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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

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

For the quarterly period ended

June 30, 2023

☐

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

For the transition period from

Commission File No.

001-41051

BLACKBOXSTOCKS INC.

(Exact name of registrant as specified in its charter)

Nevada	45-3598066
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5430 LBJ Freeway, Suite 1485, Dallas, Texas	75240
(Address of principal executive offices)	(Zip Code)

(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. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐

Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☒

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s Common Stock as of August 12, 2023 was 3,184,579.

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TABLE OF CONTENTS

		Page
INTRODUCTORY COMMENT		1
CAUTION REGARDING FORWARD LOOKING STATEMENTS		1

PART I –FINANCIAL INFORMATION		2
Item 1.	Financial Statements	2
	Balance Sheets as of June 30, 2023 (Unaudited) and December 31, 2022	2
	Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	3
	Statement of Stockholders’ Equity for the Six Months Ended June 30, 2023 and 2022 (Unaudited)	4
	Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022 (Unaudited)	5
	Notes to Financial Statements for the Three and Six Months Ended June 30, 2023 and 2022	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	16
Item 4.	Controls and Procedures	16

PART II – OTHER INFORMATION		17
Item 1.	Legal Proceedings	17
Item 1A.	Risk Factors	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3.	Defaults Upon Senior Securities	18
Item 4.	Mine Safety Disclosures	18
Item 5.	Other Information	18
Item 6.	Exhibits	18

SIGNATURES		18

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INTRODUCTORY COMMENT

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

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Our prospects are subject to uncertainties and risks. In this Quarterly Report on Form 10-Q (the “Report”), we make forward-looking statements that involve substantial uncertainties and risks. When used in this Report, the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “intend,” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) regarding events, conditions and financial trends which may affect our future plans of operations, business strategy, operating results and financial position. Such statements are not guarantees of future performance and are subject to risks and uncertainties described herein and actual results may differ materially from those included within the forward-looking statements. Additional factors are described in our other public reports and filings with the Securities and Exchange Commission (the “SEC”). Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. We undertake no obligation to publicly release the result of any revision of these forward-looking statements to reflect events or circumstances after the date they are made or to reflect the occurrence of unanticipated events.

This Report contains certain estimates and plans related to us and the industry in which we operate, which assume certain events, trends and activities will occur and the projected information based on those assumptions. We do not know that all of our assumptions are accurate. If our assumptions are wrong about any events, trends and activities, then our estimates for future growth for our business may also be wrong. There can be no assurance that any of our estimates as to our business growth will be achieved.

The following discussion and analysis should be read in conjunction with our financial statements and the notes associated with them contained elsewhere in this Report. This discussion should not be construed to imply that the results discussed in this Report will necessarily continue into the future or that any conclusion reached in this Report will necessarily be indicative of actual operating results in the future. The discussion represents only the best assessment of management.

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part1PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Blackboxstocks Inc.

Balance Sheets

As of June 30 2023 and December 31, 2022

(Unaudited)

	June 30,			December 31,
	2023			2022

Assets
Current assets:
Cash	$	272,564		$	425,578
Accounts receivable, net of allowance for doubtful accounts of $68,589 at June 30, 2023 and December 31, 2022		289,958			59,613
Inventory		15,464			15,464
Marketable securities		673,174			3,216,280
Prepaid expenses and other current assets		144,722			190,120
Total current assets		1,395,882			3,907,055

Property and equipment:
Office, computer and related equipment, net of depreciation of $125,607 and $104,410 at June 30, 2023 and December 31, 2022, respectively		74,772			93,086
Right of use lease, net of amortization of $249,062 and $213,459 at June 30, 2023 and December 31, 2022, respectively		300,037			335,640
Total property and equipment		374,809			428,726

Investments		8,424,000			-

Total assets	$	10,194,691		$	4,335,781

Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable	$	750,097		$	730,099
Accrued interest		1,613			1,613
Unearned subscriptions		720,516			1,022,428
Lease liability right of use, current		67,371			70,002
Note payable, current portion (Note 8)		28,877			28,733
Total current liabilities		1,568,474			1,852,875

Long term liabilities:
Note payable (Note 8)		25,139			39,614
Lease liability right of use, long term		232,667			265,639
Total long term liabilities		257,806			305,253

Commitments and contingencies (Note 9)

Stockholders' equity
Preferred stock, $0.001 par value, 5,000,000 shares authorized; no shares issued and outstanding at June 30, 2023 and December 31, 2022		-			-
Series A Convertible Preferred Stock, $0.001 par value, 5,000,000 shares authorized; 3,269,998 issued and outstanding at June 30, 2023 and December 31, 2022		3,185			3,270
Series B Convertible Preferred Stock, $0.001 par value, 10,000,000 shares authorized; 2,400,000 and -0- issued and outstanding at March 31, 2023 and December 31, 2022, respectively		2,400			-
Common stock, $0.001 par value, 100,000,000 shares authorized: 3,184,579 and 3,297,927 issued and outstanding at June 30, 2023 and December 31, 2022, respectively		3,270			3,298
Common stock payable		-			23,340
Treasury stock		(15,291	)		(1,102,375	)
Additional paid in capital		26,520,145			18,070,556
Accumulated deficit		(18,145,298	)		(14,820,436	)
Total stockholders' equity		8,368,411			2,177,653

Total liabilities and stockholders' equity	$	10,194,691		$	4,335,781

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

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Blackboxstocks Inc.

Statements of Operations

For the Three and Six Months Ended June 30, 2023 and 2022

(Unaudited)

	For the three months ended						For the six months ended
	June 30,						June 30,
	2023			2022			2023			2022
Revenue:
Subscriptions	$	734,648		$	1,395,624		$	1,589,638		$	2,666,554
Other revenues		2,750			3,691			6,764			5,247
Total revenues		737,398			1,399,315			1,596,402			2,671,801

Cost of revenues		426,975			499,427			874,606			1,079,389

Gross margin		310,423			899,888			721,796			1,592,412

Operating expenses:
Software development costs		227,250			344,986			582,294			529,870
Selling, general and administrative		1,350,378			1,191,474			3,128,012			2,416,197
Advertising and marketing		153,415			526,344			368,396			825,140
Depreciation and amortization		10,679			5,850			21,197			11,125
Total operating expenses		1,741,722			2,068,654			4,099,899			3,782,332

Operating loss		(1,431,299	)		(1,168,766	)		(3,378,103	)		(2,189,920	)

Other (income) expense:
Interest expense		147			28,952			312			58,195
Amortization of debt discount and issuance costs		-			13,314			-			26,628
Investment (income) loss		(6,952	)		105,067			(53,553	)		283,799
Total other (income) expense, net		(6,805	)		147,333			(53,241	)		368,622

Loss before income taxes		(1,424,494	)		(1,316,099	)		(3,324,862	)		(2,558,542	)

Income taxes		-			-			-			-

Net loss		(1,424,494	)		(1,316,099	)		(3,324,862	)		(2,558,542	)

Weighted average number of common shares outstanding - basic		3,158,593			3,296,415			3,231,203			3,295,938
Net loss per share - basic	$	(0.45	)	$	(0.40	)	$	(1.03	)	$	(0.78	)

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

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Blackboxstocks Inc.

Statement of Stockholders’ Equity

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

	Preferred Stock				Series A Preferred Stock				Series B Preferred Stock				Common Stock						Common Stock			Treasury			Additional Paid in			Accumulated
	Shares		Amount		Shares		Amount		Shares		Amount		Shares			Amount			Payable			Stock			Capital			Deficit			Total

Balances, December 31, 2021		-	$	-		3,269,998	$	3,270		-	$	-		3,274,927		$	3,275		$	15,000		$	-		$	17,596,459		$	(9,800,554	)	$	7,817,450

Purchase of treasury stock		-		-		-		-		-		-		-			-			-			(945,449	)		-			-			(945,449	)

Cashless exercise of warrants		-		-		-		-		-		-		21,597			22			-			-			(22	)		-			-

Issuance of warrants for compensation		-		-		-		-		-		-		-			-			-			-			63,760			-			63,760

Issuance of options for compensation		-		-		-		-		-		-		-			-			-			-			169,452			-			169,452

Common stock payable for compensation		-		-		-		-		-		-		-			-			15,000			-			-			-			15,000

Net loss		-		-		-		-		-		-		-			-			-			-			-			(2,558,542	)		(2,558,542	)

Balances, June 30, 2022		-	$	-		3,269,998	$	3,270		-	$	-		3,296,524		$	3,297		$	30,000		$	(945,449	)	$	17,829,649		$	(12,359,096	)	$	4,561,671

Balances, December 31, 2022		-	$	-		3,269,998	$	3,270		-	$	-		3,297,927		$	3,298		$	23,340		$	(1,102,375	)	$	18,070,556		$	(14,820,436	)	$	2,177,653

Issuance of stock for fractional shares resulting from reverse split		-		-		-		-		-		-		8,838			9			-			-			(9	)		-			-

Purchase of treasury stock		-		-		-		-		-		-		-			-			-			(94,391	)		-			-			(94,391	)

Retirement of treasury stock		-		-		-		-		-		-		(454,441	)		(454	)		-			1,181,475			(1,181,021	)		-			-

Issuance of warrants for compensation		-		-		-		-		-		-		-			-			-			-			63,760			-			63,760

Issuance of options for compensation		-		-		-		-		-		-		-			-			-			-			307,274			-			307,274

Issuance of stock for compensation		-		-		-		-		-		-		332,255			332			(23,340	)		-			837,985			-			814,977

Issuance of stock for investment		-		-		-		-		2,400,000		2,400		-			-			-			-			8,421,600			-			8,424,000

Net loss		-		-		-		-		-		-		-			-			-			-			-			(3,324,862	)		(3,324,862	)

Balances, June 30, 2023		-	$	-		3,269,998	$	3,270		2,400,000	$	2,400		3,184,579		$	3,185		$	-		$	(15,291	)	$	26,520,145		$	(18,145,298	)	$	8,368,411

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

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Blackboxstocks Inc.

Statements of Cash Flows

For the Six Months Ended June 30, 2023 and 2022

(Unaudited)

	For the six months ended
	June 30,
	2023			2022
Cash flows from operating activities:
Net loss	$	(3,324,862	)	$	(2,558,542	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		21,197			11,125
Amortization of note discount and issuance costs		-			26,628
Stock based compensation		1,173,761			248,212
Investment (income) loss		(53,553	)		283,799
Changes in operating assets and liabilities:
Accounts receivable		(230,345	)		(3,000	)
Inventory		-			(1,808	)
Prepaid expenses and other current assets		(33,702	)		124,605
Accounts payable		32,248			221,849
Unearned subscriptions		(301,912	)		(391,400	)
Net cash used in operating activities		(2,717,168	)		(2,038,532	)

Cash flows from investing activities:
Purchase of property and equipment		(2,883	)		(30,584	)
Purchase of marketable securities		(5,417,253	)		(13,753,390	)
Sale of marketable securities		8,013,912			14,750,753
Net cash provided by investing activities		2,593,776			966,779

Cash flows from financing activities:
Principal payments on senior secured note payable		-			(60,000	)
Principal payments on notes payable		(14,331	)		(14,189	)
Purchase of treasury stock		(15,291	)		(945,449	)
Net cash used in financing activities		(29,622	)		(1,019,638	)

Net decrease in cash	$	(153,014	)	$	(2,091,391	)
Cash - beginning of period		425,578			2,426,497
Cash - end of period	$	272,564		$	335,106

Supplemental disclosures:
Interest paid	$	312		$	58,195
Income taxes paid	$	-		$	-

Non-cash investing and financing activities:
Treasury stock purchased with other assets	$	79,100		$	-
Retirement of treasury stock	$	1,181,475		$	-
Issuance of stock for investment	$	8,424,000		$	-

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

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Blackboxstocks Inc.

Notes to Financial Statements

For the Six Months Ended June 30, 2023 and 2022

1. Organization

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

The Company changed its name to Blackboxstocks, Inc. and began operating as a financial technology and social media platform in March 2016. The platform offers real-time proprietary analytics and news for stock and options traders of all levels. The Company believes its web-based software employs “predictive technology” enhanced by artificial intelligence to find volatility and unusual market activity that may result in the rapid change in the price of a stock or option. The software continuously scans the NASDAQ, New York Stock Exchange, CBOE, and other options markets, analyzing over 10,000 stocks and up to 1,500,000 options contracts multiple times per second. The Company also provides users with a fully interactive social media platform that is integrated into our dashboard, enabling users to exchange information and ideas quickly and efficiently through a common network. The Company also introduced a live audio/video feature that allows members to broadcast on their own channels to share trade strategies and market insight within the community. The platform was initially made available to subscribers in September 2016. Subscriptions for the use of the platform are sold on a monthly or annual subscription basis to individual consumers through the Company website at http://www.blackboxstocks.com.

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

2. Summary of Significant Accounting Policies

The accompanying interim unaudited financial statements and footnotes of Blackboxstocks Inc. have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the instructions to Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these unaudited consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the results of the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2023. These financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

The accompanying financial statements have been prepared in assumption of the continuation of the Company as a going concern, which is dependent upon the Company's ability to obtain sufficient financing or establish itself as a profitable business. For the six months ended June 30, 2023, the Company incurred an operating loss of $3,378,103 and a net loss of $3,324,862. In addition, for the year ended December 31, 2022, the Company incurred an operating loss of $4,546,026 and a net loss of $5,019,882. Cash flows used in operations totaled $2,717,168 for the six months ended June 30, 2023. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management has implemented a number of initiatives aimed at improving operating cash flow including, new product development, revised marketing strategies and expense reductions. In addition to the operating initiatives, the Company has entered into a non-binding letter of intent to undertake a merger transaction with Evtec Group Limited, Evtec Aluminium Limited and Evtec Automotive Limited (collectively “Evtec”). Evtec is a supplier of proprietary parts for leading Luxury, Performance, and Electric Vehicle “EV” brands including Jaguar Land Rover, Aston Martin, and Ford, among many others. The Company intends to acquire Evtec by issuing common shares sufficient to give Evtec approximately 91.6% of the total post-merger common shares outstanding via a reverse merger. As discussed in Note 3, the Company entered into a share exchange agreement with Evtec as a preliminary step towards the completion of the merger.. In addition, the Company has historically been able to raise debt or equity financing to meet its capital needs and is also evaluating strategic alternatives with respect to possible mergers or acquisitions. There can be no assurance that the Company operational changes will impact its cash flow or if it will be able to raise additional capital or on what terms.

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

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

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

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

Recently Issued Accounting Pronouncements. During the six months ended June 30, 2023, there were no new accounting pronouncements issued that management believes the adoption of which will have a material impact on the Company’s financial statements.

Earnings or (Loss) Per Share. Basic earnings per share (or loss per share), is computed by dividing the earnings (loss) for the period by the weighted average number of common stock shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities by including other potentially issuable shares of common stock, including shares issuable upon conversion of convertible securities or exercise of outstanding stock options and warrants, in the weighted average number of common shares outstanding for the period. Therefore, because including shares issuable upon conversion of convertible securities and/or exercise of outstanding options and warrants would have an anti-dilutive effect on the loss per share, only the basic earnings (loss) per share is reported in the accompanying financial statements for period of loss.

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

	June 30,
	2023
Series A Convertible Preferred Shares		3,269,998
Conversion rate		0.2
Common shares after conversion		654,000
Series B Convertible Preferred Shares		2,400,000
Option shares		219,285
Warrant shares		109,584

Revenue Recognition. The Company operates under a software as a service (SaaS) model whereby we sell monthly and annual subscriptions allowing subscribers access to our platform. We recognize revenue over the subscription period (either monthly or annual) and record cash received but not yet earned as deferred revenue on our balance sheet.

Additionally, the Company receives revenues from commissions and the sale of promotional products which are presented as other revenues on the accompanying statements of operations. Commission revenues are recognized as they are earned and revenues from the sale of promotional products are recognized upon shipment.

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3. Investments and Marketable Securities

Marketable Securities

The Company determines the fair values of its financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following three levels of inputs may be used to measure fair value:

Level 1 inputs utilize unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access;

Level 2 inputs utilize other-than-quoted prices that are observable, either directly or indirectly and include quoted prices for similar assets and liabilities in active markets, and inputs such as interest rates and yield curves that are observable at commonly quoted intervals; and

Level 3 inputs are unobservable and are typically based on our own assumptions, including situations where there is little, if any, market activity.

The Company’s marketable securities are highly liquid and are quoted on major exchanges and are therefore classified as Level 1 securities.

The following table summarizes the Company’s assets that were measured and recognized at fair value as of June 30, 2023:

	Level 1			Level 2		Level 3		Total
Balance at December 31, 2022	$	3,216,280		$	-	$	-	$	3,216,280
Purchases		5,417,253			-		-		5,417,253
Sales		(8,013,912	)		-		-		(8,013,912	)
Change in fair value		53,553			-		-		53,553
Balance at June 30, 2023	$	673,174		$	-	$	-	$	673,174

Investments

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

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

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

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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, 2,400,000 of which are designated as “Series B Convertible Preferred Stock” at $0.001 par value, and 100,000,000 authorized shares of common stock at $0.001 par value (“Common Stock”).

Shares of Series A Convertible Preferred Stock (the “Series A Stock”) rank pari passu with the Company’s Common Stock with respect to dividend and liquidation rights. Additionally, each share entitles the holder to 100 votes on matters submitted to Company stockholders. There are 3,269,998 shares of Series A Stock outstanding which are all held by Gust Kepler, the Company’s Chairman and Chief Executive Officer (“Mr. Kepler”). The Company and Mr. Kepler entered into Conversion Rights Agreement dated effective as of October 14, 2021, limiting the rights of the holder(s) of our outstanding shares of Series A Stock to convert such shares into Common Stock on a one-for-one basis as provided in the certificate of designation. Pursuant to the terms of the Conversion Rights Agreement, the Series A Stock designated 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 designated conversion right (on a 1-for-1 share basis).

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

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

In February of 2023, the Company retired 171,940 shares of Common Stock acquired pursuant to its stock repurchase plan. In March of 2023, the Company acquired 282,501 shares of its common stock from Mr. Kepler at a price of $0.28 per share and then retired these shares returning them to authorized but unissued shares (See Note 7).

On April 10, 2023, the Company filed an Amendment to the Company’s Articles of Incorporation with the Nevada Secretary of State to effect the Reverse Stock Split at a Split Ratio of one-for-four. The Amendment took effect April 10, 2023 and the Company’s Common Stock began trading on a split-adjusted basis on The Nasdaq Capital Market at the commencement of trading on April 11, 2023 under the Company’s existing symbol “BLBX.”

There was no change in the par value of our Common Stock or Preferred Stock.

As a result of the Reverse Stock Split, every 4 shares of the Company’s Common Stock issued and outstanding immediately prior to the Effective Time was consolidated into one issued and outstanding share. In addition, proportionate adjustments were made to the exercise prices of the Company’s outstanding stock options and warrants and to the number of shares issued and issuable under the Company’s existing stock incentive plans.

The impact of the reverse stock split has been retroactively applied to these financial statements.

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5. Warrants to Purchase Common Stock

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

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Life (in years)
Warrants as of December 31, 2022		109,584	$	13.24		4.53
Issued		-	$	-		-
Exercised		-	$	-		-
Warrants as of June 30, 2023		109,584	$	13.25		4.03

At June 30, 2023, warrants for the purchase of 99,862 shares were vested and warrants for the purchase of 9,722 shares remained unvested. The Company expects to incur expenses for the unvested warrants totaling $148,776 as they vest.

6. Incentive Stock Plan

On August 4, 2021, our Board of Directors and stockholders approved the 2021 Blackboxstocks, Inc. Incentive Stock Plan (the “2021 Plan”) which became effective August 31, 2021. Effective October 7, 2022, the Company’s Stockholders approved an amendment and restatement of the 2021 Plan to increase the numbers of issuable shares from 187,500 to 312,500. On February 6, 2023 the Company’s stockholders approved an additional amendment and restatement of the 2021 Plan to increase the number of shares available for issuance from 312,500 to 612,500 shares. The 2021 Plan allows the Company, under the direction of the Board of Directors or a committee thereof, to make grants of stock options, restricted and unrestricted stock and other stock-based awards to employees, including our executive officers, consultants and directors.

During September 2022, 7,353 shares of restricted common stock were granted with 25% vesting quarterly over twelve months. As of June 30, 2023, 5,515 shares of the restricted common stock shares have vested.

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

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

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Life (in years)
Options as of December 31, 2022		167,561		$	11.68		8.78
Issued		75,000		$	3.65		10.00
Forfeited		(23,276	)	$	11.03		8.73
Exercised		-		$	-		-
Options as of June 30, 2023		219,285		$	9.00		8.85

At June 30, 2023, options to purchase 152,776 shares were vested and options to purchase 66,509 shares remained unvested. The Company expects to incur expenses for the unvested options totaling $340,072 as they vest.

7. Related Party Transactions

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

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8. Debt

Note Payable

On May 1, 2020, pursuant to the Paycheck Protection Program under the Coronavirus Aid Relief and Economic Security Act (“CARES Act”), the Company received a loan of $130,200. The loan carries an interest rate of 1% and an initial maturity of May 1, 2022. During August 2021, the Company received partial loan forgiveness from the SBA reducing the principal balance of the note to $96,795. During December 2021, the terms of the note were amended to carry an interest rate of 1% and mature on May 4, 2025. As of June 30, 2023, the unpaid balance of the note was $54,016.

9. Commitments and Contingencies

The Company leases approximately 2,685 square feet of office space in Dallas Texas pursuant to an office lease with Teachers Insurance and Annuity Association of America that expires on September 30, 2028. During the period ended June 30, 2023, the Company’s rental expenses totaled approximately $63,000.

The table below shows the future lease payment obligations:

Year Ending December 31,	Amount
2023	$	44,303
2024		89,948
2025		91,122
2026		93,136
2027		95,150
Thereafter		72,495
Total remaining lease payments	$	486,154
Less: imputed interest		(186,116	)
Present Value of remaining lease payments	$	300,038

Current	$	67,371
Noncurrent	$	232,667

Weighted-average remaining lease term (years)		4.01
Weighted-average discount rate		10.00	%

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

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

We urge you to read the following discussion in conjunction with management’s discussion and analysis contained in our Annual Report on Form 10-K for the year ended December 31, 2022 as well as with our condensed financial statements and the notes thereto included elsewhere herein. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed in the section titled “Risk Factors” and elsewhere in this Report.

Overview

Blackboxstocks, Inc. is a financial technology and social media hybrid platform offering real-time proprietary analytics and news for stock and options traders of all levels. Our web-based software (the “Blackbox System”) employs “predictive technology” enhanced by artificial intelligence to find volatility and unusual market activity that may result in the rapid change in the price of a stock or option. We continuously scan the New York Stock Exchange (“NYSE”), NASDAQ, Chicago Board Options Exchange (the “CBOE”) and other options markets, analyzing over 10,000 stocks and over 1,500,000 options contracts multiple times per second. We provide our users with a fully interactive social media platform that is integrated into our dashboard, enabling our users to exchange information and ideas quickly and efficiently through a common network. We have also introduced a live audio/video feature that allows our members to broadcast on their own channels to share trading strategies and market insight within the Blackbox community. We employ a subscription based Software as a Service (“SaaS”) business model and maintain a growing base of users that spans over 40 countries.

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

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

Our principal office is located at 5430 LBJ Freeway, Suite 1485, Dallas, Texas 75240 and our telephone number is (972) 726-9203. Our Common Stock is quoted on the Nasdaq Stock Market LLC (the “Nasdaq”) under the symbol “BLBX.” Our corporate website is located at https:/.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.

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Basis of Presentation

The accompanying financial statements have been prepared in assumption of the continuation of the Company as a going concern, which is dependent upon the Company's ability to obtain sufficient financing or establish itself as a profitable business. For the six months ended June 30, 2023 the Company incurred an operating loss of $3,378,103 and a net loss of $3,324,862. In addition, for the year ended December 31, 2022, the Company incurred an operating loss of $4,546,026 and a net loss of $5,019,882. Cash flows used in operations were $2,717,168 for the six months ended June 30, 2023 and $4,285,039 for the year ended December 31, 2022. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management has implemented a number of initiatives aimed at improving operating cash flow including new product development, revised marketing strategies and expense reductions. In addition to the operating initiatives, the Company has executed a binding letter of intent to undertake an acquisition of Evtec Group Limited and Evtec Aluminium Limited (collectively “Evtec”). Evtec is a supplier of proprietary parts for leading luxury, performance, and electric vehicle “EV” brands including Jaguar Land Rover, Aston Martin, and Ford, among many others. The Company intends to acquire Evtec by issuing common shares sufficient to give Evtec approximately 91.6% of the total post-merger common shares outstanding via a reverse merger. Evtec has substantially larger operations and anticipates revenue of approximately $119 million for its fiscal year ended March 31, 2024. In addition, the Company has historically been able to raise debt or equity financing to meet its capital needs. There can be no assurance that the Company’s operational changes will impact its cash flow or, whether or not the Company will be able to complete the proposed transaction or if that transaction will provide sufficient cash flow or capital to meet the Company’s needs or if it will be able to raise additional capital or on acceptable terms.

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 ended December 31, 2022 filed with the Securities and Exchange Commission on April 14. 2023.

Liquidity and Capital Resources

At June 30, 2023, we had cash and marketable securities totaling $945,738 as compared to cash and marketable securities totaling $3,641,858 at December 31, 2022. Our cash flows used in operations were $2,717,168 for the six months ended June 30, 2023 as compared to $2,038,532 for the same period in the prior year.

Net cash from investing activities for the six months ended June 30, 2023 was $2,593,776 as compared to $966,779 for the prior year period. The increase in in the cash flow from investing activities was due to the liquidation of marketable securities in order to fund the Company’s operations. The volume of marketable securities includes trading activity in a Company account that is used to research and test specific trading techniques although the account holds less than $100,000. We do not expect capital expenditures to be significant for the remainder of 2023.

Net cash used in financing activities was $29,622 for the six months ended June 30, 2023 as compared to $1,019,638 for the prior year period. During the six months ended June 30, 2022, the Company made treasury stock purchases totaling $945,449 which accounted for the majority of the higher use of cash.

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As noted above, the Company intends to pursue the planned acquisition transaction with Evtec however there can be no assurance that it will be able to complete the transaction or that such a transaction will provide the Company with sufficient liquidity to fund its operations. In addition, the Company may need to raise additional debt or equity capital in order to fund its operations. There can be no assurance that the Company will be able to do so or on acceptable terms.

Results of Operations

Comparison of Three Months Ended June 30, 2023 and 2022

For the three months ended June 30, 2023, our revenue was $737,398, as compared to $1,399,315, for the three months ended June 30, 2022. We believe 2023 revenues continue to be adversely impacted by sluggish macro-economic issues compounded by a significant increase in the number of competitors. Average members for the three months ended June 30, 2023 was 3,987 as compared to 6,202 for the prior year period. Average monthly revenue per member was $62.47 for the three months ended June 30, 2023 as compared to $75,21 in the prior year period. The decrease in average monthly revenue per member was due to a larger proportion of annual members as well as a higher level of promotional members for the 2023 period. Cost of revenues for the three months ended June 30, 2023 and 2022 were $426,975 and $499,427, resulting in gross margins of 42% and 64%, respectively. The primary components of cost of revenues include costs related to data and news feed expenses for exchange information which comprise the majority of the costs, as well as the costs for program moderators. The gross margin percentage declined due to lower revenues and a higher percentage of fixed versus variable costs.

For the three months ended June 30, 2023, operating expenses were $1,741,722 as compared to $2,068,654 for the same period in 2022, a decrease of $326,932 or 16%. The Company significantly reduced expenditures in software development costs and advertising and marketing and had modest increases in selling general and administrative expenses for the 2023 period. Selling, general and administrative expenses increased from $1,191,474 for the three months ended June 30, 2022 to $1,350,378 for the three months ended June 30, 2023, an increase of $158,904 or 13%. The increase was primarily driven by higher stock-based compensation and legal fees which were partially offset by lower non-stock-based compensation expense. Advertising and marketing expenses decreased by $372,929 or 72% from $526,344 for the three months ended June 30, 2022 to $153,415 for the three months ended June 30, 2023 as the Company continues to reposition its marketing strategy. Software development costs decreased by $117,736 or 34% from $344,986 in the three months ended June 30, 2022 to $227,250 for the three months ended June 30, 2023. The decreased software development costs reflected lower development costs for our new product Stock Nanny as it nears release.

We continue to pursue reductions in our operating expenses. With the exception of the unusually high stock compensation expense incurred in the first two quarters this year we expect our selling general and administrative expenses to remain stable or decrease. Our software development costs should decline as we finalize the release of Stock Nanny. We expect that advertising and marketing expenses will stay at or near their current level until we launch Stock Nanny later this year.

Our loss from operations for the three months ended June 30, 2023, was $1,431,299 as compared to a loss from operations of $1,168,766 for the prior year period. Lower revenues combined with higher operating expenses driven by stock-based compensation resulted in the higher loss from operations. Non-operating income for the three months ended June 30, 2023, was $6,805 as compared to non-operating expense of $147,333 for the prior year period.

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Comparison of Six Months Ended June 30, 2023 and 2022

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

Operating expenses for the six months ended June 30, 2023 were $4,099,899 or $317,567 higher than the same period in June 2023. Software development costs of $582,294 for the six months ended June 30, 2023 were $52,424 or 10% higher than the same period in 2022 due to higher development costs incurred in the first quarter of 2023 for Stock Nanny. Selling, general and administrative costs of $3,128,012 for the six months ended June 30, 2023 were $711,815 higher than the same period in 2022. This increase was caused by stock compensation expense of $1,173,761 for the six months ended June 30, 2023 which was $925,549 higher than the same period in 2022. Advertising and marketing expenses were 368,396 for the six months ended June 30, 2023 or 55% lower than the same period in 2022. Loss from operations was $3,378,103 as compared to 2,189,920 for the six months ended June 30 2023 and 2022 respectively. The higher loss in the 2023 period was caused by lower revenues and gross margin as well as higher compensation expense which was only partially offset by lower advertising and marking expenses.

Other income was $53,241 for the six months ended June 30, 2023 as comparted to other expense of $368,622 for the prior year period. The 2022 period included investment losses on the companies fixed income portfolio of $283,799 as well as higher interest expense on the Company’s senior debt which was repaid in 2022.

EBITDA (Non-GAAP Financial Measure)

We report our financial results in accordance w

SEC Form 10-Q filed by Blackboxstocks Inc.