# Realloys Inc.: Form 10-Q for the period ended Sep 30, 2022

- Company: [Realloys Inc.](/companies/aloy.md) (CIK 1567900)
- Form: 10-Q
- Filed: 2022-11-14
- Accepted by EDGAR: Nov 14, 2022, 16:16 ET
- Period: 2022-09-30
- Accession: 0001437749-22-027277
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1567900/000143774922027277/blkbx20220930_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1567900/000143774922027277/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-07-01 to 2022-09-30 | $1.2m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 9 months, 2022-01-01 to 2022-09-30 | $3.9m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2022-07-01 to 2022-09-30 | $493.0k | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2022-01-01 to 2022-09-30 | $1.6m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2022-07-01 to 2022-09-30 | $726.2k | us-gaap:GrossProfit |
| Gross profit | 9 months, 2022-01-01 to 2022-09-30 | $2.3m | us-gaap:GrossProfit |
| Operating income | 3 months, 2022-07-01 to 2022-09-30 | −$1.2m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2022-01-01 to 2022-09-30 | −$3.4m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2022-07-01 to 2022-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-01-01 to 2022-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-07-01 to 2022-09-30 | −$1.3m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-01-01 to 2022-09-30 | −$3.9m | us-gaap:NetIncomeLoss |
| Basic EPS | 3 months, 2022-07-01 to 2022-09-30 | −$0.10 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-01-01 to 2022-09-30 | −$0.29 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-07-01 to 2022-09-30 | 13,185,659 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2022-01-01 to 2022-09-30 | 13,184,393 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2022-01-01 to 2022-09-30 | −$3.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2022-01-01 to 2022-09-30 | $63.5k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2022-09-30 | $643.5k | us-gaap:Cash |
| Current assets | at 2022-09-30 | $5.5m | us-gaap:AssetsCurrent |
| Total assets | at 2022-09-30 | $6.0m | us-gaap:Assets |
| Current liabilities | at 2022-09-30 | $2.4m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2022-09-30 | $3.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 15,535 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. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed in the section titled “*Risk Factors”* and elsewhere in this Report.

### 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 have also 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 September 30, 2022, we had cash and marketable securities totaling $5,356,556 as compared to cash and marketable securities totaling $10,442,379 at December 31, 2021. Our cash flows used in operations were ($3,493,223) for the nine months ended September 30, 2022 as compared to ($211,360) for the same period in the prior year.

Net cash from investing activities for the nine months ended September 30, 2022 was $2,886,780 as compared to ($60,610) for the prior year period. The volume of marketable securities purchases and sales for the current period was substantially 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 $90,000. We expect our capital expenditures to remain at or below their current level through 2023.

Net cash used in financing activities was ($1,176,526) for the nine months ended September 30, 2022 as compared to ($280,455) for the prior year period. The purchase of $1,065,216 of treasury stock pursuant to the Company’s stock repurchase plan was the primary component of the use of cash in the nine months ended September 30, 2022. During the nine months ended September 30, 2021, principal payments on debt totaling $417,056 were partially offset by sales of common stock totaling $138,006 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. The Company does not expect that it will fully utilize the total authorized amount of its stock purchase plan prior to December 31, 2022. The senior secured FVP Note with a principal balance of $900,000 at September 30, 2022 matured on November 14, 2022 and was repaid in full.

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 consummation of 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 for the twelve months following the issuance of this report.

### Results of Operations

### Comparison of Three Months Ended September 30, 2022 and 2021

For the three months ended September 30, 2022 and 2021, our revenue was $1,219,150 and $1,471,814, respectively, a decrease of 17%. We believe 2022 revenues continue to be negatively impacted by macro-economic factors including poor overall performance in the stock market, high inflation and sluggish gross domestic product (GDP) growth. The S&P 500 dropped by 24.1% during the nine months of 2022. In addition to the poor market performance, inflation measured by the consumer price index (CPI) remained high at an average of 8.3% for the three months ended September 30, 2022 while GDP growth in the third quarter was only 2.6% annualized following two quarters of negative growth. We believe that these factors 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 promotional programs in March of 2022 and again in the August /September 2022 timeframe around Labor Day. Average users for the three months ended September 30, 2022 was 5,197 as compared to 5,535 for the prior year period. Cost of revenues for the three months ended September 30, 2022 and 2021 were $492,991 and $469,601, resulting in gross margins of 60% and 68%, 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 $23,390 for the quarter ended September 30 2022 as compared to the prior year primarily as a result of an increase in the cost of our program moderators and higher costs associated with our new broadcast enabled social media feature. As noted above, our promotional event resulted in increased user counts but limited revenue that offset the costs which resulted in a lower gross margin percentage of 60% as compared to 68% for the 2021 period.

For the three months ended September 30, 2022, operating expenses were $1,924,460 as compared to $1,501,142 for the same period in 2021, an increase of $423,318 or 28%. We experienced higher expenditures in most of our expense categories for the 2022 period. Software development costs increased from $111,898 for the three months ended September 30, 2021 to $302,273 for the three months ended September 30, 2022, an increase of 170%. The increased software development costs were primarily the result of increased personnel costs including external contractors and were incurred for improvements to our platform and new product development. Advertising and marketing costs increased from $286,057 for the three months ended September 30, 2021 to $417,433 for the three months ended September 30, 2022, an increase of 46%. Selling, general and administrative expenses increased from $1,098,427 for the three months ended September 30, 2021 to $1,199,233 for the three months ended September 30, 2022, an increase of 9%. The primary components of the increase were increases in salary and public investor relations which were partially offset by higher stock-based compensation in the prior year period.

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 September 30, 2022 was $1,198,301 as compared to a loss from operations of $498,929 for the prior year period. Lower sales and gross margin resulting from promotions combined with higher operating expenses resulted in the loss from operations. Non-operating expenses for the three months ended September 30, 2022 were $110,141 as compared to $7,047 for the prior year period.

### Comparison of Nine Months Ended September 30, 2022 and 2021

For the nine months ended September 30, 2022, we generated sales of $3,890,951 as compared to sales of $4,425,088 for the same period in 2021. As noted above, we believe that the macro-economic environment in 2022 has been detrimental to our sales. Our average subscriber count for the first nine months of 2022 increased from 5,503 for the nine months ended September 30, 2021 to 5,695, an increase of 3.5%. Although the subscriber count was higher for the 2022 period, revenues declined due to lower average revenues per subscriber, primarily resulting from the promotions described above. Cost of sales for the nine months ended September 30, 2022 were $1,572,380 as compared to $1,274,953 for the nine months ended September 30, 2021. The increase of $297,427 was primarily due to an increase in the cost of our program moderators and higher costs associated with our new broadcast enabled social media feature. As noted above, our promotional event resulted in increased user counts but limited revenue that offset the costs which resulted in a lower gross margin percentage of 60% as compared to 71% for the 2021 period.

For the nine months ended September 30, 2022, our operating expenses were $5,706,792 as compared to $3,621,454 for the same period in 2021. Selling general and administrative expenses increased to $3,615,430 for the nine months ended September 30, 2022 as compared to $2,320,841 for the same period in 2021, an increase of $1,294,589. The 2022 increase was driven primarily by higher personnel costs. In addition, investor relations expense and stock compensation were higher for the nine months ended September 30, 2022. Advertising and marketing expense increased to $1,242,573 for the nine months ended September 30, 2022 as compared to $840,557 for the prior year period reflecting a higher cost of acquiring new subscribers. The increase was partially attributable to approximately $153,000 of television advertising done in the second quarter. Software development costs increased from $445,591 for the nine months ended September 30, 2021 to $832,143 for the nine months ended September 30, 2022. The increased software development costs were primarily the result of increased personnel costs including outside contractors and were incurred for improvements to our platform including our online social media component, development of a native application which was released at the end of April and new product development.

### 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 (i) to compare operating performance on a consistent basis, (ii) for planning purposes including the preparation of its internal annual operating budget and (iii) 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 loss to EBITDA

The following table sets forth a reconciliation of net loss to EBITDA

|  | For the three months ended September 30, 2022 | 2021 | For the nine months ended September 30, 2022 | 2021 |
| --- | ---: | ---: | ---: | ---: |
| Net loss | $(1,308,442) | $(505,976) | $(3,866,984) | $(736,757) |
| Interest | 28,025 | 30,281 | 86,220 | 104,576 |
| Investment loss | 68,802 | - | 352,601 | - |
| Depreciation and amortization | 5,521 | 4,760 | 16,646 | 14,465 |
| Amortization of debt discount | 13,314 | 10,171 | 39,942 | 194,267 |
| Stock compensation | 117,090 | 433,534 | 365,302 | 433,534 |
| EBITDA | $(1,075,690) | $(27,230) | $(3,006,273) | $10,085 |

### Off Balance Sheet Arrangements

As of September 30, 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, 2,959 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 September 30, 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 September 30, 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 September 30, 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 Nov 14, 2022.
Source: SEC EDGAR, the filing index for accession 0001437749-22-027277. Last ingested by Listed: Oct 26, 2026, 17:10 ET. No prices; not investment advice.