UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended December 31, 2023
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from __________ to __________
Commission
File Number: 333-255624
ThumzupTM
Media Corporation
(Exact
name of registrant as specified in its charter)
(Address of principal executive offices) (Zip Code)
(800)403-6150
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class
Common
Stock, $0.001 per share
Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒
No
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 ☐ No
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted 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). ☒ Yes ☐ No
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. ☒
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 ☐
Non-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 has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
The
aggregate market value of voting and non-voting common equity held by non-affiliates of the Registrant was $16,325,809 as of June 30,
2023.
As
of March 18, 2024, there were 7,720,084 shares of the registrant’s common stock outstanding.
THUMZUPTM
MEDIA CORPORATION
FORM
10-K
FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2023
INDEX
Page
PART I
Item 1. Business 6
Item 1A. Risk Factors 10
Item 1B. Unresolved Staff Comments 21
Item 1C. Cybersecurity 21
Item 2. Properties 21
Item 3. Legal Proceedings 21
Item 4. Mine Safety Disclosure 21
PART II
Item 6. [RESERVED] 22
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 25
Item 8. Financial Statements and Supplementary Data 25
Item 9A. Controls and Procedures 26
Item 9B. Other Information 26
PART III
Item 10. Directors, Executive Officers and Corporate Governance 27
Item 11. Executive Compensation 27
Item 14. Principal Accountant Fees and Services 32
PART IV
Item 15. Exhibits, Financial Statement Schedules 32
Index to Financial Statements 32
Signatures 34
PART
I
In
this Annual Report on Form 10-K, “we,” “our,” “us,” “ThumzupTM,” and “the
Company” refer to ThumzupTM Media Corporation, unless the context requires otherwise.
Forward-Looking
and Cautionary Statements
This
Annual Report contains forward-looking statements that involve risks, uncertainties and assumptions that, if they never materialize or
prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The
statements contained in this Annual Report that are not purely historical are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 2IE of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). Forward-looking statements are often identified by the use of words such as, but not limited
to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,”
“expect,” “intend,” “may,” “might,” “plan,” “project,” “seek,”
“should,” “target, would” and similar expressions or variations intended to identify forward-looking statements.
Examples of forward-looking statements include, among others, statements we make regarding:
● future financial position;
● business strategy;
● budgets, projected costs, and plans;
● future industry growth;
● financing sources;
● the impact of litigation, government inquiries and investigations; and
These
statements are based on the beliefs and assumptions of our management, which are in turn based on information currently available to
management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results
and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled “Risk
Factors” included under Part I, Item 1A below. Furthermore, such forward-looking statements speak only as of the date of this report.
Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after
the date of such statements.
Incorporation
by Reference
The
Commission allows us to incorporate by reference the information we file with it. This means that we can disclose information to you
by referring you to those documents. The documents that have been incorporated by reference are an important part of this annual report,
and you should review that information in order to understand the nature of any investment by you in our common shares.
RISK
FACTOR SUMMARY
Our
business operations are subject to numerous risks and uncertainties, including the risks described in the section titled “Risk
Factors” included under Part I, Item 1A of this Annual Report on Form 10-K, that could cause our business, financial condition
or operating results to be harmed, including risks regarding the following:
Risks
Relating to Our Business
The
Company is a recently formed company with an unproven business plan, has not yet established profitable operations and has generated
minimal revenue.
The
Company was formed in October 2020 and has not yet established profitable operations and has generated nominal revenue.
The
Company expects to continue to incur losses from operations and negative cash flows, which raise substantial doubt about its ability
to continue as a “going concern.”
The
Company’s independent registered public accounting firm’s reports have raised substantial doubt as to its ability to continue
as a “going concern.”
The
continuing COVID-19 pandemic may have a significant negative impact on the Company’s business, sales, results of operations and
financial condition.
The
Company may not generate sufficient cash flows to cover its operating expenses.
Security
breaches and other disruptions could compromise the Company’s information and expose it to liability, which would cause its business
and reputation to suffer.
The
Company is dependent on third parties to, among other things, maintain its servers, provide the bandwidth necessary to transmit content,
and utilize the content derived therefrom for the potential generation of revenues.
Because
the Company does not intend to pay any cash dividends on its shares of common stock in the near future, shareholders will not be able
to receive a return on their shares unless and until they sell them.
The
Company is dependent on key personnel.
The
Company may not be able to successfully execute the business plan.
The
Company is a new company with a brief operating history, no revenue and an untested business plan which may not be accepted in the markets
in which it intends to operate.
The
Company has not yet established brand identity and customer loyalty.
The
Company cannot assure investors that the Thumzup® App will be accepted.
A
better financed competitor may enter the marketplace, cause the Company’s market share or acceptance rates to plummet and adversely
affect its ability to sustain viable operations.
Although
the Company may own various intellectual property rights, these rights may not provide it with any competitive advantage.
The
Company’s future financial results are uncertain and its operating results may fluctuate, due to, among other things, consumer
trends, the impact of COVID on advertising budgets and App user activity, competition, and changing social media behaviors.
The
Company’s ability to succeed will depend on the ability of its management to control costs.
Key
personnel of the Company do not devote full time to the affairs of the Company and could allocate their time and attention to other business
ventures which may not benefit the Company.
The
Company’s Officers, Directors, and employees are entitled to receive compensation, payments and reimbursements, regardless of whether
it operates at a profit or a loss.
Combination
or “layering” of multiple risk factors may significantly increase the risk of loss on shares of the Company’s common
stock.
Our
business is sensitive to consumer spending, inflation and economic conditions.
Russia’s
Invasion of Ukraine may negatively impact our business.
Several
of our outsourced developers are based in Pakistan and our product development could be impacted by conflict in the Middle East.
We
rely on third-party internal and outsourced software to run our critical development and information systems. As a result, any sudden
loss, disruption or unexpected costs to maintain these systems could significantly increase our operational expense and disrupt the management
of our business operations.
Cyber
security breaches of our systems and information technology could adversely impact our ability to operate.
Failures
or security breaches of our networks or information technology systems could have an adverse effect on our business.
Risks
Related to our Common Stock
There
can be no assurance that our Common Stock will ever be approved for listing on a national securities exchange. Failure to develop or
maintain an active trading market could negatively affect the value of our common stock and make it difficult or impossible for investors
to sell their shares in a timely manner.
The
Company is controlled by its Chairman/Board of Directors, Chief Executive Officer, President, and additional Officers of the Company.
The
Company’s common stock price may be volatile, which could result in substantial losses to investors and litigation.
The
sale or availability for sale of substantial amounts of the Company’s common stock could adversely affect the market price of the
common stock.
The
Company is controlled by a small group of existing shareholders, whose interests may differ from other shareholders. The Company’s
Officers and Directors will significantly influence its activities, and their interests may differ from an investor’s interests
as a shareholder.
The
Company is an “emerging growth company” under the JOBS Act and it cannot be certain if the reduced disclosure requirements
applicable to emerging growth companies will make the Company’s common stock less attractive to investors.
The
Company’s disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
If
equity research analysts do not publish research or reports about the Company, or if they issue unfavorable commentary or downgrade its
common stock, the market price of its common stock will likely decline.
ITEM
1. BUSINESS.
Overview
General
As
used herein, “we,” “us,” “our,” the “Company,” “ThumzupTM,” means ThumzupTM
Media Corporation unless otherwise indicated. ThumzupTM operates in a single business segment which is social media marketing. ThumzupTM
has a mobile iPhone and Android applications called “ThumzupTM” that connects brands and people who use and love these
brands. For the advertiser, ThumzupTM incentivizes real people to become content creators and post authentic valuable posts on social
media about the advertiser and its products.
OVERVIEW
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 year ended December 31, 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.
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.
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.
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 ThumzupTM 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.
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.
Competition
The
Company has competitors in influencer marketing software companies as GRIN, #paid, CreatorIQ, Mavrck, Popular Pays, Tribe Dynamics, Aspire,
Influenster, Traackr, and Skeepers. All of the above-named competitor influencer marketing software is focused on influencers who see
themselves as professional influencers. To the best of the Company’s knowledge, these competitors are not building platforms designed
to turn social media creators into micro-influencers in the manner that the Company seeks to accomplish. Rep is also an app that connects
brands with influencers who are interesting in promoting brands. Rep’s app is different from Thumzup® because it is targeting
people who consider themselves influencers.
The
Company does not currently know of another business that is seeking to build a community of everyday people and empowering them to post
about brands that they love.
Nevertheless,
the influencer marketing industry segments are rapidly evolving and competitive and the Company expects competition to intensify in the
future with the emergence of new technologies and market entrants. The Company’s competitors may enjoy competitive advantages,
such as greater name recognition, longer operating histories, substantially greater market share, established marketing relationships
with, and access to, large existing advertisers and user bases, and substantially greater financial, technical and other resources. These
competitors may use these advantages to offer apps or other products similar to the Company’s at a lower price, develop different
products to compete with the Company’s current solutions and respond more quickly and effectively than the Company does to new
or changing opportunities, technologies, standards or client requirements particularly across different cities and geographical regions.
Certain competitors could also use strong or dominant positions in one or more markets to gain competitive advantage against the Company
in markets in which it operates in the future. The Company believes its ability to compete successfully for users, content, and advertising
and other customers depends upon many factors both within and beyond the Company’s control, including:
● the Company’s marketing and selling efforts, and those of its competitors;
● the Company’s reputation and brand strength relative to its competitors.
Problems
in the market that Thumzup® solves
According
to Inc. Magazine, in 2019, JetBlue Airways did a promotion where it offered free travel to people in exchange for posting about JetBlue
on social media. The promotion was deemed not to be a success because many of the people reportedly deleted the posts after claiming
the reward. JetBlue had no platform for tracking the influencers and holding them accountable. The Thumzup® Platform allows Advertisers
to limit and or cap their advertising spend, as well as allowing the Advertiser to approve individual posts prior to the Creator being
paid.
Employees
As
of February 21, 2024, The Company has four (4) full-time employees, as well as sixteen (16) marketing, sales, and finance independent
contractors. The Company also utilizes the services of approximately seven (7) part-time software developers. All of these software developers
are third-party contractors and are located outside the United States.
Legal
Proceedings
From
time to time, the Company may become involved in litigation or other legal proceedings. The Company is not currently a party to any litigation
or legal proceedings. Regardless of outcome, litigation can have an adverse impact on the Company because of defense and settlement costs,
diversion of management resources and other factors.
Available
Information:
ThumzupTM
is located at 11845 W. Olympic Blvd, Ste 1100W #13, Los Angeles, CA 90064. Our telephone number is (800) 403-6150 and our Internet website
address is www.ThumzupMedia.com.
We
file or furnish electronically with the U.S. Securities and Exchange Commission (“SEC”) annual reports on Form 10-K, quarterly
reports on Form 10- Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d)
of the Exchange Act. We make copies of these reports available free of charge through our investor relations website as soon as reasonably
practicable after we file or furnish them with the SEC. These reports are also accessible through the SEC website at www.sec.gov. Information
contained on or accessible through our website www.thumzupmedia.com is not incorporated into, and does not form a part of, this Annual
Report or any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references
only.
Item
1A. Risk Factors.
An
investment in our in our common stock involves a high degree of risk. The risks described below include the principal material risks
to our company or to investors that are known to our company. You should carefully consider the risks described below together with the
other information contained in this Form 10-K. If any of the following risks actually occur, our business, financial condition and results
of operations could be materially harmed. As a result, should a trading market develop, as to which no assurance can be given, the trading
price of our common stock could decline, and investors might lose all or part of their investment.
Risks
Relating to Our Business
In
addition to the other information in this Annual Report, you should carefully consider the following factors in evaluating us and our
business. This Annual Report on Form 10-K contains, in addition to historical information, forward-looking statements that involve risks
and uncertainties, some of which are beyond our control. Should one or more of these risks and uncertainties materialize or should underlying
assumptions prove incorrect, our actual results could differ materially. Factors that could cause or contribute to such differences include,
but are not limited to, those discussed below, as well as those discussed elsewhere in this Form 10-K, including the documents incorporated
by reference.
There
are risks associated with investing in companies such as ours who are primarily engaged in research and development. In addition to risks
which could apply to any company or business, you should also consider the business we are in and the following:
The
Company is a recently formed company with an unproven business plan, has not yet established profitable operations and has generated
minimal revenue.
The
Company has principally funded its operations through the sale of equity and equity instruments, including sales of common stock of $1,573,891
and $587,863, net offering costs of $17,601 and $149,137, along with sales of preferred stock of $0 and $1,259,995, during the years
ended December 31, 2023 and 2022, respectively. As the Company moves forward in developing its technology and commercializing the Thumzup
mobile application (the “Thumzup® App” or “App”), or as it responds to potential opportunities and/or adverse
events, the Company’s working capital needs may change. Pending its ability to generate adequate cash flow, as to which no assurance
can be given, the Company likely will continue to incur significant losses in the foreseeable future for various reasons, including unforeseen
expenses, difficulties, complications, and delays, and other unknown events. As a result, the Company will require additional funding
to sustain its ongoing operations and to continue its research and development activities. The Company cannot assure that its available
funds will be sufficient to meet its anticipated needs for working capital and capital expenditures through any period of twelve months.
The
Company’s ability to generate positive cash flow will be dependent upon its ability to recruit and retain Advertisers and Creators.
The Company can give no assurances it will generate sufficient cash flows in the future to satisfy its liquidity requirements or sustain
continuing operations, or that additional funding, if required, will be available when needed or, if available, on favorable terms.
The
Company was formed in October 2020 and has not yet established profitable operations and has generated nominal revenue.
For
the year ended December 31, 2023, we incurred a net loss available to shareholders of $3,324,180 primarily due to software research
and development expenses of $513,088, marketing expenses of $855,270, professional and consulting expenses of $727,554, and general
and administrative expenses of $395,624. For the year ended December 31, 2022, the Company incurred a net loss available to
shareholders of $1,504,681, primarily due to software research and development expenses of $567,408, marketing expenses of $224,088,
and general and administrative expenses of $418,940.
The
Company expects to continue to incur losses from operations and negative cash flows, which raise substantial doubt about its ability
to continue as a “going concern.”
The
Company anticipates incurring additional losses until such time, if ever, it can obtain adequate Advertiser support and acceptance by
Creators. Substantial additional financing will be needed to fund the Company’s development, marketing and sales activities and
generally to commercialize its technology and develop brand support and Creator acceptance. These factors raise substantial doubt about
the Company’s ability to continue as a going concern.
The
Company will seek to obtain additional capital through the issuance of debt or equity financings or other arrangements to fund operations;
however, there can be no assurance it will be able to raise needed capital under acceptable terms, if at all. The sale of additional
equity may dilute existing shareholders and newly issued shares may contain senior rights and preferences compared to currently outstanding
shares of Common Stock. Should the Company choose to issue debt in the future, such debt securities may contain covenants and limit the
Company’s ability to pay dividends or make other distributions to shareholders. If the Company is unable to obtain such additional
financing, future operations would need to be scaled back or discontinued. Due to the uncertainty in the Company’s ability to raise
capital, the Company believes that there is substantial doubt as to its ability to continue as a going concern.
The
Company’s independent registered public accounting firm’s reports have raised substantial doubt as to its ability to continue
as a “going concern.”
The
Company’s independent registered public accounting firm indicated in its reports on the audited financial statements for the years
ended December 31, 2023 and 2022 that there is substantial doubt about the Company’s ability to continue as a going concern. A
“going concern” opinion indicates that the financial statements have been prepared assuming the business will continue as
a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of
assets, or the amounts and classification of liabilities that may result if the Company does not continue as a going concern. Therefore,
prospective Investors should not rely on the Company balance sheet as an indication of the amount of proceeds that would be available
to satisfy claims of creditors, and potentially be available for distribution to shareholders, in the event of liquidation. The presence
of the going concern note to the Company’s financial statements may have an adverse impact on the relationships the Company is
developing and plan to develop with third parties as it continues the commercialization of its products and could make it challenging
and difficult for the Company to raise additional financing, all of which could have a material adverse impact on the business and prospects
and result in a significant or complete loss of an investment.
There
is no assurance that the Company will ever be profitable or that debt or equity financing will be available to it in the amounts, on
terms, and at times deemed acceptable to the Company, if at all. The issuance of additional equity securities by the Company would result
in a significant dilution in the equity interests of its Shareholders. Obtaining commercial loans, assuming those loans would be available,
would increase the Company’s liabilities and future cash commitments. If the Company is unable to obtain financing in the amounts
and on terms deemed acceptable to it, the Company may be unable to continue the business, as planned, and as a result may be required
to scale back or cease operations, the results of which would be that shareholders would lose some or all of their investment. The financial
statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or
the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
The
continuing COVID-19 pandemic may have a significant negative impact on the Company’s business, sales, results of operations and
financial condition.
The
COVID-19 pandemic continues to adversely affect the United States of America and the world, including in the primary regions in which
the Company plans to operate. Additionally, the Company’s liquidity could be negatively impacted if these conditions continue for
a significant period of time. Capital and credit markets have been disrupted by the crisis and the Company’s ability to obtain
any required financing is not guaranteed and largely dependent upon evolving market conditions and other factors. Depending on the continued
impact of the crisis, further actions may be required to improve the Company’s cash position and capital structure.
The
extent to which the COVID-19 outbreak could ultimately impact the Company’s business, sales, results of operations and financial
condition, will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the
duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what
extent normal economic and operating conditions can resume. Even after the COVID-19 outbreak has fully subsided, the Company may continue
to experience significant impacts to its business as a result of its global economic impact, including any economic downturn or recession
that has occurred or may occur in the future.
The
Company may not generate sufficient cash flows to cover its operating expenses.
As
noted previously, the Company has incurred operating losses since inception and expects to continue to incur losses as a result of expenses
related to research and continued development of its technology, marketing expense, and corporate general and administrative expenses.
The Company has principally funded its operations through the sale of equity and equity instruments, including sales of common stock
of $1,573,891 and $587,863, net offering costs of $17,601 and $149,137, along with sales of preferred stock of $0 and $1,259,995, during
the years ended December 31, 2023 and 2022, respectively.
As
of December 31, 2023, the Company had total Shareholders’ equity of $349,327, an accumulated deficit of $5,691,803, and cash and
cash equivalents of approximately $259,212. Although the Company had cash on hand of $259,212 as of December 31, 2023, there is no assurance
that these funds will prove adequate beyond twelve months.
In
the event that the Company is unable to generate sufficient cash from its operating activities or raise additional funds, it may be required
to delay, reduce or severely curtail its operations or otherwise impede the Company’s on-going business efforts, which could have
a material adverse effect on its business, operating results, financial condition and long-term prospects.
Security
breaches and other disruptions could compromise the Company’s information and expose it to liability, which would cause its business
and reputation to suffer.
In
the ordinary course of the Company’s business, it may collect and store sensitive data, including intellectual property, proprietary
business information, proprietary business information of its customers, including, credit card and payment information, and personally
identifiable information of customers and employees. The secure processing, maintenance, and transmission of this information is critical
to the Company’s operations and business strategy. As such, the Company is subject to federal, state, provincial and foreign laws
regarding privacy and protection of data. Some jurisdictions have enacted laws requiring companies to notify individuals of data security
breaches involving certain types of personal data and the Company’s agreements with certain customers require it to notify them
in the event of a security incident. Evolving regulations regarding personal data and personal information, in the European Union and
elsewhere, including, but not limited to, the General Data Protection Regulation (GDPR), and the California Consumer Privacy Act of 2018,
especially relating to classification of IP addresses, machine identification, location data and other information, may limit or inhibit
the Company’s ability to operate or expand its business. Such laws and regulations require or may require the Company or its customers
to implement privacy and security policies, permit consumers to access, correct or delete personal information stored or maintained by
the Company or its customers, inform individuals of security incidents that affect their personal information, and, in some cases, obtain