Notes
to Condensed Consolidated Financial Statements
As
of June 30, 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 June 30, 2021 and the unaudited condensed consolidated results of its
operations and cash flows for the six months ended June 30, 2021. The unaudited condensed consolidated results of operations for the
six months ended June 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
$185,053
of cash in operating activities during the six months ended
June 30, 2021 and currently has $109,579
in cash as of June 30, 2021. 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. 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 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
June 30, 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 June 30, 2021
(Unaudited)
Joint
Venture
Balance
Labs, Inc. and subsidiaries use the equity method to account for their financial interest in the following company:
Schedule of Equity Method Investments
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
iGrow Systems Inc. (a)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
|
a)
|
Balance Labs Inc., is a 43.15% owner of iGrow Systems Inc., as of June
30, 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:
Schedule of Joint Venture of Financial Information
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
Total Assets
|
|
$
|
4,497
|
|
|
$
|
4,497
|
|
|
Total Liabilities
|
|
|
365,973
|
|
|
|
278,871
|
|
|
Shareholders’ Deficit
|
|
|
(361,476
|
)
|
|
|
(274,374
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
|
-
|
|
|
|
-
|
|
|
Expenses
|
|
|
92,102
|
|
|
|
219,027
|
|
|
Net Loss
|
|
$
|
(92,102
|
)
|
|
$
|
(219,027
|
)
|
The
Company’s portion of the net loss for the three and six months ended June 30, 2021 was $18,736
and $39,742,
which exceeded its investment in the joint venture by $157,320
as of June 30, 2021,
which is recorded as accumulated losses of unconsolidated investees in excess of investment on the condensed consolidated balance
sheets.
BALANCE
LABS, INC. and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
As
of June 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, 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 June 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.
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 June 30,
2021. Our investment in Bang Holdings Corp., is recorded at fair value as available-for-sale securities on June 30, 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 June 30, 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 June 30, 2021 and December 31, 2020.
Investments
On
January 29, 2021, the Company received 20% ownership
of Pharmacy No, 27, Ltd, a company based in Israel, as part of a Note Receivable from an unrelated party (see Note 5). As of June
30, 2021 the investment has a fair value of $29,594,
and it is recorded on our consolidated
balance sheet using the equity method. During each three and six months ended June 30, 2021 the Company recorded $13,406
of unrealized loss from this investment
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 and six months ended June 30, 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 June 30, 2021 and December 31, 2020, the carrying value of marketable securities was $195,000
and $215,500,
respectively. The securities are included in the Investment at Fair Value – Related Party on the condensed consolidated balance
sheets, 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 Krypto Ventures
Inc, formerly known as KryptoBank Co from December 28, 2017, which was subsequently sold to W Technologies (see Note 9) and it
is no longer owned by the Company. 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 periods ended June 30, 2021 and 2020, respectively.
BALANCE
LABS, INC. AND SUBSIDIARIES
Notes
to Condensed Consolidated Financial Statements
As
of June 30, 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 3,113,334
shares from convertible notes payable for
the six months ended June 30, 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 June 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 June 30, 2021.
Schedule of Fair Value of Assets on Recurring Basis
|
|
|
Total
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Fair-value – equity securities
|
|
$
|
195,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
195,000
|
|
|
Total Assets measured at fair value
|
|
$
|
195,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
195,000
|
|
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:
Schedule of Reconciliation of Assets
|
Beginning Balance as of December 31, 2020
|
|
$
|
215,500
|
|
|
|
|
|
|
|
|
Unrealized loss on (level 3) securities
|
|
|
(20,500
|
)
|
|
|
|
|
|
|
|
Ending Balance as of June 30, 2021 (unaudited)
|
|
$
|
195,000
|
|
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 six months ended June 30, 2021 and June 30, 2020, advertising,
marketing, and promotion expense was $3,329 and $1,794, respectively. For the three months ended June 30, 2021 and June 30, 2020, advertising,
marketing, and promotion expense was $1,373 and $865, 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 June 30, 2021 and December 31, 2020 consisted of the following:
Schedule of Property and Equipment
|
|
|
June 30, 2021
(unaudited)
|
|
|
December 31,
2020
|
|
|
Website
|
|
$
|
10,836
|
|
|
$
|
1,336
|
|
|
Computer equipment & Software
|
|
|
5,358
|
|
|
|
5,358
|
|
|
Furniture
|
|
|
4,622
|
|
|
|
4,622
|
|
|
Total
|
|
|
20,816
|
|
|
|
11,316
|
|
|
Less Accumulated Depreciation
|
|
|
(11,316
|
)
|
|
|
(9,900
|
)
|
|
Property and Equipment, net
|
|
$
|
9,500
|
|
|
$
|
1,416
|
|
BALANCE
LABS, INC. AND SUBSIDIARIES
Notes
to Condensed Consolidated Financial Statements
As
of June 30, 2021
(Unaudited)
Depreciation
expense for the three months ended June 30, 2021 and 2020 totaled $40
and $40,
respectively. Depreciation expense for the six months ended June 30, 2021 and 2020 totaled $80 and $80, respectively. During the
six months ended June 30, 2021 the Company incurred $9,500
of capitalized costs towards the update of the
website. During each the three and six months ended June 30, 2021, the Company recorded $1,336 of amortization on website development
costs.
Intangible
Assets
Intangible
Assets as of June 30, 2021 and December 31, 2020 consisted of the following:
Schedule of Intangible Assets
|
|
|
June 30, 2021
(unaudited)
|
|
|
December 31,
2020
|
|
|
Trademarks
|
|
$
|
2,836
|
|
|
$
|
2,836
|
|
|
Total
|
|
$
|
2,836
|
|
|
$
|
2,836
|
|
There
were no additions to Intangible Assets during the six months ended June 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.
BALANCE
LABS, INC. AND SUBSIDIARIES
Notes
to Condensed Consolidated Financial Statements
As
of June 30, 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, Krypto Ventures Inc, formerly known as KryptoBank
Co. for $500
equal to 9%
of the outstanding equity. On January 17, 2018
the Company sold an additional 40%
in its subsidiary Krypto Ventures Inc, formerly
known as KryptoBank Co. for $4,500.
As of June 30, 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 June 30, 2021 and the related changes during the periods are presented below.
Summary of Warrants Outstanding
|
Number of Warrants
|
|
Weighted Average Exercise Price
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
|
|
640,000
|
|
|
$
|
1.00
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2021 (unaudited)
|
|
|
640,000
|
|
|
$
|
1.00
|
|
As
of June 30, 2021 the warrants had no intrinsic value.
BALANCE
LABS, INC. AND SUBSIDIARIES
Notes
to Condensed Consolidated Financial Statements
As
of June 30, 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 loan 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%
interest in the recently acquired business and
related assets of Four Acquisitions Ltd. Initially, this investment had 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 and six months ended
June 30, 2021, the Company recorded $10,603
and $17,809
in accreted interest income, respectively.
The remaining discount as of June 30, 2021 is $25,191.
For the three and six months ended June 30, 2021, the Company recorded $2,942 and $4,931,
respectively
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: $60,000 and $60,000 for the six months ended June 30, 2021 and 2020, respectively. As
of June 30, 2021 and December 31, 2020, $791,659 and $731,659, 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 $57,016.
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 $22,528.
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 of $3,192 was recorded as a discount and is being amortized over the life of the
note. Additionally, the note comes with a beneficial conversion feature of $3,799 which was also recorded as a discount and is being
amortized over the life of the note. For each three and six months ended June 30, 2021, the Company recorded $17 of amortization
of debt discount. As of June 30, 2021 the remaining discount on the note is $6,974
and the Company has accrued interest of $35.
As
of June 30, 2021, the CEO and companies controlled by the CEO have loaned the Company a total of $1,658,558
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 $271,917
on the loans. $1,169,899
of these loans are in default as of June
30, 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 six months ended
June 30, 2021 and June 30, 2020 was $599
and $11,133,
respectively. Rent expense for the three months ended June 30, 2021 and June 30, 2020 was $300 and $5,633, respectively.
BALANCE
LABS, INC. AND SUBSIDIARIES
Notes
to Condensed Consolidated Financial Statements
As
of June 30, 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 June 30, 2021, accrued interest on the note is $8,280. 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%.
During
April 2021, The Farkas Group, a related party, loaned the Company $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 $10,000, unsecured for one year and one day at an interest rate of 8%.
During
June 2021, The Farkas Group, a related party, loaned the Company $52,000, 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 June 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 $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 June 30, 2021, the CEO and companies controlled by the CEO have loaned the Company a total of $1,658,558
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 $271,917
on the loans. $1,169,899
of these loans are in default as of June
30, 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 $22,528.
Krypto
Ventures Inc, formerly known as 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 June 30, 2021 is $112,167.
The Company has accrued interest of $37,524
as of June 30, 2021.
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 June 30, 2021, accrued interest on the note is $8,280. 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
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 June 30, 2021, the accrued interest on the note is $398.
Furthermore, the Company applied for Loan Forgiveness. On August 13, 2021, the Company received notification that the loan
along with accrued interest were fully forgiven (See Note 9).
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%.
During
April 2021, The Farkas Group, a related party, loaned the Company $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 $10,000, unsecured for one year and one day at an interest rate of 8%.
During
June 2021, The Farkas Group, a related party, loaned the Company $52,000, 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 June 30, 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%. On April
14, 2021 the Company paid the full balance of the note, for a total of $52,545 which included $27,545 of accrued interest.
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 June 30,
2021, accrued interest on the note is $262,354.
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 and six months ended June 30, 2021, the Company amortized $2,836 and $5,671
of debt discount. During the three and
six months ended June 30, 2020, the Company amortized $2,835 and $5,670 of debt discount. As of June 30, 2021, the remaining debt
discount was $36,855.
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 $57,016 as of June 30, 2021.
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 of $3,192 was recorded as a discount and is being amortized over the life
of the note. Additionally, the note comes with a beneficial conversion feature of $3,799 which was also recorded as a discount and
is being amortized over the life of the note. For each three and six months ended June 30, 2021, the Company recorded $17 of
amortization of debt discount. As of June 30, 2021 the remaining discount on the note is $6,974
and the Company has accrued interest of $35.
Note
9 – Subsequent Transactions
On July 9, 2021, Krypto
Ventures, Inc. formerly known as KryptoBank Co. issued an unsecured promissory note in the amount of $25,000 to Lyons Capital LLC, a
significant shareholder of Krypto Ventures, Inc. The note carries an interest rate of 12% per annum and is due on the earlier of July
8, 2022 or the date on which Krypto Ventures, Inc. raises at least $200,000 from investors.
On
July 27, 2021 the shareholders of Krypto Ventures Inc, formerly known as KryptoBank Co., including the Company, agreed to change the
name from KryptoBank Co. to Krypto Ventures Inc.
On
July 29, 2021, the Company sold its minority interest in Krypto Ventures Inc, formerly known as KryptoBank
Co. to W Technologies Inc, an unrelated party, in exchange for 52,500,000 shares of common stock of W Technologies
Inc.
On
August 3, 2021 the Company applied for loan forgiveness for the $34,500
note received on May 7, 2020 from Wells
Fargo Bank as part of the Paycheck Protection Program under the
CARES Act. On August 13, 2021, the Company received notification that the loan, along with accrued interest were fully forgiven.
On August 4, 2021, The Farkas Group, a related
party, loaned the Company $15,000, 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.