BLNC 10-Q
Balance Labs, Inc. (BLNC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended:
or
For the transition period from __________ to __________
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction Identification No.) |
(IRS Employer of incorporation) |
(Address of principal executive offices)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | None | None |
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, and (2) has been subject to such filing requirements for the past 90 days. Yes ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller Reporting Company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of November 19, 2021, there were shares outstanding of the registrant’s common stock.
BALANCE LABS, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
| 2 |
Explanatory Note:
The registrant 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, however, the registrant is not subject to such fling requirements and is making such filings on a voluntary basis.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Labs, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
| September 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses | - | |||||||
| Interest receivable | - | |||||||
| Note receivable – related party | - | |||||||
| Note receivable, net of discount of $ | - | |||||||
| Total Current Assets | ||||||||
| Property and equipment, net | - | |||||||
| Other Assets | ||||||||
| Due from related party | ||||||||
| Investment at fair value - related party | ||||||||
| Investment at fair value | - | |||||||
| Trademark | - | |||||||
| Total Other Assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accounts payable - related party | ||||||||
| Short -term advances - related party | ||||||||
| Convertible note payable | - | |||||||
| Convertible notes payable - related party,
note of debt discount of $ | ||||||||
| Notes payable - related party - net of debt discount of $ | ||||||||
| Accumulated losses of unconsolidated investees in excess of investment | ||||||||
| Note payable – current | - | |||||||
| Total Current Liabilities | ||||||||
| Long Term Liabilities | ||||||||
| Loans payable, net of current | - | |||||||
| Convertible note payable, net of debt
discount of $ | ||||||||
| Total Long Term Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Note 7) | ||||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Preferred stock, $ par value, shares authorized, issued and outstanding as of September 30, 2021 and December 31, 2020 | - | - | ||||||
| Common stock, $ par value: authorized , and shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Stockholders’ Equity (Deficit) | ( | ) | ||||||
| Non-controlling interest | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity (Deficit) | ( | ) | ||||||
| Total Liabilities and Stockholders’ Equity (Deficit) | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements
| 3 |
Balance Labs, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenues - related party | $ | $ | $ | $ | ||||||||||||
| Costs and expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Salaries and wages | ||||||||||||||||
| General and administrative expenses - related party | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Income (Loss) from operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income (expense) | ||||||||||||||||
| Unrealized gain (loss) on available for sale securities | ( | ) | ||||||||||||||
| Net loss allocated from equity method investee | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Accreted interest income and interest income on note receivable | ( | ) | - | |||||||||||||
| Interest expense (includes amortization of debt discount) | ( | ) | - | ( | ) | ( | ) | |||||||||
| Impairment of an investment – Bang Holdings Corp. | ( | ) | - | ( | ) | - | ||||||||||
| Gain on forgiveness of PPP loan | - | - | ||||||||||||||
| Gain on deconsolidation of Krypto Ventures, Inc. | - | - | ||||||||||||||
| Total other income (expense) - net | ( | ) | ( | ) | ||||||||||||
| Net Income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net loss attributable to non controlling interest | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net Income (Loss) Income attributable to the Company | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net Income (Loss) per share - basic | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net Income (Loss) per share - diluted | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Weighted average number of shares - basic | ||||||||||||||||
| Weighted average number of shares - diluted | ||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements
| 4 |
Balance Labs, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
For the Three Months Ended September 30, 2021 and 2020
(Unaudited)
| Common Stock | Additional Paid-in | Non- controlling | Accumulated | Total Equity | ||||||||||||||||||||
| Shares | Amount | Capital | Interest | Deficit | (Deficit) | |||||||||||||||||||
| Balance June 30, 2021 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||||||||
| Net Income (loss) | - | - | - | ( | ) | |||||||||||||||||||
| Balance September 31, 2021 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Common Stock | Additional Paid-in | Non- controlling | Accumulated | Total Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Interest | Deficit | Deficit | |||||||||||||||||||
| Balance June 30, 2020 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||
| Balance September 30, 2020 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements
| 5 |
Balance Labs, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)
| Common Stock | Additional Paid-in | Non- controlling | Accumulated | Total Stockholders’ Equity | ||||||||||||||||||||
| Shares | Amount | Capital | Interest | Deficit | (Deficit) | |||||||||||||||||||
| Balance December 31, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||||||||
| Beneficial conversion | - | - | - | - | ||||||||||||||||||||
| Net Income (loss) | - | - | - | ( | ) | |||||||||||||||||||
| Balance September 30, 2021 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Common Stock | Additional Paid-in | Non- controlling | Accumulated | Total Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Interest | Deficit | Deficit | |||||||||||||||||||
| Balance December 31, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||
| Balance September 30, 2020 (Unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements
| 6 |
Balance Labs, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| For
the Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Operating activities | ||||||||
| Net Income (loss) - including non-controlling interest | $ | $ | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operations | ||||||||
| Amortization of debt discount | ||||||||
| Amortization of expense on note receivable | ( | ) | - | |||||
| Depreciation expense | ||||||||
| Amortization of website development costs | - | |||||||
| Impairment of an investment – Bang Holdings Corp. | - | |||||||
| Net loss from equity method investment | ||||||||
| Unrealized (gain) on available - for - sale securities | ( | ) | ( | ) | ||||
| Gain on deconsolidation of subsidiary (Krypto Ventures, Inc.) | ( | ) | - | |||||
| Gain on forgiveness of PPP loan | ( | ) | - | |||||
| Changes in operating assets and liabilities | ||||||||
| (Increase) decrease in | ||||||||
| Interest receivable | ( | ) | - | |||||
| Prepaids | ( | ) | ||||||
| Increase (decrease) in | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Accounts payable and accrued expenses - related party | ||||||||
| Accumulated losses on unconsolidated investees in excess of investment | - | |||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing activities | ||||||||
| Notes receivable | ( | ) | - | |||||
| Website development cost | ( | ) | - | |||||
| Advance to a related party | ( | ) | ( | ) | ||||
| Cash disposed in deconsolidation of subsidiary | ( | ) | - | |||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing activities | ||||||||
| Payment of convertible note payable | ( | ) | - | |||||
| Proceeds from issuance of note payable | - | |||||||
| Proceeds from issuance of note payable, related party | - | |||||||
| Proceeds from issuance of convertible note payable, related party, net | - | |||||||
| Proceeds from short term advances, related parties | ||||||||
| Net cash provided by financing activities | ||||||||
| Net decrease in cash | ( | ) | ||||||
| Cash and cash equivalents - beginning of period | ||||||||
| Cash and cash equivalents - end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income tax | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities | ||||||||
| Investment at fair value received from issuance of note receivable | $ | $ | ||||||
| Beneficial conversion features on convertible notes payable - related party | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements
| 7 |
Note 1 – Business Organization and Nature of Operations
Balance Labs, Inc. (“Balance Labs” or the “Company”) was incorporated on June 5, 2014 under the laws of the State of Delaware. Balance Labs is a consulting firm that provides business development and consulting services to start up and development stage businesses. The Company offers services to help businesses in various industries improve and fine tune their business models, sales and marketing plans and internal operations as well as make introductions to professional services such as business plan writing, accounting firms and legal service providers.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited condensed consolidated financial position of Balance Labs as of September 30, 2021 and the unaudited condensed consolidated results of its operations and cash flows for the nine months ended September 30, 2021. The unaudited condensed consolidated results of operations for the nine months ended September 30, 2021 are not necessarily indicative of the operating results for the full year. It is recommended that these unaudited condensed consolidated financial statements be read in conjunction with the audited financial statements and related disclosures of the Company for the year ended December 31, 2020 which was filed with the Securities and Exchange Commission on March 31, 2021.
Note 2 – Going Concern
The
condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company used
$
There is substantial doubt about the Company to continue as a going concern. The Company without additional sources of debt or equity capital would potentially need to cease operations. Management plans to raise additional capital within the next twelve months that is expected to sustain its operations for the next year. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case of equity financing. In addition, the Company expects to begin a marketing campaign to market and sell its services. There can be no assurance that such a plan will successful.
The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
Note 3 – Summary of Significant Accounting Policies
Cash and Cash Equivalents
The
Company considers all highly liquid temporary cash investments with an original maturity of 90 days or less to be cash equivalents. At
September 30, 2021 and December 31, 2020, the Company has $
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Estimates may include those pertaining to stock-based compensation, depreciable lives of fixed assets and deferred tax assets. Actual results could materially differ from those estimates.
Accounts Receivable
Accounts receivable are recorded at fair value on the date revenue is recognized. The Company provides allowances for doubtful accounts by specific customer identification. If market conditions decline, actual collections may not meet expectations and may result in decreased cash flow and increased bad debt expense. Once collection efforts by the Company and its collection agency are exhausted, the determination for charging off uncollectible receivables is made.
| 8 |
BALANCE LABS, INC. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
As of September 30, 2021
(Unaudited)
Joint Venture
Balance Labs, Inc. and subsidiaries use the equity method to account for their financial interest in the following company:
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (unaudited) | ||||||||
| iGrow Systems Inc. (a) | $ | $ | ||||||
| Total | $ | $ |
Balance
Labs Inc., is a
The Company has a non-controlling interest in iGrow Systems, Inc., a Limited Partnership Corporation formed to develop a rapid plant growing device. Some of the members participate in the project which is under the general management of the members.
Summary information on the joint venture at September 30, 2021 and December 31, 2020 is as follows:
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (unaudited) | ||||||||
| Total Assets | $ | $ | ||||||
| Total Liabilities | ||||||||
| Shareholders’ Deficit | ( | ) | ( | ) | ||||
| Income | ||||||||
| Expenses | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
The
Company’s portion of the net loss for the three and nine months ended September 30, 2021 was $
| 9 |
BALANCE LABS, INC. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
As of September 30, 2021
(Unaudited)
Revenue Recognition
The Company accounts for its revenues under FASB ASC 606, which is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. The Company considers revenue realized or realizable and earned when all the five following criteria are met: (1) Identify the Contract with a Customer, (2) Identify the Performance Obligations in the Contract, (3) Determine the Transaction Price, (4) Allocate the Transaction Price to the Performance Obligations in the Contract, and (5) Recognize Revenue When (or As) the Entity Satisfies a Performance Obligation.
The Company recognizes consulting income when the services are performed, which occurs at a point in time. Additionally, at the time services are performed, the Company has satisfied its single performance obligation .
Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of items that have been included or excluded in the financial statements or tax returns. Deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse.
The Company adopted the provisions of Accounting Standards Codification (“ASC”) Topic 740-10, which prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
Management has evaluated and concluded that there are no material tax positions requiring recognition in the Company’s unaudited condensed consolidated financial statements as of September 30, 2021. The Company does not expect any significant changes in its unrecognized tax benefits within twelve months of the reporting date. The Company’s, 2018, 2019, and 2020 tax returns remain open for audit for Federal and State taxing authorities.
The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and administrative expenses in the statement of operations.
Marketable Securities
The Company accounts for marketable and available-for-sale securities under ASU 2016-01, “Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income.
The Company accounts for its investment in Bang Holdings, Corp as available-for-sale securities, therefore, the unrealized gain on the available-for-sale securities has been recorded in other income on the condensed consolidated statements of operations.
The Company accounts for its investment in EZFill Holdings, Inc. as available-for-sale securities pursuant to the S-1 Registration Statement declared effective on September 14, 2021, therefore, the unrealized gain on the available-for-sale securities during the three and nine months ended September 30, 2021 and 200 has been recorded in Other Income on the Income Statement.
| 10 |
Investments – Related Parties
The Company holds two investments on its Balance Sheet as of September 30, 2021 and December 31, 2020.
During
the three months ended September 30, 2021, our investment in Bang Holdings
Corp., was fully impaired due to the Company being delisted from OTC Pink Sheets and not having a liquid trading market at that time.
The Company recorded an impairment expense of $
On November 9, 2018, the Company acquired a non-controlling interest in iGrow Systems Inc. This investment is recorded on our consolidated balance sheet using the equity method as of September 30, 2021 and December 31, 2020.
On December 2, 2020, the Company received shares from EZFill Holdings, Inc, a related party, for past services, with each share valued at $each. At the time of acquiring these shares, EZFill Holdings, Inc. was not a publicly traded company.
On September 14, 2021, the S-1 Registration Statement for EZFill Holdings, Inc. was declared effective by the U.S. Securities and Exchange Commission. As a result of becoming a publicly traded company, our investment is now recorded at fair value as available-for-sale securities on September 30, 2021, with the gains and losses being recorded through other income on the consolidated statements of operations for the three and nine months then ended.
On November 18, 2020, the Company executed a two (2) year, third-party consulting agreement for various corporate services. In connection with this agreement, and with the effectiveness of the Company’s Form S-1 registration statement, the Company was entitled to compensation as follows:
●
shares of common stock having a fair value of $
●
$
●
During the first year of the agreement, $
●
During the second year of the agreement, $
● On each anniversary of the agreement, shares of common stock
Investments
The Company owned a majority interest
in Krypto Ventures Inc, formerly known as KryptoBank Co. On July 29, 2021, the Company exchanged shares of common stock in Krypto Ventures, Inc. for shares of common stock in W Technologies Inc. (“W Tech”), an unrelated party in a Share Exchange
Agreement. As of September 30, 2021, the investment has a fair value of $
On
January 29, 2021, the Company received
| 11 |
Deconsolidation of Subsidiary
In accordance with ASC Topic 810-10-40, a parent company must deconsolidate a subsidiary as of the date the parent ceases to have a controlling interest in that subsidiary and recognize a gain or loss in net income at that time.
The Company owned a majority interest in Krypto
Ventures Inc, formerly known as KryptoBank Co. On July 29, 2021, the Company exchanged shares of common stock in Krypto Ventures,
Inc. for shares of common stock in W Technologies Inc (“W Tech”), an unrelated party having a fair value of $
| Consideration | ||||
| Shares of common stock - W Technologies, Inc. | $ | |||
| Fair value of consideration received | $ | |||
| Recognized amounts of identifiable assets sold and liabilities assumed by W Tech: | ||||
| Cash | $ | |||
| Trademark | ||||
| Intangible assets – net | ||||
| Total assets assigned to W Tech | ||||
| Accounts payable and accrued expenses | ||||
| Due to Balance Labs, Inc. | ||||
| Due to Lyons Capital, LLC | ||||
| Note payable | ||||
| Total liabilities assumed by W Tech | ||||
| Total net liabilities assumed by W Tech | ||||
| Gain on deconsolidation of Krypto Ventures, Inc. | $ |
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash, cash equivalents and marketable
securities. As of September 30, 2021 and December 31, 2020, the carrying value of marketable securities was $
Principles of Consolidation
The
condensed consolidated financial statements include the Company and its wholly owned corporate subsidiaries, Balance Labs LLC., from
October 12, 2015, Balance AgroTech Co., from July 11, 2016, Advanced Auto Tech Co., from May 10, 2016, Balance Cannabis Co., from May
13, 2016, and Balance Medical Marijuana Co from December 22, 2015, and our former
The
Company has a non-controlling interest of
The
Company has a non-controlling interest of
| 12 |
BALANCE LABS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
As of September 30, 2021
(Unaudited)
Basic and diluted income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares and warrants from convertible debentures outstanding during the periods. The effect of and warrants and and shares from convertible notes payable for the nine months ended September 30, 2021, and 2020, respectively.
| For the | For the | |||||||
| three months ended | three months ended | |||||||
| September 30, 2021 | September 30, 2020 | |||||||
| Net income (loss) attributable to common stockholder for the period | $ | $ | ( | ) | ||||
| Weighted average number of shares outstanding | ||||||||
| Basic earnings per share | $ | $ | ( | ) | ||||
The following tables are for the computation of diluted earnings per share:
| For the | For the | |||||||
| three months | three months | |||||||
| ended | ended | |||||||
| September 30, 2021 | September 30, 2020 | |||||||
| Net income (loss) attributable to common stockholder for the period | $ | $ | ( | ) | ||||
| Add: Interest attributable to convertible debt | - | |||||||
| Adjusted net income attributable to common stockholder for the period | $ | $ | ( | ) | ||||
| Weighted average number of shares outstanding | ||||||||
| Add: Shares issued upon conversion of debt | - | |||||||
| Weighted average number of common and common equivalent shares | ||||||||
| Diluted earnings per share | $ | $ | ( | ) | ||||
| For the | For the | |||||||
| nine months ended | nine months ended | |||||||
| September 30, 2021 | September 30, 2020 | |||||||
| Net income (loss) attributable to common stockholder for the period | $ | $ | ( | ) | ||||
| Weighted average number of shares outstanding | ||||||||
| Basic earnings per share | $ | $ | ( | ) | ||||
The following tables are for the computation of diluted earnings per share:
| For the | For the | |||||||
| nine months | nine months | |||||||
| ended | ended | |||||||
| September 30, 2021 | September 30, 2020 | |||||||
| Net income (loss) attributable to common stockholder for the period | $ | $ | ( | ) | ||||
| Add: Interest attributable to convertible debt | - | |||||||
| Adjusted net income attributable to common stockholder for the period | $ | $ | ( | ) | ||||
| Weighted average number of shares outstanding | ||||||||
| Add: Shares issued upon conversion of debt | - | |||||||
| Weighted average number of common and common equivalent shares | ||||||||
| Diluted earnings per share | $ | $ | ( | ) | ||||
| 13 |
The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Awards granted to directors are treated on the same basis as awards granted to employees.
The Company has computed the fair value of warrants granted using the Black-Scholes option pricing model. The expected term used for warrants is the contractual life. Since the Company’s stock has not been publicly traded for a sufficiently long period, the Company is utilizing an expected volatility figure based on a review of the historical volatilities, over a period of time, equivalent to the expected life of the instrument being valued, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.
Fair Value of Financial Instruments
The Company measures its financial assets and liabilities in accordance with GAAP. For certain of our financial instruments, including cash, accounts payable, and the short-term portion of long-term debt, the carrying amounts approximate fair value due to their short maturities.
We adopted accounting guidance for financial and non-financial assets and liabilities (ASC 820). This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
| ● | Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. |
| ● | Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. |
| ● | Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use. |
| 14 |
BALANCE LABS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
As of September 30, 2021
(Unaudited)
The following table presents certain assets of the Company’s measured and recorded at fair value on the Company’s balance sheet on a recurring basis and their level within the fair value hierarchy as of September 30, 2021.
| Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Fair-value – equity securities | $ | $ | $ | $ | ||||||||||||
| Total Assets measured at fair value | $ | $ | $ | $ | ||||||||||||
The following table presents certain assets of the Company’s measured and recorded at fair value on the Company’s balance sheet on a recurring basis and their level within the fair value hierarchy as of December 31, 2020.
| Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Fair-value – equity securities | $ | $ | $ | $ | ||||||||||||
| Total Assets measured at fair value | $ | $ | $ | $ | ||||||||||||
The Company accounts for its investment in
EzFill Holdings, Inc. (“EzFill”) as available-for-sale securities. As of September 30, 2021, the Company reclassified its
EzFill investment of $
The Company accounts for its investment in
Bang Holdings, Corp as available-for-sale securities as level 3 due to unobservable inputs in which little or no market data exists.
The investment in Bang Holdings Corp. was fully impaired due to the Company being delisted from OTC Pink Sheets and not having a liquid
trading market at that time. The Company recorded an impairment expense of $
Business Segments
The
Company operates in
Advertising, Marketing and Promotional Costs
Advertising,
marketing, and promotional expenses are expensed as incurred and are included in selling, general and administrative expenses on the
accompanying unaudited condensed consolidated statement of operations. For the nine months ended September 30, 2021 and September 30,
2020, advertising, marketing, and promotion expense was $
Property and equipment
Property
and equipment consists of furniture and office equipment and is stated at cost less accumulated depreciation. Depreciation is determined
by using the straight-line method for furniture and office equipment, over the estimated useful lives of the related assets, generally
Expenditures for repairs and maintenance of equipment are charged to expense as incurred. Major replacements and betterments are capitalized and depreciated over the remaining useful lives of the related assets.
Property and equipment as of September 30, 2021 and December 31, 2020 consisted of the following:
September
30, (unaudited) | December 31, 2020 | |||||||
| Website | $ | $ | ||||||
| Computer equipment & Software | ||||||||
| Furniture | ||||||||
| Total | ||||||||
| Less Accumulated Depreciation | ( | ) | ( | ) | ||||
| Property and Equipment, net | $ | $ | ||||||
| 15 |
BALANCE LABS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
As of September 30, 2021
(Unaudited)
Depreciation
expense for the three months ended September 30, 2021, and 2020 totaled $
Depreciation
expense for the nine months ended September 30, 2021, and 2020 totaled $
During
the nine months ended September 30, 2021, the Company incurred $
During the three and nine months ended September 30, 2021, the Company recorded $
Intangible Assets
Intangible Assets as of September 30, 2021 and December 31, 2020 consisted of the following:
| Type | September 30, 2021 | December 31, 2020 | ||||||
| Trademarks | $ | - | $ | |||||
| Total – net | $ | $ | ||||||
There were no additions to Intangible Assets during the nine months ended September 30, 2021.
Recently Issued Accounting Pronouncements
The Company has evaluated all new accounting standards that are in effect and may impact its unaudited condensed consolidated financial statements and does not believe that there are any other new accounting standards that have been issued that might have a material impact on its financial position or results of operations.
| 16 |
BALANCE LABS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
As of September 30, 2021
(Unaudited)
Note 4 – Stockholders’ Equity
Authorized Capital
The Company is authorized to issue shares of common stock, $ par value, and shares of preferred stock, $ par value.
Non-Controlling Interest
On
December 28, 2017, the Company sold a non-controlling interest in its former subsidiary, Krypto Ventures Inc, formerly known
as KryptoBank Co. for $
Warrants
During
2015, the Company issued
During
2016, Balance Group LLC loaned the Company $
On
October 3, 2019, the Company received $
The following tables summarize warrants outstanding as of September 30, 2021 and the related changes during the periods are presented below.
| Number of Warrants | Weighted Average Exercise Price | |||||||
| Balance at December 31, 2020 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Expired | ( | ) | ||||||
| Balance at September 30, 2021 (unaudited) | $ | |||||||
As of September 30, 2021 the warrants had intrinsic value.
| 17 |
BALANCE LABS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
As of September 30, 2021
(Unaudited)
Note 5 – Note Receivable
On June 29, 2021, Balance Labs Inc. made a loan
to Krypto Ventures, Inc, formerly known as KryptoBank Co., a related party in the principal amount of $
On
January 29, 2021, Balance Labs Inc. made a loan to Four Acquisitions Ltd., an unrelated party in the principal amount of $
For
the three and nine months ended September 30, 2021, the Company recorded $
Note 6 – Related Party Transactions
The
Company’s CEO earns $
On
September 30, 2016, Balance Group LLC loaned $
During
2016, 2017, and 2019 Balance Group LLC loaned an additional $
On
June 27, 2021, the Company received $
On
July 9, 2021, Krypto Ventures, Inc. formerly known as KryptoBank Co. issued an unsecured promissory note in the amount of $
On June 29, 2021, Balance Labs Inc. made a loan
to Krypto Ventures, Inc, formerly known as KryptoBank Co., a related party in the principal amount of $
As
of September 30, 2021, the CEO and companies controlled by the CEO have loaned the Company a total of $
Krypto Ventures Inc, formerly known as
KryptoBank Co., as part of its initial funding, borrowed an additional $
On
July 27, 2016, the Company signed a sublease (the “Master Lease”) with an entity partially owned by a related party to sub-lease
approximately
| 18 |
BALANCE LABS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
As of September 30, 2021
(Unaudited)
On
October 3, 2019, The Company received $
On December 2, 2020, the Company received shares from EZFill Holdings Inc., a related party, in exchange for consulting services provided in the past and as part of an agreement between both parties. The shares are valued at $each. The shares received are not publicly traded. Each share valued at $1 each based on a recent cash price of the related party. The investment is reflected on the consolidated balance sheet as an investment in a related party. On September 14, 2021, the S-1 Registration Statement for EZFill Holdings, Inc. was declared effective by Securities and Exchange Commission. This investment is recorded at fair value as available-for-sale securities as of September 30, 2021 and using cost method as of December 31, 2020, with the gains and losses being recorded through other income on the consolidated income statement for the periods then ended.
During
January 2021, The Farkas Group, a related party, loaned the Company $
During
February 2021, The Farkas Group, a related party, loaned the Company $
During
March 2021, The Farkas Group, a related party, loaned the Company $
During
April 2021, The Farkas Group, a related party, loaned the Company $
During
May 2021, The Farkas Group, a related party, loaned the Company $
During
June 2021, The Farkas Group, a related party, loaned the Company $
During
August 2021, The Farkas Group, a related party, loaned the Company $
| 19 |
BALANCE LABS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
As of September 30, 2021
(Unaudited)
Note 7 – Commitments and Contingencies
Litigation, Claims and Assessments
In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s condensed consolidated financial position or results of operations.
Consulting Fees
The
Company will continue to pay its CEO $
Note 8 – Convertible Notes and Notes Payable
Notes Payable
As
of September 30, 2021, the CEO and companies controlled by the CEO have loaned the Company a total of $
On July 9, 2021, Krypto Ventures, Inc.
formerly known as KryptoBank Co. issued an unsecured promissory note in the amount of $
During
2016, 2017, and 2019, Balance Group loaned an additional $
Krypto
Ventures Inc, formerly known as KryptoBank Co., as part of its initial funding, borrowed an additional $
On
October 3, 2019, The Company received $
On
May 7, 2020, the Company (the “Borrower”) received a note payable in the amount of $
During
January 2021, The Farkas Group, a related party, loaned the Company $
During
February 2021, The Farkas Group, a related party, loaned the Company $
During
March 2021, The Farkas Group, a related party, loaned the Company $
During
April 2021, The Farkas Group, a related party, loaned the Company $
During
May 2021, The Farkas Group, a related party, loaned the Company $
During
June 2021, The Farkas Group, a related party, loaned the Company $
On
August 4, 2021, The Farkas Group, a related party, loaned the Company $
| 20 |
BALANCE LABS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
As of September 30, 2021
(Unaudited)
Convertible Notes Payable
On
December 23, 2015, the Company issued a secured convertible promissory note in the amount of $
On
April 1, 2016, the Company received $
On
September 30, 2016, Balance Group LLC loaned the Company $
On
June 27, 2021, the Company received $
Note 9 – Subsequent Events
On September 30, 2021,
Balance Labs Inc. made a loan to Four Acquisitions Ltd., an unrelated party in the principal amount of $
As previously disclosed in Note 3, the Company owned a majority interest in Krypto Ventures Inc, formerly known as KryptoBank Co. On July 29, 2021, the Company exchanged shares of common stock in Krypto Ventures, Inc. for shares of common stock in W Technologies Inc. (“W Tech”), an unrelated party in a Share Exchange Agreement. As a result, Krypto Ventures, Inc was deconsolidated and is no longer our subsidiary. On November 17, 2021, W Tech repurchased all the shares owned by the Company and the Company no longer owns any portion of Krypto Ventures Inc.’s and W Tech’s outstanding shares of common stock.
| 21 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of the condensed consolidated results of operations and financial condition of Balance Labs, Inc., and subsidiaries (“Balance Labs” or the “Company”) for the three and nine months ended September 30, 2021 should be read in conjunction with our condensed consolidated financial statements and the notes thereto that are included elsewhere in this Quarterly Report on Form 10-Q. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us,” “we,” “our,” and similar terms refer to Balance Labs. This Quarterly Report includes forward-looking statements, as that term is defined in the federal securities laws, based upon current expectations that involve risks and uncertainties, such as plans, objectives, expectations, and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. Words such as “anticipate,” “estimate,” “plan,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions are used to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain risk factors discussed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2021. Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.
Overview
We were incorporated on June 5, 2014 under the laws of the State of Delaware. We are a consulting firm that provides business development and consulting services to startup and development-stage companies. We provide businesses in various industries with customized consulting services to meet their business needs and help them improve their business models, sales and marketing plans and internal operations, as well as introduce these businesses to experienced professional contacts that would be vital to the success of these companies.
The Company is not a registered investment company under the Investment Company Act of 1940, as amended (the “1940 Act”) and does not engage primarily, in the business of investing, reinvesting, or trading in securities. The Company is not managed like an active investment vehicle, is not an investment company registered under the 1940 Act, and is not required to register under the 1940 Act.
Additionally, in accordance with the 1940 Act, Section 3(c)(1), the Company is not an Investment Company as defined by the 1940 Act because the Company does not have outstanding securities beneficially owned by more than one hundred persons and, at this time, the Company is not making and does not presently propose to make a public offering of its securities. Additionally, the Company has not and has no plans to purchase or acquire any securities issued by any registered investment company.
Our business focuses on providing advisement services to entrepreneurs and assisting business owners so that their ideas can be fully developed and implemented. Due to limited resources, lack of experienced management and competing priorities, startup and developmental stage companies are not operating as efficiently as they can be, and therefore would benefit from an outside party that could assist in developing and executing certain strategies. We utilize our knowledge in developing businesses, share practical experiences with our clients and introduce the business owners to experienced professionals who could help these inexperienced entrepreneurs further implement their ideas. Startups and development stage businesses across all industries commonly experience these certain “growing pains”.
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Plan of Operations
Our plan is to prepare our clients for the many inevitable challenges they will encounter and to develop a customized plan for them to overcome these obstacles, so that they can focus on marketing their product(s) and/or service(s) to their potential customers.
Although we’ve only worked with three clients since inception, our goal is to add and service a minimum of two to three new clients between now and the end of 2021. We’re marketing our services through both personal contact and online by (a) mining our existing network of professional contacts via personal outreach programs, which will also target international prospects that may wish to enter the US market; (b) expanding our network by attending targeted conferences and professional gatherings; and (c) utilizing our website at www.balancelabs.co, plus engaging potential clients on social media, including LinkedIn, Facebook and Twitter. However, because we have a limited budget allocated for our year one on-line marketing campaign, we anticipate that professionals within our professional network and personal referrals from companies that are satisfied with our professional services are likely to be our most significant and efficient near-term form of marketing.
The Company incorporated or formed nine subsidiaries since 2016, Balance Labs, LLC, Balance AgroTech Co., Advanced AutoTech Co., Balance Cannabis Co., Balance Medical Marijuana Co. Krypto Ventures Inc, formerly known as KryptoBank Co. , a former subsidiary. Except for Krypto Ventures Inc, formerly known as KryptoBank Co. all of the subsidiaries are wholly owned by the company. On July 29, 2021, the Company exchanged 52,500,000 shares of common stock in Krypto Ventures, Inc. for 119,584,736 shares of common stock in W Technologies Inc. (“W Tech”), an unrelated party in a Share Exchange Agreement. As a result, Krypto Ventures, Inc was deconsolidated and is no longer our subsidiary.
In November 2018, the Company acquired a non-controlling minority interest in a new startup company, iGrow Systems, Inc. As of September 30, 2021, this investment has a value of $0 based on the equity method of accounting. iGrow Systems, Inc., is developing a plant growing device for home use.
iGrow Systems, Inc., as part of its initial funding borrowed $15,000 from Krypto Ventures Inc. On July 15, 2019, Krypto Ventures Inc, formerly known as KryptoBank Co. converted the $15,000 note into 150,000 shares of common stock at a price of $0.10 per share.
Krypto Ventures Inc, as part of its initial funding, borrowed an additional $95,000 from its shareholders during the year ended December 31, 2018. The notes have a stated interest rate of 12% compounded annually and are due on demand. The balance outstanding as of July 29, 2021 is $112,167. The notes and accrued interest were deconsolidated as part of deconsolidation of Krypto Ventures, Inc.
On June 15, 2021, Krypto Ventures Inc, a Delaware corporation (“Krypto Ventures”), entered into a share exchange agreement (the “Share Exchange Agreement”) with (i) W Technologies, Inc., a Delaware corporation (“W Tech”), (ii) each of the stockholders of Krypto Ventures (the “Krypto Ventures Stockholders”) and (iii) Aleksandr Rubin as the representative of the Krypto Ventures Stockholders (the “Stockholders’ Representative”).
The Closing of the Share Exchange Agreement occurred on July 29, 2021. Pursuant to the terms of the Share Exchange Agreement, W Tech acquired 102,500,000 shares of Krypto Ventures’ common stock, representing 100% of the issued and outstanding capital stock of Krypto Ventures, in exchange for the issuance to the Krypto Ventures Stockholders of 233,474,958 shares of the W Tech’s common stock (the “Exchange”). Immediately prior to the closing of the Share Exchange Agreement, the Company owned 52,500,000 shares of common stock of Krypto Ventures which it exchanged for 119,584,736 shares of common stock of W Tech. As a result of the Exchange, the Company owned 46.1% of the issued and outstanding common stock of W Tech. On November 17, 2021, W Tech repurchased all the shares owned by the Company and the Company no longer owned any portion of Krypto Ventures Inc.’s outstanding shares of common stock and the Company no longer owns any portion of Krypto Ventures Inc. outstanding common stock.
In connection with the transaction, the Company entered into a lockup agreement pursuant to which the Company agreed, among other things, that they will not sell or transfer (subject to certain customary exceptions) any shares of the W Tech’s Common Stock for a period of 12 months following the Closing, and also agreed not to (i) offer for sale, sell, pledge or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of the W Tech’s Common Stock; (ii) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of the W Tech’s Common Stock, whether any such transaction is to be settled by delivery of shares of the W Tech’s Common Stock or other securities, in case or otherwise; or (iii) publicly disclose the intention to do any of the foregoing actions.
We believe that we can support our clients with our existing full-time staff, supplemented with part-time subcontracted professionals and service providers, as necessary. Between now and the end of 2021, we intend to formalize our relationships with these sub-contractors so that we can offer our clients turn-key business development products and services.
Our primary requirement for funding is for working capital in order to accommodate temporary imbalances between cash receipts and cash expenditures (see “Liquidity and Capital Resources”).
| 23 |
Results of Operations
Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020.
Overview
We reported a net income of $2,752,141 and net loss of $505,166 for the nine months ended September 30, 2021 and 2020, respectively. This represents a difference of $3,257,307, or 645%, primarily due to an increase in the unrealized gain of available for sale securities.
Revenues – Related Party
For the nine months ended September 30, 2021 and September 30, 2020, we generated $200,000 and $0, respectively in revenue. The primary reason or the increase in revenue was due to consulting agreement with EZFill Holdings, Inc. in connection with the effectiveness of the S-1 Registration, the Company received a one-time payment of $200,000 for consulting services from a related party.
General and Administrative Expenses
General and administrative expenses were $25,194 and $29,488 for the nine months ended September 30, 2021 and 2020, respectively, a decrease of $4,294 or 15% primarily due to a decrease in rent.
Professional Fees
Professional fees were $69,229 and $55,710 for the nine months ended September 30, 2021 and 2020, respectively, an increase of 24% due to an increase in accounting fees.
Other Income and Expense
Other income for the nine months ended September 30, 2021 was $2,842,911. Other expense for the nine months ended September 30, 2020 was $207,420. This represents a difference of 1,471% which was attributable to an increase in borrowing from related parties, amortization of debt discount and unrealized gain from available for sale securities, offset by accreted interest income and interest income on note receivable and gain on deconsolidation of Krypto Ventures, Inc. and gain on forgiveness of Paychex Protection Loan as described below. In addition, during the nine months ended September 30, 2021, our investment in Bang Holdings Corp., was fully impaired due to the Company being delisted from OTC Pink Sheets and not having a liquid trading market at that time. The Company recorded an impairment expense of $195,000.
Gain on Forgiveness of PPP Loan
On August 13, 2021, the Paycheck Protection Program (“PPP”) loan was 100% forgiven by the SBA. As a result, the Company recorded a gain on the forgiveness of the loan in the amount of $34,759.
Gain on Deconsolidation
On July 29, 2021, the Company exchanged 52,500,000 shares of common stock in Krypto Ventures, Inc. for 119,584,736 shares of common stock in W Technologies Inc., an unrelated party having a fair value of $0 due to the stock being illiquid. As a result, Krypto Ventures, Inc was deconsolidated and recognized a gain on deconsolidation of $153,907.
Unrealized gain or loss on available for sale securities
Unrealized gain on available for sale securities for the nine months ended September 30, 2021 was $3,069,500. Unrealized gain on available for sale securities for the nine months ended September 30, 2020 was $18,000. This represents an increase of $3,051,500 or 16,953% attributable to an investment in W Technologies, Inc. and a reduction in the stock price of the securities.
Net Loss allocated from Equity Method Investee
Net Loss allocated from Equity Method Investee for the nine months ended September 30, 2021 and September 30, 2020 was $72,756 and $71,455 respectively, an increase of 2% primarily due to a new investment made by the Company which incurred a loss during the period.
| 24 |
Three Months Ended September 30, 2021 Compared with Three Months Ended September 30, 2020.
Overview
We reported a net income of $3,120,504 and net loss of $270,894 for the three months ended September 30, 2021 and 2020, respectively. This represents a difference of $3,391,398, or 1,252%, primarily due to an increase in the unrealized gain of available for sale securities.
Revenues – Related Party
For the three months ended September 30, 2021 and September 30, 2020, we generated $200,000 and $0, respectively in revenue. The primary reason or the increase in revenue was due to consulting agreement with EZFill Holdings, Inc. in connection with the effectiveness of the S-1 Registration, the Company received a one-time payment of $200,000 for consulting services from a related party.
General and Administrative Expenses
General and administrative expenses were $7,386 and $6,584 for the three months ended September 30, 2021 and 2020, respectively, an increase of $802 or 12% primarily due to a decrease in rent expense offset by an increase in office expenses.
Professional Fees
Professional fees were $28,579 and $18,105 for the three months ended September 30, 2021 and 2020, respectively, an increase of $10,474 or 58% due to increase in accounting fees for the quarter.
Other Income and Expense
Other income for the three months ended September 30, 2021 was $3,020,320. Other expense for the three months ended September 30, 2020 was $184,487. This represents a difference of 1,737% which was attributable to an unrealized gain from available for sale securities, offset by accreted interest income, interest income on note receivable and gain on deconsolidation of Krypto Ventures, Inc. and gain on forgiveness of Paychex Protection Loan as described below. During the three months ended September 30, 2021, our investment in Bang Holdings Corp., was fully impaired due to the Company being delisted from OTC Pink Sheets and not having a liquid trading market at that time. The Company recorded an impairment expense of $195,000.
Gain on Forgiveness of PPP Loan
On August 13, 2021, the Paycheck Protection Program (“PPP”) loan was 100% forgiven by the SBA. As a result, the Company recorded a gain on the forgiveness of the loan in the amount of $34,759.
Gain on Deconsolidation
On July 29, 2021, the Company exchanged 52,500,000 shares of common stock in Krypto Ventures, Inc. for 119,584,736 shares of common stock in W Technologies Inc., an unrelated party having a fair value of $0 due to the stock being illiquid. As a result, Krypto Ventures, Inc was deconsolidated and recognized a gain on deconsolidation of $153,907.
Unrealized gain or loss on available for sale securities
Unrealized gain on available for sale securities for the three months ended September 30, 2021 was $3,090,000. Unrealized loss on available for sale securities for the three months ended September 30, 2020 was $110,000. This represents an increase of $3,200,000 or 2,909% attributable to an investment in W Technologies, Inc. and a reduction in the stock price of the securities.
Net Loss allocated from Equity Method Investee
Net Loss allocated from Equity Method Investee for the three months ended September 30, 2021 and September 30, 2020 was $19,608 and $22,220 respectively, an decrease of $2,612 or 12% primarily due to a new investment made by the Company which incurred a loss during the period.
Liquidity and Capital Resources
We measure our liquidity in a number of ways, including the following:
September 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| Cash | $ | 222,319 | $ | 5,632 | ||||
| Working capital (deficiency) | $ | (3,509,301 | ) | $ | (3,356,986 | ) | ||
Availability of Additional Funds
Except for the monthly consulting fee to our CEO and Chairman of the Board and the month-to-month lease of our office space, as described elsewhere in this Quarterly Report, we currently do not have any material commitments for capital expenditures. We are actively pursuing new client relationships. Even if we were to add a new client(s), due to our current lack of a diversified client base, there could be temporary imbalances between cash receipts and cash operating expenditures, which means that we may need additional capital. The engagement revenues associated with most client engagements will self-fund the in-house and sub-contractor services we need in order to supply products and services to our clients.
| 25 |
As of September 30, 2021, the Company had a working capital deficiency of $3,509,301. The Company used cash in operations of $53,993. The Company has raised $407,500 in debt financing from related parties, $25,000 issuance of note payable – related party, and $50,000 issuance of convertible note payable – related party, during the nine months ended September 30, 2021. In addition, the Company is working to manage its current liabilities while it continues to make changes in operations to further improve its cash flow and liquidity position.
Net Cash Used in Operating Activities
We experienced negative cash flows from operating activities for the nine months ended September 30, 2021 and September 30, 2020 in the amount of $53,993 and $173,759, respectively. This was primarily due to a net income of $2,752,141 offset by an unrealized gain on the value of an investment by $3,069,500, gain on deconsolidation of Krypto Ventures, Inc. of $153,907, gain on forgiveness of PPP loan of $34,500, impairment of investment in Bang Holdings, Corp of $195,000, change in accounts payable and accrued expenses by $93,716, net loss from equity method investee of $14,278 and accumulated losses on unconsolidated investees in excess of investment of $58,478
Net Cash Used in Investing Activities
Net cash used in investing activities during the nine months ended September 30, 2021 and September 30, 2020 was $186,820 and $17,500, respectively. During the nine months ended September 30, 2021, cash used in investing activities was $119,000 as a note receivable to an unrelated party, advances to related party of $5,142, improvements on the existing Krypto Ventures Inc, formerly known as KryptoBank website for $9,500 and cash disposed in deconsolidation of subsidiary of $53,718. During the nine months ended September 30, 2020, cash used in investing activities were for capital contributions to the joint venture and advances to a related party.
Net Cash Provided by Financing Activities
Net cash provided by financing activities during the nine months ended September 30, 2021 and September 30, 2020 was $457,500 and $187,450, respectively. Cash provided by financing activities during the nine months ended September 30, 2021, was $482,500 from related parties, an increase of $329,550 compared to the nine months ended September 30, 2020. During the nine months ended September 30, 2021, the Company also used $25,000 to fully pay an outstanding convertible note payable.
Our Auditors Have Issued a Going Concern Opinion
The Company’s independent registered public accounting firm has expressed substantial doubt as to the Company’s ability to continue as a going concern as of December 31, 2020. The unaudited condensed consolidated financial statements in this report on Form 10-Q have been prepared assuming that the Company will continue as a going concern. As discussed in the notes to the unaudited condensed consolidated financial statements, these conditions raise substantial doubt from the Company’s ability to continue as a going concern. The Company’s plans in regard to these matters are also described in the notes to the Company’s unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.
The Company anticipates the receipt of funding within such period, but there can be no assurance that it will occur. If the Company is unable to meet its internal revenue forecasts or obtain additional financing on a timely basis, it may have to delay vendor payments and/or initiate cost reductions, which would have a material adverse effect on the Company’s business, financial condition and results of operations, and ultimately it could be forced to discontinue the Company’s operations, liquidate, and/or seek reorganization under the U.S. bankruptcy code. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case of equity financing.
Furthermore, COVID-19 has also caused severe disruptions in transportation and limited access to the Company’s facilities resulting in limited support from its staff and professional advisors. This in turn has limited the Company’s resources in promoting its services and acquiring additional capital.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
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Critical Accounting Policies and Estimates
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Estimates may include those pertaining to accruals, stock-based compensation and income taxes. Actual results could materially differ from those estimates.
Revenue Recognition
The Company accounts for revenues under FASB ASC 606, which is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. The Company considers revenue realized or realizable and earned when all the five following criteria are met: (1) Identify the Contract with a Customer, (2) Identify the Performance Obligations in the Contract, (3) Determine the Transaction Price, (4) Allocate the Transaction Price to the Performance Obligations in the Contract, and (5) Recognize Revenue When (or As) the Entity Satisfies a Performance Obligation.
Recent Accounting Standards
We have implemented all new accounting standards that are in effect and may impact our consolidated financial statements and do not believe that there are any other new accounting standards that have been issued that might have a material impact on our financial position or results of operations.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of September 30, 2021.
The Company’s assessment identified certain material weaknesses which are set forth below:
Functional Controls, Lack of Audit Committee and Segregation of Duties
Because of the Company’s limited resources, there are limited controls over information processing.
The Company does not have an audit committee and therefore there is no independent review and independent oversight over the Company’s financial reporting.
There is an inadequate segregation of duties consistent with control objectives. Our Company’s management is composed of a small number of individuals resulting in a situation where limitations on segregation of duties exist. In order to remedy this situation, we would need to hire additional staff to provide greater segregation of duties. Currently, it is not feasible to hire additional staff to obtain optimal segregation of duties. Management will reassess this matter at end of the fiscal year to determine whether improvement in segregation of duty is feasible.
Accordingly, as the result of identifying the above material weakness we have concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the Company’s internal controls.
Management believes that the material weaknesses set forth above were the result of the scale of our operations and are intrinsic to our small size. Management believes these weaknesses did not have a material effect on our financial results and intends to take remedial actions upon receiving funding for the Company’s business operations.
This Quarterly Report on Form 10-Q does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report herein.
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Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
To the best of our knowledge, there are no material pending legal proceedings to which we are a party or of which any of our property is the subject. From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
Item 1A. Risk Factors.
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On June 27, 2021, the Company received $50,000 from the CEO in exchange for a convertible promissory note with a face value of $53,192 which bears 12% interest per annum and matures on June 27, 2022 or upon the Company raising $250,000 from investors, whichever occurs first. The difference between the amount received and the face value was recorded as a discount and is being amortized over the life of the note. Additionally, the note comes with a beneficial conversion feature which was also recorded as a discount and is being amortized over the life of the note. As of September 30, 2021 the remaining discount on the note is $5,191 and the Company has accrued interest of $1,644
The Company relied upon the exemption from registration provided under Section 4(a)(2) under the Securities Act for transactions not involving a public offering.
Item 3. Defaults Upon Senior Securities.
On October 3, 2019, The Company received $40,000 from The Foundation in exchange for a promissory note which bears 12% interest per annum and matured on October 10, 2020 or upon the Company raising $500,000 from outside investors, whichever occurs first. The promissory note is currently in default, and as of September 30, 2021, accrued interest on the note is $12,427. The promissory note comes with a warrant to purchase 40,000 shares of the Company’s stock with an exercise price of $1.00 per share and expires on October 10, 2022. The warrants have a relative fair value of $8,283, which was recorded as a debt discount which has been fully amortized.
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On September 30, 2016, Balance Group loaned $120,000 as a convertible note payable to the Company at an interest rate of 10%, due on October 1, 2017. $60,033 in interest has been accrued as of September 30, 2021. The loan is in default as of September 30, 2021.
During 2016, 2017, and 2019 Balance Group LLC loaned an additional $66,850 to the Company. The notes are in default and have an accrued interest balance of $25,081.
As of September 30, 2021, the CEO and companies controlled by the CEO have loaned the Company a total of $1,673,558 in addition to the convertible notes discussed above. The loans carry an interest rate of 8% and mature one year and one day from the date of the loan. The Company accrued interest of $311,994 on the loans, $1,220,899 of these loans are in default as of September 30, 2021.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits
*Filed herewith
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BALANCE LABS, INC. | ||
| Date: November 19, 2021 | By: | /s/ Michael D. Farkas |
| Michael D. Farkas | ||
| President, Chief Executive Officer Chief Financial Officer | ||
| (Principal Executive Officer and Principal Financial Officer) | ||
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