses was caused by: marketing expenses increasing $163,937 from $64,748 during the three months ended September 30, 2022 to $228,685 during the same period in 2023, general and administrative expenses increasing $220,452 from $100,900 during the three months ended September 30, 2022 to $321,352 during the same period in 2023, depreciation and amortization expenses increasing $8,020 from $540 during the three months ended September 30, 2022 to $8,560 during the same period in 2023, software research development expenses increasing $33,441 from $126,479 during the three months ended September 30, 2022 to $159,920 during the same period in 2023, and cost of revenues decreasing $1,900 from $1,900 during the three months ended September 30, 2022 to $0 during the same period in 2023. The increases in operating expenses were caused by the Company expanding operations during the three months ended September 30, 2023 to accelerate the platform’s growth.
Net Loss from operations
The Company realized a net loss from operations of $718,445 and $292,935 for the three months ended September 30, 2023 and 2022, respectively, an increase of $425,510 for the reasons stated above.
Other expenses
For the three months ended September 30, 2023 and 2022, the Company had $364,729 and $0 in expenses for liquidated damages related to the Company’s equity offerings, respectively. For the three months ended September 30, 2023 and 2022, the Company had $27,937 and $0 in interest expense, respectively, related to liquidated damages and debt notes, respectively. The debt notes were retired by converting and exchanging to equity in September 2022.
Net Loss available to common shareholders
The Company realized a net loss available to common shareholders of $1,111,110 and $292,935 for the three months ended September 30, 2023 and 2022, respectively, an increase of $818,175 for the reasons stated above.
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NINE MONTHS ENDED SEPTMEBER 30, 2023 AND 2022
The following table sets forth certain selected unaudited statement of operations data for the nine months ended September 30, 2023 and 2022.
| For the Nine Months ended | ||||||||||||||||
| Sept 30, 2023 | Sept 30, 2022 | $ Change | %Change | |||||||||||||
| Revenues | $ | 2,422 | $ | 6,524 | $ | (4,102 | ) | (62.88 | )% | |||||||
| Operating Expenses | 2,149,445 | 790,083 | 1,359,362 | 172.05 | % | |||||||||||
| Loss from Operations | (2,147,023 | ) | (783,559 | ) | (1,363,464 | ) | 174.01 | % | ||||||||
| Other Income (Expense) | (794,813 | ) | (8,886 | ) | (785,927 | ) | 8,844.55 | % | ||||||||
| Net Income (Loss) Available to Common Stockholders | $ | (2,941,836 | ) | $ | (792,445 | ) | $ | (2,149,391 | ) | 271.24 | % | |||||
Revenues
The Company generated revenues of $2,422 and $6,524 for the nine months ended September 30, 2023 and 2022, respectively, a decrease of $4,102. The Company updated its revenue recognition policy for the year ended December 31, 2022, resulting in the Company reporting net revenue, which caused revenue to decrease despite a significant increase in platform activity during the nine months ended September 30, 2023.
Operating expenses
For the nine months ended September 30, 2023 and 2022, the Company incurred operating expenses of $2,149,445 and $790,083, respectively, an increase of $1,359,362. The increase in operating expenses was caused by: costs of revenues decreasing by $1,784 from $1,900 during the nine months ended September 30, 2022 to $116 during the same period in 2023, marketing expenses increasing $620,252 from $130,107 during the nine months ended September 30, 2022 to $750,359 during the same period in 2023, general and administrative expenses increasing $660,427 from $243,979 during the nine months ended September 30, 2022 to $904,406 during the same period in 2023, depreciation and amortization expenses increasing $15,037 from $1,620 during the nine months ended September 30, 2022 to $16,657 during the same period in 2023, and software research development expenses of $65,429 from $412,477 during the nine months ended September 30, 2022 to $477,906 during the same period in 2023. The increases in the operating expenses were caused by the Company expanding operations during the nine months ended September 30, 2023 to accelerate the platform’s growth.
Net Loss from operations
The Company realized a net loss from operations of $2,147,023 and $783,559 for the nine months ended September 30, 2023 and 2022, respectively, an increase of $1,363,464 for the reasons stated above.
Other expenses
For the nine months ended September 30, 2023 and 2022, the Company had $794,811 and $0 in expenses for liquidated damages for certain of the Company’s equity offerings, respectively. For the nine months ended September 30, 2023 and 2022, the Company had $63,161 and $8,886 in interest expense, respectively, related to liquidated damages and debt notes, respectively. The debt notes were retired by converting and exchanging to equity in September 2022.
Net Loss available to common shareholders
The Company realized a net loss available to common shareholders of $2,941,836 and $792,445 for the nine months ended September 30, 2023 and 2022, respectively, an increase of $2,149,391 for the reasons stated above.
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Liquidity and capital resources
As of September 30, 2023 and December 31, 2022, the Company had cash in the amount of $146,240 and $1,155,343, respectively. As of September 30, 2023 and December 31, 2022, the Company had stockholders’ equity of $255,089 and $786,524, respectively.
The Company’s accumulated deficit was $5,317,073 and $2,367,623 as of September 30, 2023 and December 31, 2022, respectively.
The Company used net cash in operations of $1,911,767 and $851,984 for the nine months ended September 30, 2023 and 2022, respectively.
Net cash used in investing activities for nine months ending September 30, 2023 and 2022 was $114,640 and $0, respectively. During the nine months ended September 30, 2023, there were $108,313 in capitalized development costs and $6,327 used for the purchase of equipment.
Net cash provided by financing activities was $1,017,304 for the nine months ended September 30, 2023, comprised of $33,000 from the sale of common stock related to the sale of common stock in a prior period and $984,304 from the Company’s offering under Regulation A+, net offering costs of $9,946. Net cash provided by financing activities was $1,527,300 for the nine months ended September 30, 2022, with $737,000 generated from the sale of common stock, $300 in loan proceeds, and $790,000 from the sale of the Company’s Series A preferred stock.
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.
Item 4. Controls and Procedures.
a) Disclosure and control procedures
Our management, with the participation of our Principal Executive Officer and Principal Financial and Accounting Officer, evaluated the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report on Form 10-Q, and have concluded that, based on such evaluation, our disclosure controls and procedures were not effective due to the material weakness in our internal control over financial reporting as of September 30, 2023 as described below.
Notwithstanding the conclusion that our disclosure controls and procedures were not effective as of the end of the period covered by this report, we believe that our consolidated financial statements and other information contained in our quarterly report on Form 10-Q present fairly, in all material respects, our business, financial condition and results of operations for the periods presented.
b) Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a -15(f) under the Exchange Act. Our internal control was designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements.
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Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (issued in 2013).
Based upon the assessments, management has concluded that as of September 30, 2023, there was a material weakness in our internal control over financial reporting due to the fact that we did not have an adequate process established to ensure appropriate levels of review of accounting and financial reporting matters, which resulted in our closing process not identifying all required adjustments and disclosures in a timely fashion.
We plan to take steps to enhance and improve the design of our internal control over financial reporting. To remediate our material weaknesses, we plan to appoint additional qualified personnel with the requisite knowledge to improve the levels of review of accounting and financial reporting matters; however, such remediation efforts are largely dependent upon our securing additional financing or generating significant revenue to cover the costs of implementing the changes required.
The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, in designing and evaluating the disclosure controls and procedures, management recognizes that any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.
PART II - OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS |
We are not currently a party to any lawsuit or proceeding which, in the opinion of management, is likely to have a material adverse effect on us or our business.
| Item 1A. | Risk Factors. |
Not required of a smaller reporting company.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
During the three months ended September 30, 2023, the Company issued 7,000 shares of common stock with a fair market value of $40,250 for services rendered to the Company.
During the three months ended September 30, 2023, the Company issued 130,259 and 6,579 shares of common and Series A preferred stock, respectively, pursuant to Waiver Agreements whereby certain investors waived liquidated damages owed to the Investors by the Company under Registration Rights Agreements.
During the three months ended September 30, 2023, the Company issued 2,671 shares of Series A Preferred Stock as a dividend pursuant to the Certificate of Designation of the Company’s Series A Preferred Shares.
| Item 3. | Defaults upon Senior Securities |
None.
| Item 4. | Mine Safety Disclosures |
Not applicable.
| Item 5. | Other Information |
Except as set forth under Item 2 above, there is no other information required to be disclosed under this item which has not been previously disclosed.
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| Item 6. | Exhibit |
| * | filed herewith. |
| + | Denotes a management contract or compensatory plan. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Thumzup Media Corporation | ||
| By: | /s/ Robert Steele | |
| Robert Steele | ||
| Chief Executive Officer and Chief Financial Officer | ||
| (Principal Executive Officer and Principal Financial Officer) | ||
Date: November 13, 2023
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