Item 1A. Risk Factors 13
Item 1B. Unresolved Staff Comments 22
Item 2. Properties 22
Item 3. Legal Proceedings 22
Item 4. Mine Safety Disclosure 22
PART II
Item 6. Selected Financial Data 23
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 26
Item 8. Financial Statements and Supplementary Data 26
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 29
PART IV
Item 15. Exhibits, Financial Statement Schedules 29
Signatures 31
Index to Financial Statements F-1
Item 16. Form 10K Summary
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. We are incorporating
by reference the documents listed below:
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, that could cause our business, financial condition or
operating results to be harmed, including risks regarding the following:
Risks
Relating to Our Business
We will require substantial additional funding, which may not be available to us on acceptable terms, or at all, and, if not so available,
may require us to delay, limit, reduce or cease our operations.
We
are an early-stage pre-revenue company with an untested business plan which makes it difficult for us to forecast our financial results,
creates uncertainty as to how investors will evaluate our prospects, and increases the risk that we will not be successful.
We
expect to continue to incur losses from operations and negative cash flows, which raise substantial doubt about our ability to continue
as a Going Concern.
Our independent registered public accounting firm’s reports for the years ended December 31, 2021 and 2020 have raised substantial
doubt as to our ability to continue as a “going concern.”
The
outbreak of COVID-19 and its variants may have a significant negative impact on our business, sales, results of operations and financial
condition.
We may not generate sufficient cash flows to cover our operating expenses.
Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and
reputation to suffer.
We are dependent on third parties to, among other things, maintain our servers, provide the bandwidth necessary to transmit content,
and utilize the content derived therefrom for the potential generation of revenues.
We are dependent on key personnel the loss of whose services would have a materially adverse effect on our business.
We
have not yet established brand identity and customer loyalty.
We
cannot assure that our Thumzup app will commercially accepted by advertisers and users.
A
better financed competitor may enter our marketplace, cause our market share or acceptance rates to plummet and adversely affect our
ability to sustain viable operations.
Our
ability to succeed will depend on the ability of our management to control costs.
Our
officers and director 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.
Risks
Related to our Common Stock
An
active trading market for our common stock may not develop.
Should
an active market for our shares develop our stock price may be volatile and fluctuate widely, which could result in substantial losses
to investors and litigation.
The
sale or availability for sale of substantial amounts of our common stock could adversely affect the market price of our common stock.
We
are controlled by a small group of our existing shareholders, whose interests may differ from other shareholders. Our executive officers
and directors will significantly influence our activities, and their interests may differ from your interests as a shareholder.
We
are an “emerging growth company” under the JOBS Act and we cannot be certain if the reduced disclosure requirements applicable
to emerging growth companies will make our common stock less attractive to investors.
Our
disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
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.
ThumzupTM was incorporated
October 27, 2020, under the laws of the State of Nevada. Its headquarters are located in Carson City, Nevada. We have never been the subject
of any bankruptcy or receivership. We have never engaged in any material reclassification, merger, or consolidation of the company. We
have not acquired or disposed of any material amount of assets except in the normal course of business.
ThumzupTM seeks to capitalize
on industry-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. ThumzupTM tools are designed to facilitate this democratization trend
for the consumer and the advertiser within the online advertising space.
ThumzupTM
has built the technology to support an influencer and “gig” economy community around its ThumzupTM mobile app. This technology
and community is 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.
Social Media Marketing Software Technology
The ThumzupTM mobile
app enables users, also referred to as creators, to select from brands advertising on the app and get paid to post about the advertiser
on social media. Once the ThumzupTM creator selects the brand and takes a photo using the ThumzupTM app, the ThumzupTM
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 ThumzupTM
system enables brands to get real people to promote their products to their friends, rather than displaying banner ads that people are
tuning out.
The
average American adult is estimated to spend 7.5 hours a day using digital media in 2020.[1]
The amount of daily usage has increased every year since 2008 and we believe the recent rate of increase is accelerating.[2]We
empower businesses that want to interact with these creators. We provide 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 new social
media platforms which present the right combination of experience and value, will attract creators who will invest significant amounts
of time on compelling new platforms.
[1]
https://www.statista.com/statistics/565628/time-spent-digital-traditional-media-usa/
[2]
https://www.bondcap.com/report/itr19/
2
We
are an early-stage entity building a new real-time platform to support the gig economy. We believe that acceptance of our app and revenue
growth can be driven by our empowering everyday people to make money by posting about what they find to be enjoyable or attractive on
social media. ThumzupTM in our view, is a conduit for advertisers to connect directly with consumers and we will need to secure
enough advertisers to make our app an attractive platform for adoption, scalability and that the platform is interesting for the creators
to return to on a regular basis. No assurance can be given that we will be able to achieve these results.
Our
Industry—Influencer Marketing
We
sell our services into the rapidly growing subset of online advertising called “influencer marketing”. As social media influencers
become more plentiful and proven, advertising spending has increased in this space. Brands are estimated to spend up to $5 billion on
influencer marketing by 2023[3]. Major brands recognize that having their happy customers
post on social media is valuable.
Most
existing paid influencer marketing platforms were designed for professional and semi-professional online personalities. Some of these
platforms have expanded to accommodate what they term as micro-influencers, people with 5,000 to 30,000 social media followers. In our
opinion, none of these influencer platforms has entered the public consciousness and found mass adoption.
Nielsen’s
study “Global Trust In Advertising” found that 83% of respondents say they completely or somewhat trust the recommendations
of friends and family.[4] 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.[5]
In Mary Meeker’s 2019 Internet Trends report she highlighted that the primary reason people chose to make new e-commerce
purchases was that the product had been recommended by a friend.[6]
· Around 66% of marketers now use influencers.
· Nearly half of U.S. marketers plan to increase their influencer budgets.
We
have designed ThumzupTM “from the ground up” to make it easy for brands and service providers to activate people who
are not professional influencers but who are passionate about the products, services, or establishments they enjoy or frequent and then
are willing to relate those experiences to their friends and other social media followers. We have designed ThumzupTM app and advertiser
dashboard with Apple-style simplicity and intuitive features to make participation by all individuals seamless with their existing use
of social media.
[3] https://www.marketingcharts.com/charts/us-advertising-media-market-sizes-2019-vs-2023/attachment/pwc-us-ad-market-sizes-2019-2023-june2019
[4] https://www.nielsen.com/us/en/insights/report/2015/global-trust-in-advertising-2015/
[5] https://cdn2.hubspot.net/hubfs/1882019/TapInfluence/Resources/1009%20-%20Nielsen_Study_Case_Study.pdf
[6] https://www.scribd.com/document/413048704/Internet-Trends-2019#download&from_embed
[7] https://mediakix.com/blog/influencer-rates/
[8] https://www.marketingdive.com/news/social-nfluencer-marketing-evolution-2016/432185/
3
Our first product—ThumzupTM app
We operate in a single business
segment which is social media marketing. Our mobile iPhone and Android applications called “ThumzupTM” connects brands,
products and services to the people who use and love these brands, products and services. For advertisers, ThumzupTM activates real
people to post real product reviews and testimonials on social media which may enhance brand awareness, reach targeted consumers more
directly and effectively while driving profitable traffic to their goods and services.
We are building an influencer
and gig economy community around our ThumzupTM mobile app that will generate scalable authentic product posts and recommendations
for advertisers on social media and create a technology platform making person-to-person advertising easy, cost-effective, and scalable.
Our app and advertiser dashboard is designed to connect advertisers with individuals who are willing to promote their products online
and offline.
Social Media Marketing Software Technology
Our Services
The ThumzupTM 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 ThumzupTM
creator selects the brand and takes a photo using the ThumzupTM app, the ThumzupTM 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 ThumzupTM system enables brands to get real people to
promote their products to their friends, rather than displaying banner ads that people are tuning out.
With the ThumzupTM app we
are targeting and seeking to sign up everyday people and gig economy workers who like specific brands and present them with opportunities
to be paid for posting about the brands on social media. We believe that our management team has the sales relationships, legal and technology
expertise for our current level of development. We will need to add additional staff to rapidly grow our business.
Intellectual Property
We own the copyrights to the source
code for the ThumzupTM applications on the iPhone iOS and Android operating mobile operating systems used on the majority of mobile
phone and tablet devices. We also own the copyrighted source code for the “backend” system that administrates the ThumzupTM
app, tracks payments and advertising campaigns.
On April 13, 2021, ThumzupTM Media Corporation
filed application 90642789 with the U.S. Patent and Trademark Office to trademark "ThumzupTM" and application 90642848
to trademark the ThumzupTM logo, with the latter published in the Trademark Official Gazette (TMOG) on March 1, 2022.
Business Model
Advertisers purchase a campaign
on the Thumzup 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 $1000.00. The ThumzupTM 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.
Per Post Fee. ThumzupTM
advertisers are charged a “Per Post Fee.” By way of illustration, an advertiser that buys 100,000 posts from ThumzupTM,
to pay out $10 per post to ThumzupTM creators, would purchase the posts for $12.00 each or $1,200,000. The creators in this
illustration would receive a total of $1,000,000 and ThumzupTM would retain $200,000 for its services. The ThumzupTM platform
would facilitate 100,000 posts for the advertiser from ThumzupTM creators sharing with their friends about their endorsed products
on social media.
4
FTC disclosure
The
Federal Trade Commission requires that paid posts are disclosed. ThumzupTM includes a disclosure in every post to comply with these
FTC requirements.
Value
Proposition
The ThumzupTM 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. We envision that many gig economy workers will be ideal candidates to
become creators posting on ThumzupTM. 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 ThumzupTM.
We believe that ThumzupTM can readily provide extra income for this existing pool of gig economy workers. We believe these gig economy
workers will be able to provide quality ThumzupTM posts on social media for which advertisers will be willing to pay.
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.
We plan on implementing compliance controls to ensure proper disclosure of all material relationships and consideration for an influencer’s
endorsements.
We
do not believe our compliance with existing FTC regulations will have a material effect on capital expenditures, earnings and competitive
position of the company and its subsidiaries, for the current fiscal year and any other material future period
ThumzupTM App Workflow
5
6
7
8
The
mobile app enables the creator to search for brands they like that will pay them to post. This is useful so that ThumzupTM creators
can easily discover brands they like to post about. The app pays creators to post about brands.
9
[9] https://blog.adstage.io/instagram-ads-cpm-cpc-ctr-
benchmarks#:~:text=The%20average%20click%2Dthrough%20rate,all%20the%20major%20ad%20networks
10
The
system provides advertisers with quality control by enabling the advertiser to review posts to make sure that the posts meet community
standards and are commercially useful to the advertiser. This helps reduce the number of people who may try to game the system to otherwise
not use it properly. ThumzupTM creators can opt-in to receive text message from brands. This opt-in opportunity is valuable to brands
because text messageshave
higher visibility to potential customers than emails.[10]
The
system enables “campaign spend” to be limited by a total dollar amount determined by the advertiser. Once the posts that the
advertiser has paid for in a campaign have been posted and approved for payment, the campaign expires and the advertiser incurs no additional
cost until it choosesto
increase the amount. It also enables the advertiser to limit the number of posts made by an individual creator by day, week and month.
We believe that this feature enables more efficient budgetary control while reducing unintended cost overruns. Creator. This feature may
eliminate abuse or saturation by creators who post more than what may be commercially valuable to advertisers.
Financing Plan
In
November 2020, we raised an aggregate of $215,000 through sales of senior secured convertible promissory notes to four investors. Since
December 31, 2020 we have raised an additional $ $1,273,000 through the sale of our shares to accredited investors as that term is defined
under federal securities laws.
These funds have been used to build and beta test the ThumzupTM app and to cover operating costs including and other administrative
costs and expenses.
During the year 2021 the company was pre-revenue
and transitioned into beta testing. The Thumzup commercial launch is planned in 2022.
Competition
Top 10 Influencer Marketing Platforms
Market Research firm G2 ranks
the top ten influencer marketing software companies as GRIN, #paid, CreatorIQ, Mavrck, Popular Pays, Tribe Dynamics, AspireIQ, Influenster,
Traackr ,and Hivency.[11] This influencer marketing software space is focused on influencers who see themselves as professional
influencers. None of these companies is building a platform designed to turn social media creators into micro-influencers in the manner
that we seek to accomplish.
Rep
is also an app that connects brands with influencers who are interesting in promoting brands. It is different from Thumzup because it
is targeting people who consider themselves an influencer.
We do not currently know of a
company 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 we expect competition to intensify in the future with the emergence of new
technologies and market entrants. Our 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 companies may use these advantages to offer apps
or other products similar to ours at a lower price, develop different products to compete with our current solutions and respond more
quickly and effectively than we do 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 us in markets in which we operate in the future. We believe our ability to compete successfully for users,
content, and advertising and other customers depends upon many factors both within and beyond our control, including:
●the popularity, usefulness,
ease of use, performance and reliability of our apps and services
compared to those of our competitors;
●our ability, in and of
itself as well as in comparison to the ability of our competitors, to develop
new apps, other products and services
and enhancements to then existing apps, products and
services;
●our ad targeting and measurement
capabilities, and those of our competitors;
●the size, composition and
level of engagement of our app user communities relative to those
of our competitors;
●our marketing and selling
efforts, and those of our competitors;
●the pricing of our apps
and services relative to those of our competitors;
●the actual or perceived
return our customers receive from the deployment of our apps within
our user communities relative
to returns from our competitors; and
●our reputation and brand
strength relative to our competitors.
Problems
in the market that we solve
In
March 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.[12] The
ThumzupTM platform can sample the creator’s Instagram feed to assure that the post is up before the payment is due.
[10] https://www.mediapost.com/publications/article/339343/study-texting-is-more-efficient-than-email.html
[11] https://www.g2.com/categories/influencer-marketing-platforms
[12] https://mediakix.com/blog/influencer-marketing-fails/
11
Employees
We
have one full-time employee and have retained an outsourced management consultant, who on a part-time basis performs accounting and financial
reporting services on our behalf. We also utilize the services of approximately eight to ten part-time software developers.
Legal
Proceedings
From
time to time, we may become involved in litigation or other legal proceedings. We are not currently a party to any litigation or legal
proceedings. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of
management resources and other factors.
Available
Information:
ThumzupTM is located at 711
S. Carson Street Suite 4 Carson City, Nevada 89701. Our telephone number is
(310) 237-2887 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.
12
Item 1 A. 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 prospectus 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 prospectus, 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:
We
will require substantial additional funding, which may not be available to us on acceptable terms, or at all, and, if not so available,
may require us to delay, limit, reduce or cease our operations.
To
date, we have relied primarily on debt and equity financing to carry on our business. We have limited financial resources, no operating
cash flow and no assurance that sufficient funding will be available to us to fund our operating expenses and to further develop our
business. We expect that our current cash position, will enable us to fund our operating expenses and capital expenditure requirements
for less than the next twelve months. Unless we achieve profitability, as to which no assurance can be given, we anticipate that we will
need to raise additional capital to fund our operations while we implement and execute our business plan. We currently do not have any
contracts or commitments for additional financing. In addition, any additional equity financing may involve substantial dilution to our
existing shareholders. There can be no assurance that such additional capital will be available on a timely basis or on terms that will
be acceptable to us. Failure to obtain such additional financing could result in delay or indefinite postponement of operations or the
further development of our business with the possible loss of such properties or assets. If adequate funds are not available or are not
available on acceptable terms, we may not be able to fund our business or the expansion thereof, take advantage of strategic acquisitions
or investment opportunities or respond to competitive pressures. Such inability to obtain additional financing when needed could have
a material adverse effect on our business, results of operations, cash flow, financial condition and prospects.
We are an early stage pre-revenue company with an untested business plan which makes it difficult for us to forecast our financial results, creates uncertainty as to how investors will evaluate our prospects, and increases the risk that we will not be successful.
We were formed in October 2020 to develop and market the Thumzup
app to advertisers and micro influencers. and have not yet established profitable operations or generated revenue. The Company
realized a net loss from operations of $839,769 and $5,687 for the years ended December 31, 2021 and 2020, respectively. We
have an untested business plan and it is uncertain how our new business model will affect investors’ perceptions and expectations
with respect to our business and economic prospects. Our new business model may not be successful and no
assurance can be given that we will ever generate positive cash flow.
13
We
expect to continue to incur losses from operations and negative cash flows, which raise substantial doubt about our ability to continue
as a Going Concern.
We
anticipate incurring additional losses until such time, if ever, we can obtain adequate advertiser support and user acceptance. Substantial
additional financing will be needed to fund our development, marketing and sales activities and generally to commercialize our technology
and develop brand support and user acceptance. These factors raise substantial doubt about our ability to continue as a going concern.
We
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 we 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. Issued debt securities may contain covenants and limit our ability to pay dividends or make other distributions to shareholders.
If we are unable to obtain such additional financing, future operations would need to be scaled back or discontinued. Due to the uncertainty
in our ability to raise capital, we believe that there is substantial doubt as to our ability to continue as a going concern.
Our
independent registered public accounting firm’s reports for the years ended December 31, 2021 and 2020 have raised substantial
doubt as to our ability to continue as a “going concern.”
Our
independent registered public accounting firm indicated in its report on our audited financial statements as of and for the years ended
December 31, 2021 and 2020 that there is substantial doubt about our ability to continue as a going concern. A “going concern”
opinion indicates that the financial statements have been prepared assuming we 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 we do not continue as a going concern. Therefore, you should not rely on our 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 our financial statements may have an adverse impact on the relationships
we are developing and plan to develop with third parties as we continue the commercialization of our products and could make it challenging
and difficult for us to raise additional financing, all of which could have a material adverse impact on our business and prospects and
result in a significant or complete loss of your investment.
There
is no assurance that we will ever be profitable or that debt or equity financing will be available to us in the amounts, on terms, and
at times deemed acceptable to us, if at all. The issuance of additional equity securities by us would result in a significant dilution
in the equity interests of our current shareholders. Obtaining commercial loans, assuming those loans would be available, would increase
our liabilities and future cash commitments. If we are unable to obtain financing in the amounts and on terms deemed acceptable to us,
we may be unable to continue our business, as planned, and as a result may be required to scale back or cease operations for our business,
the results of which would be that our 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 we be unable to continue as a going concern.
14
The
outbreak of COVID-19 and its variants may have a significant negative impact on our business, sales, results of operations and financial
condition.
The
outbreak of the COVID-19 pandemic continues to affect the United States of America and the world, including in the primary regions in
which we will operate. Many State Governors issued temporary Executive Orders in 2020, which continue to remain effective in many states
that, among other stipulations, effectively limit in-person work activities for most industries and businesses having the effect of suspending
or severely curtailing operations. Many of these orders
are in the process of being lifted.
Additionally,
our 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 our 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 our
cash position and capital structure.
The
extent to which the COVID-19 outbreak could ultimately impact our 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 subsided, we may continue to experience significant impacts
to our business as a result of its global economic impact, including any economic downturn or recession that has occurred or may occur
in the future.
We
may not generate sufficient cash flows to cover our operating expenses.
As
noted previously, we have incurred operating losses since inception and expect to continue to incur losses as a result of expenses related
to research and continued development of our technology, marketing expense, corporate general and administrative expenses and interest
on the senior secured convertible promissory notes. Our limited capital resources and operations to date have been substantially funded
through issuance of $215,000 in senior secured convertible promissory notes (in November 2020) and our subsequent issuances during 2021
and January 2022 of 724,500 shares of common stock at $1.00 per share for gross proceeds of $724,500 and 365,671 shares of common stock
at $1.50 per share for gross proceeds of $ $548,500.00.
The
Company’s accumulated deficit was $862,942 and $5,687 as of December 31, 2021 and 2020, respectively. As of December 31, 2021,
we had total stockholders’ equity of $179,845 and although we had as of December 31, 2021, cash on hand of $424,445 the Company
believes that these funds will not prove adequate beyond twelve months.
In
the event that we are unable to generate sufficient cash from our operating activities or raise additional funds, we may be required
to delay, reduce or severely curtail our operations or otherwise impede our on-going business efforts, which could have a material adverse
effect on our business, operating results, financial condition and long-term prospects.
Security
breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation
to suffer.
In
the ordinary course of our business, we may collect and store sensitive data, including intellectual property, our proprietary business
information, proprietary business information of our customers, including, credit card and payment information, and personally identifiable
information of our customers and employees. The secure processing, maintenance, and transmission of this information is critical to our
operations and business strategy. As such, we are 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 our agreements with certain customers require us 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, which we refer to as 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 our ability to operate or expand our
business. Such laws and regulations require or may require us or our customers to implement privacy and security policies, permit consumers
to access, correct or delete personal information stored or maintained by us or our customers, inform individuals of security incidents
that affect their personal information, and, in some cases, obtain consent to use personal information for specified purposes.
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We
intend to take reasonable steps to protect the security, integrity and confidentiality of the information we collect, use, store, and
disclose, and we take steps to strengthen our security protocols and infrastructure, however, our information technology and infrastructure
may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, or other disruptions. We also could be negatively
impacted by software bugs or other technical malfunctions, as well as employee error or malfeasance. Advanced cyber-attacks can be multi-staged,
unfold over time, and utilize a range of attack vectors with military-grade cyber weapons and proven techniques, such as spear phishing
and social engineering, leaving organizations and users at high risk of being compromised. Any such access, disclosure, or other loss
of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory
penalties, a disruption of our operations, damage to our reputation, a loss of confidence in our business, early termination of our contracts
and other business losses, indemnification of our customers, liability for stolen assets or information, increased cybersecurity protection
and insurance costs, financial penalties, litigation, regulatory investigations and other significant liabilities, any of which could
materially harm our business any of which could adversely affect our business, revenues, and competitive position.
We
are dependent on third parties to, among other things, maintain our servers, provide the bandwidth necessary to transmit content, and
utilize the content derived therefrom for the potential generation of revenues.
We
depend on third-party service providers, suppliers, and licensors to supply some of the services, hardware, software, and operational
support necessary to provide some of our products and services. Some of these third parties do not have a long operating history or may
not be able to continue to supply the equipment and services we desire in the future. If demand exceeds these vendors’ capacity,
or if these vendors experience operating or financial difficulties or are otherwise unable to provide the equipment or services we need
in a timely manner, at our specifications and at reasonable prices, our ability to provide some products and services might be materially
adversely affected, or the need to procure or develop alternative sources of the affected materials or services might delay our ability
to serve our users. These events could materially and adversely affect our ability to retain and attract users, and have a material negative
impact on our operations, business, financial results, and financial condition.
Because
we do not intend to pay any cash dividends on our shares of common stock in the near future, our shareholders will not be able to receive
a return on their shares unless and until they sell them.
We
intend to retain a significant portion of any future earnings to finance the development, operation and expansion of our business. We
do not anticipate paying any cash dividends on our common stock in the near future. The declaration, payment, and amount of any future
dividends will be made at the discretion of our board of directors, and will depend upon, among other things, the results of operations,
cash flows, and financial condition, operating and capital requirements, and other factors as our board of directors considers relevant.
There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance with respect to the amount
of any such dividend. Unless our board of directors determines to pay dividends, our shareholders will be required to look to appreciation
of our common stock to realize a gain on their investment. There can be no assurance that this appreciation will occur.
We
are dependent on key personnel the loss of whose services would have a materially adverse effect on our business.
Our
continued success will depend, to a significant extent, on the services of our executive management team, and key personnel. If one or
more of these individuals were to leave, there is no guarantee we could replace them with qualified individuals in a timely or economically
satisfactory manner or at all. The loss or unavailability of any or all of these individuals could harm our ability to execute our
business plan, maintain important business relationships and complete certain product development initiatives, which would have a material
adverse effect on our business, results of operations and financial conditions.
We
are 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 we intend to operate.
We
were formed in Nevada in October 2020. We will encounter difficulties, including unforeseen difficulties as an early-stage, pre-revenue
company in establishing the credibility of our brand and commercial acceptability of our launched app.
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We
will incur net losses in the foreseeable future if we are unable to anticipate market trends and match our service offerings to market
patterns. Our business strategy is unproven, and we may not be successful in addressing early-stage challenges, such as establishing
our position in the market and developing effective marketing of our Thumzup app. To implement our business plan, we will be required
to obtain additional financing. We cannot guaranty that such additional financing will be available.
Our
prospects must be considered highly speculative, considering the risks, expenses, and difficulties frequently encountered in the establishment
of a new business with an unproven business plan, specifically the risks inherent in developmental stage companies seeking to have app
users with limited number social media followers endorse products or services at a level that advertisers will seek to fund and support.
We expect to continue to incur significant operating and capital expenditures and, as a result, we expect significant net losses in the
future which may materially affect our operationally viability. We cannot assure that we will be able to achieve positive cash flow operations
or, if achieved, that positive cash can be maintained for any significant period, or at all.
Although
we believe that our business strategy addresses an underserved but significant niche of market segment utilizing an important users or
consumers whom we define as “micro-influencers,” we may not be successful in the implementation of our business strategy
or our business strategy may not be successful, either of which will impede our development and growth. Our business strategy involves
attracting a large number of users who are active in social media and who are willing to make recommendations over our Thumzup app with
advertisers who find our service cost effective in generating sales and market support. Our ability to implement this business strategy
is dependent on our ability to:
•
predict concerns of advertisers;
•
identify and engage advertisers;
•
convince a large number of end users to adopt our Thumzup mobile application;
•
establish brand recognition and customer loyalty; and
•
manage growth in administrative overhead costs during the initiation of our business efforts.
We
do not know whether we will be able to successfully implement our business strategy or whether our business strategy will ultimately
be successful. In assessing our ability to meet these challenges, a potential investor should consider our lack of operating history
and brand recognition, our focus on nano-influencer users, management’s relative inexperience, the competitive conditions existing
in our industry and general economic conditions and consumer discretionary spending habits. Our growth is largely dependent on our ability