# Realloys Inc.: Form 10-Q for the period ended Mar 31, 2022

- Company: [Realloys Inc.](/companies/aloy.md) (CIK 1567900)
- Form: 10-Q
- Filed: 2022-05-16
- Accepted by EDGAR: May 16, 2022, 17:04 ET
- Period: 2022-03-31
- Accession: 0001437749-22-012678
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1567900/000143774922012678/blkbx20220331_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1567900/000143774922012678/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-01-01 to 2022-03-31 | $1.3m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2022-01-01 to 2022-03-31 | $580.0k | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2022-01-01 to 2022-03-31 | $692.5k | us-gaap:GrossProfit |
| Operating income | 3 months, 2022-01-01 to 2022-03-31 | −$1.0m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2022-01-01 to 2022-03-31 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-01-01 to 2022-03-31 | −$1.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-01-01 to 2022-03-31 | −$0.09 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-01-01 to 2022-03-31 | −$0.09 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-01-01 to 2022-03-31 | 13,181,820 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2022-01-01 to 2022-03-31 | −$793.2k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2022-01-01 to 2022-03-31 | $0 | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2022-03-31 | $651.5k | us-gaap:Cash |
| Current assets | at 2022-03-31 | $8.7m | us-gaap:AssetsCurrent |
| Total assets | at 2022-03-31 | $9.1m | us-gaap:Assets |
| Current liabilities | at 2022-03-31 | $2.9m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2022-03-31 | $5.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 11,787 characters.

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, 2021 as well as with our condensed financial statements and the notes thereto included elsewhere herein.

### Overview

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 10,000 stocks and over 1,500,000 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 Nasdaq Stock Market LLC (the “Nasdaq”) 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.

### Significant Accounting Policies

There have been no changes from the Summary of Significant Accounting Policies described in our Annual Report on Form 10-K for the year ending December 31, 2021 filed with the Securities and Exchange Commission on March 31, 2022.

### Liquidity and Capital Resources

At March 31, 2022, we had cash and marketable securities totaling $8,573,762 as compared to cash and marketable securities totaling $10,442,379 at December 31, 2021. Our cash flows from operations were ($793,188) for the three months ended March 31, 2022 as compared to $231,912 for the same period in the prior year.

Net cash used in investing activities for the three months ended March 31, 2022 was $85,094 as compared to 31,234 for the prior year period. The volume of marketable securities purchases and sales for the current quarter was the result of trading activity in a Company account that is used to research and test specific trading techniques. The account used for those specific activities had an account balance of approximately $100,000.

Net cash used in financing activities was $896,697 for the three months ended March 31, 2022 as compared to $59,035 for the prior year period. The purchase of $859, 612 of common stock pursuant to the Company’s stock repurchase plan was the primary component of the use of cash. The stock repurchase plan initially authorized the repurchase of up to $2,500,000 of the Company’s common stock and expires on December 31, 2022.

On November 9, 2021 the Company enter into an underwriting agreement pursuant to which it sold 2,400,000 shares of its Common Stock at an offering price of $5.00 in an underwritten public offering upon which our shares became listed on the NASDAQ Capital Market. Net proceeds to the Company after underwriting discounts and offering expenses were approximately $10,510,000. We expect to use proceeds from this offering to further develop our Blackbox System platform, expand our product offerings, fund marketing efforts to grow our subscriber base, as well as for general and administration expenses and other general corporate purposes.

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

### Results of Operations

### Comparison of Three Months Ended March 31, 2022 and 2021

For the three months ended March 31, 2022 and 2021, our revenue was $1,272,486 and $1,489,668, respectively, a decrease of 14.6%. We believe 2022 revenues were negatively impacted by a confluence of macro-economic factors including poor overall performance in the stock market, soaring inflation and negative gross domestic product (GDP) growth during the first quarter of 2022. The S&P 500 dropped by 4.9% during the first quarter of 2022 as compared to a gain of 5.8% in the first quarter of 2021. In addition to the poor market performance, inflation of 7.5% as measured by the consumer price index (CPI) and a decline in GDP of (1.4%) may have constricted disposable cash of prospective subscribers. Although we believe that our platform enables our subscribers to profit in both bull and bear markets, we attribute some of our decline in revenues to a higher level of hesitancy resulting from the poor macro-economic data. In order to combat this, we implemented a promotional program offering our software for $5 for the first month. This promotional offering was the first of its kind in the Company’s history and was effective in increasing the subscriber totals but only contributed minimal revenue per user. Average users for the three months ended March 31, 2022 was 5,709 as compared to 5,575 for the prior year period and 5,749 for the quarter ended December 31, 2021.Total users of 7,400 as of March 31, 2022 included those new subscribers from the $5 promotion. Cost of revenues for the three months ended March 31, 2022 and 2021 were $579,962 and $395,775, resulting in gross margins of 54% and 73%, respectively. The primary components of cost of revenues include costs related to data and news feed expenses for exchange information which comprise the majority of the costs, as well as the costs for program moderators. Cost of goods sold increased by $184,187 for the quarter ended March 31 2022 as compared to the prior year primarily as a result of a 74% increase in the cost of our program moderators, higher costs associated with our new broadcast enabled social media feature and news feeds. As noted above, our promotional event resulted in increased user counts but limited revenue that offset the costs which resulted in unusually low gross margin percentage of 54%.

For the three months ended March 31, 2022, operating expenses were $1,713,678 as compared to $948,761 for the same period in 2021, an increase of $764,917 or 81%. We experienced significantly higher expenditures in most of our expense categories for the 2022 period. Selling, general and administrative expenses increased from $606,687 for the three months ended March 31, 2021 to $1,224,723 for the three months ended March 31, 2022, an increase of 102%. The increase in selling, general and administrative expenses of $618,036 was the largest dollar value component of the operating expense increase. The primary components of the increase were increases in salary and stock-based compensation, public investor relations. Advertising and marketing expenses increased by $91,484 or 44% from $207,312 in the three months ended March 31, 2021 to $298,796 in the three months ended March 31, 2022. Software development costs also increased by $54,446 or 42% from $130,438 in the three months ended March 31, 2021 to $184,884 for the three months ended March 31, 2022. The increased software development costs were incurred for improvements to our platform including our online social media component, development of a native application and new product development.

We expect to continue to incur increases in our operating costs for the foreseeable future. Expense increases for digital advertising and marketing activities, our primary advertising mechanism, should continue to increase with sales but may also increase as a result of additional strategies including but not limited to television advertising. Software development costs are also expected to increase as we expand our development team and invest in new products and features.

Our loss from operations for the three months ended March 31, 2022 was $1,021,154 as compared to income from operations of $145,132 for the prior year period. Lower sales and gross margin resulting from the $5 promotion in March of 2022 combined with higher operating expenses resulted in the loss from operations. Non-operating expenses for the three months ended March 31, 2022 were $221,289 as compared to $132,577 for the prior year period.

### EBITDA (Non-GAAP Financial Measure)

We report our financial results in accordance with accounting principles generally accepted in the United States of America (“GAAP”). However, management believes the presentation of certain non-GAAP financial measures provides useful information to management and investors regarding financial and business trends relating to the Company’s financial condition and results of operations, and that when GAAP financial measures are viewed in conjunction with the non-GAAP financial measures, investors are provided with a more meaningful understanding of the Company’s ongoing operating performance. In addition, these non-GAAP financial measures are among the primary indicators management uses as a basis for evaluating performance. For all non-GAAP financial measures in this release, we have provided corresponding GAAP financial measures for comparative purposes in the report.

EBITDA is defined by us as net income (loss) before interest expense, income tax, depreciation and amortization expense and certain non-cash. EBITDA is not a measure of operating performance under GAAP and therefore should not be considered in isolation nor construed as an alternative to operating profit, net income (loss) or cash flows from operating, investing or financing activities, each as determined in accordance with GAAP. Also, EBITDA should not be considered as a measure of liquidity. Moreover, since EBITDA is not a measurement determined in accordance with GAAP, and thus is susceptible to varying interpretations and calculations, EBITDA, as presented, may not be comparable to similarly titled measures presented by other companies.

Reconciliation of net income (loss) to EBITDA

|  | Three Months Ended March 31, 2022 | 2021 |
| --- | ---: | ---: |
| Net income (loss) | $(1,242,443) | $12,555 |
| Adjustments: |  |  |
| Interest expense | 29,243 | 41,038 |
| Investment loss | 178,732 | - |
| Depreciation and amortization expense | 5,275 | 4,324 |
| Amortization of debt discount | 13,314 | 91,539 |
| Stock based compensation | 122,033 | - |
| Total Adjustments | $348,597 | $136,901 |
| EBITDA | $(893,846) | $149,456 |

13

### Off Balance Sheet Arrangements

As of March 31, 2022, we did not have any material off-balance sheet arrangements.

## Market risk

As filed, 168 characters.

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.

## Controls and procedures

As filed, 2,947 characters.

### Evaluation of Disclosure Controls and Procedures

Gust Kepler, our principal executive officer and Robert Winspear, our principal financial officer, conducted an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of March 31, 2022, pursuant to Exchange Act Rule 13a-15. Such disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company is accumulated and communicated to the appropriate management on a basis that permits timely decisions regarding disclosure. Based upon that evaluation, our principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures as of March 31, 2022, were effective to provide reasonable assurance that information required to be disclosed in the Company’s periodic filings under the Exchange Act is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

### Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting during the quarter ended March 31, 2022 that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

### Limitations on the Effectiveness of Controls

Our disclosure controls and procedures provide our principal executive officer and principal financial officer with reasonable assurances that our disclosure controls and procedures will achieve their objectives. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting can or will prevent all human error. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Furthermore, the design of a control system must reflect the fact that there are internal resource constraints, and the benefit of controls must be weighed relative to their corresponding costs. Because of the limitations in all control systems, no evaluation of controls can provide complete assurance that all control issues and instances of error, if any, within our company are detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur due to human error or mistake. Additionally, controls, no matter how well designed, could be circumvented by the individual acts of specific persons within the organization. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all potential future conditions.

## Risk factors

As filed, 907 characters.

Important risk factors that could affect our operations and financial performance, or that could cause results or events to differ from current expectations, are described in Part I, Item 1A, "*Risk Factors”* of our Annual Report on Form 10-K filed with the SEC on March 31, 2022 for the year ended December 31, 2021, as supplemented by the "*Risk Factors*" sections in our registration statement on Form S-1 filed with the SEC on October 5, 2021, as amended on November 5, 2021 and the information contained elsewhere in this Report. The risks and uncertainties described within our Form 10-K for the year ended December 31, 2021 and the registration statement, as amended, are not the only risks we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business or results of operations.

Filed May 16, 2022.
Source: SEC EDGAR, the filing index for accession 0001437749-22-012678. Last ingested by Listed: Oct 26, 2026, 17:10 ET. No prices; not investment advice.