Executive Summary / Key Takeaways

• Blackboxstocks (NASDAQ: BLBX) is undergoing a fundamental strategic transformation, pivoting from its legacy financial technology and social media platform business towards becoming a player in the critical rare earth elements market via a reverse merger with REalloys Inc.
• The legacy fintech business faces significant headwinds, evidenced by declining revenue and subscriber metrics in Q1 2025, ongoing operating losses, and a stated substantial doubt about its ability to continue as a going concern, underscoring the necessity of a strategic shift.
• The proposed merger with REalloys aims to position the combined entity as a North American integrated mine-to-magnet producer, leveraging REalloys' high-grade Hoidas Lake deposit and targeting critical supply chains for U.S. national defense and advanced industries.
• Recent financing of up to $2.3 million through senior secured debentures provides crucial interim capital to support the merger process and operations, but successful completion of the transaction and securing future funding remain critical dependencies.
• For investors, the investment thesis is shifting dramatically; the primary value driver and focus are expected to be the potential of the rare earth business, with the legacy fintech operations becoming a significantly smaller component of the post-merger entity.

A Pivot Born of Headwinds: From Trading Desks to Rare Earth Deposits

Blackboxstocks Inc., initially established in 2011 and evolving into a financial technology and social media platform by March 2016, built its business around providing real-time analytics and news for stock and options traders. Operating on a Software as a Service (SaaS) model, its core offering, the Blackbox System, leverages predictive technology enhanced by artificial intelligence. This technology is designed to continuously scan major exchanges like NASDAQ, NYSE, and CBOE, analyzing over 10,000 stocks and up to 1.5 million options contracts multiple times per second to identify volatility and unusual market activity. Beyond raw data, the platform integrated a social media dashboard and later live audio/video features, fostering a community where traders could exchange ideas and strategies.

In the competitive landscape of financial technology, Blackboxstocks operates alongside large brokerage platforms like Interactive Brokers (IBKR), Charles Schwab (SCHW), and Morgan Stanley (MS) (including E*TRADE), which offer their own trading tools and data feeds. It also competes with a "plethora of new services" including other trading platforms, scanners, and educational providers that have emerged, particularly during periods of market buoyancy. Blackboxstocks has sought to differentiate itself through the speed and proprietary nature of its AI-driven analytics and its integrated community features, which facilitate real-time collaboration among users—a feature often less prominent in larger, more traditional platforms. While its AI processing speed (analyzing 1.5 million options contracts multiple times per second) offers a potential edge in identifying rapid market changes, the company operates at a significantly smaller scale than major brokers, facing higher operating costs per user and lacking their broad financial reach and diversified revenue streams. The proliferation of competitors has also increased marketing costs, making it more challenging and expensive to acquire new subscribers.

Despite its technological foundation and community focus, the company's legacy business has faced significant headwinds. The stock market, the core market for Blackboxstocks, has been difficult and unpredictable, particularly impacting the approximately 80% of its user base who are directional options traders and find consistent profitability challenging in volatile conditions. This market turbulence, coupled with increased competition, has pressured key operational metrics. In the first quarter of 2025, subscription revenue declined to $562,079 from $648,770 in the prior-year period, contributing to a total revenue decrease of 9.6% to $587,078. The average number of subscribers fell to 2,707 from 2,996, and average monthly revenue per subscriber slightly decreased to $69.22 from $72.19. Gross margins also compressed to 41.6% from 44.9%, partly due to lower average revenue per subscriber and increased data costs.

These operational pressures have contributed to ongoing operating losses, which totaled $887,666 in Q1 2025. Cash flows used in operations were $643,730 for the quarter. These conditions, including the accumulated deficit, have led the company to state that there is substantial doubt about its ability to continue as a going concern, emphasizing the critical need for sufficient financing or achieving profitability.

Acknowledging these challenges and seeking a path towards enhanced stockholder value, Blackboxstocks has actively pursued strategic alternatives. This search included negotiations for a share exchange agreement with Evtec Aluminium Limited, which was ultimately terminated by mutual agreement in January 2025 due to a protracted timeframe and hurdles outside the company's control.

A Transformative Leap: Entering the Critical Rare Earth Market

Following the termination of the Evtec transaction, Blackboxstocks announced a definitive merger agreement on March 10, 2025, to acquire REalloys Inc., marking a dramatic strategic pivot. This transaction is expected to fundamentally transform the company's business focus from financial technology to the production of rare earth elements.

REalloys is described as an integrated company focused on the development and production of rare earth elements, with a primary asset in its 100% owned Hoidas Lake deposit in Saskatchewan, Canada. This deposit is noted for its high-grade concentration of both Light Rare Earth Elements (LREEs) like Neodymium and Praseodymium, and Heavy Rare Earth Elements (HREEs) such as Dysprosium and Terbium. REalloys' strategic vision centers on becoming a North American integrated mine-to-magnet producer, specifically targeting critical supply chains for U.S. national defense stockpiles, advanced technologies, and infrastructure under an "America First" initiative. The global rare earth market is currently heavily dominated by foreign suppliers, creating geopolitical and supply chain security concerns for Western nations. REalloys aims to position itself as a reliable, scalable domestic source in this critical market.

The merger is structured as a reverse merger, with REalloys expected to be the accounting acquiror. Immediately following the closing, pre-Closing Blackboxstocks stockholders are expected to collectively retain approximately 7.3% of the combined company's common stock, while REalloys holders will receive approximately 92.7%. This ownership structure underscores the magnitude of the shift, with the value proposition for investors becoming predominantly tied to the future performance and potential of the rare earth business.

Recent developments indicate REalloys is taking concrete steps towards its production goals. On May 19, 2025, REalloys announced a joint Memorandum of Understanding (MOU) with the Saskatchewan Research Council (SRC) to collaborate on processing rare earth materials. This collaboration is intended to enable REalloys' planned production start in Q2 2025, with targeted expansion to 500 metric tonnes per year of magnet materials in 2026 and 1,000 metric tonnes by 2028. These targets provide specific operational milestones for the new business focus.

Fueling the Transition: Financing and Future Capital

Executing this transformative merger and funding the operations of the combined entity, particularly the capital-intensive rare earth production business, requires significant financial resources. Blackboxstocks has secured interim financing to support this transition.

The company entered into a Securities Purchase Agreement with Five Narrow Lane LP (FNL) for senior secured debentures totaling up to $2.3 million. By March 31, 2025, $1.05 million of this financing had been received. An additional $750,000 was funded in April 2025 upon the filing of the S-4 registration statement for the REalloys merger, and a final tranche of $500,000 is expected upon the S-4 being declared effective by the SEC. This debenture is secured by substantially all of the company's assets and matures on the earlier of the merger closing or January 17, 2026. The financing provides crucial capital for transaction expenses and ongoing operations, addressing the immediate liquidity needs highlighted by the going concern risk.

In addition to the FNL debenture, the company filed a shelf registration statement on Form S-3 in January 2025 for the potential sale of up to $50 million of securities. However, this is subject to limitations, including that the company cannot sell securities in a primary offering exceeding one-third of its public float in any 12-month period as long as its public float remains below $75 million. Furthermore, under the terms of the FNL Purchase Agreement, up to 50% of the proceeds from any S-3 sale may be required to repay the outstanding FNL debentures.

While the FNL financing provides a bridge, the successful completion of the REalloys merger and the ability to raise additional capital, potentially through the S-3 or other means, remain critical for the long-term funding of the combined entity and the build-out of REalloys' production capabilities. There can be no assurance that the merger will be completed or that the company will be able to raise necessary future capital on acceptable terms.

Legacy Operations and Future Outlook

Amidst this strategic shift, the legacy fintech business continues to operate, albeit facing challenges. While revenue and subscriber numbers have declined, the company has continued to invest in product development and marketing, albeit with a repositioned strategy reflected in reduced advertising spend in Q1 2025. Efforts to diversify within the fintech space included the development of new products like Stock Nanny, an alert system for self-directed investors, and Blackbox Pro, targeting professional traders, as well as augmenting educational offerings. As of Q3 2022 commentary, Stock Nanny was targeted for a Q1 2023 release and Blackbox Pro for Q2 2023, though the Q1 2025 filing primarily highlights education revenue as a new component of "other revenues" and expects it to increase significantly.

However, the future trajectory of the company is now overwhelmingly tied to the success of the REalloys merger and the execution of the rare earth business plan. The legacy fintech operations, while still generating revenue, are expected to constitute a much smaller part of the combined entity. The outlook for the company is therefore dominated by factors related to the merger: SEC approval of the S-4 registration, Nasdaq listing approval for REalloys, stockholder approvals, and REalloys' ability to achieve its production targets (e.g., 500 mt/year by 2026, 1,000 mt by 2028) and secure its position in the critical rare earth market. The expected termination of merchant cash advance financing costs in July 2025 will reduce one expense, but interest expense is expected to increase due to the FNL debenture.

Key risks for investors include the substantial doubt about the company's ability to continue as a going concern if the merger or sufficient financing is not secured, the inherent uncertainties in completing the complex reverse merger transaction, the execution risk associated with building and scaling a rare earth production business (an entirely new industry for the current BLBX management), and the competitive dynamics within the global rare earth market.

Conclusion

Blackboxstocks stands at a critical juncture, attempting a dramatic transformation from a niche financial technology provider facing significant market and competitive headwinds to a participant in the strategically vital rare earth elements industry. The proposed reverse merger with REalloys represents a bold pivot, offering a potential path to unlock new value by tapping into the growing demand for critical minerals and addressing supply chain security concerns.

While the legacy fintech business has demonstrated technological innovation and community building, its recent financial performance and the stated going concern risk underscore the challenges it faces in its current market. The future of the company, and the investment thesis for BLBX stockholders, is now largely predicated on the successful completion of the REalloys merger, the effective integration of the two disparate businesses, and REalloys' ability to execute its plan to become a significant North American producer of rare earth magnet materials. The recently secured financing provides necessary interim support, but investors must closely monitor the progress of the merger, future funding requirements, and REalloys' operational milestones as the company seeks to establish itself in this new, high-stakes industry.