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Blackboxstocks(BLBX) - 2024 Q4 - Annual Report
BLBXBlackboxstocks(BLBX)2025-03-21 21:16

Revenue Growth and Financial Performance - The company anticipates significant revenue growth, which is dependent on attracting new subscribers and reducing non-renewals [124]. - The company must increase revenue levels to achieve profitability, focusing on paid subscriptions to its Blackbox System platform [128]. - The company's revenue for the year ended December 31, 2024, was 2,566,946,adecreaseof2,566,946, a decrease of 539,080 or 17.4% compared to 3,106,026in2023,primarilyduetoadeclineinsubscribers[230].−Theaveragesubscribercountfor2024was2,998,whichis12.13,106,026 in 2023, primarily due to a decline in subscribers [230]. - The average subscriber count for 2024 was 2,998, which is 12.1% lower than the previous year, and the average monthly revenue per subscriber decreased from 75.88 in 2023 to 72.24in2024[230].−Grossmarginfor2024was72.24 in 2024 [230]. - Gross margin for 2024 was 1,129,663, representing 44.0% of revenues, down from 46.4% in 2023, attributed to lower average revenue per subscriber and poorer fixed cost absorption [230]. - Operating expenses decreased by 2,298,778or34.12,298,778 or 34.1% from 6,737,505 in 2023 to 4,438,727in2024,withsignificantreductionsinsoftwaredevelopmentandadvertisingexpenses[231].−Thecompanyreportedanetlossof4,438,727 in 2024, with significant reductions in software development and advertising expenses [231]. - The company reported a net loss of 3,471,227 for 2024, an improvement from a net loss of 4,664,455in2023[236].−EBITDAfor2024was4,664,455 in 2023 [236]. - EBITDA for 2024 was (2,954,311), compared to (3,225,199)in2023,indicatingareductioninoperatinglosses[236].−Cashflowsusedinoperationstotaled(3,225,199) in 2023, indicating a reduction in operating losses [236]. - Cash flows used in operations totaled 1,095,776 for the year ended December 31, 2024, a significant improvement from negative cash flow of 3,166,067intheprioryear[225].MergersandAcquisitions−TheCompanyexpectstoincurnon−recurringcostsrelatedtotheMerger,includingtaxes,legalfees,andadvisorfees,whichmayexceedestimatesandimpactfinancialcondition[164].−TheMergerrequiresREalloysInc.toapplyforaninitiallistingonNasdaq,withminimumequityrequirementsandaminimumbidpriceof3,166,067 in the prior year [225]. Mergers and Acquisitions - The Company expects to incur non-recurring costs related to the Merger, including taxes, legal fees, and advisor fees, which may exceed estimates and impact financial condition [164]. - The Merger requires REalloys Inc. to apply for an initial listing on Nasdaq, with minimum equity requirements and a minimum bid price of 4.00 per share [165]. - The number of Blackboxstocks shares to be issued in the Merger may be adjusted based on changes in REalloys share capital prior to Closing [166]. - Completion of the Merger is subject to numerous conditions, and there is no assurance that these conditions will be fulfilled or that the Merger will be completed as planned [168]. - Failure to complete the Merger could adversely affect the market price of the Company's common shares and its financial condition [170]. - The announcement of the Merger may disrupt business relationships and create uncertainty among employees, potentially affecting retention and recruitment [171]. - The Company may face litigation related to the Merger, which could result in substantial costs and delay completion [173]. - The company expects to receive 5,000,000infinancinguponthecompletionofthemergerwithREalloys,whichisanticipatedtoenhanceitscapitalposition[210].CompetitionandMarketChallenges−Thecompanyfacesincreasingcompetitionfromestablishedfirmsandnewentrants,whichmaypressurepricingandmarketshare[130].−Thecompanymayfacechallengesinmaintainingitsreputationandbrandrecognition,whicharecrucialforattractingandretainingcustomers[132].−Thecompanymaynotbeabletoeffectivelyhalttheoperationsofentitiesthatcopyitsintellectualproperty,potentiallyharmingitsbrand[141].−Thecompanymaynotbeabletoprotectitstrademarksandtradenamesadequately,whichcouldhinderitsbrandrecognitionandmarketcompetitiveness[153].−Thecompanymayfacechallengesinobtainingnecessarylicensesforthird−partyintellectualproperty,affectingitsabilitytocommercializenewsolutions[162].IntellectualPropertyandLegalRisks−Thecompanyreliesonthird−partySaaStechnologiesforcriticaloperations,whichposesrisksiftheseservicesbecomeunavailable[134].−Thecompanyiscurrentlynotsubjecttoanymaterialclaimsfromthirdpartiesassertinginfringementoftheirintellectualpropertyrights[144].−Thecompanyhasinvestedinprotectingitsintellectualpropertythroughpatentfilings,althoughithasnotyetobtainedanyissuedpatentsforitstechnologyorproducts[148].−Thecompanyreliesontradesecretsandconfidentialityagreementstoprotectitsproprietaryinformation,butthesemeasuresmaynotbefullyeffective[158].−Thecompanymayincursignificantcostsrelatedtolegalproceedingsconcerningintellectualpropertydisputes,whichcouldadverselyaffectitsfinancialcondition[146].−Thecompanyacknowledgesthatthelegalsystemsinsomeforeigncountriesmaynotfavortheenforcementofintellectualpropertyrights,complicatingitsabilitytoprotectitsassets[152].CorporateGovernanceandManagement−Thecompanyisclassifiedasa"controlledcompany,"allowingittorelyonexemptionsfromcertainNasdaqcorporategovernancerequirements[121].−ThecompanyhasariskmanagementprocessoverseenbytheBoard,includingregularreportsonoperational,strategic,financial,legal,andregulatoryrisks[268].−TheAuditCommitteeisresponsibleforoverseeingrisksrelatedtoaccountingmattersandfinancialreporting[269].−TheCompanyhasadoptedaformalCodeofEthicsandBusinessConductapplicabletoallBoardmembers,officers,andemployees[280].−TheCompanyhasestablishedanInsiderTradingPolicytopromotecompliancewithinsidertradinglaws[271].−TheCompanydoesnotcurrentlyhavealeadindependentdirector,allowingflexibilityinleadershipstructure[267].ExecutiveCompensation−GustKepler,theCEO,receivedatotalcompensationof5,000,000 in financing upon the completion of the merger with REalloys, which is anticipated to enhance its capital position [210]. Competition and Market Challenges - The company faces increasing competition from established firms and new entrants, which may pressure pricing and market share [130]. - The company may face challenges in maintaining its reputation and brand recognition, which are crucial for attracting and retaining customers [132]. - The company may not be able to effectively halt the operations of entities that copy its intellectual property, potentially harming its brand [141]. - The company may not be able to protect its trademarks and trade names adequately, which could hinder its brand recognition and market competitiveness [153]. - The company may face challenges in obtaining necessary licenses for third-party intellectual property, affecting its ability to commercialize new solutions [162]. Intellectual Property and Legal Risks - The company relies on third-party SaaS technologies for critical operations, which poses risks if these services become unavailable [134]. - The company is currently not subject to any material claims from third parties asserting infringement of their intellectual property rights [144]. - The company has invested in protecting its intellectual property through patent filings, although it has not yet obtained any issued patents for its technology or products [148]. - The company relies on trade secrets and confidentiality agreements to protect its proprietary information, but these measures may not be fully effective [158]. - The company may incur significant costs related to legal proceedings concerning intellectual property disputes, which could adversely affect its financial condition [146]. - The company acknowledges that the legal systems in some foreign countries may not favor the enforcement of intellectual property rights, complicating its ability to protect its assets [152]. Corporate Governance and Management - The company is classified as a "controlled company," allowing it to rely on exemptions from certain Nasdaq corporate governance requirements [121]. - The company has a risk management process overseen by the Board, including regular reports on operational, strategic, financial, legal, and regulatory risks [268]. - The Audit Committee is responsible for overseeing risks related to accounting matters and financial reporting [269]. - The Company has adopted a formal Code of Ethics and Business Conduct applicable to all Board members, officers, and employees [280]. - The Company has established an Insider Trading Policy to promote compliance with insider trading laws [271]. - The Company does not currently have a lead independent director, allowing flexibility in leadership structure [267]. Executive Compensation - Gust Kepler, the CEO, received a total compensation of 219,494 in 2024, which includes a salary of 200,000andacashbonusof200,000 and a cash bonus of 19,494 [285]. - Robert Winspear, the CFO, has an annual salary of 200,000andholdsawarranttopurchase25,000sharesat200,000 and holds a warrant to purchase 25,000 shares at 7.80 per share, exercisable for ten years [286]. - Charles Smith, the CTO, has an annual salary of 180,000andholdsanoptiontopurchase12,500sharesat180,000 and holds an option to purchase 12,500 shares at 13.68 per share, also exercisable for ten years [287]. - The 2021 Stock Incentive Plan was amended to increase the number of shares available for issuance from 312,500 to 612,500 as of February 6, 2023 [297]. - Non-employee directors receive an annual cash retainer of 30,000 and an option grant of 5,000 shares of common stock [290]. - The company has not entered into any other employment agreements with named executives or directors providing for compensation [289]. Audit and Financial Reporting - The company engaged Victor Mokuolo CPA PLLC as its new independent registered public accounting firm for the audit of the consolidated financial statements for the year ended December 31, 2024 [311]. - Total fees billed by Turner, Stone & Company, L.L.P. for professional services in 2024 amounted to 101,979, an increase of 50.6% from 67,662in2023[313].−Auditfeesfor2024were67,662 in 2023 [313]. - Audit fees for 2024 were 89,299, up from 63,912in2023,representinganincreaseof39.563,912 in 2023, representing an increase of 39.5% [313]. - Tax fees for 2024 were 5,250, compared to $3,750 in 2023, reflecting a 40% increase [313]. - The Audit Committee pre-approved all auditing services and permitted non-audit services performed by the independent auditor [314]. - Three out of five directors, including Messrs. Keller Reid and Grant Evans and Ms. Dalya Sulaiman, are considered independent directors [310].