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 |
to |
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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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(Address of principal executive offices) |
(Zip Code) |
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(Registrant’s telephone number, including area code) |
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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 12, 2023 was
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.
part1PART I - FINANCIAL INFORMATION
Balance Sheets
As of June 30 2023 and December 31, 2022
(Unaudited)
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June 30, |
December 31, |
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2023 |
2022 |
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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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Prepaid expenses and other current assets |
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Total current assets |
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Office, computer and related equipment, net of depreciation of $ |
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Right of use lease, net of amortization of $ |
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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 (Note 8) |
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Total current liabilities |
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| Long term liabilities: | ||||||||
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Note payable (Note 8) |
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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 (Note 9) |
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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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Common stock payable |
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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 financial statements.
Statements of Operations
For the Three and Six Months Ended June 30, 2023 and 2022
(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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2023 |
2022 |
2023 |
2022 |
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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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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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Interest expense |
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Amortization of debt discount and issuance costs |
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Investment (income) loss |
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Total other (income) expense, net |
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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 financial statements.
Statement of Stockholders’ Equity
For the Six Months Ended June 30, 2023 and 2022
(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, 2021 |
$ | $ | - | $ | - | $ | $ | $ | $ | $ | ( |
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Purchase of treasury stock |
- | - | - | - | ( |
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Cashless exercise of warrants |
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Issuance of warrants for compensation |
- | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
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Issuance of options for compensation |
- | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
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Common stock payable for compensation |
- | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
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Net loss |
- | - | - | - | - | - | - | - | - | ( |
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Balances, June 30, 2022 |
$ | $ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
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Balances, December 31, 2022 |
$ | $ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||||||||||||||||||||||
| Issuance of stock for fractional shares resulting from reverse split | - | - | - | ( |
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Purchase of treasury stock |
- | - | - | - | - | ( |
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Retirement of treasury stock |
- | - | ( |
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Issuance of warrants for compensation |
- | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
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Issuance 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 |
- | - | - | - | - | (3,324,862 |
) |
(3,324,862 | ) | |||||||||||||||||||||||||||||||||||||||||||
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Balances, June 30, 2023 |
$ | $ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
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The accompanying notes are an integral part of these financial statements.
Statements of Cash Flows
For the Six Months Ended June 30, 2023 and 2022
(Unaudited)
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For the six months ended |
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June 30, |
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2023 |
2022 |
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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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Amortization of note discount and issuance costs |
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Stock based compensation |
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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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| Inventory | ( |
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Prepaid expenses and other current assets |
( |
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Accounts payable |
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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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Principal payments on senior secured note payable |
( |
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Principal payments on notes payable |
( |
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Purchase of treasury stock |
( |
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Net cash used in financing activities |
( |
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| Net 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 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 financial statements.
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. 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 $
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 period of loss.
The Company had total potential additional dilutive securities outstanding at June 30, 2023, as follows.
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June 30, |
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2023 |
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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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Series B Convertible Preferred Shares |
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Option shares |
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Warrant shares |
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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 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:
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Level 1 |
Level 2 |
Level 3 |
Total |
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Balance at December 31, 2022 |
$ | $ | $ | $ | ||||||||||||
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Purchases |
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Sales |
( |
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Change in fair value |
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Balance at June 30, 2023 |
$ | $ | $ | $ | ||||||||||||
Investments
On June 9, 2023, the Company entered into a securities exchange agreement with Evtec Group Limited (“Evtec Group”) whereby the Company issued
The Company’s initial investment in Evtec Group was measured at $
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.
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
In February of 2023, the Company retired
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 . 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
The impact of the reverse stock split has been retroactively applied to these financial statements.
5. Warrants to Purchase Common Stock
The following table presents the Company’s warrants as of June 30, 2023:
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Number of Shares |
Weighted Average Exercise Price |
Weighted Average Remaining Life (in years) |
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Warrants as of December 31, 2022 |
$ | |||||||||||
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Issued |
$ | - | ||||||||||
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Exercised |
$ | |||||||||||
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Warrants as of June 30, 2023 |
$ | |||||||||||
At June 30, 2023, warrants for the purchase of
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
During September 2022,
During the six months ended June 30, 2023,
The following table presents the Company’s options as of June 30, 2023:
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Number of Shares |
Weighted Average Exercise Price |
Weighted Average Remaining Life (in years) |
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Options as of December 31, 2022 |
$ | |||||||||||
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Issued |
$ | |||||||||||
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Forfeited |
( |
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Exercised |
$ | - | ||||||||||
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Options as of June 30, 2023 |
$ | |||||||||||
At June 30, 2023, 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 $
9. Commitments and Contingencies
The Company leases approximately
The table below shows the future lease payment obligations:
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Year Ending December 31, |
Amount |
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2023 |
$ | |||
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2024 |
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2025 |
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2026 |
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2027 |
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Thereafter |
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| Total remaining lease payments | $ | |||
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Less: imputed interest |
( |
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Present Value of remaining lease payments |
$ | |||
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Current |
$ | |||
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Noncurrent |
$ | |||
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Weighted-average remaining lease term (years) |
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Weighted-average discount rate |
% | |||
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.
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.
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.
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, 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.
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.
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 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:
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Three Months Ended June 30, |
Six Months Ended June 30, |
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2023 |
2022 |
2023 |
2022 |
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Net income (loss) |
$ | (1,424,494 | ) | $ | (1,316,099 | ) | $ | (3,324,862 | ) | $ | (2,558,542 | ) | ||||
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Adjustments: |
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Interest expense |
147 | 28,952 | 312 | 58,195 | ||||||||||||
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Investment (income) loss |
(6,952 | ) | 105,067 | (53,553 | ) | 283,799 | ||||||||||
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Depreciation and amortization |
10,679 | 5,850 | 21,197 | 11,125 | ||||||||||||
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Amortization of debt discount |
- | 13,314 | - | 26,628 | ||||||||||||
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Stock based compensation |
405,632 | 126,179 | 1,173,761 | 248,212 | ||||||||||||
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Total adjustments |
$ | 409,506 | $ | 279,362 | $ | 1,141,717 | $ | 627,959 | ||||||||
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EBITDA |
$ | (1,014,988 | ) | $ | (1,036,737 | ) | $ | (2,183,145 | ) | $ | (1,930,583 | ) | ||||
Off Balance Sheet Arrangements
As of June 30, 2023, 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, 2023, 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, 2023, 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, 2023, 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.
As reported in our current report on Form 8-K filed June 15, 2023, on June 9, 2023, the Company entered into a Securities Exchange Agreement Evtec. Under the terms of the Securities Exchange Agreement the Company issued 2,400,000 shares of Series B Convertible Preferred Stock, $0.001 par value per share (the “Series B Share Consideration”), in exchange for 4,086 newly issued preference shares of Evtec Group Limited. The shares representing the Series B Share Consideration were issued in reliance upon an exemption from registration pursuant to 4(a)(2) under the Securities Act of 1933, as amended.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Securities
As reported in our current report on Form 8-K filed June 15, 2023,on June 9, 2023, the Company entered into a Securities Exchange Agreement Evtec. Under the terms of the Securities Exchange Agreement the Company issued 2,400,000 shares of Series B Convertible Preferred Stock, $0.001 par value per share (the “Series B Share Consideration”), in exchange for 4,086 newly issued preference shares of Evtec Group Limited. The shares representing the Series B Share Consideration were issued in reliance upon an exemption from registration pursuant to 4(a)(2) under the Securities Act of 1933, as amended.
Use of Proceeds of Registered Securities
On January 7, 2022 our Board of Directors authorized a stock repurchase plan for up to $2,500,000 of the Company’s Common Stock. The program will terminate on December 31, 2023 or when the $2,500,000 authorized has been fully utilized. As of June 30, 2023, the Company has repurchased 176,940 shares of common stock for an aggregate purchase price of $1,117,666 (as adjusted for the April 10, 2023 reverse stock split at a ratio of 4 for 1) under the stock repurchase plan. In addition, the Company repurchased an additional 282,501 shares of common stock for $79,100 outside of the stock repurchase plan. This use of proceeds was not anticipated or disclosed in the Company’s prospectus.
Other than as described above, the proceeds of the public offering have been used as described in the prospectus to promote and market our Blackbox System platform and increase our subscriber base, and for general and administration expenses.
Purchases of Equity Securities by Issuer
The following table sets forth information regarding purchases made under the Company’s stock repurchase plan for up to $2,500,000 of the Company’s Common Stock. The program was authorized and publicly announced on January 7, 2022 and will terminate on December 31, 2023 or when the $2,500,000 authorized has been fully utilized. As noted above, as of June 30, 2023, the Company has repurchased 176,940 shares of common stock for an aggregate purchase price of $1,117,666. In addition, the Company repurchased an additional 282,501 shares of common stock for $79,100 outside of the stock repurchase plan.
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Period |
Total Number of Shares Purchased |
Average Price Paid Per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
Approximate Dollar Value of Shares that May Yet Be Purchase under the Plans or Programs |
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|
April 1, 2023 through April 30, 2023 |
0 | $ | - | 171,940 | $ | 1,397,625 | ||||||||||
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May 1, 2023 through May31, 2023 |
0 | $ | - | 171,940 | $ | 1,397,625 | ||||||||||
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June 1, 2023 through June 30, 2023 |
5,000 | $ | 3.06 | 176,940 | $ | 1,382,334 | ||||||||||
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Total |
5,000 | $ | 3.06 | 176,940 | $ | 1,382,334 | ||||||||||
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
None.
The following exhibits are filed with this Quarterly Report on Form 10-Q or are incorporated by reference as described below.
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Exhibit |
Description |
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31.1 |
Certification of Principal Executive Officer pursuant to Rule 13a-14a/Rule 14d-14(a)* |
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31.2 |
Certification of Principal Financial Officer pursuant to Rule 13a-14a/Rule 14d-14(a)* |
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32.1 |
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350** |
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32.2 |
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350** |
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101.1 |
Inline Interactive data files pursuant to Rule 405 of Regulation S-T* |
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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.
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August 14, 2023 |
BLACKBOXSTOCKS INC. |
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By: |
/s/ Gust Kepler |
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Gust Kepler |
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President, Chief Executive Officer and Secretary |
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(Principal Executive Officer) |
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By: |
/s/ Robert Winspear |
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Robert Winspear |
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Chief Financial Officer and Secretary (Principal Financial |
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and Accounting Officer) |
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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** |
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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