Filing summary
Entity note: The request identifies REALLOYS INC., but the supplied Form 10-Q is for Blackboxstocks Inc. This summary reflects the filing text.
Business context and reporting period
Blackboxstocks develops and markets subscription-based, real-time analytics software for securities traders. This unaudited Form 10-Q covers the quarter and six months ended June 30, 2018; it was filed August 20, 2018. The company reported 23,000,000 common shares outstanding as of that date.
Key financial metrics
| Metric | Three months ended June 30, 2018 | Six months ended June 30, 2018 |
|---|---|---|
| Revenue | $147,375 | $290,670 |
| Gross profit (loss) | $(3,363) | $(27,343) |
| Operating expenses | $232,798 | $406,613 |
| Operating loss | $(236,161) | $(433,956) |
| Net loss | $(243,976) | $(446,518) |
| Basic loss per share | $(0.01) | $(0.02) |
- Cash flow: Six-month operating cash use was $24,772, investing cash use was $19,977, and financing provided $60,527. Cash increased $15,778 to $23,933.
- Liquidity: At June 30, 2018, current assets were $274,941 and current liabilities were $933,468, producing a $658,527 working capital deficit. Management reported an accumulated deficit of $3,141,105.
- Debt and related-party amounts: Notes payable totaled $48,220 ($42,465 short-term and $5,755 long-term). The company owed CEO Gust Kepler $103,240 in unsecured, non-interest-bearing advances.
- Other balance-sheet items: Unearned revenue was $260,000 and unearned subscriptions were $46,379. Prepaid expenses included $36,700 related to a company owned by the CEO.
Changes versus the prior comparable period
- Second-quarter revenue fell to $147,375 from $196,945; six-month revenue declined to $290,670 from $324,558. Management attributed the decrease mainly to termination of the BBTR licensing agreement, partly offset by growth in domestic subscriptions.
- Gross results deteriorated from profit of $63,753 in Q2 2017 and $95,086 for the first half of 2017 to losses in the 2018 periods. Costs of operations rose to $150,738 for Q2 and $318,013 for the first half.
- Net losses narrowed year over year: $243,976 versus $352,472 for Q2, and $446,518 versus $544,270 for the first half. Operating expenses decreased, chiefly because BBTR-related software development spending was lower; the company said development was materially complete, although ongoing development and maintenance would continue.
- Six-month operating cash use improved from $264,162 in 2017 to $24,772 in 2018. The 2018 cash balance was nevertheless low, and the filing’s comparative cash-flow statement reports $386,470 of cash at June 30, 2017.
Outlook, risks, contingencies, and unusual items
- Outlook and going concern: The company said subscription revenue had not reached a level sufficient to cover overhead, did not expect profitable operations before the end of 2018, and might need additional capital. Management believed available working capital could fund operating deficiencies and development costs through year-end, absent a significant change in cash requirements; it cautioned there was no assurance of obtaining funding or achieving profitability.
- Unearned revenue: The company received $260,000 in advance from prospective customers anticipating a new subscription service. The filing does not provide a clear timetable for recognizing this amount as revenue.
- Advisory agreement: A June 2018 agreement with IC Ventures provides for monthly compensation in company common stock valued at $20,000 for a 24-month term, with a possible $15,000 monthly cash increase for 12 months. It also includes 920,000 shares if a NASDAQ listing is achieved and an acquisition closing fee of 1.5% of gross proceeds or at least $500,000 under specified conditions.
- Financing and related parties: The company used short-term quasi-factoring financing with daily repayments and recorded $11,601 of note-discount amortization as interest expense in the first half. The CEO both provided advances and controls a company with which Blackboxstocks has prepaid marketing services.
- Controls: Management concluded disclosure controls were not effective as of June 30, 2018. It identified a material weakness from lack of segregation of duties, with one director and executive officer handling general administrative and financial matters, and said it did not intend to add staff to address it given cash constraints.
- Legal matters: The company reported no material litigation or threatened litigation and no off-balance-sheet arrangements. The filing provides no specific financial-market-risk disclosure because the company qualified as a smaller reporting company.
The company cautioned that forward-looking statements are uncertain and actual results may differ materially. No specific revenue or earnings guidance was provided.
Important facts for investors to verify
- Confirm the intended issuer: the supplied filing is for Blackboxstocks Inc., not REALLOYS INC.
- Assess cash runway and financing needs against the $23,933 cash balance, working capital deficit, near-term note repayments, and management’s conditional year-end funding estimate.
- Verify the terms, collection, and revenue-recognition timing for the $260,000 customer advances and the status and retention of the anticipated subscription service.
- Review subscription trends, customer acquisition and retention costs, data-feed expenses, and the effects of the terminated BBTR license on future revenue and margins.
- Evaluate the IC Ventures agreement’s potential stock dilution, cash obligations, and transaction-related fees, as well as related-party advances and prepaid services.
- Track remediation of the disclosed material weakness and whether disclosure controls improve.