UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended
June 30, 2016
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from
 
to
 

Commission File No.
0-55108

BLACKBOXSTOCKS INC.
(Exact name of registrant as specified in its charter)

Nevada
 
45-3598066
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)

5430 LBJ Freeway, Suite 1485, Dallas, Texas
 75240
(Address of principal executive offices)
(Zip Code)

( 972) 726-9203
(Registrant's telephone number, including area code)

 
(Former name, former address and former fiscal year if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  ☒   No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  ☒   No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☐   Accelerated filer  ☐

Non-accelerated filer ☐                                                                                                                                  Smaller reporting company ☒
 
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐   No ☒

The number of shares outstanding of the Registrant's Common Stock as of August 11, 2016 was 20,200,000.

TABLE OF CONTENTS
 
     
 
 
Page
INTRODUCTORY COMMENT
1
CAUTION REGARDING FORWARD LOOKING STATEMENTS
1
   
PART I –FINANCIAL INFORMATION
2
ITEM 1.
FINANCIAL STATEMENTS
2
 
Consolidated Balance Sheets as of June 30, 2016 (Unaudited) and December 31, 2015 (Audited)
2
 
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2016 and 2015 (Unaudited)
3
 
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015 (Unaudited)
4
 
Notes to Consolidated Financial Statements for the three and six months ended June 30, 2016 and 2015
5
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
10
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
12
ITEM 4.
CONTROLS AND PROCEDURES
12
 
 
 
PART II – OTHER INFORMATION
13
ITEM 1.
LEGAL PROCEEDINGS
13
ITEM 1A.
RISK FACTORS
13
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
13
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
13
ITEM 4.
MINE SAFETY DISCLOSURES
13
ITEM 5.
OTHER INFORMATION
13
ITEM 6.
EXHIBITS
14
 
 
 
SIGNATURES
 
14
INTRODUCTORY COMMENT

Throughout this Quarterly Report on Form 10-Q, the terms "we,"  "us,"  "our,"  "Blackboxstocks," or the "Company" refers to Blackboxstocks Inc., a Nevada corporation.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Our prospects are subject to uncertainties and risks. In this Quarterly Report on Form 10-Q, we make forward-looking statements in this Item 2 and elsewhere that also involve substantial uncertainties and risks. These forward-looking statements are based upon our current expectations, estimates and projections about our business, and reflect our beliefs and assumptions based upon information available to us at the date of this report. In some cases, you can identify these statements by words such as "if," "may," "might," "will, "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," and other similar terms. These forward-looking statements include, among other things, plans for proposed operations, descriptions of our strategies, our product and market development plans, and other objectives, expectations and intentions, the trends we anticipate in our business and the markets in which we operate, and the competitive nature and anticipated growth of those markets.

We caution readers that forward-looking statements are predictions based on our current expectations about future events. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Our actual results, performance or achievements could differ materially from those expressed or implied by the forward-looking statements as a result of a number of factors including, but not limited to, the risks and uncertainties discussed in our other filings with the Securities Exchange Commission ("SEC") . We undertake no obligation to revise or update any forward-looking statement for any reason.

1
PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

Blackboxstocks Inc. (formerly SMSA Ballinger Acquisition Corp.) and Subsidiary
Consolidated Balance Sheets
June 30, 2016 and December 31, 2015
 
   
June 30,
   
December 31,
 
   
2016
   
2015
 
   
(unaudited)
       
             
Assets
           
             
Current assets:
           
Cash
 
$
4,347
   
$
60,286
 
Investments, trading
   
-
     
414
 
Prepaid expenses
   
-
     
3,414
 
Prepaid expenses, related parties (Note 6)
   
24,050
     
154,500
 
Total current assets
   
28,397
     
218,614
 
                 
Property:
               
Computer and related equipment, net of depreciation of $2,578
               
at June 30, 2016 and $0 at December 31, 2015
   
12,887
     
15,465
 
Total property
   
12,887
     
15,465
 
                 
Total Assets
 
$
41,284
   
$
234,079
 
                 
Liabilities and Stockholders' Equity
               
                 
Current liabilities:
               
Accounts payable
 
$
79,819
   
$
29,148
 
Accrued interest
   
861
     
-
 
Advances, related party (Note 6)
   
9,960
     
-
 
Notes payable (Note 7)
   
50,000
     
-
 
Total current liabilities
   
140,640
     
29,148
 
                 
Commitments and contingencies (Note 8)
               
                 
Stockholders' Equity:
               
Preferred stock, $0.001 par value, 5,000,000 shares authorized;
               
no shares issued and outstanding at June 30, 2016 and December 31, 2015
   
-
     
-
 
Series A Convertible Preferred Stock, $0.001 par value, 5,000,000
               
shares authorized; 5,000,000 issued and outstanding at June 30, 2016
         
 and December 31, 2015, respectively
   
5,000
     
5,000
 
Common stock, $0.001 par value, 100,000,000 shares
               
authorized: 20,000,000 and 20,835,010 issued and outstanding at
         
June 30, 2016 and December 31, 2015, respectively
   
20,000
     
20,835
 
Additional paid in capital
   
800,442
     
799,607
 
Accumulated deficit
   
(924,798
)
   
(620,511
)
Total Stockholders' Equity
   
(99,356
)
   
204,931
 
                 
Total Liabilities and Stockholders' Equity
 
$
41,284
   
$
234,079
 
 
The accompanying notes are an integral part of these consolidated
financial statements.
 
 


2
Blackboxstocks Inc. (formerly SMSA Ballinger Acquisition Corp.) and Subsidiary
Consolidated Statements of Operations
For the three and six months ended June 30, 2016 and 2015
(Unaudited)
 
 
   
For the Three Months
   
For the Six Months
 
   
Ended June 30,
   
Ended June 30,
 
   
2016
   
2015
   
2016
   
2015
 
                         
Revenue
 
$
-
   
$
-
   
$
-
   
$
-
 
                                 
Cost of operations
   
-
     
-
     
-
     
-
 
                                 
Gross margin
   
-
     
-
     
-
     
-
 
                                 
Expenses:
                               
Software development costs
   
42,449
     
23,376
     
89,321
     
45,447
 
General and administrative
   
123,555
     
42,648
     
212,388
     
74,950
 
Depreciation
   
1,289
     
-
     
2,578
     
-
 
Total operating expenses
   
167,293
     
66,024
     
304,287
     
120,397
 
                                 
Operating loss
   
(167,293
)
   
(66,024
)
   
(304,287
)
   
(120,397
)
                                 
Loss before income taxes
   
(167,293
)
   
(66,024
)
   
(304,287
)
   
(120,397
)
                                 
Income taxes
   
-
     
-
     
-
     
-
 
                                 
Net loss
 
$
(167,293
)
 
$
(66,024
)
 
$
(304,287
)
 
$
(120,397
)
                                 
Weighted average number of common
                               
shares outstanding - basic
   
20,000,000
     
17,923,407
     
20,188,107
     
17,012,928
 
                                 
Net loss per share - basic
 
$
(0.01
)
 
$
(0.00
)
 
$
(0.02
)
 
$
(0.01
)
The accompanying notes are an integral part of these consolidated financial statements.
 

 
3
Blackboxstocks Inc. (formerly SMSA Ballinger Acquisition Corp.) and Subsidiary
Consolidated Statements of Cash Flows
For the six months ended June 30, 2016 and 2015
(Unaudited)
 
   
2016
   
2015
 
Cash flows from operating activities
           
Net loss
 
$
(304,287
)
 
$
(120,397
)
Adjustments to reconcile net loss to net cash used in
         
  operating activities:
               
  Depreciation expense
   
2,578
     
-
 
Changes in operating assets and liabilities:
               
Investment, trading
   
414
     
-
 
Prepaid expenses
   
3,414
     
-
 
Prepaid expenses, related parties
   
130,450
     
(31,164
)
Accounts payable
   
50,671
     
8,489
 
Accounts payable, related parties
   
-
     
(109,781
)
Accrued interest
   
861
         
Net cash used in operating activities
   
(115,899
)
   
(252,853
)
                 
Cash flows from investing activities
               
Purchases of fixed assets
   
-
     
(13,472
)
Net cash used in investing activities
   
-
     
(13,472
)
                 
Cash flows from financing activities
               
Common stock issued for cash
   
-
     
560,000
 
Advances from shareholder
   
9,960
     
-
 
Proceeds from notes issued
   
50,000
     
-
 
Net cash provided by financing activities
   
59,960
     
560,000
 
                 
Net increase(decrease) in cash
   
(55,939
)
   
293,675
 
                 
Cash - beginning of period
   
60,286
     
200,530
 
Cash - end of period
 
$
4,347
   
$
494,205
 
                 
Supplemental disclosure-
               
Non-cash investing and financing activities:
               
Cancellation of common shares
 
$
835
   
$
-
 
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 

4
Blackboxstocks Inc. (formerly SMSA Ballinger Acquisition Corp.) and Subsidiary
Notes to Consolidated Financial Statements
For the three and six months ended June 30, 2016 and 2015

1. Organization

Blackboxstocks Inc. 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 (the "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.

On December 1 , 2015 , the Company entered into a Share Exchange Agreement ("Exchange Agreement"), by and among the Company, Tiger Trade Technologies, Inc. ("Tiger Trade"), a Texas corporation and the Stockholders of Tiger Trade.  Tiger Trade had a total of 25 stockholders as of the date of the Exchange Agreement.

On February 8, 2016, the Company entered into an Agreement and Plan of Merger ("Merger Agreement") with Tiger Trade, providing for the merger of Tiger Trade with and into the Company. At the effective time of the merger (February 9, 2016), the shares of Tiger Trade capital stock outstanding immediately before the effective time were canceled, retired and ceased to exist.

On February 10, 2016, the Company entered into a Stock Cancellation Agreement (the "Cancellation Agreement") with Gust C. Kepler, our sole Director and the President, Chief Executive Officer, Chief Financial Officer and Secretary   of the Company, pursuant to which Mr. Kepler cancelled and forfeited 835,010 shares of Company Common Stock held by him.

The Company filed a Certificate of Amendment to its Articles of Incorporation effective as of March 9, 2016 changing the name of the Company to Blackboxstocks Inc.

The Company is in the business of developing, marketing and distributing a real time analytical platform (the "Blackbox System") to serve as a tool for day traders and swing traders on the OTC Markets Group, Inc. ("OTC"), NYSE, AMEX and NASDAQ exchanges markets.

2.  Going Concern

The Company is still developing its Blackbox System technology and associated website/platform and anticipates making it available to subscribers in September 2016.  The Company estimates additional costs of One Million Dollars ($1,000,000) to Two Million Dollars ($2,000,000) over the next twelve months to complete research and development, as well as provide capital to market, implement and maintain the Blackbox System.  Marketing for potential subscribers will begin when the Blackbox System becomes enterprise ready for subscriber sales.

We cannot provide any assurances that the Company will be able to secure sufficient funds to satisfy the cash requirements for the next twelve months, nor that it will be successful in its endeavors to market the Blackbox System.  The inability to secure additional funds would have a material adverse effect on the Company.  The Company currently anticipates raising the amounts necessary to implement our plans through debt and/or equity financing from the sale of Company Common Stock and reinvestment of profits generated through subscription revenue.


5
Blackboxstocks Inc. (formerly SMSA Ballinger Acquisition Corp.) and Subsidiary
Notes to Consolidated Financial Statements
For the three and six months ended June 30, 2016 and 2015

2.  Going Concern (Continued)

The consolidated financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company's ability to continue as a going concern.  There is no assurance that the Company will be successful in its efforts to raise funds through sales of stock or obtain debt financing, nor generate subscription revenues. These factors raise substantial doubt about the ability of the Company to continue as a going concern.

3. Summary of Significant Accounting Policies
The accompanying interim unaudited financial statements and footnotes of Blackboxstocks Inc. have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). The financial statements reflect all adjustments that are, in the opinion of management, necessary to fairly present such information. All such adjustments are of a normal recurring nature. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures, including a description of significant accounting policies normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Company's Annual Report.  The accompanying unaudited financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results for any subsequent quarter or the entire year ending December 31, 2016.
Basis of Presentation - The accompanying financial statements were prepared in conformity with GAAP.

Use of Estimates - Blackboxstocks' financial statement preparation requires that management make estimates and assumptions which affect the reporting of assets and liabilities and the related disclosure of contingent assets and liabilities in order to report these financial statements in conformity with GAAP.  Actual results could differ from those estimates.

Recently Issued Accounting Pronouncements - During the six months ended June 30, 2016 and 2015, there were several new accounting pronouncements issued by the Financial Accounting Standards Board ("FASB"). Each of these 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.

Property and Equipment - Blackboxstocks is engaged in the development of its proprietary Blackbox System technology, an algorithm driven system, through a combination of in house system analysts and outside firms.  The Company's Blackbox System software is still in development and will be expensed until the software reaches technological feasibility.

The Company's property and equipment acquired during 2015 was placed in service effective January 1, 2016 and  depreciated on the straight line basis over an estimated useful life of three years beginning in 2016.


6
Blackboxstocks Inc. (formerly SMSA Ballinger Acquisition Corp.) and Subsidiary
Notes to Consolidated Financial Statements
For the three and six months ended June 30, 2016 and 2015

3. Summary of Significant Accounting Policies (Continued)

Earnings or (Loss) Per Share - Basic earnings per share (or loss per share), is computed by dividing the earnings (loss) for the period by the weighted average number of common stock shares outstanding for the period.  Diluted earnings per share reflects the potential dilution of securities by including other potential common stock,  including stock options and warrants, in the weighted average number of common shares outstanding for the period.  Therefore because including options and warrants issued 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.  At June 30, 2016 the potential dilution would be 5,000,000 common shares in the event the issued and outstanding shares of Series A Convertible Preferred Stock are converted.  The Company had no potential dilution as of June 30, 2015.

Revenue Recognition - The Company recognizes revenue from the sale of its subscriptions, when persuasive evidence of an arrangement exists, delivery and collectability is probable. Revenue generally is recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities.  As of June 30, 2016 the Company continues to develop its software and has generated no revenues.

4.   Stockholders' Equity

At December 31, 2015 the Company had authorized 10,000,000 shares of preferred stock at $0.001 par value, 5,000,000 of which are designated as "Series A Convertible Preferred Stock" at $0.001 par value and 100,000,000 authorized shares of common stock at $0.001 par value ("Common Stock").  20,000,000 shares of Common Stock have been issued including 15,000,000 issued for proprietary assets contributed by our President and a third party vendor (Note 6).

Shares of Series A Convertible Preferred Stock have a $0.001 par value, do not accumulate dividends, and are convertible into shares of Common Stock on a one-for-one basis.  Additionally, each share entitles the holder to 100 votes and, with respect to dividend and liquidation rights, the shares rank pari passu with the Company's Common Stock.

On December 1 , 2015 , the Company entered into an Exchange Agreement, by and among, Tiger Trade, its Stockholders and the Company (Note 1). Under the terms and conditions of the Agreement, the Company offered and sold Seventeen Million Nine Hundred Thousand (17,900,000) newly issued shares of Company Common Stock and Five Million (5,000,000) newly issued shares of Company Series A Convertible Preferred Stock in consideration for all the issued and outstanding shares of Tiger Trade capital stock. The effect of the issuance was that Tiger Trade stockholders acquired approximately 85.91% of the issued and outstanding shares of Company Common Stock and 100% of the issued and outstanding shares of Company Preferred Stock. Tiger Trade became a wholly owned subsidiary of the Company as a result of the Exchange Agreement transaction.

 Tiger Trade was subsequently merged with and into the Company on February 9, 2016, at which time all of the outstanding capital stock of Tiger Trade outstanding immediately before the effective date were canceled, retired and ceased to exist.

On February 10, 2016, the Company entered into a Stock Cancellation Agreement with Gust C. Kepler, a Director, President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company, pursuant to which Mr. Kepler cancelled and forfeited 835,010 shares of the Company's Common Stock.


7
Blackboxstocks Inc. (formerly SMSA Ballinger Acquisition Corp.) and Subsidiary
Notes to Consolidated Financial Statements
For the three and six months ended June 30, 2016 and 2015

5.  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.  When the options or warrants are exercised, the receipt of consideration is an increase in stockholders' equity.  There was no stock option or warrant activity during the six months ended June 30, 2016 and 2015 and as of August 15, 2016 no options or warrants were outstanding.

6.  Related Party Transactions

During the quarter ended June 30, 2016, Gust C. Kepler, a Director, President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company advanced $9,960 to the Company. The advance is unsecured and bears no interest.

During the period April 28, 2014 through March 31, 2016, the Company (and its predecessor, Tiger Trade) engaged the services of Karma Black Box LLC ("Karma"), which became a Company stockholder as a result of the Exchange Agreement (Note 4), for application development services of the Company's Blackbox System technology.   Karma was issued 5,000,000 shares of Tiger Trade common stock in exchange for some of the services valued at $5,000.  Karma's Tiger Trade shares were exchanged for Company Common Stock on a one-for-one basis under the terms of the Exchange Agreement. At June 30, 2016 and December 31, 2015, there was no accounts payable owed to Karma.

G2 International, Inc. ("G2"), which does business as IPA Tech Group ("IPA") (Note 8), 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. During the six months ended June 30, 2016 and 2015, G2 provided software development services to the Company totaling $0 and $3,000, respectively.  In 2016 G2/IPA refunded $154,500 of prepayments leaving a prepaid balance of $0 as of August 15, 2016.  During the six months ended June 30, 2016 and 2015 the Company incurred $0 and $64,736 of expenses with G2, respectively.  At June 30, 2016 and December 31, 2015, there was no accounts payable owed to G2.

7.  Notes Payable

On April 29, 2016 a third party advanced $50,000 to the Company in exchange for a six month promissory note accruing interest at a rate of 10% per annum and secured by all assets and personal property of the Company.  Accrued interest on the note was $861 as of June 30, 2016.


8
Blackboxstocks Inc. (formerly SMSA Ballinger Acquisition Corp.) and Subsidiary
Notes to Consolidated Financial Statements
For the three and six months ended June 30, 2016 and 2015

8. Commitments and Contingencies

On April 28, 2014, Tiger Trade entered into a consulting agreement with G2, doing business as IPA, to render advice and reasonable assistance for a period of one year at a monthly fee of $8,500 plus any reasonable and actual costs incurred by IPA in connection with such services. G2 is wholly owned Gust C. Kepler, a Director, President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company, and the Company's controlling stockholder.  On April 28, 2015 this agreement was extended for an additional one year term expiring on April 28, 2016.  However, the consulting agreement was terminated by mutual agreement effective August 31, 2015.  During the six months ended June 30, 2016 and 2015, consulting fees incurred under this agreement totaled $0 and $51,000, respectively.

The Company entered into a sublease agreement with G2 effective July 1, 2015 subject to the terms and conditions of the office lease between G2 and Teachers Insurance and Annuity Association of America for approximately 1,502 square feet of office space at 5430 LBJ Freeway, Dallas, Texas.  The sublease agreement expires March 31, 2020.  During the six months ended June 30, 2016 we incurred $21,448 in office rental expense.

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.

9.  Subsequent Events

On July 22, 2016 and August 16, 2016, the Company entered into subscription agreements for the sale of a total of 220,000 shares of the Company's Common Stock at a price of $0.50 per share for aggregate proceeds of $110,000.  As of August 15, 2016, 200,000 of those shares have been issued.


9
ITEM 2.  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, 2015, as well as with our condensed financial statements and the notes thereto included elsewhere herein.

Overview

The Company is in the business of developing, marketing and distributing a real time analytical platform to serve as a tool for day traders and swing traders on the OTC Markets Group, Inc., NYSE, AMEX and NASDAQ markets. Our proprietary technology is an algorithm driven system (the "Blackbox System") that works in real time, measuring market trends and data while utilizing a multitude of specific criteria, both live and historical. Our Blackbox System was designed to monitor and analyzes over 13,000 stocks on the NASDAQ, NYSE, AMEX and OTC markets simultaneously as our servers receive live feeds from these markets. We consider the Blackbox System technology to be among the most user-friendly of its kind.

The Blackbox System is still in the development phase. The Company expects to complete development of the Blackbox System and the associated website/platform and interface in order to make it available to subscribers by the end of September 2016. The launch date for our product was pushed back from our prior anticipated June 2016 date because additional features were added to the Blackbox System which are intended to enhance its appeal to users, such as an online chat feature for members and three additional scanning functions. The Blackbox System is expected to be sold on a monthly and/or annual subscription basis to individual consumers through our website/platform.

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." Prior to March 9, 2016, our Common Stock was quoted under the symbol "SMQA."  We do not currently have a corporate website.

Basis of Presentation of Financial Information

The accompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern, which is dependent upon the Company's ability to establish itself as a profitable business.  At June 30, 2016, the Company had an accumulated deficit of $924,798, and for the three and six months ended June 30, 2016, incurred net losses of $167,293 and $304,287, respectively.  Management expects that the Company will need to raise additional capital to sustain operations until such time as the Company can achieve profitability.  However, there can be no assurance that management will be successful in obtaining additional funding or in attaining profitable operations.

The financial statements do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should the Company 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 April 14, 2016 .
 
 
10

Liquidity and Capital Resources

We are a development stage company and have not achieved any revenues as a result of our current business operations.  Since our inception, we have not attained a level of operations that allows us to meet our current overhead.  We do not contemplate attaining profitable operations until we execute plans to launch the Blackbox System, market and make it available for subscription to customers. Nevertheless, there can be no assurance that management will be able to successfully implement such plans and if executed, there can be no assurance that operating levels sufficient to sustain profitability can ever be achieved.  We expect to be dependent upon obtaining additional financing in order to adequately fund working capital, infrastructure, development and marketing expenses in order to execute plans for future operations, so that we can achieve a level of revenue adequate to support our cost structure, none of which can be assured.  These factors raise substantial doubt about our ability to continue as a going concern and the accompanying financial statements do not include any adjustments related to the recoverability or classification of asset carrying amounts or the amounts and classification of liabilities that may result should we be unable to continue as a going concern.

As of June 30, 2016, the Company's cash balance was $4,347. Management expects that the Company will need to raise significant additional capital to sustain operations until such time as the Company can achieve profitability.    Our ability to begin generating revenue with the goal of reaching profitability is solely dependent upon the success of our planned efforts to finish development and market the Blackbox System to subscribers. We expect to complete development of the Blackbox System in order to make it available to subscribers by the end of September 2016. If subscriptions for the Blackbox System do not meet our revenue objectives, we will not be able to reach or sustain profitability and will be required to obtain funds through debt or equity financing sources, however, there can be no assurance that management will be able to successfully obtain financing on acceptable terms.

Results of Operations

Comparison of Three Months Ended June 30, 2016 and 2015

For the three months ended June 30, 2016 and 2015, the Company had no revenue.  For the three months ended June 30, 2016, the Company had operating expenses totaling $167,293 compared to $66,024 for the same period in 2015, an increase of $101,269. This change is primarily a result of an increase in general and administrative expenses of $80,907 primarily due to new expenses relating to payroll, consulting, rent, insurance and marketing, as well as increased accounting, legal and transfer agent expenses. In addition, software development costs increased by $19,073, from $23,376 to $42,449 for the second quarter ended June 30, 3015 and 2016, respectively, which were attributable to new costs of data feeds that were necessary for the BlackBox System to receive and derive information for its analytics and associated data used in conjunction with development of  the Blackbox System, as well as costs associated with development of new features and readying the Blackbox System for market.

Comparison of Six Months Ended June 30, 2016 and 2015

For the six months ended June 30, 2016 and 2015, the Company had no revenue.  For the six months ended June 30, 2016, the Company had operating expenses totaling $304,287 compared to $120,397 for the same period in 2015, an increase of 183,890. This change is primarily a result of an increase in general and administrative expenses of approximately $137,439 primarily due to new expenses relating to payroll, consulting, rent, insurance and marketing, as well as increased accounting, legal and transfer agent expenses. In addition, software development costs increased by $43,874, from $45,447 to $89,321 for the six months ended June 30, 3015 and 2016, respectively, which were attributable to new costs of data feeds that were necessary for the BlackBox System to receive and derive information for its analytics and associated data used in conjunction with development of the Blackbox System, as well as costs associated with development of new features and readying the Blackbox System for market.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements.
 
 
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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our Company is a "smaller reporting company" as defined by Rule 12b-2 of the Exchange Act, and as such, is not required to provide the information required under this Item.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Gust Kepler, our principal executive officer and 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 June 30, 2016, 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, the Company's principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures as of June 30, 2016 were not 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 June 30, 2016 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.

Management is aware that there is a lack of segregation of duties at the Company due to the fact that the Company only has one director and executive officer dealing with general administrative and financial matters. This constitutes a material weakness in the internal controls. Management has decided that considering the officer/director involved, the control procedures in place, and the outsourcing of certain financial functions, the risks associated with such lack of segregation were low and the potential benefits of adding additional employees to clearly segregate duties did not justify the expenses associated with such increases. Management periodically reevaluates this situation. In light of the Company's current cash flow situation, the Company does not intend to increase staffing to mitigate the current lack of segregation of duties within the general administrative and financial functions.
 
 
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PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

None .

ITEM 1A.  RISK FACTORS

Our Company is a "smaller reporting company" as defined by Rule 12b-2 of the Exchange Act, and as such, is not required to provide the information required under this Item.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEEDS

We did not issue any unregistered securities during the three months ended June 30, 2016. Subsequent to the end of our second fiscal quarter, we issued 220,000 shares of our Common Stock to two individual investors at a price of $0.50 per shares for aggregate proceeds of $110,000. As of August 15, 2016, 200,000 of such shares have been issued.

The Common Stock was privately offered and sold in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act. The Company reasonably believed that each of the purchasers of such securities had access to information concerning its operations and financial condition, was acquiring the securities for its own account and not with a view to the distribution thereof, and was an "accredited investor" as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act. Furthermore, no "general solicitation of investors" was made by the Company with respect to sale of any of the securities. At the time of their issuance, the securities described above were deemed to be restricted securities for purposes of the Securities Act and the documentation representing the securities bear legends and/or non-transfer provisions to that effect.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.  OTHER INFORMATION

None.


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ITEM 6.  EXHIBITS

The following exhibits are filed with this Quarterly Report on Form 10-Q or are incorporated by reference as described below.

Exhibit
Description
31.1
Certification of Principal Executive Officer pursuant to Rule 13a-14a/Rule 14d-14(a)*
31.2
Certification of Principal Financial Officer pursuant to Rule 13a-14a/Rule 14d-14(a)*
32.1
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350**
32.2
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350**
10.1
Promissory Note dated April 29, 2016 in the principal amount of $50,000 payable to Pepperwood Capital Partners, LLC*
10.2
Security Agreement dated April 29, 2016 between the Company and Pepperwood Capital Partners, LLC*
101.1
Interactive data files pursuant to Rule 405 of Regulation S-T*
*   Filed herewith.
**              Furnished herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
     
August 15, 2016
BLACKBOXSTOCKS INC.
     
 
 By:
      /s/ Gust Kepler
 
Gust Kepler
 
President, Chief Executive Officer and Secretary
(Principal Executive Officer and Principal Financial
and Accounting Officer)


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EXHIBIT INDEX

Exhibit
Description
31.1
Certification of Principal Executive Officer pursuant to Rule 13a-14a/Rule 14d-14(a)*
31.2
Certification of Principal Financial Officer pursuant to Rule 13a-14a/Rule 14d-14(a)*
32.1
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350**
32.2
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350**
10.1
Promissory Note dated April 29, 2016 in the principal amount of $50,000 payable to Pepperwood Capital Partners, LLC*
10.2
Security Agreement dated April 29, 2016 between the Company and Pepperwood Capital Partners, LLC*
101.1
Interactive data files pursuant to Rule 405 of Regulation S-T*
*   Filed herewith.
**              Furnished herewith

15
 
 
PROMISSORY NOTE
 
$50,000.00
April 29, 2016
 
FOR VALUE RECEIVED, Blackboxstocks Inc., a Nevada corporation (" Maker "), promises to pay to the order of Pepperwood Capital Partners, LLC, a Texas limited liability company (" Payee ") the principal sum of $50,000.00, together with interest on the unpaid principal balance from time to time outstanding at a rate per annum equal to 10% (calculated on the basis of actual days elapsed, but computed as if each calendar year consisted of 360 days); provided that, in no event shall the interest rate hereunder exceed the Highest Lawful Rate (as hereinafter defined).

"Highest Lawful Rate" means, at any given time during which indebtedness shall be outstanding hereunder, the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged, or received on the indebtedness evidenced by this Promissory Note (the " Note ") under the laws of the United States and the State of Texas applicable thereto which are presently in effect or, to the extent allowed by law, under such applicable laws of the United States and the State of Texas which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow, in any case after taking into account, to the extent required by applicable law, any and all relevant payments or charges under this Note and any documents executed in connection herewith.

Interest on this Note shall accrue from the date hereof.  All principal of and interest on this Note shall be due and payable on October 26, 2016.  All payments on this Note shall be due and payable in lawful money of the United States of America at 2711 Haskell Avenue, Suite 550, Dallas, Texas 75204 (or such other place as Payee may from time to time designate).

1.   Prepayments .  The accrued but unpaid interest on this Note may be prepaid in whole or in part at any time without penalty or premium.  The unpaid principal balance of this Note may be prepaid in whole or in part at any time without premium or penalty, but only if all accrued interest on the amount of each such prepayment is paid to the date of such prepayment.

2.   Events of Default and Remedies .  Without notice or demand (which are hereby waived), the entire unpaid principal balance of and all accrued interest on this Note shall immediately become due and payable at the option of the holder hereof upon the occurrence of any one or more of the following events of default (individually or collectively, herein called an " Event of Default "):

(a)   the failure or refusal of Maker to pay all or any part of the principal of or accrued interest on this Note as and when the same becomes due and payable in accordance with the terms hereof;

(b)   the entry of a decree or order for relief by a court having jurisdiction in respect of Maker in an involuntary case under the federal bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, at such time as it becomes a final, nonappealable decree, order, or judgment against Maker;
 
 
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(c)   the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator, or other similar official of Maker for any substantial part of Maker's property, or the receipt by Maker of a final, non-appealable order by a court having jurisdiction in respect of Maker to wind up or liquidate Maker's affairs;

(d)   the commencement by Maker of a voluntary case under the federal bankruptcy laws, as now constituted or hereafter amended, or any other applicable federal or state bankruptcy, insolvency or other similar law (which case is not dismissed within sixty (60) days thereof), or the consent by Maker to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator, or other similar official of Maker of a substantial portion of its property (which consent is not withdrawn and/or appointment is not terminated or rescinded within sixty (60) days thereof), or the Maker shall generally fail to pay its or their debts as they become due or shall make a general assignment for the benefit of creditors (which shall continue unremedied for sixty (60) days from the date thereof); or
(e)   if Maker is liquidated or winds up its affairs.
Upon the occurrence of an Event of Default, the holder of this Note may (a) offset against this Note any sum or sums owed by the holder hereof to Maker and (b) proceed to protect and enforce its rights either by suit in equity and/or by action at law, or by other appropriate proceedings, whether for the specific performance of any covenant or agreement contained in this Note or any document or instrument executed and delivered by Maker in connection with this Note or in aid of the exercise of any power or right granted by this Note or any document or instrument executed and delivered by Maker in connection with this Note or to enforce any other legal or equitable right of the holder of this Note.

3.   Cumulative Rights .  No delay on the part of the holder of this Note in the exercise of any power or right under this Note, or under any document or instrument executed in connection herewith, shall operate as a waiver thereof, nor shall a single or partial exercise of any other power or right.

4.   Waiver .  Maker hereby waives demand, presentment, protest, notice of nonpayment, notice of intention to accelerate, notice of acceleration, notice of protest, and any and all lack of diligence or delay in collection or the filing of suit hereon which may occur; agrees that its liability under this Note shall not be affected by any renewal or extension in the time of payment hereof, by any indulgences, or by any release or change in any security for the payment of this Note; and hereby consent to any and all renewals, extensions, indulgences, releases, or changes hereof or hereto, regardless of the number of such renewals, extensions, indulgences, releases, or changes.

5.   No Impairment .  Maker will not, by amendment of its organizational documents or through any reorganization, transfer of assets, merger, dissolution, issuance or sale of securities or any other voluntary action or inaction, intentionally avoid or seek to avoid the observance or performance of any of the material terms to be observed or performed hereunder by Maker but will at all times in good faith assist in the carrying out of all the provisions of this Note.
 
 
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6.   Attorneys' Fees and Costs .  In the event an Event of Default shall occur, and in the event that thereafter this Note is placed in the hands of attorneys for collection, or in the event this Note is collected in whole or in part through legal proceedings of any nature, then and in any such case Maker promises to pay all costs of collection, including, but not limited to, reasonable attorneys' fees, incurred by the holder hereof on account of such collection.

7.   NO ORAL AGREEMENTS .  THIS NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

8.   Governing Law .  This Note shall be governed by and construed in accordance with the laws of the State of Texas.

9.   Severability .  If any provision of this Note shall be held to be unenforceable by a court of competent jurisdiction, such provisions shall be severed from this Note and the remainder of this Note shall continue in full force and effect.

10.   Assignment .  This Note, or any portion hereof, may be assigned by Payee without the consent of Maker.

11.   Limitation on Interest .  It is the intent of Payee and Maker in the execution of this Note and all other instruments now or hereafter securing this Note to contract in strict compliance with applicable usury law.  In furtherance thereof, Payee and Maker stipulate and agree that none of the terms and provisions contained in this Note, or in any other instrument executed in connection herewith, shall ever be construed to create a contract to pay for the use, forbearance or detention of money, interest at a rate in excess of the maximum interest rate permitted to be charged by applicable law; that neither Maker nor any guarantors, endorsers or other parties now or hereafter becoming liable for payment of this Note shall ever be obligated or required to pay interest on this Note at a rate in excess of the maximum interest that may be lawfully charged under applicable law; and that the provisions of this paragraph shall control over all other provisions of this Note and any other instruments now or hereafter executed in connection herewith which may be in apparent conflict herewith.  The holder of this Note expressly disavows any intention to charge or collect excessive unearned interest or finance charges in the event the maturity of this Note is accelerated.  If the interest received for the actual period of existence of the loan evidenced by this Note exceeds the applicable maximum lawful rate, the holder of this Note shall, at its option, either refund to Maker the amount of such excess or credit the amount of such excess against the principal balance of this Note then outstanding and thereby shall render inapplicable any and all penalties of any kind provided by applicable law as a result of such excess interest.  In the event that Payee or any other holder of this Note shall contract for, charge or receive any amount or amounts and/or any other thing of value which are determined to constitute interest which would increase the effective interest rate on this Note to a rate in excess of that permitted to be charged by applicable law, an amount equal to interest in excess of the lawful rate shall, upon such determination, at the option of the holder of this Note, be either immediately returned to Maker or credited against the principal balance of this Note then outstanding, in which event any and all penalties of any kind under applicable law as a result of such excess interest shall be inapplicable. The term "applicable law" as used in this Note shall mean the laws of the State of Texas or the laws of the United States, whichever laws allow the greater rate of interest, as such laws now exist or may be changed or amended or come into effect in the future.


[ Signature Page Follows ]
 

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IN WITNESS WHEREOF, the undersigned has executed this Note as of the day and year first above written.

 
Maker:
 
Blackboxstocks Inc.

By: _________________________
        Gust C. Kepler, President
 
Address:     5430 LBJ Freeway, Suite 1485
                      Dallas, Texas 75240
 
Phone:          972-726-9203
 

 
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SECURITY AGREEMENT
Debtor:
 
Secured Party:
     
Blackboxstocks Inc.
 
Pepperwood Capital Partners, LLC
5430 LBJ Freeway,
 
1909 Woodall Rogers
Suite 1485
 
Suite 590
Dallas, Texas 75240
 
Dallas, Texas 75201

THIS SECURITY AGREEMENT (this " Agreement ") is entered into this 29th day of April, 2016, by and between Blackboxstocks Inc., a Nevada corporation with its principal place of business located at the address set forth above (" Debtor "), and Pepperwood Capital Partners, LLC, a Texas limited liability company (" Secured Party "). Concurrently herewith, Debtor has executed a Secured Promissory Note of even date herewith (the " Secured Promissory Note "), in the original principal amount of $50,000.00 .
1.   Security Interest and Indebtedness . Debtor hereby pledges and assigns to the Secured Party, and grants to the Secured Party a continuing lien on and security interest in, all of the Debtor's right, title and interest in, to and under all the Debtor's assets and personal property, whether now or hereafter existing or presently owned or hereafter acquired or arising and wherever located, of every kind and description, tangible or intangible (collectively, the " Collateral "), including, without limitation, all general intangibles, accounts, chattel paper, deposit accounts, documents, equipment, fixtures, goods, instruments, inventory, investment property, letter-of-credit rights and any commercial tort claims hereafter identified by the Debtor in any authenticated record delivered to the Secured Party, and all supporting obligations, products, proceeds, offspring, accessions, rents, profits, income, benefits, substitutions and replacements of or arising from or relating to any of the foregoing and all books, correspondence, files and other records, including, without limitation, all tapes, desks, cards, software, data and computer programs in the possession or under the control of the Debtor or any person from time to time acting for the Debtor, in each case, to the extent of the Debtor's rights therein, that at any time evidence or contain information relating to any of the foregoing or are otherwise necessary or helpful in the collection or realization thereof, in each case howsoever the Debtor's interest therein may arise or appear (whether by ownership, security interest, claim or otherwise).  The security interest created hereby in the Collateral constitutes continuing collateral security for all of the following obligations (collectively, referred to herein as " Indebtedness ," whether now existing or hereafter incurred, whether arising before or after any filing of a petition in bankruptcy or the commencement of any insolvency proceeding and including all interest accrued after any such filing or commencement): (a) the payment by the Debtor, as and when due and payable (by scheduled maturity, required prepayment, acceleration, demand or otherwise), of all amounts from time to time owing by it in respect of the Secured Promissory Note; and (b) the due and prompt and full payment, performance and observance by the Debtor of (i) all indebtedness, obligations and liabilities that the Debtor may at any time now or hereafter owe to the Secured Party, whether direct or indirect, absolute or contingent, whether on open accounts or otherwise, (ii) all liabilities and/or amounts that the Secured Party may now or hereafter incur or pay or advance at any time in connection with the Secured Promissory Note, or any other loan documents, including for taxes, levies, insurance, repairs, maintenance or other protection with respect to the Collateral, and (iii) all costs and expenses that the Secured Party may incur in enforcing or protecting its rights under the Secured Promissory Note, including with respect to the Collateral or the indebtedness secured by the Collateral, including attorneys' fees.
 
 
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2.   Representations and Warranties . Debtor represents and warrants to Secured Party that (a) Exhibit A hereto correctly identifies Debtor's legal name, type of organization, state of organization, and, if required for the financing statement, state organizational number and/or federal tax identification number; (b) Debtor has the right to grant a security interest in the Collateral; (c) there are no effective liens, security interests or encumbrances against the Collateral except as described on Exhibit B hereto; (d) Debtor is legally formed and validly existing; (e) the execution and performance of this Agreement have been authorized by all necessary corporate, shareholder, membership and/or partnership action and do not violate any provision of Debtor's organizational documents or applicable law; and (f) the Indebtedness is incurred only for, and the Collateral is to be used only for, commercial purposes and not for personal, family or household purposes.
3.   Debtor's Covenants . Until the Indebtedness has been paid in full, Debtor shall (i) keep the Collateral free from any other effective lien; (ii) promptly advise Secured Party of any event or circumstance which can reasonably be expected to have a material adverse effect on the Collateral; (iii) to the extent not being contested in the Debtor's good faith, pay when due all taxes and similar obligations that might result in a lien on the Collateral if not paid; and (iv) execute additional documents and take such other actions (at Debtor's expense) as Secured Party may reasonably request from time to time to implement or evidence the terms of this Agreement.
4.   Perfection and Protection of Collateral . Debtor hereby authorizes Secured Party to file financing statements in all applicable filing offices (a) indicating the Collateral (i) as all accounts of the Debtor or words of similar effect, or (ii) as being of an equal or lesser scope or with greater detail, and (b) contain any other information required by part 5 of Article 9 of the UCC (hereinafter defined). Debtor shall execute, obtain, deliver and (if applicable) file or record all financing statements, correction statements and notices, and use Commercially Reasonable Efforts   to obtain   consents, control agreements, landlords' waivers, acknowledgments and other documents, and take all other actions that Secured Party may deem necessary or advisable to perfect or protect Secured Party's security interest in the Collateral against the interests of third parties. Debtor agrees to pay, on demand, all costs, taxes and fees payable in connection with any such filings, recordings, notices or other actions. Debtor shall give Secured Party written notice on or before ninety (90) days after changing its name or structure, or state of organization, and in each case shall (at Debtor's expense) promptly take all steps necessary or advisable to preserve continuously the perfection and priority of Secured Party's security interests in the Collateral.
5.   Events of Default; Remedies . " Event of Default " shall have the meaning given to it in the Secured Promissory Note.  Upon the continuance of any Event of Default, and at any time thereafter, at Secured Party's option, the Indebtedness shall become immediately due and payable (with interest thereon from the date of demand as provided in the Secured Promissory Note) without presentment or demand or any notice to Debtor or any other person obligated thereon, and Secured Party shall be entitled to exercise any or all of the rights and remedies available at law or in equity, including the rights and remedies of a secured party under the Uniform Commercial Code as in effect on the date hereof in the State of Texas (the " UCC "). These remedies include the right and power to take possession of the Collateral, wherever it may be found, or otherwise collect, enforce, dispose of or use all or any portion of the Collateral in any manner authorized or permitted under the UCC, in such order or manner as Secured Party may elect in his sole discretion.
 
 
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6.   General Authority . Secured Party shall be under no obligation or duty to exercise any of the powers hereby conferred upon Secured Party, and shall have no liability for any act or failure to act in connection with any of the Collateral (including any diminution in the value of the Collateral from any cause whatsoever). Secured Party shall be under no duty to collect any amount that may be or become due on any of the Collateral, to redeem or realize on the Collateral, to make any presentments, demands or notices of protest in connection with any of the Collateral, to take any steps necessary to preserve rights in any instrument, contract or lease against third parties or to preserve rights against prior parties, to remove any liens or to do anything for the enforcement, collection or protection of the Collateral, except to the extent, if any, that the UCC requires Secured Party to use reasonable care with respect to the Collateral while in his possession.
7.   Debtor Waivers . Except as expressly provided herein, and to the fullest extent permitted by law, Debtor hereby waives presentment, demand and protest and notice of presentment, protest, default, non-payment, maturity, release, compromise, settlement, extension or renewal of any or all accounts, contract rights, documents, instruments, general intangibles, chattel paper and guaranties at any time held by Secured Party on which Debtor may in any way be liable and hereby ratifies and confirms whatever Secured Party may do in this regard; notice prior to taking possession or control of the Collateral or any bond or security that might be required by any court before allowing Secured Party to exercise any of Secured Party's remedies, and any right to require Secured Party to prepare the Collateral for sale; any marshalling of assets, or any right to compel Secured Party to resort first or in any particular order to any other collateral or other persons before enforcing his rights as to the Collateral or pursuing Debtor for payment of the Indebtedness; the benefit of all valuation, appraisement and exemption laws; and any claims and defenses based on principles of suretyship or impairment of collateral.
8.   General Provisions .
(a)   Notices . All notices and communications required under this Agreement shall be communicated as provided for in the Secured Promissory Note.
(b)   Successors and Assigns . Debtor shall not assign its rights or delegate its duties under this Agreement. Debtor's covenants and agreements herein shall bind Debtor's successors and assigns, and those who become bound to this Agreement, and shall inure to the benefit of Secured Party and his successors and assigns. Secured Party may assign the Indebtedness to one or more assignees on such terms and conditions as Secured Party shall deem advisable. As to any such assignee, Debtor waives and will not assert any claims, setoffs, recoupments or defenses that Debtor may have against Secured Party.
 
 
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(c)   Amendments and Waivers . This Agreement may not be modified or amended except in writing signed by Debtor and Secured Party, and none of its provisions may be waived except in writing signed by Secured Party. No waivers shall be implied, whether from any custom or course of dealing or any delay or failure in Secured Party's exercise of his rights and remedies hereunder or otherwise. Any waiver granted by Secured Party shall not obligate Secured Party to grant any further, similar, or other waivers.
(d)   Remedies . All remedies provided to Secured Party herein are cumulative, in addition to all other remedies available to Secured Party under this Agreement or any other agreement, at law or in equity or otherwise, and the exercise or partial exercise of any such right or remedy shall not preclude the exercise of any other right or remedy.
(e)   Governing Law . This Agreement shall be construed in accordance with and governed by the laws of the State of Texas (without regard to its rules on conflicts of laws).
(f)   Usury . The parties intend that the interest charged, paid or collected hereunder or on the Indebtedness shall not in any event exceed the maximum permissible rate under applicable law. Any excess interest will be applied to reduce the principal amount of the Indebtedness or repaid to Debtor.
(g)   Defined Terms; UCC Terms . In addition to other words and terms defined in this Agreement (including the Exhibits), the following terms have the following meanings herein, unless the context expressly requires otherwise. The term " business day " means any day other than a Saturday, Sunday or day on which commercial banks are authorized to close under the laws of the State of Texas. The term " Commercially Reasonable Efforts " means efforts that are commercially reasonable but in no event require the making of material payments or material concessions in exchange for such consent. The term " Loan Documents " means any agreement evidencing or securing any Indebtedness. The term " person " means any individual, corporation, partnership, joint venture, association, limited liability company, joint stock company, trust, unincorporated organization, government (or any agency or political subdivision thereof) or any other form of entity. The terms " includes " and " including " and words of similar import are inclusive and not exclusive terms, and are not intended to create any limitation. All defined terms apply to both singular and plural forms, and all references to any gender include all other genders. Terms used in this Agreement that are defined in Article 9 of the UCC (as in effect on the date hereof) shall have the same meanings herein. If Debtor is a partnership or an unincorporated association of more than one person, the term " Debtor " refers to each partner and/or each such person, jointly, severally and individually. All defined terms and references as to any agreements, notes, instruments, certificates or other documents shall be deemed to refer to such documents as they may from time to time be amended, modified, renewed, extended, replaced, restated, supplemented or substituted. Unless otherwise provided, all references to statutes and related regulations shall include any amendments thereof and any successor statutes and regulations.
(h)   Captions; Exhibits; Severability . The captions in this Agreement are for convenience only, and in no way limit or amplify the provisions hereof. All Exhibits and Schedules attached hereto are by reference made a part hereof, and this Agreement governs in case of any conflict. This Agreement is severable, and the invalidity of any provision shall not affect any other provision hereof.
 
 
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9.   Entire Agreement . This Agreement represents the entire agreement between Secured Party and Debtor with respect to the subject matter hereof, superseding any and all other agreements, promises or representations.
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ENTERED INTO as of the date first written above.
 
Debtor:
Secured Party:
   
Blackboxstocks Inc.
Pepperwood Capital Partners, LLC
   
   
   
By:  ___________________________
By:  ________________________________
Gust C. Kepler
Name: ______________________________
President
Title: _______________________________
 


6

EXHIBIT A
DEBTOR INFORMATION
Debtor's Legal Name and Address:
 
Blackboxstocks Inc.
5430 LBJ Freeway, Suite 1485
Dallas, Texas 75240
   
Debtor's Form of Entity:
Corporation
   
Debtor's State of Organization:
Nevada
   
Debtor's State Entity Number:
E0547532011-0
   
Federal Tax Identification Number:
45-3598066
 

 

EXHIBIT B
EXISTING LIENS AGAINST THE COLLATERAL

 
 
 

 
 
 
EXHIBIT 31.1

CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

I, Gust Kepler, certify that:

(1)
I have reviewed this quarterly report on Form 10-Q of Blackboxstocks Inc.;

(2)
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3)
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4)
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

(5)
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

August 15, 2016
 
/s/ Gust Kepler
 
 
Gust Kepler
 
 
Principal Executive Officer
EXHIBIT 31.2

CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

I, Gust Kepler, certify that:

(1)
I have reviewed this quarterly report on Form 10-Q of Blackboxstocks Inc.;

(2)
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3)
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4)
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

(5)
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

August 15, 2016
 
/s/ Gust Kepler
 
 
Gust Kepler
 
 
Principal Financial Officer
EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Blackboxstocks Inc. (the "Company") on Form 10-Q for the period ended June 30, 2016 (the "Report"), I, Gust Kepler, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Gust Kepler
Gust Kepler
Principal Executive Officer and Principal Financial Officer
August 15, 2016

This certification accompanies the Report pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company or purposes of §18 of the Securities Exchange Act of 1934, as amended.

A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Blackboxstocks Inc. (the "Company") on Form 10-Q for the period ended June 30, 2016 (the "Report"), I, Gust Kepler, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Gust Kepler
Gust Kepler
Principal Financial Officer
August 15, 2016

This certification accompanies the Report pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company or purposes of §18 of the Securities Exchange Act of 1934, as amended.

A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.