Blackboxstocks Inc. — Form 10-Q Summary
Filing identity: The supplied filing is for Blackboxstocks Inc., not REALLOYS INC. It covers the quarter ended March 31, 2017; the financial statements are unaudited.
Business context
Blackboxstocks develops and markets a real-time analytics platform sold through monthly and annual subscriptions to traders. Its web application launched in September 2016. The company describes the platform as monitoring more than 13,000 stocks across U.S. markets. Shares trade on OTC Pink under BLBX.
Financial results and liquidity
| Metric | Q1 2017 | Q1 2016 |
|---|---|---|
| Revenue | $127,612 | $0 |
| Cost of operations | $96,280 | $0 |
| Gross profit | $31,332 | $0 |
| Gross margin | 24.5% | Not applicable |
| Operating expenses | $222,683 | $136,995 |
| Operating loss | $(191,351) | $(136,995) |
| Net loss | $(191,799) | $(136,995) |
| Basic loss per share | $(0.01) | $(0.01) |
| Net cash used in operations | $(136,032) | $(46,297) |
At March 31, 2017, cash was $570,940, current assets were $881,314, current liabilities were $143,067, and working capital was $738,247. Total assets were $898,866. The balance sheet reports no debt; liabilities consisted of accounts payable and unearned subscriptions. Cash fell $132,698 during the quarter. The filing reports $3,334 of net cash provided by investing activities, including shareholder advance and repayment flows.
Changes and notable items
- Revenue began after the September 2016 product launch; Q1 2016 had no revenue or cost of operations.
- Operating expenses rose $85,688 year over year. General and administrative expense increased about $103,717, partly offset by an $18,734 decline in software development costs.
- Management attributed operating costs largely to market data feeds (about $67,027), referral payments (about $8,460), and website design and maintenance (about $12,666).
- The company reported a $36,474 unsecured, non-interest-bearing advance receivable from its CEO. It also reported $36,700 of prepaid marketing expenses with a company wholly owned by the CEO.
- Five million Series A preferred shares were outstanding, convertible one-for-one into common shares and carrying 100 votes per share. No options or warrants were outstanding.
Outlook, risks, and controls
Management said subscription revenue had not yet reached a level sufficient to cover current overhead. It did not expect profitable operations before the end of Q2 2017 and cautioned that profitability might never be achieved. Management stated that, absent a significant change in cash requirements, working capital was expected to fund operating deficiencies and development costs through the end of 2018. It also said additional capital might be needed and that funding was not assured. The filing identifies a $1,624,643 accumulated deficit and substantial dependence on establishing a profitable business.
Disclosure controls were assessed as ineffective as of March 31, 2017. Management identified lack of segregation of duties, given the company’s single director and executive officer handling general administrative and financial matters, as a material weakness; it did not plan to add staff to address it. The company reported no material litigation and no off-balance-sheet arrangements. Its office sublease runs through March 31, 2020.
Important facts for investors to verify
- Confirm the issuer identity: the supplied 10-Q is for Blackboxstocks Inc., despite the request metadata naming REALLOYS INC.
- Track subscription growth, gross margin, and whether revenue can cover operating costs, particularly market data feed expenses.
- Assess cash burn and the assumptions behind management’s estimate that resources may last through year-end 2018; verify whether additional financing is needed.
- Review related-party balances and transactions, including the CEO advance and prepaid marketing balance, and monitor remediation of the material control weakness.