UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended | March 31, |
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from | to |
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Commission File No. |
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BLACKBOXSTOCKS INC. |
(Exact name of registrant as specified in its charter) |
Nevada | 45-3598066 |
(State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.) |
5430 LBJ Freeway, Suite 1485, Dallas, Texas | 75240 |
(Address of principal executive offices) | (Zip Code) |
(972) 726-9203 | |
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(Former name, former address and former fiscal year if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ | |
Non-accelerated filer ☒ | Smaller reporting company ☒ | |
Emerging growth company ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares outstanding of the registrant’s Common Stock as of May 12, 202114, 2022 was 8,579,877.13,185,659.
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Item 1. | 2 | |
Balance Sheets as of March 31, | 2 | |
Statements of Operations for the Three Months Ended March 31, 2022 and 2021 | 3 | |
4 | ||
Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 | 5 | |
Notes to Financial Statements for the Three Months Ended March 31, | 6 | |
Item 2. |
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Item 3. |
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Item 4. |
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Item 1A. |
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Item 6. |
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Throughout this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” “Blackboxstocks,” or the “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 (the “Report”), we make forward-looking statements that involve substantial uncertainties and risks. When used in this Report, the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “intend,” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) regarding events, conditions and financial trends which may affect our future plans of operations, business strategy, operating results and financial position. Such statements are not guarantees of future performance and are subject to risks and uncertainties described herein and actual results may differ materially from those included within the forward-looking statements. Additional factors are described in our other public reports and filings with the Securities and Exchange Commission (the “SEC”). Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. We undertake no obligation to publicly release the result of any revision of these forward-looking statements to reflect events or circumstances after the date they are made or to reflect the occurrence of unanticipated events.
This Report contains certain estimates and plans related to us and the industry in which we operate, which assume certain events, trends and activities will occur and the projected information based on those assumptions. We do not know that all of our assumptions are accurate. If our assumptions are wrong about any events, trends and activities, then our estimates for future growth for our business may also be wrong. There can be no assurance that any of our estimates as to our business growth will be achieved.
The following discussion and analysis should be read in conjunction with our financial statements and the notes associated with them contained elsewhere in this Report. This discussion should not be construed to imply that the results discussed in this Report will necessarily continue into the future or that any conclusion reached in this Report will necessarily be indicative of actual operating results in the future. The discussion represents only the best assessment of management.
PART I - FINANCIAL INFORMATION
Blackboxstocks Inc.
As of March 31, 20212022 (Unaudited) and December 31, 20202021
March 31, | December 31, | |||||||
2021 | 2020 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash | $ | 1,114,468 | $ | 972,825 | ||||
Accounts receivable, net of allowance for doubtful accounts of $68,589 at March 31, 2021 and December 31, 2020, respectively | 10,996 | 17,990 | ||||||
Inventory | 18,016 | 17,661 | ||||||
Total current assets | 1,143,480 | 1,008,476 | ||||||
Property and equipment: | ||||||||
Office, computer and related equipment, net of depreciation of $66,285 and $61,961 at March 31, 2021 and December 31, 2020, respectively | 32,592 | 5,682 | ||||||
Right of use lease, net of amortization of $107,987 and $97,725 at March 31, 2021 and December 31, 2020, respectively | 285,184 | 62,348 | ||||||
Total property and equipment | 317,776 | 68,030 | ||||||
Long term assets: | ||||||||
Prepaid expenses | 29,043 | 44,643 | ||||||
Prepaid expenses, related party (Note 5) | 36,700 | 36,700 | ||||||
Total long term assets | 65,743 | 81,343 | ||||||
Total Assets | $ | 1,526,999 | $ | 1,157,849 | ||||
Liabilities and Stockholders' Deficit | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 364,544 | $ | 352,545 | ||||
Accrued interest | 8,037 | 10,425 | ||||||
Unearned subscriptions | 1,094,993 | 1,016,157 | ||||||
Lease liability right of use, current | 59,918 | 40,473 | ||||||
Other liabilities | - | 180,000 | ||||||
Senior secured note payable, current | 10,000 | 10,000 | ||||||
Convertible notes payable, net of discount of $102,727 and $194,267 at March 31, 2021 and December 31, 2020, respectively (Note 6) | 152,481 | 257,150 | ||||||
Notes payable, at | ||||||||
Notes payable (Note 6) | 130,773 | 131,605 | ||||||
Notes payable, related party (Note 6) | 859 | 859 | ||||||
Total current liabilities | 1,821,605 | 1,999,214 | ||||||
Long term liabilities: | ||||||||
Senior secured note payable, long term, net of debt issuance costs of $86,538 and $99,852 at March 31, 2021 and December 31, 2020, respectively | 903,462 | 890,148 | ||||||
Lease liability right of use, long term | 229,125 | 26,241 | ||||||
Total long term liabilities | 1,132,587 | 916,389 | ||||||
Commitments and contingencies (Note 7) | ||||||||
Stockholders' Deficit: | ||||||||
Preferred stock, $0.001 par value, 5,000,000 shares authorized; no shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively | - | - | ||||||
Series A Convertible Preferred Stock, $0.001 par value, 5,000,000 shares authorized; 5,000,000 issued and outstanding at March 31, 2021 and December 31, 2020, respectively | 5,000 | 5,000 | ||||||
Common stock, $0.001 par value, 100,000,000 shares authorized: 8,579,877 and 8,410,386 issued and outstanding at March 31, 2021 and December 31, 2020, respectively | 8,580 | 8,410 | ||||||
Common stock, subscribed | - | 12,500 | ||||||
Additional paid in capital | 5,731,490 | 5,401,154 | ||||||
Accumulated deficit | (7,172,263 | ) | (7,184,818 | ) | ||||
Total Stockholders' Deficit | (1,427,193 | ) | (1,757,754 | ) | ||||
Total Liabilities and Stockholders' Deficit | $ | 1,526,999 | $ | 1,157,849 |
March 31, 2022 | December 31, 2021 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash | $ | 651,518 | $ | 2,426,497 | |||
Accounts receivable, net of allowance for doubtful accounts of $68,589 at March 31, 2022 and December 31, 2021, respectively | 11,074 | 18,585 | |||||
Inventory | 14,062 | 13,567 | |||||
Marketable securities | 7,922,244 | 8,015,882 | |||||
Prepaid expenses and other current assets | 95,591 | 227,440 | |||||
Total current assets | 8,694,489 | 10,701,971 | |||||
Property and equipment: | |||||||
Office, computer and related equipment, net of depreciation of $86,957 and $81,682 at March 31, 2022 and December 31, 2021, respectively | 44,598 | 49,873 | |||||
Right of use lease, net of amortization of $166,058 and $150,829 at March 31, 2022 and December 31, 2021, respectively | 383,041 | 398,270 | |||||
Total property and equipment | 427,639 | 448,143 | |||||
Total assets | $ | 9,122,128 | $ | 11,150,114 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 700,987 | $ | 585,615 | |||
Accrued interest | 6,544 | 6,544 | |||||
Unearned subscriptions | 1,177,701 | 1,302,036 | |||||
Lease liability right of use, current | 66,494 | 62,630 | |||||
Senior secured note payable, net of debt issuance costs of $33,283 and $46,597 at March 31, 2022 and December 31, 2021, respectively (Note 7) | 926,717 | 943,403 | |||||
Note payable, current portion (Note 7) | 28,448 | 28,448 | |||||
Total current liabilities | 2,906,891 | 2,928,676 | |||||
Long term liabilities: | |||||||
Note payable, net of current portion (Note 7) | 61,262 | 68,347 | |||||
Lease liability right of use, long term | 316,547 | 335,641 | |||||
Total long term liabilities | 377,809 | 403,988 | |||||
Commitments and contingencies (Note 9) | |||||||
Stockholders' equity | |||||||
Preferred stock, $0.001 par value, 5,000,000 shares authorized; no shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively | 0 | 0 | |||||
Series A Convertible Preferred Stock, $0.001 par value, 5,000,000 shares authorized; 3,269,998 issued and outstanding at March 31, 2022 and December 31, 2021, respectively | 3,270 | 3,270 | |||||
Common stock, $0.001 par value, 100,000,000 shares authorized: 13,185,659 and 13,099,272 issued and outstanding at March 31, 2022 and December 31, 2021, respectively | 13,186 | 13,099 | |||||
Common stock payable | 22,500 | 15,000 | |||||
Treasury stock | (859,612 | ) | 0 | ||||
Additional paid in capital | 17,701,081 | 17,586,635 | |||||
Accumulated deficit | (11,042,997 | ) | (9,800,554 | ) | |||
Total stockholders' equity | 5,837,428 | 7,817,450 | |||||
Total liabilities and stockholders' equity | $ | 9,122,128 | $ | 11,150,114 |
The accompanying notes are an integral part of these financial statements
Blackboxstocks Inc.
Statements of Operations
For the Three Months Ended March 31, 2021 and 2020
(Unaudited)
March 31, | ||||||||
2021 | 2020 | |||||||
Revenue: | ||||||||
Subscriptions | $ | 1,485,798 | $ | 411,801 | ||||
Other revenues | 3,870 | 3,450 | ||||||
Total revenues | 1,489,668 | 415,251 | ||||||
Cost of revenues | 395,775 | 170,352 | ||||||
Gross margin | 1,093,893 | 244,899 | ||||||
Operating expenses: | ||||||||
Software development costs | 130,438 | 34,331 | ||||||
Selling, general and administrative | 606,687 | 349,446 | ||||||
Advertising and marketing | 207,312 | 88,344 | ||||||
Depreciation and amortization | 4,324 | 3,491 | ||||||
Total operating expenses | 948,761 | 475,612 | ||||||
Operating income (loss) | 145,132 | (230,713 | ) | |||||
Interest expense | 41,038 | 33,495 | ||||||
Convertible note financing | - | 217,776 | ||||||
Gain on derivative liability | - | (601,170 | ) | |||||
Default expense | - | 24,750 | ||||||
Amortization of debt discount | 91,539 | 51,607 | ||||||
Income before income taxes | 12,555 | 42,829 | ||||||
Income taxes | - | - | ||||||
Net income | $ | 12,555 | $ | 42,829 | ||||
Weighted average number of common | ||||||||
shares outstanding - basic | 8,513,694 | 7,942,846 | ||||||
shares outstanding - fully diluted | 14,134,194 | 13,555,627 | ||||||
Net loss per share - basic | $ | 0.00 | $ | 0.01 | ||||
Net income per share - fully diluted | $ | 0.00 | $ | 0.00 |
Statement of Stockholders’ Deficit
For the Three Months Ended March 31, 2021 (Unaudited)2022 and the Year Ended December 31, 20202021
(Unaudited)
Common | Additional | |||||||||||||||||||||||||||||||||||||||
Series A Preferred Stock | Preferred Stock | Common Stock | Stock | Paid-in | Accumulated | |||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Subscribed | Capital | Deficit | Total | |||||||||||||||||||||||||||||||
Balance at December 31, 2019 | 5,000,000 | $ | 5,000 | - | - | 7,908,231 | $ | 7,908 | $ | 35,060 | $ | 3,443,640 | $ | (6,829,907 | ) | $ | (3,338,299 | ) | ||||||||||||||||||||||
Issuance of shares in settlement of expenses | - | - | - | - | 50,005 | 50 | - | 99,950 | - | 100,000 | ||||||||||||||||||||||||||||||
Net income | - | - | - | - | - | - | - | - | 42,829 | 42,829 | ||||||||||||||||||||||||||||||
Balance at March 31, 2020 | 5,000,000 | $ | 5,000 | - | - | 7,958,236 | $ | 7,958 | $ | 35,060 | $ | 3,543,590 | $ | (6,787,078 | ) | $ | (3,195,470 | ) | ||||||||||||||||||||||
Balance at December 31, 2020 | 5,000,000 | $ | 5,000 | - | - | 8,410,386 | $ | 8,410 | $ | 12,500 | $ | 5,401,154 | $ | (7,184,818 | ) | $ | (1,757,754 | ) | ||||||||||||||||||||||
Issuance of shares for cash | - | - | - | - | 70,772 | 71 | - | 137,935 | - | 138,006 | ||||||||||||||||||||||||||||||
Issuance of subscribed shares | - | - | - | - | 6,411 | 6 | (12,500 | ) | 12,494 | - | - | |||||||||||||||||||||||||||||
Issuance of shares in settlement of liabilities | - | - | - | - | 92,308 | 93 | - | 179,907 | - | 180,000 | ||||||||||||||||||||||||||||||
Net income | - | - | - | - | - | - | - | - | 12,555 | 12,555 | ||||||||||||||||||||||||||||||
Balance at March 31, 2021 | 5,000,000 | $ | 5,000 | - | - | 8,579,877 | $ | 8,580 | $ | - | $ | 5,731,490 | $ | (7,172,263 | ) | $ | (1,427,193 | ) |
For the three months ended March 31, | ||||||||
2022 | 2021 | |||||||
Revenue: | ||||||||
Subscriptions | $ | 1,270,930 | $ | 1,485,798 | ||||
Other revenues | 1,556 | 3,870 | ||||||
Total revenues | 1,272,486 | 1,489,668 | ||||||
Cost of revenues | 579,962 | 395,775 | ||||||
Gross margin | 692,524 | 1,093,893 | ||||||
Operating expenses: | ||||||||
Software development costs | 184,884 | 130,438 | ||||||
Selling, general and administrative | 1,224,723 | 606,687 | ||||||
Advertising and marketing | 298,796 | 207,312 | ||||||
Depreciation and amortization | 5,275 | 4,324 | ||||||
Total operating expenses | 1,713,678 | 948,761 | ||||||
Operating income (loss) | (1,021,154 | ) | 145,132 | |||||
Otherexpense: | ||||||||
Interest expense | 29,243 | 41,038 | ||||||
Amortization of debt discount and issuance costs | 13,314 | 91,539 | ||||||
Investment loss | 178,732 | 0 | ||||||
Total other expense | 221,289 | 132,577 | ||||||
Income (loss) before income taxes | (1,242,443 | ) | 12,555 | |||||
Income Taxes | 0 | 0 | ||||||
Net income (loss) | (1,242,443 | ) | 12,555 | |||||
Weighted average number of common shares outstanding - basic | 13,181,820 | 8,513,694 | ||||||
Weighted average number of common shares outstanding - diluted | 13,181,820 | 13,780,566 | ||||||
Net income (loss) per share - basic | $ | (0.09 | ) | $ | 0.00 | |||
Net income (loss) per share - diluted | $ | (0.09 | ) | $ | 0.00 |
The accompanying notes are an integral part of these financial statements.
Blackboxstocks Inc.
Statement of Stockholders’ Equity (Deficit)
For the three months ended March 31, 2022 and 2021
(Unaudited)
Preferred Stock | Series A | Common Stock | Common | Common | Additional | |||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Stock Subscribed | Stock Payable | Treasury Stock | Paid in Capital | Accumulated Deficit | Total | |||||||||||||||||||||||||||||||||||||
Balances, December 31, 2020 | - | $ | - | 5,000,000 | $ | 5,000 | 8,410,386 | $ | 8,410 | $ | 12,500 | $ | - | $ | 0 | $ | 5,401,154 | $ | (7,184,818 | ) | $ | (1,757,754 | ) | |||||||||||||||||||||||||
Issuance of shares for cash, net of fees | - | - | - | - | 70,772 | 71 | - | - | 0 | 137,935 | 0 | 138,006 | ||||||||||||||||||||||||||||||||||||
Issuance of subscribed shares | - | - | - | - | 6,411 | 6 | (12,500 | ) | - | 0 | 12,494 | - | - | |||||||||||||||||||||||||||||||||||
Issuance of shares in settlement of liabilities | - | - | - | - | 92,308 | 93 | - | - | 0 | 179,907 | 0 | 180,000 | ||||||||||||||||||||||||||||||||||||
Net income | - | 0 | - | 0 | - | 0 | 0 | 0 | 0 | 0 | 12,555 | 12,555 | ||||||||||||||||||||||||||||||||||||
Balances, March 31, 2021 | - | $ | - | 5,000,000 | $ | 5,000 | 8,579,877 | $ | 8,580 | $ | 0 | $ | - | $ | 0 | $ | 5,731,490 | $ | (7,172,263 | ) | $ | (1,427,193 | ) | |||||||||||||||||||||||||
Balances, December 31, 2021 | - | $ | - | 3,269,998 | $ | 3,270 | 13,099,272 | $ | 13,099 | $ | - | $ | 15,000 | $ | 0 | $ | 17,586,635 | $ | (9,800,554 | ) | $ | 7,817,450 | ||||||||||||||||||||||||||
Purchase of treasury stock | - | 0 | - | 0 | - | 0 | 0 | 0 | (859,612 | ) | 0 | 0 | (859,612 | ) | ||||||||||||||||||||||||||||||||||
Cashless exercise of warrants | 0 | 0 | 0 | 0 | 86,387 | 87 | 0 | 0 | 0 | (87 | ) | 0 | 0 | |||||||||||||||||||||||||||||||||||
Issuance of warrants for compensation | - | - | - | - | - | - | - | - | 0 | 31,880 | 0 | 31,880 | ||||||||||||||||||||||||||||||||||||
Issuance of options for compensation | - | - | - | - | - | - | - | - | 0 | 82,653 | 0 | 82,653 | ||||||||||||||||||||||||||||||||||||
Common stock payable for compensation | - | - | - | - | - | - | - | 7,500 | - | - | 0 | 7,500 | ||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | 0 | (1,242,443 | ) | (1,242,443 | ) | ||||||||||||||||||||||||||||||||||
Balances, March 31, 2022 | 0 | $ | 0 | 3,269,998 | $ | 3,270 | 13,185,659 | $ | 13,186 | $ | 0 | $ | 22,500 | $ | (859,612 | ) | $ | 17,701,081 | $ | (11,042,997 | ) | $ | 5,837,428 |
The accompanying notes are an integral part of these financial statements.
Blackboxstocks Inc.
Statements of Cash Flows
For the Three Months Ended March 31, 20212022 and 20202021
(Unaudited)
March 31, | ||||||||
2021 | 2020 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 12,555 | $ | 42,829 | ||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization expense | 4,324 | 3,491 | ||||||
Amortization of note discount | 91,539 | 51,607 | ||||||
Amortization of debt issuance costs | 13,314 | - | ||||||
Shares issued in settlement of financing costs | - | 100,000 | ||||||
Expenses paid by lender | - | 6,133 | ||||||
Convertible note financing | - | 217,776 | ||||||
Change in fair value of derivative liability | - | (601,170 | ) | |||||
Convertible note default expense | - | 24,750 | ||||||
Right of use lease expense | (506 | ) | - | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 6,994 | 1,866 | ||||||
Inventory | (355 | ) | - | |||||
Prepaid expenses | 15,600 | - | ||||||
Accounts payable | 11,999 | 7,284 | ||||||
Accrued interest | (2,388 | ) | 28,434 | |||||
Accrued interest, related party | - | 3,640 | ||||||
Unearned subscriptions | 78,836 | 73,084 | ||||||
Net cash provided by (used in) operating activities | 231,912 | (40,276 | ) | |||||
Cash flows from investing activities | ||||||||
Purchases of property and equipment | (31,234 | ) | - | |||||
Net cash used in investing activities | (31,234 | ) | - | |||||
Cash flows from financing activities | ||||||||
Common stock issued for cash | 150,506 | - | ||||||
Common stock subscribed | (12,500 | ) | - | |||||
Proceeds from issuance of notes payable | - | 127,100 | ||||||
Proceeds from issuance of convertible notes payable | - | 100,000 | ||||||
Principal payments on notes payable | (832 | ) | (110,980 | ) | ||||
Principal payments on convertible notes payable | (196,209 | ) | - | |||||
Principal payments on notes payable, related parties | - | (27,046 | ) | |||||
Cash advances from related parties | - | 5,000 | ||||||
Net cash used in financing activities | (59,035 | ) | 94,074 | |||||
Net increase (decrease) in cash | 141,643 | 53,798 | ||||||
Cash - beginning of year | 972,825 | 21,172 | ||||||
Cash - end of year | $ | 1,114,468 | $ | 74,970 | ||||
Supplemental disclosures | ||||||||
Interest paid | $ | 43,425 | $ | - | ||||
Income taxes paid | $ | - | $ | - | ||||
Non-cash investing and financing activities: | ||||||||
Repayment of note in exchange for note payable | $ | - | $ | (39,370 | ) | |||
Common stock issued in settlement of accrued liabilities | $ | 180,000 | $ | - | ||||
Discount on notes payable | $ | - | $ | 69,500 | ||||
Repayment of note payable, related party in exchange for advances | $ | - | $ | 2,954 |
March 31, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | (1,242,443 | ) | $ | 12,555 | |||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization expense | 5,275 | 4,324 | ||||||
Amortization of note discount and issuance costs | 13,314 | 104,853 | ||||||
Stock based compensation | 122,033 | 0 | ||||||
Right of use lease | 0 | (506 | ) | |||||
Investment loss | 178,732 | 0 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 7,511 | 6,994 | ||||||
Inventory | (495 | ) | (355 | ) | ||||
Prepaid expenses and other current assets | 131,849 | 15,600 | ||||||
Accounts payable | 115,371 | 11,999 | ||||||
Accrued interest | 0 | (2,388 | ) | |||||
Unearned subscriptions | (124,335 | ) | 78,836 | |||||
Net cash provided by (used in) operating activities | (793,188 | ) | 231,912 | |||||
Cash flows from investing activities: | ||||||||
Purchase of property and equipment | 0 | (31,234 | ) | |||||
Purchase of marketable securities | (9,855,275 | ) | 0 | |||||
Proceeds from sales of marketable securities | 9,770,181 | 0 | ||||||
Net cash used in investing activities | (85,094 | ) | (31,234 | ) | ||||
Cash flows from financing activities: | ||||||||
Common stock and warrants issued for cash | 0 | 150,506 | ||||||
Common stock subscribed | 0 | (12,500 | ) | |||||
Principal payments on senior secured note payable | (30,000 | ) | 0 | |||||
Principal payments on notes payable | (7,085 | ) | (832 | ) | ||||
Principal payments on convertible notes payable | 0 | (196,209 | ) | |||||
Purchase of treasury stock | (859,612 | ) | 0 | |||||
Net cash used in financing activities | (896,697 | ) | (59,035 | ) | ||||
Net increase (decrease) in cash | $ | (1,774,979 | ) | $ | 141,643 | |||
Cash - beginning of year | 2,426,497 | 972,825 | ||||||
Cash - end of year | $ | 651,518 | $ | 1,114,468 | ||||
Supplemental disclosures: | ||||||||
Interest paid | $ | 29,243 | $ | 43,425 | ||||
Income taxes paid | $ | 0 | $ | 0 | ||||
Non-cash investing and financing activities: | ||||||||
Common stock issued in settlement of accrued liabilities | $ | 0 | $ | 180,000 |
The accompanying notes are an integral part of these financial statements.
Blackboxstocks Inc.
Notes to Financial Statements
For the Three Months Ended March 31, 20212022 and 20202021
1. Organization
Blackboxstocks Inc. (the “Company”) 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 for the Northern District of Texas for reorganization under Chapter 11 of the United States Bankruptcy Code.
The Company changed its name to Blackboxstocks, Inc. and began operating as a financial technology and social media platform in March 2016. The platform offers real-time proprietary analytics and news for stock and options traders of all levels. The Company believes its web-based software employs “predictive technology” enhanced by artificial intelligence to find volatility and unusual market activity that may result in the rapid change in the price of a stock or option. The software continuously scans the NASDAQ, New York Stock Exchange, CBOE, and other options markets, analyzing over 8,00010,000 stocks and up to 1,000,0001,500,000 options contracts multiple times per second. The Company also provides users with a fully interactive social media platform that is integrated into our dashboard, enabling users to exchange information and ideas quickly and efficiently through a common network. Recently, the Company also introduced a live audio/video feature that allows members to broadcast on their own channels to share trade strategies and market insight within the community. The platform was initially made available to subscribers in September 2016. Subscriptions for the use of the platform are sold on a monthly and/or annual subscription basis to individual consumers through the Company website at http://www.blackboxstocks.com.
On November 10, 2021, the Company issued 2,400,000 shares of Common Stock in its initial public offering and concurrently was listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “BLBX”.
2. Summary of Significant Accounting Policies
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 of America (“GAAP”) for interim financial information and the instructions to Rule 10-0110-01 of Regulation S-XS-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these unaudited consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the results of the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2021. 2022. These financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K10-K for the year ended December 31, 2020.2021.
The accompanying financial statements have been prepared in assumption of the continuation of the Company as a going concern, which is dependent upon the Company's ability to obtain sufficient financing or establish itself as a profitable business. At March 31, 2021, the Company had an accumulated deficit of $7,172,263, and for the years ended December 31, 2020 and 2019 the Company incurred net losses of $354,911 and $2,983,438, respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. As discussed in Note 6, the Company executed a Loan Agreement with certain lenders (the “Lenders”) and FVP Servicing LLC, (“FVP”), as agent for the Lenders in connection with the issuance of a Note in the amount of $1,000,000 bearing interest at 12% per annum with an initial maturity of November 12, 2022. Simultaneously, with the execution of the Loan Agreement, the Company repaid an existing secured note payable in the amount of $100,000 along with accrued interest, and certain outstanding trade payables in the amount of $133,880. In addition, the Company granted the Lender a security interest in substantially all of its assets. As a result of this financing and the cash flows from operations, the Company had a cash balance of $1,114,468 at March 31, 2021. Management believes that this will be sufficient to fund its operations and service its debt for the next twelve months. In addition, management may continue to raise additional debt or equity capital in order to improve liquidity or finance more aggressive growth or development. There can be no assurance that the Company will be able to raise additional capital or on what terms.
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.
Use of Estimates -Estimates. The Company’s financial statement preparation requires that management make estimates and assumptions which affect the reporting of assets and liabilities and the related disclosure of contingent assets and liabilities in order to report these financial statements in conformity with GAAP. Actual results could differ from those estimates.
Cash -
Cash. Cash includes all highly liquid investments that are readily convertible to known amounts of cash and have original maturities at the date of purchase of three months or less.
Investments in Marketable Securities. The Company invests in marketable securities which primarily consist of investments in mutual funds that hold commercial and government debt securities. These investments are recorded at fair value based on quoted prices at the end of the Company’s reporting period. Any realized or unrealized gains or losses are recognized in the accompanying statements of operations.
Recently Issued Accounting Pronouncements -Pronouncements. During the three months ended March 31, 2021 2022, there were severalno new accounting pronouncements issued by the FASB. Each of the other pronouncements, as applicable, has been or will be adopted by the Company. Management does not believethat management believes the adoption of any of these accounting pronouncements has had orwhich will have a material impact on the Company’s financial statements.
Earnings or (Loss) Per Share -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. 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 for period of loss.
The Company had total potential additional dilutive securities outstanding at March 31, 2022, as follows:
March 31, 2022 | ||||
Series A Convertible Preferred Shares | 3,269,998 | |||
Conversion rate | 0.2 | |||
Common shares after conversion | 654,000 | |||
Option shares | 652,500 | |||
Warrant shares | 438,336 |
Revenue Recognition- Revenue isRecognition. We operate under a software as a service (SaaS) model whereby we sell monthly and annual subscriptions allowing subscribers access to our platform. We recognize revenue over the subscription period (either monthly or annual) and record cash received but not yet earned as deferred revenue on our balance sheet. Additionally, the Company receives revenues from commissions and the sale of promotional products which are presented as other revenues on the accompanying statements of operations. Commission revenues are recognized as they are earned and revenues from the sale of subscriptions forpromotional products are recognized upon shipment.
3. Marketable Securities
The Company determines the fair values of its financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the Blackbox System web application, on a monthlyuse of unobservable inputs when measuring fair value. The following three levels of inputs may be used to measure fair value:
Level 1 inputs utilize unadjusted quoted prices in active markets for identical assets or annual basis. Revenue generally is recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities. The performance obligation byliabilities that the Company is in exchange forhas the monthly subscription fee, the subscriber is allowed accessability to the Blackbox System on the website for the calendar month. Revenue related to annual subscriptions is recognized each month with unearned subscriptions reflected as a current liability.access;
Reclassification - Affiliate referral expenses totaling $ 37,496Level 2 inputs utilize other-than-quoted prices that are observable, either directly or indirectly and include quoted prices for similar assets and liabilities in active markets, and inputs such as interest rates and yield curves that are observable at commonly quoted intervals; and
Level 3 inputs are unobservable and are typically based on our own assumptions, including situations where there is little, if any, market activity.
The Company’s marketable securities are highly liquid and are quoted on major exchanges and are therefore classified as Level 1 securities. The following table summarizes the Company’s assets that were measured and recognized at fair value as of March 31, 2020 have been reclassed from cost2022:
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Balance at December 31, 2021 | $ | 8,015,882 | $ | - | $ | - | $ | 8,015,882 | ||||||||
Additions | 0 | - | - | 0 | ||||||||||||
Change in fair value | (178,732 | ) | - | - | (178,732 | ) | ||||||||||
Balance at March 31, 2022 | $ | 7,922,244 | $ | - | $ | - | $ | 7,922,244 |
3.4.Stockholders’ DeficitEquity (Deficit)
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 A Convertible Preferred Stock” at $0.001 par value and 100,000,000 authorized shares of common stock at $0.001 par value (“Common Stock”).
Shares of Series A Convertible Preferred Stock do not accumulate dividends, have no liquidation preferences and are convertible into shares of(“Series A Stock”) rank pari passu with the Company’s Common Stock on a one-for-one basis.with respect to dividend and liquidation rights. Additionally, each share entitles the holder to 100 votes votes. During 2021, 1,730,002 previously issued and with respect to dividend and liquidation rights,outstanding shares of the shares rank pari passu with the Company’sSeries A Stock were converted into Common Stock. All currently issued and outstanding shares of the Series A Stock are held by Gust C. Kepler, Director,the Company’s Chairman and Chief Executive Officer, President and Chief Financial Officer (“Mr. Kepler”). The Company and Mr. Kepler entered into Conversion Rights Agreement dated effective as of October 14, 2021, limiting the rights of the holder(s) of our outstanding shares of Series A Stock to convert such shares into Common Stock on a one-for one basis as provided for in the Certificate of Designation of the Series A Stock (the “Designation Conversion Rights”). Pursuant to the terms of the Conversion Rights Agreement, the Designation Conversion Rights are limited and exercisable based upon the Company reaching the following market capitalization thresholds, measured on the last day of each calendar quarter:
● | If the Company’s Market Capitalization is less than $150,000,000, the outstanding Series A Stock will be convertible into Common Stock on a 5-for-1 share basis; |
● | If the Company’s Market Capitalization is equal to or greater than $150,000,000 but less than $200,000,000, the outstanding Series A Stock will be convertible into Common Stock on a 3.3-for-1 share basis; |
● | If the Company’s Market Capitalization is equal to or greater than $200,000,000 but less than $250,000,000, the outstanding Series A Stock will be convertible into Common Stock on a 2.5-for-1 share basis; |
● | If the Company’s Market Capitalization is equal to or greater than $250,000,000 but less than $350,000,000 the outstanding Series A Stock will be convertible into Common Stock on a 1.75-for-1 share basis; |
● | If the Company’s Market Capitalization is equal to or greater than $350,000,000 the outstanding Series A Stock will thereafter convertible into Common Stock pursuant to the Designation Conversion Rights (on a 1-for-1 share basis). |
The Agreement terminates when the last share of Series A Stock is either converted or the largest Market Capitalization Threshold is met.
During the quarter ended March 31, 2021 the Company exchanged a liabilityOn January 4, 2022, 86,387 shares of $180,000common stock were issued for the purchasecashless exercise of a Simple Agreement for Future Tokens into 92,308 shares of Common Stock at $1.95 per share.120,000 warrants (Note 5).
During On January 7, 2022, the quarter ended Company’s Board of Directors authorized a stock repurchase plan for up to $2,500,000 of the Company’s common stock. The program will terminate on December 31, 2022 or when the $2,500,000 authorized has been fully utilized. As of March 31, 2021 28, 2022, the Company sold 70,772has repurchased 436,600 shares for an aggregate purchase price of Common Stock to third parties for $138,006 and issued 6,411 shares of Common Stock previously subscribed for $12,500.$859,612.
4.5. Warrants to Purchase Common Stock
Costs attributable toThe following table presents the issuanceCompany’s warrants as of warrants to purchase common stock are measured at fair value at the date of issuance and offset with a corresponding increase in ‘Additional Paid in Capital’ at the time of issuance. The fair value cost is computed utilizing the Black-Scholes model and assuming volatility based on U.S. Treasury yield rates for a similar period. The cost of these warrants was not recognized in the financial statements because they were granted in connection with raising capital for the Company. When the options or warrants are exercised, the receipt of consideration will be reported as an increase in stockholders’ equity.March 31, 2022:
Concurrently with the execution of certain securities purchase agreements, the Company issued warrants to purchase Common Stock. Each warrant is exercisable for a period of five years from the date of the securities purchase agreement. The fair value cost at the date of issuance of these warrants was $639,194.
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Life (in years) | ||||||||||
Warrants as of December 31, 2021 | 558,336 | $ | 3.28 | 5.09 | ||||||||
Issued | 0 | $ | 0 | - | ||||||||
Exercised | (120,000 | ) | $ | 1.00 | 3.28 | |||||||
Warrants as of March 31, 2022 | 438,336 | $ | 4.18 | 5.28 |
In conjunction with the issuance of convertible notes payable as described in Note 6, a warrant for the purchase of up to 115,385 shares of common Stock exercisable for a one-year period was issued at an exercise price of $0.01 per share and another warrant for the purchase of up to 360,000 shares of Common Stock exercisable for a five-year period was issued at an exercise price of $1.00 per share. During the year ended DecemberAt March 31, 2020, the 2022, warrants for the purchase of 115,385357,783 shares of Common Stock were exercised at $0.01vested and as of March 31, 2021, there are warrants for the purchase of up80,553 shares remained unvested. The Company expects to 479,554incur expenses for the unvested warrants totaling $308,176 as they vest.
6. Incentive Stock Plan
On August 4, 2021, our Board of Directors created and our stockholders approved the 2021 Blackboxstocks, Inc. Incentive Stock Plan (the “2021 Plan”) which became effective August 31, 2021. We have reserved 750,000 of our outstanding shares of Common Stock outstanding.our common stock for issuance under the 2021 Plan. The 2021 Plan allows the Company, under the direction of the Board of Directors or a committee thereof, to make grants of stock options, restricted and unrestricted stock and other stock-based awards to employees, including our executive officers, consultants and directors.
In addition, 6,048 shares of restricted common stock were granted on September 11, 2021 with 25% vesting at issuance and the remaining shares vesting quarterly over nine months. As of March 31, 2022, 4,536 of the restricted common stock shares have vested and are included in common stock payable.
The following table presents the Company’s options as of March 31, 2022:
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Life (in years) | ||||||||||
Options as of December 31, 2021 | 675,833 | $ | 3.07 | 9.69 | ||||||||
Issued | 0 | $ | 0 | - | ||||||||
Forfeited | (23,333 | ) | $ | 2.99 | 9.60 | |||||||
Exercised | - | $ | - | - | ||||||||
Options as of March 31, 2022 | 652,500 | $ | 3.07 | 9.45 |
At March 31, 2022, options to purchase 235,003 shares were vested and options to purchase 417,497 shares remained unvested. The Company expects to incur expenses for the unvested options totaling $631,614 as they vest.
Number of Shares | Exercise Price | Weighted Average Remaining Life (in year) | |||||||||||
Warrants as of December 31, 2019 | 84,295 | $1.95 | 4.53 | ||||||||||
Issued during 2020 | - | $0.01 | - | $1.95 | |||||||||
Exercise during 2020 | (115,385 | ) | $0.01 | ||||||||||
Warrants as of December 31, 2021 | 479,554 | $0.97 | |||||||||||
Warrants as of March 31, 2021 | 479,554 | $0.97 | 3.86 |
5.7.Related Party Transactions
During the year ended December 31, 2019 the Company advanced $1,500 to its VP/Director of Operations and the balance remains outstanding, is unsecured and bears no interest.
G2 International, Inc. (“(“G2”), which does business as IPA Tech Group (“IPA”), is a company wholly owned by Mr.Gust C. Kepler. As of MarchDecember 31, 2021 and 2020, the Company had a prepaid balance of $36,700 for public relations and marketing services with G2/IPA. These funds are reserved in anticipation of a future campaign to movewere utilized during the Company’s stock to listing on a national exchange.
6. Debt
A summary of the Company’s debt at March 31, 2021 and year ended December 31, 2020, by counterparty, is as follows:2021.
Loan Description | 3/31/2021 | 12/31/2020 | ||||||
$1,000,000 12% Senior secured note due November 12 2022 | $ | 1,000,000 | $ | 1,000,000 | ||||
$130,200 loan bearing interest at 1% per annum maturing May 1, 2022 issued under the Payroll Protection Program | 130,200 | 130,200 | ||||||
$108,000 Related party note payable due November 30, 2020 | 859 | 859 | ||||||
$385,000 8% convertible note payable due July 2021 | 179,772 | 318,012 | ||||||
$165,000 8% convertible note payable due July 2021 | 75,436 | 133,405 | ||||||
Miscellaneous equipment loans | 573 | 1,405 | ||||||
1,386,840 | 1,583,881 | |||||||
Less unamortized discount and debt issuance costs | (189,265 | ) | (294,119 | ) | ||||
Total notes payable | $ | 1,197,575 | $ | 1,289,762 | ||||
Current portion of long-term debt | 294,113 | 399,614 | ||||||
Long-term portion | $ | 903,462 | $ | 890,148 |
8. Debt
Notes Payable
On May 1, 2020, pursuant to the Paycheck Protection Program under the Coronavirus Aid Relief and Economic Security Act (“CARES Act”) the Company was awarded a loan of $130,200. The loan carries an interest rate of 1% and matures on May 1, 2022. TheDuring August 2021, the Company may apply forreceived partial loan forgiveness followingfrom the SBA guidelines and a portion or allreducing the principal balance of the loan may be forgiven.note to $96,795. During December 2021, the terms of the note were amended to carry and interest rate of 1% and mature on May 4, 2025. As of March 31, 2022 and December 31, 2021, the unpaid balances of the note totaled $89,710 and $96,795, respectively.
On November 12, 2020, the Company executed a Loan Agreement with certain Lenders (“the Lenders”) and FVP Servicing LLC, as agent for the Lenders in connection with the issuance of a Note in the amount of $1,000,000 bearing interest at 12% per annum with an initial maturity of November 12, 2022. Simultaneously, with the execution of the Loan Agreement, the Company also entered into an agreement with an affiliate of FVP to provide certain credit and debit card processing services for the Company, which services will continue for a period of one year after the loan is repaid and contains a right of first refusal to continue to provide such services in the future subject to certain limitations. Mr. Kepler executed a guaranty in favor of FVP in connection with the loan. Proceeds from the loan were used to repay the existing senior secured loan balance of $100,000 along with accrued interest, certain outstanding trade payables in the amount of $133,880 and for general working capital purposes. In addition, the Company granted the Lender a security interest in substantially all of its assets.
Notes Payable, related party As of March 31, 2022 and December 31, 2021, the unpaid balances of the note totaled $960,000 and $990,000, respectively.
On March 9, 2022 the Company and FVP amended the loan agreement to change the Debt Service Coverage Ratio measurement date from the quarter ended December 6, 2018, Mr. Kepler, advanced $108,000 31, 2021 to the quarter ending September 30, 2022. The Company for payment to a third party note holderwas in exchange for an unsecured promissory note. During the year ended December 31, 2020 the Company repaid $107,141 in principal, reducing the balance due as of compliance with all debt covenants at March 31, 2021 to $859.2022.
Convertible Notes Payable
On May 21, 2019, the Company issued an 8% Fixed Convertible Promissory Note payable to a third party with a face value of $385,000, which included an original issue discount of 10% on the investment amount. On July 17, 2019, the Company issued another 8% Fixed Convertible Promissory Note with a face value of $165,000 which also included am original discount of 10% on the investment amount. The two notes contain substantially identical terms. The Company recorded the value of the notes conversion feature in the amount of $342,308 at inception. The Company defaulted on the notes and incurred default fees of $57,750 and $24,750 for the years ended December 31, 2019 and 2020, respectively which amounts were added to the principal balance.
On July 10, 2020, the Company entered into Forbearance and Note Settlement Agreements (“Agreements”) with the holders of the 8% Fixed Convertible Promissory Notes agreeing to take no further action to avail themselves of the remedies of default defined in the Notes. The Agreements stipulate the Company remit payment of all accrued interest and principal outstanding beginning on July 20, 2020 for thirteen agreed upon payments and until the note is repaid in full. Upon execution of these Agreements, effectively extinguishing the above-described notes, the Company recognized a cancellation of the derivative liability previously related to the conversion feature of $522,065. As additional consideration for the Agreements, the holders were issued warrants to purchase up to 360,000 shares of the Company’s Common Stock at a price of $1.00 per share, exercisable beginning January 10, 2021 and expiring on July 10, 2025. The fair value of the warrant at the date of issuance was $371,243, and was reflected in paid in capital and the related debt discount is being amortized over the term of the Agreements.
7.9. Commitments and Contingencies
On During August 11, 2020 2017 the Company entered into a letter agreementacquired and was assigned all right, title and interest in an office lease with Winspear Investments, LLC (“Winspear”), pursuant to which Teachers Insurance and Annuity Association of America for approximately 1,502 square feet of office space at 5430 LBJ Freeway, Dallas, Texas. During September 2017 the Company retained Winspearamended the lease to provide strategic advisory services for financial and business matters. The agreement provides for a minimum three-month term and that Winspear would be compensated with the grant of 20,000 shares of the Company’s common stock at inception and an additional 5,000 shares per month for the initial term. In the event Winspear continues to provide services, Winspear shall be compensated an additional grant of 3,000 shares per monthexpand its space by approximately 336 square feet for a total of twelve-months1,838 square feet and such grants shall not exceed an aggregate issuanceextended the expiration date to September 30, 2022. The Company records rent expense associated with this lease on a straight-line basis in conjunction with the terms of 71,000 shares. The agreement also provides that Winspear shall be granted 80,000 shares if the Company achieves a listing with NASDAQ. The total shares issuable under the agreement shall not be less than a minimum of 35,000 and not exceed a maximum of 151,000 shares. As of March 31, 2021 48,000 common shares have been issued.
underlying lease. On February 22, 2021 the Company amended its lease with Teachers Insurance and Annuity Association of America (“TIAA”) to expand its space by approximately 847 square feet for a total of 2,685 square feet and extended the expiration date to September 30, 2025.On April 14, 2021, the Company amended its lease with TIAA extending the lease expiration until September 30, 2028. During the three months ended March 31, 2022, the Company’s office rental expenses totaled approximately $22,300.
The table below shows the future lease payment obligations:
Year Ending December 31, | Amount | |||
2022 | $ | 66,495 | ||
2023 | 87,934 | |||
2024 | 89,948 | |||
2025 | 91,122 | |||
2026 | 93,136 | |||
Thereafter | 167,645 | |||
$ | 596,280 |
The Company is not currently a defendant in any material litigation or any threatened litigation that could have a material effect on the Company’s financial statements.
8. Subsequent Events
On April 14, 2021, the Company entered into an amendment for its office lease with Teachers Insurance and Annuity Association of America for its office space at 5430 LBJ Freeway, Dallas, Texas whereby it extended the lease expiration until September 30, 2028.
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’s discussion and analysis contained in our Annual Report on Form 10-K for the year ended December 31, 20202021 as well as with our condensed financial statements and the notes thereto included elsewhere herein.
Overview
Blackboxstocks, Inc. is a financial technology and social media hybrid platform offering real-time proprietary analytics and news for stock and options traders of all levels. Our web-based software (the “Blackbox System”) employs “predictive technology” enhanced by artificial intelligence to find volatility and unusual market activity that may result in the rapid change in the price of a stock or option. We continuously scan the New York Stock Exchange (“NYSE”), NASDAQ, Chicago Board Options Exchange (the “CBOE”) and other options markets, analyzing over 8,00010,000 stocks and over 1,000,0001,500,000 options contracts multiple times per second. We provide our users with a fully interactive social media platform that is integrated into our dashboard, enabling our users to exchange information and ideas quickly and efficiently through a common network. We recently introduced a live audio/video feature that allows our members to broadcast on their own channels to share trading strategies and market insight within the Blackbox community. We employ a subscription based Software as a Service (“SaaS”) business model and maintain a growing base of users that spans 42 countries.
The Blackbox System is a unique and disruptive financial technology platform combining proprietary analytics and broadcast enabled social media to connect traders of all types worldwide on an intuitive, user-friendly system. The complexity of our backend analytics is neatly hidden from the end user by our simple and easy to navigate dashboard which includes real-time alerts, scanners, financial news, institutional grade charting and proprietary analytics.
We launched the 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.
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.Nasdaq Stock Market LLC (the “OTC Pink”“Nasdaq”) under the symbol “BLBX.” Our corporate website is located at http://www.blackboxstocks.com.www.blackboxstocks.com. We are not including the information contained in our website as part of, or incorporating it by reference into, this Report on Form 10-Q.
Basis of Presentation of Financial Information
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern, which is dependent upon our ability to obtain sufficient financing or establish the Company as a profitable business. At March 31, 2021, we had an accumulated deficit of $7,172,263 and for the years ended December 31, 2020 and 2019 the Company incurred net losses of $354,911 and $2,983,438, respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
In November 2020, we executed a Loan Agreement with certain lenders (the “Lenders”) and FVP Servicing LLC, (“FVP”), as agent for the Lenders in connection with the issuance of a Note in the amount of $1,000,000 bearing interest at 12% per annum with an initial maturity of November 12, 2022.
During the quarter ended March 31, 2021 we sold 70,772 shares of Common Stock to third parties for $138,006 and issued 6,411 shares of Common Stock previously subscribed for $12,500.
As a result of our debt and equity financing and cash flows from operations, we had a cash balance of $1,114,468 at March 31, 2021. Management believes that this will be sufficient to fund our operations and service our debt for the next twelve months. In addition, management may continue to raise additional debt or equity capital in order to improve liquidity or finance more aggressive growth or development. Nevertheless, there can be no assurance that we will be able to raise additional capital or on what terms.
The financial statements do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.
Significant Accounting Policies
There have been no changes from the Summary of Significant Accounting Policies described in our Annual Report on Form 10-K for the year ending December 31, 2021 filed with the Securities and Exchange Commission on March 31, 2021.2022.
Liquidity and Capital Resources
At March 31, 2021,2022, we had a cash balance of $1,114,468 and a working capital deficit of $678,125marketable securities totaling $8,573,762 as compared to cash and marketable securities totaling $10,442,379 at December 31, 2021. Our cash flows from operations were ($793,188) for the three months ended March 31, 2022 as compared to $231,912 for the same period in the prior year.
Net cash used in investing activities for the three months ended March 31, 2022 was $85,094 as compared to 31,234 for the prior year period. The volume of marketable securities purchases and sales for the current quarter was the result of trading activity in a cashCompany account that is used to research and test specific trading techniques. The account used for those specific activities had an account balance of $74,970 and a working capital deficit of $3,367,329 atapproximately $100,000.
Net cash used in financing activities was $896,697 for the three months ended March 31, 2020.2022 as compared to $59,035 for the prior year period. The purchase of $859, 612 of common stock pursuant to the Company’s stock repurchase plan was the primary component of the use of cash. The stock repurchase plan initially authorized the repurchase of up to $2,500,000 of the Company’s common stock and expires on December 31, 2022.
On November 9, 2021 the Company enter into an underwriting agreement pursuant to which it sold 2,400,000 shares of its Common Stock at an offering price of $5.00 in an underwritten public offering upon which our shares became listed on the NASDAQ Capital Market. Net proceeds to the Company after underwriting discounts and offering expenses were approximately $10,510,000. We expect to use proceeds from this offering to further develop our Blackbox System platform, expand our product offerings, fund marketing efforts to grow our subscriber base, as well as for general and administration expenses and other general corporate purposes.
We believe that the Company has sufficient capital resources to fund current operations and debt service requirements.
Sale
Results of Operations
Comparison of Three Months Ended March 31, 20212022 and 20202021
For the three months ended March 31, 20212022 and 2020,2021, our revenue totaledwas $1,272,486 and $1,489,668, respectively, a decrease of 14.6%. We believe 2022 revenues were negatively impacted by a confluence of macro-economic factors including poor overall performance in the stock market, soaring inflation and $415,251, respectively, an increasenegative gross domestic product (GDP) growth during the first quarter of 259%2022. The S&P 500 dropped by 4.9% during the first quarter of 2022 as compared to a gain of 5.8% in the first quarter of 2021. In addition to the poor market performance, inflation of 7.5% as measured by the consumer price index (CPI) and a decline in GDP of (1.4%) may have constricted disposable cash of prospective subscribers. Although we believe that our platform enables our subscribers to profit in both bull and bear markets, we attribute some of our decline in revenues to a higher level of hesitancy resulting from the poor macro-economic data. In order to combat this, we implemented a promotional program offering our software for which our respective costs$5 for the first month. This promotional offering was the first of revenues totaled $ 395,775its kind in the Company’s history and $170,352, an increase of 132%. The $1,074,417 increasewas effective in increasing the subscriber totals but only contributed minimal revenue resulted from an expanded subscription base for monthly revenues. Gross marginper user. Average users for the three months ended March 31, 20212022 was 5,709 as compared to 5,575 for the prior year period and 2020 were $1,093,893 and $244,899 respectively. Gross margin5,749 for the quarter ended December 31, 2021.Total users of 7,400 as a percentage of sales increasedMarch 31, 2022 included those new subscribers from 59.0% to 73.4% in the period$5 promotion. Cost of revenues for the three months ended March 31, 2022 and 2021 were $579,962 and $395,775, resulting in gross margins of 54% and 73%, respectively. The primary components of cost of revenues include costs related to data and news feed expenses for exchange information which comprise the majority of the costs, as well as the costs for program moderators. Cost of goods sold increased by $184,187 for the quarter ended March 31 2022 as compared to the prior year primarily as a result of a 74% increase in the higher revenues and certain fixed cost of sales.our program moderators, higher costs associated with our new broadcast enabled social media feature and news feeds. As noted above, our promotional event resulted in increased user counts but limited revenue that offset the costs which resulted in unusually low gross margin percentage of 54%.
For the three months ended March 31, 2021, we had2022, operating expenses totaling $948,761were $1,713,678 as compared to $475,612$948,761 for the same period in 2020,2021, an increase of $473,149$764,917 or 99%81%. This change is primarily a resultWe experienced significantly higher expenditures in most of an increase in selling,our expense categories for the 2022 period. Selling, general and administrative expenses increased from $349,446 for the three months ended March 31, 2020 compared to $606,687 for the three months ended March 31, 2021.2021 to $1,224,723 for the three months ended March 31, 2022, an increase of 102%. The increase in selling, general and administrative expenses of $257,241$618,036 was due tothe largest dollar value component of the operating expense increase. The primary components of the increase were increases in referral expenses of $88,638; professional and outside consulting services of $106,571; rent expense of $7,967; general administrative expenses of $48,833; salary and related $91,492; and computer and internet expenses of $6,456 netted with a decrease in financing expenses of $92,716.stock-based compensation, public investor relations. Advertising and marketing expenses increased by $118,968$91,484 or 135%44% from $88,344 in the three months ended March 31, 2020 to $207,312 in the three months ended March 31, 2021. Software development costs also increased by $96,107 from $34,3312021 to $298,796 in the three months ended March 31, 2020 as compared to2022. Software development costs also increased by $54,446 or 42% from $130,438 in same period in 2021. We also recorded depreciation and amortization expense of $4,324the three months ended March 31, 2021 to $184,884 for the three months ended March 31, 2021 compared2022. The increased software development costs were incurred for improvements to $3,491our platform including our online social media component, development of a native application and new product development.
We expect to continue to incur increases in our operating costs for the foreseeable future. Expense increases for digital advertising and marketing activities, our primary advertising mechanism, should continue to increase with sales but may also increase as a result of additional strategies including but not limited to television advertising. Software development costs are also expected to increase as we expand our development team and invest in new products and features.
Our loss from operations for the three months ended March 31, 2020. For the three months ended March 31, 2021 we recorded operating income of $145,1322022 was $1,021,154 as compared to anincome from operations of $145,132 for the prior year period. Lower sales and gross margin resulting from the $5 promotion in March of 2022 combined with higher operating expenses resulted in the loss of $230,713from operations. Non-operating expenses for the three months ended March 31, 2020.
For the three months ended March 31, 2021 we incurred interest expense of $41,038 and amortization of debt discount in the amount of $91,539. The amortization of debt discount relates to our convertible preferred notes. For the three months ended March 31, 2020, we incurred interest expense of $33,495, convertible note financing expense of $217,776 default expense of $24,750 and amortization of debt discount of $51,607. The lower interest and financing expenses resulted from the Company repaying certain high interest debt during 2020 and its reliance on lower cost financing. In addition the company recorded a gain on derivative liability in the amount of $601,170 during the three months ended March 31, 2020. We recorded net income of $12,555 for the three months ended March 31, 2021 as a result of our significant increase in revenues and higher operating margins2022 were $221,289 as compared to $132,577 for the prior year period.
EBITDA (Non-GAAP Financial Measure)
We report our financial results in accordance with accounting principles generally accepted in the United States of America (“GAAP”). However, management believes the presentation of certain non-GAAP financial measures provides useful information to management and investors regarding financial and business trends relating to the Company’s financial condition and results of operations, and that when GAAP financial measures are viewed in conjunction with the non-GAAP financial measures, investors are provided with a more meaningful understanding of the Company’s ongoing operating performance. In addition, these non-GAAP financial measures are among the primary indicators management uses as a basis for evaluating performance. For all non-GAAP financial measures in this release, we have provided corresponding GAAP financial measures for comparative purposes in the report.
EBITDA is defined by us as net income (loss) before interest expense, income tax, depreciation and amortization expense and certain non-cash. EBITDA is not a measure of $42,829 for the three months ended March 31, 2020. The 2020operating performance under GAAP and therefore should not be considered in isolation nor construed as an alternative to operating profit, net income was due(loss) or cash flows from operating, investing or financing activities, each as determined in accordance with GAAP. Also, EBITDA should not be considered as a measure of liquidity. Moreover, since EBITDA is not a measurement determined in accordance with GAAP, and thus is susceptible to the gain on derivative liability offsetting the operating lossvarying interpretations and calculations, EBITDA, as presented, may not be comparable to similarly titled measures presented by other companies.
Reconciliation of $230,713 and interest and other financing costs totaling $327,628.net income (loss) to EBITDA
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Net income (loss) | $ | (1,242,443 | ) | $ | 12,555 | |||
Adjustments: | ||||||||
Interest expense | 29,243 | 41,038 | ||||||
Investment loss | 178,732 | - | ||||||
Depreciation and amortization expense | 5,275 | 4,324 | ||||||
Amortization of debt discount | 13,314 | 91,539 | ||||||
Stock based compensation | 122,033 | - | ||||||
Total Adjustments | $ | 348,597 | $ | 136,901 | ||||
EBITDA | $ | (893,846 | ) | $ | 149,456 |
Off Balance Sheet Arrangements
As of March 31, 2021,2022, we did not have any material off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act, and as such, we are 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 Robert Winspear, our 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 March 31, 2021,2022, 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, our principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures as of March 31, 20212022, were not effective to provide reasonable assurance that information required to be disclosed in the Company’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 ended March 31, 20212022 that 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. 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 we only have 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 our current cash flow situation, we do not intend to increase staffing to mitigate the current lack of segregation of duties within the general administrative and financial functions.
None.
WeImportant risk factors that could affect our operations and financial performance, or that could cause results or events to differ from current expectations, are a “smaller reporting company”described in Part I, Item 1A, "Risk Factors” of our Annual Report on Form 10-K filed with the SEC on March 31, 2022 for the year ended December 31, 2021, as definedsupplemented by Rule 12b-2 of the Exchange Act,"Risk Factors" sections in our registration statement on Form S-1 filed with the SEC on October 5, 2021, as amended on November 5, 2021 and the information contained elsewhere in this Report. The risks and uncertainties described within our Form 10-K for the year ended December 31, 2021 and the registration statement, as such,amended, are not the only risks we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not required to provide the information required under this Item.material, may also become important factors that adversely affect our business or results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On January 4, 2021 we sold 12,821 sharesUnregistered Sales of Common Stock at $1.95 per share to a third party for $25,001.Securities
On January 25, 2021 we sold 25,6414, 2022, 86,387 shares of Common Stock at $1.95 per share to a third party for $50,000.
On January 28, 2021 we converted previously received payments of $130,000common stock were issued for the purchasecashless exercise of a Simple Agreement for Future Tokens into 66,667 shares of Common Stock.
On February 3, 2021 we entered into a subscription agreement to sell 5,129 shares of Common Stock at $1.95 per share to a third party for $10,002.
On February 3, 2021 we entered into a subscription agreement to sell 12,821 shares of Common Stock at $1.95 per share to a third party, for $25,001.
On February 8, 2021 we entered into a subscription agreement to sell 5,129 shares of Common Stock at $1.95 per share, to a third party, for $10,002.
On March 11, 2021 we sold 9,231 shares of Common Stock at $1.95 per share to a third party for $18,000.
On March 16, 2021 we converted previously received payments of $50,000 for the purchase of a Simple Agreement for Future Tokens into 25,641 shares of Common Stock.120,000 warrant shares.
The securities described above were privately offered and sold in reliance upon exemptions from registration pursuant to Section 4(a)(2) under the Securities Act. We reasonably believed that each of the purchasers of such securities had access to information concerning its operations and financial condition, were acquiring the securities for their own account and not with a view to the distribution thereof, and each investor qualified as an "accredited investor" as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act. Furthermore, no "general solicitation" was made by the Company with respect to sale of any of the securities. At the time of their issuance, the securities described above were deemed to be restricted securities for purposes of the Securities Act and the documentation representing the securities bear legends and/or non-transfer provisions to that effect.
All of the ourThere have been no other sales of unregistered securities during the period covered by the Report that have not been previously reported as required in Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and/or current reports on Form 8-K.
Use of Proceeds of Registered Securities
On January 7, 2022 the Company’s Board of Directors authorized a stock repurchase plan for up to $2,500,000 of the Company’s Common Stock. The program will terminate on December 31, 2022 or when the $2,500,000 authorized has been fully utilized. As of March 31, 2022, the Company has repurchased 436,600 shares of common stock for an aggregate purchase price of $859,612. This use of proceeds was not anticipated or disclosed in the Company’s prospectus.
Other than as described above, the proceeds of the public offering have been used as described in the prospectus to promote and market our Blackbox System platform and increase our subscriber base, and for general and administration expenses.
Purchases of Equity Securities by Issuer
The following table sets forth information regarding purchases made under the Company’s stock repurchase plan for up to $2,500,000 of the Company’s Common Stock. The program was authorized and publicly announced on January 7, 2022 and will terminate on December 31, 2022 or when the $2,500,000 authorized has been fully utilized.
Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value of Shares that May Yet Be Purchase under the Plans or Programs |
January 1, 2022 through January 31, 2022 | 221,121 | $2.12 | 221,121 | $2,031,416 |
February 1, 2022 through February 28, 2022 | 146,781 | $1.84 | 367,902 | $1,761,165 |
March 1, 2022 through March 31, 2022 | 68,698 | $1.76 | 436,600 | $1,640,388 |
Total | 436,600 | $1.97 | 436,600 | $1,640,388 |
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
None.
The following exhibits are filed with this Quarterly Report on Form 10-Q or are incorporated by reference as described below.
Exhibit | Description |
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 | Inline Interactive data files pursuant to Rule 405 of Regulation S-T* |
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* Filed herewith.
** Furnished herewith
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.
May | BLACKBOXSTOCKS INC. | |
By: |
| |
Gust Kepler | ||
President, Chief Executive Officer and Secretary | ||
(Principal Executive Officer) |
By: | /s/ Robert Winspear | |
Robert Winspear | ||
Chief Financial Officer and | ||
and Accounting Officer) |
EXHIBIT INDEX
Exhibit | Description |
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 | Inline Interactive data files pursuant to Rule 405 of Regulation S-T* |
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* Filed herewith.
** Furnished herewith