The following discussion and analysis of the condensed consolidated results of
operations and financial condition of Balance Labs, Inc., and subsidiaries
("Balance Labs" or the "Company") for the nine months ended September 30, 2020
should be read in conjunction with our condensed consolidated financial
statements and the notes thereto that are included elsewhere in this Quarterly
Report on Form 10-Q. References in this Management's Discussion and Analysis of
Financial Condition and Results of Operations to "us," "we," "our," and similar
terms refer to Balance Labs. This Quarterly Report includes forward-looking
statements, as that term is defined in the federal securities laws, based upon
current expectations that involve risks and uncertainties, such as plans,
objectives, expectations and intentions. Actual results and the timing of events
could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors. Words such as "anticipate,"
"estimate," "plan," "continuing," "ongoing," "expect," "believe," "intend,"
"may," "will," "should," "could," and similar expressions are used to identify
forward-looking statements. We caution you that these statements are not
guarantees of future performance or events and are subject to a number of
uncertainties, risks and other influences, many of which are beyond our control,
which may influence the accuracy of the statements and the projections upon
which the statements are based. Our actual results could differ materially from
those anticipated in the forward-looking statements as a result of certain risk
factors discussed in our Annual Report on Form 10-K filed with the Securities
and Exchange Commission (the "SEC") on May 28, 2020. Any one or more of these
uncertainties, risks and other influences could materially affect our results of
operations and whether forward-looking statements made by us ultimately prove to
be accurate. Our actual results, performance and achievements could differ
materially from those expressed or implied in these forward-looking statements.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether from new information, future events or otherwise.
Overview
We were incorporated on June 5, 2014 under the laws of the State of Delaware. We
are a consulting firm that provides business development and consulting services
to startup and development-stage companies. We provide businesses in various
industries with customized consulting services to meet their business needs and
help them improve their business models, sales and marketing plans and internal
operations, as well as introduce these businesses to experienced professional
contacts that would be vital to the success of these companies.
The Company is not a registered investment company under the Investment Company
Act of 1940, as amended (the "1940 Act") and does not engage primarily, in the
business of investing, reinvesting, or trading in securities. The Company is not
managed like an active investment vehicle, is not an investment company
registered under the 1940 Act, and is not required to register under the 1940
Act.
Additionally, in accordance with the 1940 Act, Section 3(c)(1), the Company is
not an Investment Company as defined by the 1940 Act because the Company does
not have outstanding securities beneficially owned by more than one hundred
persons and, at this time, the Company is not making and does not presently
propose to make a public offering of its securities. Additionally, the Company
has not and has no plans to purchase or acquire any securities issued by any
registered investment company.
Our business focuses on providing advisement services to entrepreneurs and
assisting business owners so that their ideas can be fully developed and
implemented. Due to limited resources, lack of experienced management and
competing priorities, startup and developmental stage companies are not
operating as efficiently as they can be, and therefore would benefit from an
outside party that could assist in developing and executing certain strategies.
We utilize our knowledge in developing businesses, share practical experiences
with our clients and introduce the business owners to experienced professionals
who could help these inexperienced entrepreneurs further implement their ideas.
Startups and development stage businesses across all industries commonly
experience these certain "growing pains".
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Plan of Operations
Our plan is to prepare our clients for the many inevitable challenges they will
encounter and to develop a customized plan for them to overcome these obstacles,
so that they can focus on marketing their product(s) and/or service(s) to their
potential customers.
Although we've only worked with two clients since inception, our goal is to add
and service a minimum of two to three new clients between now and the end of
2020. We're marketing our services through both personal contact and online by
(a) mining our existing network of professional contacts via personal outreach
programs, which will also target international prospects that may wish to enter
the US market; (b) expanding our network by attending targeted conferences and
professional gatherings; and (c) utilizing our website at www.balancelabs.co,
plus engaging potential clients on social media, including LinkedIn, Facebook
and Twitter. However, because we have a limited budget allocated for our year
one on-line marketing campaign, we anticipate that professionals within our
professional network and personal referrals from companies that are satisfied
with our professional services are likely to be our most significant and
efficient near-term form of marketing.
The Company incorporated or formed six subsidiaries since 2016, BalanceLabs,
LLC, Balance AgroTech Co., Advanced AutoTech Co., Balance Cannabis Co., Balance
Medical Marijuana Co., and KryptoBank Co. 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 September 30, 2020, this
investment has a value of $0 based on the equity method of accounting. iGrow
Systems, Inc., is developing a plant growing device for home use.
iGrow Systems, Inc., as part of its initial funding borrowed $15,000 from
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 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 September 30, 2020 is $112,167.
We believe that we can support our year one clients with our existing full-time
staff, supplemented with part-time subcontracted professionals and service
providers, as necessary. Between now and the end of 2020, we intend to formalize
our relationships with these sub-contractors so that we can offer our clients
turn-key business development products and services.
Our primary requirement for funding is for working capital in order to
accommodate temporary imbalances between cash receipts and cash expenditures
(see "Liquidity and Capital Resources").
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Results of Operations
Nine Months Ended September 30, 2020 Compared with Nine Months Ended September
30, 2019.
Overview
We reported a net loss of $505,166 and $648,036 for the nine months ended
September 30, 2020 and 2019, respectively. A decrease of $142,870, or 22%,
primarily due to a reduction in salaries and wages.
Revenues
For the nine months ended September 30, 2020, and September 30, 2019 we
generated $0 and $3,333 in revenue, respectively. A decrease of 100% due to the
Company's inability to market its services because of COVID-19.
General and Administrative Expenses
General and administrative expenses were $29,488 and $48,187 for the nine months
ended September 30, 2020 and 2019, respectively, a decrease of 39% primarily due
to a decrease in office expenses as a direct result of the impact of COVID-19.
Professional Fees
Professional fees were $55,710 and $105,005 for the nine months ended September
30, 2020 and 2019, respectively, a decrease of 47% due to a reduction in legal
expenses as a consequence of no current outstanding litigations, offset by an
increase in accounting fees paid due to more extensive work required for the
filing of quarterly reports.
Interest expense
Interest expense for the nine months ended September 30, 2020 and September 30,
2019 was $153,965 and $114,881, respectively, an increase of 34% which was
attributable to an increase in borrowing from related parties and amortization
of debt discount.
Unrealized gain or loss on available for sale purchases
Unrealized loss on available for sale purchases for the nine months ended
September 30, 2019 was $29,500.Unrealized gain on available for sale purchases
for the nine months ended September 30, 2020 was $18,000, respectively, an
increase of $47,500 or 161% due to the rise in stock price of the securities.
Net Loss allocated from Equity Method Investee
Net Loss allocated from Equity Method Investee for the nine months ended
September 30, 2020 and September 30, 2019 was $71,455 and $50,791, respectively,
an increase of $20,664 or 41% due to an increase in operating expenses by the
investee.
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Three Months Ended September 30, 2020 Compared with Three Months Ended September
30, 2019.
Overview
We reported a net loss of $270,894 and $252,166 for the three months ended
September 30, 2020 and 2019, respectively. A change of $18,728, or 7%, primarily
due to a decrease in the value of an investment, and an increase in interest
expense, offset by a decrease in general and administrative expenses.
Revenues
For the three months ended September 30, 2020, and September 30, 2019 we
generated $0 in revenue. This was due to the Company's inability to market its
services.
General and Administrative Expenses
General and administrative expenses were $6,584 and $20,183 for the three months
ended September 30, 2020 and 2019, respectively, a decrease of 67% primarily due
to a decrease in rent and other general office expenses due to COVID-19.
Professional Fees
Professional fees were $18,105 and $14,777 for the three months ended September
30, 2020 and 2019, respectively, an increase of 23% due to higher accounting
fees.
Interest expense
Interest expense for the three months ended September 30, 2020 and September 30,
2019 was $52,267 and $39,446, respectively, an increase of 33% which was
attributable to an increase in borrowing from related parties and amortization
of debt discount.
Unrealized loss on available for sale purchases
Unrealized loss on available for sale purchases for the three months ended
September 30, 2020 and September 30, 2019 was $110,000 and $72,000,
respectively, an increase of $38,000 or 53% due to the fall in stock price of
the securities.
Net Loss allocated from Equity Method Investee
Net Loss allocated from Equity Method Investee for the three months ended
September 30, 2020 and September 30, 2019 was $22,220 and $3,000 respectively,
an increase of $19,220 or 641% due to an increase in operating expenses by the
investee.
Liquidity and Capital Resources
We measure our liquidity in a number of ways, including the following:
September 30, December 31,
2020 2019
(Unaudited)
Cash $ 5,375 $ 9,184
Working capital (deficiency) $ (3,193,293 ) $ (2,690,791 )
Availability of Additional Funds
Except for the monthly consulting fee to our CEO and Chairman of the Board and
the month-to-month lease of our office space, as described elsewhere in this
Quarterly Report, we currently do not have any material commitments for capital
expenditures. We are actively pursuing new client relationships. Even if we were
to add a new client(s), due to our current lack of a diversified client base,
there could be temporary imbalances between cash receipts and cash operating
expenditures, which means that we may need additional capital. The engagement
revenues associated with most client engagements will self-fund the in-house and
sub-contractor services we need in order to supply products and services to our
clients.
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As of September 30, 2020, the Company had a working capital deficiency of
$3,193,293. The Company used cash in operations of $173,759. The Company has
raised $152,950 in debt financing from related parties and $34,500 from Wells
Fargo Bank as part of the Paycheck Protection Program during the nine months
ended September 30, 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.
Net Cash Used in Operating Activities
We experienced negative cash flows from operating activities for the nine months
ended September 30, 2020 and September 30, 2019 in the amount of $173,759 and
$287,717, respectively. This was primarily due to a net loss of $505,166 and an
unrealized gain on the value of an investment by $18,000, partially offset by an
increase in accounts payable and accrued expenses by $173,797 followed by an
increase in net loss from equity method investee of $71,455.
Net Cash Used in Investing Activities
Net cash used in investing activities during the nine months ended September 30,
2020 and September 30, 2019 was $17,500 and $34,500, respectively. In both
periods, cash used in investing activities were for capital contributions to the
joint venture and advances to a related party.
Net Cash Provided by Financing Activities
Net cash provided by financing activities during the nine months ended September
30, 2020 and September 30, 2019 was $187,450 and $299,069, respectively. Cash
provided by financing activities during the nine months ended September 30, 2020
was $152,950 from related parties, a decrease of $144,650 compared to the nine
months ended September 30, 2019, and $34,500 from Wells Fargo Bank as part of
the Paycheck Protection Program.
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, 2019. The unaudited condensed consolidated financial statements
in this report on Form 10-Q have been prepared assuming that the Company will
continue as a going concern. As discussed in the notes to the unaudited
condensed consolidated financial statements, these conditions raise substantial
doubt from the Company's ability to continue as a going concern. The Company's
plans in regard to these matters are also described in the notes to the
Company's unaudited condensed consolidated financial statements. The unaudited
condensed consolidated financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying amounts or
the amount and classification of liabilities that might result should the
Company be unable to continue as a going concern.
The Company anticipates the receipt of funding within such period, but there can
be no assurance that it will occur. If the Company is unable to meet its
internal revenue forecasts or obtain additional financing on a timely basis, it
may have to delay vendor payments and/or initiate cost reductions, which would
have a material adverse effect on the Company's business, financial condition
and results of operations, and ultimately it could be forced to discontinue the
Company's operations, liquidate, and/or seek reorganization under the U.S.
bankruptcy code.
Furthermore, COVID-19 has also caused severe disruptions in transportation and
limited access to the Company's facilities resulting in limited support from its
staff and professional advisors. This in turn has limited the Company's
resources in promoting its services and acquiring additional capital.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
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Critical Accounting Policies and Estimates
Use of Estimates
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America ("GAAP") requires
us to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Estimates may include those pertaining to
accruals, stock-based compensation and income taxes. Actual results could
materially differ from those estimates.
Revenue Recognition
The Company accounts for revenues under FASB ASC 606, which is a comprehensive
new revenue recognition model that requires revenue to be recognized in a manner
to depict the transfer of goods or services to a customer at an amount that
reflects the consideration expected to be received in exchange for those goods
or services. The Company considers revenue realized or realizable and earned
when all the five following criteria are met: (1) Identify the Contract with a
Customer, (2) Identify the Performance Obligations in the Contract, (3)
Determine the Transaction Price, (4) Allocate the Transaction Price to the
Performance Obligations in the Contract, and (5) Recognize Revenue When (or As)
the Entity Satisfies a Performance Obligation.
Recent Accounting Standards
We have implemented all new accounting standards that are in effect and may
impact our consolidated financial statements and do not believe that there are
any other new accounting standards that have been issued that might have a
material impact on our financial position or results of operations.
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