Notes
to Condensed Consolidated Financial Statements
As
of March 31, 2021 (Unaudited)
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
Company leverages its knowledge in developing businesses with entrepreneurs and start up companies’ management whereby it
creates a customized plan for them to overcome obstacles so that they can focus on marketing their product(s) and/or service(s)
to their potential customers.
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 March 31, 2021 and the
unaudited condensed consolidated results of its operations and cash flows for the three months ended March 31, 2021. The unaudited
condensed consolidated results of operations for the three months ended March 31, 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
$127,486 of cash in operating activities and currently has $7,646 in cash. There is substantial doubt about the Company to continue
as a going concern. This will not sustain the Company without additional funds. Management plans to raise additional capital within the
next twelve months that will sustain its operations for the next year. In addition, the Company will begin an active marketing campaign
to market 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 March 31, 2021 and December 31, 2020, the Company has $2,000 and $2,000 in cash equivalents, respectively.
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.
BALANCE
LABS, INC. and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
As
of March 31, 2021 (Unaudited)
Joint
Venture
Balance
Labs, Inc. and subsidiaries use the equity method to account for their financial interest in the following company:
|
|
|
|
March 31,
|
|
|
|
December 31,
|
|
|
|
|
|
2021
|
|
|
|
2020
|
|
|
iGrow Systems Inc. (a)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
a)
Balance Labs Inc., is a 43.15% owner of iGrow Systems Inc., as of March 31, 2021 and December 31, 2020, respectively.
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 follows:
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Total Assets
|
|
$
|
4,497
|
|
|
$
|
4,497
|
|
|
Total Liabilities
|
|
|
322,552
|
|
|
|
278,871
|
|
|
Shareholders’ Deficit
|
|
|
(318,055
|
)
|
|
|
(274,374
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
|
-
|
|
|
|
-
|
|
|
Expenses
|
|
|
48,681
|
|
|
|
219,027
|
|
|
Net Loss
|
|
$
|
(48,681
|
)
|
|
$
|
(219,027
|
)
|
The
Company’s portion of the net loss for the three months ended March 31, 2021 was $21,006, which exceeded its investment
in the joint venture by $138,584, which is recorded as a Current Liability in the unaudited condensed consolidated financial statements
under operating agreement.
BALANCE
LABS, INC. and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
As
of March 31, 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, and performance obligations are satisfied.
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 March 31, 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.
Investments
– Related Parties
When
the fair value of an investment is indeterminable, the Company accounts for its investments that are under 20% of the total equity
outstanding using the cost method. For investments in which the Company holds between 20-50% equity and is non-controlling are
accounted for using the equity method. For any investments in which the Company holds over 50% of the outstanding stock, the Company
consolidates those entities into their condensed consolidated financial statements herein. The Company holds two investments on
its Balance Sheet as of March 31, 2021. Our investment in Bang Holdings Corp., is recorded at fair value as available-for-sale
securities on March 31, 2021 and December 31, 2020, with the gains and losses being recorded through other income on the consolidated
income statement for the periods then ended. 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 March 31, 2021 and December 31,
2020.
On
December 2, 2020, the Company received 1,000,000 shares from EZFill Holdings, Inc, a related party, for past services, with
each share valued at $1 each. The shares received are not publicly traded. Each share valued at $1 each based on a recent
cash price of the related party. This investment is recorded on our consolidated balance sheet using the cost method as of
December 31, 2020.
Investments
On January 29, 2021, the Company received a
20% ownership in the business and related assets of Pharmacy No, 27, Ltd, a company based in Israel, as part of a Note Receivable
from an unrelated party (see Note 5). The business and related assets (collectively referred to as “the Pharmacy”) were
recently acquired by Four Acquisitions Ltd., the note receivable holder. The investment has a fair value of $43,000. This investment
is recorded on our consolidated balance sheet using the equity method as of March 31, 2021. No gain or loss has been recorded for this equity method investee as the Pharmacy has been closed since it was acquired
and is in the process of reopening.
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
during the three months ended March 31, 2021 and 2020 has been recorded in Other Income on the Income
Statement.
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 March 31, 2021 and December 31, 2020, the carrying value of marketable securities was
$210,000 and $215,500, respectively, which consist of common shares held in one (1) investment which currently is trading
on the Over-the-Counter Bulletin Board (OTCBB). The Company has classified this investment as a Level 3 asset on the fair value
hierarchy because the investment is valued using unobservable inputs, due to the fact that observable inputs are not available,
or situations in which there is little, if any, market activity for the asset or liability at the measurement date
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 51% majority owned subsidiary KryptoBank Co
from December 28, 2017. All intercompany transactions are eliminated. The Company’s four subsidiaries, Balance AgroTech
Co., Advanced AutoTech Co., Balance Cannabis Co., and Balance Medical Marijuana Co. are dormant. The Company has a non-controlling
interest of 43.15% in iGrow Systems Inc., which is not included in this consolidation for the period ended March 31, 2021 and
2020, respectively.
BALANCE
LABS, INC. and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
As
of March 31, 2021 (Unaudited)
Net
Income (Loss) Per Common Share
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 640,000 and 740,000 warrants and
3,279,236 and 3,003,137 shares from convertible notes payable for the three months ended March 31, 2021 and 2020, respectively,
were anti-dilutive.
Stock-Based
Compensation
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.
|
BALANCE
LABS, INC. and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
As
of March 31, 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 March 31, 2021.
|
|
|
Total
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
|
Fair-value
– equity securities
|
|
$
|
210,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
210,000
|
|
|
Total
Assets measured at fair value
|
|
$
|
210,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
210,000
|
|
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
|
|
$
|
215,500
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
215,500
|
|
|
Total Assets measured at fair value
|
|
$
|
215,500
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
215,500
|
|
The
following is a reconciliation of the level 3 Assets:
|
Beginning Balance as of December 31, 2020
|
|
$
|
215,500
|
|
|
|
|
|
|
|
|
Unrealized loss on (level 3) securities
|
|
|
(5,500
|
)
|
|
|
|
|
|
|
|
Ending Balance as of March 31, 2021 (unaudited)
|
|
$
|
210,000
|
|
Business
Segments
The
Company operates in one segment and therefore segment information is not presented.
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 three months ended March 31, 2021 and March
31, 2020, advertising, marketing and promotion expense was $1,956 and $929, respectively.
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 three to five years.
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 March 31, 2021 and December 31, 2020 consisted of the following:
|
|
|
March
31,
2021
|
|
|
December
31,
2020
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
Website
|
|
$
|
1,336
|
|
|
$
|
1,336
|
|
|
Computer
equipment & Software
|
|
|
5,358
|
|
|
|
5,358
|
|
|
Furniture
|
|
|
4,622
|
|
|
|
4,622
|
|
|
Total
|
|
|
11,316
|
|
|
|
11,316
|
|
|
Less
Accumulated Depreciation
|
|
|
(9,940
|
)
|
|
|
(9,900
|
)
|
|
Property
and Equipment, net
|
|
$
|
1,376
|
|
|
$
|
1,416
|
|
BALANCE
LABS, INC. and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
As
of March 31, 2021 (Unaudited)
Depreciation
expense for the three months ended March 31, 2021 and 2020 totaled $40 and $40, respectively. There were no additions during
the three months ended March 31, 2021.
Intangible
Assets
Intangible
Assets as of March 31, 2021 and December 31, 2020 consisted of the following:
|
|
|
|
March
31,
2021
|
|
|
December
31,
2020
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
Trademarks
|
|
|
$
|
2,836
|
|
|
$
|
2,836
|
|
|
Total
|
|
|
$
|
2,836
|
|
|
$
|
2,836
|
|
There
were no additions to Intangible Assets during the three months ended March 31, 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.
BALANCE
LABS, INC. and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
As
of March 31, 2021 (Unaudited)
Note
4 – Stockholders’ Equity
Authorized
Capital
The
Company is authorized to issue 500,000,000 shares of common stock, $0.0001 par value, and 50,000,000 shares of preferred stock,
$0.0001 par value.
Non-Controlling
Interest
On
December 28, 2017, the Company sold a non-controlling interest in its subsidiary, KryptoBank Co. for $500 equal to 9% of the outstanding
equity. On January 17, 2018 the Company sold an additional 40% in its subsidiary KryptoBank Co. for $4,500. As of March 31, 2021,
the non-controlling interest is 49% of the shares outstanding.
Warrants
During
2015, the Company issued 100,000 warrants as part of a convertible note offering. The fair value of the warrants was $19,965.
The warrants expired December 23, 2020.
During 2016, Balance Group LLC
loaned the Company $120,000. In addition to paying interest at 10%, the Company issued 600,000 warrants at an exercise price of
$1.00 per share expiring on September 30, 2021.
On
October 3, 2019, the Company received $40,000 from The Sammy Farkas 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. In conjunction with The Sammy Farkas Foundation agreement the Company issued warrants to purchase 40,000 shares of the
Company’s common stock at an exercise price of $1.00 per share expiring on October 10, 2022.
The
following tables summarize warrants outstanding as of March 31, 2021 and the related changes during the periods are presented
below.
|
Number of Warrants
|
|
Weighted Average Exercise Price
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
|
|
640,000
|
|
|
$
|
1.00
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2021 (unaudited)
|
|
|
640,000
|
|
|
$
|
1.00
|
|
As
of March 31, 2021 the warrants had an intrinsic value of $0.25 for each warrant.
BALANCE
LABS, INC. and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
As
of March 31, 2021 (Unaudited)
Note
5 – Note Receivable
On January 29, 2021, Balance Labs Inc. made a
loan to Four Acquisitions Ltd., an unrelated party in the principal amount of $119,000 which has an interest rate of 10% per annum and
a maturity date of January 28, 2022. Additionally, in connection with the loan, the Company received a 20% ownership in the business
and related assets of Pharmacy No, 27, Ltd, a company based in Israel. The business and related assets (collectively referred to as “the
Pharmacy”) were recently acquired by Four Acquisitions Ltd. This investment has a fair value of $43,000, which was recorded as
a discount from the note which will be amortized over the life of the note. For the three months ended March 31, 2021, the Company recorded
$7,206 in accreted interest income. The remaining discount as of March 31, 2021 is $35,794. For the three months ended March 31, 2021,
the Company recorded $1,989 of interest income in relation to this note.
Note 6
– Related Party Transactions
The
Company’s CEO earned $10,000 per month. The following compensation was recorded within general and administrative expenses
– related parties on the statements of operations: $30,000 and $30,000 for the three months ended March 31, 2021 and 2020,
respectively. As of March 31, 2021 and December 31, 2020, $756,659 and $726,659, respectively, of compensation was
unpaid and was included in accounts payable – related party on the consolidated balance sheet.
On
September 30, 2016, Balance Group LLC loaned $120,000 as a convertible note payable to the Company at an interest rate of 10%, due on
October 1, 2017. In addition, the Company issued 600,000 warrants at an execution price of $1.00 which expire on September 30, 2021.
See Note 8. The note is currently in default and has an accrued interest balance of $54,016.
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 $21,191.
As
of March 31, 2021, the CEO and companies controlled by the CEO have loaned the Company a total of $1,514,558 in addition
to the convertible note 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 $239,630 on the loans. $1,152,699 of these loans are in default as of March
31, 2021.
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 2200 square feet located at 1691 Michigan Ave, Miami Beach, Florida 33139, beginning August 1, 2016
and ending December 31, 2019 at a monthly base rental of $7,741 per month until July 31, 2017, $7,973 per month from August 1,
2017 to July 31, 2018, and $8,212 from August 1, 2018 to the sublease termination date. In addition to base rent, the Company
will have to pay 50% of the CAM charges as additional rent. On or about January 15, 2017, the Company was made aware that the
Master Lease for the office space was in default. Consequently, the Company ceased payments. On or about March 31, 2017, the Company
was served with an eviction notice as the Master Lease was still in default. The Company has partially settled the claim under
the sublease and has $16,725 accrued on its books to cover any further claims. Beginning October 2020, the Company is leasing
a virtual office with a new landlord: Spaces, paying only $99.75 per month. Rent expense for the three months ended March 31,
2021 and March 31, 2020 was $299 and $5,500, respectively.
iGrow
Systems, Inc., as part of its initial funding borrowed $15,000 from KryptoBank Co. On July 15, 2019, KryptoBank Co. converted
the $15,000 note into 150,000 shares of common stock at a price of $0.10 per share.
BALANCE
LABS, INC. and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
As
of March 31, 2021 (Unaudited)
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 March 31, 2021, accrued interest on the note is $7,080. 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.
On
December 2, 2020, the Company received 1,000,000 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 $1 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.
During
January 2021, The Farkas Group, a related party, loaned the Company $73,500, unsecured, for one year and one day at an interest
rate of 8%.
During
February 2021, The Farkas Group, a related party, loaned the Company $165,000, unsecured for one year and one day at an interest
rate of 8%.
During
March 2021, The Farkas Group, a related party, loaned the Company $10,000, unsecured for one year and one day at an interest rate
of 8%.
BALANCE
LABS, INC. and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
As
of March 31, 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.
Previously,
the Company entered into a litigation with Bang Holdings in order to have the restrictions on its shares removed. A settlement
was reached in which Bang Holdings agreed to remove the restriction on the Company’s shares. The Company’s shares
can now be traded on the open market.
Consulting
Fees
The
Company will continue to pay its CEO $10,000 per month as compensation on a month-to-month basis. It will be recorded in general
and administrative expenses-related parties on the consolidated statement of operations.
Note
8 – Convertible Notes and Notes Payable
Notes
Payable
As
of March 31, 2021, the CEO and companies controlled by the CEO have loaned the Company a total of $1,514,558 in addition
to the convertible note discussed below. 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 $239,630 on the loans. $1,152,699 of these loans are in default as of March
31, 2021.
During
2016, 2017, and 2019, Balance Group loaned an additional $66,850 at an interest rate of 8%. The notes are currently in default
and have an accrued interest balance of $21,191.
KryptoBank
Co., as part of its initial funding, borrowed an additional $100,000 from its shareholders during the years ended December 31,
2018 and 2017. The notes have a stated interest rate of 12% compounded annually and are due on demand. The balance outstanding
as of March 31, 2021 is $112,167. The Company has accrued interest of $34,296 as of March 31, 2021.
On
October 3, 2019, The Sammy Farkas Foundation, a related party, loaned the Company $40,000, the note bears 12% interest per annum
and matures on October 10, 2020 or upon the Company raising $500,000 from outside investors, whichever occurs first (see Note
6). 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 promissory note is currently in default, and as of March 31, 2021, accrued
interest on the note is $7,080. The warrants have a relative fair value of $8,283, which was recorded as a debt discount and amortized
over the life of the note. The debt discount has been fully amortized.
On
May 7, 2020, the Company (the “Borrower”) received a note payable in the amount of $34,500 from Wells Fargo Bank (the
“Lender”) as part of the Paycheck Protection Program under the CARES Act. The interest rate is 1%. Payments shall
be due and payable monthly in the amount of $1,463.85 commencing on September 2021. The note shall mature on May 3, 2022, at which
time all unpaid principal, accrued interest, and any other unpaid amounts shall be due and payable in full. Unless otherwise agreed,
all sums received from the borrower may be applied to interest, fees, principal, or any other amounts due to Lender in any order
at Lender’s sole discretion. The Borrower may apply for the loan to be forgiven in whole or in part. As of March 31, 2021,
the accrued interest on the note is $311. Furthermore, the Company plans on applying for Loan Forgiveness within the subsequent
weeks.
During
January 2021, The Farkas Group, a related party, loaned the Company $73,500, unsecured, for one year and one day at an interest
rate of 8%.
During
February 2021, The Farkas Group, a related party, loaned the Company $165,000, unsecured for one year and one day at an interest
rate of 8%.
During
March 2021, The Farkas Group, a related party, loaned the Company $10,000, unsecured for one year and one day at an interest rate
of 8%.
BALANCE
LABS, INC. and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
As
of March 31, 2021 (Unaudited)
Convertible
Notes Payable
On
December 23, 2015, the Company issued a secured convertible promissory note in the amount of $25,000. The note carries a rate
of 8% and was due on March 23, 2016. It is secured by all the assets of the Company. The note further contains a provision that
the lender may convert any part of the note, including accrued interest, that is unpaid into the Company’s common stock
at an exercise price of $0.50 per share. The note also contains a five-year warrant to purchase 100,000 shares of common stock
at an exercise price of $0.50 per share until December 23, 2020. As of March 23, 2016, the note is in default and the interest
rate has been increased to 18%. As of March 31, 2021, the accrued interest on the note is $27,388.
On
April 1, 2016, the Company received $500,000 from Newell Trading Group in exchange for a convertible debenture due April 2, 2017
bearing interest at 10% and convertible into common stock at $.25 per share unless the note is paid by the Company prior to the
election of the holder to convert. The Company recognized a beneficial conversion feature expense of $500,000 that has been fully
amortized. As of March 31, 2021, accrued interest on the note is $249,854. On October 3, 2019, Newell Trading Group assigned its
rights and interests in its $500,000 convertible debenture to the Sammy Farkas Foundation Inc., (the “Foundation”),
a related party. The Foundation then entered into an agreement with the Company to extend the maturity date of the convertible
debenture to October 10, 2024 in exchange for 54,000 shares of the Company’s stock. The shares have a fair value of $56,700
which was recorded as a debt discount and amortized over the life of the extension. On November 11, 2019, The Sammy Farkas
Foundation transferred all the rights and interests of the note to another party, 16th Avenue Associates. The terms remain the
same and the transfer has no effect on the financial statements. During the three months ended March 31, 2021, the Company
amortized $2,835 of debt discount. As of March 31, 2021, the remaining debt discount was $39,690.
On
September 30, 2016, Balance Group LLC loaned the Company $120,000 with an interest rate of 10% and is convertible into common
stock at $1.00. In addition, the Company issued the CEO 600,000 warrants and recorded a debt discount of $111,428, which has been
fully amortized. The Company valued the warrants using the Black-Scholes option pricing model with the following assumptions:
Expected volatility of 514%, expected life of five years, risk free rate of return of 1.14% and an expected divided yield of 0%.
The warrants had a fair value of $85,714. The note is currently in default and has an accrued interest balance of $54,016 as of
March 31, 2021.
Note
9 – Subsequent Transactions
During
April 2021, The Farkas Group, a related party, loaned the Company a
total of $82,000, unsecured, for one year and one day at an interest rate of 8%.
During May 2021, The Farkas
Group, a related party, loaned the Company a total of $10,000, unsecured, for one year and one day at an interest rate of 8%.
The
coronavirus pandemic may adversely impact our operations and demand for our products and services and our ability to find new
clients. This is due in part to restrictions such as: social distancing requirements; stay at home orders and the shutdown of
non-essential businesses and the impact these restrictions have on small businesses and their ability to generate revenues which
effects their ability to afford our services.