UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549
FORM 10-K
(Mark One)
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended | December 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. | 0-55108 |
BLACKBOXSTOCKS INC. |
(Exact name of registrant as specified in its charter) |
Nevada | 45-3598066 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
5430 LBJ Freeway, Suite 1485, Dallas, Texas | 75240 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code | (972) 726-9203 |
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
None | N/A | |
N/A |
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $.001 |
(Title of class) |
Indicate by check mark if the registrant is a well-seasonedwell-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☒☐ No ☐
Indicate by check mark whether the registrant has (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 and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated filer"” “accelerated filer,” “smaller reporting company,” and "smaller reporting company"“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 Ex‐change Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting company ☒
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates (530,612(2,959,900 shares of common stock) as of June 30, 20152020 was $5,306.12$7,281,354 (computed by reference to the price at which the common equity was last sold ($0.01)2.46) as of the last business day of the registrant's most recently completed second fiscal quarter). For purposes of the foregoing calculation only, directors, executive officers, and holders of 10% or more of the issuer'sissuer’s common capital stock have been deemed affiliates.
The number of shares outstanding of the Registrant'sRegistrant’s Common Stock as of April 8, 2016March 30, 2021 was 20,000,000.
DOCUMENTS INCORPORATED BY REFERENCE: None.
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ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 6 | |
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ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 12 | |
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ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | 16 | |
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | 17 | |
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Throughout this Annual Report on Form 10-K (the "Report""Report”), the terms "we," "us," "our," "Blackboxstocks,"“we,” “us,” “our,” “Blackboxstocks,” or the "Company"“Company” refers to Blackboxstocks Inc., a Nevada corporation.
When used in this Report, the words "may," "will," "expect," "anticipate," "continue," "estimate," "intend,"“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"“Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”) regarding events, conditions and financial trends which may affect the Company'sCompany’s 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 the Company'sCompany’s other public reports and filings with the Securities and Exchange Commission (the "SEC"“SEC”). Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. The Company undertakes 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.
Overview of Business
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 Corporate Historyweb-based software (the “Blackbox System”) employs “predictive technology” enhanced by artificial intelligence to find volatility and Background
The Company was organizedBlackbox 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 October 4, 2011 underan intuitive, user-friendly system. The complexity of our backend analytics is neatly hidden from the lawsend user by our simple and easy to navigate dashboard which includes real-time alerts, scanners, financial news, institutional grade charting and proprietary analytics.
Development of the State of Nevada under the name SMSA Ballinger Acquisition Corp.Blackbox System
The Blackbox System was made available for use 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.
We also provide our users with a full set of internal social media functions within our dashboard. These features include chat rooms, direct messaging, follow/block capability, custom user profiles, and most importantly broadcast enabled audio channels. We believe that combining these social media features with our analytics, within a single dashboard provides a unique user experience allowing for the rapid exchange of information and consensus throughout our community. The resulting dynamic is what we describe as our servers receive live feeds from these markets. “the best of man and machine”.
We considerare in the process of developing and anticipate adding many new features and functions to the Blackbox System, technologyincluding but not limited to, be amongnative iOS and Android mobile applications, a crypto currency analytics and trading platform, as well as a comprehensive watchlist and portfolio management system. In January of 2021 we deployed an intermediate native application for iOS an Android phones to send push notifications to our users which allowed us to cease using a third-party solution that was inefficient and cumbersome. We are also in the most user-friendlyprocess of its kind.
Marketing of the Blackbox System
The Company launched its Blackbox System web application for domestic use and made it available to subscribers in September 2016. Use of the Blackbox System which is still in the development phase. The Company expects to complete development of the Blackbox System and the associated website/platform and interface in order to make it available to subscribers by the end of June 2016. As of December 31, 2015 the Company (and Tiger Trade) has incurred approximately $304,000 in research and development costs and expenses. In order to finalize the Blackbox System for sale and provide for costs associated with maintaining the Blackbox System, we expect to require approximately $1 Million over the next 12 months.
Intellectual Property
We plan to rely on a combination of trademark and copyright laws, trade secrets, confidentiality provisions and other contractual provisions to protect our proprietary rights, which are primarily our brand names, product coding and marks. As of the date of this report, the Company has not yet registered any trademarks, copyrights or other intellectual property associated with our business.
Government Regulation and Approvals
The Company will offeroffers its subscribing customers a trading tool and not a trading platform, broker dealer or exchange, and therefore does not expect to be subject to regulatory oversight by the SEC, FINRA or other financial regulatory agencies. We are not aware of any governmental regulations or approvals required for the marketing or use of our product.
Competition
We intend to operate in a highly competitive environment. The principal resources necessary for the development of investment software tools and services and knowledgeable personnel to conduct all phases of development and marketing operations are limited. We must compete for such resources with startups, major financial services companies and midsize competitors. Many of these competitors have financial and other resources substantially greater than ours. Our current operating
We consider our platform unique and financial resources aredo not adequate to precludeconsider any significant disruptiontrading tools or trading analytics software direct competitors of our operations.Company. There are many trading tools on the current market often referred to as “scanners”, that provide features, functions and analytics similar to those of the Blackbox System. There are also many social media platforms that cater to stock traders that serve as real-time informational sources. However, we believe that our Blackbox System is the only platform that has successfully merged a comprehensive analytics system or “scanner” and a social media platform within the same “dashboard” allowing users to view the same real-time data in parallel. Our Blackbox System creates a unique community for traders that can all share the same information and analyze this information on an identical analytics in real-time. We also consider our system unique because our predictive algorithms automatically populate alerts for active stocks with high probability of short-term gains. In spite of these factors that differentiate us, we believe the following companies that could be considered competitors due to some like features and retail price point: Trade Ideas, Flow Algo, Trade Alert and Wall Street Jesus.
As of the date hereof,March 30, 2021, the Company has 7 full-time employees and one employee, Jeff Sharrock, who serves as Vice President of Operations. Until such time as the Company has sufficient resourcespart-time employee. We consider our relationship with our employees to compensate additional employees, Gust Kepler who serves as our sole director and our President, Chief Executive Officer, Chief Financial Officer and Secretary, and Mr. Sharrock will be primarily responsible for managing our administrative affairs.
Additional Information
We are required to file annual reports on Form 10-K and quarterly reports on Form 10-Q with the Securities and Exchange Commission (the "SEC"“SEC”) on a regular basis, and are required to disclose certain material events in a current reportreports on Form 8-K. The public may read and copy any materials that we file with the SEC at the Public Reference Room at the SEC located at 100 F Street NE, Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. The public may also obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.
We make available, free of charge on our website (http://www.blackboxstocks.com), our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K (and any amendments to such reports) as soon as reasonably practical after such reports are filed. Information contained on or connected to our website is not incorporated by reference into this report and should not be considered part of this report or any other filing that we make with the SEC.
The Company is a "smaller“smaller reporting company"company” as defined by Rule 12b-2 of the Exchange Act, and as such, is not required to provide the information required under this Item.
None.
We do not own any real estate or other physical properties. Our principal office is located at 5430 LBJ Freeway, Suite 1485, Dallas, Texas 75240 in office space leased by G2 International, Inc. ("G2"), a company controlled by Gust Kepler who serves as our sole director and our President, Chief Executive Officer, Chief Financial Officer and Secretary. Tiger Trade (our former subsidiary that was merged with and into the Company) entered a Sublease Agreement (the "Sublease") with G2 International, Inc. effective July 1, 2015, subject to the terms and conditions of the Office Lease dated March 26, 2015 (the "Office Lease") between G2 International, Inc. andfrom Teachers Insurance and Annuity Association of America, for approximately 1,502 square feet ofAmerica. During the years ended December 31, 2020 and 2019 we incurred $59,597 and $54,631, respectively, in office space at 5430 LBJ Freeway, Dallas, Texas. The Sublease began on July 1, 2015rental expense. Future minimum rental payments under the extended lease are $61,800 in 2021 and terminates upon the termination of the Office Lease, which expires March 31, 2020. Under the terms of the Sublease , the Company is obligated to pay the full monthly rent specified$46,863 in the Office Lease, which is $40,179 in 2016, $41,680 in 2017, $43,182 in 2018, $44,684 in 2019 and $11,265 in 2020.
There are currently no material pending legal or governmental proceedings, relatingother than ordinary routine litigation incidental to ourthe business, to which the Company or properties to which we areany of its subsidiaries is a party and to our knowledge, there are no other material proceedings inor of which any of our directors, executive officers, affiliates or shareholders are a party adverse to us or that may have a material interest adverse to us.
Not applicable.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDERMATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Market Information
Our Common Stock is quoted on the OTC Pink tier of the OTC Markets Group, Inc. (the "OTC Pink"“OTC Pink”) under the symbol "BLBX." Prior to March 9, 2016, our Common Stock was quoted under the symbol "SMQA."“BLBX.” The following table shows the reported high and low closing bid prices per share for our Common Stock based on information provided by the OTC Pink. The over-the-counter market quotations set forth for our Common Stock reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
Common Stock Bid Price | ||||||||
| Financial Quarter Ended | High ($) | Low ($) | ||||||
| December 31, 2015 | 0.03 | 0.03 | ||||||
| September 30, 2015 | 0.03 | 0.01 | ||||||
| June 30, 2015 | 0.01 | 0.01 | ||||||
| March 31, 2015 | 0.00 | 0.00 | ||||||
| December 31, 2014 | 0.00 | 0.00 | ||||||
| September 30, 2014 | 0.00 | 0.00 | ||||||
| June 30, 2014 | 0.00 | 0.00 | ||||||
| March 31, 2014 | 0.00 | 0.00 | ||||||
Common Stock Bid Price | ||||||||
Financial Quarter Ended | High ($) | Low ($) | ||||||
December 31, 2020 | 2.15 | 3.35 | ||||||
September 30, 2020 | 3.10 | 2.00 | ||||||
June 30, 2020 | 2.55 | 2.21 | ||||||
March 31, 2020 | 2.75 | 1.99 | ||||||
December 31, 2019 | 4.95 | 4.74 | ||||||
September 30, 2019 | 6.60 | 2.50 | ||||||
June 30, 2019 | 9.00 | 6.60 | ||||||
March 31, 2019 | 14.97 | 3.00 | ||||||
On April 8, 2016,March 17, 2021, the last closing bid price per share for our Common Stock reported by the OTC Pink was $2.15.
Holders
Records of Securities Transfer Corporation, our transfer agent,, indicate that as of April 8, 2016,March 17, 2021, we had 615696 record holders of our Common Stock. The number of registered stockholders excludes any estimate by us of the number of beneficial owners of shares of Common Stock held in "street“street name."” As of April 8, 2016,March 17, 2021, we had 20,000,0008,579,877 shares of our Common Stock issued and outstanding.
Dividends
We have not declared any dividends on our Common Stock and do not anticipate that we will declare or pay any dividends on our Common Stock in the foreseeable future.
Any future determination to pay cash dividends will be at the discretion of our Board of Directors and will be dependent upon our financial condition, operating results, capital requirements, applicable contractual restrictions, restrictions in our organizational documents, and any other factors that our Board of Directors deems relevant.Securities Authorized for Issuance under Equity Compensation Plans
The Company has no equity compensation plans.
During the quarter ended December 31, 2020 the Company sold 6,411 shares of Common Stock and Warrants, exercisable for a period of 5 years, to purchase 3,206 shares of Common Stock at an exercise price of $1.95 per share, to third parties for aggregate consideration of $12,501.
During the quarter ended December 31, 2020 the Company sold 155,505 shares of Common Stock to third parties for $303,235.
During the quarter ended December 31, 2020 the Company issued 51,283 shares of its Common Stock at a value of $1.95 to third parties in settlement of convertible promissory notes.
On December 7, 2020 the Company issued 23,000 shares of its Common Stock at a value of $1.95 to a third party in conjunction with a consulting services agreement.
On November 4, 2020 the Company issued 3,000 shares of its Common Stock at a value of $1.95 to a third party as forbearance previously granted on notes payable settled in 2019.
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. The Company reasonably believed that each of the purchasers of such securities had access to information concerning its operations and financial condition, were acquiring the securities for their own account and not with a view to the distribution thereof, and each investor qualified as an "accredited investor" as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act. Furthermore, no "general solicitation" was made by the Company with respect to sale of any of the securities. At the time of their issuance, the securities described above were deemed to be restricted securities for purposes of the Securities Act and the documentation representing the securities bear legends and/or non-transfer provisions to that effect.
All of the Company's recentCompany’s other sales of unregistered securities withinduring the past three yearsperiod covered by the Report have been previously reported as required in Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q andand/or current reports on Form 8-K.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
SELECTED FINANCIAL DATA |
Not required.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion and analysis of the results of financial condition and results of operations for the fiscal yearsyears ended December 31, 20152020 and 2014 2019 should be read in conjunction with our consolidated financial statements, and the notes to those consolidated financial statements that are included elsewhere in this Form 10-K. References in this section to "we," "us," "our" or "Blackboxstocks" are to the consolidated business of Tiger Trade.
Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as "anticipate," "estimate," "plan," "project," "continuing," "ongoing," "expect," "believe," "intend," "may," "will," "should," "could,"“anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
We are 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 employs “predictive technology” enhanced by artificial intelligence to find volatility and unusual market activity that may result in the rapid change in the trading price of a stock or option. Our Blackbox System continuously scans the NASDAQ, NYSE, CBOE, and other options markets, analyzing over 8,000 stocks and up to 1,000,000 options contracts multiple times per second. We also provide our users with a fully interactive social media platform that is integrated into our dashboard, enabling our users to exchange information and ideas quickly and efficiently through a common network. We recently introduced a live audio/video feature that allows our members to broadcast on their own channels to share trade strategies and market insight within the Blackbox community.
We launched our platform for domestic use and made it available to subscribers in September 2016. Subscriptions for the use of the reverse acquisition transaction effected with Tiger Trade, the Company changed its focusplatform are sold on a monthly and/or annual subscription basis to the business of developing, marketingindividual consumers through our website at http://www.blackboxstocks.com.
Our principal office is located at 5430 LBJ Freeway, Suite 1485, Dallas, Texas 75240 and distributing the Blackbox System, a real time analytical platform to serve as a tool for day traders and swing tradersour telephone number is (972) 726-9203. Our Common Stock is quoted on the OTC NYSE, AMEX and NASDAQ markets. On March 9, 2016,Pink under the Company changed its name to Blackboxstocks Inc.
Basis of Presentation of Financial Information
The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America ("GAAP"(“GAAP”), which contemplate continuation of the Company as a going concern, which is dependent upon the Company's ability to obtain sufficient financing or establish itself as a profitable business. At December 31, 2015,2020 and 2019, the Company had an accumulated deficit of $620,511$7,184,818 and $6,829,907, respectively, and for the yearyears ended December 31, 2015,2020 and 2019 the Company incurred net losses of $423,480. Management expects that$354,911 and $2,983,438, respectively. In November 2020, the Company executed a Loan Agreement with certain lenders (the “Lenders”) and FVP Servicing LLC, (“FVP”), as agent for the Lenders in connection with the issuance of a Note in the amount of $1,000,000 bearing interest at 12% per annum with an initial maturity of November 12, 2022. Simultaneously, with the execution of the Loan Agreement, the Company repaid an existing secured note payable in the amount of $100,000 along with accrued interest, and certain outstanding trade payables in the amount of $133,880. In addition, the Company granted the Lender a security interest in substantially all of its assets. As a result of this financing and the cash flows from operations, the Company had a cash balance of $972,825 at December 31, 2020. Management believes that this will needbe sufficient to fund its operations and service its debt for the next twelve months. In addition, management may continue to raise substantial additional debt or equity capital through sales of equityin order to improve liquidity or debt securities to pursue its business plans and sustain operations until such time as the Company can achieve profitability. However, therefinance more aggressive growth or development. There can be no assurance that managementthe Company will be successful in obtainingable to raise additional fundingcapital or in attaining profitable operations.
The financial statements do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation.
Recently Issued Accounting Pronouncements
During the year ended December 31, 20152020 and through April 12, 2016,March 31, 2021, there were several new accounting pronouncements issued by the Financial Accounting Standards Board ("FASB"(“FASB”). Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company'sCompany’s financial statements.
All other new accounting pronouncements issued but not yet effective or adopted have been deemed not to be relevant to us, hence are not expected to have any impact once adopted.
Summary of Significant Accounting Policies
Use of Estimates
The Company’s financial statement preparation of financial statements in conformity with GAAP requires that management to make estimates and assumptions thatwhich affect the reported amountsreporting of assets and liabilities and the related disclosure of contingent assets and liabilities at the date thein order to report these financial statements and the reported amount of revenues and expenses during the reporting period.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 Cash Equivalents
Fair Value of Financial Instruments
The Financial Accounting Standards Board's ("FASB"Board’s (“FASB”) Accounting Standards Codification ("ASC"(“ASC”) Topic 820, Fair Value Measurement, defines fair value, establishes a framework for measuring fair value in accordance with GAAP,U.S. generally accepted accounting principles, and requires certain disclosures about fair value measurements. In general, fair values of financial instruments are based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the customer'scustomer’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time.
Derivative Financial Instruments
FASB ASC Topic 820, Fair Value Measurement requires bifurcation of certain embedded derivative instruments, and measurement at their fair value for accounting purposes. A holder redemption feature embedded in the Company’s notes payable requires bifurcation from its host instrument and is accounted for as a freestanding derivative.
Recently Issued Accounting Pronouncements.
During the years ended December 31, 2020 and 2019, there were several new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”). Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s financial statements.
Property and Equipment
The Company’s property and outside firms. The Company's softwareequipment is still in development and will be expensed until the software reaches technological feasibility.
Income Taxes
The Company recognizeswill recognize deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.
Management evaluates the probability of the realization of its deferred income tax assets. Management determined that because the Company has not yet generated taxable income, it is unlikely that a tax benefit will be realized from these operating loss carry forwards and deductible temporary differences.forwards. Accordingly, the deferred income tax asset is offset by a full valuation allowance.
In accordance with ASC Topic 740, Income Taxes, the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be capable of withstanding examination by the taxing authorities based on the technical merits of the position. These standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
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 Stockcommon stock shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities by including other potential Common Stock,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 Stockcommon shares outstanding for the period. Therefore, because including shares issuable upon conversion of convertible securities and/or exercise of outstanding options and warrants issued 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. At December 31, 2015 the potential dilution would be 5,000,000 Common Stock shares in the event that the issued and outstanding sharesstatements for period of Company Preferred Stock are converted. The Company had no potential dilution as of December 31, 2014.
Share-Based Payment
Under ASC Topic 718, Compensation -Stock Compensation, all share based payments to employees, including share option grants, are to be recognized in the statement of operations based on their fair values. Although no shares were issued as compensation, Gust Kepler, our sole Director and the President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company, was issued 10,000,000 shares of Tiger Trade Common Stock (which was subsequently exchanged for the same number of shares of Company Common Stock) in exchange for his rights to certain design services, trade dress and website domains. Karma Blackbox, LLC, a Company stockholder and primary vendor, was issued 5,000,000 shares of Tiger Trade Common Stock (which was subsequently exchanged for the same number of shares of Company Common Stock) in exchange for its contribution of application development services during the period April 28, 2014 through December 31, 2014. No additional share based payments were issued duringfor the yearyears ended December 31, 2015.
Revenue Recognition
Revenue is recognized from the sale of its subscriptions when persuasive evidencefor the use of an arrangement exists, delivery and collectability is probable.the Blackbox System web application, on a monthly or annual basis. Revenue generally is recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities. The performance obligation by the Company is in exchange for the monthly subscription fee, the subscriber is allowed access to the Blackbox System on the website for the calendar month. Revenue related to annual subscriptions is recognized each month with unearned subscriptions reflected as a current liability.
Other Liabilities
The Company planned the development of a future product, a complimentary platform to share its IP protocol with the current Blackbox System on a subscription basis. The future product was not developed and launched. The Company received advance payments from a new subscriber group in anticipation of the development of this future product and the amounts were deferred and in the first quarter 2021 the subscribers agreed to terminate those agreements. As of December 31, 20152020, the Company continueshas received $180,000 from this future subscriber group.
Prepaid Expenses
Prepaid expenses are current assets created when the Company makes payments or incurs an obligation for expenses identified for a future period. These amounts are charged to develop its software and has generated no revenues.
Contingencies
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company'sCompany’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company'sCompany’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.
If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company'sCompany’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
Reclassification
Affiliate referral expenses totaling $121,227 for the year ended December 31, 2019 have been reclassed from cost of Operation
Liquidity and Capital Resources
At December 31, 2015,2020, the Company had a cash balance of $60,286, which was raised$972,825 and a working capital deficit of $990,738 as compared to a cash balance of $21,172 and a working capital deficit of $3,525,306 at December 31, 2019. In addition, the Company incurred a net loss of $354,911 for the year ended December 31, 2020. The Company generated cash flow from operations of $143,580 for the year ended December 31, 2020 as compared to cash used by virtueoperations of $710,992 in the prior year.
The Company believes that it has sufficient capital resources to fund its current operations and debt service requirements.
Loan Agreement
On November 12, 2020, the Company executed a Loan Agreement with certain lenders (the “Lenders”) and FVP Servicing LLC, (“FVP”), as agent for the Lenders in connection with the issuance of a private offeringNote (the “FPV Note”) in the amount of common stock$1,000,000 bearing interest at 12% per annum with an initial maturity of Tiger TradeNovember 12, 2022. Simultaneously, with the execution of the Loan Agreement, the Company repaid an existing secured note payable in the amount of $100,000 along with accrued interest and certain outstanding trade payables in the amount of $133,880.
Sale of Common Stock and Warrants
During the year ended December 31, 2020, the Company received subscriptions for the purchase of 346,533 shares of Common Stock at $0.50a cash price of $1.95 per share which were subsequently exchanged for aggregate cash consideration of $407,982 In connection with certain of the sales, warrants to purchase up to 35,259 shares of Companythe Company’s Common Stock. SuchStock at a cash amount is not sufficientprice of $1.95 per share were issued to fund our 12-month plan of operation. As such, we will need to raise additional funds to carry out our 12-month plan of operation and fund our ongoing operational expenses including the completioncertain of the developmentsubscribers.
During the year ended December 31, 2020, the Company also issued an aggregate of the Blackbox System104,339 shares of Common Stock, for settlement of debt obligations and marketing of the product. We expect that costs and expenses necessary to implement our planned product development and marketing operations over the next 12 months will be between $1 Million to $2 Million. services rendered valued at $205,950.
Additional funding is expected to be generated as necessary through equity financing from the sale of our Common Stock and/or debt. If we are successful in completing equity financing, existing stockholders will experience dilution of their interest in our Company. We do not currently have any financing arranged and we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our Common Stock or debt to fund our 12-month planplans of operation and ongoing operational expenses. In the absence of such financing, our business will likely fail. These factors raise substantial doubt about our ability to continue as a going concern and the accompanying financial statements do not include any adjustments related to the recoverability or classification of asset carrying amounts or the amounts and classification of liabilities that may result should we be unable to continue as a going concern.
Results of Operations
Comparison of Years Ended December 31, 20152020 and for2019
For the period April 28, 2014 (inception) throughyears ending December 31, 2014
For the year ending December 31, 2020, the Company had operating expenses totaling $423,480$2,578,941 compared to $197,031$1,372,530 for the for thesame period April 28, 2014 (inception) through December 31, 2014,in 2019, an increase of $226,449. This change is primarily a result$1,206,411. Operating expenses were 76.6% of an increase inrevenues for the year ended December 31, 2020 as compared to 129.2% of revenues for the year ended December 31, 2019. Selling general and administrative expenses increased by $724, 361 but decreased as a percentage of approximately $159,698sales from 98.0% to 52.4% for the year ended December 31, 2020. The increase was primarily due to our engagement of additional contractorshigher consulting, salary and selling expenses. Advertising and marketing expenses increased by $444,236 to perform services$705,706 for the Company.year ended December 31, 2020 but declined as a percentage of sales to 21.0% as compared to 24.6% for the prior year. In addition, software development costs increased approximately $66,481$43,072.
Operating loss for the year ended December 31, 2020 declined by $592,335 to $412,698 as compared to the year ended December 31, 2019 due to enhancements made to the Blackbox System to enable it to monitorsubstantially higher revenues and analyze additional stocks and exchanges.
Off Balance Sheet Arrangements
We do not have any off balance sheet arrangements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Our Company is a "smaller“smaller reporting company"company” as defined by Rule 12b-2 of the Exchange Act, and as such, is not required to provide the information required under this Item.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
All financial statements required by this Item are presented beginning on Page F-1, and are incorporated herein by this reference.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None.
Gust Kepler, our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of December 31, 2015,2020, pursuant to Exchange Act Rule 13a-15. Such disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company is accumulated and communicated to the appropriate management on a basis that permits timely decisions regarding disclosure. Based upon that evaluation, the Company's principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures as of December 31, 20152020 were not effective to provide reasonable assurance that information required to be disclosed in the Company'sCompany’s periodic filings under the Exchange Act is accumulated and communicated to our management to allow timely decisions regarding required disclosure.
Management's Annual Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company's internal control over financial reporting includes those policies and procedures that:
● | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
● | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and |
● | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In connection with the preparation of our annual financial statements, Gust Kepler, our principal executive officer and principal financial officer, has assessed the effectiveness of internal control over financial reporting as of December 31, 2015,2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or the COSO Framework. Management'sFramework, and SEC guidance on conducting such assessments. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of those controls. Based on this evaluation and qualified by the "Limitations“Limitations on Effectiveness of Controls"Controls” set forth in this Item 9A below, management has determined that as of December 31, 2015,2020, our internal controls over financial reporting were not effective and there are material weaknesses in our internal control over financial reporting.
The Company'sCompany’s management has identified a material weakness in the effectiveness of internal control over financial reporting related to a shortage of resources in the accounting department required to assure appropriate segregation of duties with employees having appropriate accounting qualifications.
Attestation Report of the Registered Public Accounting Firm
This annual reportAnnual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company'sCompany’s registered public accounting firm pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, wherein non-accelerated filers are exempt from Sarbanes-Oxley internal control audit requirements.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial reporting during the fourth quarter of the year ended December 31, 20152020 that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.
Limitations on the Effectiveness of Controls
Our disclosure controls and procedures provide our principal executive officer and principal financial officer with reasonable assurances that our disclosure controls and procedures will achieve their objectives. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting can or will prevent all human error. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Furthermore, the design of a control system must reflect the fact that there are internal resource constraints, and the benefit of controls must be weighed relative to their corresponding costs. Because of the limitations in all control systems, no evaluation of controls can provide complete assurance that all control issues and instances of error, if any, within our company are detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur due to human error or mistake. Additionally, controls, no matter how well designed, could be circumvented by the individual acts of specific persons within the organization. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all potential future conditions.
Management is aware that there is a lack of segregation of duties at the Company due to the fact that the Company only has one director and executive officer dealing with general administrative and financial matters. This constitutes a significant deficiency in the internal controls. Management has decided that considering the officer/director involved, the control procedures in place, and the outsourcing of certain financial functions, the risks associated with such lack of segregation were low and the potential benefits of adding additional employees to clearly segregate duties did not justify the expenses associated with such increases. Management periodically reevaluates this situation. In light of the Company'sCompany’s current cash flow situation, the Company does not intend to increase staffing to mitigate the current lack of segregation of duties within the general administrative and financial functions.
None.
Directors and Executive Officers
The following individualindividuals currently servesserve as the sole director and executive officerofficers of our Company. All directors of our Company hold office until the next annual meeting of shareholders or until their successors have been elected and qualified. The executive officers of our Company are appointed by our Board of Directors and hold office until their death, resignation or removal from office.
Sole Director and Executive Officers | Age | Date of Appointment | Position(s) Held |
Gust Kepler | 56 | December 1, 2015 | Director, President, Chief Executive Officer, Chief Financial Officer and Secretary |
Jeff Sharrock | 56 | January 1, 2016 | Vice President of Operations |
Gust Kepler
was appointed to serve as a director and our President, Chief Executive Officer, Chief Financial Officer and Secretary on December 1, 2015. Mr. Kepler also serves as the President of G2 International, Inc.Jeff Sharrock was appointed to serve as our Vice President of Operations on January 1, 2016. Mr. Sharrock oversees accounting, communications and IT solutions for the CompanyCompany. He is also in charge of financial analysis, budgeting, compliance and any employeecorporate governance for Blackboxstocks.com. Prior to joining Blackboxstocks, Mr. Sharrock served as the Director of Operations for G2 International, Inc. G2 is an investment banking consulting firm specializing in taking private companies public and providing those companies with advice regarding capitalization, strategic planning and investor relations. Mr. Sharrock oversaw all aspects of daily operations and was heavily involved in the accounting and regulatory aspects of the datecompany. He also served as the main point of this report.
Involvement in Certain Legal Proceedings
Neither our sole director Gust Kepler,nor any executive officer has not been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, nor has he been a party to any judicial or administrative proceeding during the past ten years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction or settlement.
Code of Ethics for Financial Executives
The Company has not yet adopted a Financial Code of Ethics applicable to our directors, officers and employees due to the fact that the Company only has one person (Gust Kepler) currently serving as a director and two persons (Gust Kepler and Jeff Sharrock) serving as executive officer and one employee (Jeff Sharrock) who serves as our Vice President of Operations.officers. The Board of Directors plans to adopt a Code of Ethics as it deems appropriate, when and if it adds additional directors, officers and employees.
Board Committees and Financial Expert
The Company does not currently maintain separate audit, nominating or compensation committees. When necessary, the entire Board of Directors performs the tasks that would be required of those committees. Furthermore, we do not have a qualified financial expert serving on the Board of Directors at this time, because we have not been able to hire a qualified candidate and we have inadequate financial resources at this time to hire such an expert.
The following table sets forth all compensation for the last two fiscal years awarded to, earned by or paid our chief executive officer and our only other compensated executive officer serving during the last completed fiscal year (collectively, the "Named Executives"):
Summary Compensation Table
Name and Principal Position | Year | Salary | All other Compensation (1)($) | Total ($) | |||||||||
Gust Kepler, Director, President, Chief Executive Officer, | 2020 | $ | 12,000 | $ | 11,120 | (2) | $ | 23,120 | |||||
| Chief Financial Officer and Secretary | 2019 | $ | 12,000 | $ | -- | $ | 12,000 | ||||||
Jeff Sharrock, Vice President of Operations | 2020 | $ | 73,000 | $ | 6,352 | (2) | $ | 79,352 | |||||
| 2019 | $ | 73,008 | $ | 500 | (2) | $ | 73,508 | ||||||
(1) | Other than the remuneration discussed above, we have no retirement, pension, profit sharing, stock option or similar program for the benefit of the officers, directors or employees of the Company. |
(2) | Reflects cash bonus payment. |
Narrative Disclosure to Summary Compensation Table
We paid salaries to both of Named Executives in 2020 and 2019. Mr. Kepler is paid an annual salary of $12,000 and Mr. Sharrock is paid an annual salary of $73,000. Mr. Kepler was paid a discretionary cash bonus of $11,120 in 2020. Mr. Sharrock was also paid discretionary bonuses of $6,352 in 2020 and $500 in 2019. All compensation was paid in cash pursuant to standard Company payroll practices. We do not have arrangements with any of our excutive officers have received compensation for services rendered inemployees, including the Named Executives, to pay or provide any capacity on behalf of the Company during the years ended December 31, 2015 and 2014.
The Company has not entered into anany other employment agreement or consulting agreement with any officer or director of the Company providing for compensation and there are no arrangements or plans pursuant to whichall serve at the Company provides pension, retirement, perquisites or similar benefits for executive officers.
The Company has no equity compensation plans.
Compensation of Directors
The Company does not pay compensation to its directors for their service at this time. Furthermore, the Company has no present formal plan for compensating our directors for their service in their capacity as such.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
The following table sets forth certain information as of the date hereof with respect to the holdings of: (1) each person known to us to be the beneficial owner of more than 5% of our Common Stock; (2) each of our directors, nominees for director and named executive officers; and (3) all directors and executive officers as a group. To the best of our knowledge, each of the persons named in the table below as beneficially owning the shares set forth therein has sole voting power and sole investment power with respect to such shares, unless otherwise indicated. Applicable percentages are based upon 20,000,0008,579,877 shares of Common Stock and 5,000,000 shares of Preferred Stock outstanding as of April 8, 2016.March 17, 2021. Unless otherwise specified, the address of each of the persons set forth below is in care of the Company, at the address of 5430 LBJ Freeway, Suite 1485, Dallas, Texas 75240.
| Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Owner | Percent of Class |
| Common Stock | |||
| As a Group | Officers and Directors (1 person) | 9,064,990 | 45% |
| As Individuals | Gust Kepler | 9,064,990 | 45% |
Karma Black Box, LLC 2 Lake Forest Court Trophy Club, Texas 76262 | 5,000,000 | 25% | |
| Series A Preferred Stock | |||
| As a Group | Officers and Directors (1 person) | 5,000,000 | 100% |
| As Individuals | Gust Kepler | 5,000,000 | 100% |
Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Owner | Percent of Class | ||||||
Common Stock | |||||||||
As a Group | Officers and Directors (1 person) | 2,331,668 | 27 | % | |||||
As Individuals | Gust Kepler | 2,331,668 | 27 | % | |||||
David Kyle | 833,334 | 10 | % | ||||||
Eric Pharis 2 Lake Forest Court Trophy Club, Texas 76262 | 791,615 | 9 | % | ||||||
Stephen Chiang 8 Kitchener Link City Square Residences #21-14 Singapore 207226 | 1,000,000 | 12 | % | ||||||
Series A Preferred Stock | |||||||||
As a Group | Officers and Directors (1 person) | 5,000,000 | 100 | % | |||||
As Individuals | Gust Kepler | 5,000,000 | 100 | % | |||||
There are no arrangements, known to the Company, the operation of which would result in a change in control of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
Transactions with Related Persons
As of January 1, 2020, the Company and Snotarator, L.L.C. extended the term of the Snotarator Distributor Agreementwas owed $9,823 from May 15, 2015 to May 15, 2017 by mutual written agreement. Orsolya Peresztegi and Kevin Halter are the owners of Snotarator LLC. The Snotarator Distributor Agreement related to the Snotarator and Snotaphant Nasal Aspirator products. Snotarator Nasal Aspirator and Snotaphant Nasal Aspirator are registered trademarks owned by Snotarator LLC, the use of which was granted to the Company pursuant to the terms of the distributor agreement. Subsequently, on December 1, 2015, the Company entered into a Termination of Distributor Agreement and Release with Snotarator LLC terminating the Snotarator Distributor Agreement.
During the Company's sole officer onyear ended December 31, 2019 the Closing Date, resigned as an officerCompany advanced $1,500 to its VP/Director of Operations and the balance remains outstanding, is unsecured and bears no interest.
During the years ended December 31, 2020 and 2019, the Company engaged the services of EDM Operators (“EDM”), which is owned by Company stockholders Eric Pharis and David Kyle, for application development services of the CompanyCompany’s Blackbox System technology. During the years ended December 31, 2020 and 2019, EDM was paid $40,200 and $13,500 for services, respectively.
G2 International, Inc. (“G2”), which does business as IPA Tech Group (“IPA”), is a company wholly owned by Gust C. Kepler, was appointed as thea Director, President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company, and (2) Mr. Kepler was appointed to serve as a directorthe Company’s controlling stockholder. As of the Company. Gust Kepler also became the holder of Ten Million (10,000,000) shares of Company Common Stock, or approximately 47.52%, of the issued and outstanding Company Common Stock and Five Million (5,000,000) shares of Company Preferred Stock, or 100% of the issued and outstanding Company Preferred Stock.
Director Independence
Our Board of Directors is currently composed of one member who does not qualify as an independent director in accordance with the published listing requirements of the NASDAQ Global Market.
PRINCIPAL ACCOUNTANT FEES AND SERVICES |
The Company does not currently maintain a separate audit committee. When necessary, the entire Board of Directors performs the tasks that would be required of an audit committee
On May 13, 2014 Goldman decided not to accept the engagement to audit our financial statements due to such firm's limited staff.
Audit Fees
The aggregate fees billed by Turner Stone for professional services rendered for the audit of our annual financial statements for 20142019 and 20152020 and the reviews of the financial statements included in our Forms 10-Q and 8-K, or services normally provided by the accountant in connection with statutory and regulatory filings for those fiscal years were $48,575.
Audit-Related Fees
No fees or expenses were billed by Goldman for professional services rendered for the audit of our annual financial statements for 2014 and the reviews of the financial statements included in our Forms 10-Q or services normally provided by the accountant in connection with statutory and regulatory filings for that fiscal year.
Tax Fees
The aggregate fees or expenses were billed by Turner Stone or DKM in fiscal years 20152019 or 2014 for professional services rendered, other than the fees disclosed above under the caption "Audit Fees" for assurance and related services relating to performance of the audit or review of our financial statements.
All Other Fees
We incurred no other fees or expenses for the 20152019 or 20142020 fiscal years for any other products or professional services rendered by Turner Stone Goldman or DKM other than as described above.
(a) | Financial Statements |
The following documents are filed as part of this Annual Report on Form 10-K beginning on the pages referenced below:
Page | |
F-1 | |
F-2 | |
F-3 | |
F-4 | |
F-5 | |
F-6 – |
(b) | Exhibits |
The following exhibits are filed with this Annual Report on Form 10-K or are incorporated by reference as described below.
Exhibit | Description |
2.1 | |
3.1 |
3.2 | |
3.3 | |
3.4 | |
3.5 | |
4.1 | |
4.2 | |
4.3 | |
4.4 |
4.5 | |
10.1 | |
10.2 | |
10.3 | |
10.4 | |
10.5 | |
10.6 | |
10.7 | Security Agreement dated |
31.1 |
Certification of Principal Executive Officer pursuant to Rule 13a-14a/Rule 14d-14(a)* | |
31.2 | Certification of Principal Financial Officer pursuant to Rule 13a-14a/Rule 14d-14(a)* |
32.1 | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.* |
32.2 | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.* |
101.1 | Interactive data files pursuant to Rule 405 of Regulation S-T* |
* Filed herewith.
None.
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 31, 2021 | |||
BLACKBOXSTOCKS INC. | |||
By: | /s/ Gust Kepler | ||
Gust Kepler | |||
President, Chief Executive Officer and Secretary and Accounting Officer) | |||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE | TITLE | DATE | ||
/s/ Gust Kepler | ||||
| Gust Kepler | President, Chief Executive Officer, Secretary and Director (Principal Executive Officer and Principal Financial and Accounting Officer) | |||
| March 31, 2021 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders’ and Sole Director of Directors and Stockholders
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Blackboxstocks Inc. and Subsidiary (the "Company"“Company”) atas of December 31, 20152020 and 20142019 and the related consolidated statements of operations, stockholders' equitystockholders’ deficit and cash flows for the yearyears then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20152020 and 2019, and the results of its operations and its cash flows for the period April 28, 2014 (inception) through December 31, 2014. years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on these consolidatedthe Company’s financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. Anmisstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit includesof its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence supportingregarding the amounts and disclosures in the consolidated financial statements. An auditOur audits also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.
/s/Turner, Stone & Company, LLP
Dallas, Texas
March 31, 2021
We have served as the Company’s auditor since 2015.
Balance Sheets
December 31, 2020 and 2019
December 31, | ||||||||
2020 | 2019 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash | $ | 972,825 | $ | 21,172 | ||||
Accounts receivable, net of allowance for doubtful accounts of $68,589 at December 31, 2020 and 2019, respectively | 17,990 | 5,745 | ||||||
Inventory | 17,661 | - | ||||||
Total current assets | 1,008,476 | 26,917 | ||||||
Property and equipment: | ||||||||
Office, computer and related equipment, net of depreciation of $46,679 and $39,526 at December 31, 2020 and 2019, respectively | 3,772 | 9,626 | ||||||
Domain name, net of amortization of $15,282 and $9,551 at December 31, 2020 and 2019, respectively | 1,910 | 7,641 | ||||||
Right of use lease, net of amortization of $97,725 and $51,009 at December 31, 2020 and 2019, respectively | 62,348 | 109,064 | ||||||
Total property and equipment | 68,030 | 126,331 | ||||||
Long term assets: | ||||||||
Advances receivable, related parties (Note 5) | - | 9,823 | ||||||
Prepaid expenses | 44,643 | 80,868 | ||||||
Prepaid expenses, related party (Note 5) | 36,700 | 36,700 | ||||||
Total long term assets | 81,343 | 127,391 | ||||||
Total Assets | $ | 1,157,849 | $ | 280,639 | ||||
Liabilities and Stockholders' Deficit | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 352,545 | $ | 632,287 | ||||
Accrued interest | 10,425 | 42,566 | ||||||
Accrued interest, related party | - | 16,680 | ||||||
Unearned subscriptions | 1,016,157 | 189,007 | ||||||
Lease liability right of use, current | 40,473 | 46,124 | ||||||
Other liabilities | 180,000 | 180,000 | ||||||
Senior secured note payable, current | 10,000 | - | ||||||
Convertible notes payable, net of discount of $194,267 and $13,859 at December 31, 2020 and 2019, respectively (Note 6) | 257,150 | 593,891 | ||||||
Notes payable, net of note discount of $0 and $38,294 at December 31, 2020 and 2019, respectively (Note 6) | 131,605 | 218,138 | ||||||
Notes payable, related party (Note 6) | 859 | 228,000 | ||||||
Derivative liability | - | 1,405,530 | ||||||
Total current liabilities | 1,999,214 | 3,552,223 | ||||||
Long term liabilities: | ||||||||
Senior secured note payable, long term, net of debt issuance costs of $99,852 at December 31, 2020 | 890,148 | - | ||||||
Lease liability right of use, long term | 26,241 | 66,715 | ||||||
Total long term liabilities | 916,389 | 66,715 | ||||||
Commitments and contingencies (Note 8) | ||||||||
Stockholders' Deficit: | ||||||||
Preferred stock, $0.001 par value, 5,000,000 shares authorized; no shares issued and outstanding at December 31, 2020 and 2019, respectively | - | - | ||||||
Series A Convertible Preferred Stock, $0.001 par value, 5,000,000 shares authorized; 5,000,000 issued and outstanding at December 31, 2020 and 2019, respectively | 5,000 | 5,000 | ||||||
Common stock, $0.001 par value, 100,000,000 shares authorized: 8,410,386 and 7,908,231 issued and outstanding at December 31, 2020 and 2019, respectively | 8,410 | 7,908 | ||||||
Common stock, subscribed | 12,500 | 35,060 | ||||||
Additional paid in capital | 5,401,154 | 3,443,640 | ||||||
Accumulated deficit | (7,184,818 | ) | (6,829,907 | ) | ||||
Total Stockholders' Deficit | (1,757,754 | ) | (3,338,299 | ) | ||||
Total Liabilities and Stockholders' Deficit | $ | 1,157,849 | $ | 280,639 | ||||
| Blackboxstocks Inc. (formerly SMSA Ballinger Acquisition Corp.) and Subsidiary | ||||||||
| Consolidated Balance Sheets | ||||||||
| December 31, 2015 and December 31, 2014 | ||||||||
| 2015 | 2014 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | 60,286 | $ | 200,530 | ||||
| Investments, trading | 414 | - | ||||||
| Prepaid expenses | 3,414 | - | ||||||
| Prepaid expenses, related parties (Note 6) | 154,500 | - | ||||||
| Total current assets | 218,614 | 200,530 | ||||||
| Property: | ||||||||
| Computer and related equipment | 15,465 | - | ||||||
| Total property | 15,465 | - | ||||||
| Total Assets | $ | 234,079 | $ | 200,530 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 29,148 | $ | 7,318 | ||||
| Accounts payable, related parties (Note 6) | - | 125,243 | ||||||
| Total current liabilities | 29,148 | 132,561 | ||||||
| Commitments and contingencies (Note 7) | ||||||||
| Stockholders' Equity: | ||||||||
| Preferred stock, $0.001 par value, 5,000,000 shares authorized; | ||||||||
| no shares issued and outstanding at December 31, 2015 and 2014 | - | - | ||||||
| Series A Convertible Preferred Stock, $0.001 par value, 5,000,000 | ||||||||
| shares authorized; 5,000,000 and no shares issued and outstanding | ||||||||
| at December 31, 2015 and 2014, respectively | 5,000 | - | ||||||
| Common stock, $0.001 par value, 100,000,000 shares | ||||||||
| authorized: 20,835,010 and 16,300,000 issued, 20,835,010 and 16,400,000 | ||||||||
| outstanding at December 31, 2015 and 2014, respectively | 20,835 | 16,400 | ||||||
| Additional paid in capital | 799,607 | 298,600 | ||||||
| Treasury stock, no shares at December 31, 2015 and 100,000 shares at | ||||||||
| December 31, 2014, at cost | - | (50,000 | ) | |||||
| Accumulated deficit | (620,511 | ) | (197,031 | ) | ||||
| Total Stockholders' Equity | 204,931 | 67,969 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 234,079 | $ | 200,530 | ||||
The accompanying footnotes are an integral part of these consolidated financial statements.
Statements of Operations
For the years ended December 31, 2020 and 2019
December 31, | ||||||||
2020 | 2019 | |||||||
Revenue: | ||||||||
Subscriptions | $ | 3,340,983 | $ | 1,037,778 | ||||
Other revenues | 23,850 | 24,795 | ||||||
Merchandise sales | 2,730 | - | ||||||
Total revenues | 3,367,563 | 1,062,573 | ||||||
Cost of revenues | 1,201,320 | 695,076 | ||||||
Gross margin | 2,166,243 | 367,497 | ||||||
Operating expenses: | ||||||||
Software development costs | 94,221 | 51,149 | ||||||
Selling, general and administrative | 1,766,130 | 1,041,769 | ||||||
Advertising and marketing | 705,706 | 261,470 | ||||||
Depreciation and amortization | 12,884 | 18,142 | ||||||
Total operating expenses | 2,578,941 | 1,372,530 | ||||||
Operating loss | (412,698 | ) | (1,005,033 | ) | ||||
Interest expense | 174,083 | 65,090 | ||||||
Convertible note financing | 500,469 | 1,240,347 | ||||||
Loss (gain) on derivative liability | (1,155,718 | ) | 83,766 | |||||
Default expense | 24,750 | 57,750 | ||||||
Amortization of debt discount | 398,629 | 531,452 | ||||||
Loss before income taxes | (354,911 | ) | (2,983,438 | ) | ||||
Income taxes | - | - | ||||||
Net loss | $ | (354,911 | ) | $ | (2,983,438 | ) | ||
Weighted average number of common shares outstanding - basic | 8,074,164 | 7,749,695 | ||||||
Net loss per share - basic | $ | (0.04 | ) | $ | (0.38 | ) | ||
| Blackboxstocks Inc.(formerly SMSA Ballinger Acquisition Corp.) and Subsidiary | ||||||||
| Consolidated Statements of Operations | ||||||||
| for the year ended December 31, 2015 and the period April 28, 2014 (inception) through December 31, 2014 | ||||||||
| 2015 | 2014 | |||||||
| Revenue | $ | - | $ | - | ||||
| Cost of operations | - | - | ||||||
| Gross margin | - | - | ||||||
| Expenses: | ||||||||
| Software development costs | 185,324 | 118,843 | ||||||
| General and administrative | 238,156 | 78,188 | ||||||
| Total operating expenses | 423,480 | 197,031 | ||||||
| Operating loss | (423,480 | ) | (197,031 | ) | ||||
| Loss before income taxes | (423,480 | ) | (197,031 | ) | ||||
| Income taxes | - | - | ||||||
| Net loss | $ | (423,480 | ) | $ | (197,031 | ) | ||
| Weighted average number of common | ||||||||
| shares outstanding - basic | 17,633,595 | 16,013,360 | ||||||
| Net loss per share - basic | $ | (0.02 | ) | $ | (0.01 | ) | ||
The accompanying footnotes are an integral part of these consolidated financial statements.
Statement of Stockholders' Deficit
For the years ended December 31, 2020 and 2019
Series A Preferred Stock | Preferred Stock | Common Stock | Common Stock | Additional Paid-in | Accumulated | |||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Subscribed | Capital | Deficit | Total | |||||||||||||||||||||||||||||||
Balance at December 31, 2018 | 5,000,000 | $ | 5,000 | - | $ | - | 7,678,047 | $ | 7,678 | $ | 144,060 | $ | 2,543,264 | $ | (3,846,469 | ) | $ | (1,146,467 | ) | |||||||||||||||||||||
Issuance of shares for cash | - | - | - | - | 216,354 | 216 | (109,000 | ) | 430,081 | - | 321,297 | |||||||||||||||||||||||||||||
Issuance of shares in settlement of accrued expenses | - | - | - | - | 13,830 | 14 | - | 127,986 | - | 128,000 | ||||||||||||||||||||||||||||||
Imputed discount on convertible notes payable (Note 6) | - | - | - | - | - | - | - | 342,309 | - | 342,309 | ||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | (2,983,438 | ) | (2,983,438 | ) | ||||||||||||||||||||||||||||
Balance at December 31, 2019 | 5,000,000 | $ | 5,000 | - | - | 7,908,231 | $ | 7,908 | $ | 35,060 | $ | 3,443,640 | $ | (6,829,907 | ) | $ | (3,338,299 | ) | ||||||||||||||||||||||
Issuance of shares for cash, net of fees | - | - | - | - | 346,533 | 347 | - | 430,195 | - | 430,542 | ||||||||||||||||||||||||||||||
Subscription of shares cancelled | - | - | - | - | - | - | (22,560 | ) | - | - | (22,560 | ) | ||||||||||||||||||||||||||||
Issuance of shares pursuant to convertible note payables | - | - | - | - | 51,283 | 51 | - | 145,472 | - | 145,523 | ||||||||||||||||||||||||||||||
Issuance of shares in settlement of expenses | - | - | - | - | 56,339 | 56 | - | 112,294 | - | 112,350 | ||||||||||||||||||||||||||||||
Issuance of shares in exchange for services | - | - | - | - | 48,000 | 48 | - | 93,552 | - | 93,600 | ||||||||||||||||||||||||||||||
Convertible note forbearance extinguishment of derivative liability | - | - | - | - | - | - | - | 522,065 | - | 522,065 | ||||||||||||||||||||||||||||||
Warrants issued for amendment of convertible notes payable | - | - | - | - | - | - | - | 653,936 | - | 653,936 | ||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | (354,911 | ) | (354,911 | ) | ||||||||||||||||||||||||||||
Balance at December 31, 2020 | 5,000,000 | $ | 5,000 | - | - | 8,410,386 | $ | 8,410 | $ | 12,500 | $ | 5,401,154 | $ | (7,184,818 | ) | $ | (1,757,754 | ) | ||||||||||||||||||||||
| Blackboxstocks Inc. (formerly SMSA Ballinger Acquisition Corp.) and Subsidiary | ||||||||||||||||||||||||||||||||||||||||
| Consolidated Statement of Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||
| For the year ended December 31, 2015 and the period April 28, 2014 (inception) through December 31, 2014 | ||||||||||||||||||||||||||||||||||||||||
| Additional | ||||||||||||||||||||||||||||||||||||||||
Series A Preferred Stock | Preferred Stock | Common Stock | Paid-in | Accumulated | Treasury | |||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Stock | Total | |||||||||||||||||||||||||||||||
| Balance at April 28, 2014 | - | $ | - | - | $ | - | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||||||||||
| Issuance of shares in exchange for design services of trade | ||||||||||||||||||||||||||||||||||||||||
| dress and initial creation of application software | - | - | - | - | 15,000,000 | 15,000 | - | - | - | 15,000 | ||||||||||||||||||||||||||||||
| Issuance of shares in exchange for cash | - | - | - | - | 1,400,000 | 1,400 | 298,600 | - | - | 300,000 | ||||||||||||||||||||||||||||||
| Purchase of treasury stock | - | - | - | - | - | - | - | - | (50,000 | ) | (50,000 | ) | ||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | (197,031 | ) | - | (197,031 | ) | ||||||||||||||||||||||||||||
| Balance at December 31, 2014 | - | - | - | - | 16,400,000 | 16,400 | 298,600 | (197,031 | ) | (50,000 | ) | 67,969 | ||||||||||||||||||||||||||||
| Issuance of shares in exchange for cash | - | - | - | - | 1,600,000 | 1,600 | 798,400 | - | - | 800,000 | ||||||||||||||||||||||||||||||
| Issuance of shares in exchange for cash | 5,000,000 | 5,000 | - | - | - | - | - | - | - | 5,000 | ||||||||||||||||||||||||||||||
| Retirement and cancellation of treasury shares | (100,000 | ) | (100 | ) | (49,900 | ) | 50,000 | - | ||||||||||||||||||||||||||||||||
| Issuance of shares by SMSA in reverse merger transaction | 10,030,612 | 10,031 | (9,589 | ) | 442 | |||||||||||||||||||||||||||||||||||
| Purchase and cancellation of shares in exchange for cash | (7,095,602 | ) | (7,096 | ) | (237,904 | ) | (245,000 | ) | ||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | (423,480 | ) | - | (423,480 | ) | ||||||||||||||||||||||||||||
| Balance at December 31, 2015 | 5,000,000 | $ | 5,000 | - | $ | - | 20,835,010 | $ | 20,835 | $ | 799,607 | $ | (620,511 | ) | $ | - | $ | 204,931 | ||||||||||||||||||||||
The accompanying footnotes are an integral part of these consolidated financial statements.
| Blackboxstocks Inc. (formerly SMSA Ballinger Acquisition Corp.) and Subsidiary | ||||||||
| Consolidated Statements of Cash Flows | ||||||||
| for the year ended December 31, 2015 and the period April 28, 2014 (inception) through December 31, 2014 | ||||||||
| 2015 | 2014 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (423,480 | ) | $ | (197,031 | ) | ||
| Adjustments to reconcile net loss to net cash used in | ||||||||
| operating activities: | ||||||||
| Common stock issued in exchange for software development | - | 15,000 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Investments, trading | (414 | ) | - | |||||
| Prepaid expenses | (3,414 | ) | - | |||||
| Prepaid expenses, related parties | (154,500 | ) | - | |||||
| Accounts payable | 21,830 | 7,318 | ||||||
| Accounts payable, related parties | (125,243 | ) | 125,243 | |||||
| Net cash used in operating activities | (685,221 | ) | (49,470 | ) | ||||
| Cash flows from investing activities | ||||||||
| Advance to stockholder | - | (50,000 | ) | |||||
| Cash received in reverse merger transaction | 442 | - | ||||||
| Purchases of fixed assets | (15,465 | ) | - | |||||
| Net cash used in investing activities | (15,023 | ) | (50,000 | ) | ||||
| Cash flows from financing activities | ||||||||
| Common stock issued for cash | 800,000 | 300,000 | ||||||
| Preferred stock issued for cash | 5,000 | - | ||||||
| Payment for cancellation of common stock | (245,000 | ) | - | |||||
| Net cash provided by financing activities | 560,000 | 300,000 | ||||||
| Net increase(decrease) in cash | (140,244 | ) | 200,530 | |||||
| Cash - beginning of period | 200,530 | - | ||||||
| Cash - end of period | $ | 60,286 | $ | 200,530 | ||||
| Supplemental disclosure- | ||||||||
| Non-cash investing and financing activities: | ||||||||
| Repurchase of shares to hold in treasury in exchange for stockholder advance | $ | - | $ | 50,000 | ||||
| Cancellation of treasury shares | $ | 50,000 | $ | - | ||||
Statements of Cash Flows
For the years ended December 31, 2020 and 2019
December 31, | ||||||||
2020 | 2019 | |||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (354,911 | ) | $ | (2,983,438 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization expense | 12,884 | 18,142 | ||||||
Amortization of note discount | 398,629 | 531,452 | ||||||
Shares issued in settlement of financing costs | 105,850 | - | ||||||
Shares issued in settlement of services | 100,100 | - | ||||||
Expenses paid by lender | 6,030 | 27,385 | ||||||
Convertible note financing | 500,469 | 1,240,347 | ||||||
Change in fair value of derivative liability | (1,155,718 | ) | 83,766 | |||||
Convertible note default expense | 24,750 | 57,750 | ||||||
Financing cost | - | 26,396 | ||||||
Right of use lease expense | 591 | - | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (12,245 | ) | (2,026 | ) | ||||
Inventory | (17,661 | ) | - | |||||
Prepaid expenses | 36,225 | 26,778 | ||||||
Accounts payable | (279,742 | ) | 107,151 | |||||
Accrued interest | (32,141 | ) | 41,732 | |||||
Accrued interest, related party | (16,680 | ) | 14,600 | |||||
Unearned subscriptions | 827,150 | 98,973 | ||||||
Net cash provided by (used in) operating activities | 143,580 | (710,992 | ) | |||||
Cash flows from investing activities | ||||||||
Cash repayments from related parties | 9,823 | - | ||||||
Purchases of property and equipment | (1,299 | ) | (1,587 | ) | ||||
Net cash provided by (used in) investing activities | 8,524 | (1,587 | ) | |||||
Cash flows from financing activities | ||||||||
Common stock issued for cash | 430,542 | 321,297 | ||||||
Common stock subscribed | (22,560 | ) | - | |||||
Proceeds from issuance of notes payable | 1,127,100 | 251,455 | ||||||
Debt issuance costs | (99,852 | ) | - | |||||
Proceeds from issuance of convertible notes payable | 100,000 | 473,725 | ||||||
Proceeds from Payroll Protection Program Loan | 130,200 | - | ||||||
Principal payments on notes payable | (457,657 | ) | (294,522 | ) | ||||
Principal payments on convertible notes payable | (181,083 | ) | - | |||||
Principal payments on notes payable, related parties | (227,141 | ) | - | |||||
Cash advances from related parties | - | 109,342 | ||||||
Cash repayments to related parties | - | (155,547 | ) | |||||
Net cash provided by financing activities | 799,549 | 705,750 | ||||||
Net increase (decrease) in cash | 951,653 | (6,829 | ) | |||||
Cash - beginning of year | 21,172 | 28,001 | ||||||
Cash - end of year | $ | 972,825 | $ | 21,172 | ||||
Supplemental disclosures | ||||||||
Interest paid | $ | 186,516 | $ | 2,000 | ||||
Income taxes paid | $ | - | $ | - | ||||
Non-cash investing and financing activities: | ||||||||
Repayment of note in exchange for note payable | $ | (39,370 | ) | $ | - | |||
Common stock issued in settlement of accrued expenses | $ | - | $ | 128,000 | ||||
Common stock issued in settlement of convertible notes payable | $ | 100,000 | $ | - | ||||
Lease, right of use and liability | $ | - | $ | 160,073 | ||||
Discount on notes payable | $ | 69,500 | $ | - | ||||
Discount on convertible notes payable | $ | - | $ | 342,309 | ||||
Debt discount on convertible notes payable | $ | - | $ | 131,417 | ||||
Financing costs on funding agreements | $ | - | $ | 84,445 | ||||
Repayment of note payable, related party in exchange for advances | $ | 2,933 | $ | - | ||||
Issuance of warrants for forbearance agreements | $ | 371,243 | $ | - | ||||
The accompanying footnotes are an integral part of these consolidated financial statements.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019
1. ORGANIZATION
Blackboxstocks Inc. (formerly SMSA Ballinger Acquisition Corp.(the “Company”) and Subsidiary
The Company changed its name to Blackboxstocks, Inc. and began operating as a share purchase agreement with Orsolya Peresztegi pursuantfinancial 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 which she acquired 9.5 million shares of our Company Common Stock, par value $0.001 ("Company Common Stock") for $9,500 cash, or $0.001 per share. As afind volatility and unusual market activity that may result of this transaction, there was ain the rapid change in controlthe price of a stock or option. The software continuously scans the NASDAQ, New York Stock Exchange, CBOE, and other options markets, analyzing over 8,000 stocks and up to 1,000,000 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 resulting in Ms. Peresztegi owning 94.7% of our 10,030,612 outstanding shares of Company Common Stock. Asalso introduced a result oflive audio/video feature that allows members to broadcast on their own channels to share trade strategies and market insight within the transaction, Ms. Peresztegi became the Company's sole director and officer.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation-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. At December 31, 2020 and 2019, the Company had an accumulated deficit of $7,184,818 and $6,829,907, respectively, and for the years ended December 31, 2020 and 2019 the Company incurred net losses of $354,911and $2,983,438, respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. As discussed in Note 6, the Company executed a Loan Agreement with certain lenders (the “Lenders”) and FVP Servicing LLC, (“FVP”), as agent for the Lenders in connection with the issuance of a Note in the amount of $1,000,000 bearing interest at 12% per annum with an initial maturity of November 12, 2022. Simultaneously, with the execution of the Loan Agreement, the Company repaid an existing secured note payable in the amount of $100,000 along with accrued interest, and certain outstanding trade payables in the amount of $133,880. In addition, the Company granted the Lender a security interest in substantially all of its assets. As a result of this financing and the cash flows from operations, the Company had a cash balance of $972,825 at December 31, 2020. Management believes that this will be sufficient to fund its operations and service its debt for the next twelve months. In addition, management may continue to raise additional debt or equity capital in order to improve liquidity or finance more aggressive growth or development. There can be no assurance that the Company will be able to raise additional capital or on what terms.
The financial statements do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation.
Use of Estimates-EstimatesBlackboxstocks'. 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 accounting principles generally accepted in the United States of America.GAAP. Actual results could differ from those estimates.
Cash
Fair Value of Financial Instruments-Instruments
Derivative Financial Instruments. FASB ASC Topic 820, Fair Value Measurement requires bifurcation of certain embedded derivative instruments, and measurement at their fair value for accounting purposes. A holder redemption feature embedded in the Company’s notes payable requires bifurcation from its host instrument and is accounted for as a freestanding derivative.
Recently Issued Accounting Pronouncements
Property and Equipment-Equipment
Income Taxes-Taxes
Management evaluates the probability of the realization of its deferred income tax assets. Management determined that because the Company has not yet generated taxable income, it is unlikely that a tax benefit will be realized from these operating loss carry forwards and deductible temporary differences.forwards. Accordingly, the deferred income tax asset is offset by a full valuation allowance.
In accordance with ASC Topic 740, Income Taxes, the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be capable of withstanding examination by the taxing authorities based on the technical merits of the position. These standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
Earnings or (Loss) Per Share-Share
Share-Based Payment-Payment. Under ASC Topic 718, Compensation -Stock Compensation, all share based payments to employees, including share option grants, are to be recognized in the statement of operations based on their fair values. Although no shares were issued as compensation, Gust C. Kepler, a Director, President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company, was issued 10,000,000 common shares in exchange for his rights to the design services, trade dress and Company website. Karma Blackbox, LLC ("Karma"), a primary vendor was issued 5,000,000 common shares in exchange for its contribution of application development services during the period April 28, 2014 through December 31, 2014. No additional share basedshare-based payments were issued for the yearyears ended December 31, 2015.
Revenue Recognition
Other Liabilities. The Company planned the development of a future product, a complimentary platform to share its IP protocol with the current Blackbox System on a subscription basis. The future product was not developed and launched. The Company received advance payments from a new subscriber group in anticipation of the development of this future product and the amounts were deferred and in the first quarter 2021 the subscribers agreed to terminate those agreements. As of December 31, 2015,2020, the Company continues to develophas received $180,000 from this future subscriber group.
Software Development Costs. Blackboxstocks is engaged in the development of its softwareproprietary Blackbox System technology, a proprietary algorithm driven system, through a combination of in-house system analysts and has generated no revenues.
Contingencies-Prepaid Expenses
Contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company'sCompany’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company'sCompany’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.
If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company'sCompany’s financial statements.
If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
Reclassification. Affiliate referral expenses totaling $121,227 for the year ended December 31, 20152019 have been reclassed from cost of revenues to advertising and marketing expense on the statement of operations. Also data feed expenses in the aggregate of $79,691 have been reclassed from software development costs as of December 31, 2019 to cost of revenue.
3.STOCKHOLDERS’ DEFICIT
The Company hadhas authorized 10,000,000 shares of preferred stock at $0.001 par value, 5,000,000 of which are designated as Series“Series A Convertible Preferred StockStock” at $0.001 par value and 100,000,000 authorized shares of common stock at $0.001 par value. 20,835,010 common shares have been issued including 15,000,000 issued for proprietary assets contributed by our President and a third party vendor (Note 6)value (“Common Stock”). Effective December 31, 2014 the Company repurchased 100,000 common shares from our President at a price of $0.50 per share, or $50,000, and canceled an advance to him for the repurchased shares which is reflected at cost as Treasury
Shares on our balance sheet. The price of these treasury shares was based on recent sales of the Company's common stock to outside investors. On December 31, 2014 the Company instructed the transfer agent to cancel these shares and on November 10, 2015 the shares were cancelled.
On January 28, 2020 the Company issued 50,000 shares of its Common Stock at a value of $2.00 to a third party in conjunction with the financing arrangement executed on January 27, 2020 (Note 6).
On July 6, 2020, warrants to purchase 115,385 shares of Common Stock, issued in conjunction with Amended Convertible Promissory Notes, as described in Note 6, were exercised at $0.01 per share for aggregate cash consideration of $1,154.
On August 28, 2020 the Company issued 3,334 shares of its Common Stock at a value of $1.95 per share to Concolidated Financial Statements
During the year ended December 31, 2015 and the period
During the year ended December 31, 2015,2020 the Company issued a total of 1,600,000sold 70,514 shares of common stock at a cash price of $0.50 per share for a total of $800,000.
During the issued and outstandingyear ended December 31, 2020 the Company sold 160,634 shares of Tiger Trade capital stock. The effect of the issuance was that Tiger Trade stockholders acquired approximately 85.91% of the issued and outstanding shares of SMSA Common Stock to third parties for $313,236 less equity placement fees of $21,349.
During the year ended December 31, 2020 holders of convertible promissory notes with an aggregate face value of $100,000 and 100%a related derivative liability of $45,523, elected to convert the issued and outstanding shares of SMSA Preferred Stock.
On October 7, 2020 the Company repaid $35,060 to a third party to cancel a previous unexecuted subscription for 35,200 shares of Common Stock dated May 24, 2018, which shares were not issued.
4. WARRANTS TO PURCHASE COMMON STOCK
Costs attributable to the issuance of stock options and share purchase warrants are measured at fair value at the date of issuance and offset with a corresponding increase in 'Additional‘Additional Paid in Capital'Capital’ at the time of issuance. The fair value cost is computed utilizing the Black-Scholes model and assuming volatility based on U.S. Treasury yield rates for a similar period. The cost of these warrants was not recognized in the financial statements because they were granted in connection with raising capital for the Company. When the options or warrants are exercised, the receipt of consideration iswill be reported as an increase in stockholders'stockholders’ equity. There
Concurrently with the execution of certain securities purchase agreements, the Company issued warrants to purchase Common Stock. Each warrant is exercisable for a period of five years from the date of the securities purchase agreement at an exercise price of $1.95 per share (Note 3). The fair value cost at the date of issuance of these warrants was no stock option or$639,194.
In conjunction with the issuance of convertible notes payable as described in Note 6, a warrant activity duringfor the purchase of up to 115,385 shares of common Stock exercisable for a one-year period was issued at an exercise price of $0.01 per share and another warrant for the purchase of up to 360,000 shares of Common Stock exercisable for a five-year period was issued at an exercise price of $1.00 per share. During the year ended December 31, 2015 and2020, the period April 28, 2014 through December 31, 2014warrants for the purchase of 115,385 shares of Common Stock were exercised at $0.01 and as of April 12, 2016 no options orDecember 31, 2020, there are warrants werefor the purchase of up to 476,348 shares of Common Stock outstanding.
Number of Shares | Exercise Price | Weighted Average Remaining Life (in years) | ||||||||
Warrants as of December 31, 2018 | - | - | ||||||||
Issued during 2019 | 84,295 | $1.95 | ||||||||
Warrants as of December 31, 2019 | 84,295 | $0.01 | - | 1.95 | 4.53 | |||||
Issued during 2020 | 510,644 | $1.95 | ||||||||
Exercised during 2020 | (115,385 | ) | $0.01 | |||||||
Warrants as of December 31, 2020 | 479,554 | $0.97 | 9.05 | |||||||
5.RELATED PARTY TRANSACTIONS
As of January 1, 2020, the Company was owed $9,823 from Gust C. Kepler. During the year ended December 31, 20152020 Mr. Kepler repaid the advance.
During the year ended December 31, 2019 the Company advanced $1,500 to its VP/Director of Operations and the period
During the years ended December 31, 2014
G2 International, Inc. (G2)
6. DEBT
A summary of the Company’s debt at December 31, 20152020 and period beginning April 28, 2014 through December 31, 2014,2019, by counterparty, is as follows:
Balance | ||||||||
Loan Description | 12/31/2020 | 12/31/2019 | ||||||
$1,000,000 12% Senior secured note due November 12 2022 | $ | 1,000,000 | $ | - | ||||
$200,000 Senior secured note bearing interest at 12% per annum due November 18, 2018 guaranteed by Mr. Kepler | - | 100,000 | ||||||
$170,000 Quasi-factoring financing with daily payments of $292-1035 maturing June -August 18, 2020 | - | 152,013 | ||||||
$130,200 loan bearing interest at 1% per annum maturing May 1, 2022 issued under the Payroll Protection Program | 130,200 | - | ||||||
$120,000 Related party note payable bearing interest at 12% per annum due May 1, 2024 | - | 120,000 | ||||||
$108,000 Related party note payable due November 30, 2020 | 859 | 108,000 | ||||||
$385,000 8% convertible note payable due July 2021 | 318,012 | 442,750 | ||||||
$165,000 8% convertible note payable due July 2021 | 133,405 | 165,000 | ||||||
Miscellaneous equipment loans | 1,405 | 4,419 | ||||||
| 1,583,881 | 1,092,182 | |||||||
Less unamortized discount and debt issuance costs | (294,119 | ) | (52,153 | ) | ||||
Total notes payable | $ | 1,289,762 | $ | 1,040,029 | ||||
| Current portion of long-term debt | 399,614 | 1,040,029 | ||||||
Long-term portion | $ | 890,148 | $ | 0 | ||||
Notes Payable
On August 8, 2018 a third party advanced $200,000 to the Company incurred $82,456in exchange for a secured promissory note, bearing interest at the rate of 12% per annum with a maturity date of November 20, 2018. The note is secured by a Security Agreement providing for a continuing lien and $70,500first priority security interest in the assets of expenses with G2, respectively. At December 31, 2015 and the period April 28, 2014 through December 31, 2014, accounts payable owed to G2 totaled $0 and $101,000, respectively.
On September 13, 2019 a non-interest bearing, unsecured advance due upon demand. Onthird party advanced $90,000 to the Company in exchange for quasi-factoring financing arrangements to be repaid in daily installments of $490, through August 18, 2020. The related note discount of $27,000 was amortized as interest expense over the term of the agreement.
In October 2019 third parties advanced $80,000 to the Company in exchange for quasi-factoring financing arrangements to be repaid in daily installments of $761 through June 2020. Approximately $39,000 of this funding was settled with proceeds of the January 27, 2020 financing described in a later paragraph. The related note discount of $31,600 was amortized as interest expense over the term of the agreement.
During the year ended December 31, 2014,2020 the Company entered into a Stock Repurchasequasi-factoring financing arrangements in the amounts of $35,000 and Cancelation Agreement whereby$207,000 that were repaid in daily installments. The related discounts of $12,500 and $57,000 were amortized as interest expense over the term of the agreements and were fully repaid during the year ended December 31, 2020.
On May 1, 2020, pursuant to the Paycheck Protection Program under the Coronavirus Aid Relief and Economic Security Act (“CARES Act”) the Company repurchased 100,000 common stock shares from Mr. Keplerwas awarded a loan of $130,200. The loan carries an interest rate of 1% and as consideration the advance was canceled.matures on May 1, 2022. The price of these treasury shares were based on recent salesCompany may apply for loan forgiveness following SBA guidelines and a portion or all of the Company's common stock to outside investors.loan may be forgiven.
On April 28, 2014, Tiger TradeNovember 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 a consultingan agreement with G2, doing business as IPA,an affiliate of FVP to render adviceprovide certain credit and reasonable assistancedebit card processing services for the Company, which services will continue for a period of one year atafter the loan is repaid and contains a monthly feeright of $8,500 plus any reasonable and actual costs incurred by IPAfirst 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 such services. G2 is wholly owned by Gust C. Kepler, a Director, President, Chief Executive Officer, Chief Financial Officerthe 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 Secretary offor general working capital purposes. In addition, the Company granted the Lender a security interest in substantially all of its assets.
Notes Payable, related party
On November 9, 2018, Mr. Kepler, advanced $120,000 to the Company in exchange for a promissory note bearing interest at 12% per annum for a ninety-day period, maturing on January 28, 2019. On November 17, 2020 the note and its controlling stockholder. accrued interest of $29,680 was paid in full.
On April 28, 2015 this agreement was extendedDecember 6, 2018, Mr. Kepler, advanced $108,000 to the Company for payment to a third party note holder in exchange for an additional one year term expiring on April 28, 2016 and was terminated by mutual agreement effective August 31, 2015.unsecured promissory note. During the year ended December 31, 20152020, the Company repaid $107,141 in principal, reducing the balance due as of December 31, 2020 to $859.
Convertible Notes Payable
On May 21, 2019, the Company issued an 8% Fixed Convertible Promissory Note payable to a third party with a face value of $385,000, which included an original issue discount of 10% on the investment amount. On July 17, 2019, the Company issued another 8% Fixed Convertible Promissory Note with a face value of $165,000 which also included am original discount of 10% on the investment amount. The two notes contain substantially identical terms. The Company recorded the value of the notes’ conversion feature in the amount of $342,308 at inception. The Company defaulted on the notes and recorded default fees of $57,750 and $24,750 for the years ended December 31, 2019 and 2020, respectively, which amounts were added to the principal balance.
On July 10, 2020, the Company entered into Forbearance and Note Settlement Agreements (“Agreements”) with the holders of the 8% Fixed Convertible Promissory Notes agreeing to take no further action to avail themselves of the remedies of default defined in the Notes. The Agreements stipulated that the Company remit payment of all accrued interest and principal outstanding beginning on July 20, 2020 for thirteen agreed upon payments and until the note is repaid in full. Upon execution of these Agreements, effectively extinguishing the above-described notes, the Company recognized a cancellation of the derivative liability previously related to the conversion feature of $522,065. As additional consideration for the Agreements, the holders were issued warrants to purchase up to 360,000 shares of the Company’s Common Stock at a price of $1.00 per share, exercisable beginning January 10, 2021 and expiring on July 10, 2025. The fair value of the warrants at the date of issuance was $371,243, and was reflected in paid in capital and the periodrelated debt discount is being amortized over the term of the Agreements.
On March 23, 2020 third parties advanced $75,000 and $25,000 to the Company in exchange for Convertible Promissory Notes, bearing interest at 52% per annum to be paid monthly in arrears beginning April 28, 2014 through December 31, 2014, consulting fees incurred under this agreement totaled $68,00030, 2020, secured by the Company’s assets, with rights to convert into the Company’s Common Stock at $0.60, and $70,500, respectively.maturing on March 25, 2021. On June 23, 2020 the Company amended the notes changing the provision for conversion into the Company’s Common Stock from $0.60 to $1.95. Additional consideration for the amended and restated notes included the issuance of warrants for the purchase of up to 115,385 shares of common stock at a price of $0.01. On July 6, 2020 the holders exercised their warrants. On November 12, 2020 the holders of these notes elected to convert the obligations in the aggregate principal amount of $100,000 into 51,282 shares of Common Stock.
7. DERIVATIVE LIABILITIES
During the year ended December 31, 20152020, notes payable in the principal amount of $100,000 were issued as convertible debt and the period
Volatility | 356.33 | % | ||
Risk-free interest rate | 1.52 | % | ||
Expected dividends | - | |||
Expected term (in years) | .5 |
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 following table presents the Company’s liabilities that were measured and recognized at fair value as of December 31, 2020:
Level 1 | Level 2 | Level 3 | ||||||||||
Balance January 1, 2019 | - | - | - | |||||||||
Additions | - | - | $ | 1,321,764 | ||||||||
Change in Fair Value | - | - | 83,766 | |||||||||
Balance at December 31, 2019 | $ | - | $ | - | $ | 1,405,530 | ||||||
Additions | - | - | 317,776 | |||||||||
Amendments | - | - | (224,066 | ) | ||||||||
Retirements | - | - | (567,588 | ) | ||||||||
Change in Fair Value | - | - | (931,652 | ) | ||||||||
Balance at December 31, 2020 | $ | - | $ | - | $ | - | ||||||
8. COMMITMENTS AND CONTINGENCIES (continued)
On August 28, 2017, the Company entered into a sublease agreement with G2 International effective July 1, 2015 subject to the termsacquired and conditions of thewas assigned all right, title and interest in an office lease between G2 International andwith Teachers Insurance and Annuity Association of America for approximately 1,502 square feet of office space at 5430 LBJ Freeway, Dallas, Texas. On September 19, 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. On January 1, 2019 the Company adopted ASC 842 requiring this lease to be recorded as an asset and corresponding liability on its balance sheet. The sublease agreement expires MarchCompany records rent expense associated with this lease on the straight-line basis in conjunction with the terms of the underlying lease. During the years ended December 31, 2020.2020 and 2019 we incurred $59,597 and $54,631, respectively, in office rental expense. Future minimum rental payments under this sublease are:
| 2016 | $ | 40,179 | |||
| 2017 | $ | 41,680 | |||
| 2018 | $ | 43,182 | |||
| 2019 | $ | 44,684 | |||
| 2020 | $ | 11,265 |
2021 | 61,800 | |||
2022 | 46,863 |
On August 11, 2020 the Company entered into a letter agreement with Winspear Investments, LLC (“Winspear”), pursuant to which the Company retained Winspear to provide strategic advisory services for financial and business matters. The agreement provides for a minimum three-month term and that Winspear would be compensated with the grant of 20,000 shares of the Company’s common stock at inception and an additional 5,000 shares per month for the initial term. In the event Winspear continues to provide services, Winspear shall be compensated an additional grant of 3,000 shares per month for a total of twelve-months and such grants shall not exceed an aggregate issuance of 71,000 shares. The agreement also provides that Winspear shall be granted 80,000 shares if the Company achieves a listing with NASDAQ. The total shares issuable under the agreement shall not be less than a minimum of 35,000 and not exceed a maximum of 151,000 shares. As of December 31. 2020 48,000 common shares have been issued.
The Company is not currently a defendant in any material litigation or any threatened litigation that could have a material effect on the Company'sCompany’s financial statements.
9.INCOME TAXES
The Company has established deferred tax assets and liabilities for the recognition of future deductions or taxable amounts and operating loss carry forwards. Deferred federal income tax expense or benefit is recognized as a result of the change in the deferred tax asset or liability during the year using the currently enacted tax laws and rates that apply to the period in which they are expected to affect taxable income. Valuation allowances are established, if necessary, to reduce deferred tax assets to the amounts that will more likely than not be realized.
During the yearyears ended December 31, 20152020 and the period April 28, 2014 through December 31, 2014,2019, a reconciliation of income tax expense at the statutory rate of 34%21 % to income tax expense at the Company'sCompany’s effective tax rate is as follows:
2020 | 2019 | |||||||
Income tax benefit at statutory rate | $ | 75,000 | $ | 627,000 | ||||
Permanent differences | 233,000 | (21,000 | ) | |||||
Change in valuation allowance | (308,000 | ) | (606,000 | ) | ||||
Provision for federal income taxes | $ | - | $ | - | ||||
| 2015 | 2014 | |||||||
| Income tax benefit at statutory rate | $ | 144,000 | $ | 67,000 | ||||
| Permanent differences | ( - | ) | ( - | ) | ||||
| Change in valuation allowance | (144,000 | ) | (67,000 | ) | ||||
| Provision for federal income taxes | $ | - | $ | - | ||||
At December 31, 2015 and 2014,2020, the Company had approximately $620,000$5,551,000, of unused net operating loss carry forwards. Unused net operating loss carry forwards may provide future tax benefits, although there can be no assurance that these net operating losses will be realized in the future. The tax benefits of these loss carryforward have been fully offset by a valuation allowance. These losses may be used to offset future taxable income and, if not fully utilized, expire in the year 2035.2038.
10. SUBSEQUENT EVENTS
On August 8, 2020 the Company entered into a subscription agreement to sell 12,821 shares of Common Stock and a Warrant, exercisable for a period of 5 years, to purchase 6,411 shares of Common Stock at an exercise price of $1.95 per share, to a third party, for aggregate consideration of $25,001. On January 4, 2021 the subscription agreement was amended to sell 6,411 shares of Common Stock and issue the Warrant to purchase 3,206 shares of Common Stock at the same exercise prices as the original agreement, for aggregate consideration of $12,500.
In January 2021 the Company entered into several subscription agreements to sell an aggregate of 43,591 shares of Common Stock at $1.95 per share, to third parties, for aggregate consideration of $85,002.
On January 28, 2021 the Company exchanged a liability of $130,000 for the purchase of a Simple Agreement for Future Tokens for 66,667 shares of Common Stock valued at $1.95 per share and on February 21, 2021 exchanged an additional $50,000 for 25,641 shares of Common Stock under a similar arrangement.