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, 2019, as well as with our condensed financial statements and
the notes thereto included elsewhere herein.
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 employs "predictive technology" enhanced
by artificial intelligence to find volatility and unusual market activity that
may result in the rapid change in the trading price of a stock or option.
Blackbox continuously scans the NASDAQ, New York Stock Exchange, CBOE, and other
options markets, analyzing over 8,000 stocks and up to 900,000 options contracts
multiple times per second. We also 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 recently introduced a live audio/video feature that allows our
members to broadcast on their own channels to share trade strategies and market
insight within the Blackbox community.
We launched our platform for domestic use and made it 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 our
website at http://www.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 OTC Pink tier of the OTC Markets Group, Inc. (the "OTC Pink") under the
symbol "BLBX." Our corporate website is located at
http://www.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 of Financial Information
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles in the United States of America
("GAAP"), which contemplate continuation of the Company as a going concern,
which is dependent upon the Company's ability to establish itself as a
profitable business. At September 30, 2020, the Company had an accumulated
deficit of $6,665,961 and for the three and nine months ended September 30,
2020, reported a net loss of $72,710 and net income of $163,946, respectively.
By contrast, at September 30, 2019, the Company had an accumulated deficit of
$5,002,609 and for the three and nine months ended September 30, 2019, incurred
net losses of $507,859 and $1,156,140, respectively. Management expects that the
Company may need to raise additional capital to sustain operations until such
time as the Company can achieve consistent profitability. However, there can be
no assurance that management will be successful in obtaining additional funding
or in attaining profitable operations on a consistent basis.
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 filed with the Securities and
Exchange Commission on April 16, 2020.
14
--------------------------------------------------------------------------------
Table of Contents
Liquidity and Capital Resources
At September 30, 2020, the Company had a cash balance of $165,477 and a working
capital deficit of $1,869,126. Although the Company experienced substantial
increases in revenues during 2020 as compared to 2019 and significantly lower
losses from operations and net losses, there can be no assurance that such
trends will continue. The company has current debt outstanding in the amount of
$1,098,411. As a result of its financial position, the Company may not be able
to generate sufficient cash flows from operations to sustain its operations and
service its debt. These factors raise substantial doubt about our ability to
continue as a going concern and the accompanying financial statements do not
include any adjustments related to the recoverability or classification of asset
carrying amounts or the amounts and classification of liabilities that may
result should we be unable to continue as a going concern.
On November 12, 2020, the Company executed a Loan Agreement with certain lenders
(the "Lenders") and FVP Servicing LLC, ("FVP"), as agent for the Lenders in
connection with the issuance of a Note (the "FPV Note") in the amount of
$1,000,000 bearing interest at 12% per annum with an initial maturity of
November 12, 2022. Simultaneously, with the execution of the Loan Agreement, the
Company repaid an existing secured note payable in the amount of $100,000 along
with accrued interest and certain outstanding trade payables in the amount of
$133,880. In addition, the Company granted the Lender a security interest in
substantially all of its assets. Excluding transaction costs, the Company will
receive net proceeds of approximately $666,000 after repayment of the notes and
payables described above. Management believes that this will be sufficient to
fund its operations and service its debt for the next twelve months. In
addition, management may continue to raise additional debt or equity capital in
order to improve liquidity or finance more aggressive growth or development.
There can be no assurance that the Company will be able to raise additional
capital or on what terms.
Sale of Common Stock and Warrants
During the nine months ended Sepember 30, 2020, the Company received
subscriptions for the purchase of 69,232 shares of Common Stock at a cash price
of $1.95 per share for an aggregate of $135,001. In connection with certain of
the sales, warrants to purchase up to 32,053 shares of the Company's Common
Stock at a cash price of $1.95 per share were issued to certain of the
subscribers.
Results of Operations
Comparison of Three Months Ended September 30, 2020 and 2019
For the three months ended September 30, 2020 and 2019, the Company's revenue
totaled $1,100,329 and $296,332, respectively, for which our respective costs of
operations totaled $288,213 and $159,216. The $803,997 increase in revenue
resulted from growth in our user base which is primarily attributable to a
consistent daily advertising spend during the period. The majority of the costs
of operations are data feed expenses for exchange information totaling
approximately $121,650 for the three months ended September 30, 2020 and
customer retention expenditures of $92,547. Other costs of operations include
$46,497 for website maintenance.
For the three months ended September 30, 2020 the Company had operating expenses
totaling $726,632 compared to $384,598 for the same period in 2019, an increase
of $342,034. This change is primarily a result of an increase in selling,
general and administrative expenses of $175,511, from $290,713 for the three
months ended September 30, 2019 compared to $466,224 for the three months ended
September 30, 2020, as a result of increases of $44,928 for referral expenses,
salary and related employee expenses of $37,122, consulting and business
development expense of $92,439 and $1,022 in aggregate other general and
administrative expenses. We also incurred increased advertising and marketing
expenses by $111,010 to $173,559 from $62,549 for the three months ended
September 30, 2020 as compared to the three months ended September 30, 2020.
Software development costs also increased by $56,565 as a result of platform
enhancement and related data feed expense.
15
--------------------------------------------------------------------------------
Table of Contents
Comparison of Nine Months Ended September 30, 2020 and 2019
For the nine months ended September 30, 2020 and 2019, the Company's revenue
totaled $2,324,428 and $776,489, respectively, for which our respective costs of
operations totaled $700,723 and $438,168. The $1,547,939 increase in revenue
resulted from growth in our user base which is primarily attributable to a
consistent daily advertising spend during the period. The majority of the costs
of operations are data feed expenses for exchange information totaling
approximately $307,564 for the nine months ended September 30, 2020 and customer
retention expenditures of $241,403. Other costs of operations included $92,314
for website maintenance and other costs of $59,442.
For the nine months ended September 30, 2020 the Company had operating expenses
totaling $1,722,218 compared to $1,107,004 for the same period in 2019, an
increase of $615,214. This change is primarily a result of an increase in
selling, general and administrative expenses of $342,573, from $789,088 for the
nine months ended September 30, 2019 compared to $1,131,661 for the nine months
ended September 30, 2020, as a result of increases of $86,497 for referral
expenses, salary and related of $70,389, consulting and business development
expense of $156,125, investment and financing expense of $20,037, internet and
computer expense of $46,235 and other general and administrative expense of
$18,429 netted with a decrease in professional fees of $55,140. We also incurred
increased advertising and marketing expenses of $203,336, from $201,299 for the
three months ended September 30, 2019 compared to $404,635 for the nine months
ended September 30, 2020. Software development costs also increased by $73,461
as a result of the enhancements to the platform and the related increased data
feed expense.
Off Balance Sheet Arrangements
As of September 30, 2020, we did not have any material off-balance sheet
arrangements.
© Edgar Online, source Glimpses