Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
REGISTRATION STATEMENT
Under
The Securities Act of 1933
(Exact name of Registrant as specified in its charter)
511210 | ||||
(State or other jurisdiction of | (Primary Standard Industrial | (IRS Employer | ||
incorporation or organization) | Classification Code Number) | Identification No.) |
THUMZUP MEDIA CORPORATION
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Chief Executive Officer
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Please send copies of all communications to:
with copies to:
Gregory Sichenzia, Esq. Jesse
L. Blue, Esq. 1185 Avenue of the Americas New York, NY 10036 (212) 930-9700 |
Ralph
V. De Martino, Esq. Marc E. Rivera, Esq. ArentFox Schiff LLP 1717 K Street NW Washington, D.C. 20006 (202) 724-6848 |
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box: ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ |
Smaller reporting company | |
Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a) may determine.
The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION | MAY 30, 2024 |
Thumzup Media Corporation
Up to [______] Shares of Common Stock
This is the initial public offering of [_______] shares of common stock, $0.001 par value per share of Thumzup Media Corporation, a Nevada corporation (the “Company”).
We are offering [_____] shares of common stock. Prior to this offering, our shares have been quoted on OTC Markets OTCQB since February 2022, with very limited trading. We currently estimate that the public offering price per share of common stock will be $[ ] per share. We intend to list our shares of common stock for trading on the CBOE BZX Exchange, Inc. (the “CBOE”), under the symbol “TZUP”. Completion of this offering is contingent on the approval of our listing application for trading of our common stock on the CBOE.
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, and, as such, may elect to comply with certain reduced public company reporting requirements for future filings. This prospectus complies with the requirements that apply to an issuer that is an emerging growth company.
Investing in our securities is highly speculative and involves a high degree of risk. See “Risk Factors” beginning on page 11 of this prospectus for a discussion of information that should be considered in connection with an investment in our securities.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Per Share of Common Stock | Total | |||||||
Public offering price | $ | $ | ||||||
Underwriting discounts and commissions (8%)(1) | $ | $ | ||||||
Proceeds to us, before expenses | $ | $ |
(1) | Does not include additional compensation payable to the underwriter. We have agreed to reimburse the underwriter for certain expenses in connection with this offering. In addition, we have agreed to issue to the underwriter, or its designees, warrants to purchase a number of shares of common stock equal to 5% of the number of shares of common stock sold in this offering, including any shares sold in the over-allotment option, if any (the “Underwriter Warrants”). We refer you to the section entitled “Underwriting” for additional information regarding underwriting compensation. |
We have granted the underwriter a 45-day option to purchase up to [______] additional shares of common stock sold in the offering, solely to cover over-allotments, if any. The purchase price to be paid per additional share will be equal to the public offering price per share of common stock, less the underwriting discount.
We will issue to the underwriter or its designees warrants to purchase up to a total of 5% of the shares of common stock sold in this offering, including the exercise of the over-allotment option, if any.
The underwriter expects to deliver the shares of common stock to purchasers in the offering on or about [_______], 2024.
Sole Book-Running Manager
DAWSON JAMES SECURITIES, INC.
The date of this prospectus is [_______], 2024
TABLE OF CONTENTS
Through and including [_______], 2024 all dealers effecting transactions in our securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter with respect to an unsold allotment or subscription.
No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.
Market data and certain industry data and forecasts used throughout this prospectus were obtained from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. We have not independently verified any of the data from third party sources, nor have we ascertained the underlying economic assumptions relied upon therein. Similarly, internal surveys, industry forecasts and market research, which we believe to be reliable based on our management’s knowledge of the industry, have not been independently verified. Forecasts are particularly likely to be inaccurate, especially over long periods of time. In addition, we do not necessarily know what assumptions regarding general economic growth were used in preparing the forecasts we cite. Statements as to our market position are based on the most currently available data. While we are not aware of any misstatements regarding the industry data presented in this prospectus, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this prospectus.
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GENERAL MATTERS
Unless otherwise indicated, all references to “dollars,” “US$,” or “$” in this prospectus are to United States dollars.
This prospectus contains various company names, product names, trade names, trademarks and service marks, all of which are the properties of their respective owners.
Unless otherwise indicated or the context otherwise requires, all information in this prospectus assumes no exercise of the over-allotment option.
Unless otherwise indicated, all references to “GAAP” in this prospectus are to United States generally accepted accounting principles.
Information contained on our websites, including ThumzupMedia.com, shall not be deemed to be part of this prospectus or incorporated herein by reference and should not be relied upon by prospective investors for the purposes of determining whether to purchase the securities offered hereunder.
For investors outside the United States, neither we nor any of our agents have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourself about and to observe any restrictions relating to this offering and the distribution of this prospectus.
USE OF MARKET AND INDUSTRY DATA
This prospectus includes market and industry data that has been obtained from third party sources, including industry publications, as well as industry data prepared by our management on the basis of its knowledge of and experience in the industries in which we operate (including our management’s estimates and assumptions relating to those industries based on that knowledge). Management’s knowledge of such industries has been developed through its experience and participation in those industries. Although our management believes such information to be reliable, neither we nor our management have independently verified any of the data from third party sources referred to in this prospectus or ascertained the underlying economic assumptions relied upon by such sources. In addition, the underwriters have not independently verified any of the industry data prepared by management or ascertained the underlying estimates and assumptions relied upon by management. Furthermore, references in this prospectus to any publications, reports, surveys or articles prepared by third parties should not be construed as depicting the complete findings of the entire publication, report, survey or article. The information in any such publication, report survey or article is not incorporated by reference in this prospectus.
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(1) | https://meetanshi.com/blog/display-advertising-statistics/ | |
(2) | https://www.nielsen.com/news-center/2015/still-recommended-by-friends-and-relatives-the-most-authentic-advertising-according-to-consumers-the-most-trusted-on-brand-websites/ | |
(3) | https://emplifi.io/resources/blog/the-user-generated-content-stats-you-need-to-know?utm_source=pixlee.com | |
(4) | https://morningconsult.com/wp-content/uploads/2019/11/The-Influencer-Report-Engaging-Gen-Z-and-Millennials.pdf | |
(5) | https://www.cnn.com/business/newsfeeds/globenewswire/7812666.html | |
(6) | https://www.bankrate.com/personal-finance/social-media-survey/ | |
(7) | https://www.retaildive.com/news/generation-z-social-media-influence-shopping-behavior-purchases-tiktok-instagram/652576/ | |
(8) | https://www.emarketer.com/content/us-time-spent-with-media-2021-update | |
(9) | https://hbr.org/2022/11/does-influencer-marketing-really-pay-off | |
(10) | https://www.prnewswire.com/news-releases/influencer-marketing-market-to-reach-199-6-billion-globally-by-2032-at-28-6-cagr-allied-market-research-301987451.html |
TRADEMARKS
We own or have rights to various trademarks, service marks and/or trade names that we use in connection with the operation of our business. This prospectus may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks and trade names or products in this prospectus is not intended to, and does not imply a relationship with, or endorsement or sponsorship by us. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus may appear without the ®, TM or SM symbols, but the omission of such references is not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable owner of these trademarks, service marks and trade names.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus and may not contain all of the information that you should consider before investing in the shares. You are urged carefully to read this prospectus in its entirety, including the information under “Risk Factors” and our financial statements and related notes included elsewhere in this Prospectus before investing in our common stock.
Overview
General
As used herein, “we,” “us,” “our,” the “Company,” “Thumzup®,” means Thumzup® Media Corporation unless otherwise indicated. Thumzup® operates in a single business segment which is social media marketing. Thumzup® has a mobile iPhone and Android application called “Thumzup®” that connects brands and people who use and love these brands. For the advertiser, Thumzup® incentivizes ordinary people to become paid content creators and post authentic valuable posts on social media about the advertiser and its products.
The Company was incorporated on October 27, 2020, under the laws of the State of Nevada. Its headquarters are located in Los Angeles, CA. The Company has never been the subject of any bankruptcy or receivership. The Company has never engaged in any material reclassification, merger, or consolidation of the Company. The Company has not acquired or disposed of any material amount of assets except in the normal course of business.
In February 2022, the Company was admitted to the Over-The-Counter Venture Market quotation system (OTCQB) under the symbol TZUP. We intend to list our common stock on the CBOE under the symbol “TZUP”. This offering will not be consummated until we have received CBOE approval of our application. There is currently very limited trading of our Common Stock, and an active trading market may never develop.
Thumzup® Products and Services
The Company operates in a single business segment which is social media marketing and advertising. The Thumzup® App works on both iPhone and Android mobile operating systems and connects brands and people who use and love these brands. For the Advertiser, Thumzup® incentivizes ordinary people to become paid content Creators and post authentic valuable posts on social media about the Advertiser and its products.
The Company seeks to capitalize on nationwide-wide gig economy and business democratization trends. Immense value and opportunity have been created through the democratization of ride sharing, hospitality, finance and other industries. The Thumzup® tools are designed to facilitate this democratization trend for the consumer and the Advertiser within the online marketing and advertising space.
The Company has built the technology to support an influencer and “gig” economy community around its Thumzup® App. This technology and community are designed to generate scalable authentic product posts and recommendations for advertisers on social media. It is designed to connect advertisers with individuals who are willing to tell their friends about the advertisers’ products online and offline.
Social Media Marketing Software Technology
The Thumzup® mobile App enables Creators, to select from brands advertising on the App and get paid to post about the advertiser on social media. Once the Thumzup® Creator selects the brand and takes a photo using the Thumzup® App, the Thumzup® App posts the photo and a caption to the Creator’s social media accounts. The advertiser then reviews and approves the post for payment and the Creator can cash out whenever they choose through popular digital payment systems. For the advertiser, the Thumzup® system enables brands to get real people to promote their products to their friends. In 2023, $148 billion was spent on digital display ads in the United States and while 43% of marketers consider display ads to be the least effective channel, 84% of marketers were still investing in them(1). We feel this demonstrates a significant need among advertisers for new methods of messaging to potential customers. We believe Thumzup’s ability to scale brand messages from the general population on social media could be part of addressing this substantial need in the market.
A recent Nielsen report found 81% of consumers believe friends and family are the most reliable sources of information about products(2). According to a Emplifi article, 64% of millennials recommend a product at least once a month(3), and according to a 2019 Morning Consult survey, 86% of Gen Z and millennials would post content for monetary compensation(4). Further, according to a 2020 IZEA Insights Study, 67% of social media consumers aspire to be paid social media influencers(5). According to a 2023 Bankrate, 48% of social media users have impulsively purchased a product seen on social media(6). Lastly, 85% of Gen Z says social media impacts purchase decisions according to a 2023 Retail Dive Survey(7).
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The average American adult spent 7 hours and 58 minutes per day using digital media in 2020 according to a 2020 eMarketer Report(8). The amount of daily usage has increased significantly since 2019, again according to an eMarketer Report(8), and the Company believes such usage will continue to accelerate. The Company empowers businesses that want to interact with these Creators and provides tools and data so they can increase consumer awareness and expand their customer bases.
In the past decade, social media platforms like Instagram, Facebook, Twitter, Pinterest, and TikTok have achieved mass worldwide consumer acceptance and created hundreds of billions of dollars in shareholder value. This worldwide viral growth demonstrates that compelling new social media platforms which present the right combination of experience and value, will attract Creators who will invest significant amounts of time on the platforms.
The Company is an early-stage entity building a new real-time platform which enables Advertisers to pay their customers and fans cash for their positive social media posts about their products and services, which in turn supports those individuals who earn money from various gig economy opportunities. The Company believes that acceptance of its App and subsequent revenue growth can be driven by empowering everyday people to make money by posting about brands and services that they already find enjoyable and attractive on social media. The Company believes that the Thumzup® App is a conduit for Advertisers to connect directly with consumers. The Company will need to secure enough advertisers to make the App an attractive platform for adoption and scalability, and to ensure that the platform is interesting enough for the Creators to return to on a regular basis. No assurance can be given that the Company will be able to achieve these results.
(1) | https://meetanshi.com/blog/display-advertising-statistics/) | |
(2) | https://www.nielsen.com/news-center/2015/still-recommended-by-friends-and-relatives-the-most-authentic-advertising-according-to-consumers-the-most-trusted-on-brand-websites/ | |
(3) | https://emplifi.io/resources/blog/the-user-generated-content-stats-you-need-to-know?utm_source=pixlee.com | |
(4) | https://morningconsult.com/wp-content/uploads/2019/11/The-Influencer-Report-Engaging-Gen-Z-and-Millennials.pdf | |
(5) | https://www.cnn.com/business/newsfeeds/globenewswire/7812666.html | |
(6) | https://www.bankrate.com/personal-finance/social-media-survey/ | |
(7) | https://www.retaildive.com/news/generation-z-social-media-influence-shopping-behavior-purchases-tiktok-instagram/652576/ | |
(8) | https://www.emarketer.com/content/us-time-spent-with-media-2021-update |
Intellectual Property
The Company owns the copyrights to the source code for the Thumzup® App on the iPhone iOS and Android operating mobile operating systems as used on the majority of mobile phone and tablet devices. The Company also owns the source code for the “backend” system that administrates the Thumzup® App, tracks payments and advertising campaigns.
The
Thumzup® thumb logo is a registered trademark owned by Thumzup® Media Corporation, Reg.
No. 6,842,424, registered Sep. 13, 2022. On April 13, 2021, the Company filed a trademark application ser. No. 90642789 with the
U.S. Patent and Trademark Office (“USPTO”) for the word mark THUMZUP, which was granted registration on June 21, 2022,
resulting in reg. no. 6764158. Also on April 13, 2021, the Company filed a trademark application ser. No. 90642848 for the
Thumzup® logo, featuring a stylized hand with an upwardly extended thumb. Meta Platforms, Inc. (which owns and operates Facebook
and Instagram) initially filed opposition to the logo on June 30, 2022. Thumzup® agreed to not use the logo as a reaction to a
post and Meta Platforms, Inc. subsequently withdrew their opposition on August 5, 2022 and it was dismissed without
prejudice.
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Business Model
Advertisers purchase an ad campaign on the Thumzup® advertiser dashboard website. Once the Advertiser approves a post for payment, the platform facilitates the payment to Creators’ a monetary amount per screened post which may range from $1.00 to $1,000.00. The Thumzup® platform enables the Advertiser to screen posts so that the Advertiser only pays for posts that are commercially valuable and rewards Creators for posts that have images and text that represent the Advertiser in a positive manner.
Per Post Fee. Thumzup® Advertisers are charged a “Per Post Fee.” By way of illustration, an Advertiser that buys 100,000 posts from Thumzup®, to pay out $10 per post to Thumzup® Creators, would purchase the posts for $13.00 each or $1,300,000. The Creators in this illustration would receive a total of $1,000,000 and Thumzup® would retain $300,000 for its services. The Thumzup® platform would facilitate 100,000 posts for the Advertiser from Thumzup® Creators sharing with their friends about their endorsed products on social media.
Value Proposition
The Thumzup® App is designed to generate scalable social media authentic social media content for Advertisers. It is designed to connect Advertisers with individuals who are willing to authentically promote their products online. The Company envisions that many gig economy workers will be ideal candidates to become Creators posting on Thumzup®. Imagine a gig economy driver waiting for their next fare who takes a moment to post about the good experience they had at their lunch spot where they are waiting. Imagine a gig economy worker on a laptop at a coffee shop doing a graphic design project from a gig economy site who takes a moment to post about the coffee shop where they are working on Thumzup®. The Company believes that Thumzup® can readily provide extra income for this existing pool of gig economy workers. The Company believes these gig economy workers will be able to provide quality Thumzup® posts on social media for which Advertisers will be willing to pay.
The Thumzup® App can also facilitate digital word of mouth recommendations of products and services from people who do not need to make extra money doing gigs, who are in fact quite affluent. The Company believes that many people who are well off may also use the App to recommend products and services to their network of friends on social media, many of whom may also be affluent.
Key Metrics as of May 10, 2024
Thumzup has had paid out on 19,182 approved posts to 1,127 Thumzup users regarding 223 advertisers since inception.
Thumzup advertisers have grown by a 148% CAGR since May 10, 2023.
Since May 10, 2023, the reach of the last 15,605 posts was 25,784,957 followers. Many of these campaigns were promotional campaigns but at list price this would have been $0.006 per reach, which is below many citations for other leading social media advertising costs.
The average number of followers for an individual Thumzup user since May 10, 2023 has been about 1,600. Many users with tens of thousands of followers posted about our advertisers, including one with more than 600,000 followers. We find that even though we are targeting the general public, in aggregate a Thumzup campaign can reach an average of more than 1,600 followers per post. So, a Thumzup campaign combines the high trust factor of the general public with less followers and also draws in some professional influencers who post because they like the product at a lower cost per post than if they were hired as an influencer.
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.
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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 and its subsidiaries, for the current fiscal year and any other material future period.
Thumzup® App Workflow
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For direct-to-consumer (“DTC”) brands, a customer might get a postcard in the box upon receiving a purchase in the mail. A postcard would inform the customer about the opportunity to get cashback by sharing a picture of the purchase with friends on social media. If the Creator takes a picture of the postcard, a link to download the Thumzup® App will appear on the customer’s phone. The illustration to the left and those below are intended as examples only and will not necessarily correlate to a final version or an amount. Actual wording and amounts will depend on agreements with Advertisers, products or brands seeking recommendations and other market factors as may be assessed by management. |
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For physical stores and restaurants, the Company offers signage to make patrons aware that they can be paid to tell their friends about their positive experience in the store or restaurant.
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The main screen appears after a Creator enters the unique code the Company sent. The main screen enables each Creator to easily select brands, nearby restaurants, and stores that will pay the Thumzup Creator to post to friends and other followers about products and places recommended by the Creator on social media.
The main screen has seven main areas where the Creator can take action. There is a “hamburger” menu in the upper left to access administrative functions and there is a balance due to the Creator displayed on the upper right. Next, going down the screen there is a search bar, a map tool, a left to the right slider to select brands that will pay for posts, and an up and down slider to select locations nearby that will pay to post. The “hamburger” menu in the upper left gives the Creator access to change bank or payment information, to link to social media, and to invite friends. The balance due to the Creator number in the upper right has the total of monies pending and monies due but not yet transferred to the Creator.
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When Creators select a brand or location tile from the main menu, the App enables them to take pictures of them enjoying the product or experience. The App then enables them to customize the caption that will be posted to social media. Once Creators submit the pictures and captions, they get uploaded and displayed on the social media account of those Creators. | |
Thumzup® inserts the tag required to disclose that the post is a paid promotion. If the Advertiser, has chosen to offer a discount code to the Thumzup Creator’s friends on social media, that discount code gets embedded in the post along with the offer.
When the Creator makes a new post, the post is reviewed by Thumzup on behalf of the Advertiser to assure that it meets community standards, does not include sexually explicit images or text, and that the post reflects the Advertiser in a commercially favorable light. For instance, if images are poorly lit or irrelevant to the brand, Creators may be sent text messages to the Creators giving them this feedback and explaining that the post is not due for payment.
When Creators want to receive the money they have earned they tap on the “PayMe!” selection on the App menu. The App then pays the Creator via online payment systems, such as Venmo or PayPal, the amount due from all screened posts made by that Creator.
The App enables the Creator to search for brands they like that will pay them to post. This is useful so that Thumzup® Creators can easily discover brands they like to post about. The App pays Creators to post about brands. |
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In the Company’s opinion, paid posts from happy customers about how much they like an Advertiser’s goods or services offer attractive, compelling values to both Advertisers and Creators compared to traditional online advertising because those posts should yield higher response rates. |
The Thumzup® 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. Thumzup® Creators can opt-in to receive text message from brands. This opt-in opportunity is valuable to Advertiser brands because text messages have higher visibility to potential customers than emails.
The Thumzup® system enables “campaign spend” to be limited by a total dollar amount as determined by the Advertiser. Once the posts that the Advertiser has paid for have been posted and approved for payment, the campaign expires and the Advertiser incurs no additional cost until it chooses to increase the amount. It also enables the Advertiser to limit the number of posts made by an individual Creator by day, week, and month. The Company believes that this feature enables more efficient budgetary control while reducing unintended cost overruns. This feature may eliminate abuse or saturation by Creators who post more than what may be commercially valuable to Advertisers.
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Available Information:
Thumzup® 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.
Our Corporate Information
Thumzup Media Corporation 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 expect the website to enable the unattended onboarding of new customers in the second quarter of 2021.The information contained on, or that can be accessed through, our website is not a part of this prospectus. We have applied for a trademark for “Thumzup.” We own the source code for the Thumzup applications on the iPhone iOS and the Android. We also own the source code for the “backend” system that administrates the Thumzup app, tracks payments and advertising campaigns.
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THE OFFERING
Common shares offered by us: | [_______] shares of common stock. | |
Assumed public offering price | $[_______] per share of common stock. | |
Over-allotment option(1) | We have granted the underwriters a 45-day option to purchase up to [______] additional shares of common stock, representing 15% of the shares sold in the offering. The purchase price to be paid per additional share will be equal to the public offering price per share of common stock. | |
Common stock outstanding before the offering(2) | 7,720,084 shares of common stock. | |
Common stock to be outstanding after the offering(3) | [______] shares of common stock. If the underwriter’s over-allotment option is exercised in full, the total number of shares of common stock outstanding immediately after this offering would be [______]. | |
Use of proceeds | We intend to use the net proceeds of this offering for general corporate purposes. See “Use of Proceeds.” | |
Risk factors | Investing in our securities is highly speculative and involves a high degree of risk. You should carefully consider the information set forth in the “Risk Factors” section beginning on page 11 before deciding to invest in our securities. | |
Proposed CBOE trading symbol | We intend to list our common stock on the CBOE under the symbol “TZUP”. This offering will not be consummated until we have received CBOE approval of our application. | |
Lock-ups | Our directors and executive officers and holders of 5% or more of our outstanding common stock, will agree with the underwriter not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of our common stock or securities convertible into common stock for a period of 180 days after the date of this prospectus. The Company will agree not to issue any shares of common stock or securities convertible into common stock, subject to certain exceptions, for a period of 6 months after the date of this prospectus without the consent of the underwriter. See “Underwriting.” | |
Underwriter’s Warrants | The Company has agreed to issue to Dawson James or its designees warrants to purchase up to a total of 5.0% of the shares of common stock sold in this offering, including the exercise of the over-allotment option, if any. Such warrants and underlying shares of common stock are included in this prospectus. The warrants are exercisable at $[_____] per share (125% of the public offering price per share of Common Stock) commencing on a date which is six (6) months from the effective date of the offering under this prospectus supplement and expiring on a date which is no more than five (5) years from the commencement of sales of the offering in compliance with FINRA Rule 5110. |
(1) | Unless otherwise indicated, all information in this prospectus assumes no exercise by the underwriter of its option to purchase up to [______] additional shares of common stock to cover over-allotments, if any. |
(2) | Based on shares of common stock outstanding on May 29, 2024, and excludes 120,000 shares (or [_____] shares if the Underwriter exercise its over-allotment in full) underlying the warrants we will issue to the Underwriter under this offering. |
(3) | Based on assumed public offering price of $[____] per share of common stock (the price listed on the cover page of this prospectus). |
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SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
In the tables below, we provide you with our summary consolidated financial data for the periods indicated. We have derived the following summary of our condensed financial statements for the three months ended March 31, 2024 and 2023, and the balance sheet data as of March 31, 2024 and December 31, 2023, from our financial statements appearing elsewhere in this prospectus. The historical financial data presented below is not necessarily indicative of our financial results in future periods. You should read the summary consolidated financial data in conjunction with those financial statements and the accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. Our consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States, or U.S. GAAP.
Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |||||||
Selected Income Statement Data: | ||||||||
Operating Expenses | $ | 2,521,078 | $ | 1,213,035 | ||||
Loss from Operation | $ | (2,519,030 | ) | $ | (1,210,614 | ) | ||
Net Loss | $ | (3,324,180 | ) | $ | (1,504,681 | ) | ||
Net Loss per Common Share: | ||||||||
Basic | $ | (0.47 | ) | $ | (0.24 | ) | ||
Fully Diluted | $ | (0.47 | ) | $ | (0.24 | ) | ||
Cash Dividend per Common Share |
December 31, 2023 | December 31, 2022 | |||||||
Selected Balance Sheet Data: | ||||||||
Cash and cash equivalents | $ | 259,212 | $ | 1,155,343 | ||||
Capitalized software costs | $ | 142,614 | $ | - | ||||
Total Assets | $ | 415,187 | $ | 1,160,799 | ||||
Accounts payable and accrued expenses | $ | 65,680 | $ | 374,275 | ||||
Shareholders’ Equity (Deficit) | $ | 349,327 | $ | 786,524 |
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RISK FACTORS
An investment in our in our common stock involves a high degree of risk. The risks described below include all material risks to our company or to investors in this offering that are known to our company. You should carefully consider such risks before participating in this offering. 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 you might lose all or part of your investment. When determining whether to buy our common stock, you should also refer to the other information in this prospectus, including our financial statements and the related notes included elsewhere in this prospectus.
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.
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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 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 consent to use personal information for specified purposes.
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The Company intends to take reasonable steps to protect the security, integrity and confidentiality of the information it collects, uses, stores, and discloses, and it takes steps to strengthen its security protocols and infrastructure, however, the Company’s information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, or other disruptions. The Company 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 the Company’s operations, damage to its reputation, a loss of confidence in the Company’s business, early termination of its contracts and other business losses, indemnification of its 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 and adversely affect the Company’s business, revenues, and competitive position.
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.
The Company depends on third-party service providers, suppliers, and licensors to supply some of the services, hardware, software, and operational support necessary to provide some of its 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 the Company desires 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 the Company needs in a timely manner, at its specifications and at reasonable prices, the Company’s 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 its ability to serve its users. These events could materially and adversely affect the Company’s ability to retain and attract users, and have a material negative impact on its operations, business, financial results, and financial condition.
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 intends to retain a significant portion of any future earnings to finance the development, operation and expansion of its business. The Company does not anticipate paying any cash dividends on its Common Stock in the near future. The declaration, payment, and amount of any future dividends will be made at the discretion of the Company 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 its 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 the Board of Directors determines to pay dividends, Shareholders will be required to look to appreciation of the Company’s Common Stock to realize a gain on their investment. There can be no assurance that this appreciation will occur.
The Company is dependent on key personnel.
The Company’s continued success will depend, to a significant extent, on the services of its Directors, executive management team, and key personnel. If one or more of these individuals were to leave, there is no guarantee the Company 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 the Company’s ability to execute its business plan, maintain important business relationships and complete certain product development initiatives, which would have a material adverse effect on its business, results of operations and financial conditions.
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The Company may not be able to successfully execute the business plan.
The Company is raising significant amounts of capital in order to scale its operations. This will allow the Company to expand its operations and continue to build out its business model. There is no guarantee that the Company will be able to achieve or sustain the foregoing within the anticipated timeframe, or at all - even though the Company’s Directors and Officers are industry professionals. The Company may exceed the budget, encounter obstacles in development activities, or be hindered or delayed in implementing the Company’s plans, any of which could imperil the Company’s ability to execute its 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 was formed in Nevada in October 2020 and will encounter difficulties, including unforeseen difficulties as an early-stage, pre-revenue company in establishing the credibility of its brand and service.
The Company will incur net losses in the foreseeable future if it is unable to anticipate market trends and match its service offerings to market patterns. The Company’s business strategy is unproven, and it may not be successful in addressing early-stage challenges, such as establishing the Company’s position in the market and developing effective marketing of its Thumzup® App. To implement its business plan, the Company will be required to obtain additional financing but cannot guaranty that such additional financing will be available.
The Company’s 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 mobile app users with limited number social media followers endorse products or services at a level that Advertisers will seek to fund and support. The Company expects to continue to incur significant operating and capital expenditures and, as a result, it expects significant net losses in the future. The Company cannot assure that it 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 the Company believes that its business strategy addresses an underserved but significant niche of market segment utilizing important Creators or consumers whom it defines as “micro-influencers,” the Company may not be successful in the implementation of its business strategy or its business strategy may not be successful, either of which will impede the Company’s development and growth. The Company’s business strategy involves attracting a large number of Creators who are active in social media and who are willing to make recommendations over the Thumzup® App with Advertisers who find the Company’s service cost effective in generating sales and market support. The Company’s ability to implement this business strategy is dependent on its ability to:
● | predict concerns of Advertisers; | |
● | identify and engage Advertisers; | |
● | convince a large number of end users to adopt the Thumzup® App; | |
● | establish brand recognition and customer loyalty; and | |
● | manage growth in administrative overhead costs during the initiation of the Company’s business efforts. |
The Company does not know whether it will be able to successfully implement its business strategy or whether the Company’s business strategy will ultimately be successful. In assessing the Company’s ability to meet these challenges, a potential Investor should consider the Company’s lack of operating history and brand recognition, its focus on nano-influencer Creators, management’s relative inexperience, the competitive conditions existing in its industry and general economic conditions and consumer discretionary spending habits. The Company’s growth is largely dependent on its ability to successfully implement its business strategy. The Company’s revenue may be adversely affected if it fails to implement its business strategy or if the Company diverts resources to a business strategy that ultimately proves unsuccessful.
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The Company has not yet established brand identity and customer loyalty.
The Company believes that establishing and maintaining brand identity and brand loyalty is critical to attracting and retaining active users to the Thumzup® App program. In order to attract Thumzup® App Creators to the Company’s program quarter over quarter, the Company may need to spend substantial funds to create and maintain brand recognition among Thumzup® App users. If the Company’s branding efforts are not successful, its ability to earn revenues and sustain its operations will be materially impaired.
Promotion and enhancement of the Thumzup® App will also depend on the Company’s success in consistently providing high-quality, ease-of-use, fun-to-share products or recommended services to the Company’s App users. Since the Company relies on technology partners to provide portions of the service to its customers, if the Company’s suppliers do not send accurate and timely data, or if its customers do not perceive the products it offers as attractive or superior, the value of the Thumzup® brand could be harmed. Any brand impairment or dilution could decrease the attractiveness of Thumzup® to one or more of these groups, which could harm the Company’s business, results of operations and financial condition.
The Company cannot assure investors that the Thumzup® App will be accepted.
Anticipation of demand and market acceptance of service offerings are subject to a high level of uncertainty and challenges to implementation. The success of the Company’s service offerings primarily depends on the interest of Creators joining its service, as to which it cannot assure to prospective Investors. In general, achieving market acceptance for the Company’s services will require substantial marketing efforts and the expenditure of significant funds, the availability of which the Company cannot be assured, to create awareness and demand among customers. The Company has limited financial, personnel and other resources to undertake extensive marketing activities. Accordingly, no assurance can be given as to the acceptance of the Thumzup® App services or the Company’s ability to generate the revenues necessary to remain in business.
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.
While platforms are in operation for professional or large-scale influencers, to the Company’s knowledge no other company is currently offering Advertisers a scalable platform to activate everyday end-user micro-influencers who do not possess a large legion of followers. The success of the Company’s service offerings primarily depends on the interest of Creators and Advertisers joining its service, as opposed to a similar service offered by a competitor catering to celebrities or other large-scale influencers. If a direct competitor having greater human and cash resources enters the market targeting micro-influencers, the Company’s achieving market acceptance for the Thumzup® App may require additional marketing efforts and the expenditure of significant funds to create awareness and demand among customers. The Company has limited financial, personnel and other resources to undertake additional marketing activities. Accordingly, the Company may be unable to compete, its operations may suffer, and it may suffer greater losses.
Although the Company may own various intellectual property rights, these rights may not provide it with any competitive advantage.
The Company uses “Thumzup®” as a brand name, however it cannot assure prospective Investors that the services it sells, or that its brand name will not infringe on the intellectual property rights of others, or that the Company’s assertions of intellectual property rights will be enforceable or provide protection against competitive products or otherwise be commercially valuable. Moreover, enforcement of intellectual property rights typically requires time-consuming and costly litigation, and the Company cannot assure that others will not independently develop substantially similar products.
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The Company’s future financial results are uncertain and its operating results may fluctuate, due to, among other things, consumer trends, App user activity, competition, and changing social media behaviors.
As a result of the Company’s lack of operating history, it is unable to forecast market penetration or anticipated revenue and it has little historical financial data upon which to base planned operating expenses. The Company bases its current and future expense levels on its operating plans and estimates of future expenses. The Company’s expenses are dependent in large part upon expenses associated with its proposed marketing expenditures and related overhead expenses, and the costs of hiring and maintaining qualified personnel to carry out its respective services. Sales and operating results are difficult to forecast because they will depend on the growth of the Company’s customer base, changes in customer demands based on consumer trends, the degree of utilization of its advertising services as well as the mix of products and services sold by its Advertisers.
As a result, the Company may be unable to make accurate financial forecasts and adjust its spending in a timely manner to compensate for any unexpected revenue shortfall. This inability could cause the Company’s net losses in a given quarter to be greater than expected and could further cause continuing greater losses quarter over quarter.
The Company’s ability to succeed will depend on the ability of its management to control costs.
The Company has used reasonable commercial efforts to assess and predict costs and expenses based on the and restricted cash experience of its management. However, the Company has a limited operating history upon which to base predictions. Implementing its business plan may require more employees, equipment, supplies or other expenditure items than the Company has predicted. Similarly, the cost of compensating additional management, employees and consultants or other operating costs may be more than its estimates, which could result in sustained losses.
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 and Directors may engage in other activities. Although there are none known to the Company, the potential for conflicts of interest exists among the Officers, Directors, and affiliated persons for future business opportunities that may not be presented to the Company. The Company’s Officers and Directors may have conflicts of interests in allocating time, services, and functions between the other business ventures in which those persons may be or become involved. The Company’s Officers and Directors however believe that the business will have sufficient staff, consultants, employees, agents, contractors, and managers to adequately conduct its business.
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.
Any compensation received by the Officers, management personnel, and Directors, and for the Company’s founders will be determined from time to time by the Board of Directors. The Company’s Officers, Directors and management personnel will be reimbursed for any out-of-pocket expenses incurred on their behalf.
Combination or “layering” of multiple risk factors may significantly increase the risk of loss on share of the Company’s common stock.
Although the various risks discussed in this prospectus are generally described separately, investors should consider the potential effects of the interplay of multiple risk factors. Where more than one significant risk factor is present, the risk of loss to an investor may be significantly increased. In considering the potential effects of layered risks, an Investor should carefully review the descriptions of the shares.
Our business is sensitive to consumer spending, inflation and economic conditions.
Consumer purchases of discretionary retail items and restaurants may be adversely affected by national and regional economic, market and other conditions such as employment levels, salary and wage levels, the availability of consumer credit, inflation, high interest rates, high tax rates, high fuel prices, the threat of a pandemic or other health crisis (such as COVID-19) and consumer confidence with respect to current and future economic, market and other conditions. Consumer purchases may decline during recessionary periods or at other times when unemployment is higher or disposable income is lower. These risks may be exacerbated for retailers such as our Advertisers. Consumer willingness to make discretionary purchases may decline, may stall or may be slow to increase due to national and regional economic conditions. Our financial performance is particularly susceptible to economic and other conditions in regions or states where we have a significant presence. There remains considerable uncertainty and volatility in the national and global economy. Further or future slowdowns or disruptions in the economy, market and other conditions could adversely affect mall traffic and new mall and shopping center development and could materially and adversely affect us and our business strategy. We may not be able to sustain or increase our current net sales if there is a decline in consumer spending.
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A deterioration of economic conditions and future recessionary periods may exacerbate the other risks faced by our business, including those risks we encounter as we attempt to execute our business plans. Such risks could be exacerbated individually or collectively.
Russia’s Invasion of Ukraine may negatively impact our business.
On February 24, 2022, Russia launched an invasion of Ukraine which has resulted in increased volatility in various financial markets and across various sectors. The United States and other countries, along with certain international organizations, have imposed economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response to the invasion. The extent and duration of the military action, resulting sanctions and future market disruptions in the region are impossible to predict. Moreover, the ongoing effects of the hostilities and sanctions may not be limited to Russia and Russian companies and may spill over to and negatively impact other regional and global economic markets of the world, including Europe and the United States. The ongoing military action along with the potential for a wider or nuclear conflict could further increase financial market volatility and cause negative effects on regional and global economic markets, industries, and companies. It is not currently possible to determine the severity of any potential adverse impact of this event on the financial condition of any of the Company’s securities, or more broadly, upon the global economy.
Several of our outsourced developers are based in Pakistan and our product development could be impacted by conflict in the Middle East.
Pakistan’s economy is heavily dependent on exports and subject to high interest rates, economic volatility, inflation, currency devaluations, high unemployment rates and high level of debt and public spending. There is also the possibility of nationalization, expropriation or confiscatory taxation, security market restrictions, political changes, government regulation, a conflict with India, or diplomatic developments (including war or terrorist attacks), which could affect adversely the economy of Pakistan or the ability of the Company to continue developing its platform. As an emerging country, Pakistan’s economy is susceptible to economic, political and social instability; unanticipated economic, political or social developments could impact economic growth. Pakistan is also subject to natural disaster risk. In addition, recent political instability and protests in the Middle East have caused significant disruptions to many industries. Pakistan has recently seen elevated levels of ethnic and religious conflict, in some cases resulting in violence or acts of terrorism. Continued political and social unrest in these areas may negatively affect the Company.
Changes in Instagram, PayPal, Apple App Store, or Google Play Store policies could disrupt our business operations. In addition, our third-party service providers may decline to provide services due to their policies, or cease to provide services previously provided to us due to a change of policy.
We rely on the Apple App Store and the Google Play Store to distribute our mobile applications, PayPal and Venmo to pay our Creators, while Instagram is currently the sole channel through which Creators can make posts utilizing our platform. Should these third parties change policy or modify interpretations of existing policies, it may cause disruptions to our business and have a material adverse effect on our business and financial condition.
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.
We rely on third-party software to run our critical development and information systems. We also depend on our software vendors to provide long-term software maintenance support for our information systems. Software vendors may decide to discontinue further development, integration or long-term software maintenance support for our information systems, in which case we may need to abandon one or more of our current information systems and migrate some or all of our development and information systems, thus increasing our operational expense as well as disrupting the management of our business operations.
Cyber security breaches of our systems and information technology could adversely impact our ability to operate.
We need to protect our own internal trade secrets, work product for our clients, and other business confidential information from disclosure. We face the threat to our computer systems of unauthorized access, computer hackers, computer viruses, malicious code, organized cyber-attacks and other security problems and system disruptions, including possible unauthorized access to our and our clients’ proprietary or classified information.
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We rely on industry-accepted security measures and technology to maintain securely all confidential and proprietary information on our information systems. We have devoted and will continue to devote significant resources to the security of our computer systems, but they are still vulnerable to these threats. A user who circumvents security measures can misappropriate confidential or proprietary information, including information regarding us, our personnel and/or our clients, or cause interruptions or malfunctions in operations. Our industry has not been immune from organized cyber-attacks from persons seeking a ransom as a condition of releasing access to the firm’s computer systems. As a result, we can be required to expend significant resources to protect against the threat of these system disruptions and security breaches or to alleviate problems caused by these disruptions and breaches. Any of these events can damage our reputation and have a material adverse effect on our business, financial condition, results of operations and cash flows.
Risks Related to the 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.
There is currently very limited trading of our Common Stock, and an active trading market may never develop. Our Common Stock is quoted on the OTCQB tier of the OTC Markets. The OTCQB tier of the OTC Markets is a thinly traded market and lacks the liquidity of certain other public markets with which some investors may have more experience. While we remain determined to work towards getting our securities listed on a national exchange, there can be no assurance that this will occur. As a result, we may never develop an active trading market for our securities which may limit our investors’ ability to liquidate their investments.
The Company is controlled by its Chairman/Board of Directors, Chief Executive Officer, President, and additional Officers of the Company.
The Company is reliant on the Directors and Officers for key operations. Officers and Directors currently own a majority of common shares outstanding. The Board, therefore, has complete control as to the direction of the Company. There is a disproportionate reliance on the Directors and Officers for the operation of the Company, and therefore a risk that the direction of the Company may change if the Board or Officers are unable to perform their duties as Directors and Officers.
The Company’s common stock price may be volatile, which could result in substantial losses to investors and litigation.
In addition to changes to market prices based on the Company’s results of operations and the factors discussed elsewhere in this “Risk Factors” section, the market price of and trading volume for the common stock may change for a variety of other reasons, not necessarily related to the Company’s actual operating performance. The capital markets have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of the Company’s common stock. In addition, the average daily trading volume of the securities of small companies can be very low, which may contribute to future volatility. Factors that could cause the market price of the Common Stock to fluctuate significantly include:
● | the results of operating and financial performance and prospects of other companies in the same industry; | |
● | strategic actions by the Company or its competitors, such as acquisitions or restructurings; | |
● | announcements of innovations, increased service capabilities, new or terminated customers or new, amended or terminated contracts by competitors; | |
● | the public’s reaction to Company press releases, other public announcements, and filings with the Securities and Exchange Commission; |
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● | lack of securities analyst coverage or speculation in the press or investment community about the Company or market opportunities in the social media marketing industry; | |
● | changes in government policies in the United States and, as the Company’s international business increases, in other foreign countries; | |
● | changes in earnings estimates or recommendations by securities or research analysts who track the Company’s Common Stock or failure of the Company’s actual results of operations to meet those expectations; | |
● | market and industry perception of the Company’s success, or lack thereof, in pursuing its growth strategy; | |
● | changes in accounting standards, policies, guidance, interpretations or principles; | |
● | any lawsuit involving the Company, its services or its products; | |
● | arrival and departure of key personnel; | |
● | sales of common stock by the Company, its investors or members of its management team; and | |
● | changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural or man-made disasters. |
Any of these factors, as well as broader market and industry factors, may result in large and sudden changes in the trading volume of the Company’s common stock and could seriously harm the market price of the common stock, regardless of the Company’s operating performance. This may prevent an Investor from being able to sell its shares at or above the price the investor paid for its shares of common stock, if at all. In addition, following periods of volatility in the market price of a company’s securities, shareholders often institute securities class action litigation against that company. The Company’s involvement in any class action suit or other legal proceeding could divert its senior management’s attention and could adversely affect the Company’s business, financial condition, results of operations and prospects.
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.
Sales of substantial amounts of shares of the Company’s common stock, or the perception that these sales could occur, could adversely affect the market price of the common stock and could impair the Company’s future ability to raise capital through common stock offerings. The Company’s Officers and Directors still beneficially own, collectively, a substantial percentage of the outstanding common stock. If one or more of them were to sell a substantial portion of the shares they hold, it could cause the Company’s stock price to decline.
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’s Officers and Directors still beneficially own, collectively, a substantial percentage of the outstanding common stock. Accordingly, these shareholders have had, and will continue to have, significant influence in determining the outcome of any corporate transaction or any other matter submitted for approval to the Company’s shareholders, including mergers, consolidations and the sale of assets, Director elections and other significant corporate actions. They will also have significant influence in preventing or causing a change in control of the Company. In addition, without the consent of these shareholders, the Company could be prevented from entering into transactions that could be beneficial to it. The interests of these shareholders may differ from an Investor’s interests as a shareholder, and they may act in a manner that advances their best interests and not necessarily those of other shareholders.
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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 is an “emerging growth company,” as defined in the JOBS Act, and it expects to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, (i) being required to present only two years of audited financial statements and related financial disclosure, (ii) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, (iii) extended transition periods for complying with new or revised accounting standards, (iv) reduced disclosure obligations regarding executive compensation in periodic reports and proxy statements and (v) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. The Company has taken, and in the future may take, advantage of these exemptions until such time that it is no longer an “emerging growth company. As a result, the Company’s financial statements may not be comparable to companies that comply with public company effective dates. The Company cannot predict if investors will find its Common Stock less attractive because it relies on these exemptions. If some investors find the Company’s Common Stock less attractive as a result, there may be a less active trading market for the Common Stock and the price of the Common Stock may be more volatile.
The Company will remain an “emerging growth company” for up to five years, although it will lose that status sooner if its annual revenues exceed $1.07 billion, if it issues more than $1 billion in non-convertible debt in a three-year period, or if the market value of the Common Stock that is held by non-affiliates exceeds $700 million as of any June 30.
The Company’s disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
The Company is subject to the periodic reporting requirements of the Exchange Act, and will be required to maintain disclosure controls and procedures that are designed to reasonably assure that information required to be disclosed by the Company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the SEC, and that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure.
As a public company, the Company is also required to maintain internal control over financial reporting and to report any material weaknesses in those internal controls. Such internal controls are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.
If the material weaknesses in the Company’s internal controls are not fully remediated or if additional material weaknesses are identified, those material weaknesses could cause the Company to fail to meet its future reporting obligations, reduce the market’s confidence in its financial statements, harm the stock price and subject the Company to sanctions or investigations by the SEC or other regulatory authorities. In addition, the Company’s common stock may not be able to remain quoted on OTCQB or any other securities quotation service or exchange.
For as long as the Company is an “emerging growth company,” as defined in the JOBS Act, or a non-accelerated filer, as defined in Rule 12b-2 under the Exchange Act, the Company’s auditors will not be required to attest as to its internal control over financial reporting. If the Company continues to identify material weaknesses in its internal control over financial reporting, are unable to comply with the requirements of Section 404 in a timely manner, are unable to assert that its internal control over financial reporting is effective or, once required, the Company’s independent registered public accounting firm is unable to attest that its internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of its financial reports and the market price of the Company’s common stock could decrease. The Company could also become subject to stockholder or other third-party litigation as well as investigations by the securities exchange on which the Company’s securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources and could result in fines, trading suspensions or other remedies.
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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.
The trading market for the Company’s common stock will rely in part on the research and reports that equity research analysts, over whom it has no control, publish about the Company and its business. The Company may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of the Company, the market price for its common stock could decline. In the event the Company obtains securities or industry analyst coverage, the market price of the common stock could decline if one or more equity analysts downgrade the common stock or if those analysts issue unfavorable commentary, even if it is inaccurate, or cease publishing reports about the Company or its business.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains, in addition to historical information, forward-looking statements. These statements are based on our management’s beliefs and assumptions and on information currently available to our management. The forward-looking statements are contained principally under the headings “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Use of Proceeds” and “Business.” Forward-looking statements include statements concerning:
● | our possible or assumed future results of operations; | |
● | our business strategies; | |
● | our ability to attract and retain customers; | |
● | our ability to sell products to customers; | |
● | our cash needs and financing plans; | |
● | our competitive position; | |
● | our industry environment; | |
● | our potential growth opportunities; | |
● | the effects of future regulation; and | |
● | the effects of competition. |
All statements in this prospectus that are not historical facts are forward-looking statements. We may, in some cases, use terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions that convey uncertainty of future events or outcomes to identify forward-looking statements.
The outcome of the events described in these forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. These important factors include our financial performance and the other important factors we discuss in greater detail in “Risk Factors.” You should read these factors and the other cautionary statements made in this prospectus as applying to all related forward-looking statements wherever they appear in this prospectus. Given these factors, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date on which the statements are made. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we currently expect.
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USE OF PROCEEDS
We estimate that we will receive net proceeds from this offering of approximately $[_____] million (or approximately $[_____] million if the underwriter’s option to purchase additional shares of common stock is exercised in full) based on an assumed initial public offering price of $[_____] per share of common stock, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Each $1.00 increase (decrease) in the assumed initial public offering price of $[____] per share of common stock would increase (decrease) the net proceeds to us from this offering by approximately $[____] million, assuming the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 100,000 shares of common stock offered by us would increase (decrease) the net proceeds to us from this offering by approximately $[_____] million, assuming the assumed initial public offering price of $[_____] per share of common stock remains the same.
We currently anticipate that we will use the net proceeds from this offering as follows:
● | approximately $[____] million ([__]% of the net proceeds) to [________]; | |
● | approximately $[____]million ([__]% of the net proceeds) to [______]; | |
● | Approximately $[____]million ([__]% of the net proceeds) to [______]; and | |
● | approximately $[____]million ([__]% of the net proceeds) to [______]. |
We cannot specify with certainty all of the particular uses for the remaining net proceeds to us from this offering. In addition, although from time to time, we may meet with and identify acquisition targets, we currently have no agreements or commitments with respect to material acquisitions or investments in other companies. Management will retain broad discretion in the allocation of the net proceeds of this offering. You will not have the opportunity to evaluate the economic, financial or other information on which we base our decisions on how to use the proceeds.
DIVIDEND
POLICY
We have not declared or paid any cash dividends on our common stock since our inception. We intend to retain future earnings, if any, to finance the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Payment of future cash dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, the requirements and contractual restrictions of then-existing debt instruments and other factors that our board of directors deems relevant.
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CAPITALIZATION
The following shows our cash and cash equivalents, our restricted cash and our capitalization as of December 31, 2023, on:
* an actual basis
** a proforma basis, giving effect to issuance of [____] shares of common stock at $[___] and [___] shares of common stock at $0.001, par value per share.
As of December 31, 2023 | ||||||||||||
Actual | Proforma | Proforma as Adjusted | ||||||||||
Cash and cash equivalents | $ | 259,212 | ||||||||||
Restricted cash | - | |||||||||||
$ | 259,212 | $ | $ | |||||||||
Total assets | $ | 415,187 | — | |||||||||
Common stock, $0.001 par value, 250,000,000 shares authorized 7,656,488 shares issued and outstanding as of December 31, 2023 | $ | 7,656 | $ | $ | ||||||||
Additional Paid in Capital | 6,033,331 | |||||||||||
Accumulated deficit | (5,691,803 | ) | ||||||||||
Total shareholders’ equity | 349,327 | |||||||||||
Total Capitalization | $ | 415,187 | $ | $ |
You should read the foregoing table in conjunction with our financial statements, including the related notes, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus.
DILUTION
If you invest in our common stock in this offering, your ownership interest will be diluted immediately to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering. Net tangible book value on December 31, 2023, was approximately $206,713, or $0.03 per share. “Net tangible book value” is total assets minus the sum of liabilities and intangible assets. “Net tangible book value per share” is net tangible book value divided by the total number of shares outstanding. Our net tangible book value per share as of December 31, 2023 was $[____] and assuming shares in this offering are sold at $[ ] per share, purchasers in this offering will incur dilution of $[ ] per share.
The dilution is summarized in the following table:
Initial public offering price per share | |||
Estimated net tangible book value per share after conversion (1) | |||
Estimated
increase in tangible net book value per share attributable to the proceeds received in the offering (2) |
|||
Estimated net tangible book value per share immediately after the offering | |||
Dilution between initial
purchase price and the estimated book value per share immediately after the offering |
|||
Dilution as a percentage of offering price |
(1) Based on [______] common stock shares |
(2) Based on [______] common stock shares |
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MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDERS MATTERS
Market for Common Stock
In February 2022, the Company was admitted to the Over-The-Counter Venture Market quotation system (OTCQB) under the symbol TZUP. On the Over-The-Counter Venture Market quotation system, any quotations that reflect interdealer prices, without retail mark-up, mark-down or commission may not necessarily represent actual transactions. We intend to list our common stock on the CBOE under the symbol “TZUP”. This offering will not be consummated until we have received CBOE approval of our application. There is currently very limited trading of our Common Stock, and an active trading market may never develop.
Holders
As of May 29, 2024 there were 306 stockholders of record. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of Common Stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies. The transfer agent of our Common Stock is Securitize (Pacific Stock Transfer), located at 6725 Via Austi Pkwy Suite 300, Las Vegas, NV 89119.
Securities authorized for issuance under equity compensation plans
2024 Equity Stock Option Plan
Our 2024 Equity Stock Option Plan the (“Plan”) governs equity awards to our employees, directors, consultants and other eligible participants that the Committee deems appropriate. The plan reserves a total of 1,000,000 shares of common stock. No single participant may receive more than 25% of the total Options awarded in any single year. The maximum period during which an Option may be exercised shall be ten (10) years from the date such Option was granted.
Employment Agreements
Robert Steele, Executive Employment Agreement
On May 30, 2024, the Company and Mr. Steele entered into an Executive Employment Agreement, which, among other things, employs Mr. Steele as the Chief Executive Officer of the Company. Effective upon the listing of the Company’s common stock on a national stock exchange, Mr. Steele will be paid a salary of $168,000 in periodic installments in accordance with the Company’s customary payroll practices and applicable wage payment and withholdings laws and requirements. Additionally, the Executive’s Base Salary will increase from $168,000 to $250,000, effective upon the Company’s achievement of $100,000 net monthly ad revenue from Thumzup advertisers for paid posters for twelve consecutive months, (ii) the Executive’s Base Salary will increase to $350,000 upon the Company achieving $250,000 in net monthly ad revenue from Thumzup advertisers for paid posters for twelve consecutive months, and (iii) effective upon the Company’s receipt of an aggregate of $800,000 in net monthly ad revenue from Thumzup advertisers for paid posters for twelve consecutive months, the Base Salary will increase to $500,000.The Company shall pay Executive a past performance bonus of $50,000 within 5 days of up-listing to a national stock exchange (CBOE, Nasdaq, NYSE), provided that Executive is employed by the Company at the time of the up-listing.
Isaac Dietrich, Executive Employment Agreement
On May 30, 2024, the Company and Mr. Dietrich entered into an Executive Employment Agreement, which, among other things, employes Mr. Dietrich as the Chief Financial Officer of the Company effective upon the listing of the Company’s common stock on a national stock exchange. Mr. Dietrich will be paid a salary of $168,000 in periodic installments in accordance with the Company’s customary payroll practices and applicable wage payment and withholdings laws and requirements. Additionally, the Executive’s Base Salary will increase from $168,000 to $250,000, effective upon the Company’s achievement of $100,000 net monthly ad revenue from Thumzup advertisers for paid posters for twelve consecutive months, (ii) the Executive’s Base Salary will increase to $250,000 upon the Company achieving $250,000 in net monthly ad revenue from Thumzup advertisers for paid posters for twelve consecutive months, and (iii) effective upon the Company’s receipt of an aggregate of $800,000 in net monthly ad revenue from Thumzup advertisers for paid posters for twelve consecutive months, the Base Salary will increase to $350,000. The Company shall pay Executive a past performance bonus of $25,000 within 5 days of up-listing to a national stock exchange (CBOE, Nasdaq, NYSE), provided that Executive is employed by the Company at the time of the up-listing.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes to those statements included elsewhere in this prospectus. This discussion and analysis and other parts of this prospectus contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives, expectations, forecasts and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the section titled “Risk Factors” and elsewhere in this prospectus. You should carefully read the “Risk Factors” to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements.”
Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the Securities and Exchange Commission (“SEC”), we are under no obligation to publicly update or revise any forward-looking statements, whether as a result of any new information, future events or otherwise. Investors, potential investors and other readers are urged to consider the above-mentioned factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results or performance.
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INTRODUCTION
Thumzup Media Corporation (“Thumzup” or “Company”) was incorporated on October 27, 2020, under the laws of the State of Nevada, and its headquarters is located in Los Angeles. The Company’s primary business is software as a service provider dedicated to connecting businesses with consumers and allowing the business to incentivize consumers to post about their experience on social media. Thumzup mission is to democratize social media marketing by connecting advertisers with non-professional people, who can be paid for their posts about products and services they love through its technology which utilizes a proprietary mobile app (“App”). The App generates scalable word-of-mouth product posts and recommendations for advertisers on social media and is designed to connect advertisers with individuals who are willing to promote their products online.
The Thumzup App enables users to select a brand they want to post about on social media. Once the Thumzup user selects the brand and takes a photo (using the App), the App will post the photo and a caption to the user’s social media account(s). As of the date of this filing, Instagram is the Company’s initial social media platform that is being used, due to its wide acceptance and its great functionality using photographs. The Company expects to add other social media platforms in the future. For the advertiser, the Thumzup system enables brands to get real people to promote products to their friends, rather than displaying banner ads that consumers now mostly ignore, or contracting with expensive professional influencers. The Company has recorded nominal revenues during the first nine months of 2023 and continues with the development of enhancements to its App and marketing efforts.
The Company is an “emerging growth company” as that term is used in the Jumpstart our Business Startups Act of 2012, and as such, has elected to comply with certain reduced public company reporting requirements.
Emerging Growth Company
We are an emerging growth company under the JOBS Act. We shall continue to be deemed an emerging growth company until the earliest of:
(a) | the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1.235 billion (as such amount is indexed for inflation every five years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more; | |
(b) | the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective IPO registration statement; | |
(c) | the date on which such issuer has, during the previous three-year period, issued more than $1.0 billion in nonconvertible debt; or | |
(d) | the date on which such issuer is deemed to be a ‘large accelerated filer’, as defined in section 240.12b-2 of title 17, Code of Federal Regulations, or any successor thereto.’ |
The Section 107 of the JOBS Act provides that we may elect to utilize the extended transition period for complying with new or revised accounting standards and such election is irrevocable if made. As such, we have made the election to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act.
We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.
OVERVIEW
We were formed in October 2020 and have not yet established profitable operations. For the year ended December 31, 2023, we incurred a net loss of $3,384,380, 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, we incurred a net loss 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.
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GOING CONCERN
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company was only recently formed, has not yet established profitable operations and has incurred losses since inception. These factors raise substantial doubt about the ability of the Company to continue as a going concern. In this regard, management is proposing to raise additional funds not provided by operations through loans or through sales of its common stock. There is no assurance that the Company will be successful in raising this additional capital or in achieving profitable operations. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties.
The Company is a software and services company that relies primarily on equity funding for its operations. The Company generated its first revenues during December 2021. As of December 31, 2023 and 2022, the Company had a cash balance of $259,212 and $1,155,343, respectively. The Company used $2,326,523 and $1,083,960 in cash for operating activities during years ending December 31, 2023 and 2022, respectively. The Company expects that it will need to raise additional funding and manage expenses in order to continue as a going concern. No assurances can be given that it will be able to raise funds on acceptable terms or at all.
RESULTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2023 and 2022
For the Fiscal Year ended | ||||||||||||||||
31-Dec-23 | 31-Dec-22 | $ Change | %Change | |||||||||||||
Revenues | $ | 2,048 | $ | 2,421 | $ | (373 | ) | (15.41 | )% | |||||||
Operating Expenses | 2,521,078 | 1,213,035 | 1,308,043 | 107.83 | % | |||||||||||
Loss from Operations | (2,519,030 | ) | (1,210,614 | ) | (1,308,416 | ) | 108.08 | % | ||||||||
Other Income (Expense) | (805,150 | ) | (294,067 | ) | (511,083 | ) | 173.80 | % | ||||||||
Net Income (Loss) Applicable to Common Stockholders | $ | (3,324,180 | ) | $ | (1,504,681 | ) | $ | (1,819,499 | ) | 120.92 | % |
Revenues
The Company generated revenues of $2,048 and $2,421 for the years ended December 31, 2023 and 2022, respectively, a decrease of $373.
Operating expenses
For the years ended December 31, 2023 and 2022, the Company incurred operating expenses of $2,521,078 and $1,213,035, respectively, an increase of $1,308,043. The increase in operating expenses was caused by costs of revenues decreasing by $295 from $439 during the year ended December 31, 2022 to $144 during the year ended December 31, 2023, marketing expenses increasing $631,182 from $224,088 during the year ended December 31, 2022 to $855,270 during the year ended December 31, 2023, general and administrative expenses decreasing $23,316 from $418,940 during the year ended December 31, 2022 to $395,624 during the year ended December 31, 2023, depreciation and amortization expenses increasing $27,238 from $2,160 during the year ended December 31, 2022 to $29,398 during the year ended December 31, 2023, an increase in professional and consulting of $727,554 from $0 during the year ended December 31, 2022 to $727,554 during the year ended December 31, 2023, offset in part by a decrease in software research development expenses of $54,320 from $567,408 during the year ended December 31, 2022 to $513,088 during the year ended December 31, 2023.
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Net Loss from operations
The Company realized a net loss from operations of $2,519,030 and $1,210,614 for the years ended December 31, 2023, and 2022, respectively, an increase of $1,308,416 for the reasons stated above.
Other expenses
For the years ended December 31, 2023, and 2022, the Company had $73,498 and $25,865 in interest expense primarily related to liquidated damages and debt notes, respectively. For the years ended December 31, 2023, and 2022, the Company had a liquidated damages expense of $731,652 and $268,202, respectively.
Net Loss applicable to common shareholders
The Company realized a net loss applicable to shareholders of $3,324,180, and $1,504,681 for the years ended December 31, 2023, and 2022, respectively, an increase of $1,819,499 for the reasons stated above.
Liquidity and capital resources
As of December 31, 2023, and 2022, the Company had cash in the amount of $259,212 and $1,155,343, respectively. As of December 31, 2023, and 2022, the Company had stockholders’ equity of $349,327 and $786,524, respectively.
The Company’s accumulated deficit was $5,691,803 and $2,367,623 as of December 31, 2023 and 2022, respectively.
The Company used net cash in operations of $2,326,523 and $1,083,960 for the years ending December 31, 2023 and 2022, respectively.
Net cash used in investing activities for years ending December 31, 2023 and 2022 was $176,499 and $0, respectively, used to purchase computer equipment.
Net cash provided by financing activities was $1,606,891 net of offering costs of $17,601 for the year ended December 31, 2023 comprised of $33,000 from subscription receivable and $1,591,492 from the sale of common stock. Net cash provided by financing activities was $1,814,858 for the year ended December 31, 2022, comprised of proceeds from the sale of common and preferred stock of approximately $737,000 and $1,260,000, respectively, offset by costs incurred for equity sales of $149,137 and subscriptions receivable of $33,000.
Recent Developments
The Company recently raised $805,000 in a Series B Preferred offering during the period March - May 2024. Each share of Series B Preferred cost $50 and initially converts into 10 shares of common stock and pays a 10% dividend on a quarterly basis and has downside price protection. Once the company up-lists on a National Stock Exchange, the Series B Preferred converts at a 20% discount to the price of the offering in this S-1 and the downside price protections are eliminated. There is a call provision that goes into effect six (6) months from the listing on a National Exchange, that if the common stock trades at a 100% premium to the conversion price for 10 days or more, the Company can force the conversion of the Series B Preferred into common stock. The Company has agreed to pay the costs of Rule 144 legal opinions for the holders of the Series B Preferred.
Regulation A+ Offering
The Company recently conducted an offering under Regulation A+, pursuant to an Offering Statement on Form 1-A/A filed on December 23, 2022 and qualified on January 9, 2023, through which the Company sold 424,144 shares for aggregate proceeds of $1,732,869, net offering expenses of $19,539.
Inflation
The Company’s results of operations have not been affected by inflation and management cannot predict the impact, if any, inflation might have on its operations in the future.
BUSINESS
Overview
General
As used herein, “we,” “us,” “our,” the “Company,” “Thumzup®,” means Thumzup® Media Corporation unless otherwise indicated. Thumzup® operates in a single business segment which is social media marketing. Thumzup® has a mobile iPhone and Android applications called “Thumzup®” that connects brands and people who use and love these brands. For the advertiser, Thumzup® incentivizes ordinary everyday people to become paid content creators and post authentic valuable posts on social media about the advertiser and its products.
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The Company was incorporated on October 27, 2020, under the laws of the State of Nevada. Its headquarters are located in Los Angeles, CA. The Company has never been the subject of any bankruptcy or receivership. The Company has never engaged in any material reclassification, merger, or consolidation of the Company. The Company has not acquired or disposed of any material amount of assets except in the normal course of business.
In February 2022, the Company was admitted to the Over-The-Counter Venture Market quotation system (OTCQB) under the symbol TZUP, and very limited trading has occurred on the OTCQB. We intend to list our common stock on the CBOE under the symbol “TZUP”. This offering will not be consummated until we have received CBOE approval of our application. There is currently very limited trading of our Common Stock, and an active trading market may never develop.
Thumzup® Products and Services
The Company operates in a single business segment which is social media marketing and advertising. The Thumzup® App works on both iPhone and Android mobile operating systems and connects brands and people who use and love these brands. For the Advertiser, Thumzup® incentivizes ordinary people to become paid content Creators and post authentic valuable posts on social media about the Advertiser and its products.
The Company seeks to capitalize on nationwide-wide gig economy and business democratization trends. Immense value and opportunity have been created through the democratization of ride sharing, hospitality, finance and other industries. The Thumzup® tools are designed to facilitate this democratization trend for the consumer and the Advertiser within the online marketing and advertising space.
The Company has built the technology to support an influencer and “gig” economy community around its Thumzup® App. This technology and community are designed to generate scalable authentic product posts and recommendations for advertisers on social media. It is designed to connect advertisers with individuals who are willing to tell their friends about the advertisers’ products online and offline.
Social Media Marketing Software Technology
The Thumzup® mobile App enables Creators, to select from brands advertising on the App and get paid to post about the advertiser on social media. Once the Thumzup® Creator selects the brand and takes a photo using the Thumzup® App, the Thumzup® App posts the photo and a caption to the Creator’s social media accounts. The advertiser then reviews and approves the post for payment and the Creator can cash out whenever they choose through popular digital payment systems. For the advertiser, the Thumzup® system enables brands to get real people to promote their products to their friends. In 2023, $148 billion was spent on digital display ads in the United States and while 43% of marketers consider display ads to be the least effective channel, 84% of marketers were still investing in them(1). We feel this demonstrates a significant need among advertisers for new methods of messaging to potential customers. We believe Thumzup’s ability to scale brand messages from the general population on social media could be part of addressing this substantial need in the market.
A recent Nielsen report found 81% of consumers believe friends and family are the most reliable sources of information about products(2). According to a Emplifi article, 64% of millennials recommend a product at least once a month(3), and according to a 2019 Morning Consult survey, 86% of Gen Z and millennials would post content for monetary compensation(4). Further, according to a 2020 IZEA Insights Study, 67% of social media consumers aspire to be paid social media influencers(5). According to a 2023 Bankrate, 48% of social media users have impulsively purchased a product seen on social media(6). Lastly, 85% of Gen Z says social media impacts purchase decisions according to a 2023 Retail Dive Survey(7).
The average American adult spent 7 hours and 58 minutes per day using digital media in 2020 according to a 2020 eMarketer Report(8). The amount of daily usage has increased significantly since 2019, again according to an eMarketer Report(8),, and the Company believes such usage will continue to accelerate. The Company empowers businesses that want to interact with these Creators and provides tools and data so they can increase consumer awareness and expand their customer bases.
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In the past decade, social media platforms like Instagram, Facebook, Twitter, Pinterest, and TikTok have achieved mass worldwide consumer acceptance and created hundreds of billions of dollars in shareholder value. This worldwide viral growth demonstrates that compelling new social media platforms which present the right combination of experience and value, will attract Creators who will invest significant amounts of time on the platforms.
The Company is an early-stage entity building a new real-time platform which enables Advertisers to pay their customers and fans cash for their positive social media posts about their products and services, which in turn supports those people who earn money from various gig economy opportunities. The Company believes that acceptance of its App and subsequent revenue growth can be driven by empowering everyday people to make money by posting about brands and services that they already find enjoyable and attractive on social media. The Company believes that the Thumzup® App is a conduit for Advertisers to connect directly with consumers. The Company will need to secure enough advertisers to make the App an attractive platform for adoption and scalability, and to ensure that the platform is interesting enough for the Creators to return to on a regular basis. No assurance can be given that the Company will be able to achieve these results.
(1) | https://meetanshi.com/blog/display-advertising-statistics/) | |
(2) | https://www.nielsen.com/news-center/2015/still-recommended-by-friends-and-relatives-the-most- authentic-advertising-according-to-consumers-the-most-trusted-on-brand-websites/ | |
(3) | https://emplifi.io/resources/blog/the-user-generated-content-stats-you-need-to-know?utm_source=pixlee.com | |
(4) | https://morningconsult.com/wp-content/uploads/2019/11/The-Influencer-Report-Engaging-Gen-Z-and-Millennials.pdf | |
(5) | https://www.cnn.com/business/newsfeeds/globenewswire/7812666.html | |
(6) | https://www.bankrate.com/personal-finance/social-media-survey/ | |
(7) | https://www.retaildive.com/news/generation-z-social-media-influence-shopping-behavior-purchases-tiktok- instagram/652576/ | |
(8) | https://www.emarketer.com/content/us-time-spent-with-media-2021-update |
The Industry – Social Media Marketing and Advertising
The Company believes that it is developing a new form of social media marketing that does not currently exist, therefore existing descriptions of market size and penetration are not directly applicable. As Thumzup® matures, the Company believes there will be other competitors in this new market of paying non-professional advocates to tell their friends about products they love on social media at the point-of-sale. The closest existing market that is similar to Thumzup’s market is the rapidly growing subset of online advertising called “influencer marketing.” More than 75% of brands have a dedicated budget for influencer marketing according to a 2022 Harvard Business Review Study (9). As social media influencers become more plentiful and proven, advertising spending has increased in this space. According to Allied Research, the influencer marketing market generated $16.5 billion in 2022 and is estimated to reach $199.6 billion by 2032, exhibiting a CAGR of 28.6% from 2023 to 2032(10). Influencer marketing is new but it is here to stay, Harvard Business Review did a study to prove this and stated “the strategy can in fact yield positive ROI(9).”
Most existing paid influencer marketing platforms were designed for professional and semi-professional online personalities. Some of these platforms have expanded to accommodate “micro-influencers” - people with 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.
The Company has designed Thumzup® “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. The Company has designed the Thumzup 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.
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The Company’s first product-Thumzup® App
The Company operates in a single business segment, which is social media marketing. The Company’s mobile iPhone and Android applications called “Thumzup®” connects brands, products, and services to the people who use and love these brands, products, and services. For Advertisers, Thumzup® activates real people to post real product reviews and testimonials on social media with the intention of enhancing brand awareness and reaching targeted consumers more directly and effectively while driving profitable traffic to the Advertisers’ products and services.
The Company is building an influencer and gig economy community around the Thumzup® 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. The App and Advertiser dashboard are designed to connect Advertisers with individuals who are willing to promote their products and services online and offline.
(9) | https://hbr.org/2022/11/does-influencer-marketing-really-pay-off | |
(10) | https://www.prnewswire.com/news-releases/influencer-marketing-market-to-reach-199-6-billion-globally- by-2032-at-28-6-cagr-allied-market-research-301987451.html |
Social Media Marketing Software Technology
The Company’s Services
The Thumzup® mobile App enables Creators to select from brands advertising on the App and get paid to post about the Advertiser on social media. Once the Thumzup® Creator selects the brand and takes a photo using the Thumzup® App, the Thumzup® App posts the photo and a caption to the Creator’s social media accounts. The Advertiser then reviews and approves the post for payment and the Creator can cash out whenever they choose through popular digital payment systems. For the Advertiser, the Thumzup® system enables brands to get the general public who are not professional influencers to promote their products and services to their friends, rather than display ads which marketers realize are less effective.
With the Thumzup® App, the Company is targeting and signing up the general public and gig economy workers who like specific brands and present them with opportunities to be paid for posting about the brands on social media. The Company believes that its management team has the sales relationships, legal, and technology expertise for its current level of development. The Company will need to add additional staff to rapidly grow the business. All source code, development work, and intellectual property performed under independent development or employment contracts paid for by the Company are assigned to and owned by Thumzup®.
Intellectual Property
The Company owns the copyrights to the source code for the Thumzup® App on the iPhone iOS and Android operating mobile operating systems as used on the majority of mobile phone and tablet devices. The Company also owns the source code for the “backend” system that administrates the Thumzup® App, tracks payments and advertising campaigns.
The
Thumzup® thumb logo “ ”
is a registered trademark owned by Thumzup® Media Corporation, Reg. No. 6,842,424, registered Sep. 13, 2022. On April 13, 2021, the
Company filed a trademark application ser. No. 90642789 with the U.S. Patent and Trademark Office (“USPTO”) for the word
mark THUMZUP, which was granted registration on June 21, 2022, resulting in reg. no. 6764158. Also on April 13, 2021, the Company filed
a trademark application ser. No. 90642848 for the Thumzup® logo, featuring a stylized hand with an upwardly extended thumb. Meta
Platforms, Inc. (which owns and operates Facebook and Instagram) initially filed opposition to the logo on June 30, 2022. Thumzup®
agreed to not use the logo as a reaction to a post and Meta Platforms, Inc. subsequently withdrew their opposition on August 5, 2022
and it was dismissed without prejudice.
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Business Model
Advertisers purchase an ad campaign on the Thumzup® advertiser dashboard website. Once the Advertiser approves a post for payment, the platform facilitates the payment to Creators’ a monetary amount per screened post which may range from $1.00 to $1,000.00. The Thumzup® platform enables the Advertiser to screen posts so that the Advertiser only pays for posts that are commercially valuable and rewards Creators for posts that have images and text that represent the Advertiser in a positive manner.
Per Post Fee. Thumzup® Advertisers are charged a “Per Post Fee.” By way of illustration, an Advertiser that buys 100,000 posts from Thumzup®, to pay out $10 per post to Thumzup® Creators, would purchase the posts for $13.00 each or $1,300,000. The Creators in this illustration would receive a total of $1,000,000 and Thumzup® would retain $300,000 for its services. The Thumzup® platform would facilitate 100,000 posts for the Advertiser from Thumzup® Creators sharing with their friends about their endorsed products on social media.
Value Proposition
The Thumzup® App is designed to generate scalable social media authentic social media content for Advertisers. It is designed to connect Advertisers with individuals who are willing to authentically promote their products online. The Company envisions that many gig economy workers will be ideal candidates to become Creators posting on Thumzup®. Imagine a gig economy driver waiting for their next fare who takes a moment to post about the good experience they had at their lunch spot where they are waiting. Imagine a gig economy worker on a laptop at a coffee shop doing a graphic design project from a gig economy site who takes a moment to post about the coffee shop where they are working on Thumzup®. The Company believes that Thumzup® can readily provide extra income for this existing pool of gig economy workers. The Company believes these gig economy workers will be able to provide quality Thumzup® posts on social media for which Advertisers will be willing to pay.
The Thumzup® App can also facilitate digital word of mouth recommendations of products and services from people who do not need to make extra money doing gigs, who are in fact quite affluent. The Company believes that many people who are well off may also use the App to recommend products and services to their network of friends on social media, many of whom may also be affluent.
Key Metrics as of May 10, 2024
Thumzup has had paid out on 19,182 approved posts to 1,127 Thumzup users regarding 223 advertisers since inception.
Thumzup advertisers have grown by a 148% CAGR since May 10, 2023 .
Since May 10, 2023, the reach of the last 15,605 posts was 25,784,957 followers. Many of these campaigns were promotional campaigns but at list price this would have been $0.006 per reach, which is below many citations for other leading social media advertising costs.
The average number of followers for an individual Thumzup user since May 10, 2023 has been about 1,600. Many users with tens of thousands of followers posted about our advertisers, including one with more than 600,000 followers. We find that even though we are targeting the general public, in aggregate a Thumzup campaign can reach an average of more than 1,600 followers per post. So, a Thumzup campaign combines the high trust factor of the general public with less followers and also draws in some professional influencers who post because they like the product at a lower cost per post than if they were hired as an influencer.
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 and its subsidiaries, for the current fiscal year and any other material future period.
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Thumzup® App Workflow
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For direct-to-consumer (“DTC”) brands, a customer might get a postcard in the box upon receiving a purchase in the mail. A postcard would inform the customer about the opportunity to get cashback by sharing a picture of the purchase with friends on social media. If the Creator takes a picture of the postcard, a link to download the Thumzup® App will appear on the customer’s phone. The illustration to the left and those below are intended as examples only and will not necessarily correlate to a final version or an amount. Actual wording and amounts will depend on agreements with Advertisers, products or brands seeking recommendations and other market factors as may be assessed by management. |
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For physical stores and restaurants, the Company offers signage to make patrons aware that they can be paid to tell their friends about their positive experience in the store or restaurant.
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The main screen appears after a Creator enters the unique code the Company sent. The main screen enables each Creator to easily select brands, nearby restaurants, and stores that will pay the Thumzup Creator to post to friends and other followers about products and places recommended by the Creator on social media.
The main screen has seven main areas where the Creator can take action. There is a “hamburger” menu in the upper left to access administrative functions and there is a balance due to the Creator displayed on the upper right. Next, going down the screen there is a search bar, a map tool, a left to the right slider to select brands that will pay for posts, and an up and down slider to select locations nearby that will pay to post. The “hamburger” menu in the upper left gives the Creator access to change bank or payment information, to link to social media, and to invite friends. The balance due to the Creator number in the upper right has the total of monies pending and monies due but not yet transferred to the Creator.
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When Creators select a brand or location tile from the main menu, the App enables them to take pictures of their enjoying the product or experience. The App then enables them to customize the caption that will be posted to social media. Once Creators submit the pictures and captions, they get uploaded and displayed on the social media account of those Creators. | |
Thumzup® inserts the tag required to disclose that the post is a paid promotion. If the Advertiser, has chosen to offer a discount code to the Thumzup Creator’s friends on social media, that discount code gets embedded in the post along with the offer.
When the Creator makes a new post, the post is reviewed by Thumzup on behalf of the Advertiser to assure that it meets community standards, does not include sexually explicit images or text, and that the post reflects the Advertiser in a commercially favorable light. For instance, if images are poorly lit or irrelevant to the brand, Creators may be sent text messages to the Creators giving them this feedback and explaining that the post is not due for payment.
When Creators want to receive the money they have earned they tap on the PayMe! selection on the App menu. The App then pays the Creator via online payment systems, such as Venmo or PayPal, the amount due from all screened posts made by that Creator.
The App enables the Creator to search for brands they like that will pay them to post. This is useful so that Thumzup® Creators can easily discover brands they like to post about. The App pays Creators to post about brands. |
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In the Company’s opinion, paid posts from happy customers about how much they like an Advertiser’s goods or services offer attractive, compelling values to both Advertisers and Creators compared to traditional online advertising because those posts should yield higher response rates. |
The Thumzup® 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. Thumzup® Creators can opt-in to receive text message from brands. This opt-in opportunity is valuable to Advertiser brands because text messages have higher visibility to potential customers than emails.
The Thumzup® system enables “campaign spend” to be limited by a total dollar amount as determined by the Advertiser. Once the posts that the Advertiser has paid for have been posted and approved for payment, the campaign expires and the Advertiser incurs no additional cost until it chooses to increase the amount. It also enables the Advertiser to limit the number of posts made by an individual Creator by day, week, and month. The Company believes that this feature enables more efficient budgetary control while reducing unintended cost overruns. This feature may eliminate abuse or saturation by Creators who post more than what may be commercially valuable to Advertisers.
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Financing Plan
The Company has historically primarily raised funds through the sale of common stock at a fixed price. The Company recently conducted an offering under Regulation A+, pursuant to an Offering Statement on Form 1-A/A filed on December 23, 2022 and qualified on January 9, 2023, through which the Company sold 424,144 shares for aggregate proceeds of $1,732,869, net offering expenses of $19,539.
The Company recently raised $805,000 in a Series B Preferred offering during the period March - May 2024. Each share of Series B Preferred cost $50 and initially converts into 10 shares of common stock and pays a 10% dividend on a quarterly basis and has downside price protection. Once the company up-lists on a National Stock Exchange, the Series B Preferred converts at a 20% discount to the price of the offering in this S-1 and the downside price protections are eliminated. There is a call provision that goes into effect six (6) months from the listing on a National Exchange, that if the common stock trades at a 100% premium to the conversion price for 10 days or more, the Company can force the conversion of the Series B Preferred into common stock. The Company has agreed to pay the costs of Rule 144 legal opinions for the holders of the Series B Preferred.
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 popularity, usefulness, ease of use, performance and reliability of the Thumzup® App and services compared to those of competitors; | |
● | the ability, in and of itself as well as in comparison to the ability of competitors, to develop new apps, other products and services and enhancements to then existing apps, products and services; | |
● | the Company’s ad targeting and measurement capabilities, and those of its competitors; | |
● | the size, composition and level of engagement of the Thumzup® App user communities relative to those of the Company’s competitors; | |
● | the Company’s marketing and selling efforts, and those of its competitors; | |
● | the pricing of the Thumzup® Apps and services relative to those of its competitors; | |
● | the actual or perceived return the Company’s customers receive from the deployment of the Thumzup® Apps within the user communities relative to returns from the Company’s competitors; and | |
● | the Company’s reputation and brand strength relative to its competitors. |
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Employees
As of May 29, 2024, The Company has six (6) full-time employees, as well as three (3) marketing, sales, and finance independent contractors. The Company also utilizes the services of approximately five (5) 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:
Thumzup® 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.
Our Corporate Information
Thumzup Media Corporation 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. The information contained on, or that can be accessed through, our website is not a part of this prospectus. We own the source code for the Thumzup applications on the iPhone iOS and the Android. We also own the source code for the “backend” system that administrates the Thumzup app, tracks payments and advertising campaigns.
Recent Developments
The Company recently raised $805,000 in a Series B Preferred offering during the period March - May 2024. Each share of Series B Preferred cost $50 and initially converts into 10 shares of common stock and pays a 10% dividend on a quarterly basis and has downside price protection. Once the company up-lists on a National Stock Exchange, the Series B Preferred converts at a 20% discount to the price of the offering in this S-1 and the downside price protections are eliminated. There is a call provision that goes into effect six (6) months from the listing on a National Exchange, that if the common stock trades at a 100% premium to the conversion price for 10 days or more, the Company can force the conversion of the Series B Preferred into common stock. The Company has agreed to pay the costs of Rule 144 legal opinions for the holders of the Series B Preferred.
Regulation A+ Offering
The Company recently conducted an offering under Regulation A+, pursuant to an Offering Statement on Form 1-A/A filed on December 23, 2022 and qualified on January 9, 2023, through which the Company sold 424,144 shares for aggregate proceeds of $1,732,869, net offering expenses of $19,539.
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MANAGEMENT
Management
The name and age of our Directors and Executive Officers are set forth below. All Directors are elected annually by the stockholders to serve until the next annual meeting of the stockholders and until their successors are duly elected and qualified. The officers are elected by our Board of Directors (the “Board”).
Name | Age | Title | ||
Robert Steele | 58 | Chairman of the Board of Directors and Chief Executive Officer | ||
Isaac Dietrich |
32 | Chief Financial Officer (effective upon uplist) | ||
Robert Haag | 58 | Director | ||
Joanna Massey | 55 | Director (effective upon uplist) | ||
Paul Dickman | 42 | Lead Director (effective upon uplist) |
All directors serve for one year and until their successors are elected and qualified. All officers serve at the pleasure of the Board of Directors. There are no family relationships among any of our officers and directors. The Bylaws provide that the Company shall be managed by a Board of at least one (1) and up to five (5) Directors. As of the date of this Registration Statement on Form S-1, we have two (2) sitting directors.
Information concerning our executive officers and directors is set forth below.
Executive Officers
Robert Steele: Chief Executive Officer, President, Secretary, Treasurer, Director
Mr. Steele is the Chief Executive Officer and a director of Thumzup Media Corporation. From October 2019 until present Mr. Steele has operated a consulting business that has provided investor relations, financial, sales and marketing consulting services to various clients. Mr. Steele was the Director of Client Positioning at IRTH Communications, LLC from January 2017 to September 2019. From May 2016 through December 2016 Mr. Steele was an independent consultant rendering sales, marketing and investor relations services. From January 2010 to May 2016 Mr. Steele was the President of Rightscorp, Inc. While at Rightscorp, Mr. Steele designed and deployed patented intellectual property software as a service (SaaS) tools that were used by major brands like Warner Bros. to protect their intellectual property. As President of Rightscorp, Mr. Steele led the design of the software used by clients like Sony/ATV and BMG. BMG successfully used Mr. Steele’s technology to win a landmark $25 million judgment against Cox Communications for copyright infringement. Mr. Steele holds a BS in Electronic and Computer Engineering from George Mason University.
Isaac Dietrich: Chief Financial Officer
Mr. Dietrich founded Greenwave Technology Solutions, Inc. and has served as Chief Financial Officer since April 2023. Mr. Dietrich previously held the following positions with the company: Chief Executive Officer (April 2013 – October 2017, December 2017 – September 2021); Chairman of the Board (April 2013 – October 2017, December 2018 – June 2021); Chief Financial Officer (April 2013 – May 2014, August 2017 – October 2017, March 2021 – November 2021, April 2023 to present); and a member of its Board of Directors (April 2013 – November 2021). Mr. Dietrich was a consultant to Greenwave from February 2022 to April 2023. Since February 2023, Mr. Dietrich has served on Truleum, Inc.’s Board of Directors and as Chairman of its Audit Committee. Since September 2022, Mr. Dietrich has served as Director of Finance for Thumzup Media Corporation.
Directors
Robert Haag: Director
Robert Haag is the Managing Member and sole owner of Westside Strategic Partners, LLC, which is an investor in the Company. Since 2012, Mr. Haag has been a Managing Director of IRTH Communications, LLC, which provides financial communications services, and strategic consulting to its clients. He was previously employed in the brokerage, investment banking industries from about 1993 - 2001 and formerly held the Series 7, 24 and 63 licenses.
Based in Asia from 2008-2012, he held senior positions with an investment fund and also an investment bank based in Saigon, Vietnam in 2008. From 2009-2012 he served as Managing Director of Asia for IRTH Communications, LLC and was based out of Shanghai, China. From approximately 2002-2007 he was Director of Speculative Investments at KMVI, a family office / holding company which invested in restaurants, oil, private equity, publicly traded companies, real estate and a wide array of other industries. While at KMVI, he was also President and CEO of Utopia Optics (majority owned by KMVI), an eyewear and apparel company focused on consumers in the action sports markets. Mr. Haag graduated from Hamilton College with a Bachelor of Arts in History in 1988.
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Joanna Massey: Director
Dr. Joanna Dodd Massey has served on the Company’s Board of Advisors since 2023, and is an experienced public company board director. Her other board roles include KULR Technology Group (NYSE American: KULR), a thermal and energy solutions company, for which she serves as Lead Independent Director, Chair of Nominating and Corporate Governance, Co-Chair of Compensation, and a member of the Audit Committee. She also serves as Chairman of the Board for TessPay, Inc., a financial technology platform that utilizes blockchain technology to provide payment assurance and liquidity. In addition to her Chairman role, she serves as Chair of Nominating & Corporate Governance, and a member of the Audit Committee. Since September 2021, Dr. Massey has served as an independent director of The Hollywood Foreign Press Association. Dr. Massey also works as a Management Consultant for her eponymous company J.D. Massey Associates, Inc. Throughout her career, Dr. Massey has held various roles, including assisting micro-cap and small/mid-cap companies attract institutional investors and expand market share by advising them on enterprise risk management and corporate governance. Dr. Massey’s expertise in crisis communications and brand reputation management enables her to anticipate stakeholder reactions and advise on change management and navigating risk. As a corporate communications executive, Dr. Massey has managed integration during major merger and acquisition transactions at Lionsgate, CBS, and Discovery; corporate turnaround as Condé Nast pivoted from print to video; and crisis communications with consumers, employees, investors, regulators, and politicians. Dr. Massey earned a Bachelor of Arts in Journalism from the University of Southern California, a Master of Business Administration from the University of Southern California and a Graduate Certificate in Corporate Finance from Harvard University, as well as a Master of Arts in Clinical Psychology from Antioch University and a Ph.D. in Psychology from Sofia University, and finally a Master of Science in Legal Studies from Cornell Law with an expected degree conference date of 2025. We believe Dr. Massey is qualified to serve as a member of our board of directors because of her governance background as a public company director, corporate communications executive, and over 30 years of experience advising chairmen and CEOs during the most challenging times, including major crises, whistleblower complaints, public-facing lawsuits, and merger and acquisition transactions, in addition to her extensive academic credentials in both finance and business administration, as well as corporate law.
Paul Dickman: Lead Director
An accomplished angel and real estate investor, Dickman has held influential positions such as Chief Financial Officer, Chairman of the Board, and Chair of the Board Audit Committee in various publicly traded companies. His notable tenure as Chairman of the Board at Medicine Man Technologies saw the company through a significant capital raise of $20M, a series of strategic acquisitions, and a remarkable increase in stock value, culminating in an enterprise value of over $130M.
Paul is the Founder & Principal of Breakwater MB, a boutique merchant bank focused on providing the expertise and funding needed for cannabis-focused organizations to transition into the public market. Prior to founding Breakwater MB, Dickman established Breakwater Corporate Finance, a professional services agency offering outsourced CFO and board governance services to private and micro-cap public companies. Through Breakwater Corporate Finance, Dickman has helped facilitate multiple rounds of new equity and debt capital and has facilitated multiple public offerings while providing profitable liquidity events for investors. Mr. Dickman has a bachelor’s degree in finance and accounting, is a licensed CPA in the State of Colorado (inactive) and is a past Fellow of the National Association of Corporate Directors (NACD).
Director Terms; Qualifications
Members of our Board serve until the next annual meeting of stockholders, or until their successors have been duly elected.
When considering whether directors and nominees have the experience, qualifications, attributes and skills to enable the Board to satisfy its oversight responsibilities effectively in light of our Company’s business and structure, the Board focuses primarily on the industry and transactional experience, and other background, in addition to any unique skills or attributes associated with a director.
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Director or Officer Involvement in Certain Legal Proceedings
There are no material proceedings to which any director or officer, or any associate of any such director or officer, is a party that is adverse to our Company or any of our subsidiaries or has a material interest adverse to our Company or any of our subsidiaries.
Directors and Officers Liability Insurance
The Company has obtained directors’ and officers’ liability insurance insuring its directors and officers against liability for acts or omissions in their capacities as directors or officers, subject to certain exclusions. Such insurance also insures our Company against losses, which it may incur in indemnifying its officers and directors which will be effective upon listing of the Company’s securities on the CBOE. In addition, officers and directors also have indemnification rights under applicable laws, and our Company’s articles of incorporation and bylaws. We have also entered into customary separate indemnification agreements with our directors and officers .
Family Relationships
There are no family relationships between any director, executive officer or person nominated to become a director or executive officer.
Director Independence
The listing rules of the CBOE require that independent directors must comprise a majority of a listed company’s Board. In addition, the rules of the CBOE require that, subject to specified exceptions, each member of a listed company’s audit, compensation, and nominating and governance committees be independent. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. Under the rules of the CBOE, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The CBOE listing rules provide that a director cannot be considered independent if:
● | the director is, or at any time during the past three (3) years was, an employee of the company; |
● | the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of twelve (12) consecutive months within the three (3) years preceding the independence determination (subject to certain exemptions, including, among other things, compensation for board or board committee service); | |
● | the director or a family member of the director is a partner in, controlling shareholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s combined gross revenue for that year or $200,000, whichever is greater (subject to certain exemptions); | |
● | the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three (3) years, any of the executive officers of the company served on the compensation committee of such other entity; or | |
● | the director or a family member of the director is a current partner of the Company’s outside auditor, or at any time during the past three (3) years was a partner or employee of the Company’s outside auditor, and who worked on the company’s audit. |
Our Board has undertaken a review of the independence of our directors and considered whether any director has a material relationship with it that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. Based upon information requested from and provided by each director concerning his background, employment and affiliations, including family relationships, the Board believes that, Robert Haag, Joanna Massey, and Paul Dickman will be “independent” as that term is defined under the applicable rules and regulations of the SEC and the listing standards of the CBOE. In making these determinations, our Board considered the current and prior relationships that each non-employee director has with our Company and all other facts and circumstances our Board deemed relevant in determining their independence, including the beneficial ownership of our Company’s capital stock by each non-employee director, and any transactions involving them described in the section captioned “Certain Relationships And Related Transactions” in this prospectus.
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Board Committees
Our Board has formed three standing committees: Audit, Compensation, and Nominating and Corporate Governance. Each of the committees operates pursuant to its charter. The responsibilities of each committee are described in more detail below.
The CBOE permits a phase-in period of up to one year for an issuer registering securities in an initial public offering to meet the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee independence requirements. Under the initial public offering phase-in period, only one member of each committee is required to satisfy the heightened independence requirements at the time our registration statement becomes effective, a majority of the members of each committee must satisfy the heightened independence requirements within 90 days following the effectiveness of our registration statement, and all members of each committee must satisfy the heightened independence requirements within one year from the effectiveness of our registration statement.
Audit Committee
The Audit Committee’s purpose and powers are, to the extent permitted by law, to (a) retain, oversee and terminate, as necessary, the auditors of our Company, (b) oversee our Company’s accounting and financial reporting processes and the audit and preparation of our Company’s financial statements, (c) exercise such other powers and authority as are set forth in the charter of the Audit Committee of the Board, and (d) exercise such other powers and authority as shall from time to time be assigned thereto by resolution of the Board. The Audit Committee also has the power to investigate any matter brought to its attention within the scope of its duties. It also has the authority to retain counsel and advisors to fulfill its responsibilities and duties.
The Board has affirmatively determined that each member who serves on the Audit Committee meets the additional independence criteria applicable to Audit Committee members under SEC rules and the CBOE listing rules. Our Board has adopted a written charter setting forth the authority and responsibilities of the Audit Committee consistent with the purposes and powers set forth above, which is available on our principal corporate website located at https://www.thumzupmedia.com/audit-committee-charter concurrently with the consummation of this offering. The information contained on our website is not incorporated by reference into this prospectus, and you should not consider any information (nor use the same in deciding whether to purchase our shares of common stock) contained on, or that can be accessed through, our website as part of this prospectus. The Board has affirmatively determined that Paul Dickman shall serve as chair and each member of the Audit Committee is financially literate, which also includes Joanna Massey and Robert Haag. All three members meet the qualifications of an audit committee financial expert within the meaning of Item 407(d) of Regulation S-K under the Securities Act. We believe that the functioning of the Audit Committee complies with the applicable requirements of the rules and regulations of the CBOE listing rules and the SEC.
Compensation Committee
The Compensation Committee’s purpose and powers are, to the extent permitted by law, to (a) review and approve the compensation of the Chief Executive Officer of our Company and such other employees of our Company as are assigned thereto by the Board and to make recommendations to the Board with respect to standards for setting compensation levels, (b) exercise such other powers and authority as are set forth in a charter of the Compensation Committee of the Board, and (c) exercise such other powers and authority as shall from time to time be assigned thereto by resolution of the Board.
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The Compensation Committee also has the power to investigate any matter brought to its attention within the scope of its duties. It also has the authority to retain counsel and advisors to fulfill its responsibilities and duties.
Our Board has adopted a written charter setting forth the authority and responsibilities of the Compensation Committee consistent with the purposes and powers set forth above, which is available on our principal corporate website at https://www.thumzupmedia.com/compensation-committee-charter concurrently with the consummation of this offering.
The Compensation Committee consists of Joanna Massey, Robert Haag and Paul Dickman. Mr. Haag serves as chairman of the Compensation Committee. The Board has affirmatively determined that each member of the Compensation Committee meets the independence criteria applicable to Compensation Committee members under SEC rules and the CBOE listing rules. The Company believes that the composition of the Compensation Committee meets the requirements for independence under, and the functioning of such Compensation Committee complies with, any applicable requirements of the rules and regulations of the CBOE listing rules and the SEC.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee’s purpose and powers are, to the extent permitted by law, to: (a) identify potential qualified nominees for director and recommend to the Board for nomination candidates for the Board, (b) develop our Company’s corporate governance guidelines and additional corporate governance policies, (c) exercise such other powers and authority as are set forth in a charter of the Nominating and Corporate Governance Committee of the Board, and (d) exercise such other powers and authority as shall from time to time be assigned thereto by resolution of the Board.
The Nominating and Corporate Governance Committee also has the power to investigate any matter brought to its attention within the scope of its duties. It also has the authority to retain counsel and advisors to fulfill its responsibilities and duties.
The Nominating and Corporate Governance Committee consists of Joanna Massey, Robert Haag and Paul Dickman, Ms. Massey serves as chairman of the Nominating and Corporate Governance Committee. Our Board has adopted a written charter setting forth the authority and responsibilities of the Nominating and Corporate Governance Committee consistent with the purposes and powers set forth above, which is available on our principal corporate website located at https://www.thumzupmedia.com/ncg-committee-charter concurrently with the consummation of this offering. The Board has determined that each member of the Nominating and Corporate Governance Committee is independent within the meaning of the independent director guidelines of the CBOE listing rules.
Compensation Committee Interlocks and Insider Participation
None of our Company’s executive officers serves, or in the past has served, as a member of the Board or its compensation committee, or other committee serving an equivalent function, of any entity that has one or more executive officers who serve as members of our Board or its Compensation Committee. None of the members of our Compensation Committee is, or has ever been, an officer or employee of our Company.
Code of Conduct
Our Board has adopted a new Code of Conduct applicable to our employees, directors and officers, in accordance with applicable U.S. federal securities laws and the corporate governance rules of the CBOE. The Code of Conduct is available on our principal corporate website located at https://www.thumzupmedia.com/code-of-conduct concurrently with the consummation of this offering. Any substantive amendments or waivers of the Code of Conduct or any similar code(s) subsequently adopted for senior financial officers may be made only by our Board and will be promptly disclosed as required by applicable U.S. federal securities laws and the corporate governance rules of the CBOE. The information contained on our website is not incorporated by reference into this prospectus, and you should not consider any information (nor use the same in deciding whether to purchase our shares of common stock) contained on, or that can be accessed through, our website as part of this prospectus.
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Board Leadership Structure and Risk Oversight
Our Board has responsibility for the oversight of our risk management processes and, either as a whole or through its committees, regularly discusses with management our major risk exposures, their potential impact on our business and the steps we take to manage them. The risk oversight process includes receiving regular reports from board committees and members of senior management to enable our Board to understand our risk identification, risk management, and risk mitigation strategies with respect to areas of potential material risk, including operations, finance, legal, regulatory, cybersecurity, strategic, and reputational risk.
Corporate Governance Guidelines
Effective upon the completion of this offering, our Board will adopt corporate governance guidelines in accordance with the corporate governance rules of the CBOE, which is available on our principal corporate website located at https://www.thumzupmedia.com/corporate-governance-guidelines concurrently with the consummation of this offering. The information contained on our website is not incorporated by reference into this prospectus, and you should not consider any information (nor use the same in deciding whether to purchase our shares of common stock) contained on, or that can be accessed through, our website as part of this prospectus.
Director Compensation
The following table presents the total compensation for the non-employee director of our Board during the fiscal year ended December 31, 2023. Other than as set forth in the table and described more fully below, we did not pay any compensation, reimburse any expense of, make any equity awards or non-equity awards to, or pay any other compensation to any of the other members of our Board in such period.
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | All Other Compensation ($) | Total ($) | |||||||||||||||
Robert Haag | $ | 4,000 | $ | - | $ | - | - | $ | 4,000 |
Mr. Haag is compensated $1,000 per quarter for his services as a director, which commenced on July 1, 2022. As of December 31, 2023, $6,000 is owed to Mr. Haag for his services as a director.
Compensation of Non-Employee Directors
Compensation for our directors is discretionary and is reviewed from time to time by our Board. Any determinations with respect to Board compensation are made by our Board. As of the date of this prospectus, we have not compensated our non-employee directors for their service to our Company and do not intend to do so upon the consummation of this offering.
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EXECUTIVE COMPENSATION
The following table sets forth information regarding compensation earned during fiscal 2023 and 2022 by our principal executive officer and our other most highly compensated executive officers, or the named executive officers, as of the end of the 2023 fiscal year.
Summary Compensation Table
The following table sets forth the compensation paid to, or accrued by, our named executive officers during the periods indicated.
Name and Principal Position | Year | Salary ($)(1) | Stock
awards ($)(2) | Total ($) | ||||||||||
Robert Steele, Chief Executive Officer(1) | ||||||||||||||
2023 | $ | 67,000 | $ | 0 | $ | 67,000 | ||||||||
2022 | $ | 15,000 | $ | 0 | $ | 16,653 |
(1) | Robert Steele, CEO, President, Secretary, and Treasurer is compensated $5,000 per month for his services as Chief Executive Officer of the Company, commencing on October 1, 2022. On June 1, 2023, the Company increased Mr. Steele’s compensation to $6,000 per month for his services as Chief Executive Officer of the Company. Mr. Steele is not compensated for his services as a director of the Company. Mr. Steele received a bonus of $1,653 during the year ended December 31, 2022. |
Board of Directors Compensation
Directors who are employees of our company or of any of our subsidiaries receive no additional compensation for serving on our Board of Directors or any of its committees. We currently have no independent or outside directors. We intend to seek and recruit additional management members and senior staff following completion of this offering.
Director Compensation
The following table presents the total compensation for the non-employee director of our Board during the fiscal year ended December 31, 2023. Other than as set forth in the table and described more fully below, we did not pay any compensation, reimburse any expense of, make any equity awards or non-equity awards to, or pay any other compensation to any of the other members of our Board in such period.
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | All Other Compensation ($) | Total ($) | |||||||||||||||
Robert Haag | $ | 4,000 | $ | - | $ | - | - | $ | 4,000 |
Mr. Haag is compensated $1,000 per quarter for his services as a director, which commenced on July 1, 2022. As of December 31, 2023, $6,000 is owed to Mr. Haag for his services as a director.
Stock Option Grants
The Company has no stock option or equity incentive plans and there are no options or warrants outstanding.
Equity Stock Option Plan
The Company has adopted an equity incentive plan as of [____].
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PRINCIPAL SHAREHOLDERS
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.
The following table sets forth certain information regarding the beneficial ownership of our Common Stock, and Series A Preferred Convertible Voting Stock by (i) each person who, to our knowledge, owns more than 5% of our Common Stock or Series A Preferred Convertible Voting Stock (“Series A Preferred”), (ii) our current directors and the named executive officers identified under the heading “Executive Compensation” and (iii) all of our current directors and executive officers as a group. We have determined beneficial ownership in accordance with applicable rules of the SEC, and the information reflected in the table below is not necessarily indicative of beneficial ownership for any other purpose. Under applicable SEC rules, beneficial ownership includes any shares as to which a person has sole or shared voting power or investment power and any shares which the person has the right to acquire within 60 days after May 29, 2024 through the exercise of any option, warrant or right or through the conversion of any convertible security. Unless otherwise indicated in the footnotes to the table below and subject to community property laws where applicable, we believe, based on the information furnished to us that each of the persons named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.
The Certificate of Designation of the Series A Preferred contains a blocker which prohibits the conversion of the Series A Preferred into shares of common stock if the number of shares of common stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares of common stock owned by the holder at such time, the number of shares of Common Stock that would result in the holder beneficially owning (as determined in accordance with Section 13(d) of the 1934 Act and the rules thereunder) more than 4.99% of all of the common stock outstanding at such time (the “4.99% Beneficial Ownership Limitation”); provided, however, that, upon the holder providing the Company with sixty-one (61) days’ advance notice (the “4.99% Waiver Notice”) that the holder would like to waive the 4.99% Beneficial Ownership Limitation with regard to any or all shares of common stock issuable upon conversion of the Series A Preferred, the 4.99% Beneficial Ownership Limitation will be of no force or effect with regard to all or a portion of the Series A Preferred referenced in the 4.99% Waiver Notice but shall in no event waive the 9.99% Beneficial Ownership Limitation (the “9.99% Beneficial Ownership Limitation”). The paragraph forgoing constituting the (“Series A Blocker”).
The Certificate of Designation of the Series B Preferred contains a blocker which prohibits the conversion of the Series B Preferred into shares of common stock if the number of shares of common stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares of common stock owned by the holder at such time, the number of shares of Common Stock that would result in the holder beneficially owning (as determined in accordance with Section 13(d) of the 1934 Act and the rules thereunder) more than 4.99% of all of the common stock outstanding at such time (the “4.99% Beneficial Ownership Limitation”); provided, however, that, upon the holder providing the Company with sixty-one (61) days’ advance notice (the “4.99% Waiver Notice”) that the holder would like to waive the 4.99% Beneficial Ownership Limitation with regard to any or all shares of common stock issuable upon conversion of the Series B Preferred, the 4.99% Beneficial Ownership Limitation will be of no force or effect with regard to all or a portion of the Series B Preferred referenced in the 4.99% Waiver Notice but shall in no event waive the 9.99% Beneficial Ownership Limitation (the “9.99% Beneficial Ownership Limitation”). The paragraph forgoing constituting the (“Series B Blocker”).
The information set forth in the table below is based on 7,720,084 shares of our Common Stock, 144,888 shares of Series A Preferred, and 16,100 shares of Series B Preferred issued and outstanding on May 29, 2024. In computing the number of shares of Common Stock beneficially owned by a person and the percentage ownership of that person, we deemed to be outstanding all shares of Common Stock subject to options, warrants, rights or other convertible securities held by that person that are currently exercisable or will be exercisable within 60 days after May 29, 2024. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the principal address of each of the Stockholders below is in care of Thumzup™ Media Corporation, 11845 W. Olympic Blvd, Ste 1100W #13, Los Angeles, CA 90064.
Number of Shares of Common Stock Beneficially Owned | Percentage of Common Stock Beneficially Owned | Number of Shares of Series A Preferred Owned | Percentage of Series A Preferred Beneficially Owned | Number of Shares of Series B Preferred Owned | Percentage of Series B Preferred Beneficially Owned | % of Total Voting Power | ||||||||||||||||||||||
Directors and Named Executive Officers | ||||||||||||||||||||||||||||
Robert Steele | 3,100,000 | 40.16 | % | - | - | - | - | 40.16 | % | |||||||||||||||||||
Robert Haag (1) | 384,290 | (2) | 4.99 | % | 30,416 | (3) | 20.99 | % | 1,000 | (4) | 6.21 | % | 4.99 | % | ||||||||||||||
All directors and named executive officers as a group (2 people) | 3,484,290 | 45.15 | % | 30,416 | 20.99 | % | 1,000 | 6.21 | % | 45.15 | % | |||||||||||||||||
Other 5% Stockholder | ||||||||||||||||||||||||||||
Daniel Lupinelli | 1,500,223 | (5) | 19.43 | % | - | - | - | - | - | % | ||||||||||||||||||
Joe Thomas (6) | 674,564 | (7) | 8.74 | % | 53,984 | (8) | 37.26 | % | - | - | 8.74 | % | ||||||||||||||||
Andrew Haag (9) | 507,773 | (10) | 6.58 | % | 53,394 | (11) | 37.57 | % | 1,000 | (12) | 6.21 | % | 6.58 | % |
(1) Robert Haag, a Director of the Company, is the Managing Member and sole owner of Westside Strategic Partners, LLC (“Westside”). Robert Haag has voting control and investment discretion over securities held by Westside. As such, Robert Haag may be deemed to be the beneficial owner (as determined under Section 13(d) of the Exchange Act) of the securities held by Westside.
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(2) Consists of (i) 278,445 shares of common stock held by Westside, (ii) 125 shares of common stock held by Robert Haag, and (iii) 106,787 shares of common stock underlying 30,416 shares of Series A Preferred held by Westside. Excludes (i) 349,453 shares of common stock underlying 30,416 shares of Series A Preferred held by Westside as such conversion is prohibited by the Series A Blocker and (ii) 10,000 shares of common stock underlying 1,000 shares of Series B Preferred held by Westside as such conversion is prohibited by the Series B Blocker and.
(3) Consists of 30,416 shares of Series A Preferred held by Westside.
(4) Consists of 1,000 shares of Series B Preferred held by Westside.
(5) Consists of 1,500,223 shares of common stock held by Mr. Lupinelli. Pursuant to a non-vote agreement, Mr. Lupinelli may not vote his shares in any corporate actions.
(6) Joe Thomas is the Managing Member of SLS Group, LLC (“SLS”) and is also the President of Optimum Holdings, LLC (“Optimum”). His spouse, Mickeleen Thomas is a shareholder and Managing Member of Optimum. Joe Thomas has voting control and investment discretion over securities held by SLS and Optimum. As such, Joe Thomas may be deemed to be the beneficial owner (as determined under Section 13(d) of the Exchange Act) of the securities held by SLS and Optimum. The address of Mr. Thomas is 4580 S Thousand Oaks Drive Salt Lake City, UT 84124.
(7) Consists of (i) 292,089 shares of common stock held by SLS and (ii) 330,462 shares of common stock held by Optimum. Excludes 809,760 shares of common stock underlying 53,984 shares of Series A Preferred held by Optimum as such conversion is prohibited by the Series A Blocker.
(8) Consists of 53,984 shares of Series A Preferred held by Optimum.
(9) Andrew Haag is the Managing Member of Hampton Growth Resources, LLC (“HGR”). Andrew Haag has voting control and investment discretion over securities held by HGR. As such, Andrew Haag may be deemed to be the beneficial owner (as determined under Section 13(d) of the Exchange Act) of the securities held by HGR. The address of Mr. Haag is 1688 Meridian Ave, Ste 700 Miami Beach, FL 33139.
(10) Consists of 507,773 shares of common stock held by HGR. Excludes (1) 816,480 shares of common stock underlying 54,432 shares of Series A Preferred held by HGR as such conversion is prohibited by the Series A Blocker (ii) 10,000 shares of common stock underlying 1,000 shares of Series B Preferred held by HGR as such conversion is prohibited by the Series B Blocker.
(11) Consists of 54,432 shares of Series A Preferred held by HGR.
(12) Consists of 1,000 shares of Series B Preferred held by HGR.
From time to time, the number of our shares held in the “street name” accounts of various securities dealers for the benefit of their clients or in centralized securities depositories may exceed 5% of the total shares of our common stock outstanding.
Lockup Agreements
On September 21, 2022, Robert Steele, and Danny Lupinelli entered into Lockup Agreements (the “Lockup Agreement’) with holders of the Series A Preferred Convertible Stock over the ownership of their securities. Other than with respect to certain issuances, without the prior consent of 51% of the holders of the Series A Preferred Convertible Stock of the Company, will not (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company; (ii) file or cause to be filed any registration statement with the Securities and Exchange Commission relating to the offering of any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have not been a party to any transaction or arrangement in which the amount involved in the transaction exceeded 1% of the average of our total assets at December 31, 2023, and 2022, and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of any class of our voting securities or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest.
On November 19, 2020, Westside, of which one of our Directors, Robert Haag, is the Managing Member and sole owner, purchased a convertible note in the principal amount of $50,000 convertible for $50,000 in consideration. The convertible note was converted into common stock and preferred shares on September 28, 2022 and the note is now retired.
On March 16, 2021, Westside, of which one of our Directors, Robert Haag, is the Managing Member and sole owner, acquired 25,000 shares of Common Stock at $1.00 per share for a subscription in the amount of $25,000.
On December 14, 2021, Westside, of which one of our Directors, Robert Haag, is the Managing Member and sole owner, acquired 33,334 shares of Common Stock at $1.50 per share for a subscription in the amount of $50,000.
On April 11, 2022, Westside, of which one of our Directors, Robert Haag, is the Managing Member and sole owner, acquired 16,667 shares of Common Stock at $3.00 per share for a subscription in the amount of $50,000.
On September 27, 2022, Westside, of which one of our Directors, Robert Haag, is the Managing Member and sole owner, acquired 2,223 shares of our Series A Preferred Stock at $45 per share for a subscription in the amount of $100,000.
On September 28, 2022, Westside, of which one of our Directors, Robert Haag, is the Managing Member and sole owner, exchanged convertible debt in the amount of $37,887.16 in principal and accrued interest for 22,962 shares of Series A Preferred Stock.
On September 28, 2022, Westside, of which one of our Directors, Robert Haag, is the Managing Member and sole owner, acquired 169,644 shares of Common Stock for the conversion of debt in the amount of $18,660.88 in principal and accrued interest.
On June 29, 2022, Robert Steele, our Chief Executive Officer and a Director, sold 100,000 shares of Common Stock for $30,000.00 in a private transaction to an accredited investor.
On November 18, 2022, the Company entered into a Media Relations Services Agreement (the “Media Relations Services Agreement”) with Elev8 New Media, LLC (“Elev8”), of which one of our directors, Robert Haag, is a member. Under the terms of the agreement, the Company will pay Elev8 $6,500 per month for six months and the Media Relations Services Agreement will automatically renew into consecutive monthly periods unless either party provides 30 days written notice of cancellation. This price is a discounted rate off Elev8’s normal monthly price of $9,500 per month. In addition to the monthly fee, through November 30, 2023, the Company has paid Elev8 an aggregate of $25,000 for a social media marketing campaign and an aggregate of $15,000 for marketing aimed at garnering more advertisers and users for its AdTech platform and mobile app, with an additional objective to increase the number of followers for the Company’s social media accounts. The vast majority of the funds paid to Elev8 for the social media campaign and marketing plan were spent with Meta, Google and other social media companies. Thumzup suspended the Media Relations Agreement with Elev8 on October 31, 2023.
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On December 15, 2022, Westside, of which one of our Directors, Robert Haag, is the Managing Member and sole owner, received a dividend of 490 shares of Series A Preferred Stock, per the terms of its Certificate of Designation.
On December 30, 2022, Westside, of which one of our Directors, Robert Haag, is the Managing Member and sole owner, acquired 1,111 shares of our Series A Preferred Stock at $45 per share for a subscription in the amount of $50,000.
On February 22, 2023, Daniel Lupinelli, a 10%+ shareholder of the Company, subscribed to purchase 223 shares of common stock at $4.50 per share for a subscription amount of $1,003.50 under the Company’s qualified offering under Regulation A+. The subscription is currently in escrow.
On February 28, 2023, Westside, of which one of our Directors, Robert Haag, is the Managing Member and sole owner, subscribed to purchase 11,150 shares of common stock at $4.50 per share for a subscription amount of $50,175 under the Company’s qualified offering under Regulation A+. Westside will receive 1,115 shares of common stock as bonus shares under the terms of the qualified offering under Regulation A+. The subscription is currently in escrow. (Pacific stock shows as issued.)
On March 15, 2023, Westside, of which one of our Directors, Robert Haag, is the Managing Member and sole owner, received a dividend of 521 shares of Series A Preferred Stock, per the terms of its Certificate of Designation.
On June 27, 2023, Westside subscribed to purchase 11,140 shares of common stock at $4.50 per share for a subscription amount of $50,130 under the Company’s qualified offering under Regulation A+. Westside received 1,114 shares of common stock as bonus shares under the terms of the qualified offering under Regulation A+. The subscription closed on June 29, 2023.
On September 2, 2023, Westside entered into certain Waiver Agreements with the Company pursuant to which Westside was issued an aggregate of 11,510 and 871 shares of common and Series A Preferred stock, respectively, for the waiver of liquidated damages due under Registration Rights Agreements for failing to file and maintain a registration statement covering the shares.
On September 15, 2023, Westside received a dividend of 558 shares of Series A Preferred Stock, per the terms of the Company’s Certificate of Designation.
On December 4, 2023, Westside entered into a Promissory Note with the Company for $30,000 (“Westside Note”). The Westside Note carried an interest rate of 0% and matured on December 8, 2023. The Company repaid the Westside Note in full on December 5, 2023 for $30,000. The Westside Note is retired.
On December 15, 2023, Westside received a dividend of 569 shares of Series A Preferred Stock, per the terms of the Company’s Certificate of Designation.
On March 14, 2024, Westside acquired 1,000 shares of our Series B Preferred Stock at $50 per share for a subscription in the amount of $50,000.
On March 15, 2024, Westside received a dividend of 580 shares of Series A Preferred Stock, per the terms of the Company’s Certificate of Designation.
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DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 250,000,000 shares of common stock, par value $0.001 per share. As of May 29, 2024, 7,720,084 shares of common stock were issued and outstanding.
Common Stock
The Company is authorized to issue 250,000,000 million shares of common stock, par value $0.001 per share.
All outstanding shares of our common stock are fully paid and nonassessable. The following summarizes the rights of holders of our common stock:
● | a holder of common stock is entitled to one vote per share on all matters to be voted upon generally by the shareholders and are not entitled to cumulative voting for the election of directors; | |
● | subject to preferences that may apply to shares of preferred stock outstanding, the holders of common stock are entitled to receive lawful dividends as may be declared by our board of directors; | |
● | upon our liquidation, dissolution or winding up, the holders of shares of common stock are entitled to receive a pro rata portion of all our assets remaining for distribution after satisfaction of all our liabilities and the payment of any liquidation preference of any outstanding preferred stock; | |
● | there are no redemption or sinking fund provisions applicable to our common stock; and | |
● | there are no preemptive, subscription or conversion rights applicable to our common stock. |
Preferred Stock
Our Amended and Restated Certificate of Incorporation authorizes the issuance of up to 25,000,000 shares of blank check preferred stock, par value $0.001 per share, of which 1,000,000 have been designated as Series A Preferred Convertible Voting stock. As of May 29, 2024, 7,720,084 shares of Common Stock and 142,213 shares of Series A Preferred Convertible Voting stock were issued and outstanding. All outstanding shares of the Company’s Common Stock and Series A Preferred Convertible Voting Stock are duly authorized, validly issued, fully-paid and non-assessable. Each such series of preferred stock shall have such number of shares, designations, preferences, voting powers, qualifications, and special or relative rights or privileges as shall be determined by our board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.
Our Amended and Restated Certificate of Designation of Rights, Powers, Preferences, Privileges And Restrictions of Series B Convertible Voting Stock. Authorizes the issuance of 40,000 shares of Series B Convertible Voting Stock, par value $0.001. As of May 29, 2024, 16,100 shares of the Company’s Series B Convertible Voting stock were issued and outstanding. All outstanding shares of the Company’s Series B Preferred Convertible Voting Stock are duly authorized, validly issued, fully-paid and non-assessable. Each such series of preferred stock shall have such number of shares, designations, preferences, voting powers, qualifications, and special or relative rights or privileges as shall be determined by our board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.
Warrants
As of May 29, 2024, there were no warrants issued.
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Anti-Takeover Effects of Nevada Law and Our Articles of Incorporation and Bylaws
Some provisions of Nevada law, our articles of incorporation, and our bylaws contain provisions that could make the following transactions more difficult: an acquisition of us by means of a tender offer; an acquisition of us by means of a proxy contest or otherwise; or the removal of our incumbent officers and directors. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that shareholders may otherwise consider to be in their best interest or in our best interests, including transactions that provide for payment of a premium over the market price for our shares.
These provisions, summarized below, are intended to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of the increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement of their terms. Shareholder Meetings. Our bylaws provide that a special meeting of shareholders may be called only by our president, by all of the directors provided that there are no more than three directors, or if more than three, by any three directors, or by the holder of a majority of our capital stock.
Shareholder Action by Written Consent. Our bylaws allow for any action that may be taken at any annual or special meeting of the shareholders to be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.
Shareholders Not Entitled to Cumulative Voting. Our bylaws do not permit shareholders to cumulate their votes in the election of directors. Accordingly, the holders of a majority of the outstanding shares of our common stock entitled to vote in any election of directors can elect all of the directors standing for election, if they choose, other than any directors that holders of our preferred stock may be entitled to elect.
Nevada Business Combination Statutes. The “business combination” provisions of Sections 78.411 to 78.444, inclusive, of the NRS, generally prohibit a Nevada corporation with at least 200 shareholders from engaging in various “combination” transactions with any interested shareholder for a period of two years after the date of the transaction in which the person became an interested shareholder, unless the transaction is approved by the board of directors prior to the date the interested shareholder obtained such status or the combination is approved by the board of directors and thereafter is approved at a meeting of the shareholders by the affirmative vote of shareholders representing at least 60% of the outstanding voting power held by disinterested shareholders, and extends beyond the expiration of the two-year period, unless:
● | the combination was approved by the board of directors prior to the person becoming an interested shareholder or the transaction by which the person first became an interested shareholder was approved by the board of directors before the person became an interested shareholder or the combination is later approved by a majority of the voting power held by disinterested shareholders; or | |
● | if the consideration to be paid by the interested shareholder is at least equal to the highest of: (a) the highest price per share paid by the interested shareholder within the two years immediately preceding the date of the announcement of the combination or in the transaction in which it became an interested shareholder, whichever is higher, (b) the market value per share of common stock on the date of announcement of the combination and the date the interested shareholder acquired the shares, whichever is higher, or (c) for holders of preferred stock, the highest liquidation value of the preferred stock, if it is higher. |
A “combination” is generally defined to include mergers or consolidations or any sale, lease exchange, mortgage, pledge, transfer, or other disposition, in one transaction or a series of transactions, with an “interested shareholder” having: (a) an aggregate market value equal to 5% or more of the aggregate market value of the assets of the corporation, (b) an aggregate market value equal to 5% or more of the aggregate market value of all outstanding shares of the corporation, (c) 10% or more of the earning power or net income of the corporation, and (d) certain other transactions with an interested shareholder or an affiliate or associate of an interested shareholder. In general, an “interested shareholder” is a person who, together with affiliates and associates, owns (or within two years, did own) 10% or more of a corporation’s voting stock. The statute could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire us even though such a transaction may offer our shareholders the opportunity to sell their stock at a price above the prevailing market price.
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Nevada Control Share Acquisition Statutes. The “control share” provisions of Sections 78.378 to 78.3793, inclusive, of the NRS apply to “issuing corporations” that are Nevada corporations with at least 200 shareholders, including at least 100 shareholders of record who are Nevada residents, and that conduct business directly or indirectly in Nevada. The control share statute prohibits an acquirer, under certain circumstances, from voting its shares of a target corporation’s stock after crossing certain ownership threshold percentages, unless the acquirer obtains approval of the target corporation’s disinterested shareholders. The statute specifies three thresholds: one-fifth or more but less than one-third, one-third but less than a majority, and a majority or more, of the outstanding voting power. Generally, once an acquirer crosses one of the above thresholds, those shares in an offer or acquisition and acquired within 90 days thereof become “control shares” and such control shares are deprived of the right to vote until disinterested shareholders restore the right. These provisions also provide that if control shares are accorded full voting rights and the acquiring person has acquired a majority or more of all voting power, all other shareholders who do not vote in favor of authorizing voting rights to the control shares are entitled to demand payment for the fair value of their shares in accordance with statutory procedures established for dissenters’ rights.
A corporation may elect to not be governed by, or “opt out” of, the control share provisions by making an election in its articles of incorporation or bylaws, provided that the opt-out election must be in place on the 10th day following the date an acquiring person has acquired a controlling interest, that is, crossing any of the three thresholds described above. We have not opted out of the control share statutes and will be subject to these statutes if we are an “issuing corporation” as defined in such statutes.
The effect of the Nevada control share statutes is that the acquiring person, and those acting in association with the acquiring person, will obtain only such voting rights in the control shares as are conferred by a resolution of the shareholders at an annual or special meeting. The Nevada control share law, if applicable, could have the effect of discouraging takeovers of us.
Amendment of Charter Provisions. The amendment of any of the above provisions would require approval by holders of at least a majority of the total voting power of all of our outstanding voting stock.
The provisions of Nevada law, our articles of incorporation, and our bylaws could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in the composition of our board of directors and management. It is possible that these provisions could make it more difficult to accomplish transactions that shareholders may otherwise deem to be in their best interests.
Transfer Agent and Registrar
Our transfer agent and registrar for our common stock is Pacific Stock Transfer, 6725 Via Austi Parkway, Suite 300, Las Vegas Nevada 89119. Its telephone number is (800) 785-7782.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been very limited trading of our Common Stock. We cannot predict what effect, if any, additional sales of our shares in the public market or the availability of shares for sale will have on the market price of our common stock. Future sales of substantial amounts of common stock in the public market, could adversely affect the market price of our common stock.
Upon completion of this offering, based on our 7,720,084 shares outstanding as of May 29, 2024, [_____] shares of our common stock will be outstanding, or [_____] shares of common stock if the underwriter exercises its option to purchase additional shares in full. All of the shares of common stock expected to be sold in this offering will be freely tradable without restriction or further registration under the Securities Act unless held by our “affiliates,” as that term is defined in Rule 144 under the Securities Act. The remaining outstanding shares of our common stock will be deemed “restricted securities” as that term is defined under Rule 144. Restricted securities may be sold in the public market only if their offer and sale is registered under the Securities Act or if the offer and sale of those securities qualify for an exemption from registration, including exemptions provided by Rules 144 and 701 under the Securities Act, which are summarized below.
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As a result of the lock-up agreements and market stand-off provisions described below and the provisions of Rules 144 or 701, the shares of our common stock that will be deemed “restricted securities” will be available for sale in the public market following the completion of this offering as follows:
● | [_____] shares will be eligible for sale on the date of this prospectus; and | |
● | [_____] shares will be eligible for sale upon expiration of the lock-up agreements and market stand-off provisions described below, following the date that is 180 days after the date of this prospectus. |
Lock-up agreements
Our officers, directors, and holders of 5% or more of our outstanding common stock have entered into or will enter into lock-up agreements with the underwriters, subject to certain exceptions, not to dispose of or hedge any of their common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of this prospectus continuing through the date that is 180 days after the date of this prospectus, except with the prior consent of the representative. See “Underwriters” for additional information.
Rule 144
Rule 144, as currently in effect, generally provides that, once we have been subject to the public company reporting requirements of Section 13 or Section 15(d) of the Exchange Act for at least 90 days, a stockholder who is not deemed to have been one of our affiliates at any time during the preceding 90 days and who has beneficially owned the shares of our capital stock proposed to be sold for at least six months is entitled to sell such shares in reliance upon Rule 144 without complying with the volume limitation, manner of sale, or notice conditions of Rule 144. If such stockholder has beneficially owned the shares of our capital stock proposed to be sold for at least one year, then such person is entitled to sell such shares in reliance upon Rule 144 without complying with any of the other conditions of Rule 144.
Rule 144 also provides that a stockholder who is deemed to have been one of our affiliates at any time during the preceding 90 days and who has beneficially owned the shares of our common stock proposed to be sold for at least six months is entitled to sell such shares in reliance upon Rule 144 within any three-month period beginning 90 days after the date of this prospectus a number of such shares that does not exceed the greater of the following:
● | 1% of the number of shares of our capital stock then outstanding, which will equal shares immediately after the completion of this offering, assuming no exercise by the underwriters of their option to purchase additional shares; or |
● | the average weekly trading volume of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. |
Sales of our capital stock made in reliance upon Rule 144 by a stockholder who is deemed to have been one of our affiliates at any time during the preceding 90 days are also subject to the current public information, manner of sale, and notice conditions of Rule 144.
Rule 701
Rule 701 generally provides that, once we have been subject to the public company reporting requirements of Section 13 or Section 15(d) of the Exchange Act for at least 90 days, a stockholder who purchased shares of our common stock pursuant to a written compensatory benefit plan or contract and who is not deemed to have been one of our affiliates at any time during the preceding 90 days may sell such shares in reliance upon Rule 144 without complying with the current public information or holding period conditions of Rule 144. Rule 701 also provides that a stockholder who purchased shares of our common stock pursuant to a written compensatory benefit plan or contract and who is deemed to have been one of our affiliates during the preceding 90 days may sell such shares under Rule 144 without complying with the holding period condition of Rule 144. However, all stockholders who purchased shares of our common stock pursuant to a written compensatory benefit plan or contract are required to wait until 90 days after the date of this prospectus before selling such shares pursuant to Rule 701.
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF THE SECURITIES
The following discussion is a summary of the material U.S. federal income tax consequences of the purchase, ownership and disposition of the shares of common stock, which we refer to collectively as the securities, issued pursuant to this offering, but does not purport to be a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or non-U.S. tax laws are not discussed. This discussion is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service (the “IRS”), in each case in effect as of the date hereof. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a holder of the securities. This discussion also does not take into account or address any impact from the recently enacted tax legislation. We have not sought and will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the purchase, ownership and disposition of the securities.
This discussion is limited to holders that hold the securities as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to a holder’s particular circumstances, including the impact of the Medicare contribution tax on net investment income. In addition, it does not address consequences relevant to holders subject to special rules, including, without limitation:
● | U.S. expatriates and former citizens or long-term residents of the United States; | |
● | persons subject to the alternative minimum tax; | |
● | persons holding the securities as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment; | |
● | banks, insurance companies, and other financial institutions; | |
● | brokers, dealers or traders in securities; | |
● | real estate investment trusts or regulated investment companies; | |
● | “controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax; | |
● | partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein); | |
● | tax-exempt organizations or governmental organizations; | |
● | persons deemed to sell the Securities under the constructive sale provisions of the Code; | |
● | persons for whom our common stock constitutes “qualified small business stock” within the meaning of Section 1202 of the Code; | |
● | persons who hold or receive the Securities pursuant to the exercise of any employee stock option or otherwise as compensation; and | |
● | tax-qualified retirement plans. |
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If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds the securities, the tax treatment of a partner in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding the Securities and the partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences to them.
THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE SECURITIES ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.
Tax Considerations Applicable to U.S. Holders
Definition of a U.S. Holder
For purposes of this discussion, a “U.S. Holder” is any beneficial owner of the securities that, for U.S. federal income tax purposes, is:
● | an individual who is a citizen or resident of the United States; | |
● | a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof, or the District of Columbia; | |
● | an estate, the income of which is subject to U.S. federal income tax regardless of its source; or | |
● | a trust that (1) is subject to the primary supervision of a U.S. court and the control of one or more United States persons (within the meaning of Section 7701(a)(30) of the Code), or (2) has made a valid election under applicable Treasury Regulations to continue to be treated as a United States person. |
Distributions
As described in the section entitled “Dividend Policy,” we do not anticipate declaring or paying dividends to holders of our common stock in the foreseeable future. However, if we do make distributions on our common stock, such distributions of cash or property on our common stock will constitute dividends to the extent paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. Dividends received by a corporate U.S. Holder may be eligible for a dividends received deduction, subject to applicable limitations. Dividends received by certain non-corporate U.S. Holders, including individuals, are generally taxed at the lower applicable capital gains rate provided certain holding period and other requirements are satisfied. Distributions in excess of our current and accumulated earnings and profits will constitute a return of capital and first be applied against and reduce a U.S. Holder’s adjusted tax basis in its common stock, but not below zero. Any excess will be treated as capital gain and will be treated as described below in the section relating to the sale or disposition of our common stock.
Sale or Other Taxable Disposition of Common Stock
Upon the sale, exchange or other taxable disposition of the common stock, a U.S. Holder generally will recognize capital gain or loss equal to the difference between (i) the amount of cash and the fair market value of any property received upon the sale, exchange or other taxable disposition and (ii) such U.S. Holder’s adjusted tax basis in the common stock. Such capital gain or loss will be long-term capital gain or loss if the U.S. Holder’s holding period in such common stock is more than one year at the time of the sale, exchange or other taxable disposition. Long-term capital gains recognized by certain non-corporate U.S. Holders, including individuals, generally will be subject to reduced rates of U.S. federal income tax. The deductibility of capital losses is subject to certain limitations.
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Information Reporting and Backup Withholding
A U.S. Holder may be subject to information reporting and backup withholding when such holder receives payments on the common stock (including constructive dividends) or receives proceeds from the sale or other taxable disposition of common stock. Certain U.S. Holders are exempt from backup withholding, including corporations and certain tax-exempt organizations. A U.S. Holder will be subject to backup withholding if such holder is not otherwise exempt and such holder:
● | fails to furnish the holder’s taxpayer identification number, which for an individual is ordinarily his or her social security number; | |
● | furnishes an incorrect taxpayer identification number; | |
● | is notified by the IRS that the holder previously failed to properly report payments of interest or dividends; or | |
● | fails to certify under penalties of perjury that the holder has furnished a correct taxpayer identification number and that the IRS has not notified the holder that the holder is subject to backup withholding. |
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS. U.S. Holders should consult their tax advisors regarding their qualification for an exemption from backup withholding and the procedures for obtaining such an exemption.
Tax Considerations Applicable to Non-U.S. Holders
Definition of a Non-U.S. Holder
For purposes of this discussion, a “Non-U.S. Holder” is any Holder who is neither an entity treated as a partnership for U.S. federal income tax purposes, nor a U.S. Holder.
Distributions
As described in the section entitled “Dividend Policy,” we do not anticipate declaring or paying dividends to holders of our common stock in the foreseeable future. However, if we do make distributions of cash or property on our common stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles.
Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital and first be applied against and reduce a Non-U.S. Holder’s adjusted tax basis in its common stock, but not below zero.
Subject to the discussion below on effectively connected income, dividends paid to a Non-U.S. Holder of our common stock will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends (or such lower rate specified by an applicable income tax treaty, provided the Non-U.S. Holder furnishes a valid IRS Form W-8BEN or W-8BEN-E (or other applicable documentation) certifying qualification for the lower treaty rate). A Non-U.S. Holder that does not timely furnish the required documentation, but that qualifies for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. Holders should consult their tax advisors regarding their entitlement to benefits under any applicable income tax treaty.
If dividends paid to a Non-U.S. Holder are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment in the United States to which such dividends are attributable), the Non-U.S. Holder will be exempt from the U.S. federal withholding tax described above. To claim the exemption, the Non-U.S. Holder must furnish to the applicable withholding agent a valid IRS Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States.
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Any such effectively connected dividends will be subject to U.S. federal income tax on a net income basis at the regular graduated rates. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected dividends, as adjusted for certain items. Non-U.S. Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.
Sale or Other Taxable Disposition of Common Stock
A Non-U.S. Holder will not be subject to U.S. federal income tax on any gain realized upon the sale or other taxable disposition of our common stock unless:
● | the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment in the United States to which such gain is attributable); or | |
● | the Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition and certain other requirements are met, |
Gain described in the first bullet point above generally will be subject to U.S. federal income tax on a net income basis at the regular graduated rates. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected gain, as adjusted for certain items.
Gain described in the second bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty), which may be offset by U.S. source capital losses of the Non-U.S. Holder (even though the individual is not considered a resident of the United States), provided the Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses.
Non-U.S. Holders should consult their tax advisors regarding potentially applicable income tax treaties that may provide for different rules.
Information Reporting and Backup Withholding
Payments of dividends on our common stock will not be subject to backup withholding, provided the applicable withholding agent does not have actual knowledge or reason to know the holder is a United States person and the holder either certifies its non-U.S. status, such as by furnishing a valid IRS Form W-8BEN, W-8BEN-E or W-8ECI, or otherwise establishes an exemption. However, information returns are required to be filed with the IRS in connection with any dividends on our common stock paid to the Non-U.S. Holder, regardless of whether any tax was actually withheld. In addition, proceeds of the sale or other taxable disposition of our common stock within the United States or conducted through certain U.S.-related brokers generally will not be subject to backup withholding or information reporting, if the applicable withholding agent receives the certification described above and does not have actual knowledge or reason to know that such holder is a United States person, or the holder otherwise establishes an exemption. Proceeds of a disposition of our common stock conducted through a non-U.S. office of a non-U.S. broker generally will not be subject to backup withholding or information reporting.
Copies of information returns that are filed with the IRS may also be made available under the provisions of an applicable treaty or agreement to the tax authorities of the country in which the Non-U.S. Holder resides or is established.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a Non-U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.
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Additional Withholding Tax on Payments Made to Foreign Accounts
Withholding taxes may be imposed under Sections 1471 to 1474 of the Code (such Sections commonly referred to as the Foreign Account Tax Compliance Act, or “FATCA”) on certain types of payments made to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends on, or gross proceeds from the sale or other disposition of, our common stock paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code), unless (1) the foreign financial institution undertakes certain diligence and reporting obligations, (2) the non-financial foreign entity either certifies it does not have any “substantial United States owners” (as defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (1) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain “specified United States persons” or “United States-owned foreign entities” (each as defined in the Code), annually report certain information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.
Under the applicable Treasury Regulations and administrative guidance, withholding under FATCA generally applies to payments of dividends on our common stock, and will apply to payments of gross proceeds from the sale or other disposition of such stock on or after January 1, 2019.
Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in our common stock.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF PURCHASING, HOLDING, AND DISPOSING OF OUR SECURITIES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAW, AS WELL AS TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL, NON-U.S., OR U.S. FEDERAL NON-INCOME TAX LAWS SUCH AS ESTATE AND GIFT TAX.
UNDERWRITING
Dawson James Securities, Inc., or “Dawson James,” is acting as the underwriter of the offering. We have entered into an underwriting agreement dated [______], 2024, with Dawson James. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriter named below, and the underwriter agreed to purchase, at the public offering price less the underwriting discounts set forth on the cover page of this prospectus, the number of common stock listed next to its name in the following table.
Underwriter | Number of Shares of Common Stock | |||
Dawson James Securities, Inc. | ||||
Total |
The underwriter is committed to purchase all the shares of common stock offered by us, other than those covered by the over-allotment option to purchase additional shares of common stock described below, if they purchase any shares of common stock. The obligations of the underwriter may be terminated upon the occurrence of certain events specified in the underwriting agreement. Furthermore, pursuant to the underwriting agreement, the underwriter’s obligations are subject to customary conditions, representations and warranties contained in the underwriting agreement, such as receipt by the underwriter of officers’ certificates and legal opinions.
The underwriter is offering the shares of common stock subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel and other conditions specified in the underwriting agreement. The underwriter reserves the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
57 |
Option to Purchase Additional Ordinary Shares
We have granted an option to the underwriter, exercisable for 45 days after the date of this prospectus, to purchase up to [______] additional shares of common stock (15.0%) of the shares of common stock sold in the offering) at the public offering price, less the underwriting discount. The underwriter may exercise this option in whole or in part at any time within 45 days after the date of the offering. The purchase price to be paid per additional share will be equal to the public offering price of one share of common stock less the underwriting discount. If this option is exercised in full to purchase shares of common stock, the total price to the public will be $[____] and the total net proceeds, before expenses, to us will be $[______].
Discounts, Commissions and Reimbursement
The following table shows the public offering price, underwriting discount and proceeds, before expenses, to us. The information assumes either no exercise or full exercise by the underwriter of its over-allotment option.
Total with No | Total with | |||||||||||
Per Share | Over-Allotment | Over-Allotment | ||||||||||
Public offering price | $ | $ | $ | |||||||||
Underwriting discounts and commissions to be paid by us (8.0%): | $ | $ | $ | |||||||||
Proceeds, before other expenses, to us | $ | $ | $ |
The underwriter proposes to offer the shares of common stock to the public at the public offering price set forth on the cover of this prospectus. In addition, the underwriter may offer some of the shares of common stock to other securities dealers at such price less a concession not in excess of $[____] per share of common stock. If all of the shares of common stock are not sold at the public offering price, the underwriter may change the offering price and other selling terms by means of a supplement to this prospectus.
In addition, we have also agreed to pay all expenses in connection with the offering, including the following expenses: (a) all filing fees and expenses relating to the registration of the shares with SEC; (b) all FINRA public offering filing fees; (c) all fees and expenses relating to the listing of the Company’s equity or equity-linked securities on an Exchange; (d) all fees, expenses and disbursements relating to the registration or qualification of the shares under the “blue sky” securities laws of such states and other jurisdictions as the underwriter may reasonably designate (including, without limitation, all filing and registration fees, and the reasonable fees and disbursements of the Company’s “blue sky” counsel, which will be underwriter’s counsel) unless such filings are not required in connection with the Company’s proposed Exchange listing; (e) all fees, expenses and disbursements relating to the registration, qualification or exemption of the shares under the securities laws of such foreign jurisdictions as the underwriter may reasonably designate; (f) the costs of all mailing and printing of the offering documents; (g) transfer and/or stamp taxes, if any, payable upon the transfer of shares from the Company to the underwriter and (h) the fees and expenses of the Company’s accountants; (i) the fees and expenses of the Company’s legal counsel and other agents and representatives; (j) up to $10,000 to cover underwriter’s actual “road show” expenses; and (i) up to $150,000 for fees and expenses, including diligence, and legal fees and disbursements for the underwriter’s legal counsel.
We estimate that the total expenses of the offering payable by us will be approximately $[____] million.
Discretionary Accounts
The underwriter does not intend to confirm sales of the securities offered hereby to any accounts over which they have discretionary authority.
58 |
Lock-Up Agreements
Pursuant to “lock-up” agreements, our executive officers and directors and holders of 5% or more our outstanding common stock, have agreed, subject to limited exceptions, without the prior written consent of Dawson James, not to directly or indirectly offer to sell, sell, pledge or otherwise transfer or dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the transfer or disposition by any person at any time in the future of) any of shares of our common stock, enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of our common stock, make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible into or exercisable or exchangeable for common stock or any of our other securities or publicly disclose the intention to do any of the foregoing, for a period of 180 days from the date of this prospectus. for a period of 180 days from the date of this prospectus.
Underwriter Warrants
The Company has agreed to issue to Dawson James or its designees warrants to purchase up to a total of 5.0% of the shares of common stock sold in this offering, including the exercise of the over-allotment option, if any. Such warrants and underlying shares of common stock are included in this prospectus. The warrants are exercisable at $[___] per share (125% of the public offering price per share of Common Stock) commencing on a date which is six (6) months from the effective date of the offering under this prospectus supplement and expiring on a date which is no more than five (5) years from the commencement of sales of the offering in compliance with FINRA Rule 5110. The warrants have been deemed compensation by FINRA and are therefore subject to a 6-month lock-up pursuant to Rule 5110 of FINRA. The underwriters (or their permitted assignees under the Rule) will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will it engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days from effectiveness. The warrants may be exercised as to all, or a lesser number of shares of common stock and will provide for cashless exercise in the event there is not an effective registration statement for the underlying shares. Such warrants will provide for registration rights upon request, in certain cases. The sole demand registration right provided will not be greater than five years from the commencement of sales of the public offering in compliance with FINRA Rule 5110(g)(8)(C). The warrants shall be exercisable on a cash basis, provided that if a registration statement registering the common stock underlying the warrants is not effective, the warrants may be exercised on a cashless basis. The warrants will have anti-dilution terms that are consistent with FINRA Rule 5110(g)(8)(E) and (F). The Company will bear all fees and expenses attendant to registering the securities issuable on exercise of the warrants other than underwriting commissions incurred and payable by the holders. The exercise price and number of shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary cash dividend or the Company’s recapitalization, reorganization, merger or consolidation. However, the warrant exercise price or underlying shares will not be adjusted for issuances of shares of common stock at a price below the warrant exercise price.
Right of First Refusal
We have agreed to provide Dawson James the right of first refusal for a period of 6 months following the consummation of this offering to act as lead managing underwriter and book runner, for any future equity, equity-linked or debt (excluding commercial bank debt) offering during such period, of the Company, or any successor or any subsidiary of the Company.
Tail Financing
We have agreed to pay the above cash compensation to the extent that any fund which Dawson James contacted or introduced to us during the term of our engagement agreement with Dawson James provides financing or capital in any public or private offering or capital raising transaction during the twelve-month period following expiration or termination of our engagement letter with the Dawson James. The Tail shall exclude all investors, selling group and syndicate members that the Company introduces to Dawson, as well as to all the Company’s existing investors, whether or not already known to Dawson.
CBOE Listing
We plan to quote our shares of common stock on the CBOE under the symbol “TZUP”.
59 |
Before this offering, there has been a limited public market for our shares of common stock. The public offering price will be determined through negotiations between us and the underwriter. In addition to prevailing market conditions, the factors to be considered in determining the public offering price are:
● | the valuation multiples of publicly traded companies that the underwriter believes to be comparable to us, |
● | our financial information, |
● | the history of, and the prospects for, our company and the industry in which we compete, |
● | an assessment of our management, its past and present operations, and the prospects for, and timing of, our future revenues, |
● | the present state of our development, and |
● | the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours. |
An active trading market for our shares of common stocks may not develop. It is also possible that after the offering our shares of common stock shares will not trade in the public market at or above the public offering price.
Electronic Offer, Sale and Distribution of Securities
A prospectus in electronic format may be made available on the websites maintained by the underwriter or selling group members. The underwriter may agree to allocate a number of securities to selling group members for sale to its online brokerage account holders. Internet distributions will be allocated by the underwriter and selling group members that will make internet distributions on the same basis as other allocations. Other than the prospectus in electronic format, the information on these websites is not part of, nor incorporated by reference into, this prospectus or the registration statement of which this prospectus forms a part, has not been approved or endorsed by us, and should not be relied upon by investors.
Indemnification
We have agreed to indemnify Dawson James, its affiliates and each person controlling Dawson James against any losses, claims, damages, judgments, assessments, costs, and other liabilities, as the same are incurred (including the reasonable fees and expenses of counsel), relating to or arising out of the offering, undertaken in good faith.
Other Relationships
The underwriter and its affiliates may in the future provide various investment banking, commercial banking and other financial services for us and our affiliates for which they may in the future receive customary fees.
Offer restrictions outside the United States
Other than in the United States, no action has been taken by us or the underwriter that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
60 |
LEGAL MATTERS
The validity of the issuance of the shares offered in this prospectus, as well as certain legal matters of U.S. federal securities law related to the offering will be passed upon for us by Sichenzia Ross Ference Carmel LLP. ArentFox Schiff LLP, Washington, D.C., is acting as counsel to the underwriter.
EXPERTS
The financial statements of our company for the years ended December 31, 2023 and 2022, included in this prospectus have been audited by Haynie & Company, independent registered public accountants, as stated in its report appearing herein and elsewhere in this prospectus and have been so included in reliance upon the report of this firm given upon their authority as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration statement on Form S-1 (including exhibits) under the Securities Act, with respect to the shares to be sold in this offering. This prospectus does not contain all the information set forth in the registration statement. For further information with respect to our company and the common stock offered in this prospectus, reference is made to the registration statement, including the exhibits filed thereto, and the financial statements and notes filed as a part thereof. Statements contained in this prospectus concerning the contents of any contract or any other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, please see the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. The SEC maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.
We also maintain a website at www.ThumzupMedia.com. Upon the effectiveness of the registration statement of which this prospectus forms a part, you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.
No dealer, salesperson, or other person has been authorized to give any information or to make any representation not contained in this prospectus, and, if given or made, such information and representation should not be relied upon as having been authorized by us. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered by this prospectus in any jurisdiction or to any person to whom it is unlawful to make such offer or solicitation. Neither the delivery of this prospectus nor any sale made hereunder shall under any circumstances create an implication that there has been no change in the facts set forth in this prospectus or in our affairs since the date hereof.
61 |
Thumzup Media Corporation
Index to Financial Statements
F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Thumzup Media Corporation
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Thumzup Media Corporation (the Company) as of December 31, 2023 and 2022, and the related statements of operations, stockholders’ equity, and cash flows for each of the years in the years ended December 31, 2023 and 2022, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and 2022, and the results of its operations and its cash flows for each of the years ended December 31, 2023, and 2022, in conformity with accounting principles generally accepted in the United States of America.
Consideration of the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 3 to the financial statements, the Company has yet to generate significant revenue, has incurred net losses and has an accumulated deficit. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 3 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/S/ Haynie & Company
Salt Lake City, Utah
March 20, 2024
We have served as the Company’s auditor since 2021
F-2 |
THUMZUP MEDIA CORPORATION
BALANCE SHEETS
December 31, | ||||||||
2023 | 2022 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | $ | ||||||
Prepaid expenses | ||||||||
Total current assets | ||||||||
Capitalized software costs, net | ||||||||
Property and equipment, net | ||||||||
Total assets | $ | $ | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | $ | ||||||
Liquidated damages and accrued interest | ||||||||
Total current liabilities | ||||||||
Total liabilities | ||||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock - | shares authorized:||||||||
Preferred stock - Series A, $ | par value, $||||||||
Common stock, $ | par value, shares authorized; and shares issued and outstanding, respectively||||||||
Additional paid in capital | ||||||||
Subscription receivable | ( | ) | ||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Total stockholders’ equity | ||||||||
Total liabilities and stockholders’ equity | $ | $ |
The accompanying notes are an integral part of these financial statements.
F-3 |
THUMZUP MEDIA CORPORATION
STATEMENTS OF OPERATIONS
For the Year Ended December 31, | ||||||||
2023 | 2022 | |||||||
Revenues | $ | $ | ||||||
Operating Expenses: | ||||||||
Cost of revenues | ||||||||
Sales and marketing | ||||||||
Research and development | ||||||||
Professional and consulting | ||||||||
General and administrative | ||||||||
Depreciation and amortization | ||||||||
Total Operating Expenses | ||||||||
Loss From Operations | ( | ) | ( | ) | ||||
Other Income (Expense): | ||||||||
Expense for liquidated damages | ( | ) | ( | ) | ||||
Interest expense | ( | ) | ( | ) | ||||
Total Other Income (Expense) | ( | ) | ( | ) | ||||
Net Loss Before Income Taxes | ( | ) | ( | ) | ||||
Provision for Income Taxes (Benefit) | ||||||||
Net Loss | ( | ) | ( | ) | ||||
Net Income (Loss) Available to Common Stockholders | $ | ( | ) | $ | ( | ) | ||
Net Income (Loss) Per Common Share: | ||||||||
Basic | $ | ( | ) | $ | ( | ) | ||
Diluted | $ | ( | ) | $ | ( | ) | ||
Weighted Average Common Shares Outstanding: | ||||||||
Basic | ||||||||
Diluted |
The accompanying notes are an integral part of these financial statements.
F-4 |
THUMZUP MEDIA CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Preferred Stock | Additional | |||||||||||||||||||||||||||||||
Series A | Common Stock | Paid | Subscription | Accumulated | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | In Capital | Receivable | Deficit | Total | |||||||||||||||||||||||||
Balance at December 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
Preferred Series A issued for cash | $ | - | $ | $ | $ | |||||||||||||||||||||||||||
Preferred Series A issued for conversion of notes | $ | - | $ | $ | $ | |||||||||||||||||||||||||||
Preferred Series A issued for dividends | $ | - | $ | $ | $ | |||||||||||||||||||||||||||
Common Stock issued for cash | - | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
Common Stock issued for services | - | $ | $ | $ | $ | |||||||||||||||||||||||||||
Common Stock issued for conversion of notes | - | $ | $ | $ | $ | |||||||||||||||||||||||||||
Stock issuance costs | - | - | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||
Net loss | - | - | ( | ) | $ | ( | ) | |||||||||||||||||||||||||
Rounding | - | - | ||||||||||||||||||||||||||||||
Balance at December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
Preferred Series A issued for dividends | $ | - | $ | $ | ||||||||||||||||||||||||||||
Preferred Series A issued for liquidated damages | $ | - | $ | $ | $ | |||||||||||||||||||||||||||
Common Stock issued for services rendered | - | $ | $ | $ | ||||||||||||||||||||||||||||
Common Stock issued for Reg A + offering and cash | - | $ | $ | $ | ||||||||||||||||||||||||||||
Common Stock offering costs | - | - | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||
Stock subscription receivable received | - | - | $ | $ | ||||||||||||||||||||||||||||
Common stock issued for liquidated damages and accrued interest | - | $ | $ | $ | ||||||||||||||||||||||||||||
Net loss | - | - | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||
Balance at December 31, 2023 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ |
The accompanying notes are an integral part of these financial statements.
F-5 |
THUMZUP MEDIA CORPORATION
CONSOLIDATED STATEMENTS OF CASHFLOWS
For the Year Ended December 31, | ||||||||
2023 | 2022 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization expense | ||||||||
Stock issued for services | ||||||||
Preferred stock dividend paid with stock | ||||||||
Preferred stock issued for liquidated damages | ||||||||
Common stock issued for liquidated damages | ||||||||
Interest expense paid with stock on conversion | ||||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | ( | ) | ( | ) | ||||
Accounts payable and accrued expenses | ( | ) | ||||||
Liquidated damages and accrued interest | ( | ) | ||||||
Net cash used in operating activities | ( | ) | ( | ) | ||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | ( | ) | ||||||
Capitalized software costs | ( | ) | ||||||
Net cash used in investing activities | ( | ) | ||||||
Cash flows from financing activities: | ||||||||
Proceeds from sale of common stock | ||||||||
Subscription receivable | ( | ) | ||||||
Costs incurred for equity sales | ( | ) | ( | ) | ||||
Proceeds from sale of preferred stock | ||||||||
Net cash provided by financing activities | ||||||||
Net (decrease) increase in cash | ( | ) | ||||||
Cash, beginning of year | ||||||||
Cash, end of year | $ | $ | ||||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid during period for interest | $ | $ | ||||||
Cash paid during period for taxes | $ | $ | ||||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Preferred Series A issued for exchange of convertible notes and accrued interest | $ | $ | ||||||
Common shares issued upon conversion of convertible notes and accrued interest | $ | $ |
The accompanying notes are an integral part of these financial statements.
F-6 |
Thumzup™ Media Corporation
Notes to Financial Statements
December 31, 2023
Note 1 - Business Organization and Nature of Operations
Thumzup Media Corporation (“Thumzup” or “Company”) was incorporated on October 27, 2020, under the laws of the State of Nevada, and its headquarters is located in Los Angeles, California. The Company’s primary business is software as a service provider dedicated to connecting businesses with consumers and allowing the business to incentivize consumers to post about their experience on social media. Thumzup’s mission is to democratize social media marketing by connecting advertisers with non-professional people, who can be paid for their posts about products and services they love through its technology which utilizes a proprietary mobile app (“App”). The App generates scalable word-of-mouth product posts and recommendations for advertisers on social media and is designed to connect advertisers with individuals who are willing to promote their products online.
The Company is an “emerging growth company” as that term is used in the Jumpstart our Business Startups Act of 2012, and as such, has elected to comply with certain reduced public company reporting requirements.
Note 2 - Restatement
The accompanying financial statements include the restatement of the Company’s previously filed balance sheet and the related statements of operations, changes in shareholder’s equity and cash flows for the year ended December 31, 2022.
In connection with the preparation of the Company’s condensed interim financial statements as of and for the fiscal quarter ended June 30, 2023, the Company identified inadvertent errors in the accounting for certain equity transactions, specifically the liquidated damages provisions contained in certain of the Company’s equity offerings. Upon further evaluation, the Company determined that the liquidated damages should have been accounted for as liabilities and losses for the liquidated damages recorded in the Company’s statements of operations.
The categories of misstatements and their impact on previously reported financial statements for the 2022 annual period are described below:
Liquidated damages: The recognition, measurement and presentation and disclosure related to the liquidated damages provisions contained in the Registration Rights Agreements of certain of the Company’s equity offerings.
In addition to the restatement of the financial statements, certain information in Note 6 to the financial statements has been restated to reflect the corrections of misstatements discussed above as well as to add disclosure language as appropriate.
The financial statement misstatements reflected in previously issued financial statements did not impact cash flows from operations, investing, or financing activities in the Company’s statements of cash flows for any period previously presented.
Comparison of restated financial statements to financial statements as previously reported
The following tables compare the Company’s previously issued Balance Sheet and Statements of Operations as of and for the year ended December 31, 2022 to the corresponding restated financial statements for the respective year.
F-7 |
The restated balance sheet and statements of operations as of and for the year ended December 31, 2022 are as follows:
THUMZUP MEDIA CORPORATION
BALANCE SHEETS
December 31, 2022 | Restatement Adjustment | December 31, 2022 | ||||||||||
(As Reported) | (As Restated) | |||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash | $ | $ | $ | |||||||||
Prepaid expenses | ||||||||||||
Total current assets | ||||||||||||
Property and equipment, net | ||||||||||||
Total assets | $ | $ | $ | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable and accrued expenses | $ | $ | $ | |||||||||
Liquidated damages and accrued interest | ||||||||||||
Total current liabilities | ||||||||||||
Total liabilities | ||||||||||||
Commitments and contingencies | ||||||||||||
Stockholders’ equity: | ||||||||||||
Preferred stock - | shares authorized:||||||||||||
Preferred stock - Series A, $ | par value, $||||||||||||
Common stock, $ | par value, shares authorized; shares issued and outstanding||||||||||||
Additional paid in capital | ||||||||||||
Subscription receivable | ( | ) | ( | ) | ||||||||
Accumulated deficit | ( | ) | ( | ) | ( | ) | ||||||
Total stockholders’ equity | ( | ) | ||||||||||
Total liabilities and stockholders’ equity | $ | $ | $ |
The accompanying notes are an integral part of these financial statements.
F-8 |
THUMZUP MEDIA CORPORATION
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2022 | Restatement Adjustment | For the Year Ended December 31, 2022 | ||||||||||
(As Reported) | (As Restated) | |||||||||||
Revenues | $ | $ | $ | |||||||||
Operating Expenses: | ||||||||||||
Cost of revenues | ||||||||||||
Sales and marketing | ||||||||||||
Research and development | ||||||||||||
General and administrative | ||||||||||||
Depreciation and amortization | ||||||||||||
Total Operating Expenses | ||||||||||||
Loss From Operations | ( | ) | ( | ) | ||||||||
Other Income (Expense): | ||||||||||||
Expense for liquidated damages | ( | ) | ( | ) | ||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ||||||
Total Other Income (Expense) | ( | ) | ( | ) | ( | ) | ||||||
Net Loss Before Income Taxes | ( | ) | ( | ) | ( | ) | ||||||
Provision for Income Taxes (Benefit) | ||||||||||||
Net Loss | ( | ) | ( | ) | ( | ) | ||||||
Net Income (Loss) Available to Common Stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Net Income (Loss) Per Common Share: | ||||||||||||
Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Weighted Average Common Shares Outstanding: | ||||||||||||
Basic | ||||||||||||
Diluted |
F-9 |
Note 3 - Summary of Significant Accounting Policies
Basis of Presentation -
The accompanying financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) with respect to Form 10-K.
Use of Estimates
The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America, which requires management to use its judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures at the date of the financial statements and the reported amounts of expenses during the reported period. These assumptions and estimates could have a material effect on the financial statements. Actual results may differ materially from those estimates. The Company’s management periodically reviews estimates on an ongoing basis based on information currently available, and changes in facts and circumstances may cause the Company to revise these estimates. Significant estimates include estimates used in the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.
Cash and Cash Equivalents
Cash and cash equivalents include all cash on hand, demand deposits and short-term investments with original maturities of three months or less when purchased.
As
of December 31, 2023 and 2022, the Company’s cash and cash equivalents consisted of $
Prepaid Expenses
As
of December 31, 2023 and December 31, 2022, the Company had $
Property and Equipment
Property and equipment, which consists of computer equipment is recorded at cost and depreciated using the straight-line method over the estimated useful lives. Ordinary repair and maintenance costs are included in general and administrative expenses on our statement of operations. However, expenditures for additions or improvements that significantly extend the useful life of the asset are capitalized in the period incurred. At the time assets are sold or disposed of, the cost and accumulated depreciation are removed from their respective accounts and the related gains or losses are reflected in the statements of operations in gains from sales of property and equipment, net.
The
estimated useful life for computer equipment is three years. We evaluate the appropriateness of remaining depreciable lives assigned
to computer equipment at the end of each fiscal year. Depreciation expense for the years ended December 31, 2023 and December 31, 2022
was $
Revenue Recognition
The Company recognizes revenue when services are realized.
The Company’s revenues are accounted for under ASC Topic 606, “Revenue From Contracts With Customers” (“ASC 606”). The fees are generally fixed at the point of sale and all consideration from contracts is included in the transaction price. The Company’s contracts do not include multiple performance obligations or material variable consideration.
F-10 |
In accordance with ASC 606, the Company recognizes revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company recognizes revenue in accordance with that core principle by applying the following:
(i) | Identify the contract(s) with a customer; | |
(ii) | Identify the performance obligation in the contract; | |
(iii) | Determine the transaction price; | |
(iv) | Allocate the transaction price to the performance obligations in the contract; and | |
(v) | Recognize revenue when (or as) the Company satisfies a performance obligation. |
We derive our revenue principally from service fees paid by the client for the use of our platform in connection with our advertising technology platform which incentivizes users to leave reviews of our clients. Our sole performance obligation in the transaction is to connect clients with end-users to facilitate the completion of a successful review on the user’s social media accounts.
Judgment is required in evaluating the presentation of revenue on a gross versus net basis based on whether we control the service provided to the end-user and are the principal in the transaction (gross), or we arrange for other parties to provide the service to the end-user and are the agent in the transaction (net). We have concluded that we are the agent in our current transactions as we arrange for users to provide the service to the clients and the users post reviews on social media accounts controlled by the users. The assessment of whether we are considered the principal or the agent in a transaction could impact the accounting for these transactions and change the timing and amount of revenue recognized. The percentage fee the Company charges is not variable.
Cost of Goods Sold
The Company classifies its credit card transaction fees as cost of goods sold.
Client Deposits
Thumzup’s clients generally prepay to utilize the Company’s technology platform. All client deposits for services are recorded as a client deposit liability upon receipt. Upon a user leaving a qualified review for the client, as defined in Thumzup’s Mobile Terms and Conditions, the Company transfers the fee payable to the user to a user account balances liability account and realizes the fees payable to the Company as revenue. The Company holds all client deposits and user account balances in cash or cash-equivalents, including money market accounts.
Capitalized Software Development Costs
We
capitalize certain costs related to the development and enhancement of the Thumzup platform. In accordance with authoritative guidance,
including ASC 350-40, we began to capitalize these costs when the technological feasibility
was established and preliminary development efforts were successfully completed, management has authorized and committed project funding,
and it was probable that the project would be completed and the software would be used as intended. Such costs are amortized when placed
in service, on a straight-line basis over the estimated useful life of the related asset, generally estimated to be three years. Costs
incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred and recorded
in product development expenses on our statements of operations. Costs incurred for enhancements that were expected to result in additional
features or functionality that would generate additional revenue are capitalized and expensed over the estimated useful life of the enhancements,
generally three years. The Company does not capitalize any testing or maintenance costs. The accounting for these capitalized software
costs requires us to make significant judgments, assumptions and estimates related to the timing and amount of recognized capitalized
software development costs. For the years ended December 31, 2023 and 2022, we capitalized $
The Company evaluates its capitalized software costs for impairment annually, at year-end. As of December 31, 2023,
the Company determined
Income Taxes
The Company utilizes the asset and liability approach to measure deferred tax assets and liabilities based on temporary differences existing at each balance sheet date using currently enacted tax rates in accordance with ASC 740. ASC 740 considers the differences between financial statement treatment and tax treatment of certain transactions. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rate is recognized as income or expense in the period that includes the enactment date of that rate.
F-11 |
The Company has no tax positions as of December 31, 2023 and 2022 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
The Company recognizes any interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. For the years ending December 31, 2023 and 2022, the Company recognized no interest and penalties.
The Company computes earnings (loss) per share under ASC subtopic 260-10, Earnings Per Share. Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods, as applicable.
The computation of basic and diluted income (loss) per share, for the year ended December 31, 2023 and 2022 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.
December 31, | December 31, | |||||||
2023 | 2022 | |||||||
Common shares issuable upon conversion of preferred stock | ||||||||
Total potentially dilutive shares |
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, which simplifies the guidance on accounting for convertible debt instruments by removing the separation models for: (1) convertible debt with a cash conversion feature; and (2) convertible instruments with a beneficial conversion feature. As a result, the Company will not separately present in equity an embedded conversion feature in such debt. Instead, we will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. We expect the elimination of these models will reduce reported interest expense and increase reported net income for the Company’s convertible instruments falling under the scope of those models before the adoption of ASU 2020-06. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer available. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The adoption of this update did not have a material impact on the Company’s financial statements and related disclosures.
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which will add required disclosures of significant expenses for each reportable segment, as well as certain other disclosures to help investors understand how the chief operating decision maker (“CODM”) evaluates segment expenses and operating results. The new standard will also allow disclosure of multiple measures of segment profitability, if those measures are used to allocate resources and assess performance. The amendments will be effective for public companies for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact of this accounting standard update on our consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. The standard will be effective for public companies for fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact of this accounting standard update on our consolidated financial statements.
There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
Note 4 - Going Concern
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company was only recently formed, has not yet established profitable operations and has incurred losses since inception. These factors raise substantial doubt about the ability of the Company to continue as a going concern. In this regard, management is proposing to raise additional funds not provided by operations through loans or through sales of its common stock. There is no assurance that the Company will be successful in raising this additional capital or in achieving profitable operations. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties.
F-12 |
The
Company recognized its first revenues in December 2021. It relies on short-term debt and equity funding for its operations. At December
31, 2023 and 2022, the Company had a cash balance of $
Note 5 - Senior Secured Convertible Promissory Notes
On
November 19, 2020, the Company issued $
At any time while the Senior Notes were outstanding, and at the sole option of the note holder, the Senior Notes were convertible into shares of the Company’s common stock, $ par value, or any shares of capital stock or other securities of the Company into which such common stock could have been changed or reclassified.
A
holder was not entitled to convert any portion of the Senior Note in excess of that portion of the Senior Note upon conversion of which
the sum of (1) the number of shares of common stock beneficially owned by the Holder and its affiliates and (2) the number of conversion
shares issuable upon the conversion would have resulted in beneficial ownership by a Holder and its affiliates of more than
The
per share conversion price into which principal and interest outstanding of the Senior Notes were convertible into shares of common stock
was equal to $
Note 6 – Contingencies
Russia-Ukraine conflict
The Russian-Ukraine conflict is a global concern. The Company does not have any direct exposure to Russia or Ukraine through its operations, employee base, investments or sanctions. However, if the conflict escalates, it is unknown whether its direct or indirect effects may impact our business.
F-13 |
Note 7 - Shareholders’ Equity
Preferred Stock
The
Company is authorized to issue
The holders of Series A Preferred shall be entitled to receive dividends, in cash or in-kind at Company’s election, in an amount equal to $ per share. If paid in kind, the dividend shall be in shares of Series A Preferred (the “Dividend Shares”) valued at the $ per share of Series A Preferred (the “Purchase Price”) unless the closing price of the common stock on the trading day prior to the issuance of the dividend is below the reference rate, in which case the dividend shares shall be valued at the purchase price adjusted pursuant to the formula set forth in Section 3 of the Certificate of Designations.
For
the year ended December 31, 2022 the Company entered into a Securities Purchase Agreement with accredited investors. Pursuant to the
Securities Purchase Agreements, the company sold
On December 30, 2022, the Company issued shares of Series A Preferred shares as dividends.
On March 15, 2023, the Company issued Series A Preferred shares as dividends.
On June 15, 2023, the Company issued Series A Preferred shares as dividends.
From September 1 to September 14, 2023, the Company entered into waiver agreements pursuant to which the Company issued Series A Preferred shares for the settlement of certain liquidated damages.
On September 15, 2023, the Company issued Series A Preferred shares as dividends.
On December 15, 2023, the Company issued Series A Preferred shares as dividends.
As December 31, 2023 and 2022, the Company had and Series A Preferred shares issued and outstanding, respectively.
Common Stock
The Company is authorized to issue million shares of common stock, par value $ per share. As of December 31, 2023 and 2022, the Company had and shares issued and outstanding, respectively.
During
the year ended December 31, 2022, the Company issued
During
the year ended December 31, 2022, the Company issued
During
the year ended December 31, 2022, the Company issued
F-14 |
During
the year ended December 31, 2023, the Company issued
During
the year ended December 31, 2023, the Company issued
During
the year ended December 31, 2023, the Company issued
During
the year ended December 31, 2023 and 2022, the Company realized losses of $
Note 8 – Related Party Transactions
We have not been a party to any transaction or arrangement in which the amount involved in the transaction exceeded 1% of the average of our total assets at December 31, 2023 and 2022 and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of any class of our voting securities or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest.
On
November 19, 2020, Westside, of which one of our Directors, Robert Haag, is the Managing Member and sole owner,
purchased a convertible note in the principal amount of $
On
March 16, 2021, Westside, of which one of our Directors, Robert Haag, is the Managing Member and sole owner,
acquired
On
January 7, 2022, Westside, of which one of our Directors, Robert Haag, is the Managing Member and sole owner,
acquired
On
July 7, 2022, Westside, of which one of our Directors, Robert Haag, is the Managing Member and sole owner, acquired
On
September 27, 2022, Westside, of which one of our Directors, Robert Haag, is the Managing Member and sole owner,
acquired
On
September 28, 2022, Westside, of which one of our Directors, Robert Haag, is the Managing Member and sole owner,
exchanged convertible debt in the amount of $
On
September 28, 2022, Westside, of which one of our Directors, Robert Haag, is the Managing Member and sole owner,
acquired
F-15 |
On
June 29, 2022, Robert Steele, our Chief Executive Officer and a Director, sold
On
November 18, 2022, the Company entered into a Media Relations Services Agreement (the “Media Relations Services Agreement”)
with Elev8 New Media, LLC (“Elev8”), of which one of our directors, Robert Haag, is a member. Under the terms of the agreement,
the Company will pay Elev8 $
On December 15, 2022, Westside, of which one of our Directors, Robert Haag, is the Managing Member and sole owner, received a dividend of shares of Series A Preferred Stock, per the terms of its Certificate of Designation.
On
December 30, 2022, Westside, of which one of our Directors, Robert Haag, is the Managing Member and sole owner,
acquired
On
February 22, 2023, Daniel Lupinelli, a 10%+ shareholder of the Company, subscribed to purchase
On
February 28, 2023, Westside, of which one of our Directors, Robert Haag, is the Managing Member and sole owner,
subscribed to purchase
On March 15, 2023, Westside, of which one of our Directors, Robert Haag, is the Managing Member and sole owner, received a dividend of shares of Series A Preferred Stock, per the terms of its Certificate of Designation.
On
June 27, 2023, Westside subscribed to purchase
On September 2, 2023, Westside entered into certain Waiver Agreements with the Company pursuant to which Westside was issued an aggregate of and shares of common and Series A Preferred stock, respectively, for the waiver of liquidated damages due under Registration Rights Agreements for failing to file and maintain a registration statement covering the shares.
On September 15, 2023, Westside received a dividend of shares of Series A Preferred Stock, per the terms of the Company’s Certificate of Designation.
On
December 4, 2023, Westside entered into a Promissory Note with the Company for $
On December 15, 2023, Westside received a dividend of shares of Series A Preferred Stock, per the terms of the Company’s Certificate of Designation.
On
March 14, 2024, Westside acquired
On March 15, 2024, Westside received a dividend of shares of Series A Preferred Stock, per the terms of the Company’s Certificate of Designation.
F-16 |
Note 9 - Income Taxes
As
of December 31, 2023, the Company has net operating loss carryforwards (“NOL”) of approximately $
The tax effect of the carry forwards that give rise to deferred tax assets at December 31, 2023 consists of the following:
2023 | 2022 | |||||||
Deferred tax assets: | ||||||||
Net operating loss | $ | $ | ||||||
Total deferred tax assets | $ | |||||||
Valuation allowance | ( | ) | ( | ) | ||||
Deferred tax asset, net of allowance | $ | $ |
A reconciliation of the statutory income tax rate and the Company’s effective tax rate is as follows:
2023 | 2022 | |||||||
Statutory U.S. federal rate | % | % | ||||||
Book to tax differences | ( | )% | ( | )% | ||||
Valuation allowance | ( | )% | ( | )% | ||||
Effective tax rate | % | % |
Note 10 - Subsequent Events
The Company has evaluated subsequent events from the balance sheet date through the date which the financial statements were issued.
In
January 2024, the Company conducted the final closing of its qualified offering under Regulation A+, for which it issued
On February 21, 2024, the Company issued shares of common stock for services rendered.
On February 28, 2024, the Company engaged an investment bank for an underwritten offering in conjunction with a listing on a national exchange.
On March 4, 2024, the Company issued shares of common stock for services to be rendered.
On March 14, 2024, the Company issued
F-17 |
Thumzup Media Corporation
March 31, 2024
Index to the Condensed Financial Statements
F-18 |
THUMZUP MEDIA CORPORATION
CONDENSED BALANCE SHEETS
March 31, | December 31, | |||||||
2024 | 2023 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | $ | ||||||
Prepaid expenses | ||||||||
Total current assets | ||||||||
Property and equipment, net | ||||||||
Capitalized software costs, net | ||||||||
Total assets | $ | $ | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | $ | ||||||
Liquidated damages and accrued interest | ||||||||
Total current liabilities | ||||||||
Total liabilities | ||||||||
Commitments and contingencies (See Note 5) | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock - | shares authorized:||||||||
Preferred stock - Series A, $ | par value, $||||||||
Preferred stock - Series B, $ | par value, $||||||||
Common stock, $ | par value, shares authorized; and shares issued and outstanding, respectively||||||||
Additional paid in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Total stockholders’ equity | ||||||||
Total liabilities and stockholders’ equity | $ | $ |
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-19 |
THUMZUP MEDIA CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended March 31, | ||||||||
2024 | 2023 | |||||||
Revenues | $ | $ | ||||||
Operating Expenses: | ||||||||
Cost of revenues | ||||||||
Sales and marketing | ||||||||
Research and development | ||||||||
General and administrative | ||||||||
Depreciation and amortization | ||||||||
Total Operating Expenses | ||||||||
Loss From Operations | ( | ) | ( | ) | ||||
Other Income (Expense): | ||||||||
Liquidated damages expense | ( | ) | ||||||
Interest expense | ( | ) | ||||||
Total Other Income (Expense) | ( | ) | ||||||
Net Loss Before Income Taxes | ( | ) | ( | ) | ||||
Provision for Income Taxes (Benefit) | ||||||||
Net Loss | $ | ( | ) | $ | ( | ) | ||
Dividends on preferred stock | ( | ) | ( | ) | ||||
Net Loss Attributable to Common Stockholders | $ | ( | ) | $ | ( | ) | ||
Net Income (Loss) Per Common Share: | ||||||||
Basic | $ | ( | ) | $ | ( | ) | ||
Diluted | $ | ( | ) | $ | ( | ) | ||
Weighted Average Common Shares Outstanding: | ||||||||
Basic | ||||||||
Diluted |
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-20 |
THUMZUP MEDIA CORPORATION
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(Unaudited)
Preferred Stock | Preferred Stock | Additional | ||||||||||||||||||||||||||||||||||||||
Series A |
Series B | Common Stock | Paid | Subscriptions | Accumulated | |||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | In Capital | Receivable | Deficit | Total | |||||||||||||||||||||||||||||||
Balance at December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||
Common Stock issued for cash, net | - | - | ||||||||||||||||||||||||||||||||||||||
Common Stock issued for services rendered and to be rendered | - | - | ||||||||||||||||||||||||||||||||||||||
Common Stock issued for Series A conversion | ( | ) | ( | ) | - | ( | ) | |||||||||||||||||||||||||||||||||
Series B issued for cash | - | - | ||||||||||||||||||||||||||||||||||||||
Preferred Series A issued for dividends | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
Balance at March 31, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ |
Preferred Stock | Preferred Stock | Additional | ||||||||||||||||||||||||||||||||||||||
Series A | Series B | Common Stock | Paid | Subscriptions | Accumulated | |||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | In Capital | Receivable | Deficit | Total | |||||||||||||||||||||||||||||||
Balance at December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||||||
Common Stock issued for services rendered | - | - | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
Stock subscription receivable received | - | - | - | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
Preferred Series A issued for dividends | $ | - | - | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||
Net loss | - | - | - | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
Balance at March 31, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ |
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-21 |
THUMZUP MEDIA CORPORATION
CONDENSED STATEMENTS OF CASHFLOWS
(Unaudited)
For the Three Months Ended March 31, | ||||||||
2024 | 2023 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization expense | ||||||||
Stock issued for services | ||||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | ( | ) | ||||||
Liquidated damages and accrued interest | ||||||||
Accounts payable and accrued expenses | ( | ) | ||||||
Net cash used in operating activities | ( | ) | ( | ) | ||||
Cash flows from investing activities: | ||||||||
Capitalized software costs | ( | ) | ( | ) | ||||
Net cash used in investing activities | ( | ) | ( | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from sale of common stock | ||||||||
Proceeds from sale of preferred stock | ||||||||
Costs incurred for equity sales | ( | ) | ||||||
Net cash provided by financing activities | ||||||||
Net (decrease) increase in cash | ( | ) | ( | ) | ||||
Cash, beginning of period | ||||||||
Cash, end of period | $ | $ | ||||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid during period for interest | $ | $ | ||||||
Cash paid during period for taxes | $ | $ | ||||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Prepaid expenses paid for by issuance of common stock | $ | $ | ||||||
Preferred Series A shares issued for dividends | $ | $ |
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-22 |
Thumzup Media Corporation
Notes to the Condensed Financial Statements (Unaudited)
March 31, 2024
Note 1 - Business Organization and Nature of Operations
Thumzup Media Corporation (“Thumzup” or “Company”) was incorporated on October 27, 2020, under the laws of the State of Nevada, and its headquarters is located in Los Angeles, California. The Company’s primary business is software as a service provider dedicated to connecting businesses with consumers and allowing the business to incentivize consumers to post about their experience on social media. Thumzup’s mission is to democratize social media marketing by connecting advertisers with non-professional people, who can be paid for their posts about products and services they love through its technology which utilizes a proprietary mobile app (“App”). The App generates scalable word-of-mouth product posts and recommendations for advertisers on social media and is designed to connect advertisers with individuals who are willing to promote their products online.
The Company is an “emerging growth company” as that term is used in the Jumpstart our Business Startups Act of 2012, and as such, has elected to comply with certain reduced public company reporting requirements.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation - Unaudited Interim Financial Information
The accompanying unaudited condensed financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited condensed financial statements reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year.
Certain information and disclosures normally included in the notes to the annual consolidated financial statements have been condensed or omitted from these interim unaudited condensed consolidated financial statements. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 as filed with the SEC on March 20, 2024 (the “Annual Report”). The December 31, 2023 balance sheet is derived from those restated financial statements.
Use of Estimates
The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America, which requires management to use its judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures at the date of the financial statements and the reported amounts of expenses during the reported period. These assumptions and estimates could have a material effect on the financial statements. Actual results may differ materially from those estimates. The Company’s management periodically reviews estimates on an ongoing basis based on information currently available, and changes in facts and circumstances may cause the Company to revise these estimates. Significant estimates include estimates used in the valuation allowance related to deferred tax assets and capitalized software costs. Actual results may differ from these estimates.
Cash and Cash Equivalents
Cash and cash equivalents include all cash on hand, demand deposits and short-term investments with original maturities of three months or less when purchased.
As
of March 31, 2024 and December 31, 2023, the Company’s cash and cash equivalents consisted of $
F-23 |
Prepaid Expenses
As
of March 31, 2024 and December 31, 2023, the Company had $
Property and Equipment
Property and equipment, which consists of computer equipment is recorded at cost and depreciated using the straight-line method over the estimated useful lives. Ordinary repair and maintenance costs are included in general and administrative expenses on our statement of operations. However, expenditures for additions or improvements that significantly extend the useful life of the asset are capitalized in the period incurred. At the time assets are sold or disposed of, the cost and accumulated depreciation are removed from their respective accounts and the related gains or losses are reflected in the statements of operations in gains from sales of property and equipment, net.
The
estimated useful life for computer equipment is three years. We evaluate the appropriateness of remaining depreciable lives assigned
to computer equipment at the end of each fiscal year. Depreciation expense for the three months ended March 31, 2024 and 2023 was $
Capitalized Software Development Costs
We
capitalize certain costs related to the development and enhancement of the Thumzup platform. In accordance with authoritative guidance,
including ASC 350-40, we began to capitalize these costs when the technological feasibility was established and preliminary development
efforts were successfully completed, management has authorized and committed project funding, and it was probable that the project would
be completed and the software would be used as intended. Such costs are amortized when placed in service, on a straight-line basis over
the estimated useful life of the related asset, generally estimated to be three years. Costs incurred prior to meeting these criteria
together with costs incurred for training and maintenance are expensed as incurred and recorded in product development expenses on our
statements of operations. Costs incurred for enhancements that were expected to result in additional features or functionality that would
generate additional revenue are capitalized and expensed over the estimated useful life of the enhancements, generally three years. The
Company does not capitalize any testing or maintenance costs. The accounting for these capitalized software costs requires us to make
significant judgments, assumptions and estimates related to the timing and amount of recognized capitalized software development costs.
For the three months ended March 31, 2024 and 2023, we capitalized $
The Company evaluates its capitalized software costs for impairment annually, at year-end. As of December 31, 2023, the Company determined no impairment of its capitalized software costs was warranted.
Revenue Recognition
The Company recognizes revenue when services are realized.
The Company’s revenues are accounted for under ASC Topic 606, “Revenue From Contracts With Customers” (“ASC 606”). The fees are generally fixed at the point of sale and all consideration from contracts is included in the transaction price. The Company’s contracts do not include multiple performance obligations or material variable consideration.
F-24 |
In accordance with ASC 606, the Company recognizes revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company recognizes revenue in accordance with that core principle by applying the following:
(i) | Identify the contract(s) with a customer; | |
(ii) | Identify the performance obligation in the contract; | |
(iii) | Determine the transaction price; | |
(iv) | Allocate the transaction price to the performance obligations in the contract; and | |
(v) | Recognize revenue when (or as) the Company satisfies a performance obligation. |
We derive our revenue principally from service fees paid by the client for the use of our platform in connection with our advertising technology platform which incentivizes users to leave reviews of our clients. Our sole performance obligation in the transaction is to connect clients with end-users to facilitate the completion of a successful review on the user’s social media accounts.
Judgment is required in evaluating the presentation of revenue on a gross versus net basis based on whether we control the service provided to the end-user and are the principal in the transaction (gross), or we arrange for other parties to provide the service to the end-user and are the agent in the transaction (net). We have concluded that we are the agent in our current transactions as we arrange for users to provide the service to the clients and the users post reviews on social media accounts controlled by the users. The assessment of whether we are considered the principal or the agent in a transaction could impact the accounting for these transactions and change the timing and amount of revenue recognized. The percentage fee the Company charges is not variable.
Cost of Goods Sold
The Company classifies its credit card transaction fees as cost of goods sold.
Client Deposits
Thumzup’s
clients generally prepay to utilize the Company’s technology platform. All client deposits for services are recorded as a client
deposit liability upon receipt. Upon a user leaving a qualified review for the client, as defined in Thumzup’s Mobile Terms and
Conditions, the Company transfers the fee payable to the user to a user account balances liability account and realizes the fees payable
to the Company as revenue. The Company holds all client deposits and user account balances in cash or cash-equivalents, including money
market accounts.
Income Taxes
The Company utilizes the asset and liability approach to measure deferred tax assets and liabilities based on temporary differences existing at each balance sheet date using currently enacted tax rates in accordance with ASC 740. ASC 740 considers the differences between financial statement treatment and tax treatment of certain transactions. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rate is recognized as income or expense in the period that includes the enactment date of that rate.
The Company has no tax positions as of March 31, 2024 and December 31, 2023 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
The Company recognizes any interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. For the years ending March 31, 2024 and December 31, 2023, the Company recognized no interest and penalties.
The Company computes earnings (loss) per share under ASC subtopic 260-10, Earnings Per Share. Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods, as applicable.
F-25 |
The computation of basic and diluted income (loss) per share, for the year ended March 31, 2024 and 2023 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.
March 31, | March 31, | |||||||
2024 | 2023 | |||||||
Common shares issuable upon conversion of convertible notes | ||||||||
Common shares issuable upon conversion of preferred stock | ||||||||
Total potentially dilutive shares |
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, which simplifies the guidance on accounting for convertible debt instruments by removing the separation models for: (1) convertible debt with a cash conversion feature; and (2) convertible instruments with a beneficial conversion feature. As a result, the Company will not separately present in equity an embedded conversion feature in such debt. Instead, we will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. We expect the elimination of these models will reduce reported interest expense and increase reported net income for the Company’s convertible instruments falling under the scope of those models before the adoption of ASU 2020-06. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer available. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The adoption of this update did not have a material impact on the Company’s financial statements and related disclosures.
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which will add required disclosures of significant expenses for each reportable segment, as well as certain other disclosures to help investors understand how the chief operating decision maker (“CODM”) evaluates segment expenses and operating results. The new standard will also allow disclosure of multiple measures of segment profitability, if those measures are used to allocate resources and assess performance. The amendments will be effective for public companies for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact of this accounting standard update on our consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. The standard will be effective for public companies for fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact of this accounting standard update on our consolidated financial statements.
There are other various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
Note 3 – Going Concern
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, the Company was only recently formed, has not yet established profitable operations and has incurred losses since inception. These factors raise substantial doubt about the ability of the Company to continue as a going concern. In this regard, management is proposing to raise additional funds not provided by operations through loans or through sales of its common stock. There is no assurance that the Company will be successful in raising this additional capital or in achieving profitable operations. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties.
F-26 |
The
Company recognized its first revenues in December 2021. It has been reliant on equity funding for its operations. At March 31, 2024 and
December 31, 2023, the Company had a cash balance of $
Note 4 – Shareholders’ Equity
Preferred Stock
The Company is authorized to issue shares of preferred stock, par value $ per share.
Series A Preferred
On
September 26, 2022, the Company submitted a Certificate of Designation to the Secretary of State of Nevada designating
The holders of Series A Preferred shall be entitled to receive dividends, in cash or in-kind at the Company’s election, in an amount equal to $ per share per quarter. If paid in kind, the dividend shall be in shares of Series A Preferred (the “Dividend Shares”) valued at the $ per share of Series A Preferred (the “Purchase Price”) unless the closing price of the Common Stock on the Trading Day prior to the issuance of the dividend is below the Reference Rate, in which case the Dividend Shares shall be valued at the Purchase Price adjusted pursuant to the formula set forth in Section 3 of the Certificate of Designations.
On January 18, 2024, a holder converted shares of Series A preferred into shares of common stock.
On March 15, 2024, the Company issued Series A shares as a dividend.
As March 31, 2024 and December 31, 2023, the Company had and Series A preferred shares issued and outstanding, respectively.
Series B Preferred
On
March 5, 2024, the Company submitted a Certificate of Designation to the Secretary of State of Nevada designating
Once the company up-lists on a National Stock Exchange, the Series B Preferred converts at a 20% discount to the price of the offering in this S-1 and the downside price protections are eliminated. There is a call provision that goes into effect six (6) months from the listing on a National Exchange, that if the common stock trades at a 100% premium to the conversion price for 10 days or more, the Company can force the conversion of the Series B Preferred into common stock. The Company has agreed to pay the costs of Rule 144 legal opinions for the holders of the Series B Preferred.
F-27 |
The holders of Series B Preferred shall be entitled to receive dividends, in cash or in-kind at the Company’s election, in an amount equal to $ per share per quarter. If paid in kind, the number of common shares issued for the dividend shall be equal to the quotient of the dividend payable divided by the volume weighted average price on the dividend date.
From
March 14 to March 28, 2024, the Company issued
Common Stock
The Company is authorized to issue million shares of common stock, par value $ per share. As March 31, 2024 and December 31, 2023, the Company had and shares issued and outstanding, respectively.
During
the three months ended March 31, 2024, the Company issued
During
the three months ended March 31, 2024, the Company issued
During the three months ended March 31, 2024, the Company issued shares of common stock for the conversion of shares of Series A preferred.
During
the three months ended March 31, 2024 and 2023, the Company realized losses of $
Note 5 – Contingencies
Russia-Ukraine conflict
The Russian-Ukraine conflict is a global concern. The Company does not have any direct exposure to Russia or Ukraine through its operations, employee base, investments or sanctions. However, if the conflict escalates, it is unknown whether its direct or indirect effects may impact our business.
Note 6 – Related Party Transactions
On
March 14, 2024, Westside acquired
On March 15, 2024, Westside received a dividend of shares of Series A Preferred Stock, per the terms of the Company’s Certificate of Designation.
Note 7 – Subsequent Events
The Company has evaluated subsequent events from the balance sheet date through the date which the financial statements were issued.
From
April 1 to May 10, 2024, the Company issued s in the aggregate
amount of $
F-28 |
[_____] Shares
Thumzup Media Corporation
COMMON STOCK
PROSPECTUS
May 29, 2024
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the expenses expected to be incurred by us in connection with the issuance and distribution of the common stock registered hereby, all of which expenses, except for the Securities and Exchange Commission registration fee, are estimates:
Description | Amount | |||
Securities and Exchange Commission registration fee | $ | |||
Accounting fees and expenses | $ | * | ||
Legal fees and expenses | $ | * | ||
Miscellaneous fees and expenses | $ | * | ||
Total | $ | * |
* | Estimated |
Item 14. Indemnification of Directors and Officers
Section 78.7502 of the Nevada Revised Statutes (“NRS”) permits a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he:
(a) is not liable pursuant to NRS 78.138, or
(b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
In addition, NRS 78.7502 permits a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he:
(a) is not liable pursuant to NRS 78.138; or
(b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation.
To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to above, or in defense of any claim, issue or matter, the corporation is required to indemnify him against expenses, including attorneys’ fees, actually and reasonably incurred by him in connection with the defense.
NRS 78.752 allows a corporation to purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such, whether or not the corporation has the authority to indemnify him against such liability and expenses.
II-1 |
Other financial arrangements made by the corporation pursuant to NRS 78.752 may include the following:
(a) the creation of a trust fund;
(b) the establishment of a program of self-insurance;
(c) the securing of its obligation of indemnification by granting a security interest or other lien on any assets of the corporation; and
(d) the establishment of a letter of credit, guaranty or surety.
No financial arrangement made pursuant to NRS 78.752 may provide protection for a person adjudged by a court of competent jurisdiction, after exhaustion of all appeals, to be liable for intentional misconduct, fraud or a knowing violation of law, except with respect to the advancement of expenses or indemnification ordered by a court.
Any discretionary indemnification pursuant to NRS 78.7502, unless ordered by a court or advanced pursuant to an undertaking to repay the amount if it is determined by a court that the indemnified party is not entitled to be indemnified by the corporation, may be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made:
(a) by the shareholders;
(b) by the board of directors by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding;
(c) if a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding so orders, by independent legal counsel in a written opinion, or
(d) if a quorum consisting of directors who were not parties to the action, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion.
Item 15. Recent Sales of Unregistered Securities
From January 10. 2023 to January 10, 2024, the Company conducted an offering under Regulation A+, pursuant to an Offering Statement on Form 1-A/A filed on December 23, 2022 and qualified on January 9, 2023, through which the Company sold 424,144 shares for aggregate proceeds of $1,732,869, net offering expenses of $19,539.
During the year ended December 31, 2022, the Company sold 286,834 shares of common stock for cash proceeds of $737,000. From September 21, 2022 to December 29, 2022, the Company sold 28,004 shares of Series A Preferred Convertible Voting Stock for aggregate proceeds of $1,259,995. The Company incurred $149,137 in offering costs. The offers and sales were made in reliance on the exemption from registration provided by Section 4(a)(2). Each beneficial note holder was an “accredited investor” and/or “sophisticated investor” pursuant to Rule 501(a) of Regulation D under the Securities Act, who provided the Company with representations, warranties and information concerning their respective qualifications as an “sophisticated investor” and/or “accredited investor.” The Company provided and made available to each purchaser full information regarding its business and operations. There was no general solicitation in connection with the offer or sale of the restricted securities. The purchasers acquired the restricted common stock for their own account, for investment purposes and not with a view to public resale or distribution thereof. The Company’s use of proceeds was for corporate and products development and general working capital.
The Company recently raised $805,000 in a Series B Preferred offering during the period March - May 2024. Each share of Series B Preferred cost $50 and initially converts into 10 shares of common stock and pays a 10% dividend on a quarterly basis and has downside price protection. Once the company up-lists on a National Stock Exchange, the Series B Preferred converts at a 20% discount to the price of the offering in this S-1 and the downside price protections are eliminated. There is a call provision that goes into effect six (6) months from the listing on a National Exchange, that if the common stock trades at a 100% premium to the conversion price for 10 days or more, the Company can force the conversion of the Series B Preferred into common stock. The Company has agreed to pay the costs of Rule 144 legal opinions for the holders of the Series B Preferred.
II-2 |
Item 16. Exhibits and Financial Statement Schedules.
See the Exhibit Index immediately preceding the signature page hereto for a list of exhibits filed as part of this registration statement
on Form S-1, which Exhibit Index is incorporated herein by reference.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the “Securities Act”) may be permitted to directors, officers and controlling persons of the Company, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned Company hereby undertakes that:
The undersigned registrant hereby undertakes that:
(1) | For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. | |
(2) | For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
II-3 |
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it met all the requirements of filing on Form S-1 and authorized this Registration Statement to be signed on its behalf by the undersigned, in Los Angeles, California, on May 30, 2024.
Thumzup Media Corporation | ||
By: | /s/ Robert Steele | |
Robert Steele | ||
Chief Executive Officer | ||
(Principal Executive Officer) | ||
By: | /s/ Robert Steele | |
Robert Steele | ||
Chief Financial Officer | ||
(Principal Financial/Accounting Officer) |
In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ Robert Steele | Chief Executive Officer (Principal Executive Officer) and | May 30, 2024 | ||
Robert Steele | Chairman of the Board of Directors | |||
/s/ Robert Steele | Chief Financial Officer | May 30, 2024 | ||
Robert Steele | (Principal Financial and Accounting Officer) | |||
/s/ Robert Haag | Director | May 30, 2024 | ||
Robert Haag |
II-4 |
EXHIBIT INDEX
* | Previously filed |
** | To be filed by amendment |
II-5 |
Exhibit 3.3
BYLAWS OF
THUMZUP MEDIA CORPORATION,
a Nevada corporation
ARTICLE 1. SHAREHOLDERS
1.1. Annual Meeting. The annual meeting of the shareholders of this Corporation shall be held at the time and place designated by the Board of Directors of the Corporation, for the purpose of electing directors of the corporation to serve during the ensuing year and for the transaction of such other business as may properly come before the meeting.
1.2. Special Meetings.
(a) Special meetings of the shareholders may be called by the chairman, the president or the Board of Directors and shall be called by the chairman, the president or the Board of Directors, or at the written request of the holders of not less than ten percent (10%) of the voting power of any class of the corporation’s stock entitled to vote on the matter or matters to be acted upon at such meeting.
(b) No business shall be acted upon at a special meeting except as set forth in the notice calling the meeting, unless one of the conditions for the holding of a meeting without notice set forth in Section 1.5 of these Bylaws shall be satisfied, in which case any business may be transacted and the meeting shall be valid for all purposes.
1.3. Place of Meetings. Any meeting of the shareholders of the corporation may be held at its registered office in the State of Nevada or at such other place in or out of the United States as the Board of Directors may designate. A waiver of notice signed by shareholders entitled to vote may designate any place for the holding of such meeting.
1.4. Notice of Meetings.
(a) The president, a vice president, the secretary, an assistant secretary or any other individual designated by the Board of Directors shall sign and deliver written notice of any meeting at least ten (10) days, but not more than sixty (60) days, before the date of such meeting. The notice shall state the place, date and time of the meeting and the purpose or purposes for which the meeting is called.
(b) In the case of an annual meeting, any proper business may be presented for action, except that action on any of the following items shall be taken only if the general nature of the proposal is stated in the notice:
(1) Action with respect to any contract or transaction between the corporation and one or more of its directors or officers or between the corporation and any corporation, firm or association in which one or more of the corporation’s directors or officers is a director or officer or is financially interested;
(2) Adoption of amendments to the Articles of Incorporation; or
(3) Action with respect to a merger, share exchange, reorganization, partial or complete liquidation or dissolution of the corporation.
(c) A copy of the notice shall be posted on SEC.gov for viewing of each shareholder of record entitled to vote at the meeting.
(d) The written certificate of the individual signing a notice of meeting, setting forth the substance of the notice or having a copy thereof attached, the date the notice was mailed or personally delivered to the shareholders and the addresses to which the notice was mailed, shall be prima facie evidence of the manner and fact of giving such notice.
(e) Any shareholder may waive notice of any meeting by a signed writing, either before or after the meeting.
1.5. Meeting Without Notice.
(a) Whenever all persons entitled to vote at any meeting consent, either by:
(1) A writing on the records of the meeting or filed with the secretary;
(2) Presence at such meeting and oral consent entered on the minutes;
or
(3) Taking part in the deliberations at such meeting without objection; the doings of such meeting shall be as valid as if had at a meeting regularly called and noticed.
(b) At such meeting any business may be transacted which is not excepted from the written consent or to the consideration of which no objection for want of notice is made at the time.
(c) If any meeting be irregular for want of notice or for such consent, provided a quorum was present at such meeting, the proceedings of the meeting may be ratified and approved and rendered likewise valid and the irregularity or defect therein waived by a writing signed by all parties having the right to vote at such meeting.
(d) Such consent or approval may be by proxy or attorney, but all such proxies and powers of attorney must be in writing.
1.6. Determination of Shareholders of Record.
(a) For the purpose of determining the shareholders entitled to notice of and to vote at any meeting of shareholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any distribution or the allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action.
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(b) If no record date is fixed, the record date for determining shareholders:
(i) entitled to notice of and to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (ii) entitled to express consent to corporate action in writing without a meeting shall be the day on which the first written consent is expressed; and (iii) for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of shareholders of record entitled to notice of or to vote at any meeting of shareholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
1.7. Quorum; Adjourned Meetings.
(a) At the shareholders’ meetings, the holders of at least 33.3% of the entire issued and outstanding voting stock of the corporation, represented in person or by proxy, shall constitute a quorum for all purposes of such meetings. If, on any issue, voting by classes is required by the laws of the State of Nevada, the Articles of Incorporation or these Bylaws, at least 33.3% of the voting power within each such class is necessary to constitute a quorum of each such class.
(b) If a quorum is not represented, a majority of the voting power so represented may adjourn the meeting from time to time until holders of the voting power required to constitute a quorum shall be represented. At any such adjourned meeting at which a quorum shall be represented, any business may be transacted which might have been transacted as originally called. When a shareholders’ meeting is adjourned to another time or place hereunder, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. The shareholders present at a duly convened meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum of the voting power.
1.8. Voting.
(a) Unless otherwise provided in the Articles of Incorporation or in the resolution providing for the issuance of the stock adopted by the Board of Directors pursuant to authority expressly vested in it by the provisions of the Articles of Incorporation, each shareholder of record, or such shareholder’s duly authorized proxy or attorney-in-fact, shall be entitled to one (1) vote for each share of voting stock standing registered in such shareholder’s name on the record date.
(b) Except as otherwise provided herein, all votes with respect to shares standing in the name of an individual on the record date (including pledged shares) shall be cast only by that individual or such individual’s duly authorized proxy, attorney-in-fact, or voting trustee(s) pursuant to a voting trust. With respect to shares held by a representative of the estate of a deceased shareholder, guardian, conservator, custodian or trustee, votes may be cast by such holder upon proof of capacity, even though the shares do not stand in the name of such holder. In the case of shares under the control of a receiver, the receiver may cast votes carried by such shares even though the shares do not stand in the name of the receiver; provided, however, that the order of the court of competent jurisdiction which appoints the receiver contains the authority to cast votes carried by such shares. If shares stand in the name of a minor, votes may be cast only by the duly appointed guardian of the state of such minor if such guardian has provided the corporation with written proof of such appointment.
(c) With respect to shares standing in the name of another corporation, partnership, limited liability company or other legal entity on the record date, votes may be cast:
(i) in the case of a corporation, by such individual as the bylaws of such other corporation prescribe, by such individual as may be appointed by resolution of the board of directors of such other corporation or by such individual (including the officer making the authorization) authorized in writing to do so by the chairman of the board of directors, president or any vice- president of such corporation and (ii) in the case of a partnership, limited liability company or other legal entity, by an individual representing such shareholder upon presentation to the corporation of satisfactory evidence of his authority to do so.
3 |
(d) Notwithstanding anything to the contrary herein contained, no votes may be cast for shares owned by this corporation or its subsidiaries, if any. If shares are held by this corporation or its subsidiaries, if any, in a fiduciary capacity, no votes shall be cast with respect thereto on any matter except to the extent that the beneficial owner thereof possesses and exercises either a right to vote or to give the corporation holding the same binding instruction on how to vote.
(e) Any holder of shares entitled to vote on any matter may cast a portion of the votes in favor of such matter and refrain from casting the remaining votes or cast the same against the proposal, except in the case of elections of directors. If such holder entitled to vote fails to specify the number of affirmative votes, it will be conclusively presumed that the holder is casting affirmative votes with respect to all shares held.
(f) With respect to shares standing in the name of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, husband and wife as community property, tenants by the entirety, voting trustees, persons entitled to vote under a shareholder voting agreement or otherwise and shares held by two or more persons (including proxy holders) having the same fiduciary relationship in respect to the same shares, votes may be cast in the following manner:
(1) If only one person votes, the vote of such person binds all.
voting binds all.
(2) If more than one person casts votes, the act of the majority so
(3) If more than one person casts votes, but the vote is evenly split on a particular matter, the votes shall be deemed cast proportionately, as split.
(g) If a quorum is present, unless the Articles of Incorporation provide for a different proportion, the affirmative vote of holders of at least a majority of the voting power represented at the meeting and entitled to vote on any matter shall be the act of the shareholders, unless voting by classes is required for any action of the shareholders by the laws of the State of Nevada, the Articles of Incorporation or these Bylaws, in which case the affirmative vote of holders of at least a majority of the voting power of each such class shall be required.
1.9. Proxies. At any meeting of shareholders, any holder of shares entitled to vote may designate, in a manner permitted by the laws of the State of Nevada, another person or persons to act as a proxy or proxies. No proxy is valid after the expiration of six (6) months from the date of its creation, unless it is coupled with an interest or unless otherwise specified in the proxy. In no event shall the term of a proxy exceed seven (7) years from the date of its creation. Every proxy shall continue in full force and effect until its expiration or revocation in a manner permitted by the laws of the State of Nevada.
1.10. Order of Business. At the annual shareholder’s meeting, the regular order of business shall be as follows:
or by proxy;
(a) Determination of shareholders present and existence of quorum, in person
(b) Reading and approval of the minutes of the previous meeting or meetings;
(c) Reports of the Board of Directors, and, if any, the president, treasurer and secretary of the corporation;
(d) Reports of committees;
(e) Election of directors;
(f) Unfinished business;
(g) New business;
(h) Adjournment.
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1.11. Absentees’ Consent to Meetings. Transactions of any meeting of the shareholders are as valid as though had at a meeting duly held after regular call and notice if a quorum is represented, either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not represented in person or by proxy (and those who, although present, either object at the beginning of the meeting to the transaction of any business because the meeting has not been lawfully called or convened or expressly object at the meeting to the consideration of matters not included in the notice which are legally required to be included therein), signs a written waiver of notice and/or consent to the holding of the meeting or an approval of the minutes thereof. All such waivers, consents and approvals shall be filed with the corporate records and made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person objects at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters not properly included in the notice if such objection is expressly made at the time any such matters are presented at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of shareholders need be specified in any written waiver of notice or consent, except as otherwise provided in Section 1.4(a) and (b) of these Bylaws.
1.12. Telephonic Meetings. Stockholders may participate in a meeting of the stockholders by means of a telephonic conference or similar method of communication by which all individuals participating in the meeting can hear each other. Participation in a meeting pursuant to this section 1.12 constitutes presence in person at the meeting.
1.13. Action Without Meeting. Any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting if a written consent thereto is signed by holders of the voting power of the corporation that would be required at a meeting to constitute the act of the shareholders. Whenever action is taken by written consent, a meeting of shareholders need not be called or notice given. The written consent may be signed in counterparts.
ARTICLE 2. DIRECTORS
2.1. Number, Tenure and Qualifications. Unless a larger number is required by the laws of the State of Nevada or the Articles of Incorporation or until changed in the manner provided herein, the Board of Directors of the corporation shall consist of at least one (1) but not more than five (5) who shall be elected at the annual meeting of the shareholders of the corporation and who shall hold office for one (1) year or until his or her successor or successors are elected and qualify. A director need not be a shareholder of the corporation.
2.2. Change in Number. Subject to any limitations in the laws of the State of Nevada, the Articles of Incorporation or these Bylaws, the number of directors may be changed from time to time by resolution adopted by the Board of Directors or fifty-one percent (51%) or more of the shareholders entitled to vote, so long as a quorum of thirty-three and one-third percent (33.3%) has been met.
2.3. Reduction in Number. No reduction of the number of directors shall have the effect of removing any director prior to the expiration of his term of office.
2.4. Resignation. Any director may resign effective upon giving written notice to the chairman of the Board of Directors, the president, the secretary or in the absence of all of them, any other officer, unless the notice specifies a later time for effectiveness of such resignation. A majority of the remaining directors, though less than a quorum, may appoint a successor to take office when the resignation becomes effective, each director so appointed to hold office during the remainder of the term of office of the resigning director.
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2.5. Removal.
(a) The Board of Directors of the corporation, by majority vote, may declare vacant the office of a director who has been declared incompetent by an order of a court of competent jurisdiction or convicted of a felony.
(b) Any director may be removed from office by the vote or written consent of shareholders representing not less than fifty-one percent (51%) of the voting power of the issued and outstanding stock entitled to vote, except that if the corporation’s Articles of Incorporation provide for the election of directors by cumulative voting, no director may be removed from office except upon the vote of shareholders owning sufficient shares to have prevented such director’s election to office in the first instance.
2.6. Vacancies.
(a) All vacancies, including those caused by an increase in the number of directors, may be filled by a majority of the remaining directors, though less than a quorum, unless it is otherwise provided in the Articles of Incorporation or unless in the case of removal of a director, the shareholders by a majority of voting power shall have appointed a successor to the removed director. Subject to the provisions of Section 2.6(b) of these Bylaws, (i) in the case of the replacement of a director, the appointed director shall hold office during the remainder of the term of office of the replaced director, and (ii) in the case of an increase in the number of directors, the appointed director shall hold office until the next meeting of shareholders at which directors are elected.
(b) If, after the filling of any vacancy by the directors, the directors then in office who have been elected by the shareholders shall constitute less than a majority of the directors then in office, any holder or holders of an aggregate of ten percent (10%) or more of the total voting power entitled to vote may call a special meeting of the shareholders to elect the entire Board of Directors. The term of office of any director shall terminate upon such election of a successor.
2.7. Annual and Regular Meetings. Immediately following the adjournment of, and at the same place as, the annual or any special meeting of the shareholders at which directors are elected other than pursuant to Section 2.6 of these Bylaws, the Board of Directors, including directors newly elected, shall hold its annual meeting without notice, other than this provision, to elect officers and to transact such further business as may be necessary or appropriate. The Board of Directors may provide by resolution the place, date and hour for holding regular meetings between annual meetings.
2.8. Special Meetings. Special meetings of the Board of Directors may be called by the chairman, or if there be no chairman, by the president or secretary and shall be called by the chairman, the president or the secretary upon the request of one (1) director. If the chairman, or if there be no chairman, both the president and secretary, refuses or neglects to call such special meeting, a special meeting may be called by notice signed by one (1) director.
2.9. Place of Meetings. Any regular or special meeting of the directors of the corporation may be held at such place as the Board of Directors, or in the absence of such designation, as the notice calling such meeting, may designate. A waiver of notice signed by directors may designate any place for the holding of such meeting.
2.10. Notice of Meetings. Except as otherwise provided in Section 2.7 of these Bylaws, there shall be delivered to all directors, at least forty-eight (48) hours before the time of such meeting, a copy of a written notice of any meeting by delivery of such notice personally by mailing such notice postage prepaid or by email. Such notice shall be addressed in the manner provided for notice to shareholders in Section 1.4(c) of these Bylaws. If mailed, the notice shall be deemed delivered two (2) business days following the date the same is deposited in the United States mail, postage prepaid. Any director may waive notice of any meeting, and the attendance of a director at a meeting shall constitute waiver of such notice; provided, however, that attendance at a meeting for the express purpose of objecting to the transaction of business thereat because the meeting is not properly called or convened shall not constitute presence nor a waiver of notice for purposes hereof.
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2.11. Quorum; Adjourned Meetings.
(a) A majority of the directors in office, at a meeting duly assembled, are necessary to constitute a quorum for the transaction of business.
(b) At any meeting of the Board of Directors where a quorum is not present, a majority of those present may adjourn, from time to time, until a quorum is present, and no notice of such adjournment shall be required. At any adjourned meeting where a quorum is present, any business may be transacted which could have been transacted at the meeting originally called.
2.12. Board of Directors’ Decisions. The affirmative vote of a majority of the directors present at a meeting at which a quorum is present is the act of the Board of Directors.
2.13. Telephonic Meetings. Members of the Board of Directors or of any committee designated by the Board of Directors may participate in a meeting of the Board of Directors or committee by means of a telephone conference or similar method of communication by which all persons participating in such meeting can hear each other. Participation in a meeting pursuant to this Section 2.13 constitutes presence in person at the meeting.
2.14. Action Without Meeting. Any action required or permitted to be taken at a meeting of the Board of Directors or of a committee thereof may be taken without a meeting if, before or after the action, a written consent thereto is signed by all of the members of the Board of Directors. The written consent may be signed in counterparts and must be filed with the minutes of the proceedings of the Board of Directors or committee.
2.15. Powers and Duties.
(a) Except as otherwise restricted by the laws of the State of Nevada or the Articles of Incorporation, the Board of Directors has full control over the affairs of the corporation. The Board of Directors may delegate any of its authority to manage, control or conduct the business of the corporation to any standing or special committee or to any officer or agent and to appoint any persons to be agents of the corporation with such powers, including the power to subdelegate, and upon such terms as may be deemed fit.
(b) The Board of Directors may present to the shareholders at annual meetings of the shareholders, and when called for by a majority vote of the shareholders at an annual meeting or a special meeting of the shareholders shall so present, a full and clear report of the condition of the corporation.
(c) The Board of Directors, in its discretion, may submit any contract or act for approval or ratification at any annual meeting of the shareholders or any special meeting properly called for the purpose of considering any such contract or act, provided a quorum is present.
2.16. Compensation. The directors and members of committees shall be allowed and paid all necessary expenses incurred in attending any meetings of the Board of Directors or committees. Subject to any limitations contained in the laws of the State of Nevada, the Articles of Incorporation or any contract or agreement to which the corporation is a party, directors may receive compensation for their services as directors as determined by the Board of Directors, but only during such times as the corporation may legally declare and pay distributions on its stock, unless the payment of such compensation is first approved by the shareholders entitled to vote for the election of directors.
2.17. Board of Directors; Officers.
(a) At its annual meeting, the Board of Directors shall elect, from among its members, a chairman of the corporation and who shall preside at meetings of the Board of Directors and may preside at meetings of the shareholders. The Board of Directors may also elect such other officers, including a chief executive officer, of the Board of Directors and for such term as it may, from time to time, determine advisable. The Corporation may have at the discretion of the Board of Directors, a Chairman of the Board of Directors and a Lead Director. The Chairman of the Board of Directors, or the Lead Director, shall have the power to preside at all meetings of the Board of Directors and shall have such other powers and shall be subject to such other duties as the Board of Directors may from time to time prescribe or as may be prescribed by these Bylaws.
(b) Any vacancy in any office of the Board of Directors because of death, resignation, removal or otherwise may be filled by the Board of Directors for the unexpired portion of the term of such office.
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2.18. Order of Business. The order of business at any meeting of the Board of Directors shall be as follows:
(a) | Determination of members present and existence of quorum; | |
(b) | Reading and approval of the minutes of any previous meeting or meetings; | |
(c) | Reports of officers and committeemen; | |
(d) | Election of officers (annual meeting); | |
(e) | Unfinished business; | |
(f) | New business; | |
(g) | Adjournment. |
ARTICLE 3. OFFICERS
3.1. Election. The Board of Directors, at its annual meeting, shall elect a president, a secretary and a treasurer to hold office “At Will”, or for a term of one (1) year or until their successors are chosen and qualify. Any individual may hold two (2) or more offices. The Board of Directors may, from time to time, by resolution, elect one (1) or more vice-presidents, assistant secretaries and assistant treasurers and appoint agents of the corporation, prescribe their duties and fix their compensation.
3.2. Removal; Resignation. Any officer or agent elected or appointed by the Board of Directors may be removed by it with or without cause. Any officer may resign at any time upon written notice to the corporation. Any such removal or resignation shall be subject to the rights, if any, of the respective parties under any contract between the corporation and such officer or agent.
3.3. Vacancies. Any vacancy in any office because of death, resignation, removal or otherwise may be filled by the Board of Directors for the unexpired portion of the term of such office.
3.4.President.
(a) While the president may also be the chief executive officer, or operations officer of the corporation, subject to the supervision and control of the Board of Directors, and shall direct the corporate affairs, with full power to execute all resolutions and orders of the Board of Directors not expressly delegated to some other officer or agent of the corporation. If the chairman of the Board of Directors elects not to preside, or is absent, the Lead Director shall preside at meetings of the shareholders and Board of Directors and perform such other duties as shall be prescribed by the Board of Directors.
(b) The president shall have full power and authority on behalf of the corporation to attend and to act and to vote, or designate such other officer or agent of the corporation to attend and to act and to vote, at any meetings of the shareholders of any corporation in which the corporation may hold stock and, at any such meetings, shall possess and may exercise any and all rights and powers incident to the ownership of such stock. The Board of Directors, by resolution from time to time, may confer like powers on any person or persons in place of the president to exercise such powers for these purposes.
(c) The President may also be the Chief Operating Officer of the corporation, subject to the control and direction of the Board of Directors and the Chairman of the Board. He shall report to the Chairman of the Board and keep the Chairman of the Board informed concerning the affairs and condition of the business of the Company. He shall have such other powers and duties as may from time to time be prescribed by these Bylaws, by resolution of the Board of Directors, or by the Chairman of the Board. In the absence of incapacity of the Chairman of the Board, he shall preside as Chairman at all meetings of the stockholders or the Board of Directors.
(d) The Chief Operating Officer (if the Company chooses to have one) shall have duty of supervision, control and management of the day-to-day operations of the corporation, subject only to directions from the Board of Directors with regard to the affairs of the corporation. The Chief Operating Officer shall perform any and all other duties as shall be prescribed by the Board of Directors.
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3.5. Vice Presidents. The Board of Directors may elect one or more vice-presidents who shall be vested with all the powers and perform all the duties of the president whenever the president is absent or unable to act and such other duties as shall be prescribed by the Board of Directors or the president.
3.6. Secretary. The secretary shall keep, or cause to be kept, the minutes of proceedings of the shareholders and the Board of Directors in books provided for that purpose. The secretary shall attend to the giving and service of all notices of the corporation, may sign with the president in the name of the corporation all contracts in which the corporation is authorized to enter, shall have the custody or designate control of the corporate seal, shall affix the corporate seal to all certificates of stock duly issued by the corporation, shall have charge or designate control of stock certificate books, transfer books and stock ledgers, and such other books and papers as the Board of Directors or appropriate committee may direct, and shall, in general, perform all duties incident to the office of the secretary.
3.7. Assistant Secretaries. The Board of Directors may appoint one or more assistant secretaries who shall have such powers and perform such duties as may be prescribed by the Board of Directors or the secretary.
3.8. Treasurer. The treasurer shall be the chief financial officer of the corporation, subject to the supervision and control of the Board of Directors and shall have custody of all the funds and securities of the corporation. When necessary or proper, the treasurer shall endorse on behalf of the corporation for collection checks, notes and other obligations; shall deposit all monies to the credit of the corporation in such bank or banks or other depository as the Board of Directors may designate; and shall sign all receipts and vouchers for payments made by the corporation. Unless otherwise specified by the Board of Directors, the treasurer may sign with the president all bills of exchange and promissory notes of the corporation, shall also have the care and custody of the stocks, bonds, certificates, vouchers, evidence of debts, securities and such other property belonging to the corporation as the Board of Directors shall designate, and shall sign all papers required by law, by these Bylaws or by the Board of Directors to be signed by the treasurer. The treasurer shall enter, or cause to be entered, regularly in the financial records of the corporation, to be kept for that purpose, full and accurate accounts of all monies received and paid on account of the corporation and, whenever required by the Board of Directors, the treasurer shall render a statement of any or all accounts. The treasurer shall at all reasonable times exhibit the books of account to any director of the corporation and shall perform all acts incident to the position of treasurer subject to the control of the Board of Directors.
The treasurer shall, if required by the Board of Directors, give bond to the corporation in such sum and with such security as shall be approved by the Board of Directors for the faithful performance of all the duties of treasurer and for restoration to the corporation, in the event of the treasurer’s death, resignation, retirement or removal from office, of all books, records, papers, vouchers, money and other property in the treasurer’s custody or control and belonging to the corporation. The expense of such bond shall be borne by the corporation.
3.9. Assistant Treasurers. The Board of Directors may appoint one or more assistant treasurers who shall have such powers and perform such duties as may be prescribed by the Board of Directors or the treasurer.
The assistant treasurer shall, if required by the Board of Directors, give bond to the corporation in such sum and with such security as shall be approved by the Board of Directors for the faithful performance of all the duties of assistant treasurer and for restoration to the corporation, in the event of the assistant treasurer’s death, resignation, retirement or removal from office, of all books, records, papers, vouchers, money and other property in the assistant treasurer’s custody or control and belonging to the corporation. The expense of such bond shall be borne by the corporation.
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ARTICLE 4. CAPITAL STOCK
4.1. Issuance. Shares of the corporation’s authorized stock shall, subject to any provisions or limitations of the laws of the State of Nevada, the Articles of Incorporation or any contracts or agreement to which the corporation may be a party, be issued in such manner, at such times, upon such conditions and for such consideration as shall be prescribed by the Board of Directors.
4.2. Certificates. Ownership in the corporation may be evidenced by certificates for shares of stock in such form as shall be prescribed by the Board of Directors, shall be under the seal of the corporation and shall be manually signed by the president or a vice-president and also by the secretary or an assistant secretary; provided, however, whenever any certificate is countersigned or otherwise authenticated by a transfer agent or transfer clerk, and by a registrar, then a facsimile of the signatures of said officers of the corporation may be printed or lithographed upon the certificate in lieu of the actual signatures. If the corporation uses facsimile signatures of its officers on its stock certificates, it shall not act as registrar of its own stock, but its transfer agent and registrar may be identical if the institution acting in those dual capacities countersigns any stock certificates in both capacities. Each certificate, if certificates are issued, shall contain the name of the record holder, the number, designation, if any, class or series of shares represented, a statement or summary of any applicable rights, preferences, privileges or restrictions thereon and a statement, if applicable, that the shares are assessable. All certificates shall be consecutively numbered. If provided by the shareholder, the name, address and federal tax identification number of the shareholder, the number of shares, and the date of issue shall be entered in the stock transfer records of the corporation.
4.3. Surrendered; Lost or Destroyed Certificates. All certificates surrendered to the corporation, except those representing shares of treasury stock, shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares shall have been canceled, except that in case of a lost, stolen, destroyed or mutilated certificate, a new one may be issued therefor. However, any shareholder applying for the issuance of a stock certificate in lieu of one alleged to have been lost, stolen, destroyed or mutilated shall, prior to the issuance of a replacement, provide the corporation with his, her or its affidavit of the facts surrounding the loss, theft, destruction or mutilation and, if required by the Board of Directors, an indemnity bond in an amount not less than twice the current market value of the stock, and upon such terms as the treasurer or the Board of Directors shall require which shall indemnify the corporation against any loss, damage, cost or inconvenience arising as a consequence of the issuance of a replacement certificate.
4.4. Replacement Certificate. When the Articles of Incorporation are amended in any way affecting the statements contained in the certificates for outstanding shares of capital stock of the corporation or it becomes desirable for any reason, in the discretion of the Board of Directors, including, without limitation, the merger of the corporation with another corporation or the reorganization of the corporation, to cancel any outstanding certificate for shares and issue a new certificate thereof conforming to the rights of the holder, the Board of Directors may order any holders of outstanding certificates for shares to surrender and exchange the same for new certificates within a reasonable time to be fixed by the Board of Directors. The order may provide that a holder of any certificate(s) ordered to be surrendered shall not be entitled to vote, receive distributions or exercise any other rights of shareholders of record until the holder has complied with the order, but the order operates to suspend such rights only after notice and until compliance.
4.5. Transfer of Shares. No transfer of stock shall be valid as against the corporation except on surrender and cancellation of the certificates therefor accompanied by an assignment or transfer by the registered owner made either in person or under assignment. Whenever any transfer shall be expressly made for collateral security and not absolutely, the collateral nature of the transfer shall be reflected in the entry of transfer in the records of the corporation.
4.6. Transfer Agent; Registrars. The Board of Directors may appoint one or more transfer agents, transfer clerk and registrars of transfer and may require all certificates for shares of stock to bear the signature of such transfer agent, transfer clerk and/or registrar of transfer.
4.7. Stock Transfer Records. The stock transfer records shall be closed for a period of at least ten (10) days prior to all meetings of the shareholders and shall be closed for the payment of distributions as provided in Article 5 of these Bylaws and during such periods as, from time to time, may be fixed by the Board of Directors, and, during such periods, no stock shall be transferable for purposes of Article 5 of these Bylaws and no voting rights shall be deemed transferred during such periods. Subject to the foregoing limitations, nothing contained herein shall cause transfers during such periods to be void or voidable.
4.8. Miscellaneous. The Board of Directors shall have the power and authority to make such rules and regulations not inconsistent herewith as it may deem expedient concerning the issue, transfer and registration of certificates for shares of the corporation’s stock.
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ARTICLE 5. DISTRIBUTIONS
Distributions may be declared, subject to the provisions of the laws of the State of Nevada and the Articles of Incorporation, by the Board of Directors at any regular or special meeting and may be paid in cash, property, shares of corporate stock or any other medium. The Board of Directors may fix in advance a record date, as provided in Section 1.6 of these Bylaws, prior to the distribution for the purpose of determining shareholders entitled to receive any distribution. The Board of Directors may close the stock transfer books for such purpose for a period of not more than ten (10) days prior to the date of such distribution.
ARTICLE 6. RECORDS; REPORTS; SEAL; AND FINANCIAL MATTERS
6.1. Records. All original records of the corporation shall be kept by or under the direction of the secretary or at such places as may be prescribed by the Board of Directors.
6.2. Officers’ and Directors’ Right of Inspection. Every officer and director shall have the absolute right at any reasonable time for a purpose reasonably related to the exercise of such individual’s duties to inspect and copy all of the corporation’s books, records and documents of every kind and to inspect the physical properties of the corporation and/or any subsidiary corporations. Such inspection may be made in person or by agent or attorney.
6.3. Corporate Seal. The Board of Directors may, by resolution, authorize a seal, and the seal may be used by causing it, or a facsimile, to be impressed, affixed, reproduced or otherwise. Except when otherwise specifically provided herein, any officer of the corporation shall have the authority to affix the seal to any document requiring it.
6.4. Fiscal Year-End. The fiscal year-end of the corporation shall be such date as may be fixed from time to time by resolution of the Board of Directors.
6.5. Reserves. The Board of Directors may create, by resolution, such reserves as the directors may, from time to time, in their discretion, think proper to provide for contingencies, or to equalize distributions or to repair or maintain any property of the corporation, or for such other purposes as the Board of Directors may deem beneficial to the corporation, and the directors may modify or abolish any such reserves in the manner in which they were created.
6.6. Required Authorization for Obligations. No agreement, contract or obligation (other than checks in payment of indebtedness incurred by authority of the Board of Directors) involving the payment of monies or the credit of the corporation for more than Two Hundred Fifty Thousand Dollars ($250,000), shall be made without the authorization by resolution of the Board of Directors, or of an executive committee acting as such.
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ARTICLE 7. INDEMNIFICATION
7.1. Indemnification and Insurance.
(a) Indemnification of Directors and Officers.
(1) For purposes of this Article 7, (A) “Indemnitee” shall mean each director or officer who was or is a party to, or is threatened to be made a party to or is otherwise involved in, any Proceeding (as hereinafter defined), by reason of the fact that he or she is or was a director or officer of the corporation or is or was serving in any capacity at the request of the corporation as a director, officer, employee, agent, partner, or fiduciary of, or in any other capacity for, another corporation or any partnership, joint venture, trust or other enterprise; and
(B) “Proceeding” shall mean any threatened, pending or completed action or suit (including, without limitation, an action, suit or proceeding by or in the right of the corporation), whether civil, criminal, administrative or investigative.
(2) Each Indemnitee shall be indemnified and held harmless by the corporation for all actions taken by him or her and for all omissions (regardless of the date of any such action or omission), to the fullest extent permitted by Nevada law, against all expenses, liability and loss (including, without limitation, attorneys’ fees, costs, judgments, fines, taxes, penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by the Indemnitee in connection with any Proceeding.
(3) Indemnification pursuant to this Section 7.1 shall continue as to an Indemnitee who has ceased to be a director or officer and shall inure to the benefit of his or her heirs, executors and administrators.
(b) Indemnification of Employees and Other Persons. The corporation may, by action of its Board of Directors and to the extent provided in such action, indemnify employees and other persons as though they were Indemnitees.
(c) Non-Exclusivity of Rights. The rights to indemnification provided in this Article 7 shall not be exclusive of any other rights that any person may have or hereafter acquire under any statute, provision of the corporation’s Articles of Incorporation or Bylaws, agreement, vote of shareholders or directors or otherwise.
(d) Insurance. The corporation may purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him or her and liability and expenses incurred by him or her in his or her capacity as a director, officer, employee or agent, or arising out of his or her status as such, whether or not the corporation has the authority to indemnify him or her against such liability and expenses.
(e) Other Financial Arrangements. The other financial arrangements which may be made by the corporation may include the following:
(i) | the creation of a trust fund; |
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(ii) | the establishment of a program of self-insurance; (iii) the securing of its obligation of indemnification by granting a security interest or other lien on any assets of the corporation; or (iv) the establishment of a letter of credit, guarantee or surety. No financial arrangement made pursuant to this subsection may provide protection for a person adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable for intentional misconduct, fraud or a knowing violation of law, except with respect to advancement of expenses or indemnification ordered by a court. |
(f) Other Matters Relating to Insurance or Financial Arrangements. Any insurance or other financial arrangement made on behalf of a person pursuant to this section may be provided by the corporation or any other person approved by the Board of Directors, even if all or part of the other person’s stock or other securities is owned by the corporation. In the absence of fraud:
(1) the decision of the Board of Directors as to the propriety of the terms and conditions of any insurance or other financial arrangement made pursuant to this Section 7.1 and the choice of the person to provide the insurance or other financial arrangement is conclusive; and
(2) the insurance or other financial arrangement;
(i) | is not void or voidable; and | |
(ii) | does not subject any director approving it to personal liability for his action, even if a director approving the insurance or other financial arrangement is a beneficiary of the insurance or other financial arrangement. |
7.2. Amendment. The provisions of this Article 7 relating to indemnification shall constitute a contract between the corporation and each of its directors and officers which may be modified as to any director or officer only with that person’s consent or as specifically provided in this Section 7.2. Notwithstanding any other provision of these Bylaws relating to their amendment generally, any repeal or amendment of this Article 7 which is adverse to any director or officer shall apply to such director or officer only on a prospective basis and shall not limit the rights of an Indemnitee to indemnification with respect to any action or failure to act occurring prior to the time of such repeal or amendment. Notwithstanding any other provision of these Bylaws, no repeal or amendment of these Bylaws shall affect any or all of this Article 7 so as to limit or reduce the indemnification in any manner unless adopted by (a) the unanimous vote of the directors of the corporation then serving, or (b) by the shareholders as set forth in Article 8 hereof; provided, however, that no such amendment shall have retroactive effect inconsistent with the preceding sentence.
7.3. Changes in Nevada Law. References in this Article 7 to Nevada law or to any provision thereof shall be to such law as it existed on the date this Article 7 was adopted or as such law thereafter may be changed; provided, however, that (a) in the case of any change which expands the liability of directors or officers or limits the indemnification rights or the rights to advancement of expenses which the corporation may provide, the rights to limited liability, to indemnification and to the advancement of expenses provided in the corporation’s Articles of Incorporation and/or these Bylaws shall continue as theretofore to the extent permitted by law; and (b) if such change permits the corporation, without the requirement of any further action by the shareholders or directors, to limit further the liability of directors (or limit the liability of officers) or to provide broader indemnification rights or rights to the advancement of expenses than the corporation was permitted to provide prior to such change, then liability thereupon shall be so limited and the rights to indemnification and the advancement of expenses shall be so broadened to the extent permitted by law.
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ARTICLE 8. AMENDMENT OR REPEAL
Except as otherwise restricted in the Articles of Incorporation or these Bylaws:
1. Any provision of these Bylaws may be altered, amended or repealed at the annual or any regular meeting of the Board of Directors without prior notice, or at any special meeting of the Board of Directors if notice of such alteration, amendment or repeal be contained in the notice of such special meeting.
2. These Bylaws may also be altered, amended or repealed at a duly convened meeting of the shareholders by the affirmative vote of the holders of fifty-one percent (51%) of the voting power of the corporation present to vote at that meeting, assuming a quorum of thirty-three and one-third percent (33.3%) of all shareholders has been met. The shareholders may provide by resolution that any Bylaw provision repealed, amended, adopted or altered by them may not be repealed, amended, adopted or altered by the Board of Directors.
CERTIFICATION
The undersigned duly elected secretary of the corporation, does hereby certify that the foregoing Bylaws were adopted by the Board of Directors and are effective as of the 29th day of May, 2024.
/s/ Robert Steele | |
Robert Steele, Secretary |
Exhibit 10.10
Employment Agreement
This Employment Agreement (the “Agreement”) is made and entered into as of May 30, 2024 (the “Effective Date”), by and between Robert Steele, an individual (the “Executive”), and Thumzup Media Corporation, a Nevada corporation (the “Company”).
WHEREAS, the Company desires to employ the Executive on the terms and conditions set forth herein; and
WHEREAS, the Executive desires to be employed by the Company on such terms and conditions.
NOW, THEREFORE, in consideration of the mutual covenants, promises, and obligations set forth herein, the parties agree as follows:
1. Term. The Executive’s employment hereunder shall be effective as of the Effective Date and shall continue At Will. The period during which the Executive is employed by the Company hereunder is hereinafter referred to as the “Employment Term.”
2. Position.
During the Employment Term, the Executive shall serve as the Chief Executive Officer, Chairman of the Board and President of the Company, reporting to the Board of Directors of the Company (the “Board”). In such position, the Executive shall have such duties, authority, and responsibility as shall be determined from time to time by the Board, which duties, authority, and responsibility are consistent with the Executive’s position. In addition, Executive shall comply with all of the written policies, procedures and directives of the Company as may be contained in any employee handbook or manual of or issued by the Company from time to time.
3. Compensation.
3.1 Base Salary. Upon uplisting to a national stock exchange (CBOE, Nasdaq, or the NYSE), the Company shall pay the Executive an annual rate of base salary of $168,000 in periodic installments in accordance with the Company’s customary payroll practices and applicable wage payment and withholdings laws and requirements, but no less frequently than monthly, except that, (i) the Executive’s Base Salary will increase from $168,000 to $250,000, effective upon the Company’s achievement of $100,000 net monthly ad revenue from Thumzup advertisers for paid posters for twelve consecutive months, (ii) the Executive’s Base Salary will increase to $350,000 upon the Company achieving $250,000 in net monthly ad revenue from Thumzup advertisers for paid posters for twelve consecutive months, and (iii) effective upon the Company’s receipt of an aggregate of $800,000 in net monthly ad revenue from Thumzup advertisers for paid posters for twelve consecutive months, the Base Salary will increase to $500,000. The Executive’s annual base salary, as in effect from time to time, is hereinafter referred to as “Base Salary”. Net ad revenue from Thumzup advertisers is defined as the Company’s margin (at present 30%) from gross advertising budgets for the Thumzup ad-tech platform. Any revenues that come from acquisitions of advertising, or other companies, shall be excluded from this formula.
3.2 Signing and Annual Bonus. The Company shall pay Executive a past performance bonus of $50,000 within 5 days of up-listing to a national stock exchange (CBOE, Nasdaq, NYSE), provided that Executive is employed by the Company at the time of the up-listing. This is a one-time bonus and if the Company moves from one national stock exchange to another, there shall be no additional bonus. For each calendar year of the Employment Term, the Executive shall be eligible to receive an annual bonus (the “Annual Bonus”). However, the decision to provide any Annual Bonus and the amount and terms of any Annual Bonus shall be at the discretion of the Board of Directors, if required. The amount will be determined by the success of the Company in achieving its earning goals, as well as in consideration of the service by Executive in contributing to business goals, as determined by the Board of Directors. Any such bonus is not intended to make up for or add to an employee’s regular hourly wage or compensation for meeting the minimum standards of the job position. It is at the sole and total discretion of the Board of Directors whether there is any bonus, the amount, timing, and the Executive will be rewarded. It should not be assumed that past payments have established a pattern for future payments. There is no guarantee of any bonus.
3.3 Equity Award. On the Effective Date, the Company shall issue to Executive 10-year options to purchase 500,000 shares of common stock with an exercise price of $5.00, 25% of which will vest on 1/1/25, and the remaining 75% of which will vest monthly in 48 equal monthly installments commencing on 1/1/2025. Upon termination and/or resignation, the Executive shall have 90 days to exercise any and all vested options, all unvested options shall remain unvested and / or shall be cancelled. Executive shall have a cashless exercise provision as follows: If the Fair Market Value (as defined below) of one share of Common Stock is greater than the Purchase Price (at the date of calculation as set forth below), in lieu of exercising the Options for cash, the Optionee may elect to pay the exercise price using a cashless exercise. If a cashless exercise is elected, the Company shall issue to the Optionee the number of shares of Common Stock computed using the following formula:
X = Y (A-B)
______
A
Where:
X = the number of shares of Common Stock to be issued to Optionee;
Y = the portion of the Option (in number of shares of Common Stock) being exercised by Optionee (at the date of such calculation);
A = the Fair Market Value (as defined below); and
B = Exercise Price (as adjusted to the date of such calculation).
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For purposes of this Agreement, Fair Market Value shall mean: “Fair Market Value” shall mean: (i) if the principal trading market for such securities is a national securities exchange, the OTCQB or other market operated by the OTC Markets (or a similar system then in use), the average of the closing prices on the principal market for the last five trading days immediately prior to such exercise date; or (ii) if (i) is not applicable, the average of the high bid and low asked prices so reported for the trading day immediately prior to such Exercise Date. Notwithstanding the foregoing, if there is no last reported sales price or bid and ask prices, as the case may be, for the day in question, then Fair Market Value shall be determined as of the latest day prior to such day for which such last reported sales price or bid and asked prices, as the case may be, are available, unless such securities have not been traded on an exchange or in the over-the-counter market for 30 or more days immediately prior to the day in question, in which case the Fair Market Value shall be determined in good faith by, and reflected in a formal resolution of the board of directors of the Company.
3.4 Fringe Benefits and Perquisites. During the Employment Term, the Executive shall be entitled to fringe benefits and perquisites consistent in accordance with the practices of the Company, and to the extent the Company provides similar benefits or perquisites (or both) to similarly situated executives of the Company.
3.5 Employee Benefits. During the Employment Term, the Executive shall be entitled to participate in all employee benefit plans, practices, and programs maintained by the Company, as in effect from time to time (collectively, “Employee Benefit Plans”), on a basis which is no less favorable than is provided to other similarly situated executives of the Company, to the extent consistent with applicable law and the terms of the applicable Employee Benefit Plans. The Company reserves the right to amend or cancel any Employee Benefit Plans at any time in its sole discretion, subject to the terms of such Employee Benefit Plan and applicable law. Any and all perks, or payments must be made with the approval of the BOD. The then-current terms of any such applicable benefits plan shall govern Executive’s participation in the plan.
3.6 Vacation; Paid Time-Off. Executive shall be permitted to take vacation / time off as he feels his duties and responsibilities permit. Rather, as part of his own flexible working schedule, Executive is entitled to take time off for vacation at his discretion after consultation with the Board of Directors and in a manner consistent with the Company’s client and operational requirements. Because Executive does not accrue any fixed amount of vacation time, he will not be “paid out” any unused vacation at the time of the termination of employment. In taking time off, Executive must keep coworkers and the Board of Directors informed and should plan at least two (2) weeks ahead of schedule whenever possible, particularly for longer absences. Client calls, meetings, and other time-sensitive responsibilities must be covered regardless of personal schedule and should be coordinated with coworkers and the Board of Directors, as appropriate, to insure coverage. Further, Executive must generally remain productive over the course of the year. Vacation taken by Executive may only be used to cover personal days for purposes unrelated to paid sick days (as set forth in the Company Handbook), illness, injury or any other purpose permitted under the Healthy Workplaces/Healthy Families Act of 2014, and unrelated to other leaves of absence as set forth in the Company Employees Handbook. Executive should strive to take sufficient time off each year. Failing to do so can have unhealthy consequences and lead to burn out, which is not good for the Executive, nor the Company and its clients.
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3.7 Business Expenses. The Executive shall be entitled to reimbursement for all reasonable and necessary out-of-pocket business, cell phone (as per the company’s telecommunications policy), mileage, entertainment, and travel expenses incurred by the Executive in connection with the performance of the Executive’s duties hereunder in accordance with the Company’s expense reimbursement policies and procedures.
3.8 Indemnification. In the event that the Executive is made a party or threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative (a “Proceeding”), other than any Proceeding initiated by the Executive or the Company related to any contest or dispute between the Executive and the Company, or any of its affiliates with respect to this Agreement, or the Executive’s employment hereunder, by reason of the fact that the Executive is or was a director or officer of the Company, or any affiliate of the Company, or is or was serving at the request of the Company as a director, officer, member, employee, or agent of another corporation or a partnership, joint venture, trust, or other enterprise, the Executive shall be indemnified and held harmless by the Company to the fullest extent applicable to any other officer or director of the Company from and against any liabilities, costs, claims, and expenses, including all costs and expenses incurred in defense of any Proceeding (including attorneys’ fees).
4. Termination of Employment. Upon termination of the Executive’s employment, the Executive shall be entitled to the Base Salary and Annual Bonus in Sections 3.1 and 3.2 that has been earned and determined, if any, as well as any expenses incurred through the date of termination as set forth in Section 3.7. In addition, Executive shall have the right to exercise all vested options within 90 days of the date of termination as set forth in Section 3.3., Executive shall have no further rights to any compensation or any other benefits from the Company or any of its affiliates, other than as set forth in Section 4.1 below. The payments and entitlements in this Paragraph are referred to herein as the “Accrued Amounts”.
4.1 Severance. There shall be no severance in the event of resignation by the Executive. If the Executive’s employment is terminated by the Company for any reason other than for “Cause”, and Executive was willing and able to remain employed, then the Company shall pay or provide the Executive with the following: contingent upon Executive’s execution and non-revocation of a waiver and release of claims form acceptable to the Company and subject to the Executive’s continued compliance with the obligations in Section 6 herein, an amount equal to the Base Salary in effect on the Termination Date, paid monthly in equal installments for a period of six (6) months, beginning at the time of termination or a lump sum payment of six (6) months Base Salary payable at the time of termination at the Company’s discretion. for purposes of this Section 4.1, “Cause” means Executive’s: (A) commission or conviction of, or guilty plea or plea of nolo contendere to, any felony or any other crime involving moral turpitude, fraud or dishonesty; (B) committing a material act of theft, dishonesty, embezzlement, fraud or misappropriation against the Company or any affiliate thereof; (C) committing an act or omission constituting any willful and material breach of a fiduciary obligation or any willful or gross misconduct relating to the business of the Company or any affiliate thereof; (D) substantial failure to perform Executive’s duties hereunder; (E) violation of any material Company policy or any applicable laws, rules or regulations; (F) material breach of this Agreement; (G) conduct tending to bring the Company into substantial public disgrace or disrepute; (H) intentional or negligent disobedience of lawful orders or directives of the Board; (I) unlawful use (including being under the influence) or possession of illegal drugs or repeated intoxication or (J) the occurrence of a force majeure event with an impact on the Company’s operations, such as a natural disaster in the State of California, a war declaration involving the USA, a large scale terrorist act in the USA or an epidemic or pandemic in the USA. To the extent the Cause is capable of cure, the Company must provide written notice to Executive setting forth the alleged cause and allowing Executive thirty (30) days to cure. If Executive fails to cure within thirty (30) days following such written notice, the Company may terminate Executive’s employment forthwith upon written notice to Employee.
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4.2 Death or Disability.
(a) The Executive’s employment hereunder shall terminate automatically upon the Executive’s death during the Employment Term, and the Company may terminate the Executive’s employment on account of the Executive’s Disability (as defined below).
(b) If the Executive’s employment is terminated during the Employment Term on account of the Executive’s death or Disability (as defined below), the Executive (or the Executive’s estate and/or beneficiaries, as the case may be) shall be entitled to receive the Accrued Amounts.
Notwithstanding any other provision contained herein, all payments made in connection with the Executive’s Disability (as defined below) shall be provided in a manner which is consistent with federal and state law.
(c) For purposes of this Agreement, “Disability” shall mean the Executive’s inability, due to physical or mental incapacity, to perform the essential functions of his job, with or without reasonable accommodation, for ninety (90) days out of any three hundred sixty-five (365) day period. Any question as to the existence of the Executive’s Disability as to which the Executive and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to the Executive and the Company. If the Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Company and the Executive shall be final and conclusive for all purposes of this Agreement.
4.3 Notice of Termination. Subject to Section 1 and Section 4, above, any termination of the Executive’s employment hereunder by the Company or by the Executive during the Employment Term (other than termination pursuant to Section 4.3(a) on account of the Executive’s death) shall be communicated by written notice of termination (“Notice of Termination”) to the other party hereto in accordance with Section 17. The Notice of Termination shall specify:
(a) The termination provision of this Agreement relied upon;
(b) To the extent applicable, the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated; and
(c) The applicable Termination Date.
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4.4 Termination Date. Subject to Section 1 and Section 4, above, the Executive’s “Termination Date” shall be:
(a) If the Executive’s employment hereunder terminates on account of the Executive’s death, the date of the Executive’s death;
(b) If the Executive’s employment hereunder is terminated on account of the Executive’s Disability, the date that it is determined that the Executive has a Disability;
(c) If the Company terminates the Executive’s employment hereunder for Cause, the date the Notice of Termination is delivered to the Executive;
(d) If the Company terminates the Executive’s employment hereunder without Cause, the date specified in the Notice of Termination;
(e) If the Executive terminates his employment hereunder, the date specified in the Executive’s Notice of Termination, which is requested to be no less than 30 days following the date on which the Notice of Termination is delivered; and
Notwithstanding anything contained herein, the Termination Date shall not occur until the date on which the Executive incurs a “separation from service” within the meaning of Section 409A of the Internal Revenue Code (“Section 409A”).
4.5 Mitigation. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and any amounts payable pursuant to this Section 4 shall not be reduced by compensation the Executive earns on account of employment with another employer.
4.6 Resignation of All Other Positions. Upon termination of the Executive’s employment hereunder for any reason, the Executive, effective on the Termination Date shall be deemed to have resigned from all positions that the Executive holds as an officer or member of the Board (or a committee thereof) of the Company or any of its affiliates.
5. Cooperation. The parties agree that certain matters in which the Executive will be involved during the Employment Term may necessitate the Executive’s cooperation in the future. Accordingly, following the termination of the Executive’s employment for any reason, to the extent reasonably requested by the Board, the Executive shall cooperate with the Company in connection with matters arising out of the Executive’s service to the Company; provided that, the Company shall make reasonable efforts to minimize disruption of the Executive’s other activities. The Company shall reimburse the Executive for reasonable expenses incurred in connection with such cooperation and, to the extent that the Executive is required to spend substantial time on such matters, the Company shall compensate the Executive at an hourly rate based on the Executive’s Base Salary on the Termination Date.
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6. Confidential Information. The Executive understands and acknowledges that during the Employment Term, he will have access to and learn about Confidential Information, as defined below.
6.1 Confidential Information Defined.
(a) Definition.
For purposes of this Agreement, “Confidential Information” includes, but is not limited to, all information not generally known to the public, in spoken, printed, electronic or any other form or medium, relating directly or indirectly to: business processes, practices, methods, policies, plans, publications, documents, research, operations, services, strategies, techniques, agreements, contracts, terms of agreements, transactions, potential transactions, negotiations, pending negotiations, know-how, trade secrets, databases, manuals, records, articles, systems, material, sources of material, supplier information, vendor information, financial information, results, accounting information, accounting records, legal information, marketing information, advertising information, pricing information, credit information, design information, payroll information, staffing information, personnel information, employee lists, supplier lists, vendor lists, developments, reports, internal controls, security procedures, graphics, drawings, sketches, market studies, sales information, revenue, costs, formulae, notes, communications, algorithms, computer code, product plans, designs, styles, models, ideas, audiovisual programs, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, manufacturing information, factory lists, distributor lists, and buyer lists of the Company or its businesses or any existing or prospective customer, supplier, investor or other associated third party, or of any other person or entity that has entrusted information to the Company in confidence.
The Executive understands that the above list is not exhaustive, and that Confidential Information also includes other information that is marked or otherwise identified as confidential or proprietary, or that would otherwise appear to a reasonable person to be confidential or proprietary in the context and circumstances in which the information is known or used.
The Executive understands and agrees that Confidential Information includes information developed by him in the course of his employment by the Company as if the Company furnished the same Confidential Information to the Executive in the first instance. Confidential Information shall not include information that is generally available to and known by the public at the time of disclosure to the Executive; provided that, such disclosure is through no direct or indirect fault of the Executive or person(s) acting on the Executive’s behalf.
(b) Company Creation and Use of Confidential Information.
The Executive understands and acknowledges that the Company has invested, and continues to invest, substantial time, money, and specialized knowledge into developing its resources, and training its employees. The Executive understands and acknowledges that as a result of these efforts, the Company has created, and continues to use and create Confidential Information. This Confidential Information provides the Company with a competitive advantage over others in the marketplace.
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(c) Disclosure and Use Restrictions.
The Executive agrees and covenants, both during and after the period of his employment with the Company: (i) to treat all Confidential Information as strictly confidential; (ii) not to directly or indirectly disclose, publish, communicate, or make available Confidential Information, or allow it to be disclosed, published, communicated, or made available, in whole or part, to any entity or person whatsoever (including other employees of the Company) not having a need to know and authority to know and use the Confidential Information in connection with the business of the Company and, in any event, not to anyone outside of the direct employ of the Company except as required in the performance of the Executive’s authorized employment duties to the Company or with the prior consent of the Board acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent); and (iii) not to access or use any Confidential Information, and not to copy any documents, records, files, media, or other resources containing any Confidential Information, or remove any such documents, records, files, media, or other resources from the premises or control of the Company, except as required in the performance of the Executive’s authorized employment duties to the Company or with the prior consent of the Board acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent. Nothing herein shall be construed to prevent disclosure of Confidential Information as may be required by applicable law or regulation, or pursuant to the valid order of a court of competent jurisdiction or an authorized government agency, provided that the disclosure does not exceed the extent of disclosure required by such law, regulation, or order. The Executive shall promptly provide written notice of any such order to the Board.
(d) Notice of Immunity Under the Economic Espionage Act of 1996, as amended by the Defend Trade Secrets Act of 2016 (“DTSA”). Notwithstanding any other provision of this Agreement:
(i) The Executive will not be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that:
(A) is made (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or
(B) is made in a complaint or other document filed under seal in a lawsuit or other proceeding.
(ii) If the Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, the Executive may disclose the Company’s trade secrets to the Executive’s attorney and use the trade secret information in the court proceeding if the Executive:
(A) files any document containing trade secrets under seal; and
(B) does not disclose trade secrets, except pursuant to court order.
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7. Proprietary Rights.
7.1 Work Product. The Executive acknowledges and agrees that all right, title, and interest in and to all writings, works of authorship, technology, inventions, discoveries, processes, techniques, methods, ideas, concepts, research, proposals, materials, and all other work product of any nature whatsoever, that are created, prepared, produced, authored, edited, amended, conceived, or reduced to practice by the Executive individually or jointly with others during the period of his employment by the Company and relate in any way to the business or contemplated business, products, activities, research, or development of the Company or result from any work performed by the Executive for the Company (in each case, regardless of when or where prepared or whose equipment or other resources is used in preparing the same), all rights and claims related to the foregoing, and all printed, physical and electronic copies, and other tangible embodiments thereof (collectively, “Work Product”), as well as any and all rights in and to US and foreign (a) patents, patent disclosures and inventions (whether patentable or not), (b) trademarks, service marks, trade dress, trade names, logos, corporate names, and domain names, and other similar designations of source or origin, together with the goodwill symbolized by any of the foregoing, (c) copyrights and copyrightable works (including computer programs), and rights in data and databases, (d) trade secrets, know-how, and other confidential information, and (e) all other intellectual property rights, in each case whether registered or unregistered and including all registrations and applications for, and renewals and extensions of, such rights, all improvements thereto and all similar or equivalent rights or forms of protection in any part of the world (collectively, “Intellectual Property Rights”), shall be the sole and exclusive property of the Company.
For purposes of this Agreement, Work Product includes, but is not limited to, Company information, including plans, publications, research, strategies, techniques, agreements, documents, contracts, terms of agreements, negotiations, know-how, work in process, databases, manuals, results, developments, reports, graphics, market studies, formulae, notes, communications, algorithms, product plans, product designs, models, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, manufacturing information, marketing information, advertising information, and sales information.
7.2 Work Made for Hire; Assignment. The Executive acknowledges that, by reason of being employed by the Company at the relevant times, to the extent permitted by law, all of the Work Product consisting of copyrightable subject matter is “work made for hire” as defined in 17 U.S.C. § 101 and such copyrights are therefore owned by the Company. To the extent that the foregoing does not apply, the Executive hereby irrevocably assigns to the Company, for no additional consideration, the Executive’s entire right, title, and interest in and to all Work Product and Intellectual Property Rights therein, including the right to sue, counterclaim, and recover for all past, present, and future infringement, misappropriation, or dilution thereof, and all rights corresponding thereto throughout the world. Nothing contained in this Agreement shall be construed to reduce or limit the Company’s rights, title, or interest in any Work Product or Intellectual Property Rights so as to be less in any respect than that the Company would have had in the absence of this Agreement.
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7.3 Further Assurances; Power of Attorney. During and after his employment, the Executive agrees to reasonably cooperate with the Company to (a) apply for, obtain, perfect, and transfer to the Company the Work Product as well as any and all Intellectual Property Rights in the Work Product in any jurisdiction in the world; and (b) maintain, protect and enforce the same, including, without limitation, giving testimony and executing and delivering to the Company any and all applications, oaths, declarations, affidavits, waivers, assignments, and other documents and instruments as shall be requested by the Company. The Executive hereby irrevocably grants the Company power of attorney to execute and deliver any such documents on the Executive’s behalf in his name and to do all other lawfully permitted acts to transfer the Work Product to the Company and further the transfer, prosecution, issuance, and maintenance of all Intellectual Property Rights therein, to the full extent permitted by law, if the Executive does not promptly cooperate with the Company’s request (without limiting the rights the Company shall have in such circumstances by operation of law). The power of attorney is coupled with an interest and shall not be affected by the Executive’s subsequent incapacity.
7.4 No License. The Executive understands that this Agreement does not, and shall not be construed to, grant the Executive any license or right of any nature with respect to any Work Product or Intellectual Property Rights or any Confidential Information, materials, software, or other tools made available to him by the Company.
7.5 The provisions of this Section 7 do not apply to an invention which qualifies fully under the provisions of Section 2870 of the California Labor Code, which provides in substance that provisions in an employment agreement providing that an employee shall assign any of his or her rights in any invention to his or her employer do not apply to an invention for which no equipment, supplies, facility, or trade secret information of the employer was used and which was developed entirely on the employee’s own time, and which (i) does not relate (1) to the business of the employer, or (2) to the employer’s actual or demonstrably anticipated research or development, or (ii) does not result from the work performed by the employee for the employer.
8. Security.
8.1 Security and Access. The Executive agrees and covenants to comply with all Company security policies and procedures as in force from time to time.
8.2 Exit Obligations. Upon (a) voluntary or involuntary termination of the Executive’s employment or (b) the Company’s request at any time during the Executive’s employment, the Executive shall (i) provide or return to the Company any and all Company property, and all Company documents and materials belonging to the Company and stored in any fashion, including but not limited to those that constitute or contain any Confidential Information or Work Product, that are in the possession or control of the Executive, whether they were provided to the Executive by the Company or any of its business associates or created by the Executive in connection with his employment by the Company; and (ii) delete or destroy all copies of any such documents and materials not returned to the Company that remain in the Executive’s possession or control, including those stored on any non-Company devices, networks, storage locations, and media in the Executive’s possession or control.
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9. Governing Law; Binding Arbitration Agreement. This Agreement, for all purposes, shall be construed in accordance with the laws of California without regard to conflicts of law principles. Any action or proceeding by either of the parties to enforce this Agreement or arising out of or relating to Executive’s employment with the Company shall be subject to binding arbitration pursuant to the Binding Arbitration Agreement attached hereto as Attachment “A”. Subject to the terms of the Binding Arbitration Agreement, the parties hereby irrevocably submit to the exclusive jurisdiction of a state or federal court located in the State of California, county of Los Angeles, and waive the defense of inconvenient forum to the maintenance of any such action or proceeding in such venue.
10. Entire Agreement. Unless specifically provided herein, this Agreement and the attached Binding Arbitration Agreement contain all of the understandings and representations between the Executive and the Company pertaining to the subject matter hereof and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter. The parties mutually agree that the Agreement can be specifically enforced be cited as evidence in legal proceedings alleging breach of the Agreement.
11. Modification and Waiver. No provision of this Agreement may be amended or modified unless such amendment or modification is agreed to in writing and signed by the Executive and the Company. No waiver by either of the parties of any breach by the other party hereto of any condition or provision of this Agreement to be performed by the other party hereto shall be deemed a waiver of any similar or dissimilar provision or condition at the same or any prior or subsequent time, nor shall the failure of or delay by either of the parties in exercising any right, power, or privilege hereunder operate as a waiver thereof to preclude any other or further exercise thereof or the exercise of any other such right, power, or privilege.
12. Severability. Should any provision of this Agreement be held by a court of competent jurisdiction to be enforceable only if modified, or if any portion of this Agreement shall be held as unenforceable and thus stricken, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties with any such modification to become a part hereof and treated as though originally set forth in this Agreement.
The parties further agree that any such court is expressly authorized to modify any such unenforceable provision of this Agreement in lieu of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the offending provision, adding additional language to this Agreement, or by making such other modifications as it deems warranted to carry out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law.
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The parties expressly agree that this Agreement as so modified by the court shall be binding upon and enforceable against each of them. In any event, should one or more of the provisions of this Agreement be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions hereof, and if such provision or provisions are not modified as provided above, this Agreement shall be construed as if such invalid, illegal, or unenforceable provisions had not been set forth herein.
13. Captions. Captions and headings of the sections and paragraphs of this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the caption or heading of any section or paragraph.
14. Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.
15. Section 409A.
15.1 General Compliance. This Agreement is intended to comply with Section 409A or an exemption thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a “separation from service” under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A, and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest, or other expenses that may be incurred by the Executive on account of non-compliance with Section 409A.
15.2 Specified Employees. Notwithstanding any other provision of this Agreement, if any payment or benefit provided to the Executive in connection with his termination of employment is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and the Executive is determined to be a “specified employee” as defined in Section 409A(a)(2)(b)(i), then such payment or benefit shall not be paid until the first payroll date to occur following the six-month anniversary of the Termination Date or, if earlier, on the Executive’s death (the “Specified Employee Payment Date”). The aggregate of any payments that would otherwise have been paid before the Specified Employee Payment shall be paid to the Executive in a lump sum on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule.
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15.3 Reimbursements. To the extent required by Section 409A, each reimbursement or in-kind benefit provided under this Agreement shall be provided in accordance with the following:
(a) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year;
(b) any reimbursement of an eligible expense shall be paid to the Executive on or before the last day of the calendar year following the calendar year in which the expense was incurred; and
(c) any right to reimbursements or in-kind benefits under this Agreement shall not be subject to liquidation or exchange for another benefit.
16. Successors and Assigns. This Agreement is personal to the Executive and shall not be assigned by the Executive. Any purported assignment by the Executive shall be null and void from the initial date of the purported assignment. The Company may assign this Agreement to any successor or assign (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of the Company. This Agreement shall inure to the benefit of the Company and permitted successors and assigns.
17. Notice. Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, or by overnight carrier to the parties at the addresses set forth below with a copy by email to Company’s Legal Counsel, the BOD, and to executive (or such other addresses as specified by the parties by like notice):
If to the Company:
11845 W. Olympic Blvd
Ste 1100W #13
Los Angeles, CA 90064
Greg Sichenzia, (Legal Counsel)
SRFC
1185 6th Ave 31st fl, New York, NY 10036
GSichenzia@SRFC.LAW
If to the Executive:
11907 Bray Street
Culver City CA 90230
stlrbrt@yahoo.com
18. Withholding. The Company shall have the right to withhold from any amount payable hereunder any Federal, state, and local taxes in order for the Company to satisfy any withholding tax obligation it may have under any applicable law or regulation.
19. Survival. Upon the expiration or other termination of this Agreement, the respective rights and obligations of the parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the parties under this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
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THUMZUP MEDIA CORPORATION | |
By |
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Name: | ||
Title: |
EXECUTIVE | ||
Signature: |
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Print Name: |
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Exhibit 10.11
Employment Agreement
This Employment Agreement (the “Agreement”) is made and entered into as of May 30, 2024 (the “Effective Date”), by and between Isaac Dietrich, an individual (the “Executive”), and Thumzup Media Corporation, a Nevada corporation (the “Company”).
WHEREAS, the Company desires to employ the Executive on the terms and conditions set forth herein; and
WHEREAS, the Executive desires to be employed by the Company on such terms and conditions.
NOW, THEREFORE, in consideration of the mutual covenants, promises, and obligations set forth herein, the parties agree as follows:
1. Term. The Executive’s employment hereunder shall be effective as of the date the Company lists its shares of common stock on a national stock exchange and shall continue At Will. The period during which the Executive is employed by the Company hereunder is hereinafter referred to as the “Employment Term.”
2. Position.
During the Employment Term, the Executive shall serve as the Chief Financial Officer and Principal Financial Officer, of the Company, reporting to the Board of Directors of the Company (the “Board”). In such position, the Executive shall have such duties, authority, and responsibility as shall be determined from time to time by the Board, which duties, authority, and responsibility are consistent with the Executive’s position. In addition, Executive shall comply with all of the written policies, procedures and directives of the Company as may be contained in any employee handbook or manual of or issued by the Company from time to time.
3. Compensation.
3.1 Base Salary. Upon uplisting to a national stock exchange (CBOE, Nasdaq, or the NYSE), the Company shall pay the Executive an annual rate of base salary of $168,000 in periodic installments in accordance with the Company’s customary payroll practices and applicable wage payment and withholdings laws and requirements, but no less frequently than monthly, except that, (i) the Executive’s Base Salary will increase from $168,000 to $250,000, effective upon the Company’s achievement of $100,000 net monthly ad revenue from Thumzup advertisers for paid posters for twelve consecutive months, (ii) the Executive’s Base Salary will increase to $250,000 upon the Company achieving $250,000 in net monthly ad revenue from Thumzup advertisers for paid posters for twelve consecutive months, and (iii) effective upon the Company’s receipt of an aggregate of $800,000 in net monthly ad revenue from Thumzup advertisers for paid posters for twelve consecutive months, the Base Salary will increase to $350,000. The Executive’s annual base salary, as in effect from time to time, is hereinafter referred to as “Base Salary”. Net ad revenue from Thumzup advertisers is defined as the Company’s margin (at present 30%) from gross advertising budgets for the Thumzup ad-tech platform. Any revenues that come from acquisitions of advertising, or other companies, shall be excluded from this formula.
3.2 Signing and Annual Bonus. The Company shall pay Executive a past performance bonus of $25,000 within 5 days of up-listing to a national stock exchange (CBOE, Nasdaq, NYSE), provided that Executive is employed by the Company at the time of the up-listing. This is a one-time bonus and if the Company moves from one national stock exchange to another, there shall be no additional bonus. For each calendar year of the Employment Term, the Executive shall be eligible to receive an annual bonus (the “Annual Bonus”). However, the decision to provide any Annual Bonus and the amount and terms of any Annual Bonus shall be at the discretion of the Board of Directors, if required. The amount will be determined by the success of the Company in achieving its earning goals, as well as in consideration of the service by Executive in contributing to business goals, as determined by the Board of Directors. Any such bonus is not intended to make up for or add to an employee’s regular hourly wage or compensation for meeting the minimum standards of the job position. It is at the sole and total discretion of the Board of Directors whether there is any bonus, the amount, timing, and the Executive will be rewarded. It should not be assumed that past payments have established a pattern for future payments. There is no guarantee of any bonus.
3.3 Equity Award. On the Effective Date, the Company shall issue to Executive 10-year options to purchase 150,000 shares of common stock with an exercise price of $5.00, 25% of which will vest on 1/1/25, and the remaining 75% of which will vest monthly in 48 equal monthly installments commencing on 1/1/2025. Upon termination and/or resignation, the Executive shall have 90 days to exercise any and all vested options, all unvested options shall remain unvested and / or shall be cancelled. Executive shall have a cashless exercise provision as follows: If the Fair Market Value (as defined below) of one share of Common Stock is greater than the Purchase Price (at the date of calculation as set forth below), in lieu of exercising the Options for cash, the Optionee may elect to pay the exercise price using a cashless exercise. If a cashless exercise is elected, the Company shall issue to the Optionee the number of shares of Common Stock computed using the following formula:
X = Y (A-B)
______
A
Where:
X = the number of shares of Common Stock to be issued to Optionee;
Y = the portion of the Option (in number of shares of Common Stock) being exercised by Optionee (at the date of such calculation);
A = the Fair Market Value (as defined below); and
B = Exercise Price (as adjusted to the date of such calculation).
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For purposes of this Agreement, Fair Market Value shall mean: “Fair Market Value” shall mean: (i) if the principal trading market for such securities is a national securities exchange, the OTCQB or other market operated by the OTC Markets (or a similar system then in use), the average of the closing prices on the principal market for the last five trading days immediately prior to such exercise date; or (ii) if (i) is not applicable, the average of the high bid and low asked prices so reported for the trading day immediately prior to such Exercise Date. Notwithstanding the foregoing, if there is no last reported sales price or bid and ask prices, as the case may be, for the day in question, then Fair Market Value shall be determined as of the latest day prior to such day for which such last reported sales price or bid and asked prices, as the case may be, are available, unless such securities have not been traded on an exchange or in the over-the-counter market for 30 or more days immediately prior to the day in question, in which case the Fair Market Value shall be determined in good faith by, and reflected in a formal resolution of the board of directors of the Company.
3.4 Fringe Benefits and Perquisites. During the Employment Term, the Executive shall be entitled to fringe benefits and perquisites consistent in accordance with the practices of the Company, and to the extent the Company provides similar benefits or perquisites (or both) to similarly situated executives of the Company.
3.5 Employee Benefits. During the Employment Term, the Executive shall be entitled to participate in all employee benefit plans, practices, and programs maintained by the Company, as in effect from time to time (collectively, “Employee Benefit Plans”), on a basis which is no less favorable than is provided to other similarly situated executives of the Company, to the extent consistent with applicable law and the terms of the applicable Employee Benefit Plans. The Company reserves the right to amend or cancel any Employee Benefit Plans at any time in its sole discretion, subject to the terms of such Employee Benefit Plan and applicable law. Any and all perks, or payments must be made with the approval of the BOD. The then-current terms of any such applicable benefits plan shall govern Executive’s participation in the plan.
3.6 Vacation; Paid Time-Off. Executive shall be permitted to take vacation / time off as he feels his duties and responsibilities permit. Rather, as part of his own flexible working schedule, Executive is entitled to take time off for vacation at his discretion after consultation with the Board of Directors and in a manner consistent with the Company’s client and operational requirements. Because Executive does not accrue any fixed amount of vacation time, he will not be “paid out” any unused vacation at the time of the termination of employment. In taking time off, Executive must keep coworkers and the Board of Directors informed and should plan at least two (2) weeks ahead of schedule whenever possible, particularly for longer absences. Client calls, meetings, and other time-sensitive responsibilities must be covered regardless of personal schedule and should be coordinated with coworkers and the Board of Directors, as appropriate, to insure coverage. Further, Executive must generally remain productive over the course of the year. Vacation taken by Executive may only be used to cover personal days for purposes unrelated to paid sick days (as set forth in the Company Handbook), illness, injury or any other purpose permitted under the Healthy Workplaces/Healthy Families Act of 2014, and unrelated to other leaves of absence as set forth in the Company Employees Handbook. Executive should strive to take sufficient time off each year. Failing to do so can have unhealthy consequences and lead to burn out, which is not good for the Executive, nor the Company and its clients.
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3.7 Business Expenses. The Executive shall be entitled to reimbursement for all reasonable and necessary out-of-pocket business, cell phone (as per the company’s telecommunications policy), mileage, entertainment, and travel expenses incurred by the Executive in connection with the performance of the Executive’s duties hereunder in accordance with the Company’s expense reimbursement policies and procedures.
3.8 Indemnification. In the event that the Executive is made a party or threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative (a “Proceeding”), other than any Proceeding initiated by the Executive or the Company related to any contest or dispute between the Executive and the Company, or any of its affiliates with respect to this Agreement, or the Executive’s employment hereunder, by reason of the fact that the Executive is or was a director or officer of the Company, or any affiliate of the Company, or is or was serving at the request of the Company as a director, officer, member, employee, or agent of another corporation or a partnership, joint venture, trust, or other enterprise, the Executive shall be indemnified and held harmless by the Company to the fullest extent applicable to any other officer or director of the Company from and against any liabilities, costs, claims, and expenses, including all costs and expenses incurred in defense of any Proceeding (including attorneys’ fees).
4. Termination of Employment. Upon termination of the Executive’s employment, the Executive shall be entitled to the Base Salary and Annual Bonus in Sections 3.1 and 3.2 that has been earned and determined, if any, as well as any expenses incurred through the date of termination as set forth in Section 3.7. In addition, Executive shall have the right to exercise all vested options within 90 days of the date of termination as set forth in Section 3.3., Executive shall have no further rights to any compensation or any other benefits from the Company or any of its affiliates, other than as set forth in Section 4.1 below. The payments and entitlements in this Paragraph are referred to herein as the “Accrued Amounts”.
4.1 Severance. There shall be no severance in the event of resignation by the Executive. If the Executive’s employment is terminated by the Company for any reason other than for “Cause”, and Executive was willing and able to remain employed, then the Company shall pay or provide the Executive with the following: contingent upon Executive’s execution and non-revocation of a waiver and release of claims form acceptable to the Company and subject to the Executive’s continued compliance with the obligations in Section 6 herein, an amount equal to the Base Salary in effect on the Termination Date, paid monthly in equal installments for a period of three (3) months, beginning at the time of termination or a lump sum payment of three (3) months Base Salary payable at the time of termination at the Company’s discretion. for purposes of this Section 4.1, “Cause” means Executive’s: (A) commission or conviction of, or guilty plea or plea of nolo contendere to, any felony or any other crime involving moral turpitude, fraud or dishonesty; (B) committing a material act of theft, dishonesty, embezzlement, fraud or misappropriation against the Company or any affiliate thereof; (C) committing an act or omission constituting any willful and material breach of a fiduciary obligation or any willful or gross misconduct relating to the business of the Company or any affiliate thereof; (D) substantial failure to perform Executive’s duties hereunder; (E) violation of any material Company policy or any applicable laws, rules or regulations; (F) material breach of this Agreement; (G) conduct tending to bring the Company into substantial public disgrace or disrepute; (H) intentional or negligent disobedience of lawful orders or directives of the Board; (I) unlawful use (including being under the influence) or possession of illegal drugs or repeated intoxication or (J) the occurrence of a force majeure event with an impact on the Company’s operations, such as a natural disaster in the State of California, a war declaration involving the USA, a large scale terrorist act in the USA or an epidemic or pandemic in the USA. To the extent the Cause is capable of cure, the Company must provide written notice to Executive setting forth the alleged cause and allowing Executive thirty (30) days to cure. If Executive fails to cure within thirty (30) days following such written notice, the Company may terminate Executive’s employment forthwith upon written notice to Employee.
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4.2 Death or Disability.
(a) The Executive’s employment hereunder shall terminate automatically upon the Executive’s death during the Employment Term, and the Company may terminate the Executive’s employment on account of the Executive’s Disability (as defined below).
(b) If the Executive’s employment is terminated during the Employment Term on account of the Executive’s death or Disability (as defined below), the Executive (or the Executive’s estate and/or beneficiaries, as the case may be) shall be entitled to receive the Accrued Amounts.
Notwithstanding any other provision contained herein, all payments made in connection with the Executive’s Disability (as defined below) shall be provided in a manner which is consistent with federal and state law.
(c) For purposes of this Agreement, “Disability” shall mean the Executive’s inability, due to physical or mental incapacity, to perform the essential functions of his job, with or without reasonable accommodation, for ninety (90) days out of any three hundred sixty-five (365) day period. Any question as to the existence of the Executive’s Disability as to which the Executive and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to the Executive and the Company. If the Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Company and the Executive shall be final and conclusive for all purposes of this Agreement.
4.3 Notice of Termination. Subject to Section 1 and Section 4, above, any termination of the Executive’s employment hereunder by the Company or by the Executive during the Employment Term (other than termination pursuant to Section 4.3(a) on account of the Executive’s death) shall be communicated by written notice of termination (“Notice of Termination”) to the other party hereto in accordance with Section 17. The Notice of Termination shall specify:
(a) The termination provision of this Agreement relied upon;
(b) To the extent applicable, the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated; and
(c) The applicable Termination Date.
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4.4 Termination Date. Subject to Section 1 and Section 4, above, the Executive’s “Termination Date” shall be:
(a) If the Executive’s employment hereunder terminates on account of the Executive’s death, the date of the Executive’s death;
(b) If the Executive’s employment hereunder is terminated on account of the Executive’s Disability, the date that it is determined that the Executive has a Disability;
(c) If the Company terminates the Executive’s employment hereunder for Cause, the date the Notice of Termination is delivered to the Executive;
(d) If the Company terminates the Executive’s employment hereunder without Cause, the date specified in the Notice of Termination;
(e) If the Executive terminates his employment hereunder, the date specified in the Executive’s Notice of Termination, which is requested to be no less than 30 days following the date on which the Notice of Termination is delivered; and
Notwithstanding anything contained herein, the Termination Date shall not occur until the date on which the Executive incurs a “separation from service” within the meaning of Section 409A of the Internal Revenue Code (“Section 409A”).
4.5 Mitigation. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and any amounts payable pursuant to this Section 4 shall not be reduced by compensation the Executive earns on account of employment with another employer.
4.6 Resignation of All Other Positions. Upon termination of the Executive’s employment hereunder for any reason, the Executive, effective on the Termination Date shall be deemed to have resigned from all positions that the Executive holds as an officer or member of the Board (or a committee thereof) of the Company or any of its affiliates.
5. Cooperation. The parties agree that certain matters in which the Executive will be involved during the Employment Term may necessitate the Executive’s cooperation in the future. Accordingly, following the termination of the Executive’s employment for any reason, to the extent reasonably requested by the Board, the Executive shall cooperate with the Company in connection with matters arising out of the Executive’s service to the Company; provided that, the Company shall make reasonable efforts to minimize disruption of the Executive’s other activities. The Company shall reimburse the Executive for reasonable expenses incurred in connection with such cooperation and, to the extent that the Executive is required to spend substantial time on such matters, the Company shall compensate the Executive at an hourly rate based on the Executive’s Base Salary on the Termination Date.
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6. Confidential Information. The Executive understands and acknowledges that during the Employment Term, he will have access to and learn about Confidential Information, as defined below.
6.1 Confidential Information Defined.
(a) Definition.
For purposes of this Agreement, “Confidential Information” includes, but is not limited to, all information not generally known to the public, in spoken, printed, electronic or any other form or medium, relating directly or indirectly to: business processes, practices, methods, policies, plans, publications, documents, research, operations, services, strategies, techniques, agreements, contracts, terms of agreements, transactions, potential transactions, negotiations, pending negotiations, know-how, trade secrets, databases, manuals, records, articles, systems, material, sources of material, supplier information, vendor information, financial information, results, accounting information, accounting records, legal information, marketing information, advertising information, pricing information, credit information, design information, payroll information, staffing information, personnel information, employee lists, supplier lists, vendor lists, developments, reports, internal controls, security procedures, graphics, drawings, sketches, market studies, sales information, revenue, costs, formulae, notes, communications, algorithms, computer code, product plans, designs, styles, models, ideas, audiovisual programs, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, manufacturing information, factory lists, distributor lists, and buyer lists of the Company or its businesses or any existing or prospective customer, supplier, investor or other associated third party, or of any other person or entity that has entrusted information to the Company in confidence.
The Executive understands that the above list is not exhaustive, and that Confidential Information also includes other information that is marked or otherwise identified as confidential or proprietary, or that would otherwise appear to a reasonable person to be confidential or proprietary in the context and circumstances in which the information is known or used.
The Executive understands and agrees that Confidential Information includes information developed by him in the course of his employment by the Company as if the Company furnished the same Confidential Information to the Executive in the first instance. Confidential Information shall not include information that is generally available to and known by the public at the time of disclosure to the Executive; provided that, such disclosure is through no direct or indirect fault of the Executive or person(s) acting on the Executive’s behalf.
(b) Company Creation and Use of Confidential Information.
The Executive understands and acknowledges that the Company has invested, and continues to invest, substantial time, money, and specialized knowledge into developing its resources, and training its employees. The Executive understands and acknowledges that as a result of these efforts, the Company has created, and continues to use and create Confidential Information. This Confidential Information provides the Company with a competitive advantage over others in the marketplace.
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(c) Disclosure and Use Restrictions.
The Executive agrees and covenants, both during and after the period of his employment with the Company: (i) to treat all Confidential Information as strictly confidential; (ii) not to directly or indirectly disclose, publish, communicate, or make available Confidential Information, or allow it to be disclosed, published, communicated, or made available, in whole or part, to any entity or person whatsoever (including other employees of the Company) not having a need to know and authority to know and use the Confidential Information in connection with the business of the Company and, in any event, not to anyone outside of the direct employ of the Company except as required in the performance of the Executive’s authorized employment duties to the Company or with the prior consent of the Board acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent); and (iii) not to access or use any Confidential Information, and not to copy any documents, records, files, media, or other resources containing any Confidential Information, or remove any such documents, records, files, media, or other resources from the premises or control of the Company, except as required in the performance of the Executive’s authorized employment duties to the Company or with the prior consent of the Board acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent. Nothing herein shall be construed to prevent disclosure of Confidential Information as may be required by applicable law or regulation, or pursuant to the valid order of a court of competent jurisdiction or an authorized government agency, provided that the disclosure does not exceed the extent of disclosure required by such law, regulation, or order. The Executive shall promptly provide written notice of any such order to the Board.
(d) Notice of Immunity Under the Economic Espionage Act of 1996, as amended by the Defend Trade Secrets Act of 2016 (“DTSA”). Notwithstanding any other provision of this Agreement:
(i) The Executive will not be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that:
(A) is made (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or
(B) is made in a complaint or other document filed under seal in a lawsuit or other proceeding.
(ii) If the Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, the Executive may disclose the Company’s trade secrets to the Executive’s attorney and use the trade secret information in the court proceeding if the Executive:
(A) files any document containing trade secrets under seal; and
(B) does not disclose trade secrets, except pursuant to court order.
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7. Proprietary Rights.
7.1 Work Product. The Executive acknowledges and agrees that all right, title, and interest in and to all writings, works of authorship, technology, inventions, discoveries, processes, techniques, methods, ideas, concepts, research, proposals, materials, and all other work product of any nature whatsoever, that are created, prepared, produced, authored, edited, amended, conceived, or reduced to practice by the Executive individually or jointly with others during the period of his employment by the Company and relate in any way to the business or contemplated business, products, activities, research, or development of the Company or result from any work performed by the Executive for the Company (in each case, regardless of when or where prepared or whose equipment or other resources is used in preparing the same), all rights and claims related to the foregoing, and all printed, physical and electronic copies, and other tangible embodiments thereof (collectively, “Work Product”), as well as any and all rights in and to US and foreign (a) patents, patent disclosures and inventions (whether patentable or not), (b) trademarks, service marks, trade dress, trade names, logos, corporate names, and domain names, and other similar designations of source or origin, together with the goodwill symbolized by any of the foregoing, (c) copyrights and copyrightable works (including computer programs), and rights in data and databases, (d) trade secrets, know-how, and other confidential information, and (e) all other intellectual property rights, in each case whether registered or unregistered and including all registrations and applications for, and renewals and extensions of, such rights, all improvements thereto and all similar or equivalent rights or forms of protection in any part of the world (collectively, “Intellectual Property Rights”), shall be the sole and exclusive property of the Company.
For purposes of this Agreement, Work Product includes, but is not limited to, Company information, including plans, publications, research, strategies, techniques, agreements, documents, contracts, terms of agreements, negotiations, know-how, work in process, databases, manuals, results, developments, reports, graphics, market studies, formulae, notes, communications, algorithms, product plans, product designs, models, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, manufacturing information, marketing information, advertising information, and sales information.
7.2 Work Made for Hire; Assignment. The Executive acknowledges that, by reason of being employed by the Company at the relevant times, to the extent permitted by law, all of the Work Product consisting of copyrightable subject matter is “work made for hire” as defined in 17 U.S.C. § 101 and such copyrights are therefore owned by the Company. To the extent that the foregoing does not apply, the Executive hereby irrevocably assigns to the Company, for no additional consideration, the Executive’s entire right, title, and interest in and to all Work Product and Intellectual Property Rights therein, including the right to sue, counterclaim, and recover for all past, present, and future infringement, misappropriation, or dilution thereof, and all rights corresponding thereto throughout the world. Nothing contained in this Agreement shall be construed to reduce or limit the Company’s rights, title, or interest in any Work Product or Intellectual Property Rights so as to be less in any respect than that the Company would have had in the absence of this Agreement.
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7.3 Further Assurances; Power of Attorney. During and after his employment, the Executive agrees to reasonably cooperate with the Company to (a) apply for, obtain, perfect, and transfer to the Company the Work Product as well as any and all Intellectual Property Rights in the Work Product in any jurisdiction in the world; and (b) maintain, protect and enforce the same, including, without limitation, giving testimony and executing and delivering to the Company any and all applications, oaths, declarations, affidavits, waivers, assignments, and other documents and instruments as shall be requested by the Company. The Executive hereby irrevocably grants the Company power of attorney to execute and deliver any such documents on the Executive’s behalf in his name and to do all other lawfully permitted acts to transfer the Work Product to the Company and further the transfer, prosecution, issuance, and maintenance of all Intellectual Property Rights therein, to the full extent permitted by law, if the Executive does not promptly cooperate with the Company’s request (without limiting the rights the Company shall have in such circumstances by operation of law). The power of attorney is coupled with an interest and shall not be affected by the Executive’s subsequent incapacity.
7.4 No License. The Executive understands that this Agreement does not, and shall not be construed to, grant the Executive any license or right of any nature with respect to any Work Product or Intellectual Property Rights or any Confidential Information, materials, software, or other tools made available to him by the Company.
7.5 The provisions of this Section 7 do not apply to an invention which qualifies fully under the provisions of Section 2870 of the California Labor Code, which provides in substance that provisions in an employment agreement providing that an employee shall assign any of his or her rights in any invention to his or her employer do not apply to an invention for which no equipment, supplies, facility, or trade secret information of the employer was used and which was developed entirely on the employee’s own time, and which (i) does not relate (1) to the business of the employer, or (2) to the employer’s actual or demonstrably anticipated research or development, or (ii) does not result from the work performed by the employee for the employer.
8. Security.
8.1 Security and Access. The Executive agrees and covenants to comply with all Company security policies and procedures as in force from time to time.
8.2 Exit Obligations. Upon (a) voluntary or involuntary termination of the Executive’s employment or (b) the Company’s request at any time during the Executive’s employment, the Executive shall (i) provide or return to the Company any and all Company property, and all Company documents and materials belonging to the Company and stored in any fashion, including but not limited to those that constitute or contain any Confidential Information or Work Product, that are in the possession or control of the Executive, whether they were provided to the Executive by the Company or any of its business associates or created by the Executive in connection with his employment by the Company; and (ii) delete or destroy all copies of any such documents and materials not returned to the Company that remain in the Executive’s possession or control, including those stored on any non-Company devices, networks, storage locations, and media in the Executive’s possession or control.
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9. Governing Law; Binding Arbitration Agreement. This Agreement, for all purposes, shall be construed in accordance with the laws of California without regard to conflicts of law principles. Any action or proceeding by either of the parties to enforce this Agreement or arising out of or relating to Executive’s employment with the Company shall be subject to binding arbitration pursuant to the Binding Arbitration Agreement attached hereto as Attachment “A”. Subject to the terms of the Binding Arbitration Agreement, the parties hereby irrevocably submit to the exclusive jurisdiction of a state or federal court located in the State of California, county of Los Angeles, and waive the defense of inconvenient forum to the maintenance of any such action or proceeding in such venue.
10. Entire Agreement. Unless specifically provided herein, this Agreement and the attached Binding Arbitration Agreement contain all of the understandings and representations between the Executive and the Company pertaining to the subject matter hereof and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter. The parties mutually agree that the Agreement can be specifically enforced be cited as evidence in legal proceedings alleging breach of the Agreement.
11. Modification and Waiver. No provision of this Agreement may be amended or modified unless such amendment or modification is agreed to in writing and signed by the Executive and the Company. No waiver by either of the parties of any breach by the other party hereto of any condition or provision of this Agreement to be performed by the other party hereto shall be deemed a waiver of any similar or dissimilar provision or condition at the same or any prior or subsequent time, nor shall the failure of or delay by either of the parties in exercising any right, power, or privilege hereunder operate as a waiver thereof to preclude any other or further exercise thereof or the exercise of any other such right, power, or privilege.
12. Severability. Should any provision of this Agreement be held by a court of competent jurisdiction to be enforceable only if modified, or if any portion of this Agreement shall be held as unenforceable and thus stricken, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties with any such modification to become a part hereof and treated as though originally set forth in this Agreement.
The parties further agree that any such court is expressly authorized to modify any such unenforceable provision of this Agreement in lieu of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the offending provision, adding additional language to this Agreement, or by making such other modifications as it deems warranted to carry out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law.
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The parties expressly agree that this Agreement as so modified by the court shall be binding upon and enforceable against each of them. In any event, should one or more of the provisions of this Agreement be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions hereof, and if such provision or provisions are not modified as provided above, this Agreement shall be construed as if such invalid, illegal, or unenforceable provisions had not been set forth herein.
13. Captions. Captions and headings of the sections and paragraphs of this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the caption or heading of any section or paragraph.
14. Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.
15. Section 409A.
15.1 General Compliance. This Agreement is intended to comply with Section 409A or an exemption thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a “separation from service” under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A, and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest, or other expenses that may be incurred by the Executive on account of non-compliance with Section 409A.
15.2 Specified Employees. Notwithstanding any other provision of this Agreement, if any payment or benefit provided to the Executive in connection with his termination of employment is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and the Executive is determined to be a “specified employee” as defined in Section 409A(a)(2)(b)(i), then such payment or benefit shall not be paid until the first payroll date to occur following the six-month anniversary of the Termination Date or, if earlier, on the Executive’s death (the “Specified Employee Payment Date”). The aggregate of any payments that would otherwise have been paid before the Specified Employee Payment shall be paid to the Executive in a lump sum on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule.
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15.3 Reimbursements. To the extent required by Section 409A, each reimbursement or in-kind benefit provided under this Agreement shall be provided in accordance with the following:
(a) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year;
(b) any reimbursement of an eligible expense shall be paid to the Executive on or before the last day of the calendar year following the calendar year in which the expense was incurred; and
(c) any right to reimbursements or in-kind benefits under this Agreement shall not be subject to liquidation or exchange for another benefit.
16. Successors and Assigns. This Agreement is personal to the Executive and shall not be assigned by the Executive. Any purported assignment by the Executive shall be null and void from the initial date of the purported assignment. The Company may assign this Agreement to any successor or assign (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of the Company. This Agreement shall inure to the benefit of the Company and permitted successors and assigns.
17. Notice. Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, or by overnight carrier to the parties at the addresses set forth below with a copy by email to Company’s Legal Counsel, the BOD, and to executive (or such other addresses as specified by the parties by like notice):
If to the Company:
11845 W. Olympic Blvd
Ste 1100W #13
Los Angeles, CA 90064
Greg Sichenzia, (Legal Counsel)
SRFC
1185 6th Ave 31st fl, New York, NY 10036
GSichenzia@SRFC.LAW
If to the Executive:
ENTER ISAAC PHYSICAL ADDRESS
isaacdietrich@gmail.com
18. Withholding. The Company shall have the right to withhold from any amount payable hereunder any Federal, state, and local taxes in order for the Company to satisfy any withholding tax obligation it may have under any applicable law or regulation.
19. Survival. Upon the expiration or other termination of this Agreement, the respective rights and obligations of the parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the parties under this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
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THUMZUP MEDIA CORPORATION | |
By |
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Name: | ||
Title: |
EXECUTIVE | ||
Signature: |
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Print Name: |
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Exhibit 14.1
CODE OF CONDUCT AND ETHICS
FOR THE DIRECTORS, OFFICERS AND EMPLOYEES OF
THUMZUP MEDIA CORPORATION
Purpose
The Board of Directors (the “Board”) of Thumzup Media Corporation, a Nevada corporation (the “Company”), has approved the following Code of Conduct and Ethics (the “Code”) to apply to all the directors, officers and employees of the Company (the “Officeholders”). The Code is intended to promote ethical conduct and compliance with laws and regulations, to provide guidance with respect to the handling of ethical issues, to implement mechanisms to report unethical conduct, to foster a culture of honesty and accountability, to deter wrongdoing and to ensure fair and accurate financial reporting.
The Board of Directors has delegated day-to-day responsibility for administering and interpreting this code to a compliance officer. The company will either employ an executive as Compliance Officer or will name one of its officers, to be determined by the Board of Directors. The Chief Financial Officer has been appointed as the Compliance Officer under this Code.
No code or policy can anticipate every situation that may arise. Accordingly, this Code is intended to serve as a source of guiding principles. Officeholders are encouraged to bring questions about particular circumstances that may involve one or more of the provisions of this Code to the attention of the Company’s Chief Executive Officer, who may consult with the Company’s outside legal counsel as appropriate.
Introduction
The Officeholders are expected to adhere to a high standard of ethical conduct. The reputation and good standing of the Company depend on how the Company’s business is conducted and how the public perceives that conduct. Unethical actions, or the appearance of unethical actions, are not acceptable. In addition to each of the directives set forth below, the Officeholders shall be guided by the following principles in carrying out their duties and responsibilities on behalf of the Company:
Loyalty, Honesty and Integrity. Officeholders must not be, or appear to be, subject to influences, interests or relationships that conflict with the best interests of the Company.
Observance of Ethical Standards. When carrying out their duties and responsibilities on behalf of the Company, Officeholders must adhere to the high ethical standards described in this Code.
Accountability. Officeholders are responsible for their own adherence and the adherence of the other directors, officers and employees to whom this Code applies. Officeholders are encouraged to familiarize themselves with each provision of this Code and those set forth in the Company’s policies which will be, or have been, published to the Officeholders from time to time.
Standards of Conduct
Integrity of Records and Financial Reporting
The Chief Executive Officer and the Chief Financial Officer and, if applicable, Principal Accounting Officer, and Controller of the Company (the Chief Financial Officer and Principal Accounting Officer and Controller are hereinafter referred to as the “Senior Financial Officers”) are responsible for the accurate and reliable preparation and maintenance of the Company’s financial records. Accurate and reliable preparation of financial records is of critical importance to proper management decisions and the fulfillment of the Company’s financial, legal and reporting obligations. As a public company, the Company files annual and periodic reports and makes other filings with the Securities and Exchange Commission (the “SEC”). It is critical that these reports be timely and accurate. The Company expects those officers who have a role in the preparation and/or review of information included in the Company’s SEC filings to record, process, summarize and report such information accurately and honestly. Reports and documents the Company files with or submits to the SEC, as well as other public communications made by the Company, should contain full, fair, accurate, timely and understandable disclosure.
No Officeholder may cause the Company to enter into a transaction with the intent to document it or record it in a deceptive or unlawful manner. No Officeholder may create any false or artificial documentation for any transaction entered into by the Company. Unrecorded or “off the books” funds or assets should not be maintained unless permitted by applicable law or regulation and brought to the attention of the Company’s Chief Financial Officer.
Any Officeholder who learns of any material information affecting or potentially affecting the accuracy or adequacy of the disclosures made by the Company in its SEC filings, submissions or other public statements should report the same to the Chief Executive Officer or Senior Financial Officers or through the procedures established from time to time by the Audit Committee (if applicable) for the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, as set forth below.
The Chief Executive Officer and Senior Financial Officers are responsible for establishing, and together with the members of the Board or the members of the Audit Committee (if applicable), as the case may be, overseeing adequate disclosure controls and procedures and internal controls over financial reporting, including procedures which are designed to enable the Company to: (a) accurately document and account for transactions on the books and records of the Company and its subsidiaries; and (b) maintain reports, vouchers, bills, invoices, payroll and service records, performance records and other essential data with care and honesty.
Improper Influence of Auditors
No Officeholder may take any action to fraudulently influence, coerce, manipulate or mislead the Company’s auditor of the Company’s financial statements for the purpose of rendering those financial statements materially misleading.
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Conflicts of Interest
Officeholders must not participate in any activity that could conflict with their duties and responsibilities to the Company. A “conflict of interest” arises when one’s personal interests or activities appear to or may influence that person’s ability to act in the best interests of the Company. Any material transaction or relationship that reasonably could be expected to give rise to a conflict of interest should be disclosed to the Company’s in-house counsel. Before engaging in any material transaction or relationship that reasonably could give rise to a conflict of interest, each Officeholder must provide full and fair disclosure of all relevant facts and circumstances to, and receive the approval of, in the case of a director or officer, the Audit Committee or another independent body of the Board of Directors, or in the case of any other Officeholder, the Compliance Officer. In addition, because conflicts of interest are not always obvious, Officeholders are encouraged to bring questions about particular situations to the attention of the Compliance Officer or Company’s Chief Executive Officer.
This Code does not describe all possible conflicts of interest that could develop.
Some of the more common conflicts from which Officeholders must refrain are set forth below:
Family members. Officeholders may encounter a conflict of interest when doing business with or competing with organizations in which they have an ownership interest or their family member has an ownership or employment interest. “Family members” include a spouse, parents, children, siblings and in-laws. Officeholders must not conduct business on behalf of the Company with family members or an organization with which their family member is associated, unless such business relationship has been disclosed and authorized by the chairperson of the Audit Committee.
Improper conduct and activities. Officeholders may not engage in any conduct or activities that are inconsistent with the Company’s best interests or that disrupt or impair the Company’s relationship with any person or entity with which the Company has or proposes to enter into a business or contractual relationship.
Compensation from non-Company sources. Officeholders may not accept compensation in any form for services performed for the Company from any source other than the Company or its consolidated subsidiaries.
Gifts. Officeholders and members of their immediate family may not ask for or accept gifts, favors, kickbacks or other improper payment or consideration from a customer, government official or any other person or entity if such gifts are being made in order to influence them in their capacity as a directors, officers or employees of the Company, in consideration for assistance or influence concerning any transaction affecting the Company, or if acceptance of such gifts could create the appearance of a conflict of interest. No Officeholder may offer or give (directly or indirectly) any improper gift, favor, kickback or other improper payment or consideration to any customer, supplier, government official, including, without limitation, any foreign government official, or any other person for assistance or influence concerning any transaction affecting the Company. Any Officeholder aware of a person offering, giving, asking for or accepting an offer of a gift, gratuity or other personal consideration to influence a business transaction affecting the Company should report the same to the Chief Executive Officer, Compliance Officer or through the procedures established from time to time by the Audit Committee (if applicable) for the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, as set forth below.
These provisions are not intended to apply to routine, reasonable business entertainment or gifts of minor value customary in local business relationships, provided that no laws or Company policies are violated.
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Personal use of Company assets. Officeholders may not use Company assets, labor or information for personal use, other than incidental personal use, unless the Chief Executive Officer approves or as part of a compensation or expense reimbursement program.
The Company has the right and obligation to determine whether conflicts of interest exist and to take appropriate action to address them.
Corporate Opportunities
Officeholders are prohibited from: (a) taking opportunities related to the Company’s business for their own personal benefit; (b) using the Company’s property, information, or position for personal gain; or (c) competing with the Company for business opportunities; provided, however, if the Company’s disinterested directors determine the Company will not pursue such opportunity, after disclosure of all material facts by the individual seeking to pursue the opportunity, the individual may do so.
Confidentiality
Officeholders must maintain the confidentiality of information entrusted to them by the Company and any other confidential information about the Company, its business, customers or suppliers, from whatever source, except when disclosure is authorized or legally mandated. For purposes of this Code, “confidential information” includes all non-public information relating to the Company, its business, customers or suppliers. Officeholders may only use confidential information for legitimate Company purposes.
Officeholders must return all of the Company’s confidential and/or proprietary information in their possession to the Company when they cease to be employed by or otherwise serve the Company.
Compliance with Laws, Rules and Regulations
It is the policy of the Company to comply with all applicable laws, rules and regulations, and the Company expects the Officeholders to carry out their responsibilities on behalf of the Company in accordance with such laws, rules and regulations and to refrain from illegal conduct. No Officeholder should engage in any unlawful activity in conducting the Company’s business or in performing his or her day-to-day duties, nor should any Officeholder instruct others to do so. Transactions in Company securities are governed by the Company’s Insider Trading Policy.
Protection and Proper Use of the Company’s Assets
Loss, theft and misuse of the Company’s assets has a direct impact on the Company’s business and its profitability. Officeholders are expected to protect the Company’s assets that are entrusted to them and to protect the Company’s assets in general. Officeholders are also expected to take steps to ensure that the Company’s assets are used only for legitimate business purposes.
Encouraging the Reporting of any Illegal or Unethical Behavior
The Company is committed to operating according to the highest standards of business conduct and ethics and to maintaining a culture of ethical compliance. The Company’s directors and officers should promote an environment in which the Company: (a) encourages employees to talk to supervisors, managers and other appropriate personnel when in doubt about the best course of action in a particular situation; (b) encourages employees to report violations of laws, rules and regulations to appropriate personnel; and (c) informs employees that the Company will not allow retaliation for reports made in good faith.
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Without prejudice to the generality of the above, procedures for the Officeholders of the Company and its subsidiaries to submit (whether openly, confidentially, or anonymously) their concerns about questionable accounting or auditing matters and violations of legal or regulatory requirements, and for the Audit Committee to receive and respond to such concerns, are governed, if applicable, by the Company’s policies then in effect concerning whistleblowers and prohibitions against retaliation.
Fair Dealing
The Officeholders should deal fairly with the Company’s customers, suppliers and competitors. It is the policy of the Company to prohibit any person from taking unfair advantage of another through manipulation, concealment, abuse of privileged information, misrepresentation of material facts or any other unfair dealing practice.
Compliance Procedures
Communications of this Code
All Officeholders will be provided with a copy of this Code upon beginning service with the Company. Updates to this Code will be provided from time to time. The standards in this Code may be further explained or implemented through policy memoranda, including those relating to specific areas of the Company’s business. A Officeholder may obtain a copy of this Code or any such memoranda upon request to the Chief Executive Officer or Compliance Officer.
Monitoring Compliance and Disciplinary Action
The Company’s management, under the supervision of its Board of Directors or a committee thereof or, in the case of accounting, internal accounting controls or auditing matters, the Audit Committee (if applicable), will take reasonable steps from time to time to (i) monitor compliance with this Code, including the establishment of monitoring systems that are reasonably designed to investigate and detect conduct in violation of this Code and (ii) when appropriate, impose and enforce appropriate disciplinary measures for violations of this Code.
The Company’s management will periodically report to the Board of Directors or a committee thereof on these compliance efforts including, without limitation, periodic reporting of alleged violations of this Code and the actions taken with respect to any such violation.
Reporting Concerns/ Receiving Advice/ No Retaliation
Be Proactive. Every Officeholder is expected to act proactively by asking questions, seeking guidance and reporting violations of this Code and other policies and procedures of the Company, as well as any violation of applicable law, rule or regulation arising in the conduct of the Company’s business or occurring on the Company’s property. If any Officeholder believes that actions have taken place, may be taking place, or may be about to take place that violate or would violate this Code, he or she is expected to bring the matter to the attention of a supervisor, the Compliance Officer or report the matter through the procedures established from time to time by the Audit Committee (if applicable) for the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, as set forth below.
Seeking Guidance. The best starting point for an Officeholder seeking advice on ethics-related issues or reporting potential violations of this Code will usually be his or her immediate supervisor. However, if the conduct in question involves the Officeholder’s immediate supervisor, if the Officeholder does not have an immediate supervisor, if the Officeholder has reported the conduct in question to his or her immediate supervisor and does not believe that he or she has dealt with it properly, or if the Officeholder does not feel that he or she can discuss the matter with his or her immediate supervisor, the Officeholder may raise the matter with the Compliance Officer.
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Communication Alternatives. Any Officeholder may communicate with the Compliance Officer by any of the following methods:
In writing (which may be done anonymously as set forth below under “Anonymity”) addressed to the Compliance Officer, by U.S. mail to 11845 W. Olympic Blvd, Ste 1100W #13, Los Angeles, CA 90064, Attention: Chief Executive Officer; or
● | By e-mail to Robert@ThumzupMedia.com (anonymity cannot be maintained). |
Reporting Accounting and Other Concerns. Any Officeholder who learns of any violation or potential violation concerning accounting, internal accounting controls or auditing matters should promptly bring the matter to the Audit Committee (if applicable, or the Chief Executive Officer, if not applicable). Accounting, internal accounting control and auditing matters include but are not limited to information concerning (i) significant deficiencies or material weaknesses in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data accurately, (ii) any fraud, whether or not material, involving management or other employees who have a significant role in the Company’s financial reporting, disclosures or internal controls, (iii) improper influence of an auditor of the Company’s financial statements or (iv) the accuracy or adequacy of the disclosures made by the Company in its SEC filings or submissions or other public disclosures.
Anonymity. When reporting suspected violations of this Code, the Company prefers that Officeholders identify themselves in order to facilitate the Company’s ability to take appropriate steps to address the report, including conducting any appropriate investigation. However, the Company also recognizes that some people may feel more comfortable reporting a suspected violation anonymously. If an Officeholder wishes to remain anonymous, he or she may do so, and the Company will use reasonable efforts to protect the confidentiality of the reporting person subject to applicable law, rule or regulation or to any applicable legal proceedings. In the event the report is made anonymously, however, the Company may not have sufficient information to look into or otherwise investigate or evaluate the allegations. Accordingly, Officeholders who make reports anonymously should provide as much detail as is reasonably necessary to permit the Company to evaluate the matter(s) set forth in the anonymous report and, if appropriate, commence and conduct an appropriate investigation.
Protection for Reporting Violations. It is prohibited, and is a violation of this Code, for the Company or any person to retaliate in any way against any Officeholder who, acting in good faith, reports information concerning suspected misconduct.
Misuse of Reporting Channels. Officeholders may not use these reporting channels in bad faith or in a false or frivolous manner.
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Enforcement
Investigating Reports of Violations. The Company is committed to full, prompt and fair enforcement of the provisions of this Code. Upon receipt of any concern, other than an accounting, internal accounting control or auditing concern, the Compliance Officer will promptly initiate an investigation to gather the relevant facts. Upon receipt of any accounting, internal accounting control and auditing concern, the Audit Committee will promptly initiate an investigation to gather the relevant facts. In conducting and monitoring investigations, the Compliance Officer or Audit Committee, as applicable, may consult and coordinate as appropriate with other Officeholders, including but not limited to members of the Company’s senior management team, Internal Audit Department, Finance Department or Human Resources Department, and will seek to ensure that the provisions of this Code are applied and enforced consistently across the Company. All lawful and appropriate investigative means and methods may be utilized in the conduct of the investigation. All Officeholders should cooperate in the investigation when called upon to do so. A failure to cooperate may itself constitute a violation of the Code.
Sanctions for Violations. Appropriate disciplinary action will be determined upon completion of the investigation, if the Compliance Officer or Audit Committee, as applicable, concludes that a violation of the Code has been committed and disciplinary action is warranted. Any violation of this Code may result in serious sanctions by the Company, which may include but is not limited to, dismissal, suspension without pay, loss of pay or bonus, loss of benefits or demotion.
Any disciplinary action to be taken against an employee will be subject to the approval of senior management and will be carried out by the Human Resources Department.
Waivers of the Code
It is the Company’s policy that waivers of this Code will not be granted except in exigent circumstances. Any waivers of this Code may only be granted by a majority of the Board after disclosure of all material facts by the individual seeking the waiver. Any waiver of this Code will be promptly disclosed as required by law or the applicable rules of the stock exchange or quotation system on which the Corporation’s shares may be listed from time to time.
Certification
Each Officeholder is required to execute a Certificate of Compliance with respect to this Code on an annual basis, or at such other frequency as determined by Company management. Upon completion, the signed Certificate of Compliance will be retained in the employee’s employment file.
Conclusion
Officeholders should communicate any suspected violations of this Code, or any unethical behavior encompassed by this Code, promptly to the Chief Executive Officer. Violations will be taken seriously and investigated by the Board, as the case may be, or by a person or persons designated by the Board, and appropriate disciplinary action will be taken in the event of any violations of the Code.
If there are any questions involving application of this Code, guidance should be sought from the Company’s outside counsel.
It shall also be the policy of the Company that the directors and officers of the Company acknowledge receipt of and certify their willingness to adhere to the foregoing annually and file a copy of such certification with the Board.
This Code of Conduct and Ethics is effective as of May 29, 2024.
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Certificate of Compliance
WITH THE CODE OF CONDUCT AND ETHICS OF
THUMZUP MEDIA CORPORATION
I hereby certify that:
1. | I have read the Code of Conduct and Ethics for the Directors, Officers and Employees (the “Code”) of Thumzup Media Corporation (the “Company”) at least once during the past 12 months and understand my responsibility to comply with the principles and policies contained in the Code. I recognize that my failure to comply with such principles and policies will be cause for severe disciplinary action or termination of my employment. I also recognize that this Code is not a comprehensive description of Company policies and that I may be subject to disciplinary action and termination of my employment for actions not detailed in this Code. |
2. | Except as stated at paragraph 3, immediately below: |
(a) | I and, to the best of my knowledge, members of my immediate family, do not have any interest which might be deemed to be a conflict of interest under the Code |
(b) | To my knowledge, I have not violated any federal, state, local or foreign law in connection with the Company’s business; and |
(c) | I am not aware of any Company activities which violate the Code. |
3. | Exceptions to the above are noted below or separately attached: |
I hereby certify that the above statements are, to the best of my knowledge and belief, true and accurate. I also certify my understanding that nothing in the Code is intended to create an express or implied contract of employment or a guarantee of continued employment, and that adherence to the Code or any other policy or procedure of the Company does not modify any employment-at-will relationship that may exist between the Company and myself.
Signature: | ||
Print Name: | ||
Title: | ||
Date: |
Please print your name and title under your signature and
return this certificate to the Company.
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in this Registration Statement on Form S-1 of our report dated March 20, 2024, relating to our audits of the December 31, 2023 and 2022 financial statements, which appears in Thumzup Media Corp.’s Annual Report on Form 10-K for the year ended December 31, 2023.
We also consent to the reference to our firm under the caption “Experts” in such Prospectus.
/s/ Haynie & Company | |
Salt Lake City, Utah | |
May 30, 2024 |
Exhibit 99.1
Audit Committee Charter of Thumzup Media Corporation
Adopted: May 29, 2024
1. PURPOSE
The primary function of the Audit Committee is to assist the Board of Directors in fulfilling its oversight responsibilities by reviewing: the financial reports and other financial information provided by the Corporation to any governmental body or the public; the Corporation’s systems of internal controls regarding finance, accounting, legal compliance and ethics that management and the Board have established; and the Corporation’s auditing, accounting and financial reporting processes generally. Consistent with this function, the Audit Committee should encourage continuous improvement of, and should foster adherence to, the Corporation’s policies, procedures and practices at all levels. The Audit Committee’s primary duties and responsibilities are to:
● | Serve as an independent and objective party to monitor the Corporation’s financial reporting process and internal control systems. |
● | Review and appraise the audit efforts of the Corporation’s independent accountants and internal auditing function (or the efforts of the outsourced internal audit service provider, if applicable). |
● | Provide an open avenue of communication among the independent accountants, financial and senior management, the internal auditing function, and the Board of Directors. |
The Audit Committee will primarily fulfill these responsibilities by carrying out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Audit Committee shall be comprised of three or more, but no more than five, independent directors, as defined by CBOE listing standards and free from any relationship that, in the opinion of the Board, would interfere with the exercise of his or her independent judgment as a member of the Committee. All members of the Committee shall have a working familiarity with basic finance and accounting practices, and at least one member of the Committee shall have accounting or related financial management expertise and be considered a Qualified Financial Expert as defined by the CBOE. Committee members may enhance their familiarity with finance and accounting by participating in educational programs conducted by the Corporation or an outside consultant.
The members of the Committee shall be elected by the Board at the annual organizational meeting of the Board or until their successors shall be duly elected and qualified. Unless a chair is elected by the full Board, the members of the committee may designate a Chair by majority vote of the full Committee membership.
III. MEETINGS
The committee shall meet at least four times annually, or more frequently as circumstances dictate. As part of its job to foster open communication, the Committee should meet at least annual with management, the director of the internal auditing function and the independent accountants in separate executive sessions to discuss any matters that the Committee or each of these groups believe should be discussed privately. In addition, the Committee or at least its Chair should communicate with the independent accountants and management quarterly to review the Corporation’s financials consistent with IV.4 below. A majority of the whole authorized number of members of the Committee shall be necessary to constitute a quorum for a meeting.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
Documents/Reports Review
1. | Review and update this Charter and Company accounting policies periodically, at least annually, as conditions dictate, and submit to the Board of Directors for their approval the Audit Committee Charter and Audit Policy Document. |
2. | Review the organization’s annual financial statements and any reports or other financial information submitted to any governmental body, or the public, including any certification, report, opinion, or review rendered by the Company’s independent auditors. |
3. | Review the regular internal reports prepared by the Chief Financial Officer. |
4. | Review with financial management and the independent accountants the 10-Q prior to its filing or prior to the release of earnings. The Chair of the Committee may represent the entire Committee for purposes of this review. |
5. | Review annually the department budget if one is deemed needed. |
6. | Review periodically audit activity, including adherence to the internal audit plan and review management’s resolution of audit findings. |
7. | Review with the Chief Financial Officer, as is appropriate, material transactions originating from director, director-related enterprises, and officer loans. |
8. | Review with management the extent and adequacy of property and liability insurance coverage, and the security program. |
9. | On a timely basis, report to the full Board, on the effectiveness of the Bank’s overall control system and audit program and any matters relating to policy which require their attention. |
10. | Review, at least annually the “structure, management, staffing and audit quality of the internal audit function.” (if applicable). |
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Independent Accountants
11. | Select the independent accountants, who are accountable to the Board and to the Audit Committee as representatives of the shareholders, considering independence and effectiveness and approve the fees and other compensation to be paid to the independent accountants. On an annual basis, the Committee should review and discuss with the accountants all significant relationships the accountants have with the Corporation to determine the accountants’ independence . The independent auditor will report directly to the audit committee. |
12. | Review the performance of the independent accountants and approve any proposed discharge of the independent accountants when circumstances warrant. |
13. | Periodically consult with the independent accountants out of the presence of management about internal controls and the fullness and accuracy of the organization’s financial statements. |
14. | This Committee will actively engage the outside auditors in a dialogue regarding independence. |
Financial Reporting Processes
15. | In consultation with the independent accountants and the internal auditors, review the integrity of the organization’s financial reporting processes, both internal and external. |
16. | Consider the independent accountants’ judgments about the quality and appropriateness of the Corporation’s accounting principles as applied in its financial reporting. |
17. | Consider and approve, if appropriate, major changes to the Corporation’s auditing and accounting principles and practices as suggested by the independent accountants, management, or the internal auditing function. |
Process Improvement
18. | Establish regular and separate systems of reporting to the Audit Committee by each of management, the independent accountants and the internal auditors regarding any significant judgments made in management’s preparation of the financial statements and the view of each as to appropriateness of such judgments. |
19. | Following the completion of the annual audit, review separately with each of management, the independent accountants and the internal auditing department any significant difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information. |
20. | Review any significant disagreement among the management and the independent accountants or the internal auditing function in connection with the preparation of the financial statements. |
21. | Review with the independent accountants, the internal auditing function and management the extent to which changes or improvements in financial or accounting practices, as approved by the Audit Committee, have been implemented. (This review should be conducted at an appropriate time subsequent to implementation of changes or improvements, as decided by the Committee.) |
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Ethical and Legal Compliance
22. | Review management’s monitoring of the Corporation’s compliance with the organization’s Ethical Code, and ensure that management has the proper review system in place to ensure that Corporation’s financial statements, reports and other financial information disseminated to governmental organization, and the public satisfy legal requirements. |
23. | The Committee is responsible for establishing the organization’s Whistleblower Policy and overseeing procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and for the confidential anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters. |
24. | Review, with the organization’s counsel, legal compliance matters including corporate securities trading policies. |
25. | Review, with the organization’s counsel, any legal matter that could have a significant impact on the organization’s financial statements. |
26. | Perform any other activities consistent with this Charter, the Corporation’s Bylaws and governing law, as the Committee or the Board deems necessary or appropriate. |
27. | The Audit Committee shall have the power to conduct and authorize investigations into any matters within the Committee’s scope of responsibilities. The Committee shall be empowered to retain independent counsel, accountants, or others to assist it in the conduct of any investigation. |
Proxy Statement Report
28. | Include a Committee report in the Corporation’s proxy statement, including |
a. | whether the Committee has reviewed and discussed the Corporation’s audited financial statements with management; |
b. | whether the Committee has discussed with the outside auditors the matters required to be discussed by SAS 61; |
c. | whether the Committee has received the written disclosures and letter from the Corporation’s outside auditors relating to their independence as required by Independent Standards Board Standard No. 1, and has discussed with the outside auditors their independence; and |
d. | whether the Committee has recommended to the Board of Directors, based upon the reviews and discussions referenced to in (a), (b) and (c), that the Corporation’s audited financial statements be included in the Corporation’s Annual Report on Form 10-K. |
Risk Oversight
29. | The Committee shall assist the Board in overseeing the risk management of the Company and shall oversee certain of the Company’s major risk exposures set forth below, provided that the Board may, in its discretion, exercise direct oversight with respect to any such matters. |
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a. | Financial and Enterprise Risk. The Committee will review with management, at least annually, the Company’s major financial risk and enterprise exposures and the steps management has taken to monitor or mitigate such exposures. |
b. | Legal and Regulatory Compliance. The Committee will review with management, at least annually, |
i. | the Company’s program for promoting and monitoring compliance with applicable legal and regulatory requirements, and |
ii. | the Company’s major legal and regulatory compliance risk exposures and the steps management has taken to monitor or mitigate such exposures. |
c. | Risks Related to ESG. The Committee will review with management, at least annually, the Company’s major ESG risk exposures and the steps management has taken to monitor or mitigate such exposures, in coordination with the other committees of the Board as appropriate. |
d. | Cybersecurity. The Committee will review with management, at least annually, the Company’s cybersecurity risk exposures and the steps management has taken to monitor or mitigate such exposures. |
e. | Other Risk Oversight. The Committee will periodically review with management the Company’s risk exposures in other areas, as the Committee deems necessary or appropriate from time to time. |
Other
30. | Review with management the outside auditor’s proposals to provide other bank services such as consulting. |
31. | Maintain minutes and other relevant records of their meetings and decisions. |
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Exhibit 99.2
Compensation Committee Charter of Thumzup Media Corporation
Adopted: May 29, 2024
Purpose
The Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of Thumzup Media Corporation (the “Company”) shall assist the Board in the discharge of its responsibilities with respect to the compensation of the directors and the executive officers of the Company.
Composition of the Compensation Committee
The Committee shall consist of not less than three (3), but no more than five (5) directors each of whom shall be an independent director as defied by CBOE (or any successor thereto, or the applicable rules of any other exchange or quotation system on which the Company’s shares may be listed from time to time) (“CBOE”) listing standards, a “nonemployee director” within the meaning of Rule 16b-3 issued by the U.S. Securities and Exchange Commission (“SEC”), and an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended.
The receipt of awards of stock or stock options pursuant to the Company’s equity incentive plans, or compensation for participation at meetings, or the reimbursement of his or her reasonable expenses, by a director as part of his or her compensation for service on the Board and committees of the Board shall not disqualify the director from serving as a member of the Committee.
If the Committee is comprised of at least three (3) members satisfying the independence requirements, then one (1) director who is not independent under CBOE rules, and is not a current officer or employee of the Company or any of its subsidiaries (or an immediate family member of such person), may be appointed to the Committee, under exceptional and limited circumstances, as determined by the Board in accordance with applicable CBOE rules.
The Board shall designate one member of the Committee as its Chairman. Members of the Committee shall serve until their resignation, retirement, removal by the Board or until their successors are appointed, or when they cease to be a director of the Company.
Responsibilities and Duties
In carrying out the purpose and authorities set forth herein, the Committee shall:
1. | Annually review and approve the factors to be considered in determining the compensation of the Chief Executive Officer (the “CEO”) of the Company and the Company’s other “executive officers” as defined under Rule 3b-7 and “officers” as defined under Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934, as amended (“Exchange Act”) (collectively with the CEO, the “Executive Officers”), and evaluate the performance of the CEO and other Executive Officers in light of these factors. Based on this evaluation, including an evaluation of the Company’s performance, the Committee will have the authority, subject to any approval by the Board which the Committee or legal counsel determines to be desirable or is required by applicable law, the Commission Rules or the Exchange Rules, to make decisions (including any formal approvals) respecting (a) salary paid to the CEO and other Executive Officers, (b) the grant of all cash-based incentive compensation and equity-based compensation to the CEO and other Executive Officers, (c) the entering into or amendment or extension of any offer letter, employment contract or similar arrangement with the CEO and other Executive Officers, (d) the entering into or amendment or extension of any CEO or other Executive Officer severance or change in control arrangements, and (e) any other CEO or other Executive Officer compensation matters; provided that the Committee may take account of the recommendations of the Board (or other members of the Board) with respect to CEO and other Executive Officer compensation. The Committee may also make similar compensation related decisions with respect to other employees of the Company if Board or Committee approval is required or desirable as determined by legal counsel. The Committee may take account of the recommendations of the CEO with respect to other Executive Officers for each of the foregoing items. The CEO shall not be present during voting or deliberations regarding his own compensation. |
2. | Oversee the administration and interpretation of the Company’s cash-based and equity-based compensation plans and agreements thereunder, and in that capacity: |
a. | approve equity awards to officers, employees or other service providers to the Company; |
b. | amend or enter into new equity plans (subject to stockholder approval when required) as may be necessary or appropriate to carry out the Company’s compensation strategy; |
c. | determine whether awards that have performance-related criteria have been earned; |
d. | authorize the repurchase of shares from terminated employees pursuant to applicable law; |
e. | have the authority to correct any defect, supply any omission, or reconcile any inconsistency in any equity compensation plan, award, exercise agreement or other arrangement; |
f. | have the authority to, when appropriate, modify existing equity awards (with the consent of the grantees, if required) and approve authorized exceptions to provisions of the equity plans; and |
g. | administer any required or appropriate equity award timing policy. |
3. | Oversee Clawbacks. Review and approve policies and procedures with respect to the clawback or recoupment of compensation from the Company’s current or former officers, employees, directors or other individuals who have received compensation, including with respect to any policy adopted pursuant to Rule 10D-1 of the Exchange Act and the related listing rules and regulations. |
4. | Oversight of Human Capital Management. The Committee shall oversee the Company’s management of and response to human capital matters, including diversity and inclusion programs and initiatives, recruitment and retention of employees, gender and racial/ethnic pay equity and relative compensation and benefits offered to employees across the Company. |
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5. | Significant Executive Officer Contracts. Review and recommend to the Board employment agreements, arrangements, or transactions with executive officers (and other officers as determined by the Committee), including any arrangements having any compensatory effect or purpose; including approving base salaries, salary increases, bonus targets and other remuneration for the executive officers, as well as any employment terms for the executive officers not part of the Company’s standard employment terms relating to its employees generally; |
6. | Director Compensation. Review and recommend to the Board appropriate director compensation programs for service as directors, committee chairmanships, and committee members, consistent with any applicable requirements of the CBOE listing standards for independent directors; |
7. | Compensation Policies and Performance Review. Periodically assess the Company’s policies applicable to the Company’s executive officers and directors, including the relationship of corporate performance to executive compensation; |
8. | Retention of Compensation Consultants and Other Professionals. Have full authority to hire independent compensation consultants and other professionals to assist in the design, formulation, analysis and implementation of compensation programs for the Company’s executive officers; |
9. | Committee Report in Proxy Statement. Assist in the preparation of and approve a report of the Committee for inclusion in the Company’s proxy statement for each annual meeting of stockholders in accordance with the rules of the SEC and any requirements of the CBOE; |
10. | Review. Periodically review the operation of all of the Company’s employee benefit plans, except that the day-to-day administration of such plans, including the preparation and filing of all government reports and the preparation and delivery of all required employee materials and communications, shall be performed by the Company’s management; |
11. | Access to Executives. Have full access to the Company’s executives as necessary to carry out its responsibilities; |
12. | Other Activities. Perform any other activities consistent with this Charter, the Company’s bylaws and governing law as the Committee or the Board deems necessary or appropriate; and |
13. | Review Charter. Review this Charter from time to time for adequacy and recommend any changes to the Board. |
Committee Meetings
The Committee shall meet with the CEO at or near the start of each fiscal year to discuss the goals and incentive compensation programs to be in effect for such fiscal year and the performance targets triggering payout under those programs.
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The Committee shall, by duly authorized resolution, recommend to the Board the incentive compensation programs to be in effect for the fiscal year for the Company’s executive officers and other participants, including the objectives to be attained and the procedures for determining the individual awards payable under those programs. At or near the end of each fiscal year, the Committee shall meet to review performance under those programs and recommend to the Board the award of bonuses thereunder. At that time the Committee shall also recommend to the Board whether to adjust base salary levels in effect for the Company’s executive officers and shall review the overall performance of the Company’s employee benefit plans.
Members of the Committee may participate in meetings remotely by means of conference telephone, Internet broadcast or similar communication device, provided that all persons participating in the meeting can hear each other at the same time. Such participation shall constitute presence in person at the meeting.
A majority of all the members of the Committee shall constitute a quorum for the transaction of business, and the vote of a majority of all the members of the Committee participating (including by proxy) at a meeting at which a quorum is present shall be the act of the Committee. In addition, any action required or permitted to be taken at a meeting of the Committee, may be taken without a meeting if, before or after the action, a written consent thereto is signed by all the members of the Committee.
The Chairman of the Committee shall preside at each meeting. In the event the Chairman is not present at the meeting, the Committee members present at that meeting shall designate one of its members as the acting chair of such meeting.
Reporting
The Secretary of the Company shall keep minutes of the Committee’s proceedings. The minutes of a meeting shall be available for review by the entire Board, and shall be filed as permanent records with the Secretary of the Company.
At each meeting of the Board that follows a meeting of the Committee, the Chairman of the Committee shall report to the entire Board on the matters considered at the last meeting(s) of the Committee.
The Committee shall prepare and, through its Chairman, submit periodic reports of the Committee’s work and findings to the Board; the Committee shall include recommendations for Board actions when appropriate.
Amendments
Amendments to this Charter shall be made by the Board and may be made with or without a recommendation by the Committee.
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Exhibit 99.3
Nomination and Corporate Governance Committee Charter of Thumzup Media Corporation
Adopted: May 29, 2024
Role
The Nominating and Corporate Governance Committee’s (the “Committee”) role is to determine the slate of director nominees for election to Thumzup Media Corporation’s (“the Company”) Board of Directors, to identify and recommend candidates to fill vacancies occurring between annual shareholder meetings and to review the Company’s policies and programs that relate to matters of corporate citizenship, including public issues of significance to the Company and its shareholders.
Membership
The membership of the Committee consists of at least three directors, but no more than five, each of whom shall meet the independence requirements established by the Board of Directors and applicable laws, regulations and listing requirements. The Board of Directors appoints the members of the Committee and the chairperson. The Board of Directors may remove any member from the Committee at any time with or without cause.
Operations
The Committee meets at least twice a year. The Committee shall meet periodically in executive session without Company management present. Additional meetings may occur as the Committee or its chairperson deems advisable. The Committee will cause to be kept adequate minutes of its proceedings and will report on its actions and activities at the next quarterly meeting of the Board of Directors. Committee members will be furnished with copies of the minutes of each meeting and any action taken by unanimous consent. The Committee is governed by the same rules regarding meetings (including meetings by conference telephone or similar communications equipment), action without meetings, notice, waiver of notice and quorum and voting requirements as are applicable to the Board of Directors. The Committee is authorized and empowered to adopt its own rules of procedure not inconsistent with (a) any provision of this Charter, (b) any provision of the Bylaws of the Company, or (c) the laws of the state of Nevada.
Authority
The Committee will have the resources and authority necessary to discharge its duties and responsibilities. The Committee has sole authority to retain and terminate outside counsel, any search firm used to identify director candidates or other experts or consultants, as it deems appropriate, including sole authority to approve the firms’ fees and other retention terms. Any communications between the Committee and legal counsel in the course of obtaining legal advice will be considered privileged communications of the Company and the Committee will take all necessary steps to preserve the privileged nature of those communications.
Responsibilities
The principal responsibilities and functions of the Committee are as follows:
1. | Annually evaluate and report to the Board of Directors on the performance and effectiveness of the Board of Directors to facilitate the directors’ fulfilling their responsibilities in a manner that serves the interests of the Company and its shareholders. No person shall serve on the Board of Directors for more than twelve years. | |
2. | Annually present to the Board of Directors a list of individuals recommended for nomination for election to the Board of Directors at the annual meeting of shareholders and for appointment to the committees of the Board of Directors (including this Committee). Review and consider shareholder recommended candidates for nomination to the Board of Directors. | |
3. | Before recommending an incumbent, replacement or additional director, review his or her qualifications, including capability, availability to serve, conflicts of interest and other relevant factors. | |
4. | Assist in identifying, interviewing and recruiting candidates for the Board of Directors. | |
5. | Annually review the composition of each committee and present recommendations for committee memberships to the Board of Directors as needed. | |
6. | Monitor management’s succession plans for key executives of the Company other than the CEO and CFO, whose succession plans shall be reviewed by the Board. | |
7. | Develop and periodically review and recommend to the Board of Directors appropriate revisions to the Company’s corporate governance framework. | |
8. | Regularly review and make recommendations about changes to the charter of the Committee. | |
9. | Regularly review and make recommendations about changes to the charters of other Board of Directors committees after consultation with the respective committee chairs. | |
10. | Obtain or perform an annual evaluation of the Committee’s performance and make applicable recommendations. | |
11. | Annually review the Company’s policies and programs that relate to corporate citizenship, including environmental sustainability, the annual public policy agenda and political activities and expenditures. | |
12. | To develop and recommend to the Board for approval a Company Code of Conduct and Ethics (the “Code”), to monitor compliance with the Company’s Code, to investigate any alleged breach or violation of the Code, to enforce the provisions of the Code and to review the Code periodically and recommend any changes to the Board. | |
13. | The Committee shall oversee the Corporation’s activities in the area of corporate compliance that may impact the Corporation’s business operations or public image, in light of applicable government and industry standards, as well as legal and business trends and public policy issues. The Committee shall oversee the corporate compliance responsibilities of the Company’s Chief Compliance Officer, currently the Chief Financial Officer. |
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Exhibit 99.4
THUMZUP MEDIA CORPORATION
COMPENSATION RECOVERY POLICY
Effective May 29, 2024
In accordance with Section 10D of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Exchange Act Rule 10D-1, the listing rule of the Cboe Exchange, Inc. (the “Exchange”) where the securities of Thumzup Media Corporation (the “Company”) are listed, the Company’s Board of Directors (the “Board”) has adopted this Compensation Recovery Policy (the “Policy”). The purpose of this Policy is to recover the erroneously awarded Inventive-Based Compensation (defined below), if any, in the event that the Company is required to prepare an Accounting Restatement.
Capitalized terms used in the Policy are defined in Section A below. The application of the Policy to Executive Officers is not discretionary, except to the limited extent provided in Section G below, and applies without regard to whether an Executive Officer was at fault.
A. | Definitions |
“Accounting Restatement” means an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.
“Accounting Restatement Determination Date” means the date that a Company is required to prepare an Accounting Restatement, which is the earlier of: (a) the date the Board, a committee of the Board, or one or more of the officers of the Company authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare an Accounting Restatement; and (b) the date a court, regulator, or other legally authorized body directs the Company to prepare an Accounting Restatement.
“Excess Compensation” means the amount of Incentive-Based Compensation Received that exceeds the amount of Incentive-Based Compensation that otherwise would have been Received had such Incentive-Based Compensation been determined based on the restated amounts (this is referred to in the listings standards as “erroneously awarded incentive-based compensation”) and must be computed without regard to any taxes paid.
“Executive Officer” means each individual who is or was ever designated as an “officer” by the Board in accordance with Exchange Act Rule 16a-1(f).
“Financial Reporting Measures” means measures that are determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, and any measures that are derived wholly or in part from such measures. Stock price and total shareholder return are also Financial Reporting Measures. A Financial Reporting Measure need not be presented within the financial statements or included in a filing with the Securities and Exchange Commission.
“Incentive-Based Compensation” means any compensation that is granted, earned, or vested based wholly or in part upon the attainment of a Financial Reporting Measure (for the avoidance of doubt, no compensation that is potentially subject to recovery under the Policy will be earned until the Company’s duty to recover under the Policy has lapsed) and excludes the following: salaries, bonuses paid solely at the discretion of the Committee or Board that are not paid from a bonus pool that is determined by satisfying a Financial Reporting Measure, bonuses paid solely upon satisfying one or more subjective standards and/or completion of a specified employment period, non-equity incentive plan awards earned solely upon satisfying one or more strategic measures or operational measures, and equity awards for which the grant is not contingent upon achieving any Financial Reporting Measure performance goal and vesting upfront, upon the signing of certain agreements, or is contingent solely upon completion of time requirement (e.g., time-based vesting equity awards) and/or attaining one or more non-Financial Reporting Measures.
“Received” means, with respect to any Incentive-based Compensation, actual or deemed receipt, and Incentive-Based Compensation is “Received” under the Policy in the Company’s fiscal period during which the Financial Reporting Measure specified in the Incentive-Based Compensation award is attained, even if the payment or grant of the Incentive-Based Compensation occurs after the end of that period. For the avoidance of doubt, the Policy does not apply to Incentive-Based Compensation for which the Financial Reporting Measure is attained prior to December 31, 2023.
B. | Persons Covered by the Policy |
The Policy is binding and enforceable against all Executive Officers who received Incentive-Based Compensation covered by this Policy from the Company (See Section E below).
C. | Administration of the Policy |
The Compensation Committee of the Board (the “Committee”) has full-delegated authority to administer the Policy. The Committee is authorized to interpret and construe the Policy and to make all determinations necessary, appropriate, or advisable for the administration of the Policy. In addition, if determined in the discretion of the Board, the Policy may be administered by the independent members of the Board or another committee of the Board made up of independent members of the Board, in which case all references to the Committee will be deemed to refer to such independent members of the Board or such other Board committee. All determinations of the Committee will be final and binding and will be given the maximum deference permitted by law.
D. | Accounting Restatements Requiring Application of the Policy |
If the Company is required to prepare an Accounting Restatement, then the Committee must determine the Excess Compensation, if any, that must be recovered. The Company’s obligation to recover Excess Compensation is not dependent on if or when the restated financial statements are filed.
E. | Compensation Covered by the Policy |
The Policy applies to all Incentive-Based Compensation Received by an Executive Officer:
(a) | after beginning service as an Executive Officer; |
(b) | who served as an Executive Officer at any time during the performance period for that Incentive-Based Compensation; |
(c) | while the Company has a class of securities listed on the Exchange; |
(d) | during the three completed fiscal years immediately preceding the Accounting Restatement Determination Date. In addition to these last three completed fiscal years, the Policy must apply to any transition period (that results from a change in the Company’s fiscal year) within or immediately following those three completed fiscal years. However, a transition period between the last day of the Company’s previous fiscal year end and the first day of the Company’s new fiscal year that comprises a period of nine to 12 months would be deemed a completed fiscal year; and |
(e) | on or after December 31, 2023. |
F. | Excess Compensation Subject to Recovery of the Policy |
To determine the amount of Excess Compensation for Incentive-Based Compensation based on stock price or total shareholder return, where it is not subject to mathematical recalculation directly from the information in an Accounting Restatement, the amount must be based on a reasonable estimate of the effect of the Accounting Restatement on the stock price or total shareholder return upon which the Incentive-Based Compensation was Received and the Company must maintain documentation of the determination of that reasonable estimate and provide the documentation to the Exchange.
G. | Repayment of Excess Compensation |
The Company must recover Excess Compensation reasonably promptly and Executive Officers are required to repay Excess Compensation to the Company. Subject to applicable law, the Company may recover Excess Compensation by requiring the Executive Officer to repay such amount to the Company by direct payment to the Company or such other means or combination of means as the Committee determines to be appropriate (these determinations do not need to be identical as to each Executive Officer). These means may include:
(a) | requiring reimbursement of cash Incentive-Based Compensation previously paid; |
(b) | seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer, or other disposition of any equity-based awards; |
(c) | offsetting the amount to be recovered from any unpaid or future compensation to be paid by the Company or any affiliate of the Company to the Executive Officer; |
(d) | cancelling outstanding vested or unvested equity awards; and/or |
(e) | taking any other remedial and recovery action permitted by law, as determined by the Committee. |
The repayment of Excess Compensation must be made by an Executive Officer notwithstanding any Executive Officer’s belief (whether or not legitimate) that the Excess Compensation had been previously earned under applicable law and therefore is not subject to recovery.
The Company is prohibited from indemnifying any Executive Officer or former Executive Officer against the loss of Excess Compensation.
In addition to its rights to recovery under the Policy, the Company or any affiliate of the Company may take any legal actions it determines appropriate to enforce an Executive Officer’s obligations to the Company or its affiliate or to discipline an Executive Officer, including (without limitation) termination of employment, institution of civil proceedings, reporting of misconduct to appropriate governmental authorities, reduction of future compensation opportunities, or change in role. The decision to take any actions described in the preceding sentence will not be subject to the approval of the Committee and can be made by the Board, any committee of the Board, or any duly authorized officer of the Company or of any applicable affiliate of the Company.
H. | Limited Exceptions to the Policy |
The Company must recover Excess Compensation in accordance with the Policy except to the limited extent that any of the conditions set forth below are met, and the Committee determines that recovery of the Excess Compensation would be impracticable:
(a) | The direct expense paid to a third party to assist in enforcing the Policy would exceed the amount to be recovered. Before reaching this conclusion, the Company must make a reasonable attempt to recover the Excess Compensation, document the reasonable attempt(s) taken to so recover, and provide that documentation to the Exchange; |
(b) | Recovery would violate home country law where that law was adopted prior to December 31, 2023. Before reaching this conclusion, the Company must obtain an opinion of home country counsel, acceptable to the Exchange, that recovery would result in such a violation, and must provide such opinion to the Exchange; or |
(c) | Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of 26 U.S.C. 401(a)(13) (Assignment and alienation) or 26 U.S.C. 411(a) (Minimum vesting standards) and regulations thereunder. |
I. | Other Important Information in the Policy |
Notwithstanding the terms of any of the Company’s organizational documents (including, but not limited to, the Company’s bylaws), any corporate policy or any contract (including, but not limited to, any indemnification agreement), neither the Company nor any affiliate of the Company will indemnify or provide advancement for any Executive Officer against any loss of Excess Compensation, or any claims relating to the Company’s enforcement of its rights under the Policy. Neither the Company nor any affiliate of the Company will pay for or reimburse insurance premiums for an insurance policy that covers potential recovery obligations. In the event that pursuant to the Policy the Company is required to recover Excess Compensation from an Executive Officer who is no longer an employee, the Company will be entitled to seek recovery in order to comply with applicable law, regardless of the terms of any release of claims or separation agreement such individual may have signed. Neither the Company nor any affiliate of the Company will enter into any agreement that exempts any Incentive-Based Compensation that is granted, paid, or awarded to an Executive Officer from the application of the Policy or that waives the Company’s right to recovery of any Excess Compensation, and the Policy shall supersede any such agreement (whether entered into before, on, or after the adoption of the Policy).
The Committee or Board may review and modify the Policy from time to time.
If any provision of the Policy or the application of any such provision to any Executive Officer is adjudicated to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability will not affect any other provisions of the Policy or the application of such provision to another Executive Officer, and the invalid, illegal or unenforceable provisions will be deemed amended to the minimum extent necessary to render any such provision or application enforceable.
The Policy will terminate and no longer be enforceable when the Company ceases to be a listed issuer within the meaning of Section 10D of the Exchange Act or when the Exchange Act Rule 10D-1, and rules of the Cboe Exchange, Inc. are no longer effective.
Exhibit 99.5
THUMZUP MEDIA CORPORATION
WHISTLEBLOWER PROTECTION POLICY
Introduction
The organization will not retaliate against a whistleblower. This includes, but is not limited to, protection from retaliation in the form of an adverse employment action such as termination, compensation decreases, or poor work assignments and threats of physical harm. Any whistleblower who believes he/she is being retaliated against must contact the Human Resources Director immediately. The right of a whistleblower for protection against retaliation does not include immunity for any personal wrongdoing that is alleged and investigated.
Covered Persons
Whistleblower protections are provided in two important areas: confidentiality and retaliation. Insofar as possible, the confidentiality of the whistleblower will be maintained. However, identity may have to be disclosed to conduct a thorough investigation, to comply with the law, and to provide accused individuals their legal rights of defense. Individuals protected include:
a. | the employee, or a person acting on behalf of the employee, who reports to a public body or is about to report to a public body a matter of public concern; or |
b. | the employee who participates in a court action, an investigation, a hearing, or an inquiry held by a public body on a matter of public concern. |
Administration
The organization may not discharge, threaten, or otherwise discriminate against an employee regarding the employee’s compensation, terms, conditions, location, or privileges of employment.
The organization may not disqualify an employee or other person who brings a matter of public concern, or participates in a proceeding connected with a matter of public concern, before a public body or court, because of the report or participation, from eligibility to bid on contracts with the organization; receive land under a district ordinance; or receive another right, privilege, or benefit. The provisions of this policy do not:
a. | require the organization to compensate an employee for participation in a court action or in an investigation, hearing, or inquiry by a public body; |
b. | prohibit the organization from compensating an employee for participation in a court action or in an investigation, hearing, or inquiry by a public body; |
c. | authorize the disclosure of information that is legally required to be kept confidential; or |
d. | diminish or impair the rights of an employee under a collective bargaining agreement. |
Limitation to protections:
a. | A person is not entitled to the protections under this policy unless he or she reasonably believes that the information reported is, or is about to become, a matter of public concern; and reports the information in good faith. |
b. | A person is entitled to the protections under this policy only if the matter of public concern is not the result of conduct by the individual seeking protection, unless it is the result of conduct by the person that was required by his or her employer. |
Before an employee initiates a report to a public body on a matter of public concern under this policy, the employee shall submit a written report concerning the matter to the organization’s chief executive officer. However, the employee is not required to submit a written report if he or she believes with reasonable certainty that the activity, policy, or practice is already known to the chief executive officer; or that an emergency is involved. Relief and penalties:
a. | A person who alleges a violation of this policy may bring a civil action and the court may grant appropriate relief. |
b. | A person who violates or attempts to violate this policy is also liable for a civil fine of not more than ten thousand dollars ($10,000.00). |
Procedures
I. If an employee has knowledge of or a concern of illegal or dishonest/fraudulent activity, the employee is to contact his/her immediate supervisor or the Human Resources Director. All reports or concerns of illegal and dishonest activities will be promptly submitted by the receiving supervisor to the Human Resources Director, who is responsible for investigating and coordinating any necessary corrective action. Any concerns involving the Human Resource Director should be reported to the chief executive officer.
II. The whistleblower is not responsible for investigating the alleged illegal or dishonest activity, or for determining fault or corrective measures; appropriate management officials are charged with these responsibilities.
III. Examples of illegal or dishonest activities include violations of federal, state, or local laws; billing for services not performed or for goods not delivered; and other fraudulent financial reporting. The employee must exercise sound judgment to avoid baseless allegations. An employee who intentionally files a false report of wrongdoing will be subject to disciplinary action.
Exhibit 107
Calculation of Filing Fee Tables
FORM S-1
(Form Type)
(Exact Name of Registrant as Specified in its Charter)
Table 1: Newly Registered and Carry Forward Securities
Security Type | Security Class Title | Fee Calculation or Carry Forward Rule | Amount Registered | Proposed Maximum Offering Price Per Unit | Maximum Aggregate Offering Price(1) | Fee Rate | Amount of Registration Fee | ||||||||||||
Newly Registered Securities | |||||||||||||||||||
Fees to Be Paid | 0.0001476 | ||||||||||||||||||
Fees to Be Paid | — | ||||||||||||||||||
Fees to Be Paid | 0.0001476 | ||||||||||||||||||
Carry Forward Securities | |||||||||||||||||||
Carry Forward Securities | |||||||||||||||||||
Total Offering Amounts | |||||||||||||||||||
Total Fees Previously Paid | |||||||||||||||||||
Total Fee Offsets | |||||||||||||||||||
Net Fee Due |
(1) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended (the “Securities Act”). |
(2) |
(3) |
(4) |
(5) |
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