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 |
Commission File No. | 001-41051 |
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) |
|
(Registrant’s telephone number, including area code) |
(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 |
Common Stock, par value $0.001 per share | BLBX | The Nasdaq Stock Market LLC |
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 14, 202212, 2023 was 13,185,659.3,154,303.
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Item 1. | 2 | ||
Balance Sheets as of March 31, | 2 | ||
Statements of Operations for the Three Months Ended March 31, | 3 | ||
4 | |||
Statements of Cash Flows for the Three Months Ended March 31, | 5 | ||
Notes to Financial Statements for the Three Months Ended March 31, | 6 | ||
Item 2. | Management |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. | 17 | ||
17 |
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, 2022 (Unaudited)2023 and December 31, 20212022
(Unaudited)
March 31, | December 31, | ||||||||||||||
March 31, 2022 | December 31, 2021 | 2023 | 2022 | ||||||||||||
Assets | Assets | Assets | |||||||||||||
Current assets: | |||||||||||||||
Cash | $ | 651,518 | $ | 2,426,497 | $ | 249,818 | $ | 425,578 | |||||||
Accounts receivable, net of allowance for doubtful accounts of $68,589 at March 31, 2022 and December 31, 2021, respectively | 11,074 | 18,585 | |||||||||||||
Accounts receivable, net of allowance for doubtful accounts of $68,589 at March 31, 2023 and December 31, 2022, respectively | 219,708 | 59,613 | |||||||||||||
Inventory | 14,062 | 13,567 | 15,464 | 15,464 | |||||||||||
Marketable securities | 7,922,244 | 8,015,882 | 2,180,590 | 3,216,280 | |||||||||||
Prepaid expenses and other current assets | 95,591 | 227,440 | 128,460 | 190,120 | |||||||||||
Total current assets | 8,694,489 | 10,701,971 | 2,794,040 | 3,907,055 | |||||||||||
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 | |||||||||||||
Office, computer and related equipment, net of depreciation of $114,928 and $104,410 at March 31, 2023 and December 31, 2022, respectively | 82,568 | 93,086 | |||||||||||||
Right of use lease, net of amortization of $231,346 and $213,459 at March 31, 2023 and December 31, 2022, respectively | 317,753 | 335,640 | |||||||||||||
Total property and equipment | 427,639 | 448,143 | 400,321 | 428,726 | |||||||||||
Total assets | $ | 9,122,128 | $ | 11,150,114 | $ | 3,194,361 | $ | 4,335,781 | |||||||
Liabilities and Stockholders' Equity | Liabilities and Stockholders' Equity | Liabilities and Stockholders' Equity | |||||||||||||
Current liabilities: | |||||||||||||||
Accounts payable | $ | 700,987 | $ | 585,615 | $ | 974,843 | $ | 730,099 | |||||||
Accrued interest | 6,544 | 6,544 | 1,613 | 1,613 | |||||||||||
Unearned subscriptions | 1,177,701 | 1,302,036 | 872,649 | 1,022,428 | |||||||||||
Lease liability right of use, current | 66,494 | 62,630 | 68,683 | 70,002 | |||||||||||
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 | |||||||||||||
Note payable, current portion (Note 8) | 28,805 | 28,733 | |||||||||||||
Total current liabilities | 2,906,891 | 2,928,676 | 1,946,593 | 1,852,875 | |||||||||||
Long term liabilities: | |||||||||||||||
Note payable, net of current portion (Note 7) | 61,262 | 68,347 | |||||||||||||
Note payable (Note 8) | 32,386 | 39,614 | |||||||||||||
Lease liability right of use, long term | 316,547 | 335,641 | 249,071 | 265,639 | |||||||||||
Total long term liabilities | 377,809 | 403,988 | 281,457 | 305,253 | |||||||||||
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 | |||||||||||||
Stockholders' equity (Note 4) | |||||||||||||||
Preferred stock, $0.001 par value, 5,000,000 shares authorized; no shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively | - | - | |||||||||||||
Series A Convertible Preferred Stock, $0.001 par value, 5,000,000 shares authorized; 3,269,998 issued and outstanding at March 31, 2023 and December 31, 2022, respectively | 3,270 | 3,270 | |||||||||||||
Common stock, $0.001 par value, 100,000,000 shares authorized: 3,125,987 and 3,297,927 issued and outstanding at March 31, 2023 and December 31, 2022, respectively | 3,126 | 3,298 | |||||||||||||
Common stock payable | 22,500 | 15,000 | 42,720 | 23,340 | |||||||||||
Treasury stock | (859,612 | ) | 0 | - | (1,102,375 | ) | |||||||||
Additional paid in capital | 17,701,081 | 17,586,635 | 17,637,999 | 18,070,556 | |||||||||||
Accumulated deficit | (11,042,997 | ) | (9,800,554 | ) | (16,720,804 | ) | (14,820,436 | ) | |||||||
Total stockholders' equity | 5,837,428 | 7,817,450 | 966,311 | 2,177,653 | |||||||||||
Total liabilities and stockholders' equity | $ | 9,122,128 | $ | 11,150,114 | $ | 3,194,361 | $ | 4,335,781 |
The accompanying notes are an integral part of these financial statementsstatements.
For the Three Months Ended March 31, 20222023 and 20212022
(Unaudited)
For the three months ended | ||||||||||||||||
For the three months ended March 31, | March 31, | |||||||||||||||
2022 | 2021 | 2023 | 2022 | |||||||||||||
Revenue: | ||||||||||||||||
Subscriptions | $ | 1,270,930 | $ | 1,485,798 | $ | 854,990 | $ | 1,270,930 | ||||||||
Other revenues | 1,556 | 3,870 | 4,014 | 1,556 | ||||||||||||
Total revenues | 1,272,486 | 1,489,668 | 859,004 | 1,272,486 | ||||||||||||
Cost of revenues | 579,962 | 395,775 | 447,631 | 579,962 | ||||||||||||
Gross margin | 692,524 | 1,093,893 | 411,373 | 692,524 | ||||||||||||
Operating expenses: | ||||||||||||||||
Software development costs | 184,884 | 130,438 | 355,044 | 184,884 | ||||||||||||
Selling, general and administrative | 1,224,723 | 606,687 | 1,777,634 | 1,224,723 | ||||||||||||
Advertising and marketing | 298,796 | 207,312 | 214,981 | 298,796 | ||||||||||||
Depreciation and amortization | 5,275 | 4,324 | 10,518 | 5,275 | ||||||||||||
Total operating expenses | 1,713,678 | 948,761 | 2,358,177 | 1,713,678 | ||||||||||||
Operating income (loss) | (1,021,154 | ) | 145,132 | |||||||||||||
Operating loss | (1,946,804 | ) | (1,021,154 | ) | ||||||||||||
Otherexpense: | ||||||||||||||||
Other (income) expense: | ||||||||||||||||
Interest expense | 29,243 | 41,038 | 165 | 29,243 | ||||||||||||
Amortization of debt discount and issuance costs | 13,314 | 91,539 | - | 13,314 | ||||||||||||
Investment loss | 178,732 | 0 | ||||||||||||||
Total other expense | 221,289 | 132,577 | ||||||||||||||
Investment (income) loss | (46,601 | ) | 178,732 | |||||||||||||
Total other (income) expense | (46,436 | ) | 221,289 | |||||||||||||
Income (loss) before income taxes | (1,242,443 | ) | 12,555 | |||||||||||||
Loss before income taxes | (1,900,368 | ) | (1,242,443 | ) | ||||||||||||
Income Taxes | 0 | 0 | - | - | ||||||||||||
Net income (loss) | (1,242,443 | ) | 12,555 | |||||||||||||
Net loss | (1,900,368 | ) | (1,242,443 | ) | ||||||||||||
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 | |||||||||||
Weighted average number of common shares outstanding – basic and diluted | 3,304,620 | 3,295,455 | ||||||||||||||
Net loss per share – basic and diluted | $ | (0.58 | ) | $ | (0.38 | ) |
The accompanying notes are an integral part of these financial statements.
Blackboxstocks Inc.
Statement of Stockholders’ Stockholders’ Equity (Deficit)
For the three months endedThree Months Ended March 31, 20222023 and 20212022
(Unaudited)
Preferred Stock | Series A | Common Stock | Common | Common | Additional | Preferred Stock | Series A | Common Stock | Common Stock | Treasury | Additional Paid in | Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Stock Subscribed | Stock Payable | Treasury Stock | Paid in Capital | Accumulated Deficit | Total | Shares | Amount | Shares | Amount | Shares | Amount | Payable | Stock | Capital | 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 | - | $ | - | 3,269,998 | $ | 3,270 | 3,274,818 | $ | 3,275 | $ | 15,000 | $ | - | $ | 17,596,459 | $ | (9,800,554 | ) | $ | 7,817,450 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Purchase of treasury stock | - | 0 | - | 0 | - | 0 | 0 | 0 | (859,612 | ) | 0 | 0 | (859,612 | ) | - | - | - | - | - | - | - | (859,612 | ) | - | - | (859,612 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cashless exercise of warrants | 0 | 0 | 0 | 0 | 86,387 | 87 | 0 | 0 | 0 | (87 | ) | 0 | 0 | - | - | - | - | 21,597 | 21 | - | - | (21 | ) | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of warrants for compensation | - | - | - | - | - | - | - | - | 0 | 31,880 | 0 | 31,880 | - | - | - | - | - | - | - | - | 31,880 | - | 31,880 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of options for compensation | - | - | - | - | - | - | - | - | 0 | 82,653 | 0 | 82,653 | - | - | - | - | - | - | - | - | 82,653 | - | 82,653 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock payable for compensation | - | - | - | - | - | - | - | 7,500 | - | - | 0 | 7,500 | - | - | - | - | - | - | 7,500 | - | - | - | 7,500 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | 0 | (1,242,443 | ) | (1,242,443 | ) | - | - | - | - | - | - | - | - | - | (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 | - | $ | - | 3,269,998 | $ | 3,270 | 3,296,415 | $ | 3,296 | $ | 22,500 | $ | (859,612 | ) | $ | 17,710,971 | $ | (11,042,997 | ) | $ | 5,837,428 | ||||||||||||||||||||||||||||||||||||||||||||||||
Balances, December 31, 2022 | - | $ | - | 3,269,998 | $ | 3,270 | 3,294,927 | $ | 3,928 | $ | 23,340 | $ | (1,102,375 | ) | $ | 18,070,556 | $ | (14,820,436 | ) | $ | 2,177,653 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchase of treasury stock | - | - | - | - | - | - | - | (79,100 | ) | - | - | (79,100 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement of treasury stock | - | - | - | - | (454,441 | ) | (454 | ) | - | 1,181,475 | (1,181,021 | ) | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of warrants for compensation | - | - | - | - | - | - | - | - | 31,880 | - | 31,880 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of options for compensation | - | - | - | - | - | - | - | - | 61,464 | - | 61,464 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of stock for compensation | - | - | - | - | 282,501 | 282 | - | - | 655,120 | - | 655,402 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock payable for compensation | - | - | - | - | - | - | 19,380 | - | - | - | 19,380 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | (1,900,368 | ) | (1,900,368 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balances, March 31, 2023 | - | $ | - | 3,269,998 | $ | 3,270 | 3,125,987 | $ | 3,126 | $ | 42,720 | $ | - | $ | 17,637,999 | $ | (16,720,804 | ) | $ | 966,311 |
The accompanying notes are an integral part of these financial statements.
For the Three Months Ended March 31, 20222023 and 20212022
(Unaudited)
For the three months ended | ||||||||||||||||
March 31, | March 31, | |||||||||||||||
2022 | 2021 | 2023 | 2022 | |||||||||||||
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: | ||||||||||||||||
Net loss | $ | (1,900,368 | ) | $ | (1,242,443 | ) | ||||||||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
Depreciation and amortization expense | 5,275 | 4,324 | 10,518 | 5,275 | ||||||||||||
Amortization of note discount and issuance costs | 13,314 | 104,853 | - | 13,314 | ||||||||||||
Stock based compensation | 122,033 | 0 | 768,126 | 122,033 | ||||||||||||
Right of use lease | 0 | (506 | ) | |||||||||||||
Investment loss | 178,732 | 0 | ||||||||||||||
Investment (income) loss | (46,601 | ) | 178,732 | |||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable | 7,511 | 6,994 | (160,095 | ) | 7,511 | |||||||||||
Inventory | (495 | ) | (355 | ) | - | (495 | ) | |||||||||
Prepaid expenses and other current assets | 131,849 | 15,600 | (17,440 | ) | 131,849 | |||||||||||
Accounts payable | 115,371 | 11,999 | 244,744 | 115,371 | ||||||||||||
Accrued interest | 0 | (2,388 | ) | - | - | |||||||||||
Unearned subscriptions | (124,335 | ) | 78,836 | (149,779 | ) | (124,335 | ) | |||||||||
Net cash provided by (used in) operating activities | (793,188 | ) | 231,912 | |||||||||||||
Net cash used in operating activities | (1,250,895 | ) | (793,188 | ) | ||||||||||||
Cash flows from investing activities: | ||||||||||||||||
Purchase of property and equipment | 0 | (31,234 | ) | |||||||||||||
Purchase of marketable securities | (9,855,275 | ) | 0 | (889,018 | ) | (9,855,275 | ) | |||||||||
Proceeds from sales of marketable securities | 9,770,181 | 0 | ||||||||||||||
Net cash used in investing activities | (85,094 | ) | (31,234 | ) | ||||||||||||
Sale of marketable securities | 1,971,309 | 9,770,181 | ||||||||||||||
Net cash provided by (used in) investing activities | 1,082,291 | (85,094 | ) | |||||||||||||
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 | - | (30,000 | ) | ||||||||||
Principal payments on notes payable | (7,085 | ) | (832 | ) | (7,156 | ) | (7,085 | ) | ||||||||
Principal payments on convertible notes payable | 0 | (196,209 | ) | |||||||||||||
Purchase of treasury stock | (859,612 | ) | 0 | - | (859,612 | ) | ||||||||||
Net cash used in financing activities | (896,697 | ) | (59,035 | ) | (7,156 | ) | (896,697 | ) | ||||||||
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 | ||||||||||||
Net decrease in cash | $ | (175,760 | ) | $ | (1,774,979 | ) | ||||||||||
Cash - beginning of period | 425,578 | 2,426,497 | ||||||||||||||
Cash - end of period | $ | 249,818 | $ | 651,518 | ||||||||||||
Supplemental disclosures: | ||||||||||||||||
Interest paid | $ | 29,243 | $ | 43,425 | $ | 165 | $ | 29,243 | ||||||||
Income taxes paid | $ | 0 | $ | 0 | $ | - | $ | - | ||||||||
Non-cash investing and financing activities: | ||||||||||||||||
Common stock issued in settlement of accrued liabilities | $ | 0 | $ | 180,000 | ||||||||||||
Treasury stock purchased with other assets | $ | 79,100 | $ | - | ||||||||||||
Retirement of treasury stock | $ | 1,181,475 | $ | - |
The accompanying notes are an integral part of these financial statements.
For the Three Months Ended March 31, 20222023 and 20212022
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 10,000 stocks and up to 1,500,000 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:https://www.blackboxstocks.com.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, 2022. 2023. 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, 2021.2022.
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. For the three months ended March 31, 2023, the Company incurred an operating loss of $1,946,804 and a net loss of $1,900,368. In addition, for the year ended December 31, 2022, the Company incurred an operating loss of $4,546,026 and a net loss of $5,019,882. Cash flows used in operations totaled $1,250,895 for the three months ended March 31, 2023. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.. Management has implemented a number of initiatives aimed at improving operating cash flow including, new product development, revised marketing strategies and expense reductions. In addition to the operating initiatives, the Company has entered into a non-binding letter of intent to undertake a merger transaction with Evtec Group Limited, Evtec Aluminium Limited and Evtec Automotive Limited (collectively “Evtec”). Evtec is a supplier of proprietary parts for leading Luxury, Performance, and Electric Vehicle “EV” brands including Jaguar Land Rover, Aston Martin, and Ford, among many others. The Company intends to acquire Evtec by issuing common shares sufficient to give Evtec approximately 91.6% of the total post-merger common shares outstanding via a reverse merger. Evtec has substantially larger operations and anticipates revenue of approximately $119 million for its fiscal year ended March 31, 2024. In addition, the Company has historically been able to raise debt or equity financing to meet its capital needs. There can be no assurance that the Company operational changes will impact its cash flow, whether or not it will be able to complete the proposed Evtec transaction and if that transaction will provide sufficient cash flow or capital to meet the Company’s needs or if it 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. 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. 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.Securities. The Company investshas invested 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. The Company has invested 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, 2022, 2023, there were no new accounting pronouncements issued that management believes the adoption of which will have a material impact on the Company’s financial statements. During the three months ended March 31, 2023, there were no new accounting pronouncements issued that management believes the adoption of which will have a material impact on the Company’s financial statements.
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. BecauseTherefore, 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. 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 for period of loss.
The Company had total potential additional dilutive securities outstanding at March 31, 2022, 2023, as follows:follows.
March 31, | ||||
| ||||
Series A Convertible Preferred Shares | 3,269,998 | |||
Conversion rate | 0.2 | |||
Common shares after conversion | 654,000 | |||
Option shares | ||||
Warrant shares |
Revenue Recognition. We operateThe Company operates 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 revenueunearned subscriptions on our balance sheet. The Company operates 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 unearned subscriptions 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 promotional 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 use 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 liabilities that the Company has the ability to access;
Level 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, 2022:2023:
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 |
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Balance at December 31, 2022 | $ | 3,216,280 | $ | - | $ | - | $ | 3,216,280 | ||||||||
Purchases | 889,018 | - | - | 889,018 | ||||||||||||
Sales | (1,971,309 | ) | - | - | (1,971,309 | ) | ||||||||||
Change in fair value | 46,601 | - | - | 46,601 | ||||||||||||
Balance at March 31, 2023 | $ | 2,180,590 | $ | - | $ | - | $ | 2,180,590 |
4. Stockholders’ Equity (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 (“Series(the “Series A Stock”) rank pari passu with the Company’s Common Stock with respect to dividend and liquidation rights. Additionally, each share entitles the holder to 100 votes. During 2021, 1,730,002 previously issued and outstanding shares of the Series A Stock were converted into 432,501 shares of Common Stock. All currently issued and outstanding shares of the Series A Stock are held by Gust Kepler, the Company’s Chairman and Chief Executive 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”). basis. 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 capitalizationMarket 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 |
● | If the Company’s Market Capitalization is equal to or greater than $150,000,000 but less than |
|
|
● | If the Company’s Market Capitalization is equal to or greater than |
● | If the Company’s Market Capitalization is equal to or greater than |
● | 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 |
The Agreement terminates when the last share of Series A Stock is either converted or the largest Market Capitalization Threshold is met.
On January 4,August 11, 2022, 86,387the Company entered into a services agreement whereby a third-party service provider would receive 9,000 shares of common stock were issued forvesting monthly over 12 months. As of March 31, 2023, 5,250 of the cashless exerciseshares have vested and are included in common stock payable.
In February of 120,000 warrants (Note 52023, the Company retired 171,940 shares of Common Stock acquired pursuant to its stock repurchase plan. In March of 2023, the Company acquired 282,501 shares of its common stock from Mr. Kepler at a price of $0.28 per share and then retired these shares returning them to authorized but unissued shares (See Note 7.).
On January 7, 2022, April 10, 2023, the Company filed an Amendment to the Company’s BoardArticles of Directors authorizedIncorporation with the Nevada Secretary of State to effect the Reverse Stock Split at a stock repurchase plan for up to $2,500,000Split Ratio of one-for-four. The Amendment took effect April 10, 2023 and the Company’s Common Stock began trading on a split-adjusted basis on The Nasdaq Capital Market at the commencement of trading on April 11, 2023 under the Company’s existing symbol “BLBX.” (see Note 7)
There was no change in the par value of our Common Stock or Preferred Stock.
As a result of the Reverse Stock Split, every 4 shares of the Company’s common stock. Common Stock issued and outstanding immediately prior to the Effective Time was consolidated into one issued and outstanding share. In addition, proportionate adjustments were made to the exercise prices of the Company’s outstanding stock options and warrants and to the number of shares issued and issuable under the Company’s existing stock incentive plans.
The program will terminate on December 31, 2022 or whenimpact of the $2,500,000 authorizedreverse stock split has been fully utilized. As of March 28, 2022, the Company has repurchased 436,600 shares for an aggregate purchase price of $859,612.retroactively applied to these financial statements.
5. Warrants to Purchase Common Stock
The following table presents the Company’s warrants as of March 31, 2022:2023:
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Life (in years) | 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 | ||||||||||||||||||||
Warrants as of December 31, 2022 | 109,584 | $ | 13.24 | 4.53 | ||||||||||||||||||||
Issued | 0 | $ | 0 | - | - | $ | - | - | ||||||||||||||||
Exercised | (120,000 | ) | $ | 1.00 | 3.28 | - | $ | - | - | |||||||||||||||
Warrants as of March 31, 2022 | 438,336 | $ | 4.18 | 5.28 | ||||||||||||||||||||
Warrants as of March 31, 2023 | 109,584 | $ | 13.24 | 4.28 |
At March 31, 2022, 2023, warrants for the purchase of 357,78397,779 shares were vested and warrants for the purchase of 80,55313,889 shares remained unvested. The Company expects to incur expenses for the unvested warrants totaling $308,176$180,656 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“2021 Plan”) which became effective August 31, 2021. We have reserved 750,000Effective October 7, 2022, the Company’s Stockholders approved an amendment and restatement of our outstandingthe 2021 Plan to increase the numbers of issuable shares from 187,500 to 312,500. On February 6, 2023 the Company’s stockholders approved another amendment and restatement of our common stockthe 2021 Plan to increase the number of shares available for issuance under the 2021 Plan.from 312,500 to 612,500 shares. 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, 6,048During September 2022, 7,353 shares of restricted common stock were granted on September 11, 2021 with 25% vesting at issuance and the remaining shares vesting quarterly over ninetwelve months. As of March 31, 2022, 4,5362023, 3,677 shares of the restricted common stock shares have vested and are included invested.
During February 2023, 282,501 shares of restricted common stock payable.were granted. The restricted shares, valued at $655,402, were vested at issuance.
The following table presents the Company’s options as of March 31, 2022:2023:
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Life (in years) | 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 | ||||||||||||||||||||
Options as of December 31, 2022 | 167,561 | $ | 11.68 | 8.78 | ||||||||||||||||||||
Issued | 0 | $ | 0 | - | - | $ | - | - | ||||||||||||||||
Forfeited | (23,333 | ) | $ | 2.99 | 9.60 | (11,019 | ) | $ | 11.96 | 8.42 | ||||||||||||||
Exercised | - | $ | - | - | - | $ | - | - | ||||||||||||||||
Options as of March 31, 2022 | 652,500 | $ | 3.07 | 9.45 | ||||||||||||||||||||
Options as of March 31, 2023 | 156,542 | $ | 11.69 | 8.53 |
At March 31, 2022, 2023, options to purchase 235,00393,481 shares were vested and options to purchase 417,49763,061 shares remained unvested. The Company expects to incur expenses for the unvested options totaling $631,614$338,689 as they vest.
7. Related Party Transactions
G2 International, Inc. (“G2”), which does business as IPA Tech Group (“IPA”), is a company wholly owned by Gust C. Kepler. As of December 31, 2020, On March 16, 2023, the Company hadpurchased 282,501 shares of Common Stock from Mr. Kepler at a prepaid balanceprice of $36,700$0.28 per share. The purchase of these shares was done in lieu of Mr. Kepler’s cash bonus for public relations2022. The shares acquired from Mr. Kepler were subsequently retired and marketing services with G2/IPA. These funds were utilized during the year ended December 31, 2021.added back to authorized but unissued shares.
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 an initial maturity of May 1, 2022. During August 2021, the Company received partial loan forgiveness from the SBA reducing the principal balance of the note to $96,795. During December 2021, the terms of the note were amended to carry andan interest rate of 1% and mature on May 4, 2025. As of March 31, 2022 and December 31, 2021, 2023, the unpaid balancesbalance 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. 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 31, 2021 to the quarter ending September 30, 2022. The Company was in compliance with all debt covenants at March 31, 2022.$61,191.
9. Commitments and Contingencies
During August 2017 the Company acquired and was assigned all right, title and interest in an office lease with Teachers Insurance and Annuity Association of America (“TIAA”) for approximately 1,502 square feet of office space at 5430 LBJ Freeway, Dallas, Texas. During September 2017 the Company amended the lease to expand its space by approximately 336 square feet for a total of 1,838 square feet and extended 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 the underlying lease. On During February 22, 2021, the Company amended its lease with Teachers Insurance and Annuity Association of America (“TIAA”)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, 2023, the Company’s office rental expenses totaled approximately $22,300.$32,000.
The table below shows the future lease payment obligations:
Year Ending December 31, | Amount | Amount | ||||||
2022 | $ | 66,495 | ||||||
2023 | 87,934 | $ | 66,286 | |||||
2024 | 89,948 | 89,948 | ||||||
2025 | 91,122 | 91,122 | ||||||
2026 | 93,136 | 93,136 | ||||||
2027 | 95,150 | |||||||
Thereafter | 167,645 | 72,495 | ||||||
Total remaining lease payments | $ | 508,137 | ||||||
Less: imputed interest | (190,383 | ) | ||||||
Present Value of remaining lease payments | $ | 317,754 | ||||||
$ | 596,280 | |||||||
Current | $ | 68,683 | ||||||
Noncurrent | $ | 249,071 | ||||||
Weighted-average remaining lease term (years) | 4.18 | |||||||
Weighted-average discount rate | 10.00 | % |
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.
10. Subsequent Events
On April 10, 2023, the Company filed an Amendment to the Company’s Articles of Incorporation with the Nevada Secretary of State to effect the Reverse Stock Split at a Split Ratio of one-for-four. The Amendment took effect April 10, 2023 and the Company’s Common Stock began trading on a split-adjusted basis on The Nasdaq Capital Market at the commencement of trading on April 11, 2023 under the Company’s existing symbol “BLBX.”
There was no change in the par value of our Common Stock or Preferred Stock.
As a result of the Reverse Stock Split, every 4 shares of the Company’s Common Stock issued and outstanding immediately prior to the Effective Time was consolidated into one issued and outstanding share. In addition, proportionate adjustments were made to the exercise prices of the Company’s outstanding stock options and warrants and to the number of shares issued and issuable under the Company’s existing stock incentive plans.
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, 20212022 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 10,000 stocks and over 1,500,000 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 recentlyhave also 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.
TheWe believe 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:https://www.blackboxstocks.com..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 Nasdaq Stock Market LLC (the “Nasdaq”) under the symbol “BLBX.” Our corporate website is located at http:https://www.blackboxstocks.com..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
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. For the three months ended March 31, 2023 the Company incurred an operating loss of $1,946,804 and a net loss of $1,900,368. In addition, for the year ended December 31, 2022, the Company incurred an operating loss of $4,546,026 and a net loss of $5,019,882. Cash flows from operations were $(1,250,895) for the three months ended March 31, 2023 and $(4,285,039) for the year ended December 31, 2022. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management has implemented a number of initiatives aimed at improving operating cash flow including, new product development, revised marketing strategies and expense reductions. In addition to the operating initiatives, the Company has entered into a non-binding letter of intent to undertake a merger transaction with Evtec Group Limited, Evtec Aluminium Limited and Evtec Automotive Limited (collectively “Evtec”). Evtec is a supplier of proprietary parts for leading Luxury, Performance, and Electric Vehicle “EV” brands including Jaguar Land Rover, Aston Martin, and Ford, among many others. The Company intends to acquire Evtec by issuing common shares sufficient to give Evtec approximately 91.6% of the total post-merger common shares outstanding via a reverse merger. Evtec has substantially larger operations and anticipates revenue of approximately $119 million for its fiscal year ended March 31, 2024. In addition, the Company has historically been able to raise debt or equity financing to meet its capital needs. There can be no assurance that the Company operational changes will impact its cash flow or, whether or not it will be able to complete the proposed transaction and if that transaction will provide sufficient cash flow or capital to meet the Company’s needs or if it 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.
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, 20212022 filed with the Securities and Exchange Commission on March 31, 2022.April 14. 2023.
Liquidity and Capital Resources
At March 31, 2022,2023, we had cash and marketable securities totaling $8,573,762$2,430,408 as compared to cash and marketable securities totaling $10,442,379$3,641,858 at December 31, 2021.2022. Our cash flows fromused in operations were ($793,188)$1,250,895 for the three months ended March 31, 20222023 as compared to $231,912$793,188 for the same period in the prior year.
Net cash used infrom investing activities for the three months ended March 31, 20222023 was $85,094$1,082,291 as compared to 31,234($85,094) for the prior year period. The increase in in the cash flow from investing activities was due to the liquidation of marketable securities in order to fund the Company’s operations. The volume of marketable securities purchases and sales for the current quarter was the result ofincludes trading activity in a Company account that is used to research and test specific trading techniques. Thetechniques although the account usedholds less than $100,000. We do not expect capital expenditures to be significant for those specific activities had an account balancethe remainder of approximately $100,000.2023.
Net cash used in financing activities was $896,697($7,156) for the three months ended March 31, 20222023 as compared to $59,035($896,697) for the prior year period. The purchaserepayment of $859, 612 of common stock pursuant to the Company’s stock repurchase plan$7,156 in debt was the primary component of the use of cash. The stock repurchase plan initially authorizedcash in the repurchase of up to $2,500,000 ofthree months ended March 31, 2023. During the Company’s common stock and expires on Decemberthree months ended March 31, 2022.
On November 9, 20212022, 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 listedmade treasury stock purchases totaling $859,612 and principal payments 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.totaling $37,085.
As noted above, the Company intends to pursue the merger transaction with Evtec however there can be no assurance that it will be able to complete the transaction or that such a transaction will provide the Company with sufficient liquidity to fund its operations. In addition, the Company may need to raise additional debt or equity capital in order to fund its operations. There can be no assurance that the Company will be able to do so or on what terms.
Results of Operations
Comparison of Three Months Ended March 31, 20222023 and 20212022
For the three months ended March 31, 20222023 and 2021,2022, our revenue was $1,272,486$859,004 and $1,489,668,$1,272,486, respectively, a decrease of 14.6%33%. We believe 20222023 revenues were negatively impacted by a confluence of macro-economic factors including poor overall performance in the stock market, soaringhigh inflation and negativesluggish gross domestic product (GDP) growth during the first quarter of 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,growth. Additionally, inflation of 7.5% as measured by the consumer price index (CPI) and a declineremained high at 5.0% for the twelve months ended March 31, 2023, while GDP growth in GDPthe first quarter of (1.4%)2023 was only 1.1% annualized following periods of negative growth during 2022. We believe that these factors 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 $5 for the first month. This promotional offering was the first of its kind in the Company’s history and was effective in increasing the subscriber totals but only contributed minimal revenue per user. Average users for the three months ended March 31, 20222023 was 5,7093,555 as compared to 5,5755,709 for the prior year period and 5,749 for the quarter ended December 31, 2021.Total users of 7,400 as of March 31, 2022 included those new subscribers from the $5 promotion.period. Cost of revenues for the three months ended March 31, 2023 and 2022 were $447,631 and 2021 were $579,962, and $395,775, resulting in gross margins of 54%48% and 73%54%, 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 cost of 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 lowThe gross margin percentage declined due to lower revenues and a higher percentage of 54%.fixed versus variable costs.
For the three months ended March 31, 2022,2023, operating expenses were $1,713,678$2,358,177 as compared to $948,761$1,713,678 for the same period in 2021,2022, an increase of $764,917$644,499 or 81%38%. We experienced significantly higher expenditures in most of our expense categories for the 20222023 period. Selling, general and administrative expenses increased from $606,687 for the three months ended March 31, 2021 to $1,224,723 for the three months ended March 31, 2022 to $1,777,634 for the three months ended March 31, 2023, an increase of 102%45%. The increase in selling, general and administrative expenses of $618,036$552,911 was the largest dollar value component of the operating expense increase. The primary components of the increase were increases in salary anddue to higher stock-based compensation which was only partially offset by lower investor and public investor relations.relations expense. Advertising and marketing expenses decreased by $83,815 or 28% from $298,796 for the three months ended March 31, 2022 to $214,981 for the three months ended March 31, 2023. Software development costs also increased by $91,484$170,160 or 44%92% from $207,312$184,884 in the three months ended March 31, 20212022 to $298,796 in the three months ended March 31, 2022. Software development costs also increased by $54,446 or 42% from $130,438 in the three months ended March 31, 2021 to $184,884$355,044 for the three months ended March 31, 2022.2023. The increased software development costs were incurred for improvements to our platform includingand our online social media component, development of a native application and new product development.Stock Nanny.
We expect to continue to incur increasespursue reductions in our operating costs forexpenses. With the foreseeable future. Expense increases for digital advertisingexception of the unusually high stock compensation expense incurred in the first quarter we expect our selling general and marketing activities, our primary advertising mechanism, should continueadministrative expenses to increase with sales but may also increase as a result of additional strategies including but not limited to television advertising. Softwareremain stable or decrease. Our software development costs are also expected to increaseshould decline as we expand our development teamfinalize the release of Stock Nanny. Advertising and invest in new products and features.Marketing expenses will stay at or near their current level until we launch Stock Nanny later this year.
Our loss from operations for the three months ended March 31, 20222023, was $1,021,154$1,946,804 as compared to incomea loss from operations of $145,132$1,021,154 for the prior year period. Lower sales and gross margin resulting from the $5 promotion in March of 2022 combined with higher operating expenses driven by stock-based compensation resulted in the loss from operations. Non-operating expensesincome for the three months ended March 31, 2022 were $221,2892023, was $46,436 as compared to $132,577non-operating expense of $221,289 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 (i) to compare operating performance on a consistent basis, (ii) for planning purposes including the preparation of its internal annual operating budget and (iii) 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 operating performance under GAAP and therefore should not be considered in isolation nor construed as an alternative to operating profit, net income (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 varying interpretations and calculations, EBITDA, as presented, may not be comparable to similarly titled measures presented by other companies.
ReconciliationThe following table sets forth a reconciliation of net income (loss)loss to EBITDAEBITDA:
Three Months Ended March 31, | ||||||||
2023 | 2022 | |||||||
Net income (loss) | $ | (1,900,368 | ) | $ | (1,242,443 | ) | ||
Adjustments: | ||||||||
Interest expense | 165 | 29,243 | ||||||
Investment (income) loss | (46,601 | ) | 178,732 | |||||
Depreciation and amortization expense | 10,518 | 5,275 | ||||||
Amortization of debt discount | - | 13,314 | ||||||
Stock based compensation | 768,126 | 122,033 | ||||||
Total adjustments | $ | 732,208 | $ | 348,597 | ||||
EBITDA | $ | (1,168,160 | ) | $ | (893,846 | ) |
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, 2022,2023, 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, 2022,2023, 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, 2022,2023, were 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, 20222023, 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.
None.
Important risk factors that could affect our operations and financial performance, or that could cause results or events to differ from current expectations, are described in Part I, Item 1A, "Risk Factors” of our Annual Report on Form 10-K filed with the SEC on March 31, 2022April 14, 2023 for the year ended December 31, 2021,2022, as supplemented by the "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, 20212022 and the registration statement, as amended, are not the only risks we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not 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
Unregistered Sales of Securities
On January 4, 2022, 86,387 shares of common stock were issued for the cashless exercise of 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.
There 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, 20222023 or when the $2,500,000 authorized has been fully utilized. As of March 31, 2022,2023, the Company has repurchased 436,600171,940 shares of common stock for an aggregate purchase price of $859,612.$1,102,375 (as adjusted for the April 10, 2023 reverse stock split at a ratio of 4 for 1) under the stock repurchase plan. In addition, the Company repurchased an additional 282,501 shares of common stock for $79,100 outside of the stock repurchase plan. 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’sCompany authorized a stock repurchase plan for up to $2,500,000 of the Company’s Common Stock. The program was authorized and publicly announcedStock on January 7, 2022 and2022. This plan will terminate on December 31, 20222023 or when the $2,500,000 authorized has been fully utilized. As of March 31, 2023, the Company had purchased a total of 171,940 shares at a total cost of $1,102,375 (as adjusted for the April 10, 2023 reverse stock split at a ratio of 4 for 1) under the plan. No purchases of treasury stock were made during the first three months of 2023 under the plan. In addition, the Company repurchased an additional 282,501 shares of common stock for $79,100 outside of the stock repurchase plan.
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* |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* 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: | /s/ Gust Kepler | |
Gust Kepler | ||
President, Chief Executive Officer and Secretary | ||
(Principal Executive Officer) |
By: | /s/ Robert Winspear | |
Robert Winspear | ||
Chief Financial Officer and Secretary (Principal Financial | ||
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* |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* Filed herewith.
** Furnished herewith