INTRODUCTORY COMMENT

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.

part1PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

Blackboxstocks Inc.

Balance Sheets

As of SeptemberJune 30 20222023 and December 31, 20212022

(Unaudited)

The accompanying notes are an integral part of these financial statementsstatements.

Blackboxstocks Inc.

Statements of Operations

For the Three and NineSix Months Ended SeptemberJune 30, 20222023 and 20212022

(Unaudited)

The accompanying notes are an integral part of these financial statements.

Blackboxstocks Inc.

Statement of Stockholders’ Equity (Deficit)

For the Three and NineSix Months Ended SeptemberJune 30, 20222023 and 20212022

(Unaudited)

The accompanying notes are an integral part of these financial statements.

Blackboxstocks Inc.

Statements of Cash Flows

For the NineSix Months Ended SeptemberJune 30, 20222023 and 20212022

(Unaudited)

The accompanying notes are an integral part of these financial statements.

Blackboxstocks Inc.

Notes to Financial Statements

For the Three and NineSix Months Ended SeptemberJune 30, 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. The Company has 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, 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 six months ended June 30, 2023, the Company incurred an operating loss of $3,378,103 and a net loss of $3,324,862. 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 $2,717,168 for the six months ended June 30, 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. As discussed in Note 3, the Company entered into a share exchange agreement with Evtec as a preliminary step towards the completion of the merger.. In addition, the Company has historically been able to raise debt or equity financing to meet its capital needs and is also evaluating strategic alternatives with respect to possible mergers or acquisitions. There can be no assurance that the Company operational changes will impact its cash flow 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. 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 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 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. During the periodsix months ended SeptemberJune 30, 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.

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.

The Company had total potential additional dilutive securities outstanding at SeptemberJune 30, 2022, 2023, as follows:follows.

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 unearned subscriptionsdeferred 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 promotional products are recognized upon shipment.

3. Investments and Marketable Securities

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 SeptemberJune 30, 2022:2023:

Investments

On June 9, 2023, the Company entered into a securities exchange agreement with Evtec Group Limited (“Evtec Group”) whereby the Company issued 2,400,000 shares of Series B Convertible Preferred Stock (the “Series B Stock”) (Note 4) in exchange for 4,086 preference shares of Evtec Group. The Series B Stock is convertible into common stock of the Company on a one for one share basis. Upon conversion of the Series B Stock, the 2,400,000 shares would represent approximately 43% of the Company’s total common shares outstanding. The Evtec Group preference shares are convertible into ordinary shares of Evtec Group on a one-for-one basis upon a change in control or the listing of Evtec Group on Nasdaq or the London Stock Exchange. Upon conversion, the Evtec shares held by the Company would represent 14% of the outstanding common stock of Evtec Group.

The Company’s initial investment in Evtec Group was measured at $8,424,000 in accordance with ASC 820-10-30. The value of the Series B Stock issued by the Company was set by the closing price of its common stock on the day prior to closing of $3.51 as reported by Nasdaq. As a result, the 2,400,000 Series B Stock shares were valued at $8,424,000.

Evtec Group operates through a single subsidiary, Evtec Automotive Limited, as a supplier of critical automotive parts to the automobile manufacturing industry. Evtec Group is based in the UK and provides complete assemblies to auto manufacturers, simplifying sourcing, saving time on procurement, and increasing production efficiency. Their pick and pack service supplies aftermarket automotive products, as well as offering kitting and fulfilment for non-automotive businesses. Their business focuses on premium luxury brands and a market transition to electric vehicles and includes Jaguar Land Rover Group as their largest customer.

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, 2,400,000 of which are designated as “Series B 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 votes on matters submitted to Company stockholders. There are 3,269,998 shares of the Series A Stock were converted into Common Stock. All currently issued and outstanding shares of the Series A Stockwhich are all 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 1one-for-1-for-one basis as provided for in the Certificatecertificate of Designation of the Series A Stock (the “Designation Conversion Rights”).designation. Pursuant to the terms of the Conversion Rights Agreement, the Designation Conversion RightsSeries A Stock designated 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:

The Conversion Rights Agreement terminates when the last share of Series A Stock is either converted or the largest Market Capitalization Threshold is met.

On January 4, 2022, 86,387The Series B Stock has no dividend rights and no voting rights except as required by law or the Company’s Bylaws. The Series B Stock is convertible into common shares on a one-for-one basis. Prior to the stockholder approval, the Series B Stock is not convertible into more than 19.9% of the Company’s outstanding common stock.

In February of 2023, 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 were issued for the cashless exercisefrom Mr. Kepler at a price of a warrant for the purchase of 120,000$0.28 per share and then retired these shares (Note 5)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.”

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 September 30, 2022, the Company has repurchased 615,748 shares for an aggregate purchase price of $1,065,216.

On August 11, 2022, the Company entered into a services agreement whereby a third-party service provider would receive 36,000 shares of common stock vesting monthly over 12 months. As of September 30, 2022, 3,000 of the shares have vested and are included in common stock payable.retroactively applied to these financial statements.

5. Warrants to Purchase Common Stock

The following table presents the Company’s warrants as of SeptemberJune 30, 2022:2023:

At SeptemberJune 30, 2022, 2023, warrants for the purchase of 374,44999,862 shares were vested and warrants for the purchase of 63,8879,722 shares remained unvested. The Company expects to incur expenses for the unvested warrants totaling $244,416$148,776 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. On Effective October 7, 2022, the Company’s stockholdersStockholders approved an amendment and restatement of the 2021 Plan to increase the maximumnumbers of issuable shares from 187,500 to 312,500. On February 6, 2023 the Company’s stockholders approved an additional amendment and restatement of the 2021 Plan to increase the number of authorized shares reserved by 500,000available for issuance from 312,500 to a total of 1,250,000612,500 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.

On During September 11, 2021, 6,0482022, 7,353 shares of restricted common stock were granted with 25% vesting at issuance and the remaining shares vesting quarterly over ninetwelve months. As of SeptemberJune 30, 2022, all 6,048 of the restricted common stock shares have vested and been issued.

On August 11, 36,000 shares of restricted stock were granted with vesting occurring monthly for twelve months. On September 11, 2022, 29,412 shares of restricted common stock were granted with 25% vesting quarterly over twelve months. As of September 30, 2022, 3,0002023, 5,515 shares of the restricted common stock shares have vested.

During the six months ended June 30, 2023, 315,902 shares of restricted common stock were granted. The restricted shares, valued at $776,214, were vested at issuance.

The following table presents the Company’s options as of SeptemberJune 30, 2022:2023:

At SeptemberJune 30, 2022, 2023, options to purchase 294,192152,776 shares were vested and options to purchase 376,05066,509 shares remained unvested. The Company expects to incur expenses for the unvested options totaling $530,130$340,072 as they vest.

7. Related Party Transactions

On March 16, 2023, the Company purchased 282,501 shares of Common Stock from Mr. Kepler at a price of $0.28 per share. The purchase of these shares was done in lieu of Mr. Kepler receiving a cash bonus for 2022. The shares acquired from Mr. Kepler were subsequently retired and added back to authorized but unissued shares.

7.8. Debt

NotesNote 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 awardedreceived a loan of $130,200. The loan carries an interest rate of 1% and matured 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 SeptemberJune 30, 2022 and December 31, 2021, 2023, the unpaid balancesbalance of the note totaled $75,485 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 senior secured note (the “FVP 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 an existing senior secured loan balance of $100,000 along with accrued interest, settle certain outstanding trade payables in the amount of $133,880 and for general working capital purposes. In addition, the Company granted the Lenders a security interest in substantially all of its assets. As of September 30, 2022 and December 31, 2021, the unpaid balances of the FVP Note totaled $900,000 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 September 30, 2022. The FVP Note was repaid in full at its maturity on November 14, 2022$54,016.

8.9. Commitments and Contingencies

In August 2017 theThe Company acquired and was assigned all right, title and interestleases approximately 2,685 square feet of office space in Dallas Texas pursuant to 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. On February 22, 2021 the Company amended its lease with (“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 that expires on September 30, 2028. The Company records rent expense associated with this lease on a straight-line basis in conjunction with the terms of the underlying lease. During the nine monthsperiod ended SeptemberJune 30, 2022, 2023, the Company’s office rental expenses totaled approximately $71,700.$63,000.

The table below shows the future lease payment obligations:

The Company is not currently a defendantparty to threatened or actual litigation occurring in any material litigation or any threatened litigationthe normal course of business but does not believe that the outcome of these matters could have a material effect on the Company’s financial statements.

9. Subsequent Events

On October 7, 2022 the Company’s stockholders approved an amendment and restatement to the 2021 Plan to increase the maximum number of authorized shares by 500,000 to a total of 1,250,000 shares. See Note 6.

On October 25, 2022, Blackboxstocks Inc. (the “Company”) received a written notification (the “Notification Letter”) from the Nasdaq Listing Qualifications (“Nasdaq”) that it is not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. Based on the closing bid price of the Company’s common stock for the 30 consecutive business days prior to the date of the Notification Letter, the Company no longer meets the minimum bid price requirement. The Notification Letter has no immediate effect on the listing or trading of the Company’s common stock on the Nasdaq Capital Market and, at this time, the common stock will continue to trade on the Nasdaq Capital Market under the symbol “BLBX”.

The Notification Letter provides that the Company has 180 calendar days, or until April 24, 2023, to regain compliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the closing bid price of the Company’s common stock must be at least $1.00 per share for a minimum of 10 consecutive business days. In the event the Company does not regain compliance by April 24, 2023, the Company may then be eligible for additional 180 days if it meets the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and will need to provide written notice of its intention to cure the deficiency during the second compliance period. If the Company does not qualify for the second compliance period or fails to regain compliance during the second compliance period, then Nasdaq will notify the Company of its determination to delist the Company’s common stock, at which point the Company will have an opportunity to appeal the delisting determination to a Hearings Panel.

The Company intends to monitor the closing bid price of its common stock and may, if appropriate, consider implementing available options, including, but not limited to, implementing a reverse stock split of its outstanding securities, to regain compliance with the minimum bid price requirement under the Nasdaq Listing Rules

As discussed in Note 7 above, The FVP Note was repaid in full at its maturity on November 14, 2022

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. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed in the section titled “Risk Factors” and elsewhere in this Report.

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 have 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 42over 40 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 six months ended June 30, 2023 the Company incurred an operating loss of $3,378,103 and a net loss of $3,324,862. 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 were $2,717,168 for the six months ended June 30, 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 executed a binding letter of intent to undertake an acquisition of Evtec Group Limited and Evtec Aluminium 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’s operational changes will impact its cash flow or, whether or not the Company will be able to complete the proposed transaction or 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 acceptable 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 endingended December 31, 20212022 filed with the Securities and Exchange Commission on March 31, 2022.April 14. 2023.

Liquidity and Capital Resources

At SeptemberJune 30, 2022,2023, we had cash and marketable securities totaling $5,356,556$945,738 as compared to cash and marketable securities totaling $10,442,379$3,641,858 at December 31, 2021.2022. Our cash flows used in operations were ($3,493,223)$2,717,168 for the ninesix months ended SeptemberJune 30, 20222023 as compared to ($211,360)$2,038,532 for the same period in the prior year.

Net cash from investing activities for the ninesix months ended SeptemberJune 30, 20222023 was $2,886,780$2,593,776 as compared to ($60,610)$966,779 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 period was substantially the result ofincludes trading activity in a Company account that is used to research and test specific trading techniques. Thetechniques although the account used for those specific activities had an account balance of approximately $90,000.holds less than $100,000. We do not expect our capital expenditures to remain at or below their current level throughbe significant for the remainder of 2023.

Net cash used in financing activities was ($1,176,526)$29,622 for the ninesix months ended SeptemberJune 30, 20222023 as compared to ($280,455)$1,019,638 for the prior year period. The purchase of $1,065,216 ofDuring the six months ended June 30, 2022, the Company made treasury stock pursuant topurchases totaling $945,449 which accounted for the Company’s stock repurchase plan was the primary componentmajority of the higher use of cash in the nine months ended September 30, 2022. During the nine months ended September 30, 2021, principal payments on debt totaling $417,056 were partially offset by sales of common stock totaling $138,006 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. The Company does not expect that it will fully utilize the total authorized amount of its stock purchase plan prior to December 31, 2022. The senior secured FVP Note with a principal balance of $900,000 at September 30, 2022 matured on November 14, 2022 and was repaid in full.cash.

On November 9, 2021As noted above, the Company enter into an underwriting agreement pursuantintends to whichpursue the planned acquisition transaction with Evtec however there can be no assurance that it sold 2,400,000 shares of its Common Stock at an offering price of $5.00 in an underwritten public offering upon consummation of which our shares became listed onwill be able to complete the NASDAQ Capital Market. Net proceeds totransaction or that such a transaction will provide the Company after underwriting discounts and offering expenses were approximately $10,510,000. We expectwith sufficient liquidity to use proceeds from this offeringfund its operations. In addition, the Company may need to further develop our Blackbox System platform, expand our product offerings,raise additional debt or equity capital in order to fund marketing efforts to grow our subscriber base, as well as for general and administration expenses and other general corporate purposes.

We believeits operations. There can be no assurance that the Company has sufficient capital resourceswill be able to fund current operations and debt service requirements for the twelve months following the issuance of this report.do so or on acceptable terms.

Results of Operations

Comparison of Three Months Ended SeptemberJune 30, 20222023 and 20212022

For the three months ended SeptemberJune 30, 2022 and 2021,2023, our revenue was $1,219,150 and $1,471,814, respectively, a decrease of 17%. We believe 2022 revenues continue$737,398, as compared to be negatively impacted by macro-economic factors including poor overall performance in the stock market, high inflation and sluggish gross domestic product (GDP) growth. The S&P 500 dropped by 24.1% during the nine months of 2022. In addition to the poor market performance, inflation measured by the consumer price index (CPI) remained high at an average of 8.3%$1,399,315, for the three months ended SeptemberJune 30, 2022 while GDP growth2022. We believe 2023 revenues continue to be adversely impacted by sluggish macro-economic issues compounded by a significant increase in the third quarter was only 2.6% annualized following two quartersnumber of negative growth. 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 promotional programs in March of 2022 and again in the August /September 2022 timeframe around Labor Day.competitors. Average usersmembers for the three months ended SeptemberJune 30, 20222023 was 5,1973,987 as compared to 5,5356,202 for the prior year period. Average monthly revenue per member was $62.47 for the three months ended June 30, 2023 as compared to $75,21 in the prior year period. The decrease in average monthly revenue per member was due to a larger proportion of annual members as well as a higher level of promotional members for the 2023 period. Cost of revenues for the three months ended SeptemberJune 30, 2023 and 2022 were $426,975 and 2021 were $492,991 and $469,601,$499,427, resulting in gross margins of 60%42% and 68%64%, 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 $23,390 for the quarter ended September 30 2022 as compared to the prior year primarily as a result of an increase in the cost of our program moderators and higher costs associated with our new broadcast enabled social media feature. As noted above, our promotional event resulted in increased user counts but limited revenue that offset the costs which resulted in a lowerThe gross margin percentage declined due to lower revenues and a higher percentage of 60% as compared to 68% for the 2021 period.fixed versus variable costs.

For the three months ended SeptemberJune 30, 2022,2023, operating expenses were $1,924,460$1,741,722 as compared to $1,501,142$2,068,654 for the same period in 2021, an increase2022, a decrease of $423,318$326,932 or 28%. We experienced higher expenditures in most of our expense categories for the 2022 period. Software development costs increased from $111,898 for the three months ended September 30, 2021 to $302,273 for the three months ended September 30, 2022, an increase of 170%16%. The increasedCompany significantly reduced expenditures in software development costs were primarily the result of increased personnel costs including external contractors and were incurred for improvements to our platform and new product development. Advertisingadvertising and marketing costs increased from $286,057and had modest increases in selling general and administrative expenses for the three months ended September 30, 2021 to $417,433 for the three months ended September 30, 2022, an increase of 46%.2023 period. Selling, general and administrative expenses increased from $1,098,427$1,191,474 for the three months ended SeptemberJune 30, 20212022 to $1,199,233$1,350,378 for the three months ended SeptemberJune 30, 2022,2023, an increase of 9%$158,904 or 13%. The primary components of the increase were increases in salarywas primarily driven by higher stock-based compensation and public investor relationslegal fees which were partially offset by higher stock-basedlower non-stock-based compensation expense. Advertising and marketing expenses decreased by $372,929 or 72% from $526,344 for the three months ended June 30, 2022 to $153,415 for the three months ended June 30, 2023 as the Company continues to reposition its marketing strategy. Software development costs decreased by $117,736 or 34% from $344,986 in the prior year period.three months ended June 30, 2022 to $227,250 for the three months ended June 30, 2023. The decreased software development costs reflected lower development costs for our new product Stock Nanny as it nears release.

We expect to continue to incur increasespursue reductions in our operating expenses. With the exception of the unusually high stock compensation expense incurred in the first two quarters this year we expect our selling general and administrative expenses to remain stable or decrease. Our software development costs forshould decline as we finalize the foreseeable future. Expense increases for digitalrelease of Stock Nanny. We expect that 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 asexpenses will stay at or near their current level until we expand our development team and invest in new products and features.launch Stock Nanny later this year.

Our loss from operations for the three months ended SeptemberJune 30, 20222023, was $1,198,301$1,431,299 as compared to a loss from operations of $498,929$1,168,766 for the prior year period. Lower sales and gross margin resulting from promotionsrevenues combined with higher operating expenses driven by stock-based compensation resulted in the higher loss from operations. Non-operating expensesincome for the three months ended SeptemberJune 30, 2022 were $110,1412023, was $6,805 as compared to $7,047non-operating expense of $147,333 for the prior year period. 

Comparison of Six Months Ended June 30, 2023 and 2022

Revenues for six months ended June 30, 2023 were $1,596,402 as compared to $2,671,801 for the six months ended June 30, 2023. We believe the decline of $1,076,916 or 40% was due the macro-economic conditions discussed above as well as an increase in the number of competitors for the Company’s product. Average member count for the six months ended June 30, 2023 was 3,756 as compared to 5,954 for the prior year period. Cost of revenues for the six months ended June 30, 2023 was $874,606 as compared to $1,079,389 for the six months ended June 30, 2022. Gross margin was $721,796 or 45% for the six months ended June 30, 2023 as compared to $1,592,412 or 60% for the prior year period.

Comparison of Nine Months Ended September 30, 2022 and 2021

ForOperating expenses for the ninesix months ended SeptemberJune 30, 2022, we generated sales of $3,890,951 as compared to sales of $4,425,088 for2023 were $4,099,899 or $317,567 higher than the same period in 2021. As noted above, we believe that the macro-economic environment in 2022 has been detrimental to our sales. Our average subscriber countJune 2023. Software development costs of $582,294 for the first nine months of 2022 increased from 5,503 for the ninesix months ended SeptemberJune 30, 2021 to 5,695, an increase of 3.5%. Although the subscriber count was2023 were $52,424 or 10% higher for the 2022 period, revenues declined due to lower average revenues per subscriber, primarily resulting from the promotions described above. Cost of sales for the nine months ended September 30, 2022 were $1,572,380 as compared to $1,274,953 for the nine months ended September 30, 2021. The increase of $297,427 was primarily due to an increase in the cost of our program moderators and higher costs associated with our new broadcast enabled social media feature. As noted above, our promotional event resulted in increased user counts but limited revenue that offset the costs which resulted in a lower gross margin percentage of 60% as compared to 71% for the 2021 period.

For the nine months ended September 30, 2022, our operating expenses were $5,706,792 as compared to $3,621,454 forthan the same period in 2021.2022 due to higher development costs incurred in the first quarter of 2023 for Stock Nanny. Selling, general and administrative expenses increased to $3,615,430costs of $3,128,012 for the ninesix months ended SeptemberJune 30, 2022 as compared to $2,320,841 for2023 were $711,815 higher than the same period in 2021, an increase of $1,294,589. The 20222022. This increase was driven primarilycaused by higher personnel costs. In addition, investor relations expense and stock compensation were higherexpense of $1,173,761 for the ninesix months ended SeptemberJune 30, 2023 which was $925,549 higher than the same period in 2022. Advertising and marketing expense increased to $1,242,573expenses were 368,396 for the ninesix months ended SeptemberJune 30, 20222023 or 55% lower than the same period in 2022. Loss from operations was $3,378,103 as compared to $840,5572,189,920 for the six months ended June 30 2023 and 2022 respectively. The higher loss in the 2023 period was caused by lower revenues and gross margin as well as higher compensation expense which was only partially offset by lower advertising and marking expenses.

Other income was $53,241 for the six months ended June 30, 2023 as comparted to other expense of $368,622 for the prior year period. The 2022 period reflecting aincluded investment losses on the companies fixed income portfolio of $283,799 as well as higher cost of acquiring new subscribers. The increase was partially attributable to approximately $153,000 of television advertising done ininterest expense on the second quarter. Software development costs increased from $445,591 for the nine months ended September 30, 2021 to $832,143 for the nine months ended September 30, 2022. The increased software development costs were primarily the result of increased personnel costs including outside contractors and were incurred for improvements to our platform including our online social media component, development of a native applicationCompany’s senior debt which was released at the end of April and new product development.repaid in 2022.

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.

Reconciliation of net loss to EBITDA

The following table sets forth a reconciliation of net loss to EBITDAEBITDA: