UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended |
or |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from | to |
Commission File No. | 0-55108 |
BLACKBOXSTOCKS INC. |
(Exact name of registrant as specified in its charter) |
Nevada | 45-3598066 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
5430 LBJ Freeway, Suite 1485, Dallas, Texas | 75240 |
(Address of principal executive offices) | (Zip Code) |
(972) 726-9203 |
( |
(Former name, former address and former fiscal year if changed since last report) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒x No☐¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes☒xNo☐¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large“large accelerated filer," "accelerated filer"” “accelerated filer” and "smaller“smaller reporting company"company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐¨Accelerated filer☐¨
Non-accelerated filer ☐¨Smaller reporting company☒x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐¨No☒x
The number of shares outstanding of the Registrant'sRegistrant’s Common Stock as of November 14, 2016August 9, 2017 was 23,020,000.23,110,000.
TABLE OF CONTENTS
Page | ||
INTRODUCTORY COMMENT | 1 | |
CAUTION REGARDING FORWARD LOOKING STATEMENTS | 1 | |
PART I –FINANCIAL INFORMATION | 2 | |
2 | ||
Consolidated Balance Sheets as of December 31, | 2 | |
Consolidated Statements of Operations for the Three and | 3 | |
Consolidated Statements of Cash Flows for the | 4 | |
Notes to Consolidated Financial Statements | 5 | |
9 | ||
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 11 | |
PART II – OTHER INFORMATION | ||
LEGAL PROCEEDINGS | ||
ITEM 1A. | RISK FACTORS | |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | ||
DEFAULTS UPON SENIOR SECURITIES | ||
MINE SAFETY DISCLOSURES | ||
13 |
INTRODUCTORY COMMENT
Throughout thisQuarterly Report on Form 10-Q, the terms "we," "us," "our," "Blackboxstocks,"“we,” “us,” “our,” “Blackboxstocks,” or the "Company"“Company” refers to Blackboxstocks Inc., a Nevada corporation.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Our prospects are subject to uncertainties and risks. In this Quarterly Report on Form 10-Q, we make forward-looking statements in this Item 2 and elsewhere that also involve substantial uncertainties and risks. These forward-looking statements are based upon our current expectations, estimates and projections about our business, and reflect our beliefs and assumptions based upon information available to us at the date of this report. In some cases, you can identify these statements by words such as "if," "may," "might," "will, "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue,"“if,” “may,” “might,” “will, “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” and other similar terms. These forward-looking statements include, among other things, plans for proposed operations, descriptions of our strategies, our product and market development plans, and other objectives, expectations and intentions, the trends we anticipate in our business and the markets in which we operate, and the competitive nature and anticipated growth of those markets.
We caution readers that forward-looking statements are predictions based on our current expectations about future events. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Our actual results, performance or achievements could differ materially from those expressed or implied by the forward-looking statements as a result of a number of factors including, but not limited to, the risks and uncertainties discussed in our other filings with the Securities Exchange Commission ("SEC"(“SEC”). We undertake no obligation to revise or update any forward-looking statement for any reason.
1 |
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Blackboxstocks Inc. (formerly SMSA Ballinger Acquisition Corp.) and Subsidiary
Consolidated Balance Sheets
June 30, 20162017 (Unaudited) and December 31, 2015
September 30, | December 31, | |||||||
2016 | 2015 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash | $ | 28,867 | $ | 60,286 | ||||
Investments, trading | - | 414 | ||||||
Accounts receivable | 3,501 | - | ||||||
Prepaid expenses | 3,779 | 3,414 | ||||||
Prepaid expenses, related parties (Note 6) | 24,050 | 154,500 | ||||||
Total current assets | 60,197 | 218,614 | ||||||
Property: | ||||||||
Computer and related equipment, net of depreciation of $3,866 | ||||||||
at September 30, 2016 and $0 at December 31, 2015 | 11,599 | 15,465 | ||||||
Total property | 11,599 | 15,465 | ||||||
Total Assets | $ | 71,796 | $ | 234,079 | ||||
Liabilities and Stockholders' Equity (Deficit) | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 124,699 | $ | 29,148 | ||||
Unearned subscriptions | 14,323 | - | ||||||
Accrued interest | 2,139 | - | ||||||
Advances, related party (Note 6) | 29,042 | - | ||||||
Notes payable (Note 7) | 50,000 | - | ||||||
Total current liabilities | 220,203 | 29,148 | ||||||
Commitments and contingencies (Note 8) | ||||||||
Stockholders' Equity (Deficit): | ||||||||
Preferred stock, $0.001 par value, 5,000,000 shares authorized; no shares | ||||||||
issued and outstanding at September 30, 2016 and December 31, 2015 | - | - | ||||||
Series A Convertible Preferred Stock, $0.001 par value, 5,000,000 | ||||||||
shares authorized; 5,000,000 issued and outstanding at September 30, 2016 | ||||||||
and December 31, 2015, respectively | 5,000 | 5,000 | ||||||
Common stock, $0.001 par value, 100,000,000 shares | ||||||||
authorized: 20,220,000 and 20,835,010 issued and outstanding at | ||||||||
September 30, 2016 and December 31, 2015, respectively | 20,220 | 20,835 | ||||||
Additional paid in capital | 910,222 | 799,607 | ||||||
Accumulated deficit | (1,083,849 | ) | (620,511 | ) | ||||
Total Stockholders' Equity (Deficit) | (148,407 | ) | 204,931 | |||||
Total Liabilities and Stockholders' Equity (Deficit) | $ | 71,796 | $ | 234,079 |
June 30, | December 31, | |||||||
2017 | 2016 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash | $ | 386,470 | $ | 703,638 | ||||
Accounts receivable | 480 | 1,567 | ||||||
Advances, related party (Note 5) | 79,678 | 42,690 | ||||||
Prepaid expenses | 250,257 | 236,300 | ||||||
Prepaid expenses, related parties (Note 5) | 36,700 | 36,700 | ||||||
Total current assets | 753,585 | 1,020,895 | ||||||
Property: | ||||||||
Computer and related equipment, net of depreciation of $9,544 and $5,336 | ||||||||
at June 30, 2017 and December 31, 2016, respectively | 19,474 | 16,664 | ||||||
Software development, net of amortization of $563 and $0 | ||||||||
at June 30, 2017 and December 31, 2016, respectively | 8,437 | — | ||||||
Total property | 27,911 | 16,664 | ||||||
Total Assets | $ | 781,496 | $ | 1,037,559 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 208,683 | $ | 72,279 | ||||
Unearned subscriptions | 19,485 | 17,682 | ||||||
Unearned licensing fees | 150,000 | — | ||||||
Total current liabilities | 378,168 | 89,961 | ||||||
Commitments and contingencies (Note 6) | ||||||||
Stockholders' Equity: | ||||||||
Preferred stock, $0.001 par value, 5,000,000 shares authorized; no shares | ||||||||
issued and outstanding at June 30, 2017 and December 31, 2016, respectively | — | — | ||||||
Series A Convertible Preferred Stock, $0.001 par value, 5,000,000 | ||||||||
shares authorized; 5,000,000 issued and outstanding at June 30, 2017 and | ||||||||
December 31, 2016, respectively | 5,000 | 5,000 | ||||||
Common stock, $0.001 par value, 100,000,000 shares | ||||||||
authorized:23,110,000 issued and outstanding at June 30, 2017 | ||||||||
and December 31, 2016, respectively | 23,110 | 23,110 | ||||||
Additional paid in capital | 2,352,332 | 2,352,332 | ||||||
Accumulated deficit | (1,977,114 | ) | (1,432,844 | ) | ||||
Total Stockholders' Equity | 403,328 | 947,598 | ||||||
Total Liabilities and Stockholders' Equity | $ | 781,496 | $ | 1,037,559 |
The accompanying notes are an integral part of these consolidated
2 |
Blackboxstocks Inc. (formerly SMSA Ballinger Acquisition Corp.) and Subsidiary
Consolidated Statements of Operations
For the Three and NineSix Months Ended SeptemberJune 30, 20162017 and 2015
(Unaudited)
For the Three Months | For the Nine Months | |||||||||||||||
Ended September 30, | Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenue | $ | 19,540 | $ | - | $ | 19,540 | $ | - | ||||||||
Cost of operations | 15,633 | - | 15,633 | - | ||||||||||||
Gross margin | 3,907 | - | 3,907 | - | ||||||||||||
Expenses: | ||||||||||||||||
Software development costs | 35,445 | 76,860 | 124,764 | 122,307 | ||||||||||||
General and administrative | 124,013 | 47,942 | 335,497 | 122,892 | ||||||||||||
Depreciation | 1,289 | - | 3,866 | - | ||||||||||||
Total operating expenses | 160,747 | 124,802 | 464,127 | 245,199 | ||||||||||||
Operating loss | (156,840 | ) | (124,802 | ) | (460,220 | ) | (245,199 | ) | ||||||||
Interest expense | 3,118 | - | 3,118 | - | ||||||||||||
Loss before income taxes | (159,958 | ) | (124,802 | ) | (463,338 | ) | (245,199 | ) | ||||||||
Income taxes | - | - | - | - | ||||||||||||
Net loss | $ | (159,958 | ) | $ | (124,802 | ) | $ | (463,338 | ) | $ | (245,199 | ) | ||||
Weighted average number of common | ||||||||||||||||
shares outstanding - basic | 20,164,565 | 17,618,880 | 20,180,202 | 17,217,132 | ||||||||||||
Net loss per share - basic | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.01 | ) |
For the Three Months Ended June 30, | For the Six Months Ended June 30 | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenue | $ | 196,945 | $ | — | $ | 324,558 | $ | — | ||||||||
Cost of operations | 133,192 | — | 229,472 | — | ||||||||||||
Gross margin | 63,753 | — | 95,086 | — | ||||||||||||
Expenses: | ||||||||||||||||
Software development costs | 204,590 | 42,449 | 232,728 | 89,321 | ||||||||||||
General and administrative | 208,340 | 123,555 | 400,891 | 212,388 | ||||||||||||
Depreciation and amortization | 2,777 | 1,289 | 4,771 | 2,578 | ||||||||||||
Total operating expenses | 415,707 | 167,293 | 638,390 | 304,287 | ||||||||||||
Operating loss | (351,954 | ) | (167,293 | ) | (543,304 | ) | (304,287 | ) | ||||||||
Interest expense | 518 | — | 966 | — | ||||||||||||
Loss before income taxes | (352,472 | ) | (167,293 | ) | (544,270 | ) | (304,287 | ) | ||||||||
Income taxes | — | — | — | — | ||||||||||||
Net loss | $ | (352,472 | ) | $ | (167,293 | ) | $ | (544,270 | ) | $ | (304,287 | ) | ||||
Weighted average number of common | ||||||||||||||||
shares outstanding - basic | 23,110,000 | 20,000,000 | 23,110,000 | 20,188,107 | ||||||||||||
Net loss per share - basic | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.02 | ) |
The accompanying notes are an integral part of these consolidated
3 |
Blackboxstocks Inc. (formerly SMSA Ballinger Acquisition Corp.) and Subsidiary
Consolidated Statements of Cash Flows
For the NineSix Months Ended SeptemberJune 30, 20162017 and 2015
(Unaudited)
2016 | 2015 | |||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (463,338 | ) | $ | (245,199 | ) | ||
Adjustments to reconcile net loss to net cash used in | ||||||||
operating activities: | ||||||||
Depreciation expense | 3,866 | - | ||||||
Changes in operating assets and liabilities: | ||||||||
Investment, trading | 414 | - | ||||||
Accounts receivable | (3,501 | ) | - | |||||
Prepaid expenses | (365 | ) | - | |||||
Prepaid expenses, related parties | 130,450 | (119,764 | ) | |||||
Accounts payable | 95,551 | (888 | ) | |||||
Accounts payable, related parties | - | (102,428 | ) | |||||
Unearned subscriptions | 14,323 | |||||||
Accrued interest | 2,139 | - | ||||||
Net cash used in operating activities | (220,461 | ) | (468,279 | ) | ||||
Cash flows from investing activities | ||||||||
Purchases of fixed assets | - | (15,465 | ) | |||||
Net cash used in investing activities | - | (15,465 | ) | |||||
Cash flows from financing activities | ||||||||
Common stock issued for cash | 110,000 | 760,000 | ||||||
Preferred stock issued for cash | - | 5,000 | ||||||
Payment for cancellation of common stock | - | (245,000 | ) | |||||
Advances from shareholder | 29,042 | - | ||||||
Proceeds from notes issued | 50,000 | - | ||||||
Net cash provided by financing activities | 189,042 | 520,000 | ||||||
Net increase (decrease) in cash | (31,419 | ) | 36,256 | |||||
Cash - beginning of period | 60,286 | 200,530 | ||||||
Cash - end of period | $ | 28,867 | $ | 236,786 | ||||
Supplemental disclosure- | ||||||||
Non-cash investing and financing activities: | ||||||||
Cancellation of common shares | $ | 835 | $ | - |
2017 | 2016 | |||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (544,270 | ) | $ | (304,287 | ) | ||
Adjustments to reconcile net loss to net cash used in | ||||||||
operating activities: | ||||||||
Depreciation and amortization expense | 4,771 | 2,578 | ||||||
Changes in operating assets and liabilities: | ||||||||
Investment, trading | — | 414 | ||||||
Accounts receivable | 1,087 | — | ||||||
Prepaid expenses | (13,957 | ) | 3,414 | |||||
Prepaid expenses, related parties | — | 130,450 | ||||||
Accounts payable | 136,404 | 50,671 | ||||||
Accrued interest | — | 861 | ||||||
Unearned subscriptions | 1,803 | — | ||||||
Unearned licensing fees | 150,000 | — | ||||||
Net cash used in operating activities | (264,162 | ) | (115,899 | ) | ||||
Cash flows from investing activities | ||||||||
Purchases of property | (16,018 | ) | — | |||||
Cash advances from shareholder | 20,000 | 9,960 | ||||||
Cash repayments to shareholder | (56,988 | ) | — | |||||
Net cash provided by(used in) investing activities | (53,006 | ) | 9,960 | |||||
Cash flows from financing activities | ||||||||
Proceeds from notes issued | — | 50,000 | ||||||
Net cash provided by financing activities | — | 50,000 | ||||||
Net increase(decrease) in cash | (317,168 | ) | (55,939 | ) | ||||
Cash - beginning of period | 703,638 | 60,286 | ||||||
Cash - end of period | $ | 386,470 | $ | 4,347 | ||||
Supplemental disclosure- | ||||||||
Non-cash investing and financing activities: | ||||||||
Cancellation of common shares | $ | — | $ | 835 |
The accompanying notes are an integral part of these consolidated
4 |
Blackboxstocks Inc. (formerly SMSA Ballinger Acquisition Corp.) and Subsidiary
Notes to Consolidated Financial Statements
For the Three and NineSix Months Ended SeptemberJune 30, 20162017 and 2015
1. Organization
Blackboxstocks Inc. was incorporated on October 4, 2011 under the laws of the State of Nevada under the name SMSA Ballinger Acquisition Corp. to effect the reincorporation of Senior Management Services of Heritage Oaks at Ballinger, Inc., a Texas corporation, mandated by a Plan of Reorganization confirmed by the United States Bankruptcy Court Forfor the Northern District of Texas for reorganization under Chapter 11 of the United States Bankruptcy Code.
On December 1,, 2015,, the Company entered into a Share Exchange Agreement ("(“Exchange Agreement"Agreement”), by and among the Company, Tiger Trade Technologies, Inc. ("(“Tiger Trade"Trade”), a Texas corporation and the Stockholders stockholders of Tiger Trade. Tiger Trade hadAs a total of 25 stockholders as of the dateresult of the Exchange Agreement.
On February 8, 2016, the Company entered into an Agreement and Plan of Merger ("(“Merger Agreement"Agreement”) with Tiger Trade, providing for the merger of Tiger Trade with and into the Company. At the effective time of the merger (February 9, 2016), the shares of Tiger Trade capital stock outstanding immediately before the effective time were canceled, retired and ceased to exist.
The Company filed a Certificate of Amendment to its Articles of Incorporation effective as of March 9, 2016, changing the name of the Company to Blackboxstocks Inc.
The Company is in the business of developing marketing and distributingmarketing a real time analytical platform and subscription based software as a service (the "Blackbox System"“Blackbox System”) to serve as a tool for day traders and swing traders on various securities exchanges and markets, including the OTC Markets Group, Inc. ("OTC"(“OTC”), the New York Stock Exchange, the NYSE AMEXMKT, LLC (formerly the American Stock Exchange), the NASDAQ markets, the Hong Kong Stock Exchange, the Shanghai Stock Exchange and NASDAQ exchanges markets.
2. Going Concern
The accompanying interim unaudited financial statements and footnotes of Blackboxstocks Inc. have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"(“GAAP”). The financial statements reflect all adjustments that are, in the opinion of management, necessary to fairly present such information. All such adjustments are of a normal recurring nature. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures, including a description of significant accounting policies normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Company'sCompany’s Annual Report on Form 10-K for the year ended December 31, 2015.Report. The accompanying unaudited financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results for any subsequent quarter or the entire year ending December 31, 2016.
Basisof Presentation
- The accompanying financial statements were prepared in conformity with GAAP.5 |
Blackboxstocks Inc. and Subsidiary
Notes to Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2017 and 2016
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of Estimates
Recently Issued Accounting Pronouncements
- During theProperty and Equipment
- Blackboxstocks is engaged in the development of its proprietary Blackbox System technology, an algorithm driven system, through a combination of in house system analysts and outsideThe Company'sCompany’s property and equipment acquired during 2015 was placed in service effective January 1, 2016 andis being depreciated on the straight linestraight-line basis over an estimated useful life of three years beginning in 2016.
Earnings or (Loss) Per Share
- Basic earnings per share (or loss per share), is computed by dividing the earnings (loss) for the period by the weighted average number of common stock shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities by including other potentially issuable shares of common stock, including shares issuable upon conversion of convertible securities or exercise of outstanding stock options and warrants, in the weighted average number of common shares outstanding for the period. Therefore, because including shares issuable upon conversion of convertible securities and/or exercise of outstanding options and warrants would have an anti-dilutive effect on the loss per share, only the basic earnings (loss) per share is reported in the accompanying financial statements. AtRevenue Recognition
- The Company recognizes revenue from the sale of subscriptions for the use of the Blackbox System web application, when persuasive evidence of an arrangement exists, delivery and collectability is probable. Revenue generally is recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities.In addition, the Company hadearns revenue from the licensing of its Blackbox System application for use in China, whereby a licensee is authorized to sell subscriptions for and sublicense the use of a version of the web application customized for analysis of data from certain Asian exchanges. A monthly licensing fee is charged to the licensee which began effective June 1, 2017.
6 |
Blackboxstocks Inc. and Subsidiary
Notes to Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2017 and 2016
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Software Development Costs - Blackboxstocks is engaged in the development of its proprietary Blackbox System technology, an algorithm driven system, through a combination of in house system analysts and outside contractors. Under the guidelines of Accounting Standards Codification (“ASC”) Topic 985 the cost of the Company’s Blackbox System was expensed during development and the Blackbox System software for use in the US, reached technical feasibility in August 2016, became marketable and was made available to subscribers beginning September 1, 2016. The Blackbox System for use in China achieved technical feasibility during the quarter and became marketable and available to subscribers effective May 15, 2017. In continued accordance with ASC Topic 985 these costs were expensed until technical feasibility was achieved, costs incurred until May 15, 2017 were capitalized and subsequently amortized.
3. STOCKHOLDERS’ EQUITY
The Company has authorized 10,000,000 shares of preferred stock at $0.001 par value, 5,000,000 of which are designated as "Series“Series A Convertible Preferred Stock"Stock” at $0.001 par value and 100,000,000 authorized shares of common stock at $0.001 par value ("(“Common Stock"Stock”). As of September 30, 2016, there were 20,220,000 shares of Common Stock issued and outstanding, including 15,000,000 shares issued in exchange for proprietary assets contributed by our President and a third party vendor (Note 6).
Shares of Series A Convertible Preferred Stock have a $0.001 par value, do not accumulate dividends and are convertible into shares of Common Stock on a one-for-one basis. Additionally, each share entitles the holder to 100 votes and, with respect to dividend and liquidation rights, the shares rankpari passu with the Company'sCompany’s Common Stock.
On December 1,, 2015,, the Company entered into an Exchange Agreement with Tiger Trade and its Stockholders (Note 1). Under the terms and conditions of the Exchange Agreement, the Company offered and sold Seventeen Million Nine Hundred Thousand (17,900,000) newly issued shares of Company Common Stock and Five Million (5,000,000) newly issued shares of Company Series A Convertible Preferred Stock in consideration for all the issued and outstanding shares of Tiger Trade capital stock. The effect of the issuance was that Tiger Trade stockholders acquired approximately 85.91% of the issued and outstanding shares of Company Common Stock and 100% of the issued and outstanding shares of Company Series A Convertible Preferred Stock. Tiger Trade became a wholly owned subsidiary of the Company as a result of the Exchange Agreement transaction.
Tiger Trade was subsequently merged with and into the Company on February 9, 2016, at which time all of the outstanding shares of capital stock of Tiger Trade outstanding immediately before the effective date were canceled, retired and ceased to exist.
On February 10, 2016, the Company entered into a Stock Cancellation Agreement with Gust C. Kepler, a Director, President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company, pursuant to which Mr. Kepler cancelled and forfeited 835,010 shares of the Company'sCompany’s Common Stock.
During the quarteryear ended September 30,December 31, 2016, the Company issued a total of 220,0003,310,000 shares of Common Stock at a cash price of $0.50 per share for a total of $110,000.$1,655,000. However, the Company subsequently honored a request by one investor to rescind the purchase of 200,000 of such shares of Common Stock on October 28, 2016 (Note 9).2016.
7 |
Blackboxstocks Inc. and Warrants
Notes to Consolidated Financial Statements
For the Three and Six Months Ended June 30, 2017 and 2016
4. STOCK OPTIONS AND WARRANTS
Costs attributable to the issuance of stock options and share purchase warrants are measured at fair value at the date of issuance and offset with a corresponding increase in 'Additional‘Additional Paid in Capital'Capital’ at the time of issuance. When the options or warrants are exercised, the receipt of consideration is an increase in stockholders'stockholders’ equity. There was no stock option or warrant activity during the ninesix months ended SeptemberJune 30, 20162017 and 20152016 and as of NovemberAugust 14, 20162017, no options or warrants were outstanding.
5. RELATED PARTY TRANSACTIONS
During the quartersix months ended SeptemberJune 30, 2016,2017, Gust C. Kepler, a Director, President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company was advanced $19,082 to$56,988 by the Company.Company and he repaid $20,000. The remaining advance of $79,678 is unsecured and bears no interest.
During the period April 28, 2014 through March 31,six months ended June 30, 2017 and 2016, the Company (and its predecessor, Tiger Trade) engaged the services of Karma Black Box LLC ("Karma"(“Karma”), which became a Company stockholder as a result of the Exchange Agreement (Note 4)1 and 3), for application development services of the Company'sCompany’s Blackbox System technology. During the six months ended June 30, 2017 and 2016, Karma was issued 5,000,000 shares of Tiger Trade common stock in exchangepaid $58,500 and $9,500 for some of the services, valued at $5,000. Karma's Tiger Trade shares were exchanged for Company Common Stock on a one-for-one basis under the terms of the Exchange Agreement. At September 30, 2016 and December 31, 2015, there was no accounts payable owed to Karma.
G2 International, Inc. ("G2"(“G2”), which does business as IPA Tech Group ("IPA"(“IPA”) (Note 8), is a company wholly owned by Gust C. Kepler, a Director, President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company, and the Company'sCompany’s controlling stockholder. During the nine months ended September 30, 2016 and 2015, G2 provided software development services to the Company in exchange for fees totaling $0 and $3,000, respectively. In 2016 G2/IPA refunded $130,450$117,800 of prepayments for marketing services leaving a prepaid balance of $24,050$36,700 as of November 14, 2016. During the nine months ended SeptemberJune 30, 20162017. At June 30, 2017 and 2015, the Company incurred $0 and $126,051 of expenses with G2, respectively. At September 30, 2016, and December 31, 2015, there were no accounts payable owed to G2.
On April 29, 2016August 9, 2017, we entered into a third party advanced $50,000License Agreement (the “BBTR License”) with EIGH8T TECHNOLOGIES INC. (also known as Black Box Traders and referred to herein as “BBTR”), a British Virgin Island registered company, for the development, customization and license to use and sublicense a version of the Blackbox System (known as the “BBTR System”) with data from the HKEX, SSE and SZSE. Stephen Chiang, an individual citizen of Singapore who holds 3,000,000 of Company Common Stock (approximately 13% of the issued and outstanding Common Stock), is a principal of BBTR. On May 15, 2017 BBTR remitted an advance of $250,000 for license fees to be credited under the terms of the BBTR License and the Company in exchange for a six month promissory note accruing interest at a ratehas reported $100,000 of 10% per annum and secured by all assets and personal property of the Company. Accrued interest on the note was $2,139licensing revenue as of SeptemberJune 30, 2016.
6. COMMITMENTS AND CONTINGENCIES
The Company entered into a sublease agreement with G2 effective July 1, 2015 subject to the terms and conditions of the office lease between G2 and Teachers Insurance and Annuity Association of America for approximately 1,502 square feet of office space at 5430 LBJ Freeway, Dallas, Texas. The sublease agreement expires March 31, 2020. During the ninesix months ended SeptemberJune 30, 2017 and 2016 we incurred $33,742$23,203 and $21,448, respectively, in office rental expense.
The Company is not currently a defendant in any material litigation or any threatened litigation that could have a material effect on the Company'sCompany’s financial statements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We urge you to read the following discussion in conjunction with management'smanagement’s discussion and analysis contained in our Annual Report on Form 10-K for the year ended December 31, 2015,2016, as well as with our condensed financial statements and the notes thereto included elsewhere herein.
Overview
The Company is in the business of developing marketing and distributingmarketing a real time analytical web based software as a service platform to serve(the “Blackbox System”) that serves as a tool for day traders and swing traders on the OTC Markets Group, Inc., NYSE, AMEXvarious securities exchanges and NASDAQ markets. Our proprietary Blackbox System technology is an algorithm driven system (the "Blackbox System") that works in real time, measuring market trends and data while utilizing a multitude of specific criteria, both live and historical. Our Blackbox System platform employs predictive technology enhanced by artificial intelligence to find volatility and unusual market activity that can result in the rapid change in a stock’s price. The Blackbox System was initially designed to monitor and analyzesanalyze over 13,000 stocks on the NASDAQ,OTC Markets Group, Inc. (“OTC”), New York Stock Exchange (“NYSE”), the NYSE AMEXMKT, LLC (formerly the American Stock Exchange), and OTCNASDAQ markets simultaneously as our servers receive live data feeds from thesesuch markets. We have also customized our Blackbox System to analyze data from the Hong Kong Stock Exchange (“HKEX”), Shanghai Stock Exchange (“SSE”) and Shenzhen Stock Exchange (“SZSE”) for license and use primarily in Asia. We consider the Blackbox System technology to be among the most user-friendly of its kind.
The Company launched its Blackbox System web application for domestic use and made it available to subscribers in September 2016. Subscriptions for the use of the Blackbox System web application are sold on a monthly and/or annual subscription basis to individual consumers through our website at http://www.blackboxstocks.com. Aswww.blackboxstocks.com.
On August 9, 2017, we entered into a License Agreement (the “BBTR License”) with EIGH8T TECHNOLOGIES INC. (referred to in the agreementas “BBTR”), a British Virgin Island registered company, for the development, customization and license to use and sublicense a version of September 30, 2016, we sold 230 monthlythe Blackbox System (known as the “BBTR System”) solely for use in connection with data from the HKEX, SSE and 23 annual subscriptions.
Our principal office is located at 5430 LBJ Freeway, Suite 1485, Dallas, Texas 75240 and our telephone number is (972) 726-9203. Our Common Stock is quoted on the OTC Pink tier of the OTC Markets Group, Inc. (the "OTC Pink"“OTC Pink”) under the symbol "BLBX."“BLBX.” Prior to March 9, 2016, our Common Stock was quoted under the symbol "SMQA."“SMQA.” Our corporate website is located at http://www.blackboxstocks.com.
Basis of Presentation of Financial Information
The accompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern, which is dependent upon the Company's ability to establish itself as a profitable business. At SeptemberJune 30, 2016,2017, the Company had an accumulated deficit of $1,083,849,$1,977,114 and for the three and ninesix months ended SeptemberJune 30, 2016,2017, incurred net losses of $159,958$352,472 and $463,338,$544,270, respectively. Management expects that the Company may need to raise additional capital to sustain operations until such time as the Company can achieve profitability. However, there can be no assurance that management will be successful in obtaining additional funding or in attaining profitable operations.
The financial statements do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation.
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Significant Accounting Policies
There have been no changes from the Summary of Significant Accounting Policies described in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 14, 201612, 2017.
.
The Company launched its Blackbox System web application for domestic use and made it available to subscribers in September 2016 and we have not yet attained a level of operationssubscription sales revenue that allowswould allow us to meet our current overhead. We do not contemplate attaining profitable operations until we completeprior to the developmentend of the Blackbox System web application and execute plans to market the Blackbox System. Nevertheless,third quarter of 2017, nor is there can be noany assurance that management will be able to successfully implement such plans and if executed, there can be no assurance thatan operating levels sufficient to sustain profitabilitylevel can ever be achieved. We expect to be dependent upon obtaining additional financingUnless there is a significant change in order to adequately fundcash requirements, the Company has sufficient working capital infrastructure,to fund any operating deficiencies and future development and marketing expenses in order to execute plans for future operations, so that we can achievecosts until the end of 2018.
At June 30, 2017, the Company had a level of revenue adequate to support our cost structure, none of which can be assured. These factors raise substantial doubt about our ability to continue as a going concern and the accompanying financial statements do not include any adjustments related to the recoverability or classification of asset carrying amounts or the amounts and classification of liabilities that may result should we be unable to continue as a going concern.
Results of Operations
Comparison of Three Months Ended SeptemberJune 30, 20162017 and 2015
For the three months ended SeptemberJune 30, 2017 and 2016, the Company hadCompany’s revenue totaled $196,945 and $0, respectively, for which our respective costs of revenues of $19,540 compared to nototaled $133,192 and $0. The increase in revenue and costcosts of operations are the result of $15,633 compared to nonethe Company’s launch of our Blackbox System web application for subscription in September 2016. We also generated license fee revenues from the BBTR System which was made available on a trial basis in May 2017. The majority of the costs of operations are data feed expenses for exchange information totaling approximately $81,686 for the same period in 2015. three months ended June 30, 2017. Other costs of operations included subscriber referral payments of approximately $4,925 and website design and maintenance costs of approximately $46,581.
For the three months ended SeptemberJune 30, 2016,2017, the Company had operating expenses totaling $160,747$415,707 compared to $124,802$167,293 for the same period in 2015,2016, an increase of $35,945.$248,414. This change is primarily a result of an increase in general and administrative expenses of $76,071 due to new expenses relating to payroll, consulting, rent, insurance and marketing, as well as increased accounting, legal and transfer agent expenses. The increased general and administrative expenses were offset byapproximately $84,785 which includes a decrease in softwaresalary and related expenses of approximately $3,430, an increase in other general office expenses of approximately $2,441, increased expenditures for development costs of $41,415, from $76,860marketing materials of approximately $43,809 and increases in travel and entertainment expenses of approximately $40,937. Telecom, internet and related computer expenses also decreased approximately $12,403, and legal and accounting expenses related to $35,445 for the third quarter ended September 30, 2015audits and 2016, respectively.regulatory filings increased approximately $13,431. The Company also recorded a depreciation and amortization expense of $2,777 for the three months ended June 30, 2017 compared to $1,289 for the three months ended SeptemberJune 30, 2016.
Comparison of NineSix Months Ended SeptemberJune 30, 20162017 and 2015
For the ninesix months ended SeptemberJune 30, 2017 and 2016, the Company hadCompany’s revenue totaled $324,558 and $0, respectively, for which our respective costs of revenues of $19,540 compared to nototaled $229,472 and $0. The increase in revenue and costcosts of operations are the result of $15,633 compared to none during the same periodCompany’s launch of our Blackbox System web application for subscription in 2015. September 2016. We also generated license fee revenues from the BBTR System which was made available on a trial basis in May 2017. The majority of the costs of operations are data feed expenses for exchange information totaling approximately $148,713 for the six months ended June 30, 2017. Other costs of operations included subscriber referral payments of approximately $13,385 and website design and maintenance costs of approximately $67,374.
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For the ninesix months ended SeptemberJune 30, 2016,2017, the Company had operating expenses totaling $464,127$638,390 compared to $245,199$304,287 for the same period in 2015,2016, an increase of $218,928.$334,103. This change is primarily a result of an increase in general and administrative expenses of $212,605 due to newapproximately $188,503 which includes an increase in salary and related expenses relating to payroll, consulting, rent, insuranceof approximately $1,914, an increase in office lease expenses of approximately $2,012, increased other general office expense of approximately $3,095, increased expenditures for development of marketing materials of approximately $59,802 and marketing, as well asincreases in travel and entertainment expenses of approximately $59,822. Telecom, internet and related computer expenses also increased accounting,approximately $42,533, and legal and transfer agent expenses. Software development costs alsoaccounting expenses related to audits and regulatory filings increased by $2,457, from $122,307 to $124,764 for the nine month periods ended September 30, 2015 and 2016, respectively.approximately $19,325. The Company also recorded a depreciation and amortization expense of $3,866$4,771 for the ninesix months ended SeptemberJune 30, 2017 compared to $2,578 for the six months ended June 30, 2016.
Off Balance Sheet Arrangements
We do not have any off balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our Company is a "smaller“smaller reporting company"company” as defined by Rule 12b-2 of the Exchange Act, and as such, is not required to provide the information required under this Item.
ITEM 4.CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Gust Kepler, our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of SeptemberJune 30, 2016,2017, pursuant to Exchange Act Rule 13a-15. Such disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company is accumulated and communicated to the appropriate management on a basis that permits timely decisions regarding disclosure. Based upon that evaluation, the Company's principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures as of SeptemberJune 30, 20162017 were not effective to provide reasonable assurance that information required to be disclosed in the Company'sCompany’s periodic filings under the Exchange Act is accumulated and communicated to our management to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial reporting during the quarter endedSeptemberJune 30, 2016 2017that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.
Limitations on the Effectiveness of Controls
Our disclosure controls and procedures provide our principal executive officer and principal financial officer with reasonable assurances that our disclosure controls and procedures will achieve their objectives. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting can or will prevent all human error. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Furthermore, the design of a control system must reflect the fact that there are internal resource constraints, and the benefit of controls must be weighed relative to their corresponding costs.
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Because of the limitations in all control systems, no evaluation of controls can provide complete assurance that all control issues and instances of error, if any, within our company are detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur due to human error or mistake. Additionally, controls, no matter how well designed, could be circumvented by the individual acts of specific persons within the organization. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all potential future conditions.
Management is aware that there is a lack of segregation of duties at the Company due to the fact that the Company only has one director and executive officer dealing with general administrative and financial matters. This constitutes a material weakness in the internal controls. Management has decided that considering the officer/director involved, the control procedures in place, and the outsourcing of certain financial functions, the risks associated with such lack of segregation were low and the potential benefits of adding additional employees to clearly segregate duties did not justify the expenses associated with such increases. Management periodically reevaluates this situation. In light of the Company'sCompany’s current cash flow situation, the Company does not intend to increase staffing to mitigate the current lack of segregation of duties within the general administrative and financial functions.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
Our Company is a "smaller“smaller reporting company"company” as defined by Rule 12b-2 of the Exchange Act, and as such, is not required to provide the information required under this Item.
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEEDS
None.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
The following exhibits are filed with this Quarterly Report on Form 10-Q or are incorporated by reference as described below.
Exhibit | Description |
10.1 | License Agreement dated August 9, 2017 between Blackboxstocks Inc. and EIGH8T TECHNOLOGIES INC.* |
31.1 | Certification of Principal Executive Officer pursuant to Rule 13a-14a/Rule 14d-14(a)* |
31.2 | Certification of Principal Financial Officer pursuant to Rule 13a-14a/Rule 14d-14(a)* |
32.1 | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350** |
32.2 | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350** |
101.1 | Interactive data files pursuant to Rule 405 of Regulation S-T* |
*
Filed herewith.** Furnished herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BLACKBOXSTOCKS INC. | ||
By: | /s/ Gust Kepler | |
Gust Kepler | ||
President, Chief Executive Officer and Secretary and Accounting Officer) |
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Exhibit | Description |
10.1 | License Agreement dated August 9, 2017 between Blackboxstocks Inc. and EIGH8T TECHNOLOGIES INC.* |
31.1 | Certification of Principal Executive Officer pursuant to Rule 13a-14a/Rule 14d-14(a)* |
31.2 | Certification of Principal Financial Officer pursuant to Rule 13a-14a/Rule 14d-14(a)* |
32.1 | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350** |
32.2 | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350** |
101.1 | Interactive data files pursuant to Rule 405 of Regulation S-T* |
*
Filed herewith.** Furnished herewith
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