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MarketScreener Homepage  >  Equities  >  OTC Bulletin Board - Other OTC  >  Blackboxstocks Inc.    BLBX

BLACKBOXSTOCKS INC.

(BLBX)
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BLACKBOXSTOCKS : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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06/29/2020 | 01:06pm EDT

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


We are in the business of developing and marketing a real time analytical web based software as a service platform (the "Blackbox System") that serves as a tool for day traders and swing traders on various securities exchanges and markets. Our proprietary Blackbox System technology is an algorithm driven system that works in real time, measuring market trends and data while utilizing a multitude of specific criteria, both live and historical. Our Blackbox System platform employs predictive technology enhanced by artificial intelligence to find volatility and unusual market activity that can result in the rapid change in a stock's price. The Blackbox System was initially designed to monitor and analyze over 13,000 stocks on the OTC Markets Group, Inc. ("OTC"), New York Stock Exchange ("NYSE"), the NYSE American (formerly the American Stock Exchange), and NASDAQ markets simultaneously as our servers receive live data feeds from such markets. We have also customized our Blackbox System to analyze data from the Hong Kong Stock Exchange ("HKEX"), Shanghai Stock Exchange ("SSE") and Shenzhen Stock Exchange ("SZSE") for license and use primarily in Asia. We consider the Blackbox System technology to be among the most user-friendly of its kind.

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 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 March 31, 2020, the Company had an accumulated deficit of $6,787,078 and for the three months ended March 31, 2020, reported net income of $42,829, as compared to a net loss of $208,503 for the same period in 2019. Management expects that the Company will need to raise additional capital to sustain operations until such time as the Company can achieve profitability. However, there can be no assurance that management will be successful in obtaining additional funding or in attaining profitable operations.

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.

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Liquidity and Capital Resources

We launched the Blackbox System web application for domestic use and made it available to subscribers in September 2016, but we have not yet attained a level of subscription sales revenue that would allow us to meet our current overhead. We do not contemplate attaining profitable operations prior to the end of 2020, nor is there any assurance that such an operating level can ever be achieved.

At March 31, 2020, the Company had a cash balance of $74,970 and a working capital deficit of $3,367,329 as compared to a cash balance of $24,650 and a working capital deficit of $1,418,223 at March 31, 2019. As discussed below, during the three months ended March 31, 2020 we raised $100,000 in net proceeds to the Company from the sale of two convertible promissory notes and $232,000 in net proceeds to the Company from other quasi-factoring debt financing. Such cash amount is not sufficient to fund our plans of operation. As such, we will need to raise additional funds to carry out our plans of operation and fund our ongoing operational expenses including the marketing of our Blackbox System. We expect that costs and expenses necessary to implement our planned marketing operations over the next 12 months will be between $1 Million to $2 Million. Additional funding is expected to be generated through equity financing from the sale of our Common Stock and/or the incurrence of debt. If we are successful in completing equity financing, existing stockholders will experience dilution of their interest in our Company. We do not have any financing arranged and we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our Common Stock or debt to fund our plans of operation and ongoing operational expenses. In the absence of such financing, our business will likely fail. 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.

Sale of Convertible Promissory Notes

On March 23, 2020 two lenders advanced an aggregate of $100,000 to the Company in exchange for Convertible Promissory Notes, bearing interest at 52% per annum to be paid monthly in arrears beginning April 30, 2020, and secured by the Company's assets, which are convertible into the Company's Common Stock at a price of $0.60 per share, and maturing on March 25, 2021. On June 23, 2020 the notes were amended to adjust the conversion price from $0.60 to $1.95. The amendment also provided for the issuance of warrants for the purchase of Company Common Stock to be exercised at any time until the maturity date of the notes. The warrants provide for purchase of up to 115,385 shares at $0.01 per share of Common Stock in the aggregate. In the event that the Convertible Promissory Notes are not converted before maturity, the Company retains a call right to repurchase one share of Common Stock for each $0.8666 of unconverted principal at a price of $0.01.




Other Debt Financing



On March 13, 2020 a third party advanced $25,000 to the Company in exchange for quasi-factoring financing arrangements to be repaid in daily installments of $291.67, through August 31, 2020. The related note discount of $12,500 is being amortized over the term of the agreement for a total of $1,316 in interest expense as of March 31, 2020.

On January 27, 2020 a third party advanced $207,000 to the Company in exchange for quasi-factoring financing arrangements to be repaid in daily installments of $1,035, through November 3, 2020. The related note discount of $57,000 is being amortized over the term of the agreement for a total of $13,092 in interest expense as of March 31, 2020.

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Results of Operations


Comparison of Three Months Ended March 31, 2020 and 2019

For the three months ended March 31, 2020 and 2019, the Company's revenue totaled $415,251 and $226,349, respectively, for which our respective costs of revenues totaled $207,848 and $161,318. The $188,902 increase in revenue resulted from an expanded subscription base for monthly revenues. The majority of the costs of operations are data feed expenses for exchange information totaling approximately $81,691 for the three months ended March 31, 2020. Other costs of operations included subscriber referral program payments of $37,496 and customer retention payments of approximately $69,528 to certain select online program moderators, on-boarders and educator partners.

For the three months ended March 31, 2020, the Company had operating expenses totaling $438,116 compared to $255,096 for the same period in 2019, an increase of $183,020. This change is primarily a result of an increase in general and administrative expenses from $227,885 for the three months ended March 31, 2019 compared to $400,294 for the three months ended March 31, 2020. The increase in general and administrative expenses of $172,409 was due to increases in financing expenses of $106,030; advertising expense of $19,005; professional and outside consulting services of $17,334; rent expense of $5,997; general administrative expenses of $1,934; salary and related $18,316; and computer and internet expenses of $3,793. Software development costs also increased approximately $12,353. We also recorded depreciation and amortization expense of $3,491 for the three months ended March 31, 2020 compared to $5,233 for the three months ended March 31, 2019.

Off Balance Sheet Arrangements

As of March 31, 2020, we did not have any material off-balance sheet arrangements.

© Edgar Online, source Glimpses

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