UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For
the 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:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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 ☐ No
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 8, 2024.
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Thumzup Media Corporation
September 30, 2024
Index to the Condensed Financial Statements
| 2 |
THUMZUP MEDIA CORPORATION
CONDENSED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Other receivable | ||||||||
| 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 | $ | $ | ||||||
| Notes payable - related party | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (See Note 6) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock - shares authorized: | ||||||||
| Preferred stock - Series A, $ par value, $ | ||||||||
| Preferred stock - Series B, $ par value, $ | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding, respectively | ||||||||
| Additional paid in capital | ||||||||
| 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, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| 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 income (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 CORPORATION
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
(Unaudited)
| Preferred Stock | Preferred Stock | Additional | ||||||||||||||||||||||||||||||||||||||
| Series A | Series B | Common Stock | Paid | Subscriptions | Accumulated | |||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | In Capital | Receivable | Deficit | Total | |||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Common Stock issued for services rendered and to be rendered | - | - | ||||||||||||||||||||||||||||||||||||||
| Common Stock issued for Series B dividend | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Common Stock issued for Series A conversion | ( | ) | ( | ) | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Preferred Series A issued for dividends | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Additional | ||||||||||||||||||||||||||||||||||||||
| Series A | Series B | Common Stock | Paid | Subscriptions | Accumulated | |||||||||||||||||||||||||||||||||||
| Shares | Amount | 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 attributable to common shareholders | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 5 |
THUMZUP MEDIA CORPORATION
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
(Unaudited)
| Preferred Stock | Preferred Stock | Additional | ||||||||||||||||||||||||||||||||||||||
| Series A | Series B | Common Stock | Paid | Subscriptions | Accumulated | |||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | In Capital | Receivable | Deficit | Total | |||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Common Stock issued for investment, net | - | - | ||||||||||||||||||||||||||||||||||||||
| Common Stock issued for services rendered and to be rendered | - | - | ||||||||||||||||||||||||||||||||||||||
| Common Stock issued for Series A conversion | ( | ) | ( | ) | - | ( | ) | |||||||||||||||||||||||||||||||||
| Common Stock issued for Series B dividend | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Series B issued for investment | - | - | ||||||||||||||||||||||||||||||||||||||
| Preferred Series A issued for dividends | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Issuance costs - Preferred Series B | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Additional | ||||||||||||||||||||||||||||||||||||||
| Series A | Series B | Common Stock | Paid | Subscriptions | Accumulated | |||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | In Capital | Receivable | Deficit | Total | |||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| 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 attributable to common shareholders | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 6 |
THUMZUP MEDIA CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| 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 | ||||||||
| 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 sale of preferred stock - Series B | ||||||||
| Costs incurred for equity sales | ( | ) | ( | ) | ||||
| Proceeds from loan - related party | ||||||||
| Net cash provided by financing activities | ||||||||
| Net (decrease) 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 | $ | $ | ||||||
| Common shares issued for Preferred Series B dividends | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 7 |
Thumzup Media Corporation
Notes to the Condensed Financial Statements (Unaudited)
September 30, 2024
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 – 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 has been reliant on equity funding for its operations. At September 30, 2024
and December 31, 2023, the Company had a cash balance of $
Note 3 – 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 financial statements have been condensed or omitted from these interim unaudited condensed financial statements. Accordingly, these interim unaudited condensed financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 as filed with the SEC on March 20, 2024 (the “Annual Report”). The December 31, 2023 balance sheet is derived from those restated financial statements.
| 8 |
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, 2024 and December 31, 2023, the Company’s cash and cash equivalents consisted of $
Prepaid Expenses
As
of September 30, 2024 and December 31, 2023, the Company had $
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, 2024 and 2023 was
$
| 9 |
Capitalized Software Development Costs
We
capitalize certain costs related to the development and enhancement of the Thumzup platform. In accordance with authoritative guidance,
including ASC 350-40, 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
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, 2024 and 2023, we capitalized $
The
Company evaluates its capitalized software costs for impairment annually, at year-end. As of December 31, 2023, the Company determined
Revenue Recognition
The Company recognizes revenue when services are realized.
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 upon 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; | |
| (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.
| 10 |
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, 2024 and December 31, 2023 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 period ending September 30, 2024 and 2023, the Company recognized
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 period. 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.
The computation of basic and diluted income (loss) per share, for the three and nine months ended September 30, 2024 and 2023 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, | |||||||
| 2024 | 2023 | |||||||
| Common shares issuable upon exercise of options | ||||||||
| Common shares issuable upon conversion of preferred stock | ||||||||
| Total potentially dilutive shares | ||||||||
Recent Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which will add required disclosures of significant expenses for each reportable segment, as well as certain other disclosures to help investors understand how the chief operating decision maker (“CODM”) evaluates segment expenses and operating results. The new standard will also allow disclosure of multiple measures of segment profitability, if those measures are used to allocate resources and assess performance. The amendments will be effective for public companies for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact of this accounting standard update on our financial statements.
| 11 |
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. The standard will be effective for public companies for fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact of this accounting standard update on our financial statements.
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 4 – Non-Convertible Notes
On
August 26, 2024, the Company entered into a Promissory Note with a related-party, Westside Strategic Partners, LLC, which is controlled
by one of the Company’s directors, Robert Haag. The note is in the principal amount of $
On
September 24, 2024, the Company entered into a Promissory Note with a related-party, Westside Strategic Partners, LLC, which is controlled
by one of the Company’s directors, Robert Haag. The note is in the principal amount of $
Note 5 – Shareholders’ Equity
Preferred Stock
The Company is authorized to issue shares of preferred stock, par value $ per share.
Series A Preferred
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 per quarter. 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.
| 12 |
On January 18, 2024, a holder converted shares of Series A preferred into shares of common stock.
On March 15, 2024, the Company issued Series A shares as a dividend.
On June 15, 2024, the Company issued Series A shares as a dividend.
On September 15, 2024, the Company issued Series A shares as a dividend.
On September 20, 2024, the Company converted Series A shares into common shares.
At September 30, 2024 and December 31, 2023, the Company had and Series A preferred shares issued and outstanding, respectively.
Series B Preferred
On
March 5, 2024, the Company submitted a Certificate of Designation to the Secretary of State of Nevada designating shares of preferred
stock as Series B Preferred (“Series B 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 B Preferred into the number of shares
of Common Stock. Each share of Series B Preferred initially converts into shares of Common Stock at a reference rate of $
Once the company up-lists on a National Stock Exchange, the Series B Preferred converts at a 20% discount to the price of the offering in this S-1 and the downside price protections are eliminated. There is a call provision that goes into effect six (6) months from the listing on a National Exchange, that if the common stock trades at a 100% premium to the conversion price for 10 days or more, the Company can force the conversion of the Series B Preferred into common stock. The Company has agreed to pay the costs of Rule 144 legal opinions for the holders of the Series B Preferred.
The holders of Series B Preferred shall be entitled to receive dividends, in cash or in-kind at the Company’s election, in an amount equal to $ per share per quarter. If paid in kind, the number of common shares issued for the dividend shall be equal to the quotient of the dividend payable divided by the volume weighted average price on the dividend date.
During
the nine months ended September 30, 2024, the Company issued Series B shares for cash proceeds of $
On
June 15, 2024, issued common shares with a value of $
On
September 15, 2024, issued common shares with a value of $
At September 30, 2024 and December 31, 2023, the Company had and Series B preferred shares issued and outstanding, respectively.
Common Stock
The Company is authorized to issue million shares of common stock, par value $ per share. At September 30, 2024 and December 31, 2023, the Company had and shares issued and outstanding, respectively.
During
the nine months ended September 30, 2024, the Company issued shares of common stock with a fair market value of $
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During
the nine months ended September 30, 2024, the Company issued
shares of common stock for proceeds of $
During the nine months ended September 30, 2024, the Company issued shares of common stock for the conversion of shares of Series A preferred.
During
the nine months ended September 30, 2024, the Company issued common shares with a value of $
During
the three months ended September 30, 2024 and 2023, the Company realized losses of $
Note 6 – 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 7 – Related Party Transactions
On
March 14, 2024, Westside Strategic Partners, LLC, which is controlled by one of the Company’s directors, Robert Haag, acquired
shares of our Series B Preferred Stock at $ per share for a subscription in the amount of $
On
March 20, 2024, Joanna Massey, acquired shares of our Series B Preferred Stock at $ per share for a subscription in the amount
of $
On March 15, 2024, Westside received a dividend of shares of Series A Preferred Stock, per the terms of the Company’s Certificate of Designation.
On March 15, 2024, Isaac Dietrich received a dividend of shares of Series A Preferred Stock, per the terms of its Certificate of Designation.
On June 15, 2024, Westside received a dividend of shares of Series A Preferred Stock, per the terms of the Company’s Certificate of Designation.
On June 15, 2024, Joanna Massey received a dividend of shares of Series A Preferred Stock, per the terms of the Company’s Certificate of Designation.
On June 15, 2024, Westside received common shares for a dividend for the Series B Preferred Stock, per the terms of the Company’s Certificate of Designation.
On June 15, 2024, Joanna Massey received common shares for a dividend for the Series B Preferred Stock, per the terms of the Company’s Certificate of Designation.
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On June 15, 2024, Isaac Dietrich received a dividend of shares of Series A Preferred Stock, per the terms of its Certificate of Designation.
On June 15, 2024, Westside received a dividend of shares of Series A Preferred Stock, per the terms of the Company’s Certificate of Designation.
On
August 26, 2024, Westside entered into a Promissory Note with the Company for $
On September 15, 2024, Joanna Massey received a dividend of shares of Series A Preferred Stock, per the terms of the Company’s Certificate of Designation.
On September 15, 2024, Westside received a dividend of shares of Series A Preferred Stock, per the terms of the Company’s Certificate of Designation.
On September 15, 2024, Westside received common shares for a dividend for the Series B Preferred Stock, per the terms of the Company’s Certificate of Designation.
On September 15, 2024, Joanna Massey received common shares for a dividend for the Series B Preferred Stock, per the terms of the Company’s Certificate of Designation.
On September 15, 2024, Isaac Dietrich received a dividend of shares of Series A Preferred Stock, per the terms of its Certificate of Designation.
On
September 24, 2024, Westside entered into a Promissory Note with the Company for $
On
October 21, 2024, Westside entered into a Promissory Note with the Company for $
On
October 28, 2024, Westside entered into a Promissory Note with the Company for $
Our Stockholders approved our 2024 Equity Incentive Plan (the “Plan”) in May 2024. In July 2024, our Stockholders amended the Plan to increase the number of shares issuable thereunder to .
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Note 9 – Subsequent Events
The Company has evaluated subsequent events from the balance sheet date through the date which the financial statements were issued.
Director Appointments
Effective October 28, 2024, Dr. Joanna Massey, Paul Dickman and Isaac Dietrich were appointed to Thumzup’s Board of Directors. Dr. Massey and Mr. Dickman are independent, as defined in the Nasdaq listing rules.
Entry into Underwriting Agreement
On October 28, 2024, Thumzup Media Corporation (the “Company”), entered into an underwriting agreement (the “Underwriting Agreement”) with Dawson James Securities, Inc., as representative (the “Representative”) of the underwriters named therein (the “Underwriters”), pursuant to which the Company agreed to sell to the Underwriters, in a firm commitment public offering (the “Offering”), an aggregate of of the Company’s common stock, par value $ per share (the “Common Stock”), at a public offering price of $ per share. The Common Stock was offered pursuant to a registration statement on Form S-1, as amended (File No. 333-279828), originally filed with the U.S. Securities and Exchange Commission (the “Commission”) on May 30, 2024, as amended, and which was declared effective by the Commission on October 28, 2024.
The Underwriting Agreement contains customary representations and warranties that the parties thereto made to, and solely for the benefit of, the other party in the context of all of the terms and conditions of that Underwriting Agreement and in the context of the specific relationship between the parties. The provisions of the Underwriting Agreement and schedules and exhibits thereto, including the representations and warranties contained therein respectively, are not for the benefit of any party other than the parties to such documents and agreements and are not intended as documents for investors and the public to obtain factual information about the current state of affairs of the parties to those documents and agreements. Rather, investors and the public should look to other disclosures contained in the Company’s filings with the Commission.
On
October 30, 2024, the Company closed the Offering. The total gross proceeds to the Company from the Offering, not including the exercise
of the underwriter’s over-allotment option, and before deducting discounts and expenses, were approximately $
On
November 1, 2024, Dawson James Securities, Inc., the underwriter of its previously announced public offering that closed on October 30,
2024, fully exercised its overallotment option to purchase an additional shares at $ per share, increasing the total shares
sold to and gross proceeds to approximately $
Bridge Note Repayment
On
October 30, 2024, Thumzup repaid Westside Strategic Partners, LLC, of which a Company director Robert Haag, serves as managing member
for four bridge notes in the aggregate principal amount of $
Grant of Stock Options
On October 28, 2024, the Company issued Stock Option Agreements under its 2024 Equity Incentive Plan to two officers (“Officer Stock Option Agreements”). The Officer Stock Option Agreements are for an aggregate of option shares and have a $ strike price (“Option Shares”). The Officer Stock Option Agreements vest in four equal tranches, each consisting of % of the Option Shares, on the first day of each of January in 2025, 2026, 2027, and 2028.
On October 28, 2024, the Company issued Stock Option Agreements under its 2024 Equity Incentive Plan to three directors (“Directors Stock Option Agreements”). The Directors Stock Option Agreements are for an aggregate of option shares, have a $ strike price, and vested immediately (“Option Shares”). Should a Director resign or be removed prior to completing full 12 month term, the remaining portion of the options that the Director was entitled to shall be clawed back pursuant to the Company’s Compensation Recovery Policy and the discretion of the Board of Directors.
On October 30, 2024, Thumzup issued Stock Option Agreements under its 2024 Equity Incentive Plan to nine non-executive and non-director employees and contractors (“Employee Stock Option Agreements”). The Employee Stock Option Agreements are for an aggregate of option shares and have a $ strike price (“Option Shares”). The Employee Stock Option Agreements vest in four equal tranches, each consisting of % of the Option Shares, on the first day of each of January in 2025, 2026, 2027, and 2028.
Robert Steele, Executive Employment Agreement
On
May 30, 2024, the Company and Mr. Steele entered into an Executive Employment Agreement, which, among other things, employs Mr. Steele
as the Chief Executive Officer of the Company. Effective upon the listing of the Company’s common stock on a national stock exchange,
Mr. Steele will be paid a salary of $
Isaac Dietrich, Executive Employment Agreement
On
May 30, 2024, the Company and Mr. Dietrich entered into an Executive Employment Agreement, which, among other things, employes Mr. Dietrich
as the Chief Financial Officer of the Company effective upon the listing of the Company’s common stock on a national stock exchange.
Mr. Dietrich will be paid a salary 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; | |
| ● | 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.
Overview
As used herein, “we,” “us,” “our,” the “Company,” “Thumzup®,” means Thumzup® Media Corporation unless otherwise indicated. Thumzup® operates in a single business segment which is social media marketing. Thumzup® has a mobile iPhone and Android application called “Thumzup®” that connects brands and people who use and love these brands. For the advertiser, Thumzup® incentivizes ordinary people to become paid content creators and post authentic valuable posts on social media about the advertiser and its products.
The Company was incorporated on October 27, 2020, under the laws of the State of Nevada. Its headquarters are located in Los Angeles, CA. The Company has never been the subject of any bankruptcy or receivership. The Company has never engaged in any material reclassification, merger, or consolidation of the Company. The Company has not acquired or disposed of any material amount of assets except in the normal course of business.
In February 2022, the Company was admitted to the Over-The-Counter Venture Market quotation system (OTCQB) under the symbol TZUP. We intend to list our common stock on the Nasdaq under the symbol “TZUP”. This offering will not be consummated until we have received Nasdaq approval of our application. There is currently very limited trading of our Common Stock, and an active trading market may never develop.
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Thumzup® Products and Services
The Company operates in a single business segment which is social media marketing and advertising. The Thumzup® App works on both iPhone and Android mobile operating systems and connects brands and people who use and love these brands. For the Advertiser, Thumzup® incentivizes ordinary people to become paid content Creators and post authentic valuable posts on social media about the Advertiser and its products.
The Company seeks to capitalize on nationwide-wide gig economy and business democratization trends. Immense value and opportunity have been created through the democratization of ride sharing, hospitality, finance and other industries. The Thumzup® tools are designed to facilitate this democratization trend for the consumer and the Advertiser within the online marketing and advertising space.
The Company has built the technology to support an influencer and “gig” economy community around its Thumzup® App. This technology and community are designed to generate scalable authentic product posts and recommendations for advertisers on social media. It is designed to connect advertisers with individuals who are willing to tell their friends about the advertisers’ products online and offline.
Since May of 2024, Thumzup has expanded its AdTech platform to include Hollywood and Beverly Grove, significantly broadening its influence across Greater Los Angeles. This expansion is designed to revolutionize how local businesses engage with potential and current customers through enhanced social media interaction.
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. Once the Thumzup® Creator selects the brand and takes a photo using the Thumzup® App, the Thumzup® App posts the photo and a caption to the Creator’s social media accounts. 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 get real people to promote their products to their friends. In 2023, $148 billion was spent on digital display ads in the United States and while 43% of marketers consider display ads to be the least effective channel, 84% of marketers were still investing in them(1). We feel this demonstrates a significant need among advertisers for new methods of messaging to potential customers. We believe Thumzup’s ability to scale brand messages from the general population on social media could be part of addressing this substantial need in the market.
A recent Nielsen report found 81% of consumers believe friends and family are the most reliable sources of information about products(2). According to a Emplifi article, 64% of millennials recommend a product at least once a month(3), and according to a 2019 Morning Consult survey, 86% of Gen Z and millennials would post content for monetary compensation(4). Further, according to a 2020 IZEA Insights Study, 67% of social media consumers aspire to be paid social media influencers(5). According to a 2023 Bankrate, 48% of social media users have impulsively purchased a product seen on social media(6). Lastly, 85% of Gen Z says social media impacts purchase decisions according to a 2023 Retail Dive Survey(7).
The average American adult spent 7 hours and 58 minutes per day using digital media in 2020 according to a 2020 eMarketer Report(8). The amount of daily usage has increased significantly since 2019, again according to an eMarketer Report(8), and the Company believes such usage will continue to accelerate. The Company empowers businesses that want to interact with these Creators and provides tools and data so they can increase consumer awareness and expand their customer bases.
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 that compelling new social media platforms which present the right combination of experience and value, will attract Creators who will invest significant amounts of time on the platforms.
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The Company is an early-stage entity building a new real-time platform which enables Advertisers to pay their customers and fans cash for their positive social media posts about their products and services, which in turn supports those individuals who earn money from various gig economy opportunities. The Company believes that acceptance of its App and subsequent revenue growth can be driven by empowering everyday people to make money by posting about brands and services that they already find enjoyable and attractive on social media. The Company believes that the Thumzup® App is a conduit for Advertisers to connect directly with consumers. The Company will need to secure enough advertisers to make the App an attractive platform for adoption and scalability, and to ensure that the platform is interesting enough for the Creators to return to on a regular basis. No assurance can be given that the Company will be able to achieve these results.
| (1) | https://meetanshi.com/blog/display-advertising-statistics/) | |
| (2) | https://www.nielsen.com/news-center/2015/still-recommended-by-friends-and-relatives-the-most-authentic-advertising-according-to-consumers-the-most-trusted-on-brand-websites/ | |
| (3) | https://emplifi.io/resources/blog/the-user-generated-content-stats-you-need-to-know?utm_source=pixlee.com | |
| (4) | https://morningconsult.com/wp-content/uploads/2019/11/The-Influencer-Report-Engaging-Gen-Z-and-Millennials.pdf | |
| (5) | https://www.cnn.com/business/newsfeeds/globenewswire/7812666.html | |
| (6) | https://www.bankrate.com/personal-finance/social-media-survey/ | |
| (7) | https://www.retaildive.com/news/generation-z-social-media-influence-shopping-behavior-purchases-tiktok-instagram/652576/ | |
| (8) | https://www.emarketer.com/content/us-time-spent-with-media-2021-update |
New Advisory Board Member
Thumzup® has expanded its Advisory Board with the appointment of Jon Bond, co-founder of Kirshenbaum Bond & Partners. Known for his work in innovative marketing strategies, Jon brings a wealth of expertise and a track record to the Thumzup® team. His extensive background in guerrilla marketing and digital advertising will be crucial as Thumzup® continues to grow its platform. Jon will play a key role in guiding strategic marketing initiatives and leveraging emerging advertising technologies to further Thumzup®’s market position.
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. The Company also owns the source code for the “backend” system that administrates the Thumzup® App, tracks payments and advertising campaigns.
The
Thumzup® thumb logo is a registered trademark owned by Thumzup® Media
Corporation, 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 an ad campaign on the Thumzup® advertiser dashboard website. Once the Advertiser approves a post for payment, the platform facilitates the payment to Creators’ a monetary amount per screened post which may range from $1.00 to $1,000.00. The Thumzup® platform enables the Advertiser to screen posts so that the Advertiser only pays for posts that are commercially valuable and rewards Creators for posts that have images and text that represent the Advertiser in a positive manner.
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Per Post Fee. Thumzup® Advertisers are charged a “Per Post Fee.” By way of illustration, an Advertiser that buys 100,000 posts from Thumzup®, to pay out $10 per post to Thumzup® Creators, would purchase the posts for $13.00 each or $1,300,000. The Creators in this illustration would receive a total of $1,000,000 and Thumzup® would retain $300,000 for its services. The Thumzup® platform would facilitate 100,000 posts for the Advertiser from Thumzup® Creators sharing with their friends about their endorsed products on social media.
Value Proposition
The Thumzup® App is designed to generate scalable social media authentic social media content for Advertisers. It is designed to connect Advertisers with 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®. Imagine a gig economy driver waiting for their next fare who takes a moment to post about the good experience they had at their lunch spot where they are waiting. Imagine a gig economy worker on a laptop at a coffee shop doing a graphic design project from a gig economy site who takes a moment to post about the coffee shop where they are working on Thumzup®. The Company believes that Thumzup® can readily provide extra income for this existing pool of gig economy workers. The Company believes these gig economy workers will be able to provide quality Thumzup® posts on social media for which Advertisers will be willing to pay.
The Thumzup® App can also facilitate digital word of mouth recommendations of products and services from people who do not need to make extra money doing gigs, who are in fact quite affluent. The Company believes that many people who are well off may also use the App to recommend products and services to their network of friends on social media, many of whom may also be affluent.
Key Metrics as of November 8, 2024
Thumzup has paid out on 25,996 approved posts to 1,472 Thumzup users regarding 559 advertisers since inception.
Thumzup advertisers have grown by a 209% CAGR since November 8, 2023.
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.
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.
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The Company is a beginning revenue, software and services company that has primarily relied on equity funding for its operations. At September 30, 2024 and December 31, 2023, the Company had cash balances of $110,246 and $259,212, respectively. For the nine months ended September 30, 2024 and 2023, the Company used $1,053,175 and $1,911,767 in operating activities, respectively. The Company has an accumulated deficit at September 30, 2024 and December 31, 2023 of $7,038,071 and $5,691,803 respectively, and the Company may need to raise additional funding in order to continue as a going concern.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
The following table sets forth certain selected unaudited condensed statements of operations data for the three months ended September 30, 2024 and 2023.
| For the Three Months ended | ||||||||||||||||
September 30, 2024 | September 30, 2023 | $ Change | %Change | |||||||||||||
| Revenues | $ | 150 | $ | 72 | $ | 78 | 108.33 | % | ||||||||
| Operating Expenses | 442,847 | 718,517 | (275,670 | ) | (38.37 | )% | ||||||||||
| Loss from Operations | (442,697 | ) | (718,445 | ) | 275,748 | (38.38 | )% | |||||||||
| Other Income (Expense) | 859 | (392,665 | ) | 393,524 | (100.22 | )% | ||||||||||
| Net Income (Loss) Available to Common Stockholders | $ | (464,837 | ) | $ | (1,113,781 | ) | $ | 648,944 | (58.26 | )% | ||||||
Revenues
The Company generated revenues of $150 and $72 for the three months ended September 30, 2024 and 2023, respectively, an increase of $78. The Company has prioritized expanding its footprint of listed businesses before focusing on converting them to paying clients.
Operating expenses
For the three months ended September 30, 2024 and 2023, the Company incurred operating expenses of $442,847 and $718,517, respectively, a decrease of $275,670. The decrease in operating expenses was caused by: marketing expenses decreasing $131,603 from $228,685 during the three months ended September 30, 2023 to $97,082 during the same period in 2024, general and administrative expenses decreasing $52,785 from $321,352 during the three months ended September 30, 2023 to $268,567 during the same period in 2024, depreciation and amortization expenses increasing $18,786 from $8,560 during the three months ended September 30, 2023 to $27,346 during the same period in 2024, offset by a decrease in software research development expenses of $110,068 from $159,920 during the three months ended September 30, 2023 to $49,852 during the same period in 2024. The decrease in operating expenses is a result of the Company better managing its overhead and cashflows.
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Net Loss from operations
The Company realized a net loss from operations of $442,697 and $718,445 for the three months ended September 30, 2024 and 2023, respectively, an decrease of $275,748 for the reasons stated above.
Other expenses
For the three months ended September 30, 2024 and 2023, the Company had $0 and $(364,729) in liquidated damages expense, respectively. For the three months ended September 30, 2024 and 2023, the Company had $859 and $(27,937) in interest income and expense, respectively, primarily related to interest on the liquidated damages in 2023.
Net Loss available to common shareholders
The Company realized a net loss available to common shareholders of $464,837 and $1,113,781 for the three months ended September 30, 2024 and 2023, respectively, a decrease of $648,944 for the reasons stated above.
NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
The following table sets forth certain selected unaudited condensed statements of operations data for the nine months ended September 30, 2024 and 2023.
| For the Nine Months ended | ||||||||||||||||
September 30, 2024 | September 30, 2023 | $ Change | %Change | |||||||||||||
| Revenues | $ | 585 | $ | 2,422 | $ | (1,837 | ) | (75.85 | )% | |||||||
| Operating Expenses | 1,300,292 | 2,149,445 | (849,153 | ) | (39.51 | )% | ||||||||||
| Loss from Operations | (1,299,707 | ) | (2,147,023 | ) | 847,316 | (39.46 | )% | |||||||||
| Other Income (Expense) | 2,147 | (794,813 | ) | 796,960 | (100.27 | )% | ||||||||||
| Net Income (Loss) Available to Common Stockholders | $ | (1,346,269 | ) | $ | (2,949,450 | ) | $ | 1,603,181 | (54.36 | )% | ||||||
Revenues
The Company generated revenues of $585 and $2,422 for the nine months ended September 30, 2024 and 2023, respectively, a decrease of $1,837. The Company has prioritized expanding its footprint of listed businesses before focusing on converting them to paying clients.
Operating expenses
For the nine months ended September 30, 2024 and 2023, the Company incurred operating expenses of $1,300,292 and $2,149,445, respectively, a decrease of $849,153. The decrease in operating expenses was caused by: costs of revenues decreasing by $116 from $116 during the nine months ended September 30, 2023 to $0 during the same period in 2024, marketing expenses decreasing $504,837 from $750,359 during the nine months ended September 30, 2023 to $245,522 during the same period in 2024, general and administrative expenses decreasing $54,084 from $904,406 during the nine months ended September 30, 2023 to $850,322 during the same period in 2024, depreciation and amortization expenses increasing $50,852 from $16,657 during the nine months ended September 30, 2023 to $67,509 during the same period in 2024, offset by a decrease in software research development expenses of $340,967 from $477,906 during the nine months ended September 30, 2023 to $136,939 during the same period in 2024. The decrease in operating expenses is a result of the Company better managing its overhead and cashflows.
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Net Loss from operations
The Company realized a net loss from operations of $1,299,707 and $2,147,023 for the nine months ended September 30, 2024 and 2023, respectively, an decrease of $847,316 for the reasons stated above.
Other expenses
For the nine months ended September 30, 2024 and 2023, the Company had $0 and $731,652 in liquidated damages expense, respectively. For the nine months ended September 30, 2024 and 2023, the Company had $2,147 and $63,161 in interest income and expense, respectively, primarily related to interest on the liquidated damages in 2023.
Net Loss available to common shareholders
The Company realized a net loss available to common shareholders of $1,346,269 and $2,949,450 for the nine months ended September 30, 2024 and 2023, respectively, a decrease of $1,603,181 for the reasons stated above.
Liquidity and capital resources
As of September 30, 2024 and December 31, 2023, the Company had cash in the amount of $110,246 and $259,212, respectively. As of September 30, 2024 and December 31, 2023, the Company had stockholders’ equity of $187,964 and $349,327, respectively.
The Company’s accumulated deficit was $7,038,071 and $5,691,803 as of September 30, 2024 and December 31, 2023, respectively.
The Company used net cash in operations of $1,053,175 and $1,911,767 for nine months ended September 30, 2024 and 2023, respectively.
Net cash used in investing activities for nine months ending September 30, 2024 and 2023 was $177,017 and $114,640, respectively. During the nine months ended September 30, 2024, there were $175,770 in capitalized development costs and $1,247 used for the purchase of equipment. 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 $1,081,228 for the nine months ended September 30, 2024, comprised of $140,000 from the issuance of non-convertible notes, $805,000 from the sale of preferred stock – Series B, less offering costs of $25,000 and $161,228 net proceeds from the sale of common stock.. 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.
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.
Cybersecurity
Risk Management and Strategy
We recognize the critical importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard our information systems and protect the confidentiality, integrity, and availability of our data.
Managing Material Risks & Integrated Overall Risk Management
We have strategically integrated cybersecurity risk management into our broader risk management framework to promote a company-wide culture of cybersecurity risk management. This integration ensures that cybersecurity considerations are an integral part of our decision-making processes at every level. Our management team continuously evaluates and addresses cybersecurity risks in alignment with our business objectives and operational needs.
Oversee Third-party Risk
Because we are aware of the risks associated with third-party service providers, we have implemented stringent processes to oversee and manage these risks. We conduct thorough security assessments of all third-party providers before engagement and maintain ongoing monitoring to ensure compliance with our cybersecurity standards. The monitoring includes annual assessments of the SOC reports of our providers and implementing complementary controls. This approach is designed to mitigate risks related to data breaches or other security incidents originating from third parties.
Risks from Cybersecurity Threats
We have not encountered cybersecurity challenges that have materially impaired our operations or financial standing.
Recent Developments
The Company has entered into several material agreements during the most recent fiscal quarter. References in this section to any of our contracts or other documents are not necessarily complete, and each such reference is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the relevant Current Report on Form 8-K.
Entry into Underwriting Agreement
On October 28, 2024, Thumzup Media Corporation (the “Company”), entered into an underwriting agreement (the “Underwriting Agreement”) with Dawson James Securities, Inc., as representative (the “Representative”) of the underwriters named therein (the “Underwriters”), pursuant to which the Company agreed to sell to the Underwriters, in a firm commitment public offering (the “Offering”), an aggregate of 1,425,000 of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a public offering price of $5.00 per share. The Common Stock was offered pursuant to a registration statement on Form S-1, as amended (File No. 333-279828), originally filed with the U.S. Securities and Exchange Commission (the “Commission”) on May 30, 2024, as amended, and which was declared effective by the Commission on October 28, 2024.
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The Underwriting Agreement contains customary representations and warranties that the parties thereto made to, and solely for the benefit of, the other party in the context of all of the terms and conditions of that Underwriting Agreement and in the context of the specific relationship between the parties. The provisions of the Underwriting Agreement and schedules and exhibits thereto, including the representations and warranties contained therein respectively, are not for the benefit of any party other than the parties to such documents and agreements and are not intended as documents for investors and the public to obtain factual information about the current state of affairs of the parties to those documents and agreements. Rather, investors and the public should look to other disclosures contained in the Company’s filings with the Commission.
On October 30, 2024, the Company closed the Offering. The total gross proceeds to the Company from the Offering, not including the exercise of the underwriter’s over-allotment option, and before deducting discounts and expenses, were approximately $7,125,000. A final prospectus relating to this Offering was filed with the Commission on October 30, 2024. The Common Stock was previously approved for listing on The Nasdaq Capital Market and commenced trading under the ticker symbol “TZUP” on October 29, 2024.
The foregoing summary of the terms of the Underwriting Agreement is subject to, and qualified in its entirety by reference to a copy of the Underwriting Agreement that is filed as Exhibit 1.1 to the relevant Current Report on Form 8-K.
Grant of Stock Options
On October 30, 2024, Thumzup issued Stock Option Agreements under its 2024 Equity Incentive Plan to nine non-executive and non-director employees and contractors (“Stock Option Agreements”). The Stock Option Agreements are for an aggregate of 155,000 option shares and have a $5.47 strike price (“Option Shares”). The Stock Option Agreements vest in four equal tranches, each consisting of 25% of the Option Shares, on the first day of each of January in 2025, 2026, 2027, and 2028.
Robert Steele, Executive Employment Agreement
On May 30, 2024, the Company and Mr. Steele entered into an Executive Employment Agreement, which, among other things, employs Mr. Steele as the Chief Executive Officer of the Company. Effective upon the listing of the Company’s common stock on a national stock exchange, Mr. Steele will be paid a salary of $168,000 in periodic installments in accordance with the Company’s customary payroll practices and applicable wage payment and withholdings laws and requirements. Additionally, the Executive’s Base Salary will increase from $168,000 to $250,000, effective upon the Company’s achievement of $100,000 net monthly ad revenue from Thumzup advertisers for paid posters for twelve consecutive months, (ii) the Executive’s Base Salary will increase to $350,000 upon the Company achieving $250,000 in net monthly ad revenue from Thumzup advertisers for paid posters for twelve consecutive months, and (iii) effective upon the Company’s receipt of an aggregate of $800,000 in net monthly ad revenue from Thumzup advertisers for paid posters for twelve consecutive months, the Base Salary will increase to $500,000. The Company shall pay Executive a past performance bonus of $50,000 within 5 days of up-listing to a national stock exchange (i.e., Nasdaq), provided that Executive is employed by the Company at the time of the up-listing.
Isaac Dietrich, Executive Employment Agreement
On May 30, 2024, the Company and Mr. Dietrich entered into an Executive Employment Agreement, which, among other things, employes Mr. Dietrich as the Chief Financial Officer of the Company effective upon the listing of the Company’s common stock on a national stock exchange. Mr. Dietrich will be paid a salary of $168,000 in periodic installments in accordance with the Company’s customary payroll practices and applicable wage payment and withholdings laws and requirements. Additionally, the Executive’s Base Salary will increase from $168,000 to $250,000, effective upon the Company’s achievement of $100,000 net monthly ad revenue from Thumzup advertisers for paid posters for twelve consecutive months, (ii) the Executive’s Base Salary will increase to $250,000 upon the Company achieving $250,000 in net monthly ad revenue from Thumzup advertisers for paid posters for twelve consecutive months, and (iii) effective upon the Company’s receipt of an aggregate of $800,000 in net monthly ad revenue from Thumzup advertisers for paid posters for twelve consecutive months, the Base Salary will increase to $350,000. The Company shall pay Executive a past performance bonus of $25,000 within 5 days of up-listing to a national stock exchange (i.e., Nasdaq), provided that Executive is employed by the Company at the time of the up-listing.
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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, 2024 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 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.
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 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, 2024, 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.
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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, 2024, there were 2,000 shares of common stock issued for services rendered with a value of $10,598.
During the three months ended September 30, 2024, there were 3,802 shares of common stock issued a dividend on its Series B Preferred Shares with a value of $20,125.
During the three months ended September 30, 2024, there were 2,809 shares of common stock issued for the conversion of 187 Series A Preferred Shares.
During the three months ended September 30, 2024, there were 2,874 shares of Series A Preferred shares issued as a dividend on its Series A Preferred Shares with a value of $2,874.
| 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.
| 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 | ||
| (Principal Executive Officer) | ||
Date: November 14, 2024
| By: | /s/ Isaac Dietrich | |
| Isaac Dietrich | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) |
Date: November 14, 2024
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