TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

ITEMItem 1.  FINANCIAL STATEMENTSFinancial Statements

Blackboxstocks Inc. and Subsidiary

Consolidated Balance Sheets

SeptemberAs of June 30, 2017 (Unaudited)2022 and December 31, 20162021

(Unaudited)

The accompanying notes are an integral part of these consolidated

financial statements. 

statements

Blackboxstocks Inc.

The accompanying notes are an integral partStatements of these consolidatedOperations

financial statements. For the Three and Six Months Ended June 30, 2022 and 2021

(Unaudited)

The accompanying notes are an integral part of these consolidated

financial statements.

Blackboxstocks Inc.

Statement of Stockholders’ Equity (Deficit)

For the Three and Six Months Ended June 30, 2022 and 2021

(Unaudited)

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

Blackboxstocks Inc.

Statements of Cash Flows

For the Six Months Ended June 30, 2022 and Subsidiary2021

(Unaudited)

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

Blackboxstocks Inc.

Notes to Consolidated Financial Statements

For the Three and NineSix Months Ended SeptemberJune 30, 20172022 and 20162021

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. The Company has also introduced a live audio/video feature that allows members to broadcast on their own channels to share trade strategies and market insight within the NYSE MKT, LLC (formerlycommunity. The platform was initially made available to subscribers in September 2016. Subscriptions for the American Stock Exchange),use of the NASDAQ markets,platform are sold on a monthly and/or annual subscription basis to individual consumers through the Hong Kong Stock Exchange, 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.

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.

Recently Issued Accounting Pronouncements-Pronouncements. During the nine monthsperiod ended SeptemberJune 30, 2017 and 2016, 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 of its proprietary Blackbox System technology, an algorithm driven system, through a combination of in house system analysts and outside firms. The Company’s Blackbox System software for use in China was in development and costs expensed until the software reached technological feasibility in April 2017 and capitalized until May 15, 2017 when the Blackbox System for use in China was marketable.

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 June 30, 2022, as follows:

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 developmentlittle, 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 June 30, 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.

3.   Stockholders’4. Stockholders’ Equity

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 subsidiary1-for-1 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:

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 a warrant for the purchase of 120,000 shares (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 June 30, 2022, the Company has repurchased 499,028 shares for an aggregate purchase price of $945,449.

5. Warrants to Purchase Common Stock

Tiger Trade was subsequently merged withThe following table presents the Company’s warrants as of June 30, 2022:

At June 30, 2022, warrants for the purchase of 366,116 shares were vested and intowarrants for the purchase of 72,220 shares remained unvested. The Company on February 9, 2016, atexpects to incur expenses for the unvested warrants totaling $276,296 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 remaining shares vesting quarterly over nine months. As of June 30, 2017 and 2016, the Company (and its predecessor, Tiger Trade) engaged the services of Karma Black Box LLC (“Karma”), which became a Company stockholder as a result2022, all 6,048 of the Exchange Agreement (Note 1restricted common stock shares have vested and 3), for application development services of the Company’s Blackbox System technology. During the nine months ended September 30, 2017 and 2016, Karma was paid $85,500 and $10,500 for services, respectively.are included in common stock payable.

Blackboxstocks Inc.The following table presents the Company’s options as of June 30, 2022:

At June 30, 2022, options to purchase 237,450 shares were vested and Subsidiaryoptions to purchase 453,717 shares remained unvested. The Company expects to incur expenses for the unvested options totaling $643,370 as they vest.

Notes to Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2017 and 20167. Related Party Transactions

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 had an initial maturity of 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 Licensenote were amended to extend the Company has received $400,000maturity to May 4, 2025. As of licensing revenue asJune 30, 2022 and December 31, 2021, the unpaid balances of September 30, 2017.the note totaled $82,606 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 Lenders a security interest in substantially all of its assets. As of June 30, 2022 and December 31, 2021, the unpaid balances of the note totaled $930,000 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 June 30, 2022.

9. Commitments and Contingencies

TheIn 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 six months ended June 30, 2022, the Company’s office rental expenses totaled approximately $44,700.

The table below shows the future lease payment obligations:

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.

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

We urge you to read the following discussion in conjunction with management’s discussion and analysis contained in our Annual Report on Form 10-K for the year ended December 31, 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),NASDAQ, Chicago Board Options Exchange (the “CBOE”) and NASDAQother options markets, simultaneously asanalyzing over 10,000 stocks and over 1,500,000 options contracts multiple times per second. We provide our servers receive live data feeds from such markets.users with a fully interactive social media platform that is integrated into our dashboard, enabling our users to exchange information and ideas quickly and efficiently through a common network. We have also customizedintroduced a live audio/video feature that allows our Blackbox Systemmembers to analyze data from the Hong Kong Stock Exchange (“HKEX”), Shanghai Stock Exchange (“SSE”)broadcast on their own channels to share trading strategies and Shenzhen Stock Exchange (“SZSE”) for license and use primarily in Asia. We considermarket 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.

Basis We are not including the information contained in our website as part 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.incorporating it by reference into, this Report on Form 10-Q.

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 SeptemberJune 30, 2017, the Company2022, we had a cash balance of $163,913 and our working capital was $192,871marketable securities totaling $7,069,826 as compared to cash and marketable securities totaling $10,442,379 at December 31, 2021. Our cash flows used in operations were ($2,038,532) for the six months ended June 30, 2022 as compared to ($26,192) for the same period in the prior year.

Net cash from investing activities for the six months ended June 30, 2022 was $966,779 as compared to ($54,507) 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 ($1,019,638) for the six months ended June 30, 2022 as compared to $265,636) for the prior year period. The purchase of $945,449 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 for the twelve months following the issuance of this report.

Results of Operations

Comparison of Three Months Ended SeptemberJune 30, 20172022 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 SeptemberJune 30, 2017,2022 and 2021, our revenue was $1,399,315 and $1,463,606, respectively, a decrease of 4.4%. We believe 2022 revenues continue to be negatively impacted macro-economic factors including poor overall performance in the Company hadstock market, high inflation and negative gross domestic product (GDP). The S&P 500 dropped by 20.6% during the six months of 2022. In addition to the poor market performance, inflation of 9.1% as measured by the consumer price index (CPI) and a decline in GDP of (0.9%) 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 in March. This promotional offering was effective in increasing the subscriber totals but only contributed minimal revenue per new user during the end of March and early April. Average users for the three months ended June 30, 2022 was 6,181 as compared to 5,482 for the prior year period and 5,709 for the first quarter ended March 31, 2022. Cost of revenues for the three months ended June 30, 2022 and 2021 were $499,427 and $409,577, resulting in gross margins of 64% and 72%, 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 $89,850 for the quarter ended June 30 2022 as compared to the prior year primarily as a result of a 46% increase in the cost of our program moderators, higher costs associated with our new broadcast enabled social media feature and data feeds. As noted above, our promotional event resulted in increased user counts but limited revenue that offset the costs which resulted in a lower gross margin percentage of 64%.

For the three months ended June 30, 2022, operating expenses totaling $436,077were $2,068,654 as compared to $160,747$1,171,551 for the same period in 2016,2021, an increase of $275,330.$897,103 or 77%. We experienced significantly higher expenditures in most of our expense categories for the 2022 period. Selling, general and administrative expenses increased from $615,727 for the three months ended June 30, 2021 to $1,191,474 for the three months ended June 30, 2022, an increase of 94%. The increase in selling, general and administrative expenses of $575,747 was the largest dollar value component of the operating expense increase. The primary components of the increase were increases in salary, stock-based compensation and investor and public relations. Advertising and marketing expenses increased by $179,156 or 44% from $347,188 in the three months ended June 30, 2021 to $526,344 in the three months ended June 30, 2022. The June 30, 2022 period included general advertising expense related to television advertising of approximately $153,057 which are more general in nature than the Company’s historical direct marketing campaigns. Software development costs also increased by approximately $87,070$141,731 or 70% from $35,445$203,255 in the three months ended June 30, 2021 to $344,986 for the three months ended SeptemberJune 30, 2016 compared to $122,515 for the three months ended September 30, 2017.2022. The increased software development costs were primarily attributablethe result of increased personnel costs and were incurred for improvements to our platform including our online social media component, development of a native application which was released at the end of April and new product development.

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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 testinginvest in new products and features.

Our loss from $124,013operations for the three months ended SeptemberJune 30, 20162022 was $1,168,766 as compared to $310,075a loss from operations of $117,522 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 SeptemberJune 30, 2017. The majority of the increase is a result of increased internet and telecom 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 recorded depreciation and amortization expense of $3,4872022 were $147,333 as compared to $125,814 for the three months ended September 30, 2017 compared to $1,289 for the three months ended September 30, 2016. prior year period.

Comparison of NineSix Months Ended SeptemberJune 30, 20172022 and 20162021

For the ninesix months ended SeptemberJune 30, 2017 and 2016, the Company’s revenue totaled $708,837 and $19,540, respectively, for which our respective costs2022, we generated sales of revenues totaled $392,543 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 $400,000 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 $218,812 for the nine months ended September 30, 2017. Other costs of operations included affiliate program referral, customer retention and media coordination payments of approximately $71,702 and website design and maintenance costs of approximately $93,851.

For the nine months ended September 30, 2017, the Company had operating expenses totaling $1,074,467$2,671,801 as compared to $464,127sales of $2,953,274 for the same period in 2016,2021. As noted above, we believe that the macro-economic environment in 2022 has been detrimental to our sales. Our average subscriber count for the first six months of 2022 increased from 5,528 for the six months ended June 30, 2021 to 5,945, an increase of $610,340.7.5%. Although the subscriber count was higher for the 2022 period, revenues were lower due to lower average revenues per subscriber, primarily resulting from the March promotion described above. Cost of sales for the six months ended June 30, 2022 were $1,079,389 as compared to $805,352 for the six months ended June 30, 2021. The increase of $274,037 was primarily due to $148,330 of increased costs of our moderators/team traders, $98,250 of additional costs associated with the online social media component of our platform and $4,036 in higher data feed expenses.

For the six months ended June 30, 2022, our operating expenses were $3,782,332 as compared to $2,120,312 for the same period in 2021. Selling general and administrative expenses increased to $2,416,197 for the six months ended June 30, 2022 as compared to $1,222,414 for the same period in 2021, an increase of $1,193,783. The 2022 increase was driven primarily by higher personnel costs which increased by $593,014. In addition, investor relations expense and stock compensation were higher for the six months ended June 30, 2022. Advertising and marketing expense increased to $825,140 for the six months ended June 30, 2022 as compared to $554,500 for the prior year period. The increase of $270,640 was due primarily to the television advertising done in the second quarter as discussed above. Software development costs also increased by approximately $230,479 from $124,764$333,693 for the ninesix months ended SeptemberJune 30, 2016 compared2021 to $355,243$529,870 for the ninesix months ended SeptemberJune 30, 2017.2022. The increased software development costs were primarily attributablethe result of increased personnel costs and were incurred for improvements to our platform including our online social media component, development of a native application which was released at the end of April and new product development.

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 developmentCompany’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 BBTR SystemCompany’s ongoing operating performance. In addition, these non-GAAP financial measures are among the primary indicators management uses as a basis for useevaluating performance. For all non-GAAP financial measures in this release, we have provided corresponding GAAP financial measures for comparative purposes in the report.

EBITDA is defined by the BBTR Licensee in connection with certain Asian securities exchanges and development of the Blackbox System’s new software chat features. General and administrative expenses also increased approximately $375,469 from $335,497 for the nine months ended September 30, 2016 compared to $710,966 for the nine months ended September 30, 2017. The increase is largely due to increases in internet and telecom expenses of $80,054, increased marketing and investor relations expenses of $200,613, an increase in travel and relatedus as net income (loss) before interest expense, of $80,876 and increases in administrative expense of $13,926. The Company also recordedincome tax, depreciation and amortization expense and certain non-cash. EBITDA is not a measure of $8,258 for the nine months ended September 30, 2017 comparedoperating performance under GAAP and therefore should not be considered in isolation nor construed as an alternative to $3,866 for the nine 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.

Reconciliation of net loss to EBITDA

Off Balance Sheet Arrangements

We doAs of June 30, 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 SeptemberJune 30, 2017,2022, 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 SeptemberJune 30, 20172022, 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 June 30, 20172022 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

There have been no 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 June 30, 2022, the Company has repurchased 499,028 shares of common stock for an aggregate purchase price of $945,449. 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.