What changed in this filing

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Item 1. Financial Statements

2021-05-17 compared with 2020-11-16 · 168 added, 174 removed, 154 unchanged (69% of the section changed)

2 unchanged sentences

Balance Sheets

As of September 30 , 2020 (Unaudited) and December 31, 201 9

September 30,

As of March 31, 2021 (Unaudited) and December 31, 2020

Current assets:

Accounts receivable, net of allowance for doubtful accounts of $68,589 at September 30, 2020 and December 31, 2019, respectively

Accounts receivable, net of allowance for doubtful accounts of $68,589 at March 31, 2021 and December 31, 2020, respectively

Total current assets

Property and equipment:

Office, computer and related equipment, net of depreciation of $45,200 and $39,526 at September 30, 2020 and December 31, 2019, respectively

Domain name, net of amortization of $13,849 and $9,551 at September 30, 2020 and December 31, 2019, respectively

Right of use lease, net of amortization of $86,958 and $51,009 at September 30, 2020 and December 31, 2019, respectively

Office, computer and related equipment, net of depreciation of $66,285 and $61,961 at March 31, 2021 and December 31, 2020, respectively

Right of use lease, net of amortization of $107,987 and $97,725 at March 31, 2021 and December 31, 2020, respectively

Total property and equipment

Long term assets:

Advances receivable, related parties (Note 5)

Prepaid expenses

5 unchanged sentences

Accrued interest

Accrued interest, related party

Unearned subscriptions

1 unchanged sentence

Other liabilities

Convertible notes payable, net of discount of $335,512 and $13,859 at September 30, 2020 and December 31, 2019, respectively (Note 6)

Notes payable, net of note discount of $7,049 and $38,294 at September 30, 2020 and December 31, 2019, respectively (Note 6)

Senior secured note payable, current

Convertible notes payable, net of discount of $102,727 and $194,267 at March 31, 2021 and December 31, 2020, respectively (Note 6)

Notes payable, at

Notes payable (Note 6)

Notes payable, related party (Note 6)

Derivative liability

Total current liabilities

Long term liabilities:

Senior secured note payable, long term, net of debt issuance costs of $86,538 and $99,852 at March 31, 2021 and December 31, 2020, respectively

Lease liability right of use, long term

Total long term liabilities

Commitments and contingencies (Note 7)

1 unchanged sentence

Preferred stock, $0.001 par value, 5,000,000 shares authorized;

no shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

no shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Series A Convertible Preferred Stock, $0.001 par value, 5,000,000 shares authorized;

5,000,000 issued and outstanding at September 30, 2020 and December 31, 2019, respectively

5,000,000 issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Common stock, $0.001 par value, 100,000,000 shares authorized:

8,171,187 and 7,908,231 issued and outstanding at September 30, 2020 and December 31, 2019, respectively

8,579,877 and 8,410,386 issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Common stock, subscribed

5 unchanged sentences

Statements of Operations

For the Three and Nine Months Ended September 30 , 2020 and 2019

For the three months

For the nine months

ended September 30,

For the Three Months Ended March 31, 2021 and 2020

Subscriptions

Other revenues

Merchandise sales

Total revenues

Cost of operations

Cost of revenues

Operating expenses:

Software development costs

9 unchanged sentences

Amortization of debt discount

Income (loss) before income taxes

Net income (loss)

Weighted average number of common shares outstanding - basic

Net income (loss) per share - basic

Income before income taxes

Weighted average number of common

shares outstanding - basic

shares outstanding - fully diluted

Net loss per share - basic

Net income per share - fully diluted

Blackboxstocks Inc.

Statement of Stockholders ’ Deficit

For the Nine Months Ended September 30 , 2020 and 2019 (Unaudited)

For the Three Months Ended March 31, 2021 (Unaudited) and the Year Ended December 31, 2020

Series A Preferred Stock

1 unchanged sentence

Balance at December 31, 2019

Issuance of shares for cash

Issuance of shares in settlement of accrued expenses

Imputed discount on convertible notes payable (Note 6)

Balance at September 30, 2019

Issuance of shares in settlement of expenses

Balance at March 31, 2020

Balance at December 31, 2020

Issuance of shares for cash

Issuance of shares in settlement of expenses

Issuance of shares in exchange for services

Convertible note forbearance extinguishment of derivative liability

Warrants issued for amendment of convertible notes payable

Balance at September 30, 2020

Issuance of subscribed shares

Issuance of shares in settlement of liabilities

Balance at March 31, 2021

Blackboxstocks Inc.

Statements of Cash Flows

For the Nine Months Ended September 30 , 2020 and 2019

For the Three Months Ended March 31, 2021 and 2020

Cash flows from operating activities

Net income (loss)

Adjustments to reconcile net loss to net cash provided by operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization expense

Amortization of note discount

Amortization of debt issuance costs

Shares issued in settlement of financing costs

Shares issued in settlement of services

Expenses paid by lender

2 unchanged sentences

Convertible note default expense

Financing cost

Lease expense

Right of use lease expense

Changes in operating assets and liabilities:

Investments, market testing

Accounts receivable

Prepaid expenses

Accounts payable

4 unchanged sentences

Cash flows from investing activities

Cash advances to related parties

Cash repayments from related parties

Purchases of property and equipment

3 unchanged sentences

Common stock subscribed

Proceeds from notes payable

Proceeds from convertible notes payable

Proceeds from Payroll Protection Program Loan

Repayment of notes payable

Repayment of convertible notes payable

Advances from others

Repayment of notes payable, related parties

Net cash provided by financing activities

Net increase in cash

Cash - beginning of period

Cash - end of period

Proceeds from issuance of notes payable

Proceeds from issuance of convertible notes payable

Principal payments on notes payable

Principal payments on convertible notes payable

Principal payments on notes payable, related parties

Cash advances from related parties

Net cash used in financing activities

Net increase (decrease) in cash

Cash - beginning of year

Cash - end of year

Supplemental disclosures

3 unchanged sentences

Repayment of note in exchange for note payable

Common stock issued in settlement of accrued expenses

Lease, right of use and liability

Common stock issued in settlement of accrued liabilities

Discount on notes payable

Discount on convertible notes payable

Repayment of note payable, related party in exchange for advances

Issuance of warrants for forbearance agreements

Blac kboxstocks Inc.

Blackboxstocks Inc.

Notes to Financial Statements

For the Three and Nine Months Ended September 30 , 2020 and 2019

O rganization

For the Three Months Ended March 31, 2021 and 2020

Blackboxstocks Inc.

(the “Company”) was incorporated on October 4, 2011 under the laws of the State of Nevada under the name SMSA Ballinger Acquisition Corp.

was incorporated on October 4, 2011 under the laws of the State of Nevada under the name SMSA Ballinger Acquisition Corp.

to effect the reincorporation of Senior Management Services of Heritage Oaks at Ballinger, Inc., a Texas corporation, mandated by a Plan of Reorganization confirmed by the United States Bankruptcy Court for the Northern District of Texas for reorganization under Chapter 11 of the United States Bankruptcy Code.

2 unchanged sentences

The platform offers real-time proprietary analytics and news for stock and options traders of all levels.

The Company’s 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 price of a stock or option.

The Company believes its 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 price of a stock or option.

The software continuously scans the NASDAQ, New York Stock Exchange, CBOE, and other options markets, analyzing over 8,000 stocks and up to 1,000,000 options contracts multiple times per second.

10 unchanged sentences

The accompanying financial statements have been prepared in assumption of the continuation of the Company as a going concern, which is dependent upon the Company's ability to obtain sufficient financing or establish itself as a profitable business.

At September 30, 2020, the Company had an accumulated deficit of $6,665,961 and for the nine months ended September 30, 2020 and 2019 the Company incurred net income of $163,946 and a net loss of $1,156,140, respectively.

At March 31, 2021, the Company had an accumulated deficit of $7,172,263, and for the years ended December 31, 2020 and 2019 the Company incurred net losses of $354,911 and $2,983,438, respectively.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

As discussed in Note 9, subsequent events, 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 in the amount of $1,000,000 bearing interest at 12% per annum with an initial maturity of November 12, 2022.

As discussed in Note 6, 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 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 $766,000 after repayment of the notes and payables described above.

As a result of this financing and the cash flows from operations, the Company had a cash balance of $1,114,468 at March 31, 2021.

Management believes that this will be sufficient to fund its operations and service its debt for the next twelve months.

5 unchanged sentences

Cash - Cash includes all highly liquid investments that are readily convertible to known amounts of cash and have original maturities at the date of purchase of three months or less.

Recently Issued Accounting Pronouncements - During the nine months ended September 30, 2020 there were several new accounting pronouncements issued by the FASB.

Each of the new pronouncements, as applicable, has been or will be adopted by the Company.

Recently Issued Accounting Pronouncements - During the three months ended March 31, 2021 there were several new accounting pronouncements issued by the FASB.

Each of the other pronouncements, as applicable, has been or will be adopted by the Company.

Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s financial statements.

1 unchanged sentence

Diluted earnings per share reflects the potential dilution of securities by including other potentially issuable shares of common stock, including shares issuable upon conversion of convertible securities or exercise of outstanding stock options and warrants, in the weighted average number of common shares outstanding for the period.

Therefore, because including shares issuable upon conversion of convertible securities and/or exercise of outstanding options and warrants would have an anti-dilutive effect on the loss per share, only the basic earnings (loss) per share is reported in the accompanying financial statements for period of loss.

Revenue Recognition - Revenue is recognized from the sale of subscriptions for the use of the Blackbox System web application, on a monthly or annual basis.

2 unchanged sentences

Revenue related to annual subscriptions is recognized each month with unearned subscriptions reflected as a current liability.

Reclassification - Affiliate referral expenses totaling $173,999 as of September 30, 2020 have been reclassed from cost of operations to selling, general and administrative expenses on the statement of operations.

Reclassification - Affiliate referral expenses totaling $ 37,496 as of March 31, 2020 have been reclassed from cost of operations to selling, general and administrative expenses on the statement of operations.

Stockholders ’ Deficit

3 unchanged sentences

All shares are held by Gust C.

Kepler, Director, Chief Executive Officer, and President and Chief Financial Officers (“Mr.

On January 28, 2020 the Company issued 50,000 shares of its Common Stock at a value of $2.00 to a third party in conjunction with the financing arrangement executed on January 27, 2020 (Note 6).

On July 6, 2020, warrants to purchase 115,385 shares of Common Stock, issued in conjunction with Amended Convertible Promissory Notes, as described in Note 6, were exercised at $0.01 per share for aggregate cash consideration of $1,154.

On August 27, 2020 the Company sold 5,129 shares of Common Stock to a third party for $10,001.

On August 28, 2020 the Company issued 3,334 shares of its Common Stock at a value of $1.95 to a third party in settlement of services provided for marketing and advertising.

On September 25, 2020 the Company issued 25,000 shares of its Common Stock at a value of $1.95 to a third party in conjunction with a consulting services agreement (Note 8).

During the quarter ended September 30, 2020 the Company sold 64,103 shares of Common Stock and Warrants, exercisable for a period of 5 years, to purchase 32,053 shares of Common Stock at an exercise price of $1.95 per share, to third parties for aggregate consideration of $125,000.

Stock Options and Warrants

Costs attributable to the issuance of stock options and share purchase warrants are measured at fair value at the date of issuance and offset with a corresponding increase in ‘Additional Paid in Capital’ at the time of issuance.

Kepler, Director, Chief Executive Officer, President and Chief Financial Officer (“Mr.

During the quarter ended March 31, 2021 the Company exchanged a liability of $180,000 for the purchase of a Simple Agreement for Future Tokens into 92,308 shares of Common Stock at $1.95 per share.

During the quarter ended March 31, 2021 the Company sold 70,772 shares of Common Stock to third parties for $138,006 and issued 6,411 shares of Common Stock previously subscribed for $12,500.

Warrants to Purchase Common Stock

Costs attributable to the issuance of warrants to purchase common stock are measured at fair value at the date of issuance and offset with a corresponding increase in ‘Additional Paid in Capital’ at the time of issuance.

The fair value cost is computed utilizing the Black-Scholes model and assuming volatility based on U.S.

2 unchanged sentences

When the options or warrants are exercised, the receipt of consideration will be reported as an increase in stockholders’ equity.

Concurrently with certain securities purchase agreements entered into, warrants to purchase the Company’s Common Stock were issued to the subscribers.

Each warrant is exercisable for a period of five years from the date of the securities purchase agreement at an exercise price of $1.95 per share (Note 3).

Concurrently with the execution of certain securities purchase agreements, the Company issued warrants to purchase Common Stock.

Each warrant is exercisable for a period of five years from the date of the securities purchase agreement.

The fair value cost at the date of issuance of these warrants was $639,194.

In conjunction with the issuance of convertible notes payable as described in Note 6, a warrant for the purchase of up to 115,385 shares of common Stock exercisable for a one-year period was issued at an exercise price of $0.01 per share and another warrant for the purchase of up to 360,000 shares of Common Stock exercisable for a five-year period was issued at an exercise price of $1.00 per share.

During the quarter ended September 30, 2020, the warrants for the purchase of 115,385 shares of Common Stock were exercised at $0.01 and as of September 30, 2020, there are warrants fo the purchase of up to 476,348 shares of Common Stock outstanding.

During the year ended December 31, 2020, the warrants for the purchase of 115,385 shares of Common Stock were exercised at $0.01 and as of March 31, 2021, there are warrants for the purchase of up to 479,554 shares of Common Stock outstanding.

Number of Shares

1 unchanged sentence

Weighted Average

Remaining Life (in years)

Remaining Life (in year)

Warrants as of December 31, 2019

Issued during 2020

Exercise during 2020

Warrants as of December 31, 2021

Issued during 2020

Exercised during 2020

Warrants as of September 30, 2020

Warrants as of March 31, 2021

Related Party Transactions

As of January 1, 2020 the Company was owed $9,823 from Gust C.

Kepler, a Director, President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company.

During the nine months ended September 30, 2020 Mr.

Kepler repaid $6,890 and agreed to offset $2,933 of the advances as partial settlement of the note payable to him (Note 6).

During the year ended December 31, 2019 the Company advanced $1,500 to its VP/Director of Operations and the balance remains outstanding, is unsecured and bears no interest.

G2 International, Inc.

(“G2”), which does business as IPA Tech Group (“IPA”), is a company wholly owned by Gust C.

Kepler, a Director, President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company, and the Company’s controlling stockholder.

As of both September 30, 2020 and 2019 the Company has a prepaid balance of $36,700 for public relations and marketing services with G2/IPA.

(“G2”), which does business as IPA Tech Group (“IPA”), is a company wholly owned by Mr.

As of March 31, 2021 and 2020 the Company had a prepaid balance of $36,700 for public relations and marketing services with G2/IPA.

These funds are reserved in anticipation of a future campaign to move the Company’s stock to listing on a national exchange.

A summary of the Company’s debt at September 30, 2020 and December 31, 2019, by counterparty, is as follows:

Noteholder 5, related party

Less unamortized discount

A summary of the Company’s debt at March 31, 2021 and December 31, 2020, by counterparty, is as follows:

Loan Description

$1,000,000 12% Senior secured note due November 12 2022

$130,200 loan bearing interest at 1% per annum maturing May 1, 2022 issued under the Payroll Protection Program

$108,000 Related party note payable due November 30, 2020

$385,000 8% convertible note payable due July 2021

$165,000 8% convertible note payable due July 2021

Miscellaneous equipment loans

Less unamortized discount and debt issuance costs

Total notes payable

Current portion of long-term debt

Long-term portion

Notes Payable

a – On August 8, 2018 a third party advanced $200,000 to the Company in exchange for a secured promissory note, bearing interest at the rate of 12% per annum with a maturity date of November 20, 2018.

The note is secured by a Security Agreement providing for a continuing lien and first priority security interest in the assets of the Company and by a personal Guaranty Agreement with Gust Kepler, a Director, President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company, and the Company’s controlling stockholder.

On December 6, 2018, Mr.

Kepler made a payment on the note in the amount of $100,000 plus accrued interest of $8,000 for an aggregate of $108,000.

The principal balance of $100,000 remains outstanding and was in default as of September 30, 2020.

This note was repaid on Novermber 12, 2020.

b – On September 13, 2019 a third party advanced $90,000 to the Company in exchange for quasi-factoring financing arrangements to be repaid in daily installments of $490, through August 18, 2020.

The related note discount of $27,000 was amortized as interest expense over the term of the agreement.

In October 2019 third parties advanced $80,000 to the Company in exchange for quasi-factoring financing arrangements to be repaid in daily installments of $761 through June 2020.

Approximately $39,000 of this funding was settled with proceeds of the January 27, 2020 financing described in a later paragraph.

The related note discount of $31,600 was amortized as interest expense over the term of the agreement.

On March 13, 2020 a third party advanced $35,000 to the Company in exchange for quasi-factoring financing arrangements to be repaid in daily installments of $291.67, through August 31, 2020.

The related note discount of $12,500 was amortized as interest expense over the term of the agreement

On January 27, 2020 a third party advanced $207,000 to the Company in exchange for quasi-factoring financing arrangements to be repaid in daily installments of $1,035, and the debt was fully paid on November 5, 2020.

The related note discount of $57,000 is being amortized over the term of the agreement for a total of $49,951 in interest expense as of September 30, 2020.

A portion of the proceeds of this financing settled the balance of approximately $39,000 of previous funding from the third party with an original due date of June 3, 2020.

c – On May 1, 2020, pursuant to the Paycheck Protection Program under the Coronavirus Aid Relief and Economic Security Act (“CARES Act”) the Company was awarded a loan of $130,200.

On May 1, 2020, pursuant to the Paycheck Protection Program under the Coronavirus Aid Relief and Economic Security Act (“CARES Act”) the Company was awarded a loan of $130,200.

The loan carries an interest rate of 1% and matures on May 1, 2022.

By December 31, 2020, the Company may apply for loan forgiveness following SBA guidelines and a portion or all of the loan may be forgiven.

The Company may apply for loan forgiveness following SBA guidelines and a portion or all of the loan may be forgiven.

On November 12, 2020, the Company executed a Loan Agreement with certain Lenders (“the Lenders”) and FVP Servicing LLC, as agent for the Lenders in connection with the issuance of a 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 also entered into an agreement with an affiliate of FVP to provide certain credit and debit card processing services for the Company, which services will continue for a period of one year after the loan is repaid and contains a right of first refusal to continue to provide such services in the future subject to certain limitations.

Kepler executed a guaranty in favor of FVP in connection with the loan.

Proceeds from the loan were used to repay the existing senior secured loan balance of $100,000 along with accrued interest, certain outstanding trade payables in the amount of $133,880 and for general working capital purposes.

In addition, the Company granted the Lender a security interest in substantially all of its assets.

Notes Payable, related party

e - On November 9, 2018, Mr.

Kepler, advanced $120,000 to the Company in exchange for a promissory note bearing interest at 12% per annum for a ninety-day period, maturing on January 28, 2019.

On November 12, 2020 Mr.

Kepler and the Company agreed to waive the deault and extend the maturity to the earlier of May 1, 2024 or such time as the senior secured note issued contemporaneously with the waiver is repaid (see Note 9).

Accrued interest due on the note is $27,640 as of September 30, 2020.

f - On December 6, 2018, Mr.Kepler, advanced $108,000 to the Company for payment to a third party note holder (Note 6) in exchange for an unsecured promissory note.

During the nine months ended September 30, 2020 the Company repaid $103,558 in principal and Mr.

Kepler agreed to offset previous cash advances of $2,933 to him as additional repayment of the note, reducing the balance due as of September 30, 2020 to $1,509.

On December 6, 2018, Mr.

Kepler, advanced $108,000 to the Company for payment to a third party note holder in exchange for an unsecured promissory note.

During the year ended December 31, 2020 the Company repaid $107,141 in principal, reducing the balance due as of March 31, 2021 to $859.

Convertible Notes Payable

g - On May 21, 2019, the Company issued an 8% Fixed Convertible Promissory Note payable to a third party for a $350,000, which included an original issue discount of 10% on the investment amount.

The note specified that the note holder retain an original issue discount of 10% of any consideration, bore interest of 8%, and matured 180 days from the effective date.

The note provided a redemption premium of 115% if retired after the 91 st day.

As the note was not retired on or before the maturity date, the note-holder was entitled to convert a portion or all the outstanding principal into shares of the Company’s Common Stock at a variable conversion price which equals the lower of the fixed conversion price of $1.95 per share or 65% of the lowest closing bid price during the 15 consecutive trading days prior to the date of the note holder’s election to convert.

The note was in default and the Company recorded a default fee of $57,750 which was added to the principal balance.

The note included a conversion feature recorded at inception of $207,308.

h - On July 17, 2019, the Company issued an 8% Fixed Convertible Promissory Note payable to a third party for a total face value of $165,000, which included an original issue discount of 10% on the investment amount of $150,000.

The note specified that the note holder shall retain an original issue discount of 10% of any consideration, bore interest of 8%, and matured 180 days from the effective date.

The note provided for a redemption premium of 115% if retired after the 91 st day.

As the note was not retired on or before the maturity date, the note holder was entitled to convert a portion or all the outstanding principal into shares of the Company’s Common Stock at a variable conversion price which equals the lower of the fixed conversion price of $1.95per share or 65% of the lowest closing bid price during the 15 consecutive trading days prior to the date of the note holder’s election to convert.

The note was in default and the Company recorded a default fee of $24,750 which was added to the principal balance.

The note included a conversion feature recorded at inception of $135,000.

On July 10, 2020, the Company entered into Forbearance and Note Settlement Agreements (“Agreements”) with the third parties agreeing to take no further action to avail themselves of the remedies of default defined in the Notes.

The Agreements stipulate the Company will remit payment of all accrued interest and principal outstanding beginning on July 20, 2020 for thirteen agreed upon payments and until the note is repaid in full.

On May 21, 2019, the Company issued an 8% Fixed Convertible Promissory Note payable to a third party with a face value of $385,000, which included an original issue discount of 10% on the investment amount.

On July 17, 2019, the Company issued another 8% Fixed Convertible Promissory Note with a face value of $165,000 which also included am original discount of 10% on the investment amount.

The two notes contain substantially identical terms.

The Company recorded the value of the notes conversion feature in the amount of $342,308 at inception.

The Company defaulted on the notes and incurred default fees of $57,750 and $24,750 for the years ended December 31, 2019 and 2020, respectively which amounts were added to the principal balance.

On July 10, 2020, the Company entered into Forbearance and Note Settlement Agreements (“Agreements”) with the holders of the 8% Fixed Convertible Promissory Notes agreeing to take no further action to avail themselves of the remedies of default defined in the Notes.

The Agreements stipulate the Company remit payment of all accrued interest and principal outstanding beginning on July 20, 2020 for thirteen agreed upon payments and until the note is repaid in full.

Upon execution of these Agreements, effectively extinguishing the above-described notes, the Company recognized a cancellation of the derivative liability previously related to the conversion feature of $522,065.

As additional consideration for the Agreements, the holders were issued warrants to purchase up to 360,000 shares of the Company’s Common Stock at a price of $1.00 per share, exercisable beginning January 10, 2021 and expiring on July 10, 2025.

The fair value cost at the date of issuance of the warrants was $371,243, reflected in paid in capital and the related debt discount is being amortized over the term of the Agreements.

i - On March 23, 2020 third parties advanced $75,000 and $25,000 to the Company in exchange for Convertible Promissory Notes, bearing interest at 52% per annum to be paid monthly in arrears beginning April 30, 2020, secured by the Company’s assets, with rights to convert into the Company’s Common Stock at $0.60, and maturing on March 25, 2021.

On June 23, 2020 the Company amended the notes changing the provision for conversion into the Company’s Common Stock from $0.60 to $1.95.

Additional consideration for the amended and restated notes included the issuance of warrants for the purchase of up to 115,385 shares of Common Stock at a price of $0.01.

On July 6, 2020 the holders exercised their warrants.

In the event the notes are not converted prior to the maturity date, the Company has the right to repurchase one warrant share for each $0.8666 of unconverted principal.

The Company recognized a derivative liability in the amount of $34,999 as of September 30, 2020.

As discussed in Note 9, the holders of these notes elected to convert the notes into common stock.

Derivative Liabilities

On March 23, 2020 notes payable in the principal amount of $100,000 were issued as convertible debt and qualified as derivative liabilities.

As of September 30, 2020 the aggregate fair value of the outstanding derivative liability for these notes using the Black-Scholes option pricing model used the following key assumptions:

Risk-free interest rate

Expected dividends

Expected term (in years)

The Company determines the fair values of its financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The following three levels of inputs may be used to measure fair value:

Level 1 inputs utilize unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access;

Level 2 inputs utilize other-than-quoted prices that are observable, either directly or indirectly and include quoted prices for similar assets and liabilities in active markets, and inputs such as interest rates and yield curves that are observable at commonly quoted intervals;

Level 3 inputs are unobservable and are typically based on our own assumptions, including situations where there is little, if any, market activity.

The following table presents the Company’s liabilities that were measured and recognized at fair value as of September 30, 2020:

Balance January 1, 2019

Change in Fair Value

Balance at December 31, 2019

Change in Fair Value

Balance at June 30, 2020

The fair value of the warrant at the date of issuance was $371,243, and was reflected in paid in capital and the related debt discount is being amortized over the term of the Agreements.

Commitments and Contingencies

4 unchanged sentences

The total shares issuable under the agreement shall not be less than a minimum of 35,000 and not exceed a maximum of 151,000 shares.

As of March 31, 2021 48,000 common shares have been issued.

On February 22, 2021 the Company amended its lease with Teachers Insurance and Annuity Association of America to expand its space by approximately 847 square feet for a total of 2,685 square feet and extended the expiration date to September 30, 2025.

The Company is not currently a defendant in any material litigation or any threatened litigation that could have a material effect on the Company’s financial statements.

Subsequent Events

On October 7, 2020 the Company repaid $35,060 to a third party to cancel a previous unexecuted subscription for 35,200 shares of Common Stock dated May 24, 2018, which shares were not issued.

On October 14, 2020 the Company entered into a subscription agreement to sell 12,820 shares of Common Stock at $1.95 per share, to a third party, for aggregate consideration of $24,999.

On October 15, 2020 the Company entered into subscription agreements to sell 77,300 shares of Common Stock at $1.95 per share, to a third party, for aggregate consideration of $150,735.

On November 3, 2020 the Company entered into subscription agreements to sell 25,641 shares of Common Stock at $1.95 per share, to a third party, for aggregate consideration of $49,996.

On November 12, 2020, the Company executed a Loan Agreement with certain Lenders and FVP Servicing LLC, as agent for the Lenders in connection with the issuance of a Note in the amount of $1,000,000 bearing interest at 12% per annum with an initial maturity of November 12, 2022.

Kepler executed a guaranty in favor of FVP in connection with the loan.

Proceeds from the loan will be to repay an existing secured note payable in the amount of $100,000 along with accrued interest, certain outstanding trade payables in the amount of $133,880 and for general working capital purposes.

In addition, the Company granted the Lender a security interest in substantially all of its assets.

On November 12, 2020 the holders of certain amended and restated convertible promissory notes dated June 23, 2020 elected to convert obligations under such notes in the aggregate principal amotun of $100,000 into Common Stock.

On April 14, 2021, the Company entered into an amendment for its office lease with Teachers Insurance and Annuity Association of America for its office space at 5430 LBJ Freeway, Dallas, Texas whereby it extended the lease expiration until September 30, 2028.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

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, 2020 as well as with our condensed financial statements and the notes thereto included elsewhere herein.

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 (the “Blackbox System”) employs “predictive technology” enhanced by artificial intelligence to find volatility and unusual market activity that may result in the rapid change in the price of a stock or option.

We continuously scan the New York Stock Exchange (“NYSE”), NASDAQ, Chicago Board Options Exchange (the “CBOE”) and other options markets, analyzing over 8,000 stocks and over 1,000,000 options contracts multiple times per second.

We 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 trading strategies and market insight within the Blackbox community.

We employ a subscription based Software as a Service (“SaaS”) business model and maintain a growing base of users that spans 42 countries.

The Blackbox System is a unique and disruptive financial technology platform combining proprietary analytics and broadcast enabled social media to connect traders of all types worldwide on an intuitive, user-friendly system.

The complexity of our backend analytics is neatly hidden from the end user by our simple and easy to navigate dashboard which includes real-time alerts, scanners, financial news, institutional grade charting and proprietary analytics.

We launched the Blackbox System web application for domestic use and made it available to subscribers in September 2016.

Subscriptions for the use of the Blackbox System web application 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 our ability to obtain sufficient financing or establish the Company as a profitable business.

At March 31, 2021, we had an accumulated deficit of $7,172,263 and for the years ended December 31, 2020 and 2019 the Company incurred net losses of $354,911 and $2,983,438, respectively.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

In November 2020, we 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 in the amount of $1,000,000 bearing interest at 12% per annum with an initial maturity of November 12, 2022.

During the quarter ended March 31, 2021 we sold 70,772 shares of Common Stock to third parties for $138,006 and issued 6,411 shares of Common Stock previously subscribed for $12,500.

As a result of our debt and equity financing and cash flows from operations, we had a cash balance of $1,114,468 at March 31, 2021.

Management believes that this will be sufficient to fund our operations and service our 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.

Nevertheless, there can be no assurance that we will be able to raise additional capital or on what terms.

The financial statements do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we 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 March 31, 2021.

Liquidity and Capital Resources

At March 31, 2021, we had a cash balance of $1,114,468 and a working capital deficit of $678,125 as compared to a cash balance of $74,970 and a working capital deficit of $3,367,329 at March 31, 2020.

We believe that the Company has sufficient capital resources to fund current operations and debt service requirements.

Sale of Common Stock and Warrants

During the three months ended March 31, 2021, we received subscriptions for the purchase of 70,772 shares of Common Stock at a cash price of $1.95 per share for aggregate cash consideration of $138,006.

During the quarter ended March 31, 2021 the Company issued 92,308 shares of Common Stock in settlement of a liability in the amount of $180,000 relating to the purchase of a Simple Agreement for Future Tokens.

We may raise additional capital through the sale of our Common Stock or issuing debt.

If we are successful in completing equity financing, existing stockholders will experience dilution of their interest in our Company.

Results of Operations

Comparison of Three Months Ended March 31, 2021 and 2020

For the three months ended March 31, 2021 and 2020, our revenue totaled $1,489,668 and $415,251, respectively, an increase of 259% for which our respective costs of revenues totaled $ 395,775 and $170,352, an increase of 132%.

The $1,074,417 increase in revenue resulted from an expanded subscription base for monthly revenues.

Gross margin for the three months ended March 31, 2021 and 2020 were $1,093,893 and $244,899 respectively.

Gross margin as a percentage of sales increased from 59.0% to 73.4% in the period ended March 31, 2021 as a result of the higher revenues and certain fixed cost of sales.

For the three months ended March 31, 2021, we had operating expenses totaling $948,761 compared to $475,612 for the same period in 2020, an increase of $473,149 or 99%.

This change is primarily a result of an increase in selling, general and administrative expenses from $349,446 for the three months ended March 31, 2020 compared to $606,687 for the three months ended March 31, 2021.

The increase in selling, general and administrative expenses of $257,241 was due to increases in referral expenses of $88,638;

professional and outside consulting services of $106,571;

rent expense of $7,967;

general administrative expenses of $48,833;

salary and related $91,492;

and computer and internet expenses of $6,456 netted with a decrease in financing expenses of $92,716.

Advertising and marketing expenses increased by $118,968 or 135% from $88,344 in the three months ended March 31, 2020 to $207,312 in the three months ended March 31, 2021.

Software development costs also increased by $96,107 from $34,331 in the three months ended March 31, 2020 as compared to $130,438 in same period in 2021.

We also recorded depreciation and amortization expense of $4,324 for the three months ended March 31, 2021 compared to $3,491 for the three months ended March 31, 2020.

For the three months ended March 31, 2021 we recorded operating income of $145,132 as compared to an operating loss of $230,713 for the three months ended March 31, 2020.

For the three months ended March 31, 2021 we incurred interest expense of $41,038 and amortization of debt discount in the amount of $91,539.

The amortization of debt discount relates to our convertible preferred notes.

For the three months ended March 31, 2020, we incurred interest expense of $33,495, convertible note financing expense of $217,776 default expense of $24,750 and amortization of debt discount of $51,607.

The lower interest and financing expenses resulted from the Company repaying certain high interest debt during 2020 and its reliance on lower cost financing.

In addition the company recorded a gain on derivative liability in the amount of $601,170 during the three months ended March 31, 2020.

We recorded net income of $12,555 for the three months ended March 31, 2021 as a result of our significant increase in revenues and higher operating margins as compared to net income of $42,829 for the three months ended March 31, 2020.

The 2020 net income was due to the gain on derivative liability offsetting the operating loss of $230,713 and interest and other financing costs totaling $327,628.

Off Balance Sheet Arrangements

As of March 31, 2021, we did not have any material off-balance sheet arrangements.

Quantitative and Qualitative Disclosures About Market Risk

We are a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act, and as such, we are not required to provide the information required under this Item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements