Blackboxstocks(BLBX) - 2023 Q1 - Quarterly Report

Introductory Comment Caution Regarding Forward-Looking Statements This section cautions that forward-looking statements involve substantial uncertainties and risks, and actual results may differ materially - The report contains forward-looking statements that involve substantial uncertainties and risks, and actual results may differ materially from those anticipated[7][23][87] - Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date made, and the company undertakes no obligation to publicly release revisions[23] PART I – FINANCIAL INFORMATION Item 1. Financial Statements This section presents unaudited Balance Sheets, Statements of Operations, Stockholders' Equity, and Cash Flows for Q1 2023 and 2022 - The financial statements are unaudited and prepared in accordance with GAAP for interim financial information, and management believes they contain all necessary normal recurring adjustments for a fair presentation[64] Balance Sheets as of March 31, 2023 and December 31, 2022 (Unaudited) Total assets and equity decreased, driven by reduced marketable securities and an increased accumulated deficit Balance Sheet Highlights | Metric | March 31, 2023 (in $K) | December 31, 2022 (in $K) | Change (in $K) | | :-------------------------- | :------------- | :---------------- | :----- | | Total assets | $3,194,361 | $4,335,781 | $(1,141,420) | | Total current liabilities | $1,946,593 | $1,852,875 | $93,718 | | Total long term liabilities | $281,457 | $305,253 | $(23,796) | | Total stockholders' equity | $966,311 | $2,177,653 | $(1,211,342) | | Cash | $249,818 | $425,578 | $(175,760) | | Marketable securities | $2,180,590 | $3,216,280 | $(1,035,690) | | Accumulated deficit | $(16,720,804) | $(14,820,436) | $(1,900,368) | Statements of Operations for the Three Months Ended March 31, 2023 and 2022 (Unaudited) Net loss significantly increased due to a 33% revenue decrease and 38% rise in operating expenses Key Income Statement Figures (Three Months Ended March 31) | Metric | 2023 (in $K) | 2022 (in $K) | Change (YoY) (in $K) | | :-------------------------------- | :----------- | :----------- | :----------- | | Total revenues | $859,004 | $1,272,486 | $(413,482) (-32.5%) | | Cost of revenues | $447,631 | $579,962 | $(132,331) (-22.8%) | | Gross margin | $411,373 | $692,524 | $(281,151) (-40.6%) | | Total operating expenses | $2,358,177 | $1,713,678 | $644,499 (37.6%) | | Operating loss | $(1,946,804) | $(1,021,154) | $(925,650) (-90.6%) | | Net loss | $(1,900,368) | $(1,242,443) | $(657,925) (-53.0%) | | Net loss per share – basic and diluted | $(0.58) | $(0.38) | $(0.20) | - The decline in revenues is attributed to macro-economic factors such as poor stock market performance, high inflation, and sluggish GDP growth, which may have constricted disposable cash of prospective subscribers[139] Statement of Stockholders' Equity for the Three Months Ended March 31, 2023 and 2022 (Unaudited) Stockholders' equity decreased due to a $1.90 billion net loss and reduced additional paid-in capital Stockholders' Equity Changes (Three Months Ended March 31, 2023) | Metric | December 31, 2022 (in $K) | March 31, 2023 (in $K) | Change (in $K) | | :-------------------------- | :---------------- | :------------- | :----- | | Common stock, par value $0.001 | $3,928 | $3,126 | $(802) | | Treasury stock | $(1,102,375) | $0 | $1,102,375 | | Additional paid in capital | $18,070,556 | $17,637,999 | $(432,557) | | Accumulated deficit | $(14,820,436) | $(16,720,804) | $(1,900,368) | | Total stockholders' equity | $2,177,653 | $966,311 | $(1,211,342) | - The company retired 171,940 shares of Common Stock acquired through its repurchase plan in February 2023 and an additional 282,501 shares from Mr. Kepler in March 2023, which were subsequently retired[49][81] Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022 (Unaudited) Net cash decreased due to significant operating cash outflow, partially offset by investing cash inflow from marketable securities sales Key Cash Flow Figures (Three Months Ended March 31) | Metric | 2023 (in $K) | 2022 (in $K) | Change (YoY) (in $K) | | :------------------------------------ | :------------ | :------------ | :------------ | | Net cash used in operating activities | $(1,250,895) | $(793,188) | $(457,707) | | Net cash provided by (used in) investing activities | $1,082,291 | $(85,094) | $1,167,385 | | Net cash used in financing activities | $(7,156) | $(896,697) | $889,541 | | Net decrease in cash | $(175,760) | $(1,774,979) | $1,599,219 | | Cash - end of period | $249,818 | $651,518 | $(401,700) | - The increase in cash flow from investing activities was primarily due to the liquidation of marketable securities to fund operations[106] Notes to Financial Statements for the Three Months Ended March 31, 2023 and 2022 These notes detail organization, accounting policies, marketable securities, equity, warrants, stock plans, related parties, debt, and contingencies - The notes are an integral part of the financial statements, providing additional context and detail[15][58][59] 1. Organization Blackboxstocks Inc. operates an AI-enhanced financial technology and social media platform for stock and options traders - Blackboxstocks Inc. operates as a financial technology and social media platform, offering real-time proprietary analytics and news for stock and options traders[37][88] - The platform uses "predictive technology" enhanced by artificial intelligence to identify volatility and unusual market activity, scanning over 10,000 stocks and 1,500,000 options contracts multiple times per second[37][88] - The company's common stock was listed on the Nasdaq Capital Market under the symbol "BLBX" following its initial public offering on November 10, 2021[63][101] 2. Summary of Significant Accounting Policies This section outlines key accounting policies, including going concern assumption, marketable securities, revenue recognition, and cash definition - The financial statements are prepared under the assumption of a going concern, but the company's operating losses and negative cash flows raise substantial doubt about its ability to continue as a going concern[39][105] - Management is implementing initiatives to improve cash flow, including new product development, revised marketing strategies, and expense reductions, and has entered a non-binding LOI for a reverse merger with Evtec Group Limited[39][105] - Revenue is recognized over the subscription period for its SaaS model, with unearned subscriptions recorded for cash received but not yet earned[44][69] 3. Marketable Securities Marketable securities, primarily mutual funds, decreased significantly due to sales exceeding purchases - Marketable securities are primarily investments in mutual funds holding commercial and government debt securities, recorded at fair value using Level 1 inputs[42][73] Marketable Securities Activity (Three Months Ended March 31, 2023) | Metric | Amount (in $K) | | :------------------- | :------------- | | Balance at Dec 31, 2022 | $3,216,280 | | Purchases | $889,018 | | Sales | $(1,971,309) | | Change in fair value | $46,601 | | Balance at Mar 31, 2023 | $2,180,590 | 4. Stockholders' Equity This note details authorized and outstanding common and preferred stock, including CEO-held Series A and common stock retirements - The company has authorized 100,000,000 shares of common stock and 10,000,000 shares of preferred stock, with 5,000,000 designated as Series A Convertible Preferred Stock[74] - All outstanding Series A Stock is held by the CEO, Gust Kepler, with conversion rights to common stock dependent on market capitalization thresholds (e.g., 5-for-1 below $150 million, 1-for-1 above $350 million)[47][75] - In February and March 2023, the company retired 171,940 shares of common stock from its repurchase plan and 282,501 shares from Mr. Kepler (in lieu of a bonus), returning them to authorized but unissued shares[49][81] 5. Warrants to Purchase Common Stock As of March 31, 2023, 109,584 warrants were outstanding with a $13.24 exercise price and 4.28 years remaining life Warrants Outstanding (March 31, 2023) | Metric | Value | | :-------------------------------- | :------ | | Number of Shares | 109,584 | | Weighted Average Exercise Price (in $) | $13.24 | | Weighted Average Remaining Life (in years) | 4.28 | - As of March 31, 2023, 97,779 warrants were vested, and the company expects to incur $180.66 thousand in expenses for the remaining unvested warrants as they vest[79] 6. Incentive Stock Plan The 2021 Incentive Stock Plan was amended to 612,500 shares, with 156,542 options outstanding and restricted stock granted - The 2021 Blackboxstocks, Inc. Incentive Stock Plan was amended to increase the number of shares available for issuance to 612,500[93] Options Outstanding (March 31, 2023) | Metric | Value | | :-------------------------------- | :------ | | Number of Shares | 156,542 | | Weighted Average Exercise Price (in $) | $11.69 | | Weighted Average Remaining Life (in years) | 8.53 | - During February 2023, 282,501 shares of restricted common stock valued at $655.40 thousand were granted and vested at issuance[53] 7. Related Party Transactions The company purchased 282,501 common shares from CEO Mr. Kepler for $0.28 per share in lieu of his 2022 bonus - The company purchased 282,501 shares of common stock from CEO Mr. Kepler for $0.28 per share on March 16, 2023, in lieu of his 2022 cash bonus, and subsequently retired these shares[81] 8. Debt The company has an outstanding Paycheck Protection Program loan of $61.19 thousand at 1% interest, maturing May 4, 2025 - The company has an outstanding Paycheck Protection Program loan with an unpaid balance of $61.19 thousand as of March 31, 2023, carrying a 1% interest rate and maturing on May 4, 2025[56] 9. Commitments and Contingencies No material litigation is reported; an office lease extends to September 30, 2028, with $508.14 thousand in future obligations - The company is not currently a defendant in any material litigation or threatened litigation that could materially affect its financial statements[84] Future Lease Payment Obligations (as of March 31, 2023) | Year | Amount (in $) | | :--------- | :------- | | 2023 | $66,286 | | 2024 | $89,948 | | 2025 | $91,122 | | 2026 | $93,136 | | 2027 | $95,150 | | Thereafter | $72,495 | | Total remaining lease payments | $508,137 | | Less: imputed interest | $(190,383) | | Present Value of remaining lease payments | $317,754 | 10. Subsequent Events On April 10, 2023, the company effected a one-for-four reverse stock split, adjusting options, warrants, and incentive plan shares - On April 10, 2023, the company implemented a one-for-four reverse stock split, which also resulted in proportionate adjustments to outstanding stock options, warrants, and shares under incentive plans[77][86][92] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2023 financial performance, liquidity, and capital, highlighting macroeconomic challenges and going concern risk - The discussion should be read in conjunction with the annual report on Form 10-K and contains forward-looking statements subject to risks and uncertainties[87] Overview Blackboxstocks Inc. operates the "Blackbox System," an AI-enhanced financial technology and social media platform for traders - The Blackbox System is a unique financial technology platform combining proprietary analytics and broadcast-enabled social media for traders, utilizing AI-enhanced "predictive technology"[88][100] - The platform offers real-time alerts, scanners, financial news, institutional-grade charting, and proprietary analytics through a user-friendly dashboard, integrated with a social media platform and live audio/video features[88][100] - The company operates on a subscription-based Software as a Service (SaaS) business model, serving a growing user base in 42 countries[88][89] Basis of Presentation Financial statements assume going concern, despite significant losses and negative cash flows raising substantial doubt about continuation - The financial statements are prepared assuming the company will continue as a going concern, but significant operating losses and negative cash flows raise substantial doubt about this ability[105] Significant Accounting Policies No changes occurred in significant accounting policies from the 2022 Annual Report on Form 10-K - No changes have occurred in the Summary of Significant Accounting Policies from the Annual Report on Form 10-K for the year ended December 31, 2022[114] Liquidity and Capital Resources Cash and marketable securities decreased significantly, with substantial cash used in operations, leading to going concern risk Cash and Marketable Securities | Metric | March 31, 2023 (in $K) | December 31, 2022 (in $K) | Change (in $K) | | :-------------------------- | :------------- | :---------------- | :----- | | Cash and marketable securities | $2,430,408 | $3,641,858 | $(1,211,450) | | Cash flows used in operations | $(1,250,895) | $(793,188) (prior year period) | $(457,707) | - Net cash from investing activities increased to $1.08 billion for Q1 2023 (from $(85.09 million) in Q1 2022) due to the liquidation of marketable securities to fund operations[106] - The company intends to pursue a reverse merger with Evtec Group Limited to address liquidity concerns, but there is no assurance of completion or sufficient capital[105][138] Results of Operations Q1 2023 saw a 33% revenue decrease and 38% operating expense increase, resulting in higher operating and net losses - Revenues decreased by 33% for the three months ended March 31, 2023, compared to the prior year, primarily due to macroeconomic factors like poor stock market performance, high inflation, and sluggish GDP growth[139] - Operating expenses increased by 38% to $2.36 billion, driven by a 45% rise in selling, general, and administrative expenses (due to higher stock-based compensation) and a 92% increase in software development costs for platform improvements and the new "Stock Nanny" product[118] - The operating loss for Q1 2023 was $(1.95 billion), a significant increase from $(1.02 billion) in Q1 2022, due to lower sales and higher operating expenses[109] EBITDA (Non-GAAP Financial Measure) EBITDA, a non-GAAP measure, shows a $(1.17 billion) loss for Q1 2023, larger than the prior year - EBITDA is a non-GAAP measure defined as net income (loss) before interest expense, income tax, depreciation and amortization expense, and certain non-cash items, used by management to compare operating performance[110][119] EBITDA Reconciliation (Three Months Ended March 31) | Metric | 2023 (in $K) | 2022 (in $K) | | :-------------------------- | :------------- | :------------- | | Net income (loss) | $(1,900,368) | $(1,242,443) | | Total adjustments | $732,208 | $348,597 | | EBITDA | $(1,168,160) | $(893,846) | Off Balance Sheet Arrangements As of March 31, 2023, the company did not have any material off-balance sheet arrangements - The company did not have any material off-balance sheet arrangements as of March 31, 2023[143] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company," Blackboxstocks Inc. is not required to provide detailed market risk disclosures - As a "smaller reporting company," the registrant is not required to provide the information for this item[121] Item 4. Controls and Procedures The principal executive and financial officers evaluated the effectiveness of the company's disclosure controls and procedures as of March 31, 2023, concluding they were effective in providing reasonable assurance for timely disclosure - The principal executive and financial officers concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, to provide reasonable assurance for timely disclosure[144] - There were no material changes in internal controls over financial reporting during the quarter ended March 31, 2023[145] - Management acknowledges that control systems provide only reasonable, not absolute, assurance and are subject to inherent limitations such as human error, resource constraints, and potential circumvention[146] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company reported no material legal proceedings for the period - There are no material legal proceedings to report[126] Item 1A. Risk Factors Readers are referred to the 2022 Form 10-K and Form S-1 for important risk factors - Important risk factors are described in the company's Annual Report on Form 10-K and registration statement on Form S-1[127] - The listed risks are not exhaustive, and other unknown or currently immaterial risks may also adversely affect the business[127] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales were reported; public offering proceeds funded promotion, and common stock was repurchased under a plan and from the CEO - No unregistered sales of securities were made during the period that have not been previously reported[148] - Proceeds from the public offering were used to promote and market the Blackbox System platform, increase the subscriber base, and cover general and administration expenses[128] - The company repurchased 171,940 shares for $1.10 million under a stock repurchase plan (authorized for up to $2.5 million until Dec 31, 2023) and an additional 282,501 shares for $79.10 thousand outside the plan[129][149] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - There are no defaults upon senior securities to report[130] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable to the company[131] Item 5. Other Information The company reported no other information required to be disclosed under this item - No other information is required to be disclosed under this item[132] Item 6. Exhibits This section lists exhibits filed with the Quarterly Report on Form 10-Q, including officer certifications and interactive data files Exhibits Filed | 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). | SIGNATURES Signatures The report was signed by Gust Kepler (President, CEO, Secretary) and Robert Winspear (CFO, Secretary) on May 15, 2023 - The report was signed by Gust Kepler (President, CEO, and Secretary) and Robert Winspear (CFO and Secretary) on May 15, 2023[133][135][153][155]