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.


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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.


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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.

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