Blackboxstocks(US:BLBX)2025-03-21 21:16Revenue Growth and Financial Performance - The company anticipates significant revenue growth, which is dependent on attracting new subscribers and reducing non-renewals [124]. - The company must increase revenue levels to achieve profitability, focusing on paid subscriptions to its Blackbox System platform [128]. - The company's revenue for the year ended December 31, 2024, was $2,566,946, a decrease of $539,080 or 17.4% compared to $3,106,026 in 2023, primarily due to a decline in subscribers [230]. - The average subscriber count for 2024 was 2,998, which is 12.1% lower than the previous year, and the average monthly revenue per subscriber decreased from $75.88 in 2023 to $72.24 in 2024 [230]. - Gross margin for 2024 was $1,129,663, representing 44.0% of revenues, down from 46.4% in 2023, attributed to lower average revenue per subscriber and poorer fixed cost absorption [230]. - Operating expenses decreased by $2,298,778 or 34.1% from $6,737,505 in 2023 to $4,438,727 in 2024, with significant reductions in software development and advertising expenses [231]. - The company reported a net loss of $3,471,227 for 2024, an improvement from a net loss of $4,664,455 in 2023 [236]. - EBITDA for 2024 was $(2,954,311), compared to $(3,225,199) in 2023, indicating a reduction in operating losses [236]. - Cash flows used in operations totaled $1,095,776 for the year ended December 31, 2024, a significant improvement from negative cash flow of $3,166,067 in the prior year [225]. Mergers and Acquisitions - The Company expects to incur non-recurring costs related to the Merger, including taxes, legal fees, and advisor fees, which may exceed estimates and impact financial condition [164]. - The Merger requires REalloys Inc. to apply for an initial listing on Nasdaq, with minimum equity requirements and a minimum bid price of $4.00 per share [165]. - The number of Blackboxstocks shares to be issued in the Merger may be adjusted based on changes in REalloys share capital prior to Closing [166]. - Completion of the Merger is subject to numerous conditions, and there is no assurance that these conditions will be fulfilled or that the Merger will be completed as planned [168]. - Failure to complete the Merger could adversely affect the market price of the Company's common shares and its financial condition [170]. - The announcement of the Merger may disrupt business relationships and create uncertainty among employees, potentially affecting retention and recruitment [171]. - The Company may face litigation related to the Merger, which could result in substantial costs and delay completion [173]. - The company expects to receive $5,000,000 in financing upon the completion of the merger with REalloys, which is anticipated to enhance its capital position [210]. Competition and Market Challenges - The company faces increasing competition from established firms and new entrants, which may pressure pricing and market share [130]. - The company may face challenges in maintaining its reputation and brand recognition, which are crucial for attracting and retaining customers [132]. - The company may not be able to effectively halt the operations of entities that copy its intellectual property, potentially harming its brand [141]. - The company may not be able to protect its trademarks and trade names adequately, which could hinder its brand recognition and market competitiveness [153]. - The company may face challenges in obtaining necessary licenses for third-party intellectual property, affecting its ability to commercialize new solutions [162]. Intellectual Property and Legal Risks - The company relies on third-party SaaS technologies for critical operations, which poses risks if these services become unavailable [134]. - The company is currently not subject to any material claims from third parties asserting infringement of their intellectual property rights [144]. - The company has invested in protecting its intellectual property through patent filings, although it has not yet obtained any issued patents for its technology or products [148]. - The company relies on trade secrets and confidentiality agreements to protect its proprietary information, but these measures may not be fully effective [158]. - The company may incur significant costs related to legal proceedings concerning intellectual property disputes, which could adversely affect its financial condition [146]. - The company acknowledges that the legal systems in some foreign countries may not favor the enforcement of intellectual property rights, complicating its ability to protect its assets [152]. Corporate Governance and Management - The company is classified as a "controlled company," allowing it to rely on exemptions from certain Nasdaq corporate governance requirements [121]. - The company has a risk management process overseen by the Board, including regular reports on operational, strategic, financial, legal, and regulatory risks [268]. - The Audit Committee is responsible for overseeing risks related to accounting matters and financial reporting [269]. - The Company has adopted a formal Code of Ethics and Business Conduct applicable to all Board members, officers, and employees [280]. - The Company has established an Insider Trading Policy to promote compliance with insider trading laws [271]. - The Company does not currently have a lead independent director, allowing flexibility in leadership structure [267]. Executive Compensation - Gust Kepler, the CEO, received a total compensation of $219,494 in 2024, which includes a salary of $200,000 and a cash bonus of $19,494 [285]. - Robert Winspear, the CFO, has an annual salary of $200,000 and holds a warrant to purchase 25,000 shares at $7.80 per share, exercisable for ten years [286]. - Charles Smith, the CTO, has an annual salary of $180,000 and holds an option to purchase 12,500 shares at $13.68 per share, also exercisable for ten years [287]. - The 2021 Stock Incentive Plan was amended to increase the number of shares available for issuance from 312,500 to 612,500 as of February 6, 2023 [297]. - Non-employee directors receive an annual cash retainer of $30,000 and an option grant of 5,000 shares of common stock [290]. - The company has not entered into any other employment agreements with named executives or directors providing for compensation [289]. Audit and Financial Reporting - The company engaged Victor Mokuolo CPA PLLC as its new independent registered public accounting firm for the audit of the consolidated financial statements for the year ended December 31, 2024 [311]. - Total fees billed by Turner, Stone & Company, L.L.P. for professional services in 2024 amounted to $101,979, an increase of 50.6% from $67,662 in 2023 [313]. - Audit fees for 2024 were $89,299, up from $63,912 in 2023, representing an increase of 39.5% [313]. - Tax fees for 2024 were $5,250, compared to $3,750 in 2023, reflecting a 40% increase [313]. - The Audit Committee pre-approved all auditing services and permitted non-audit services performed by the independent auditor [314]. - Three out of five directors, including Messrs. Keller Reid and Grant Evans and Ms. Dalya Sulaiman, are considered independent directors [310].