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.
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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
2022. 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 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 Descrypto Holdings, Inc. ("Descrypto")
(formerly W Technologies Inc.), 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 December 31, 2021, this
investment has no value based on the equity method of accounting. iGrow Systems,
Inc., is developing a plant growing device for home use.
Krypto Ventures Inc, as part of its initial funding, borrowed $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) Descrypto Holdings, Inc. ("Descrypto") (formerly W
Technologies Inc.), a Delaware corporation, (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, Descrypto 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 Descrypto'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 Descrypto.
As a result of the Exchange, the Company owned 46.1% of the issued and
outstanding common stock of Descrypto.
On November 18, 2021, the Company entered into a redemption agreement (the
"November Redemption Agreement") pursuant to which the Company agreed to sell,
and Descrypto agreed to purchase, an aggregate of 83,709,315 shares of
Descrypto's Common Stock owned by the Company for total proceeds of $84.
Following the November Redemption Agreement, the Company owned 35,875,421 shares
of Descrypto.'s Common Stock.
On February 18, 2022, the Company entered into a redemption agreement (the
"February Redemption Agreement") pursuant to which the Company agreed to sell,
and Descrypto agreed to purchase, an aggregate of 28,700,337 shares of
Descrypto.'s Common Stock owned by the Company for total proceeds of $287.
Following the February Redemption Agreement, the Company owned 7,175,084 shares
of Descrypto's 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
Descrypto.'s Common Stock for a period of 12 months following the Closing on
July 29, 2021, 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 Descrypto'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
Descrypto's Common Stock, whether any such transaction is to be settled by
delivery of shares of Descrypto's Common Stock or other securities, in case or
otherwise; or (iii) publicly disclose the intention to do any of the foregoing
actions.
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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 2022, 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, 2021 and December 31, 2020.
Overview
We reported a net loss attributable to the Company of $796,696 and a net income
attributable to the Company of $357,757 for the years ended December 31, 2021
and 2020, respectively, a difference of $(1,154,453) or 322.69%, primarily due
to an increase in the unrealized loss on available for sale securities and a
decrease in consulting income from a related party in the form of stock and
cash.
Revenues - Related Party
For the years ended December 31, 2021 and December 31, 2020, we generated
$624,590 and $1,000,000, respectively in revenue. The primary reason for the
decrease 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 and monthly payments totaling $624,590 for
consulting services from a related party in the form of stock and cash.
General and Administrative Expenses
General and administrative expenses were $29,963 and $36,909 for the years ended
December 31, 2021 and 2020, respectively, a decrease of $6,946 or 18.82%
primarily due to a decrease in rent.
Professional Fees
Professional fees were $104,729 and $73,440 for the years ended December 31,
2021 and 2020, respectively, an increase of 42.60% due to an increase in
accounting fees.
Salaries and Wages
Wages were $145,472 and $157,145 for the years ended December 31, 2021 and 2020,
respectively, an decrease of 7.43% due to a decrease in salaries expense.
Other Income and Expense
Other expenses for the year ended December 31, 2021 was $1,033,830. Other
expense for the year ended December 31, 2020 was $261,848. This represents a
difference of 294.82% which was attributable to an increase in interest expense
attributable to an increase in borrowing from related parties, amortization of
debt discount and unrealized loss 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 year ended December
31, 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.
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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 and accrued interest 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 Descrypto
Holdings, Inc. ("Descrypto") (formerly 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 loss on available for sale securities for the year ended December 31,
2021, was $822,533. Unrealized gain on available for sale securities for the
year ended December 31, 2020, was $38,500. This represents a decrease of
$861,033 or 2,236.45% attributable to an investment in EZFill Holdings, Inc. a
reverse stock split, 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 year ended December 31,
2021 and December 31, 2020 was $13,591 and $94,510 respectively, a decrease of
85.62% primarily due to investments made by the Company which incurred losses
during the year.
Liquidity and Capital Resources
We measure our liquidity in a number of ways, including the following.
December 31, 2021 December 31, 2020
Cash $ 227,558 $ 5,632
Working capital (deficiency) $ (3,513,015 ) $ (3,356,986 )
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.
As of December 31, 2021, the Company had a working capital deficiency of
$3,513,015. The Company used cash in operations of $56,896. The Company has
raised $482,500 in debt financing from related parties during the year ended
December 31, 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. 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, 2021 to December 31, 2021, entities controlled by the CEO made
short term advances to the Company of $407,500.
Net Cash Used in Operating Activities
We experienced negative cash flows from operating activities for the year ended
December 31, 2021 and December 31, 2020 in the amount of $56,896 and $218,002,
respectively. This was primarily due to a net loss of $809,404, gain on
deconsolidation of Krypto Ventures, Inc. of $153,907, gain on forgiveness of PPP
loan and accrued interest of $34,759 and investment received in exchange of
consulting services of $352,090 offset by an impairment of investment in Bang
Holdings, Corp of $195,000, an unrealized loss on the value of an investment by
$822,533, change in accounts payable and accrued expenses by $180,324 and change
in accounts payable and accrued expenses - related party by $120,000.
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Net Cash Used in Investing Activities
Net cash used in investing activities during the year ended December 31, 2021
and December 31, 2020 was $203,678 and $17,500, respectively. During the year
ended December 31, 2021, cash used in investing activities was $144,000 as a
note receivable to an unrelated party, 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 year ended December 31,
2020, cash used in investing activities were advances to a related party.
Net Cash Provided by Financing Activities
Net cash provided by financing activities during the year ended December 31,
2021 and December 31, 2020 was $482,500 and $231,950, respectively. Cash
provided by financing activities during the year ended December 31, 2021, was
$482,500 from related parties, an increase of $285,050 compared to the year
ended December 31, 2020.
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, 2021. 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.
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.
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.
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. 
