Plan of Operations
Our plan of operations over the next 12 months is to continue to prepare our
clients for the many inevitable challenges they will encounter and to develop a
customized plan for them to help 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 an 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 six subsidiaries since 2015, BalanceLabs,
LLC., Balance AgroTech Co., Advanced AutoTech Co., Balance Cannabis Co., Balance
Medical Marijuana Co., and KryptoBank Co.
BalanceLabs LLC, is strictly a management company that provides necessary
administrative services to small companies. The Company's four subsidiaries,
Balance Agrotech Co., Advanced AutoTech Co., Balance Cannabis Co., and Balance
Medical Marijuana Co. are dormant as of December 31, 2020. Except for KryptoBank
Co., all of the subsidiaries are wholly owned by the Company.
In November 2018, the Company acquired a non-controlling minority interest in a
new startup company, iGrow Systems, Inc. As of December 31, 2020, this
investment has no value 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 received $68,791 from
BalanceLabs LLC as an investment and $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.
KryptoBank Co., as part of its initial funding, borrowed $5,000 from a
shareholder during the year ended December 31, 2017 and 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 December 31, 2020 is $142,235.
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We believe that we can support our clients with our existing full-time staff,
supplemented with part-time sub-contracted professionals and service providers,
as necessary. Between now and the end of 2021, we intend to formalize our
relationships with these subcontractors 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 negative cash flows from operations (see "Liquidity and
Capital Resources").
Results of Operations
For the years ended December 31, 2020 and December 31, 2019.
Overview
We reported a net income attributable to the Company of $357,757 and a net loss
attributable to the Company of $884,217 for the years ended December 31, 2020
and 2019, respectively, a difference of $1,241,974, or 140%, primarily due to
the Company receiving a $1,000,000 consulting income for past services from a
related party in the form of stock ownership, a decrease in professional fees
and salaries and wages, along with an increase in the unrealized gain from
available for sale purchases.
Revenues
For the year ended December 31, 2020, we generated $1,000,000 in revenue from a
related party for past services, related to the fair value of an investment in
exchange for consulting services. For the year ended December 31, 2019 we
generated $3,333 in revenue from a related party.
General and administrative expenses
General and administrative expenses were $36,909 and $60,990 for the years ended
December 31, 2020 and 2019, respectively, a decrease of $24,081 or 39%. The
decrease in cost was primarily due to a reduction in office rent.
Related party general and administrative expenses were $120,000 for the years
ended December 31, 2020 and December 31, 2019.
Interest expense
Interest expense for the years ended December 31, 2020 and 2019 was $205,838 and
$167,087, respectively, the increase is due to the issuance of new debt
instruments and amortization of warrants.
Professional Fees
Professional fees for the years ended December 31, 2020 and 2019 were $73,440
and $122,005 respectively, a decrease of $48,565 or 39%. The decrease was due to
less legal fees incurred throughout the year.
Liquidity and Capital Resources
We measure our liquidity in a number of ways, including the following.
December 31, 2020 December 31, 2019
Cash $ 5,632 $ 9,184
Working capital (deficiency) $ (3,356,987 ) $ (2,690,791 )
Availability of Additional Funds
Except for the monthly consulting fee to our CEO and Chairman of the Board and
the monthly lease of our virtual office, as described elsewhere in this annual
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.
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As of December 31, 2020, the Company had a working capital deficiency of
$3,356,987. The Company used cash in operations of $218,002. The Company has
raised $231,950 in debt financing from related parties during the year ended
December 31, 2020. 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. Based upon subsequent debt financing and
the Company's current cash flow projections, management believes the Company
will have sufficient capital resources to meet projected cash flow requirements
for the next year ended.
From January 1, 2020 to December 31, 2020, entities controlled by the CEO made
short term advances to the Company of $197,450.
Net Cash Used in Operating Activities
We experienced negative cash flows from operating activities for the years ended
December 31, 2020 and December 31, 2019 in the amount of $218,002 and $365,608,
respectively. This was primarily due to an unrealized gain of $38,500 on
available for sale securities, offset by a loss from equity method investment of
$94,510, a net income of $350,658 primarily due to an investment in a related
party valued at $1,000,000, received in exchange for consulting services
provided in the past, along with an increase in accounts payable and accrued
expenses by $353,293. The negative cash flow in 2019 was primarily due to an
unrealized loss of $43,000 on available for sale securities, $38,068 of
accumulated losses from an equity method investment, and a net loss of $889,888
partially offset by an increase in accounts payable and accrued expenses by
$351,902.
Net Cash Used in Investing Activities
Net cash used in investing activities during the years ended December 31, 2020
and December 31, 2019 was $17,500 and $70,000, respectively. In 2020 cash used
in investing activities of $17,500 was for advances to a related party. In 2019,
cash used in investing activities was primarily as capital contributions to the
Equity Method Investee.
Net Cash Provided by Financing Activities
Net cash provided by financing activities during the years ended December 31,
2020 and December 31, 2019 was $231,950 and $417,569, respectively. In 2020,
cash received through financing activities as of December 31, 2020 was $197,450
from related parties and notes payable of $34,500 from Wells Fargo as part of
the Paycheck Protection Program. For the year ended December 31, 2019 financing
activities were $418,600 of short-term advances from related parties and notes
payable of $2,600 from our consolidated subsidiary.
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 consolidated financial statements in this annual
report on Form 10-K have been prepared assuming that the Company will continue
as a going concern. As discussed in the notes to the consolidated financial
statements, these conditions raise substantial doubt from our independent
auditor about 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 consolidated financial statements. The 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.
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Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
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 its revenues under FASB ASC 606, 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.
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.
Recently Issued Accounting Pronouncements
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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BALANCE LABS, INC. 
