Note 5 - Incentive Stock Plan

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

4. Warrants to Purchase Common Stock

Costs attributable to the issuance of warrants to purchase common stock are measured at fair value at the date of issuance and offset with a corresponding increase in ‘Additional Paid in Capital’ at the time of issuance.

Until January 1, 2021, the fair value cost was computed utilizing the Black-Scholes model using the following inputs: the price of the Company’s common stock on the date of issuance, a risk-free interest rate based on applicable treasury rates, and expected volatility of the Company’s common stock of based on historical volatility, various exercise prices, and terms reflecting the term of the warrant issued.

Concurrently with the execution of certain securities purchase agreements during 2020, the Company issued warrants to purchase Common Stock. Each warrant is exercisable for a period of one to five years from the date of the securities purchase agreement. The fair value cost at the date of issuance of these warrants was $639,194.

In conjunction with the issuance of convertible notes payable as described in Note 7, a warrant for the purchase of up to 115,385 shares of common Stock exercisable for a one-year period was issued at an exercise price of $0.01 per share and another warrant for the purchase of up to 360,000 shares of Common Stock exercisable for a five-year period was issued at an exercise price of $1.00 per share.

Beginning January 1, 2021, the Company computes fair value cost using the Cox-Ross-Rubinstein binomial model. During the period ended September 30, 2021, the Company estimated the fair value of the warrants based on assumptions used in the Cox-Ross-Rubinstein binomial pricing model using the following inputs: the price of the Company’s common stock on the date of issuance, a risk-free interest rate of 1.30%, and expected volatility of 50% based on the volatility of comparable publicly traded entities, various exercise prices, and terms of up to 10 years.

On September 11, 2021, the Company issued Robert Winspear, Chief Financial Officer, Secretary and a director of the Company, a warrant to purchase up to 100,000 shares of common stock exercisable for a ten-year period at an exercise price of $1.95. The warrants vest monthly over 36 months after the issuance date. The fair value of these warrants at the issuance date was $382,571, which is being expensed as vesting occurs.

The following table presents the Company’s warrants as of September 30, 2021 and December 31, 2020:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Life (in years)
Warrants as of December 31, 2019		84,295		$	1.95		4.45
Issued		510,644		$	0.84		5.00
Exercised		(115,385	)	$	0.01		-
Warrants as of December 31, 2020		479,554		$	1.24		4.34
Issued		152,602		$	1.80		10.00
Exercised		-		$	-		-
Warrants as of September 30, 2021		632,156		$	1.37		4.64

At September 30, 2021, warrants for the purchase of 534,937 shares were vested and warrants for the purchase of 97,219 shares remained unvested. The Company expects to incur expenses for the unvested warrants totaling $371,936 as they vest.

Share-based Payment Arrangement, Option [Member]

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

5. Incentive Stock Plan

On August 11, 2021, the Company filed an information statement with the SEC disclosing that the Company had created the 2021 Blackboxstocks, Inc. Incentive Stock Plan (the “Plan”). The Plan provides for the grant of stock options and restricted stock grants to employees, directors and certain non-employee consultants. The Plan is administered by the Company’s board of directors or a committee thereof. 750,000 shares of the common stock are reserved for issuance under the plan.

During the period ended September 30, 2021, the Company estimated the fair value of the options based on assumptions used in the Cox-Ross-Rubinstein binomial pricing model using the following inputs: the price of the Company’s common stock on the date of issuance; a risk-free interest rate of 1.30%, and expected volatility of 50% based on the volatility of comparable publicly traded entities, various exercise prices, and terms of 10 years.

On August 31, 2021, options to purchase up to 597,500 shares of common stock exercisable for a ten-year period were issued at an exercise price of $2.99. The fair value of these options at the issuance date was $1,076,340, which is being expensed as vesting occurs over the applicable service periods.

On September 11, 2021, options to purchase up to 15,000 shares of common stock exercisable for a ten-year period were issued at an exercise price of $4.96. The fair value of these options at the issuance date was $44,823, which is being expensed as vesting occurs over the applicable service periods. In addition, 6,048 shares of restricted common stock were granted on Spetember 11, 2021 and vest monthly over twelve months. As of September 30, 2021, none of the restricted common stock shares have vested or been issued.

The following table presents the Company’s options as of September 30, 2021 and December 31, 2020:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Life (in years)
Options as of December 31, 2020		-	$	-		-
Issued		612,500	$	3.04		10.00
Exercised		-	$	-		-
Options as of September 30, 2021		612,500	$	3.04		9.92

At September 30, 2021, options to purchase 222,085 shares were vested and options to purchase 390,415 shares remained unvested. The Company expects to incur expenses for the unvested options totaling $698,264 as they vest.