UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended |
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or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from |
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Commission File No. |
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(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Former name, former address and former fiscal year if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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The |
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.
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).
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.
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Large accelerated filer ☐ |
Accelerated filer ☐ |
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Smaller reporting company |
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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
The number of shares outstanding of the registrant’s Common Stock as of August 14, 2024 was
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Item 1. |
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Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 (Unaudited) |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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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.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Blackboxstocks Inc.
Condensed Consolidated Balance Sheets
As of June 30, 2024 and December 31, 2023
(Unaudited)
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June 30, |
December 31, |
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2024 |
2023 |
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Assets |
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Current assets: |
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Cash |
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Accounts receivable, net of allowance for doubtful accounts of $ |
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Inventory |
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Marketable securities |
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Other receivable |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment: |
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Property and equipment, net |
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Right of use lease |
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Total property and equipment |
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Investments |
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Total assets |
$ | $ | ||||||
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Liabilities and Stockholders' Equity |
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Current liabilities: |
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Accounts payable |
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Accrued interest |
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Unearned subscriptions |
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Lease liability right of use, current |
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Note payable, current portion |
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Merchant cash advance |
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Other liabilities |
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Total current liabilities |
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Long term liabilities: |
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Note payable |
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Lease liability right of use, long term |
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Total long term liabilities |
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Commitments and contingencies |
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Stockholders' equity |
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Preferred stock, $ |
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Series A Convertible Preferred Stock, $ |
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Series B Convertible Preferred Stock, $ |
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Common stock, $ |
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Treasury stock |
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Additional paid in capital |
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Accumulated deficit |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
$ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
Condensed Consolidated Statements of Operations
For the Three Months and Six Months Ended June 30, 2024 and 2023
(Unaudited)
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For the three months ended |
For the six months ended |
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June 30, |
June 30, |
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2024 |
2023 |
2024 |
2023 |
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Revenue: |
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Subscriptions |
$ | $ | $ | $ | ||||||||||||
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Other revenues |
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Total revenues |
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Cost of revenues |
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Gross margin |
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Operating expenses: |
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Software development costs |
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Selling, general and administrative |
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Advertising and marketing |
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Depreciation and amortization |
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Total operating expenses |
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Operating loss |
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Other (income) expense: |
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Interest expense |
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Financing costs |
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Investment (income) loss |
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Total other (income) expense |
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Loss before income taxes |
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Income Taxes |
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Net loss |
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Weighted average number of common shares outstanding - basic |
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Net loss per share - basic |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
Condensed Consolidated Statement of Stockholders’ Equity
For the Six months Ended June 30, 2024 and 2023
(Unaudited)
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Preferred Stock |
Series A |
Series B |
Common Stock |
Common Stock |
Treasury |
Additional Paid in |
Accumulated |
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Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
Payable |
Stock |
Capital |
Deficit |
Total |
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Balances, December 31, 2022 |
$ | $ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||||||||||||||||||||||
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Purchase of treasury stock |
- | - | - | - | - | - | - | - | - | ( |
) | - | - | ( |
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Retirement of treasury stock |
- | - | - | - | - | - | ( |
) | ( |
) | - | ( |
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Vesting of warrants for compensation |
- | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||
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Vesting of options for compensation |
- | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||
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Vesting of stock for compensation |
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
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Net loss |
- | - | - | - | - | - | - | - | - | - | - | ( |
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Balances, March 31, 2023 |
$ | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||||||||||||||||||||||
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Issuance of stock for fractional shares resulting from reverse split |
- | - | - | - | - | - | - | - | ( |
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Purchase of treasury stock |
- | - | - | - | - | - | - | - | - | ( |
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Vesting of warrants for compensation |
- | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||
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Vesting of options for compensation |
- | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||
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Issuance of stock for compensation |
- | - | - | - | - | - | ( |
) | - | - | ||||||||||||||||||||||||||||||||||||||||||
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Issuance of stock for investment |
- | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
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Net loss |
- | - | - | - | - | - | - | - | - | - | - | ( |
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Balances, June 30, 2023 |
$ | $ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||||||||||||||||||||||
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Balances, December 31, 2023 |
$ | $ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||||||||||||||||||||||
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Vesting of warrants for compensation |
- | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||
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Vesting of options for compensation |
- | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||
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Issuance of stock for compensation |
- | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
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Net loss |
- | - | - | - | - | - | - | - | - | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||
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Balances, March 31, 2024 |
$ | $ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||||||||||||||||||||||
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Vesting of warrants for compensation |
- | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||
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Vesting of options for compensation |
- | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||
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Vesting of stock for compensation |
- | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||
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Retirement of treasury stock |
- | - | - | - | - | - | ( |
) | ( |
) | - | ( |
) | - | ||||||||||||||||||||||||||||||||||||||
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Net loss |
- | - | - | - | - | - | - | - | - | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||||||
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Balances, June 30, 2024 |
$ | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2024 and 2023
(Unaudited)
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For the six months ended |
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June 30, |
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2024 |
2023 |
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Cash flows from operating activities: |
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Net loss |
$ | ( |
) | $ | ( |
) | ||
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization expense |
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Financing costs |
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Stock based compensation |
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Loss on disposition of assets |
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Right of use lease |
( |
) | ||||||
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Investment (income) loss |
( |
) | ( |
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Changes in operating assets and liabilities: |
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Accounts receivable |
( |
) | ||||||
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Other receivable |
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Inventory |
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Prepaid expenses and other current assets |
( |
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Accounts payable |
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Other liabilities |
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Unearned subscriptions |
( |
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Net cash used in operating activities |
( |
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Cash flows from investing activities: |
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Purchase of property and equipment |
( |
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Purchase of marketable securities |
( |
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Sale of marketable securities |
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Net cash provided by investing activities |
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Cash flows from financing activities: |
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Proceeds from other liabilities |
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Proceeds from merchant cash advance |
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Principal payments on notes payable |
( |
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Payments on merchant cash advance |
( |
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Purchase of treasury stock |
- | ( |
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Net cash provided by (used in) financing activities |
( |
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Net increase (decrease) in cash |
$ | $ | ( |
) | ||||
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Cash - beginning of period |
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Cash - end of period |
$ | $ | ||||||
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Supplemental disclosures: |
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Interest paid |
$ | $ | ||||||
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Income taxes paid |
$ | $ | ||||||
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Non-cash investing and financing activities: |
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Treasury stock purchased from related party with other assets |
$ | $ | ||||||
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Retirement of treasury stock |
$ | $ | ||||||
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Issuance of stock for investment |
$ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
Notes to Condensed Consolidated Financial Statements
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. Recently, 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 and/or annual subscription basis to individual consumers through the Company website at http://blackboxstocks.com.
On April 1, 2024, the Company formed Blackbox.io Inc., a Delaware corporation, and on April 18, 2024, the Company and Blackbox.io Inc entered into a contribution agreement (the “Contribution Agreement”) pursuant to which the Company transferred certain specified business assets (the “Contributed Assets”) to Blackbox.io Inc. In consideration for the Contributed Assets, Blackbox.io Inc issued to the Company
Simultaneously with the execution of the Contribution Agreement, the Company delivered fully executed documents of conveyance to effect the contribution of the Contributed Assets and the assignment of the Assumed Liabilities to Blackbox.io Inc, including (i) a bill of sale, (ii) an assignment and assumption agreement and (iii) an intellectual property assignment and Blackbox.io Inc delivered certificates and notices of issuance of stock transferable on the books of Blackbox.io Inc evidencing the issuance of the Blackbox.io Operating Equity.
As a result of the Contribution Agreement, Blackbox.io Inc. is a wholly-owned corporate subsidiary of the Company that now holds the Company’s legacy assets and continues its legacy business operations.
The Company is listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “BLBX”.
2. Summary of Significant Accounting Policies
Basis of Presentation The accompanying interim unaudited condensed consolidated 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 condensed 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, 2024. These condensed consolidated 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, 2023.
The accompanying condensed consolidated 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 year ended December 31, 2023, the Company incurred an operating loss of $
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.
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 periods of loss.
The Company had total potential additional dilutive securities outstanding at June 30, 2024, as follows.
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Series A Convertible Preferred Shares |
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Conversion rate |
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Common shares after conversion |
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Option shares |
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Warrant shares |
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.
3. Investments
Investments
Evtec Group Limited (“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.
On June 9, 2023, the Company entered into a Securities Exchange Agreement (the Securities Exchange Agreement”) with Evtec Group whereby the Company issued
The Company’s initial investment in Evtec Group was measured at $
On November 24, 2023, the Company entered into a Binding Amendment to Amended Letter of Intent (the “LOI Amendment”) with Evtec Group, Evtec Automotive Limited, and Evtec Aluminium (collectively the “Evtec Companies), which amended a non-binding Amended Letter of Intent (the “LOI”) dated April 14, 2023. Pursuant to the LOI Amendment, the Company has agreed to continue to negotiate in good faith to consummate a proposed acquisition of the Evtec Companies contemplated by the LOI (the “Proposed Transaction”), subject to the terms of the LOI Amendment.
As a condition to the Company’s continued good faith negotiations regarding the Proposed Transaction, the Evtec Companies agreed to (i) pay the Company aggregate extension fees totaling $
As a result of the transaction not closing by April 1, 2024, Evtec Aluminium has provided $400,000 of financial support to the Company that has been classified as other liabilities as of June 30, 2024.
As provided for in the LOI Amendment, Evtec Group entered into a Forfeiture Agreement with the Company dated November 28, 2023 pursuant to which Evtec Group forfeited all of its right, title and interest in and to the
On December 12, 2023, the Company entered into a Share Exchange Agreement (the Share Exchange Agreement") with Evtec Aluminium, and the shareholders of Evtec Aluminium (“Sellers”). Upon the terms and subject to the satisfaction of the conditions described in the Share Exchange Agreement, the Company is expected to acquire all of the issued and outstanding Evtec Aluminium Ordinary Shares, with the result of Evtec Aluminium becoming a wholly-owned subsidiary of the Company (the “Exchange”). At the closing of the Exchange (the “Closing”), the Sellers will receive shares of common stock of the Company, $
On May 13, 2024 the Company filed a Registration Statement on Form 4 including an information statement/prospectus and a notice of action taken by written consent pursuant to section 14(C) of the Securities Exchange Act of 1934 as required under the terms of the Securities Exchange Agreement with Evtec Aluminium. The registration statement is subject to review and approval by the Securities and Exchange Commission and has not yet been declared effective.
4. Stockholders’ Equity
The Company has authorized
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
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● |
If the Company’s Market Capitalization is less than $ |
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If the Company’s Market Capitalization is equal to or greater than $ |
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If the Company’s Market Capitalization is equal to or greater than $ |
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If the Company’s Market Capitalization is equal to or greater than $ |
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If the Company’s Market Capitalization is equal to or greater than $ |
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 basis. Prior to the stockholder approval, the Series B Stock is not convertible into more than
5. Warrants to Purchase Common Stock
The following table presents the Company’s warrants as of June 30, 2024:
|
Number of Shares |
Weighted Average Exercise Price |
Weighted Average Remaining Life (in years) |
||||||||||
|
Warrants as of December 31, 2023 |
$ | |||||||||||
|
Issued |
$ | - | ||||||||||
|
Forfeited |
( |
) | $ | - | ||||||||
|
Exercised |
$ | - | ||||||||||
|
Warrants as of June 30, 2024 |
$ | |||||||||||
At June 30, 2024, warrants for the purchase of
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 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
The following table presents the Company’s options as of June 30, 2024:
|
Options as of December 31, 2023 |
$ | |||||||||||
|
Issued |
$ | - | ||||||||||
|
Forfeited |
( |
) | $ | |||||||||
|
Exercised |
$ | - | ||||||||||
|
Options as of June 30, 2024 |
$ |
At June 30, 2024, options to purchase
7. Related Party Transactions
On March 16, 2023, the Company purchased
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 $
Merchant Cash Advance
On May 28, 2024, the Company entered into a merchant cash advance agreement with proceeds totaling $
9. Commitments and Contingencies
The Company leases approximately
The table below shows the future lease payment obligations:
|
Year Ending December 31, |
Amount |
|||
|
2024 |
$ | |||
|
2025 |
||||
|
2026 |
||||
|
2027 |
||||
|
2028 |
||||
|
Total remaining lease payments |
$ | |||
|
Less: imputed interest |
( |
) | ||
|
Present Value of remaining lease payments |
$ | |||
|
Current |
$ | |||
|
Noncurrent |
$ | |||
|
Weighted-average remaining lease term (years) |
||||
|
Weighted-average discount rate |
% | |||
The Company is named as a defendant in a lawsuit filed by Feenix Payment Systems, LLC before the New York State Supreme Court, County of New York on June 20, 2023. The plaintiff seeks damages in the amount of $
10. Subsequent Events
On July 1, 2024, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) pursuant to which the Company sold
On July 1, 2024, the Company entered into a Convertible Loan Agreement with Evtec Aluminium pursuant to which the Company loaned Evtec Aluminum $
On July 3, 2024, the Company and Evtec entered into a First Amendment to Share Exchange Agreement (the “Amendment”) in order to reflect the effects of the Stock Purchase Agreement transaction and the proposed issuance of Evtec warrants in connection with its pre-closing financing efforts. Specifically, the Amendment provides:
|
● |
That the Company will issue replacement warrants to holders of any outstanding warrants to acquire Evtec Aluminium ordinary shares which will permit holders to acquire shares of the Company’s Common Stock on substantially the same terms after adjusting the number of shares issuable and exercise price based upon the Exchange value of Evtec Aluminium ordinary shares and the Exchange Ratio. Evtec Aluminium’s issuance of warrants is subject to approval by the Company in its reasonable discretion. |
|
● |
The definition of “Exchange Ratio” was changed to mean initially |
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, 2023, as well as with our 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.
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, 2024, the Company incurred an operating loss of $1,718,823 and a net loss of $1,741,654. In addition, for the year ended December 31, 2023, the Company incurred an operating loss of $5,297,671 and a net loss of $4,664,455. Cash flows used in operations were $687,198 for the six months ended June 30, 2024, and $3,166,067 for the year ended December 31, 2023. The Company has cash of $1,055,482 as of June 30, 2024.These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company has executed a share exchange agreement with Evtec Aluminium Limited (“Evtec Aluminium”), whereby the Company expects to acquire all of the issued and outstanding share capital of Evtec Aluminium with the result of Evtec Aluminium becoming a wholly-owned subsidiary of the Company (the “Exchange”). in the Exchange will be accounted for as a reverse acquisition with Evtec Aluminium being the accounting acquiror. The Company believes that the merger with Evtec Aluminium will attract additional capital investment as Evtec Aluminium is substantially larger than Blackbox and has a strong acquisition pipeline. Management has also implemented a number of initiatives aimed at improving operating cash flow including, new product development, revised marketing strategies and expense reductions. 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’s operational changes will impact its cash flow or if it will be able to raise additional capital or on what terms or if it will be able to execute the planned acquisition of Evtec Aluminium.
The financial statements do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation.
Significant Accounting Policies
There have been no changes from the Summary of Significant Accounting Policies described in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on April 1, 2024.
Liquidity and Capital Resources
At June 30, 2024, we had cash and marketable securities totaling $1,055,482 as compared to cash and marketable securities totaling $475,652 at December 31, 2023. Our cash flows used in operations were $687,198 for the six months ended June 30, 2024, as compared to $2,717,168 for the same period in the prior year.
Net cash from investing activities for the six months ended June 30, 2024, was $3,303 as compared to $2,593,776 for the prior year period. The decrease in the cash flow from investing activities was due to the liquidation of marketable securities in order to fund the Company’s operations during the prior year. The volume of marketable securities includes trading activity in a Company account that was used to research and test specific trading techniques although the account held less than $100,000. We do not expect capital expenditures to be significant for the remainder of 2024.
Net cash provided by financing activities was $1,266,680 for the six months ended June 30, 2024, as compared to net cash used in financing activities of $29,622 for the prior year period. The increase in financing activities was the result of additional funding received in 2024 recorded as other liabilities and merchant cash advances.
As noted above, the Company intends to pursue the planned acquisition transaction with Evtec Aluminium 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, 2024 and 2023
For the three months ended June 30, 2024, our revenue was $684,712, as compared to $737,398, for the three months ended June 30, 2023. The decline in revenue of 7% was due to fewer subscribers in the current year that was partially offset by higher average revenue per subscriber. Average subscribers for the three months ended June 30, 2024, was 2,983 as compared to 3,987 for the prior year period. Average monthly revenue per subscriber was $72.18 for the three months ended June 30, 2024, as compared to $61.42 in the prior year period. The increase in average revenue per subscriber was due to a large promotion with heavily discounted memberships in the second quarter of 2023.
Cost of revenues for the three months ended June 30, 2024, and 2023 were $356,017 and $426,975, resulting in gross margins of 48% and 42%, 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 is expected to remain between 45% and 50%.
For the three months ended June 30, 2024, operating expenses were $1,183,552 as compared to $1,741,722 for the same period in 2023, a decrease of $558,170 or 32%. We significantly reduced expenditures in software development costs, advertising and marketing and selling general and administrative expenses for the 2024 period. Selling, general and administrative expenses decreased from $1,350,378 for the three months ended June 30, 2023, to $938,249 for the three months ended June 30, 2024, a decrease of $412,129 or 31%. The decrease was primarily driven by lower stock-based compensation expense which was partially offset by higher professional fees associated with the pending Exchange with Evtec Aluminum. Advertising and marketing expenses decreased by $41,752 or 27% from $153,415 for the three months ended June 30, 2023, to $111,663 for the three months ended June 30, 2024, as the Company continues to reposition its marketing strategy. Software development costs decreased by $126,608 or 56% from $227,250 in the three months ended June 30, 2023, to $100,642 for the three months ended June 30, 2024. The decreased software development costs reflected lower development costs for our new product Stock Nanny.
Our loss from operations for the three months ended June 30, 2024, was $854,857 as compared to a loss from operations of $1,431,299 for the prior year period. The improvement in the loss from operations was driven by lower operating expenses and was partially offset by the lower sales.
Comparison of Six Months Ended June 30, 2024 and 2023
For the six months ended June 30, 2024, our revenue was $1,332,722, as compared to $1,589,638, for the six months ended June 30, 2023. The decline in revenue of 16% was due to fewer subscribers in the current year that was partially offset by higher average revenue per subscriber. Average subscribers for the six months ended June 30, 2024, was 2,989 as compared to 3,756 for the prior year period. Average monthly revenue per subscriber was $74.30 for the six months ended June 30, 2024, as compared to $70.53 in the prior year period. The increase in average revenue per subscriber was due to a large promotion with heavily discounted memberships in the second quarter of 2023.
Cost of revenues for the six months ended June 30, 2024, and 2023 were $713,975 and $874,606, resulting in gross margins of 46% and 45%, 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 is expected to remain between 45% and 50%.
For the six months ended June 30, 2024, operating expenses were $2,338,980 as compared to $4,099,899 for the same period in 2023, a decrease of $1,760,919 or 43%. We significantly reduced expenditures in software development costs, advertising and marketing and selling general and administrative expenses for the 2024 period. Selling, general and administrative expenses decreased from $3,128,012 for the six months ended June 30, 2023, to $1,844,178 for the six months ended June 30, 2024, a decrease of $1,283,834 or 41%. The decrease was primarily driven by lower stock-based compensation expense which was partially offset by higher professional fees associated with the pending Exchange with Evtec Aluminum. Advertising and marketing expenses decreased by $124,010 or 34% from $368,396 for the six months ended June 30, 2023, to $244,386 for the six months ended June 30, 2024, as the Company continues to reposition its marketing strategy. Software development costs decreased by $373,249 or 64% from $582,294 in the six months ended June 30, 2023, to $209,045 for the six months ended June 30, 2024. The decreased software development costs reflected lower development costs for our new product Stock Nanny.
Our loss from operations for the six months ended June 30, 2024, was $1,718,823 as compared to a loss from operations of $3,378,103 for the prior year period. The improvement in the loss from operations was driven by lower operating expenses and was partially offset by the lower sales.
EBITDA (Non-GAAP Financial Measure)
We report our financial results in accordance with accounting principles generally accepted in the United States of America (“GAAP”). However, management believes the presentation of certain non-GAAP financial measures provides useful information to management and investors regarding financial and business trends relating to the Company’s financial condition and results of operations, and that when GAAP financial measures are viewed in conjunction with the non-GAAP financial measures, investors are provided with a more meaningful understanding of the Company’s ongoing operating performance. In addition, these non-GAAP financial measures are among the primary indicators management uses (i) to compare operating performance on a consistent basis, (ii) for planning purposes including the preparation of its internal annual operating budget and (iii) as a basis for evaluating performance. For all non-GAAP financial measures in this release, we have provided corresponding GAAP financial measures for comparative purposes in the report.
EBITDA is defined by us as net income (loss) before interest expense, income tax, depreciation and amortization expense and certain non-cash. EBITDA is not a measure of operating performance under GAAP and therefore should not be considered in isolation nor construed as an alternative to operating profit, net income (loss) or cash flows from operating, investing or financing activities, each as determined in accordance with GAAP. Also, EBITDA should not be considered as a measure of liquidity. Moreover, since EBITDA is not a measurement determined in accordance with GAAP, and thus is susceptible to varying interpretations and calculations, EBITDA, as presented, may not be comparable to similarly titled measures presented by other companies.
The following table sets forth a reconciliation of net loss to EBITDA:
|
Three Months Ended June 30, |
||||||||
|
2024 |
2023 |
|||||||
|
Net loss |
$ | (877,943 | ) | $ | (1,424,494 | ) | ||
|
Adjustments: |
||||||||
|
Interest expense |
74 | 149 | ||||||
|
Investment income |
- | (6,952 | ) | |||||
|
Depreciation and amortization expense |
3,038 | 10,679 | ||||||
|
Financing costs |
23,012 | - | ||||||
|
Stock based compensation |
104,666 | 405,635 | ||||||
|
Total adjustments |
$ | 130,790 | $ | 409,511 | ||||
|
EBITDA |
$ | (747,153 | ) | $ | (1,014,983 | ) | ||
|
Six Months Ended June 30, |
||||||||
|
2024 |
2023 |
|||||||
|
Net loss |
$ | (1,741,654 | ) | $ | (3,324,862 | ) | ||
|
Adjustments: |
||||||||
|
Interest expense |
167 | 312 | ||||||
|
Investment income |
(348 | ) | (53,553 | ) | ||||
|
Depreciation and amortization expense |
11,411 | 21,197 | ||||||
|
Financing costs |
23,012 | - | ||||||
|
Stock based compensation |
219,332 | 1,173,761 | ||||||
|
Total adjustments |
$ | 253,574 | $ | 1,141,717 | ||||
|
EBITDA |
$ | (1,488,080 | ) | $ | (2,183,145 | ) | ||
Off Balance Sheet Arrangements
As of June 30, 2024, we did not have any material off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act, and as such, we are not required to provide the information required under this Item.
Item 4. 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 June 30, 2024, 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, our principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures as of June 30, 2024, were 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 ended June 30, 2024, 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.
None.
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 April 1, 2024 for the year ended December 31, 2023, 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, 2023 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
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
.
The following exhibits are filed with this Quarterly Report on Form 10-Q or are incorporated by reference as described below.
|
Exhibit |
Description |
|
31.1 |
Certification of Principal Executive Officer pursuant to Rule 13a-14a/Rule 14d-14(a)* |
|
31.2 |
Certification of Principal Financial Officer pursuant to Rule 13a-14a/Rule 14d-14(a)* |
|
32.1 |
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350** |
|
32.2 |
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350** |
|
101.1 |
Inline Interactive data files pursuant to Rule 405 of Regulation S-T* |
|
104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* Filed herewith.
** Furnished herewith
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
August 15, 2024 |
BLACKBOXSTOCKS INC. |
|
|
By: |
/s/ Gust Kepler |
|
|
Gust Kepler |
||
|
President, Chief Executive Officer and Secretary |
||
|
(Principal Executive Officer) |
||
|
By: |
/s/ Robert Winspear |
|
|
Robert Winspear |
||
|
Chief Financial Officer and Secretary (Principal Financial |
||
|
and Accounting Officer) |
||
EXHIBIT INDEX
|
Exhibit |
Description |
|
31.1 |
Certification of Principal Executive Officer pursuant to Rule 13a-14a/Rule 14d-14(a)* |
|
31.2 |
Certification of Principal Financial Officer pursuant to Rule 13a-14a/Rule 14d-14(a)* |
|
32.1 |
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350** |
|
32.2 |
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350** |
|
101.1 |
Inline Interactive data files pursuant to Rule 405 of Regulation S-T* |
|
104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* Filed herewith.
** Furnished herewith