Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549

 

FORM 10-Q

(Mark One)

 

☒ 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended

September 30, 2017

March 31, 2022

or

☐ 

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

001-41051

 

BLACKBOXSTOCKS INC.

(Exact name of registrant as specified in its charter)

 

Nevada

45-3598066

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

5430 LBJ Freeway, Suite 1485, Dallas, Texas

75240

(Address of principal executive offices)

(Zip Code)

 

(972) 726-9203

(Registrant’s telephone number, including area code)

 

 

(Former name, former address and former fiscal year if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

BLBX

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx 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). YesxNo¨

 

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 accelerated filer,” “accelerated filer”filer,” “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer¨ Accelerated filer¨

Non-accelerated filer¨ Smaller reporting companyx

 

Large accelerated filer ☐

Accelerated filer ☐

 

Non-accelerated filer ☒ 

Smaller reporting company ☒

Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.                                                                ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨Nox

 

The number of shares outstanding of the Registrant’sregistrant’s Common Stock as of November 9, 2017May 14, 2022 was 23,000,000.13,185,659.

 


 

TABLE OF CONTENTS

 

   
  

Page

INTRODUCTORY COMMENT

1

CAUTION REGARDING FORWARD LOOKING STATEMENTS

1

  

PART I –FINANCIALFINANCIAL INFORMATION

2

Item 1.

financial statements2

Consolidated Balance Sheets as of September 30, 2017 (Unaudited) and

December 31, 2016

Financial Statements

2

 Consolidated

Balance Sheets as of March 31, 2022 (Unaudited) and December 31, 2021

2

Statements of Operations for the Three and Nine Months Ended September 30, 2017March 31, 2022 and 20162021 (Unaudited)

3

 Consolidated

Statement of Stockholders’ Equity (Deficit) for the Three Months Ended March 31, 2022 and 2021 (Unaudited)

4

Statements of Cash Flows for the NineThree Months Ended September 30, 2017March 31, 2022 and 20162021 (Unaudited)

45

 

Notes to Consolidated Financial Statements for the Three Months Ended March 31, 2022 and 2021

   5

6

Item 2.

Management’s

Managements Discussion and Analysis of Financial Condition and Results of Operations

10

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and Qualitative Disclosures About Market Risk

12

14

Item 4.

Controls and Procedures

12

14

   

PART II  OTHER INFORMATION

13

15

Item 1.

LEGAL PROCEEDINGS

Legal Proceedings

13

15

ITEM

Item 1A.

RISK FACTORS

Risk Factors

13

15

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities and Use of Proceeds

13

15

Item 3.

DEFAULTS UPON SENIOR SECURITIES

Defaults Upon Senior Securities

13

16

Item 4.

MINE SAFETY DISCLOSURES

Mine Safety Disclosures

13

16

Item 5.

Other Information

13

16

Item 6.

eXHIBITS

Exhibits

14

17

   
Signatures

SIGNATURES

 14

17

 


INTRODUCTORY COMMENT

 

Throughout thisQuarterly Report on Form 10-Q,, the terms “we,” “us,” “our,” “Blackboxstocks,” or the “Company” refers to Blackboxstocks Inc., a Nevada corporation.

 

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

 

Our prospects are subject to uncertainties and risks. In this Quarterly Report on Form 10-Q (the “Report”), we make forward-looking statements in this Item 2 and elsewhere that also involve substantial uncertainties and risks. TheseWhen used in this Report, the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “intend,” and similar expressions are intended to identify forward-looking statements are based uponwithin the meaning of Section 27A of the Securities Act of 1933, as amended (the “Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) regarding events, conditions and financial trends which may affect our current expectations, estimatesfuture plans of operations, business strategy, operating results and projections about our business, and reflect our beliefs and assumptions based upon information available to us at the date of this report. In some cases, you can identify these statements by words such as “if,” “may,” “might,” “will, “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” and other similar terms. These forward-looking statements include, among other things, plans for proposed operations, descriptions of our strategies, our product and market development plans, and other objectives, expectations and intentions, the trends we anticipate in our business and the markets in which we operate, and the competitive nature and anticipated growth of those markets.

We caution readers that forward-looking statements are predictions based on our current expectations about future events. These forward-lookingfinancial position. Such statements are not guarantees of future performance and are subject to risks and uncertainties described herein and assumptions that are difficult to predict. Our actual results performance or achievements couldmay differ materially from those expressed or implied byincluded within the forward-looking statements as a result of a number ofstatements. Additional factors including, but not limited to, the risks and uncertainties discussedare described in our other public reports and filings with the Securities and Exchange Commission (“SEC”(the “SEC”). Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. We undertake no obligation to revisepublicly release the result of any revision of these forward-looking statements to reflect events or updatecircumstances 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 forward-looking statementevents, trends and activities, then our estimates for future growth for our business may also be wrong. There can be no assurance that any reason.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.

1
1

PART I - FINANCIAL INFORMATION

 

ITEMItem 1.  FINANCIAL STATEMENTSFinancial Statements

 

Blackboxstocks Inc. and Subsidiary

Consolidated Balance Sheets

September 30, 2017As of March 31, 2022 (Unaudited) and December 31, 20162021

 

  September 30,   December 31, 
   2017   2016 
Assets        
Current assets:        
Cash $163,913  $703,638 
Investments, trading  931   —   
Accounts receivable  800   1,567 
Advances, related party (Note 5)  895   42,690 
Prepaid expenses  458,481   236,300 
Prepaid expenses, related parties (Note 5)  36,700   36,700 
Total current assets  661,720   1,020,895 
Property:        
Computer and related equipment, net of depreciation of $11,906 and $5,336        
at September 30, 2017 and December 31, 2016, respectively  16,706   16,664 
Software development, net of amortization of $1688 and $0        
at September 30, 2017 and December 31, 2016, respectively  7,312   —   
Total property  24,018   16,664 
Total Assets $685,738  $1,037,559 
Liabilities and Stockholders' Equity        
Current liabilities:        
Accounts payable $442,490  $72,279 
Unearned subscriptions  26,359   17,682 
Total current liabilities  468,849   89,961 
Commitments and contingencies (Note 6)        
Stockholders' Equity:        
Preferred stock, $0.001 par value, 5,000,000 shares authorized; no shares       
 issued and outstanding at September 30, 2017 and December 31, 2016, respectively  —     —   
Series A Convertible Preferred Stock, $0.001 par value, 5,000,000        
 shares authorized; 5,000,000 issued and outstanding at September        
 30, 2017 and December 31, 2016, respectively  5,000   5,000 
Common stock, $0.001 par value, 100,000,000 shares        
authorized:23,000,000 and 23,110,000 issued and outstanding at         
September 30, 2017 and December 31, 2016, respectively  23,000   23,110 
Additional paid in capital  2,381,192   2,352,332 
Accumulated deficit  (2,192,303)  (1,432,844)
Total Stockholders' Equity  216,889   947,598 
Total Liabilities and Stockholders' Equity $685,738  $1,037,559 

  

March 31,

2022

 

December 31,

2021

 
        

Assets

 

Current assets:

       

Cash

 $651,518 $2,426,497 

Accounts receivable, net of allowance for doubtful accounts of $68,589 at March 31, 2022 and December 31, 2021, respectively

  11,074  18,585 

Inventory

  14,062  13,567 

Marketable securities

  7,922,244  8,015,882 

Prepaid expenses and other current assets

  95,591  227,440 

Total current assets

  8,694,489  10,701,971 
        

Property and equipment:

       

Office, computer and related equipment, net of depreciation of $86,957 and $81,682 at March 31, 2022 and December 31, 2021, respectively

  44,598  49,873 

Right of use lease, net of amortization of $166,058 and $150,829 at March 31, 2022 and December 31, 2021, respectively

  383,041  398,270 

Total property and equipment

  427,639  448,143 
        

Total assets

 $9,122,128 $11,150,114 
        

Liabilities and Stockholders' Equity

 
        

Current liabilities:

       

Accounts payable

 $700,987 $585,615 

Accrued interest

  6,544  6,544 

Unearned subscriptions

  1,177,701  1,302,036 

Lease liability right of use, current

  66,494  62,630 

Senior secured note payable, net of debt issuance costs of $33,283 and $46,597 at March 31, 2022 and December 31, 2021, respectively (Note 7)

  926,717  943,403 

Note payable, current portion (Note 7)

  28,448  28,448 

Total current liabilities

  2,906,891  2,928,676 
        

Long term liabilities:

       

Note payable, net of current portion (Note 7)

  61,262  68,347 

Lease liability right of use, long term

  316,547  335,641 

Total long term liabilities

  377,809  403,988 
        

Commitments and contingencies (Note 9)

         
        

Stockholders' equity

       

Preferred stock, $0.001 par value, 5,000,000 shares authorized; no shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

  0  0 

Series A Convertible Preferred Stock, $0.001 par value, 5,000,000 shares authorized; 3,269,998 issued and outstanding at March 31, 2022 and December 31, 2021, respectively

  3,270  3,270 
Common stock, $0.001 par value, 100,000,000 shares authorized: 13,185,659 and 13,099,272 issued and outstanding at March 31, 2022 and December 31, 2021, respectively  13,186  13,099 

Common stock payable

  22,500  15,000 

Treasury stock

  (859,612) 0 

Additional paid in capital

  17,701,081  17,586,635 

Accumulated deficit

  (11,042,997) (9,800,554)

Total stockholders' equity

  5,837,428  7,817,450 
        

Total liabilities and stockholders' equity

 $9,122,128 $11,150,114 

 

The accompanying notes are an integral part of these consolidated

financial statements. 

statements

 

Blackboxstocks Inc. and Subsidiary
Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2017 and 2016
(unaudited)
         
  For the Three Months For the Nine Months
  Ended September 30, Ended September 30,
  2017 2016 2017 2016
         
Revenue:                
Subscriptions $84,279  $19,540  $308,837  $19,540 
Licensing  300,000   —     400,000   —   
Total revenues  384,279   19,540   708,837   19,540 
                 
Cost of operations  163,071   15,633   392,543   15,633 
                 
Gross margin  221,208   3,907   316,294   3,907 
                 
Expenses:                
Software development costs  122,515   35,445   355,243   124,764 
General and administrative  310,075   124,013   710,966   335,497 
Depreciation and amortization  3,487   1,289   8,258   3,866 
Total operating expenses  436,077   160,747   1,074,467   464,127 
                 
Operating loss  (214,869)  (156,840)  (758,173)  (460,220)
                 
Interest expense  320   3,118   1,286   3,118 
                 
Loss before income taxes  (215,189)  (159,958)  (759,459)  (463,338)
                 
Income taxes  —     —     —     —   
                 
Net loss $(215,189) $(159,958) $(759,459) $(463,338)
                 
Weighted average number of common                
shares outstanding - basic  23,107,609   20,164,565   23,109,194   20,180,202 
                 
Net loss per share - basic $(0.01) $(0.01) $(0.03) $(0.02)
2

 

Blackboxstocks Inc.

The accompanying notes are an integral partStatements of these consolidatedOperations

financial statements. For the Three Months Ended March 31, 2022 and 2021

(Unaudited)

 

Blackboxstocks Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2017 and 2016
(unaudited)
     
  2017 2016
Cash flows from operating activities    
Net loss $(759,459) $(463,338)
Adjustments to reconcile net loss to net cash used in        
  operating activities:        
Depreciation and amortization expense  8,258   3,866 
Shares issued in exchange for services  96,250     
Changes in operating assets and liabilities:        
Investment, trading  (931)  414 
Accounts receivable  767   (3,501)
Prepaid expenses  (222,181)  (365)
Prepaid expenses, related parties  —     130,450 
Accounts payable  370,211   95,551 
Accrued interest  —     2,139 
Unearned subscriptions  8,677   14,323 
Net cash used in operating activities  (498,408)  (220,461)
         
Cash flows from investing activities        
Purchases of property  (15,612)  —   
Cash repayments from shareholder  70,000   29,042 
Cash advances to shareholder  (95,705)  —   
Net cash provided by(used in) investing activities  (41,317)  29,042 
         
Cash flows from financing activities        
Common stock issued for cash  —     110,000 
Proceeds from notes issued  —     50,000 
Net cash provided by financing activities  —     160,000 
         
Net increase(decrease) in cash  (539,725)  (31,419)
         
Cash - beginning of period  703,638   60,286 
Cash - end of period $163,913  $28,867 
         
Supplemental disclosure-        
Non-cash investing and financing activities:        
  Cancellation of common shares $67,500  $835 

  

For the three months ended

March 31,

 
  

2022

  

2021

 

Revenue:

        

Subscriptions

 $1,270,930  $1,485,798 

Other revenues

  1,556   3,870 

Total revenues

  1,272,486   1,489,668 
         

Cost of revenues

  579,962   395,775 
         

Gross margin

  692,524   1,093,893 
         

Operating expenses:

        

Software development costs

  184,884   130,438 

Selling, general and administrative

  1,224,723   606,687 

Advertising and marketing

  298,796   207,312 

Depreciation and amortization

  5,275   4,324 

Total operating expenses

  1,713,678   948,761 
         

Operating income (loss)

  (1,021,154)  145,132 
         

Otherexpense:

        

Interest expense

  29,243   41,038 

Amortization of debt discount and issuance costs

  13,314   91,539 

Investment loss

  178,732   0 

Total other expense

  221,289   132,577 
         

Income (loss) before income taxes

  (1,242,443)  12,555 
         

Income Taxes

  0   0 
         

Net income (loss)

  (1,242,443)  12,555 
         

Weighted average number of common shares outstanding - basic

  13,181,820   8,513,694 

Weighted average number of common shares outstanding - diluted

  13,181,820   13,780,566 
         

Net income (loss) per share - basic

 $(0.09) $0.00 

Net income (loss) per share - diluted

 $(0.09) $0.00 

 

The accompanying notes are an integral part of these consolidated

financial statements.

 

3

 

Blackboxstocks Inc.

Statement of Stockholders’ Equity (Deficit)

For the three months ended March 31, 2022 and 2021

(Unaudited)

4
  

Preferred Stock

  

Series A

  

Common Stock

  

Common

  

Common

      

Additional

         
  

Shares

  

Amount

  

Shares

  

Amount

  

Shares

  

Amount

  

Stock

Subscribed

  

Stock

Payable

  

Treasury

Stock

  

Paid in Capital

  

Accumulated

Deficit

  

Total

 
                                                 

Balances, December 31, 2020

  -  $-   5,000,000  $5,000   8,410,386  $8,410  $12,500  $-  $0  $5,401,154  $(7,184,818) $(1,757,754)
                                                 

Issuance of shares for cash, net of fees

  -   -   -   -   70,772   71   -   -   0   137,935   0   138,006 
                                                 

Issuance of subscribed shares

  -   -   -   -   6,411   6   (12,500)  -   0   12,494   -   - 
                                                 

Issuance of shares in settlement of liabilities

  -   -   -   -   92,308   93   -   -   0   179,907   0   180,000 
                                                 

Net income

  -   0   -   0   -   0   0   0   0   0   12,555   12,555 
                                                 

Balances, March 31, 2021

  -  $-   5,000,000  $5,000   8,579,877  $8,580  $0  $-  $0  $5,731,490  $(7,172,263) $(1,427,193)
                                                 

Balances, December 31, 2021

  -  $-   3,269,998  $3,270   13,099,272  $13,099  $-  $15,000  $0  $17,586,635  $(9,800,554) $7,817,450 
                                                 

Purchase of treasury stock

  -   0   -   0   -   0   0   0   (859,612)  0   0   (859,612)
                                                 

Cashless exercise of warrants

  0   0   0   0   86,387   87   0   0   0   (87)  0   0 
                                                 

Issuance of warrants for compensation

  -   -   -   -   -   -   -   -   0   31,880   0   31,880 
                                                 

Issuance of options for compensation

  -   -   -   -   -   -   -   -   0   82,653   0   82,653 
                                                 

Common stock payable for compensation

  -   -   -   -   -   -   -   7,500   -   -   0   7,500 
                                                 

Net loss

  -   -   -   -   -   -   -   -   -   0   (1,242,443)  (1,242,443)
                                                 

Balances, March 31, 2022

  0  $0   3,269,998  $3,270   13,185,659  $13,186  $0  $22,500  $(859,612) $17,701,081  $(11,042,997) $5,837,428 

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

4

Blackboxstocks Inc. and Subsidiary

Notes to Consolidated Financial Statements of Cash Flows

For the Three and Nine Months Ended September 30, 2017March 31, 2022 and 20162021

(Unaudited)

 

  

March 31,

 
  

2022

  

2021

 

Cash flows from operating activities:

        

Net income (loss)

 $(1,242,443) $12,555 

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

     

Depreciation and amortization expense

  5,275   4,324 

Amortization of note discount and issuance costs

  13,314   104,853 

Stock based compensation

  122,033   0 

Right of use lease

  0   (506)

Investment loss

  178,732   0 

Changes in operating assets and liabilities:

        

Accounts receivable

  7,511   6,994 

Inventory

  (495)  (355)

Prepaid expenses and other current assets

  131,849   15,600 

Accounts payable

  115,371   11,999 

Accrued interest

  0   (2,388)

Unearned subscriptions

  (124,335)  78,836 

Net cash provided by (used in) operating activities

  (793,188)  231,912 
         

Cash flows from investing activities:

        

Purchase of property and equipment

  0   (31,234)

Purchase of marketable securities

  (9,855,275)  0 

Proceeds from sales of marketable securities

  9,770,181   0 

Net cash used in investing activities

  (85,094)  (31,234)
         

Cash flows from financing activities:

        

Common stock and warrants issued for cash

  0   150,506 

Common stock subscribed

  0   (12,500)

Principal payments on senior secured note payable

  (30,000)  0 

Principal payments on notes payable

  (7,085)  (832)

Principal payments on convertible notes payable

  0   (196,209)

Purchase of treasury stock

  (859,612)  0 

Net cash used in financing activities

  (896,697)  (59,035)
         

Net increase (decrease) in cash

 $(1,774,979) $141,643 

Cash - beginning of year

  2,426,497   972,825 

Cash - end of year

 $651,518  $1,114,468 
         

Supplemental disclosures:

        

Interest paid

 $29,243  $43,425 

Income taxes paid

 $0  $0 
         

Non-cash investing and financing activities:

        

Common stock issued in settlement of accrued liabilities

 $0  $180,000 

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

5

Blackboxstocks Inc.

Notes to Financial Statements

For the Three Months Ended March 31, 2022 and 2021

1. Organization

 

Blackboxstocks Inc. (the “Company”) was incorporated on October 4, 2011 under the laws of the State of Nevada under the name SMSA Ballinger Acquisition Corp. to effect the reincorporation of Senior Management Services of Heritage Oaks at Ballinger, Inc., a Texas corporation, mandated by a Plan of Reorganization confirmed by the United States Bankruptcy Court for the Northern District of Texas for reorganization under Chapter 11 of the United States Bankruptcy Code.

 

On December 1, 2015, the Company entered into a Share Exchange Agreement (“Exchange Agreement”), by and among the Company, Tiger Trade Technologies, Inc. (“Tiger Trade”), a Texas corporation and the stockholders of Tiger Trade. As a result of the Exchange Agreement transaction, the Tiger Trade stockholders acquired approximately 88.64% of the issued and outstanding capital stock of the Company, and Tiger Trade became a wholly owned subsidiary of the Company. 

On February 8, 2016, the Company entered into an Agreement and Plan of Merger (“Merger Agreement”) with Tiger Trade, providing for the merger of Tiger Trade with and into the Company. At the effective time of the merger (February 9, 2016), the shares of Tiger Trade capital stock outstanding immediately before the effective time were canceled, retired and ceased to exist.

The Company filed a Certificate of Amendment tochanged its Articles of Incorporation effective as of March 9, 2016, changing the name of the Company to Blackboxstocks, Inc.

and began operating as a financial technology and social media platform in March 2016. The platform offers real-time proprietary analytics and news for stock and options traders of all levels. The Company isbelieves its web-based software employs “predictive technology” enhanced by artificial intelligence to find volatility and unusual market activity that may result in the businessrapid change in the price of developing and marketing a real time analytical platform and subscription basedstock or option. The software as a service (the “Blackbox System”) to serve as a tool for day traders and swing traders on various securities exchanges and markets, includingcontinuously scans the OTC Markets Group, Inc. (“OTC”), theNASDAQ, New York Stock Exchange, CBOE, and other options markets, analyzing over 10,000 stocks and up to 1,500,000 options contracts multiple times per second. The Company also provides users with a fully interactive social media platform that is integrated into our dashboard, enabling users to exchange information and ideas quickly and efficiently through a common network. Recently, the NYSE MKT, LLC (formerlyCompany also introduced a live audio/video feature that allows members to broadcast on their own channels to share trade strategies and market insight within the American Stock Exchange),community. The platform was initially made available to subscribers in September 2016. Subscriptions for the NASDAQ markets,use of the Hong Kong Stock Exchange,platform are sold on a monthly and/or annual subscription basis to individual consumers through the Shanghai Stock Exchange and the Shenzhen Stock Exchange.Company website at http://www.blackboxstocks.com.

 

On November 10, 2021, the Company issued 2,400,000 shares of Common Stock in its initial public offering and concurrently was listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “BLBX”.

2. Summary of Significant Accounting Policies

 

The accompanying interim unaudited financial statements and footnotes of Blackboxstocks Inc. have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the instructions to Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). TheAccordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements reflect all adjustments that are, instatements. In the opinion of management, necessary to fairly present such information. All suchthese unaudited consolidated financial statements contain all adjustments, areconsisting of a normal recurring nature. Althoughadjustments, considered necessary for a fair presentation of the Company believes thatresults of the disclosuresinterim periods, but are adequatenot necessarily indicative of the results of operations to makebe anticipated for the information presented not misleading, certain information and footnote disclosures, including a description of significant accounting policies normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. full year ending December 31, 2022. These financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report. The accompanying unaudited financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flowsReport on Form 10-K for the interim periods, but are not necessarily indicative of the results for any subsequent quarter or the entire year ending ended December 31, 2017.2021.

 

Basisof Presentation - The accompanying financial statements were prepared in conformity with GAAP.

5

Blackboxstocks Inc. and Subsidiary

Notes to Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2017 and 2016

2. Summary of Significant Accounting Policies (continued)

Use of Estimates - Blackboxstocks’Estimates. The Company’s financial statement preparation requires that management make estimates and assumptions which affect the reporting of assets and liabilities and the related disclosure of contingent assets and liabilities in order to report these financial statements in conformity with GAAP. Actual results could differ from those estimates.

Cash. Cash includes all highly liquid investments that are readily convertible to known amounts of cash and have original maturities at the date of purchase of three months or less.

Investments in Marketable Securities. The Company invests in marketable securities which primarily consist of investments in mutual funds that hold commercial and government debt securities. These investments are recorded at fair value based on quoted prices at the end of the Company’s reporting period. Any realized or unrealized gains or losses are recognized in the accompanying statements of operations.

Recently Issued Accounting Pronouncements-Pronouncements. During the ninethree months ended September 30, 2017 and 2016, March 31, 2022, there were severalno 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 believethat management believes the adoption of any of these accounting pronouncements has had orwhich will have a material impact on the Company’s financial statements.

In May 2014, the FASB issued ASU No.2014-09,Revenue from Contracts with Customers (Topic 606). This standard provides a single set of guidelines for revenue recognition to be used across all industries and requires additional disclosures. It is effective for annual and interim reporting periods beginning after December 15, 2017. This standard permits early adoption, but not before December 15, 2016, and permits the use of either a retrospective or cumulative effect transition method. We are currently evaluating the potential impact of this standard on our financial position and results of operations, as well as our selected transition method. Based on our preliminary assessment, we believe the new standard will not have a material impact on our financial position and results of operations, as we do not expect to change the manner or timing of recognizing revenue on a majority of our revenue transactions. We recognize revenue on sales to customers and distributors upon satisfaction of our performance obligations when the goods are shipped. For consignment sales, we recognize revenue when the goods are pulled from consignment inventory.

 

Property and Equipment - Blackboxstocks is engaged in the development

6

The Company’s property and equipment is being depreciated on the straight-line basis over an estimated useful life of three years.

Earnings or (Loss) Per Share -Share. Basic earnings per share (or loss per share), is computed by dividing the earnings (loss) for the period by the weighted average number of common stock shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities by including other potentially issuable shares of common stock, including shares issuable upon conversion of convertible securities or exercise of outstanding stock options and warrants, in the weighted average number of common shares outstanding for the period. Therefore, becauseBecause including shares issuable upon conversion of convertible securities and/or exercise of outstanding options and warrants would have an anti-dilutive effect on the loss per share, only the basic earnings (loss) per share is reported in the accompanying financial statements. At September 30, 2017 and 2016, the potential dilution would be 5,000,000 sharesstatements for period of common stock in the event the issued and outstanding shares of Series A Convertible Preferred Stock are converted.loss.

 

The Company had total potential additional dilutive securities outstanding at March 31, 2022, as follows:

 

 6

March 31,

2022

 

Series A Convertible Preferred Shares

3,269,998 

Conversion rate

0.2

Common shares after conversion

654,000

Option shares

652,500

Warrant shares

438,336

Blackboxstocks Inc. and Subsidiary

Notes to Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2017 and 2016

 

2. Summary

Revenue Recognition. We operate under a software as a service (SaaS) model whereby we sell monthly and annual subscriptions allowing subscribers access to our platform. We recognize revenue over the subscription period (either monthly or annual) and record cash received but not yet earned as deferred revenue on our balance sheet. Additionally, the Company receives revenues from commissions and the sale of Significant Accounting Policies (continued)

Revenue Recognition - The Company recognizes revenuepromotional products which are presented as other revenues on the accompanying statements of operations. Commission revenues are recognized as they are earned and revenues from the sale of subscriptions forpromotional products are recognized upon shipment.

3. Marketable Securities

The Company determines the fair values of its financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of the Blackbox System web application, when persuasive evidence of an arrangement exists, deliveryobservable inputs and collectability is probable. Revenue generally is recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities. The Company launched its Blackbox System web application and began generating subscription sales revenues during the quarter ended September 30, 2016.

In addition, the Company earns revenue from the licensing of its Blackbox System application for use in China, whereby a licensee is authorized to sell subscriptions for and sublicenseminimize the use of a versionunobservable inputs when measuring fair value. The following three levels of the web application customized for analysis of data from certain Asian exchanges. A monthly licensing fee is chargedinputs may be used to the licensee which began effective June 1, 2017.measure fair value:

 

Software Development Costs - BlackboxstocksLevel 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 engaged in the development of its proprietary Blackbox System technology, an algorithm driven system, through a combination of in house system analystslittle, if any, market activity.

The Company’s marketable securities are highly liquid and outside contractors. Under the guidelines of Accounting Standards Codification (“ASC”) Topic 985 the cost ofare quoted on major exchanges and are therefore classified as Level 1 securities. The following table summarizes the Company’s Blackbox System was expensed during developmentassets that were measured and the Blackbox System software for use in the US, reached technical feasibility in August 2016, became marketable and was made available to subscribers beginning September 1, 2016. The Blackbox System for use in China achieved technical feasibility during the quarter and became marketable and available to subscribers effective May 15, 2017. In continued accordance with ASC Topic 985 these costs were expensed until technical feasibility was achieved, costs incurred until May 15, 2017 were capitalized and subsequently amortized.recognized at fair value as of March 31, 2022:

 

Prepaid Expenses - Prepaid expenses are current assets created when the Company makes payments or incurs an obligation for expenses identified for a future period.  The Company has prepaid for marketing and advertising services to be used over approximately the next twelve months and expensed a prorated amount during the quarter ended September 30, 2017. In addition, the Company entered into a consulting services agreement for investor relations advisory services for the period August 11, 2017 through February 10, 2018.

  

Level 1

  

Level 2

  

Level 3

  

Total

 

Balance at December 31, 2021

 $8,015,882  $-  $-  $8,015,882 

Additions

  0   -   -   0 

Change in fair value

  (178,732)  -   -   (178,732)

Balance at March 31, 2022

 $7,922,244  $-  $-  $7,922,244 

 

7

3.   Stockholders’

4. Stockholders Equity (Deficit)

 

The Company has authorized 10,000,000 shares of preferred stock at $0.001 par value, 5,000,000 of which are designated as “Series A Convertible Preferred Stock” at $0.001 par value and 100,000,000 authorized shares of common stock at $0.001 par value (“Common Stock”).

 

Shares of Series A Convertible Preferred Stock do not accumulate dividends and are convertible into shares of(“Series A Stock”) rank pari passu with the Company’s Common Stock on a one-for-one basis.with respect to dividend and liquidation rights. Additionally, each share entitles the holder to 100 votes and, with respect to dividend and liquidation rights, the shares rankpari passu with the Company’s Common Stock.

On December 1, 2015, the Company entered into an Exchange Agreement with Tiger Trade and its Stockholders (Note 1). Under the terms and conditions of the Exchange Agreement, the Company offered and sold Seventeen Million Nine Hundred Thousand (17,900,000) newly issued shares of Company Common Stock and Five Million (5,000,000) newly issued shares of Company Series A Convertible Preferred Stock in consideration for all the votes. During 2021, 1,730,002 previously issued and outstanding shares of Tiger Trade capital stock. The effect of the issuance was that Tiger Trade stockholders acquired approximately 85.91% of theSeries A Stock were converted into Common Stock. All currently issued and outstanding shares of the Series A Stock are held by Gust Kepler, the Company’s Chairman and Chief Executive Officer (“Mr. Kepler”). The Company Common Stock and 100%Mr. Kepler entered into Conversion Rights Agreement dated effective as of October 14, 2021, limiting the rights of the issued andholder(s) of our outstanding shares of Company Series A Convertible Preferred Stock. Tiger Trade becameStock to convert such shares into Common Stock on a wholly owned subsidiaryone-for one basis as provided for in the Certificate of Designation of the Company as a resultSeries A Stock (the “Designation Conversion Rights”). Pursuant to the terms of the ExchangeConversion Rights Agreement, transaction.the Designation Conversion Rights are limited and exercisable based upon the Company reaching the following market capitalization thresholds, measured on the last day of each calendar quarter:

If the Company’s Market Capitalization is less than $150,000,000, the outstanding Series A Stock will be convertible into Common Stock on a 5-for-1 share basis;

If the Company’s Market Capitalization is equal to or greater than $150,000,000 but less than $200,000,000, the outstanding Series A Stock will be convertible into Common Stock on a 3.3-for-1 share basis;

 If the Company’s Market Capitalization is equal to or greater than $200,000,000 but less than $250,000,000, the outstanding Series A Stock will be convertible into Common Stock on a 2.5-for-1 share basis;

If the Company’s Market Capitalization is equal to or greater than $250,000,000 but less than $350,000,000 the outstanding Series A Stock will be convertible into Common Stock on a 1.75-for-1 share basis;

If the Company’s Market Capitalization is equal to or greater than $350,000,000 the outstanding Series A Stock will thereafter convertible into Common Stock pursuant to the Designation Conversion Rights (on a 1-for-1 share basis).

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

 

Blackboxstocks Inc. and Subsidiary

Notes to Consolidated Financial Statements

ForOn January 4, 2022, 86,387 shares of common stock were issued for the Three and Nine Months Ended September 30, 2017 and 2016cashless exercise of 120,000 warrants (Note 5).

 

3.   Stockholders’ Equity (continued)On January 7, 2022, the Company’s Board of Directors authorized a stock repurchase plan for up to $2,500,000 of the Company’s common stock. The program will terminate on December 31, 2022 or when the $2,500,000 authorized has been fully utilized. As of March 28, 2022, the Company has repurchased 436,600 shares for an aggregate purchase price of $859,612.

8

5. Warrants to Purchase Common Stock

 

Tiger Trade was subsequently merged withThe following table presents the Company’s warrants as of March 31, 2022:

  

Number of Shares

  

Weighted Average Exercise Price

  

Weighted Average

Remaining Life (in

years)

 

Warrants as of December 31, 2021

  558,336  $3.28   5.09 

Issued

  0  $0   - 

Exercised

  (120,000) $1.00   3.28 

Warrants as of March 31, 2022

  438,336  $4.18   5.28 

At March 31, 2022, warrants for the purchase of 357,783 shares were vested and intowarrants for the purchase of 80,553 shares remained unvested. The Company on February 9, 2016, atexpects to incur expenses for the unvested warrants totaling $308,176 as they vest.

6. Incentive Stock Plan

On August 4, 2021, our Board of Directors created and our stockholders approved the 2021 Blackboxstocks, Inc. Incentive Stock Plan (the “2021 Plan”) which time allbecame effective August 31, 2021. We have reserved 750,000 of theour outstanding shares of capitalour common stock of Tiger Trade outstanding immediately beforefor issuance under the effective date were canceled, retired and ceased to exist.

On February 10, 2016, the Company entered into a Stock Cancellation Agreement with Gust C. Kepler, a Director, President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company, pursuant to which Mr. Kepler cancelled and forfeited 835,010 shares of the Company’s Common Stock.

During the year ended December 31, 2016, the Company issued a total of 3,310,000 shares of Common Stock at a cash price of $0.50 per share for a total of $1,655,000. However, the Company subsequently honored a request by one investor to rescind the purchase of 200,000 of such shares of Common Stock on October 28, 2016.

On September 28, 2017, the Company entered into a Stock Repurchase and Cancellation Agreement with Gust Kepler, a Director and the President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company, pursuant to which the Company repurchased 110,000 shares of Common Stock of the Company in exchange for cancellation and forgiveness of debt obligations owed by Mr. Kepler to the Company for advances in the aggregate amount of $55,000.

4. Stock Options and Warrants

Costs attributable to the issuance of stock options and share purchase warrants are measured at fair value at the date of issuance and offset with a corresponding increase in ‘Additional Paid in Capital’ at the time of issuance.  When the options or warrants are exercised, the receipt of consideration is an increase in stockholders’ equity. There was no stock option or warrant activity during the nine months ended September 30, 2017 and 2016 and as of November 14, 2017, no options or warrants were outstanding.

5.  Related Party Transactions

During the nine months ended September 30, 2017, Gust C. Kepler, a Director, President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company was advanced $95,705 by the Company and he repaid $70,000. On September 28, 2017, the Company entered into a Stock Repurchase and Cancellation Agreement (Note 3) with Mr. Gust Kepler, pursuant to which the Company repurchased 110,000 shares of Common Stock in exchange for cancellation and forgiveness of debt obligations owed by Mr. Kepler to the Company for advances in the aggregate amount of $55,000. On September 28, 2017, the Company also agreed to cancel and forgive debt obligations owed by Mr. Kepler to the Company for advances in the aggregate amount of $12,500 in exchange for Mr. Kepler’s transfer of 25,000 shares of Common Stock for the benefit of2021 Plan. The 2021 Plan allows the Company, under the termsdirection of the Board of Directors or a Services Agreement between the Companycommittee thereof, to make grants of stock options, restricted and PCG Advisory Group dated August 11, 2017. The remaining advance of $895 is unsecuredunrestricted stock and bears no interest.other stock-based awards to employees, including our executive officers, consultants and directors.

 

DuringIn addition, 6,048 shares of restricted common stock were granted on September 11, 2021 with 25% vesting at issuance and the six months ended June 30, 2017 and 2016, the Company (and its predecessor, Tiger Trade) engaged the servicesremaining shares vesting quarterly over nine months. As of Karma Black Box LLC (“Karma”), which became a Company stockholder as a resultMarch 31, 2022, 4,536 of the Exchange Agreement (Note 1restricted common stock shares have vested and 3), for application development services ofare included in common stock payable.

The following table presents the Company’s Blackbox System technology. Duringoptions as of March 31, 2022:

  

Number of Shares

  

Weighted Average Exercise Price

  

Weighted Average Remaining Life (in years)

 

Options as of December 31, 2021

  675,833  $3.07   9.69 

Issued

  0  $0   - 

Forfeited

  (23,333) $2.99   9.60 

Exercised

  -  $-   - 

Options as of March 31, 2022

  652,500  $3.07   9.45 

At March 31, 2022, options to purchase 235,003 shares were vested and options to purchase 417,497 shares remained unvested. The Company expects to incur expenses for the nine months ended September 30, 2017 and 2016, Karma was paid $85,500 and $10,500 for services, respectively.unvested options totaling $631,614 as they vest.

7. Related Party Transactions

 

Blackboxstocks Inc. and Subsidiary

Notes to Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2017 and 2016

5.  Related Party Transactions (continued)

G2 International, Inc. (“(G2”), which does business as IPA Tech Group (“IPA”), is a company wholly owned by Gust C. Kepler, a Director, President, Chief Executive Officer, Chief Financial Officer and SecretaryKepler. As of December 31, 2020, the Company and the Company’s controlling stockholder. In 2016 G2/IPA refunded $117,800 of prepayments for marketing services leavinghad a prepaid balance of $36,700 asfor public relations and marketing services with G2/IPA. These funds were utilized during the year ended December 31, 2021.

8. Debt

Notes Payable

 

On May 1, 2020, pursuant to the Paycheck Protection Program under the Coronavirus Aid Relief and Economic Security Act (“CARES Act”) the Company was awarded a loan of $130,200. The loan carries an interest rate of 1% and matures on May 1, 2022. During August 9, 2017, we entered into a License Agreement (the “BBTR License”) with EIGH8T TECHNOLOGIES INC. (also known as Black Box Traders and referred to herein as “BBTR”), a British Virgin Island registered company, for 2021, the development, customization and license to use and sublicense a versionCompany received partial loan forgiveness from the SBA reducing the principal balance of the Blackbox System (known as the “BBTR System”) with data from the HKEX, SSE and SZSE. Stephen Chiang, an individual citizen of Singapore who holds 3,000,000 of Company Common Stock (approximately 13% of the issued and outstanding Common Stock), is a principal of BBTR. Under note to $96,795. During December 2021, the terms of the BBTR License note were amended to carry and interest rate of 1% and mature on May 4, 2025. As of March 31, 2022 and December 31, 2021, the Company has received $400,000unpaid balances of licensing revenue as of September 30, 2017.the note totaled $89,710 and $96,795, respectively.

 

6.On November 12, 2020, the Company executed a Loan Agreement with certain Lenders (“the Lenders”) and FVP Servicing LLC, as agent for the Lenders in connection with the issuance of a Note in the amount of $1,000,000 bearing interest at 12% per annum with an initial maturity of November 12, 2022. Simultaneously, with the execution of the Loan Agreement, the Company also entered into an agreement with an affiliate of FVP to provide certain credit and debit card processing services for the Company, which services will continue for a period of one year after the loan is repaid and contains a right of first refusal to continue to provide such services in the future subject to certain limitations. Mr. Kepler executed a guaranty in favor of FVP in connection with the loan. Proceeds from the loan were used to repay the existing senior secured loan balance of $100,000 along with accrued interest, certain outstanding trade payables in the amount of $133,880 and for general working capital purposes. In addition, the Company granted the Lender a security interest in substantially all of its assets. As of March 31, 2022 and December 31, 2021, the unpaid balances of the note totaled $960,000 and $990,000, respectively.

On March 9, 2022 the Company and FVP amended the loan agreement to change the Debt Service Coverage Ratio measurement date from the quarter ended December 31, 2021 to the quarter ending September 30, 2022. The Company was in compliance with all debt covenants at March 31, 2022.

9. Commitments and Contingencies

 

TheDuring August 2017 the Company entered into a sublease agreement with G2 effective July 1, 2015 subject to the termsacquired and conditions of thewas assigned all right, title and interest in an office lease between G2 andwith Teachers Insurance and Annuity Association of America for approximately 1,502 square feet of office space at 5430 LBJ Freeway, Dallas, Texas. The sublease agreement expires March 31, 2020. During the nine months ended September 30, 2017 and 2016 we incurred $35,072 and $33,742, respectively, in office rental expense.

On August 11, 2017, the Company entered into a six month consulting Services Agreement with PCG Advisory Group, providing for capital markets advisory and investor relations consulting services in exchange for cash payments totaling $32,000 and stock compensationamended the lease to expand its space by approximately 336 square feet for a total of 75,000 common shares, restricted under Rule 1441,838 square feet and extended the expiration date to be issued during the six months of the agreement. On September 28, 2017, the30, 2022. The Company also agreed to cancel and forgive debt obligations owed by Gust C. Kepler to the Company for advancesrecords rent expense associated with this lease on a straight-line basis in the aggregate amount of $12,500 in exchange for Mr. Kepler’s transfer of 25,000 shares of Common Stock for the benefit of the Company underconjunction with the terms of the Services Agreement.underlying lease. On February 22, 2021 the Company amended its lease with Teachers Insurance and Annuity Association of America (“TIAA”) to expand its space by approximately 847 square feet for a total of 2,685 square feet and extended the expiration date to September 30, 2025. On April 14, 2021, the Company amended its lease with TIAA extending the lease expiration until September 30, 2028. During the three months ended March 31, 2022, the Company’s office rental expenses totaled approximately $22,300.

The table below shows the future lease payment obligations:

Year Ending

December 31,

 

Amount

 

2022

 $66,495 

2023

  87,934 

2024

  89,948 

2025

  91,122 

2026

  93,136 

Thereafter

  167,645 
  $596,280 

 

The Company is not currently a defendant in any material litigation or any threatened litigation that could have a material effect on the Company’s financial statements.

 

9

ITEMItem 2.Management’s Managements Discussion and Analysis of Financial Condition and Results of Operations

 

We urge you to read the following discussion in conjunction with management’s discussion and analysis contained in our Annual Report on Form 10-K for the year ended December 31, 2016,2021 as well as with our condensed financial statements and the notes thereto included elsewhere herein.

 

Overview

 

The CompanyBlackboxstocks, Inc. is in the businessa financial technology and social media hybrid platform offering real-time proprietary analytics and news for stock and options traders of developing and marketing a real time analytical web basedall levels. Our web-based software as a service platform (the “Blackbox System”) that serves as a tool for day traders and swing traders on various securities exchanges and markets. Our proprietary Blackbox System technology is an algorithm driven system that works in real time, measuring market trends and data while utilizing a multitude of specific criteria, both live and historical. Our Blackbox System platform employs predictive technology“predictive technology” enhanced by artificial intelligence to find volatility and unusual market activity that canmay result in the rapid change in the price of a stock’s price. The Blackbox System was initially designed to monitor and analyze over 13,000 stocks onstock or option. We continuously scan the OTC Markets Group, Inc. (“OTC”), New York Stock Exchange (“NYSE”), the NYSE MKT, LLC (formerly the American Stock Exchange), and NASDAQ, markets simultaneously as our servers receive live data feeds from such markets. We have also customized our Blackbox System to analyze data from the Hong Kong StockChicago Board Options Exchange (“HKEX”), Shanghai Stock Exchange (“SSE”(the “CBOE”) and Shenzhen Stock Exchange (“SZSE”) for licenseother options markets, analyzing over 10,000 stocks and use primarily in Asia.over 1,500,000 options contracts multiple times per second. We considerprovide our users with a fully interactive social media platform that is integrated into our dashboard, enabling our users to exchange information and ideas quickly and efficiently through a common network. We recently introduced a live audio/video feature that allows our members to broadcast on their own channels to share trading strategies and market insight within the Blackbox System technology to be among the most user-friendlycommunity. We employ a subscription based Software as a Service (“SaaS”) business model and maintain a growing base of its kind.users that spans 42 countries.

 

The CompanyBlackbox System is a unique and disruptive financial technology platform combining proprietary analytics and broadcast enabled social media to connect traders of all types worldwide on an intuitive, user-friendly system. The complexity of our backend analytics is neatly hidden from the end user by our simple and easy to navigate dashboard which includes real-time alerts, scanners, financial news, institutional grade charting and proprietary analytics.

We launched itsthe Blackbox System web application for domestic use and made it available to subscribers in September 2016. Subscriptions for the use of the Blackbox System web application are sold on a monthly and/or annual subscription basis to individual consumers through our website at http://www.blackboxstocks.com.

 

On August 9, 2017, we entered into a License Agreement (the “BBTR License”) with EIGH8T TECHNOLOGIES INC. (referred to in the agreementas “BBTR”), a British Virgin Island registered company, for the development, customization and license to use and sublicense a version of the Blackbox System (known as the “BBTR System”) solely for use in connection with data from the HKEX, SSE and SZSE. The BBTR System was made available to BBTR on a trial basis beginning May 15, 2017 and launched for use by BBTR customers beginning on June 1, 2017. Stephen Chiang, an individual citizen of Singapore who holds 3,000,000 of Company Common Stock (approximately 13% of the issued and outstanding Common Stock), is a principal of EIGH8T TECHNOLOGIES INC.

Our principal office is located at 5430 LBJ Freeway, Suite 1485, Dallas, Texas 75240 and our telephone number is (972) 726-9203. Our Common Stock is quoted on the OTC Pink tier of the OTC Markets Group, Inc.Nasdaq Stock Market LLC (the “OTC Pink”“Nasdaq”) under the symbol “BLBX.” Prior to March 9, 2016, our Common Stock was quoted under the symbol “SMQA.” Our corporate website is located at http://www.blackboxstocks.com. We are not including the information contained in our website as part of, or incorporating it by reference into, this Report on Form 10-Q.

 

Basis of Presentation of Financial Information

The accompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern, which is dependent upon the Company's ability to establish itself as a profitable business. At September 30, 2017, the Company had an accumulated deficit of $2,192,303 and for the three and nine months ended September 30, 2017, incurred net losses of $215,189 and $759,459, respectively. Management expects that the Company may need to raise additional capital to sustain operations until such time as the Company can achieve profitability. However, there can be no assurance that management will be successful in obtaining additional funding or in attaining profitable operations.

The financial statements do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation.

Significant Accounting Policies

 

There have been no changes from the Summary of Significant Accounting Policies described in our Annual Report on Form 10-K for the year ending December 31, 2021 filed with the Securities and Exchange Commission on April 12, 2017.March 31, 2022.

 

Liquidity and Capital Resources

The Company launched its Blackbox System web application for domestic use and made it available to subscribers in September 2016 and we have not yet attained a level of subscription sales revenue that would allow us to meet our current overhead. We do not contemplate attaining profitable operations prior to the end of the fourth quarter of 2017, nor is there any assurance that such an operating level can ever be achieved. Unless there is a significant change in cash requirements, the Company believes it has sufficient working capital to fund any operating deficiencies and future development costs until the end of 2018.

 

At September 30, 2017, the CompanyMarch 31, 2022, we had a cash balance of $163,913 and our working capital was $192,871marketable securities totaling $8,573,762 as compared to cash and marketable securities totaling $10,442,379 at December 31, 2021. Our cash flows from operations were ($793,188) for the three months ended March 31, 2022 as compared to $231,912 for the same period in the prior year.

Net cash used in investing activities for the three months ended March 31, 2022 was $85,094 as compared to 31,234 for the prior year period. The volume of marketable securities purchases and sales for the current quarter was the result of trading activity in a cashCompany account that is used to research and test specific trading techniques. The account used for those specific activities had an account balance of $28,867 and a working capital deficit of $160,006 at September 30, 2016.approximately $100,000.

 

Net cash used in financing activities was $896,697 for the three months ended March 31, 2022 as compared to $59,035 for the prior year period. The purchase of $859, 612 of common stock pursuant to the Company’s stock repurchase plan was the primary component of the use of cash. The stock repurchase plan initially authorized the repurchase of up to $2,500,000 of the Company’s common stock and expires on December 31, 2022.

On November 9, 2021 the Company enter into an underwriting agreement pursuant to which it sold 2,400,000 shares of its Common Stock at an offering price of $5.00 in an underwritten public offering upon which our shares became listed on the NASDAQ Capital Market. Net proceeds to the Company after underwriting discounts and offering expenses were approximately $10,510,000. We expect to use proceeds from this offering to further develop our Blackbox System platform, expand our product offerings, fund marketing efforts to grow our subscriber base, as well as for general and administration expenses and other general corporate purposes.

We believe that the Company has sufficient capital resources to fund current operations and debt service requirements.

Results of Operations

 

Comparison of Three Months Ended September 30, 2017March 31, 2022 and 20162021

For the three months ended September 30, 2017 and 2016, the Company’s revenue totaled $384,279 and $19,540, respectively, for which our respective costs of revenues totaled $163,071 and $15,633. The increase in revenue and costs of operations are the result of the Company’s launch of our Blackbox System web application for subscription in September 2016. We also generated $300,000 in license fee revenues from the BBTR System which was made available on a trial basis in May 2017. The majority of the costs of operations are data feed expenses for exchange information totaling approximately $70,099 for the three months ended September 30, 2017. Other costs of operations included affiliate program referral, customer retention and media coordination payments of approximately $43,818 and website design and maintenance costs of approximately $46,777.

 

For the three months ended September 30, 2017,March 31, 2022 and 2021, our revenue was $1,272,486 and $1,489,668, respectively, a decrease of 14.6%. We believe 2022 revenues were negatively impacted by a confluence of macro-economic factors including poor overall performance in the Company hadstock market, soaring inflation and negative gross domestic product (GDP) growth during the first quarter of 2022. The S&P 500 dropped by 4.9% during the first quarter of 2022 as compared to a gain of 5.8% in the first quarter of 2021. In addition to the poor market performance, inflation of 7.5% as measured by the consumer price index (CPI) and a decline in GDP of (1.4%) may have constricted disposable cash of prospective subscribers. Although we believe that our platform enables our subscribers to profit in both bull and bear markets, we attribute some of our decline in revenues to a higher level of hesitancy resulting from the poor macro-economic data. In order to combat this, we implemented a promotional program offering our software for $5 for the first month. This promotional offering was the first of its kind in the Company’s history and was effective in increasing the subscriber totals but only contributed minimal revenue per user. Average users for the three months ended March 31, 2022 was 5,709 as compared to 5,575 for the prior year period and 5,749 for the quarter ended December 31, 2021.Total users of 7,400 as of March 31, 2022 included those new subscribers from the $5 promotion. Cost of revenues for the three months ended March 31, 2022 and 2021 were $579,962 and $395,775, resulting in gross margins of 54% and 73%, respectively. The primary components of cost of revenues include costs related to data and news feed expenses for exchange information which comprise the majority of the costs, as well as the costs for program moderators. Cost of goods sold increased by $184,187 for the quarter ended March 31 2022 as compared to the prior year primarily as a result of a 74% increase in the cost of our program moderators, higher costs associated with our new broadcast enabled social media feature and news feeds. As noted above, our promotional event resulted in increased user counts but limited revenue that offset the costs which resulted in unusually low gross margin percentage of 54%.

For the three months ended March 31, 2022, operating expenses totaling $436,077were $1,713,678 as compared to $160,747$948,761 for the same period in 2016,2021, an increase of $275,330.$764,917 or 81%. We experienced significantly higher expenditures in most of our expense categories for the 2022 period. Selling, general and administrative expenses increased from $606,687 for the three months ended March 31, 2021 to $1,224,723 for the three months ended March 31, 2022, an increase of 102%. The increase in selling, general and administrative expenses of $618,036 was the largest dollar value component of the operating expense increase. The primary components of the increase were increases in salary and stock-based compensation, public investor relations. Advertising and marketing expenses increased by $91,484 or 44% from $207,312 in the three months ended March 31, 2021 to $298,796 in the three months ended March 31, 2022. Software development costs also increased by approximately $87,070$54,446 or 42% from $35,445$130,438 in the three months ended March 31, 2021 to $184,884 for the three months ended September 30, 2016 compared to $122,515 for the three months ended September 30, 2017.March 31, 2022. The increased software development costs were primarily attributableincurred for improvements to our platform including our online social media component, development of a native application and new product development.

We expect to continue to incur increases in our operating costs for the foreseeable future. Expense increases for digital advertising and marketing activities, our primary advertising mechanism, should continue to increase with sales but may also increase as a result of additional strategies including but not limited to television advertising. Software development costs are also expected to increase as we expand our development team and testing of the Blackbox System’sinvest in new software chatproducts and features. General and administrative expenses also increased approximately $186,062

Our loss from $124,013operations for the three months ended September 30, 2016March 31, 2022 was $1,021,154 as compared to $310,075income from operations of $145,132 for the prior year period. Lower sales and gross margin resulting from the $5 promotion in March of 2022 combined with higher operating expenses resulted in the loss from operations. Non-operating expenses for the three months ended September 30, 2017. The majorityMarch 31, 2022 were $221,289 as compared to $132,577 for the prior year period.

EBITDA (Non-GAAP Financial Measure)

We report our financial results in accordance with accounting principles generally accepted in the United States of America (“GAAP”). However, management believes the presentation of certain non-GAAP financial measures provides useful information to management and investors regarding financial and business trends relating to the Company’s financial condition and results of operations, and that when GAAP financial measures are viewed in conjunction with the non-GAAP financial measures, investors are provided with a more meaningful understanding of the increaseCompany’s ongoing operating performance. In addition, these non-GAAP financial measures are among the primary indicators management uses as a basis for evaluating performance. For all non-GAAP financial measures in this release, we have provided corresponding GAAP financial measures for comparative purposes in the report.

EBITDA is a result of increased internet and telecomdefined by us as net income (loss) before interest expense, of $41,762, marketing and investor relations of $140,811, increased travel expense of $18,964 offset by a reduction in administrative expenses of $15,476. The Company also recordedincome tax, depreciation and amortization expense and certain non-cash. EBITDA is not a measure of $3,487 for the three months ended September 30, 2017 comparedoperating performance under GAAP and therefore should not be considered in isolation nor construed as an alternative to $1,289 for the three months ended September 30, 2016. operating profit, net income (loss) or cash flows from operating, investing or financing activities, each as determined in accordance with GAAP. Also, EBITDA should not be considered as a measure of liquidity. Moreover, since EBITDA is not a measurement determined in accordance with GAAP, and thus is susceptible to varying interpretations and calculations, EBITDA, as presented, may not be comparable to similarly titled measures presented by other companies.

 

ComparisonReconciliation of Nine Months Ended September 30, 2017 and 2016net income (loss) to EBITDA

 

For the nine months ended September 30, 2017 and 2016, the Company’s revenue totaled $708,837 and $19,540, respectively, for which our respective costs

  

Three Months Ended March 31,

 
  

2022

  

2021

 

Net income (loss)

 $(1,242,443) $12,555 

Adjustments:

        

Interest expense

  29,243   41,038 

Investment loss

  178,732   - 

Depreciation and amortization expense

  5,275   4,324 

Amortization of debt discount

  13,314   91,539 

Stock based compensation

  122,033   - 

Total Adjustments

 $348,597  $136,901 

EBITDA

 $(893,846) $149,456 

13

 

Off Balance Sheet Arrangements

 

We doAs of March 31, 2022, we did not have any off balancematerial off-balance sheet arrangements.

 

ITEMItem 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKQuantitative and Qualitative Disclosures About Market Risk

 

Our Company isWe are a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act, and as such, iswe are not required to provide the information required under this Item.

 

ITEMItem 4.CONTROLS AND PROCEDURES Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Gust Kepler, our principal executive officer and Robert Winspear, our principal financial officer, conducted an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of September 30, 2017,March 31, 2022, pursuant to Exchange Act Rule 13a-15. Such disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company is accumulated and communicated to the appropriate management on a basis that permits timely decisions regarding disclosure. Based upon that evaluation, the Company'sour principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures as of September 30, 2017March 31, 2022, were not effective to provide reasonable assurance that information required to be disclosed in the Company’s periodic filings under the Exchange Act is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal controls over financial reporting during the quarter endedSeptember 30, 2017 March 31, 2022 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 material weakness in the internal controls. Management has decided that considering the officer/director involved, the control procedures in place, and the outsourcing of certain financial functions, the risks associated with such lack of segregation were low and the potential benefits of adding additional employees to clearly segregate duties did not justify the expenses associated with such increases. Management periodically reevaluates this situation. In light of the Company’s current cash flow situation, the Company does not intend to increase staffing to mitigate the current lack of segregation of duties within the general administrative and financial functions.

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

None.

ITEM 1A.  RISK FACTORS

Our Company is a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act, and as such, is not required to provide the information required under this Item.

 

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEEDSItem 1.Legal Proceedings

 

None.

 

ITEMItem 1A.Risk Factors

Important risk factors that could affect our operations and financial performance, or that could cause results or events to differ from current expectations, are described in Part I, Item 1A, "Risk Factors” of our Annual Report on Form 10-K filed with the SEC on March 31, 2022 for the year ended December 31, 2021, as supplemented by the "Risk Factors" sections in our registration statement on Form S-1 filed with the SEC on October 5, 2021, as amended on November 5, 2021 and the information contained elsewhere in this Report. The risks and uncertainties described within our Form 10-K for the year ended December 31, 2021 and the registration statement, as amended, are not the only risks we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business or results of operations. 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Securities

On January 4, 2022, 86,387 shares of common stock were issued for the cashless exercise of 120,000 warrant shares.

The securities described above were privately offered and sold in reliance upon exemptions from registration pursuant to Section 4(a)(2) under the Securities Act. We reasonably believed that each of the purchasers of such securities had access to information concerning its operations and financial condition, were acquiring the securities for their own account and not with a view to the distribution thereof, and each investor qualified as an "accredited investor" as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act. Furthermore, no "general solicitation" was made by the Company with respect to sale of any of the securities. At the time of their issuance, the securities described above were deemed to be restricted securities for purposes of the Securities Act and the documentation representing the securities bear legends and/or non-transfer provisions to that effect.

There have been no other sales of unregistered securities during the period covered by the Report that have not been previously reported as required in Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and/or current reports on Form 8-K.

Use of Proceeds of Registered Securities

On January 7, 2022 the Company’s Board of Directors authorized a stock repurchase plan for up to $2,500,000 of the Company’s Common Stock. The program will terminate on December 31, 2022 or when the $2,500,000 authorized has been fully utilized. As of March 31, 2022, the Company has repurchased 436,600 shares of common stock for an aggregate purchase price of $859,612. This use of proceeds was not anticipated or disclosed in the Company’s prospectus.

Other than as described above, the proceeds of the public offering have been used as described in the prospectus to promote and market our Blackbox System platform and increase our subscriber base, and for general and administration expenses.

Purchases of Equity Securities by Issuer

The following table sets forth information regarding purchases made under the Company’s stock repurchase plan for up to $2,500,000 of the Company’s Common Stock. The program was authorized and publicly announced on January 7, 2022 and will terminate on December 31, 2022 or when the $2,500,000 authorized has been fully utilized.

Period

Total Number of

Shares Purchased

Average Price Paid

Per Share

Total Number of

Shares Purchased as

Part of Publicly

Announced Plans or

Programs

Maximum Number

(or Approximate

Dollar Value of

Shares that May Yet

Be Purchase under

the Plans or

Programs

January 1, 2022 through January 31, 2022

221,121

$2.12

221,121

$2,031,416

February 1, 2022 through February 28, 2022

146,781

$1.84

367,902

$1,761,165

March 1, 2022 through March 31, 2022

68,698

$1.76

436,600

$1,640,388

Total

436,600

$1.97

436,600

$1,640,388

Item 3.DEFAULTS UPON SENIOR SECURITIES Defaults Upon Senior Securities

 

None.

 

ITEMItem 4.MINE SAFETY DISCLOSURES Mine Safety Disclosures

 

Not applicable.

 

ITEMItem 5.OTHER INFORMATION Other Information

 

None.

 

ITEM

Item 6. EXHIBITSExhibits

 

The following exhibits are filed with this Quarterly Report on Form 10-Q or are incorporated by reference as described below.

 

Exhibit

Description

10.1

31.1

Services Agreement dated August 11, 2017 between the Blackboxstocks, Inc. and PCG Advisory Group*
10.2Stock Repurchase and Cancellatoin Agreement dated September 28, 2017 by and between Blackboxstocks, Inc. and Gust Kepler (incorporated by reference to Exhibit 10.1 of the Company’s Information Statement on Form 8-K filed with the Commission on September 29, 2017)
10.3License Agreement dated August 9, 2017 between Blackboxstocks Inc. and EIGH8T TECHNOLOGIES INC. (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed with the Commission on August 14, 2017)
31.1

Certification of Principal Executive Officer pursuant to Rule 13a-14a/Rule 14d-14(a)*

31.2

Certification of Principal Financial Officer pursuant to Rule 13a-14a/Rule 14d-14(a)*

32.1

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350**

32.2

Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350**

101.1

Inline Interactive data files pursuant to Rule 405 of Regulation S-T*

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*          Filed herewith.

**       Furnished herewith

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

May 16, 2022

November 14, 2017

BLACKBOXSTOCKS INC.

   
 

By:

      /s/

/s/ Gust Kepler

 

Gust Kepler

 

President, Chief Executive Officer and Secretary (Principal

(Principal Executive Officer)

By:

/s/ Robert Winspear

Robert Winspear

Chief Financial Officer and PrincipalSecretary (Principal Financial

and Accounting Officer)

 

EXHIBIT INDEX

 

Exhibit

Description

10.1

31.1

Services Agreement dated August 11, 2017 between the Blackboxstocks, Inc. and PCG Advisory Group*
10.2Stock Repurchase and Cancellatoin Agreement dated September 28, 2017 by and between Blackboxstocks, Inc. and Gust Kepler (incorporated by reference to Exhibit 10.1 of the Company’s Information Statement on Form 8-K filed with the Commission on September 29, 2017)
10.3License Agreement dated August 9, 2017 between Blackboxstocks Inc. and EIGH8T TECHNOLOGIES INC. (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed with the Commission on August 14, 2017)
31.1

Certification of Principal Executive Officer pursuant to Rule 13a-14a/Rule 14d-14(a)*

31.2

Certification of Principal Financial Officer pursuant to Rule 13a-14a/Rule 14d-14(a)*

32.1

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350**

32.2

Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350**

101.1

Inline Interactive data files pursuant to Rule 405 of Regulation S-T*

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*          Filed herewith.

**       Furnished herewith

15
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