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 three and six months ended June 30,
2021 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 March 31, 2021. 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 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 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, Balance Labs,
LLC, Balance AgroTech Co., Advanced AutoTech Co., Balance Cannabis Co., Balance
Medical Marijuana Co., and 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.
In November 2018, the Company acquired a non-controlling minority interest in a
new startup company, iGrow Systems, Inc. As of June 30, 2021, 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 Krypto
Ventures Inc. On July 15, 2019, Krypto Ventures Inc, formerly known as
KryptoBank Co. converted the $15,000 note into 150,000 shares of common stock at
a price of $0.10 per share.
Krypto Ventures Inc, 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 June 30, 2021 is $112,167.
On June 15, 2021, Krypto Ventures Inc, a Delaware corporation ("Krypto
Ventures"), entered into a share exchange agreement (the "Share Exchange
Agreement") with (i) W Technologies, Inc., a Delaware corporation ("W Tech"),
(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, W Tech 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 the W Tech'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 W Tech. As
a result of the Exchange, the Company now owns 46.1% of the issued and
outstanding common stock of W Tech and the Company no longer owns any portion of
Krypto Ventures Inc. outstanding 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 the W
Tech's Common Stock for a period of 12 months following the Closing, 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 the W Tech'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 the W Tech's Common Stock, whether
any such transaction is to be settled by delivery of shares of the W Tech's
Common Stock or other securities, in case or otherwise; or (iii) publicly
disclose the intention to do any of the foregoing actions.
We believe that we can support our clients with our existing full-time staff,
supplemented with part-time subcontracted professionals and service providers,
as necessary. Between now and the end of 2021, 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
Six Months Ended June 30, 2021 Compared with Six Months Ended June 30, 2020.
Overview
We reported a net loss of $368,363 and $234,272 for the six months ended June
30, 2021 and 2020, respectively. An increase of $134,091, or 57%, primarily due
to an increase in interest expense, and an unrealized loss in available for sale
securities.
Revenues
For the six months ended June 30, 2021 and June 30, 2020, we generated $0 in
revenue. This was due to the Company's inability to market its services. The
Company does not currently have any revenue producing clients.
General and Administrative Expenses
General and administrative expenses were $17,808 and $22,904 for the six months
ended June 30, 2021 and 2020, respectively, a decrease of $5,096 or 22%
primarily due to a decrease in rent.
Professional Fees
Professional fees were $40,650 and $37,605 for the six months ended June 30,
2021 and 2020, respectively, an increase of 8% due to an increase in accounting
fees.
Other Expense
Other expense for the six months ended June 30, 2021 and June 30, 2020 was
$177,409 and $22,933, respectively, an increase of 674% which was 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.
Unrealized gain or loss on available for sale securities
Unrealized loss on available for sale securities for the six months ended June
30, 2021 was $20,500. Unrealized gain on available for sale securities for the
six months ended June 30, 2020 was $128,000. This represents a decrease of
$148,500 or 116% attributable to 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 six months ended June 30,
2021 and June 30, 2020 was $53,148 and $49,235 respectively, an increase of 8%
primarily due to a new investment made by the Company which incurred a loss
during the period.
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Three Months Ended June 30, 2021 Compared with Three Months Ended June 30, 2020.
Overview
We reported a net loss of $185,190 and net income of $5,632 for the three months
ended June 30, 2021 and 2020, respectively. This represents a difference of
$190,822, or 3,388%, primarily due to an increase in the unrealized loss of
available for sale securities.
Revenues
For the three months ended June 30, 2021 and June 30, 2020, we generated $0 in
revenue. This was due to the Company's inability to market its services. The
Company does not currently have any revenue producing clients.
General and Administrative Expenses
General and administrative expenses were $11,908 and $12,516 for the three
months ended June 30, 2021 and 2020, respectively, a decrease of $608 or 5%
primarily due to a decrease in rent expense offset by an increase in office
expenses.
Professional Fees
Professional fees were $15,620 and $16,105 for the three months ended June 30,
2021 and 2020, respectively, a decrease of $485 or 3% due to slightly lower
accounting fees for the quarter.
Other Income and Expense
Other expense for the three months ended June 30, 2021 was $89,557. Other income
for the three months ended June 30, 2020 was $101,580. This represents a
difference of 188% which was attributable to an unrealized loss from available
for sale securities, offset by accreted interest income and interest income on
note receivable.
Unrealized gain or loss on available for sale securities
Unrealized loss on available for sale securities for the three months ended June
30, 2021 was $15,000. Unrealized gain on available for sale securities for the
three months ended June 30, 2020 was $179,000. This represents a decrease of
$194,000 or 108% attributable to 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 three months ended June
30, 2021 and June 30, 2020 was $32,142 and $26,231 respectively, an increase of
$5,911 or 23% primarily due to a new investment made by the Company which
incurred a loss during the period.
Liquidity and Capital Resources
We measure our liquidity in a number of ways, including the following:
June 30, December 31,
2021 2020
(Unaudited)
Cash $ 109,579 $ 5,632
Working capital (deficiency) $ (3,745,705 ) $ (3,356,986 )
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 June 30, 2021, the Company had a working capital deficiency of $3,745,705.
The Company used cash in operations of $185,053. The Company has raised $442,500
in debt financing from related parties during the six months ended June 30,
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.
Net Cash Used in Operating Activities
We experienced negative cash flows from operating activities for the six months
ended June 30, 2021 and June 30, 2020 in the amount of $185,053 and $120,006,
respectively. This was primarily due to a net loss of $368,363 offset by an
unrealized loss on the value of an investment by $20,500, change in accounts
payable and accrued expenses by $40,290, net loss from equity method investee of
$13,406 and accumulated losses on unconsolidated investees in excess of
investment of $39,742.
Net Cash Used in Investing Activities
Net cash used in investing activities during the six months ended June 30, 2021
and June 30, 2020 was $128,500 and $17,500, respectively. During the six months
ended June 30, 2021, cash used in investing activities was $119,000 as a note
receivable to an unrelated party and improvements on the existing Krypto
Ventures Inc, formerly known as KryptoBank website for $9,500. During the six
months ended June 30, 2020, 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 six months ended June 30,
2021 and June 30, 2020 was $417,500 and $136,450, respectively. Cash provided by
financing activities during the six months ended June 30, 2021 was $442,500 from
related parties, an increase of $340,550 compared to the six months ended June
30, 2020. During the six months ended June 30, 2021 the Company also used
$25,000 to fully pay an outstanding convertible note payable.
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 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. 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.
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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