Blackboxstocks Inc. — Form 10-Q Summary
Entity note: The supplied filing is for Blackboxstocks Inc., not Realloys Inc. It covers the quarter and six months ended June 30, 2021; financial statements are unaudited.
Business context
Blackboxstocks operates a subscription-based financial technology and social media platform for stock and options traders. Its service provides market analytics, alerts, news, and user community features. The company reported users in 42 countries and traded on OTC Pink under BLBX.
Key financial results
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $1.464 million | $0.809 million | $2.953 million | $1.224 million |
| Gross margin dollars | $1.054 million | $0.567 million | $2.148 million | $0.812 million |
| Gross margin percentage | 72% | 70% | 73% | 66% |
| Operating income (loss) | $(0.118) million | $0.047 million | $0.028 million | $(0.184) million |
| Net income (loss) | $(0.243) million | $0.194 million | $(0.231) million | $0.237 million |
| Basic earnings (loss) per share | $(0.03) | $0.02 | $(0.03) | $0.03 |
- Q2 revenue rose 81% year over year; six-month revenue rose 141%. Management attributed growth to subscriber-base expansion, marketing, and acceptance of the platform.
- Operating expenses increased 125% in Q2 to $1.172 million and 113% for the six-month period to $2.120 million. Higher spending included marketing, software development, payroll, consulting, and referrals.
- For the six months, operating income improved from a loss to modest income, but net results turned to a loss. The prior-year periods included large nonrecurring convertible-debt expenses and derivative-liability gains, which affected comparability.
- Six-month operating cash flow was $(26,192), versus $87,680 provided in the prior-year period. Investing cash flow was $(54,507), primarily for servers; financing cash flow was $(265,636), mainly reflecting debt principal repayments, partly offset by stock issuance.
- Cash was $626,490 at June 30, 2021, down from $972,825 at December 31, 2020. Current assets were $680,530 and current liabilities $1.613 million; the reported working capital deficit was $932,752.
- Total notes payable, net of unamortized discounts and issuance costs, were $1.097 million, including a $1 million senior secured note bearing 12% interest and a $130,200 PPP loan. The senior note is secured by substantially all company assets. The company reported $180,068 of current long-term debt and $916,775 of long-term debt.
- Stockholders’ deficit was $1.649 million at quarter-end, compared with $1.758 million at year-end 2020. Accumulated deficit was $7.416 million.
Outlook, risks, and notable items
- Management said cash and operating cash flows should fund operations and debt service for the next 12 months, while also noting potential need for additional debt or equity and no assurance of obtaining it. The filing separately states that recurring losses and accumulated deficit raise substantial doubt about the company’s ability to continue as a going concern.
- Management expected gross margins to remain near current levels absent new products or unexpected costs. It anticipated continued operating-cost increases, software-development spending broadly consistent with current levels through 2021, and lower debt-service requirements after repayment of convertible notes. It reported $50,039 in remaining convertible-note principal payments, expected in Q3 2021; senior-note principal payments of $10,000 per month begin in December 2021.
- Management said unusual first-quarter 2021 market activity, including GameStop and AMC, may have driven short-term subscriptions. It cautioned that this effect and growth assumptions may not continue.
- Disclosure controls were assessed as ineffective. Management identified lack of segregation of duties as a material weakness and said it did not intend to add staff to address it given current cash flows.
- The company amended its office lease, extending it through September 2028. It reported no material litigation and no material off-balance-sheet arrangements.
- After quarter-end, holders converted 1,130,002 Series A preferred shares into common shares. The company also disclosed a new incentive plan reserving 750,000 common shares for potential awards.
Important facts for investors to verify
- Whether subscriber growth and revenue gains are sustainable, particularly after the market-driven activity management cited.
- Cash runway, future financing needs, and ability to meet secured debt and lease obligations given the working capital deficit and going-concern uncertainty.
- The plan and timing for remediating the ineffective disclosure controls and segregation-of-duties weakness.
- Potential dilution from warrants, preferred-share conversions, and the 750,000-share incentive plan.
- The six-month cost-of-revenue amount is inconsistent in the filing: the financial statements show $805,352, while MD&A states $805,232. The statement amount reconciles to reported gross margin; investors should confirm the correct figure.