Business Context and Reporting Period
Issuer identification: The request identifies REALLOYS INC., but the supplied filing is for Blackboxstocks Inc. (formerly SMSA Ballinger Acquisition Corp.). Verify that this is the intended filing. It is a Form 10-K for the fiscal year ended December 31, 2015, not a standalone fourth-quarter report. The financial statements reflect Tiger Trade Technologies, Inc. as accounting acquirer following the December 1, 2015 reverse acquisition.
The company was developing a real-time analytical software platform for day and swing traders. It had not launched the product or generated revenue by year-end. Management expected subscriber availability by June 2016. The company changed its name to Blackboxstocks Inc. effective March 9, 2016; Tiger Trade merged into the company in February 2016.
Financial Results and Position
| Metric | FY 2015 / Dec. 31, 2015 | Comparable 2014 period |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $423,480 | $197,031 |
| Net loss | $(423,480) | $(197,031) |
| Basic loss per share | $(0.02) | $(0.01) |
| Cash | $60,286 | $200,530 |
| Total assets | $234,079 | $200,530 |
| Total current liabilities | $29,148 | $132,561 |
| Stockholders’ equity | $204,931 | $67,969 |
The 2014 comparison covers April 28, 2014 (inception) through year-end, so it is not a full-year comparison. Gross margin and operating margin are not meaningful because there was no revenue. Operating cash used was $685,221 in 2015; investing cash used was $15,023; financing provided $560,000. Cash declined by $140,244 during the year. Financing included $800,000 from common-stock issuance, $5,000 from preferred-stock issuance, and a $245,000 payment connected with cancellation of shares.
No debt balance is reported. Year-end current liabilities were accounts payable of $29,148. Current assets included $154,500 in prepaid expenses due from related parties, as well as $60,286 cash. The filing reports no off-balance-sheet arrangements. Software development costs were expensed while the software remained in development.
Changes, Outlook, and Risks
- Operating expenses rose $226,449, about 115%, from the 2014 inception-period amount. Management attributed approximately $159,698 to higher general and administrative expenses, including additional contractors, and approximately $66,481 to increased software development costs.
- Management estimated another $1 million to complete development and stated that planned development, maintenance, and marketing costs over the next 12 months could total $1 million to $2 million. It separately anticipated raising approximately $1 million to $2 million for marketing, including $100,000 to $250,000 for television advertising. The filing says no financing was arranged.
- Management stated that year-end cash was insufficient for its 12-month plan and that the company would need debt or equity financing. It warned that without sufficient financing, the business would likely fail; the auditor’s report also highlights substantial doubt about the company’s ability to continue as a going concern.
- The company subleased office space from G2 International, which is owned by CEO Gust Kepler. Disclosed future minimum rent was $40,179 in 2016, rising to $44,684 in 2019, plus $11,265 in 2020. The filing also reports related-party prepayments of $154,500 to G2 for marketing; G2 refunded $69,250 in 2016, leaving $85,250 prepaid as of April 8, 2016.
- Management concluded disclosure controls and internal control over financial reporting were ineffective and identified a material weakness related to limited accounting resources and inadequate segregation of duties. The company had one director who was also CEO, CFO, and secretary, no separate audit committee, and no board financial expert.
- Five million Series A preferred shares were outstanding at year-end, convertible one-for-one into common shares and carrying 100 votes per share. The related-party, control, and potential dilution implications merit attention. The filing reports no material pending litigation.
Important Facts to Verify
- Confirm the issuer and filing match the intended REALLOYS INC. request; the supplied document names Blackboxstocks Inc.
- Verify current financing, cash runway, product launch status, actual development and marketing costs, and whether the stated subscriber launch and fundraising plans were achieved.
- Review the recoverability and terms of related-party prepayments, the G2 lease and services, and the $245,000 share-cancellation payment.
- Confirm the preferred shares’ voting and conversion terms, post-year-end share cancellations and merger effects, and resulting ownership and dilution.
- Check whether the material weakness in financial reporting controls was remediated and review the related-party disclosures and auditor history.