UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the fiscal year ended
or
For the transition period from ___________ to ___________
Commission
file number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of Identification No.) |
(I.R.S. Employer incorporation or organization) | |
| (Address of principal executive offices) | (Zip Code) |
(
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
Reporting Company | |
| Emerging
growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes
State
the aggregate market value of the voting and non-voting common equity held by non-affiliates (2,850,578 shares) computed by reference
to the price at which the common equity was last sold, ($0.75) as of the last business day of the registrant’s most recently completed
second fiscal quarter, June 30, 2021 $
As of March 31, 2022, the number of shares of common stock of the registrant outstanding is , par value $0.0001 per share.
TABLE OF CONTENTS
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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K contains “forward-looking statements”. Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “anticipate,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward looking statements.
We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Annual Report on Form 10-K and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.
These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the Annual Report on Form 10-K. All subsequent written and oral forward-looking statements concerning other matters addressed in this Annual Report on Form 10-K and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Annual Report on Form 10-K.
Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.
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PART I
Item 1. Business.
Overview
Balance Labs, Inc. was 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 businesses. With each client, our company provides 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 the businesses to experienced professional contacts that would be vital to the success of these businesses.
The Company is led by our President, CEO, CFO and Chairman of the Board, Michael D. Farkas, who is a seasoned entrepreneur and has worked in corporate finance and in assisting and developing businesses in multiple industries for the past twenty-six (26) years.
Along with Mr. Farkas, our management team consists of experienced business people in high-tech fields such as telecommunications, EV Charging infrastructure, laser technology, E-Cig and Vapor as well as the agricultural industry, specifically in the cultivation of olives and production of olive oil. Throughout the years while working with various companies, our management team recognized the need for an independent third party company that could help developmental stage and startup businesses create and implement a viable business model, assist them in developing marketing, promotional and merchandising plans.
Our business focuses on providing advice 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 different experienced professionals who could help these inexperienced entrepreneurs further implement their ideas. Startups and development stage businesses across all industries commonly experience certain “growing pains”. Our plan is to prepare our clients for many inevitable challenges and 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.
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Our Services
The Company will assist in the development and execution of the following services for our client companies:
| ● | Business model development, including marketing research, naming and branding |
| ● | Business plan writing |
| ● | Financial modeling |
| ● | Website mobile app development |
| ● | Employee and board member recruitment |
| ● | Patent/trademark filing assistance |
| ● | Professional introductions |
| ● | Product or service development |
| ● | Product production |
| ● | Develop marketing material |
| ● | Product or service placement |
| ● | Celebrity endorsements |
| ● | Introductions to professional services such as legal accounting |
| ● | In the future we plan to offer executive office sharing and additional ancillary services |
Target Market
The target market will consist of startup and developmental stage businesses located in the United States and abroad. We cater our services to startups and developmental stage companies that do not have the resources to execute or implement their business plan or ideas with the personnel in-house. Our client companies can derive value from our support and expertise with dealing with the typical growing pains and common mistakes experienced by startups.
Marketing and Sales
We are starting to become more active in the market by developing relationships initially with startups and development stage companies. In addition to personal relationships of the principals, we plan to use our website www.balancelabs.co to promote our services and provide a contact function that allows potential clients to reach us for additional information. The references to our website in this Annual Report on Form 10-K are inactive textual references only. The information on our website is not incorporated by reference into this Annual Report on Form 10-K. We may also utilize social media such as Facebook, Twitter and an online blog to increase our presence online and communicate the value we can add.
We do not have any specific marketing channels in place at this point to market our services to potential customers. In the next year ended we plan to market our services through word of mouth or personal referrals. We also plan to advertise in startup and development stage specific journals and online media. Referrals from companies that are satisfied with our provided services are likely to be our most significant and efficient form of marketing.
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Competition
Our primary source of competition will come from various service providers such as business plan writers, auditors, lawyers, marketing firms as well as many other types of service providers. In addition, those startups and development stage companies that have the resources and inclination to handle these tasks in-house will not need our services.
There are also numerous established firms that offer some combination of marketing, promotional and general consulting services to startup and development stage companies in the industry. In addition, there are a number of large and well-established general marketing agencies that provide strategy and implementation services to the industry as well as a number of other industries. We are in a very competitive market and may struggle to differentiate ourselves as a specialist that provides more value for startup and development stage companies.
Services Pricing
The cost for consulting projects will depend on the scope of the project and time required to execute it. We may charge a flat fee based on the services that our clients request from us, an hourly rate, revenue share or a combination of the above in order to provide our clients with as many cost effective options as possible. Additionally, all expenses incurred, including engaging third parties, travel as well as other approved expenses, will be passed through to the client for reimbursements.
Employees
We presently have no other employees other than our President, CEO and CFO, Michael Farkas, Secretary, Carmen Villegas, and General Counsel, Yechiel Baron. Over time, we may hire employees and/or engage additional independent contractors in order to execute our projects. These decisions will be made by our officers if and when appropriate.
Government Regulation
Our business activities currently are subject to no particular regulation by government agencies other than that routinely imposed on corporate businesses. We do not anticipate any regulations specific to our business activities in the future.
Seasonality
We do not have a seasonal business cycle.
Environmental Matters
Our business currently does not implicate any environmental regulation.
Intellectual Property
We do not hold any patents, trademarks or other registered intellectual property on services or processes relating to our business. With the exception of domain name and mobile app in the future, we do not consider the grant of patents, trademarks or other registered intellectual property essential to the success of our business.
Where You Can Find Us
The Company’s principal executive office and mailing address is 407 Lincoln Road, Suite 701, Miami Beach, FL. Our telephone number is (305) 907-7600.
We have registered the domain name of http://www.balancelabs.co.
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Item 1A. Risk Factors.
RISK FACTORS
You should carefully consider the risks described below together with all of the other information included in this Annual Report on Form 10-K before making an investment decision with regard to our securities. The statements contained in or incorporated herein that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, you may lose all or part of your investment.
Risks Related to Our Business
AN OCCURRENCE OF AN UNCONTROLLED EVENT SUCH AS THE COVID-19 PANDEMIC IS LIKELY TO NEGATIVELY AFFECT OUR OPERATIONS
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.
IF WE DO NOT OBTAIN ADDITIONAL FINANCING OR SUFFICIENT REVENUES, OUR BUSINESS WILL FAIL.
We have had limited operations since our formation. There can be no assurance that management of the Company will be successful in completing the Company’s business development plan, devise a marketing plan to successfully reach the companies in this field or that the Company will generate sufficient revenues to meet its expenses or to achieve or maintain profitability.
Our current operating funds are less than necessary to complete the full development of our business plan, and we most likely will need to obtain additional financing in order to complete our business plan. We currently have minimal operations and we are not currently generating revenue or net income.
The Company currently does not have sufficient funds to support its obligations. As a result, the Company will require additional financing to execute its business plan through raising additional capital and/or beginning to generate revenue.
We do not currently have any firm arrangements for financing, and we can provide no assurance to investors that we will be able to find such additional financing if required. Obtaining additional financing is subject to a number of factors, including current financial condition as well as general market conditions. These factors affect the timing, amount, terms or conditions of additional financing unavailable to us. And if additional financing is not arranged, the company faces the risk of going out of business. The Company’s management is currently engaged in actively pursuing multiple financing options in order to obtain the capital necessary to execute the Company’s business plan, however, there cannot be any assurance that additional funds will be available when needed from any source, or if available, will be available on terms that are acceptable to us.
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OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM HAS RAISED SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.
Our independent registered public accounting firm has expressed substantial doubt as to our ability to 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 our ability to continue as a going concern. Our plans in regard to these matters are also described in the notes to our 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 our company be unable to continue as a going concern.
We will require additional capital to implement our business plan and support our operations. Currently, we have no established bank financing arrangements. Therefore, depending on the revenue growth rate, we may need to seek additional financing through a future private offering of our equity or debt securities, or through strategic partnerships and other arrangements with corporate partners. We believe we will be successful in these efforts; however, there can be no assurance we will meet our internal revenue forecasts or, if necessary, be successful in raising additional debt or equity financing to fund our operations on terms agreeable to the company. These matters raise substantial doubt from our independent auditor about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might be necessary if we were unable to continue as a going concern. We presently do not have enough cash on hand to sustain our operations. If we are unable to meet our internal revenue forecasts or obtain additional financing on a timely basis, we may have to delay vendor payments and/or initiate cost reductions, which would have a material adverse effect on our business, financial condition and results of operations, and ultimately we could be forced to discontinue our operations, liquidate, and/or seek reorganization under the U.S. bankruptcy code.
ADDITIONAL FINANCING MAY ADVERSLY EFFECT TO YOUR INTEREST
If we raise additional capital through the issuance of equity or convertible debt securities, the percentage ownership of our company held by existing shareholders will be reduced and those shareholders may experience significant dilution. In addition, we may also have to issue securities that may have rights, preferences and privileges senior to our Common Stock. In the event we seek to raise additional capital through the issuance of debt or its equivalents, this will result in increased interest expense.
LIMITED EXPERIENCE IN MANAGING AND OPERATING A PUBLIC COMPANY
Our current management has limited experience managing and operating a public company and relies in many instances on the professional experience and advice of third parties including its attorneys and accountants. Failure to adequately comply with laws, rules, or regulations applicable to our business may result in fines or regulatory action, which may materially adversely affect our business, results of operations, or financial condition and could result in delays in the development of an active and liquid trading market for our stock.
SIGNIGFICANT COSTS TO BE A PUBLIC COMPANY
We may incur significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. In addition, we may not be able to absorb these costs of being a public company which will negatively affect our business operations. Based on our management’s reasonable estimates, we anticipate that our cost of being a public company, including legal, audit costs, printing, filing fees and other costs will be between $50,000 and $75,000 per year.
SIGNIFICANT ADVERSE IMPACT TO OUR CAPITAL RESERVE OF ANY LIABLE UNINSURABLE CLAIM
Although we are in the process of obtaining the necessary Director and Officer liability insurance, we do not have any insurance to cover potential risks and general liabilities, including, but not limited to, injuries or economic losses arising out of or relating to our omission or errors in providing our services. Even if we decide to obtain insurance coverage in the future, it is possible that: (1) we may not be able to get enough insurance to meet our needs; (2) we may have to pay very high premiums for the additional coverage; (3) we may not be able to acquire any insurance for certain types of business risk; or (4) we may have gaps in coverage for certain risks. We may be exposed to potential uninsured claims for which we could have to expend significant amounts of capital. Consequently, if we were found liable for a significant uninsured claim in the future, we may be forced to expend a significant amount of our capital to resolve the uninsured claim.
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COMPLETE CONTROL OVER THE COMPANY
Our majority shareholder, Balance Holdings, LLC, which our Chairman of the Board, Michael D. Farkas has investing and dispositive power of, beneficially own approximately 59.9% of our common stock. Mr. Farkas also has investing and dispositive power of Shilo Holding Group LLC, which own approximately 5.08% of our common stock. Therefore, Mr. Farkas is able to exercise control over all matters requiring shareholder approval, including the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions, and he also has significant control over our management and policies. The directors elected thereof will be able to significantly influence decisions affecting our capital structure. This control may have the effect of delaying or preventing changes in control or changes in management, or limiting the ability of our other shareholders to approve transactions that they may deem to be in their best interest.
DEPENDENCE ON KEY PERSONNEL
We will be dependent on services from our management team, including Chairman of the Board, CEO and CFO, Michael D. Farkas and Secretary Carmen Villegas. The loss of our officers and/or key employees could have a material adverse effect on the operations and prospects of the Company. Our management is expected to handle all marketing and sales efforts and manage the operations. Their responsibilities include formalizing business arrangements with third party service providers, directing the development of the Company website and other online communication tools, and formulating marketing materials to be used during presentations and meetings. At this time, we do not have an employment agreement with Ms. Villegas, though the Company may enter into such an agreement with her on terms and conditions usual and customary for its industry. The Company does have an employment agreement with Mr. Farkas. The Company does not currently have “key man” life insurance on Ms. Villegas, or Mr. Farkas.
HIGHLY COMPETITIVE MARKET
There are numerous established companies that offer some combination of marketing, promotional and general consulting services to startup and development stage companies in the industry. In addition, there are a number of large and well-established full-service consulting firms that provide strategy and implementation services to a broad spectrum of industries. We are a new entry into this competitive market and may struggle to differentiate ourselves as a specialist that provides more value for startup and development stage companies.
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INDEMNIFICATION AND LIMITATION OF LIABILITY
Our Certificate of Incorporation and By-Laws include provisions that eliminate the personal liability of the directors of the Company for monetary damages to the fullest extent possible under the laws of the State of Delaware or other applicable law. These provisions eliminate the liability of directors to the Company and its stockholders for monetary damages arising out of any violation of a director of his fiduciary duty of due care. Under Delaware law, however, such provisions do not eliminate the personal liability of a director for (i) breach of the director’s duty of loyalty, (ii) acts or omissions not in good faith or involving intentional misconduct or knowing violation of law, (iii) payment of dividends or repurchases of stock other than from lawfully available funds, or (iv) any transaction from which the director derived an improper benefit. These provisions do not affect a director’s liabilities under the federal securities laws or the recovery of damages by third parties.
POTENTIAL CLIENTS MAY NOT HAVE THE FUNDS OR THE NEED TO OUT SOURCE THIS WORK
Some companies have the resources to handle the strategy and implementation of these services in-house. Other companies may have limited available resources which will prohibit them from engaging us to help them develop and implement their strategy. Therefore, we risk having a limited niche potential client base.
COMPANY MAY RELY UPON INDEPENDENT CONTRACTORS TO IMPLEMENT SOLUTIONS
In order to implement our services at a scale commensurate with the business plan, we will most likely engage independent contractors who will need to be mentored and actively managed to ensure that their work product meets the standards of our Company. Recruiting, engaging, contracting and maintaining independent contractors who can perform this work could cause delays, unplanned expenses and other adverse results for the Company.
REPORTING REQUIREMENTS UNDER THE EXCHANGE ACT AND COMPLIANCE WITH THE SARBANES-OXLEY ACT OF 2002, INCLUDING ESTABLISHING AND MAINTAINING ACCEPTABLE INTERNAL CONTROLS OVER FINANCIAL REPORTING, ARE COSTLY AND MAY INCREASE SUBSTANTIALLY.
The rules and regulations of the SEC require a public company to prepare and file periodic reports under the Exchange Act, which will require that the Company engage legal, accounting, auditing and other professional services. The engagement of such services is costly. Additionally, the Sarbanes-Oxley Act of 2002 (the “Sarbanes- Oxley Act”) requires, among other things, that we design, implement and maintain adequate internal controls and procedures over financial reporting. The costs of complying with the Sarbanes-Oxley Act and the limited technically qualified personnel we have may make it difficult for us to design, implement and maintain adequate internal controls over financial reporting. In the event that we fail to maintain an effective system of internal controls or discover material weaknesses in our internal controls, we may not be able to produce reliable financial reports or report fraud, which may harm our overall financial condition and result in loss of investor confidence and a decline in our share price.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act of 2010 and other applicable securities rules and regulations. Despite recent reforms made possible by the JOBS Act, compliance with these rules and regulations will nonetheless increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer an “emerging growth company.” The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and operating results.
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We are working with our legal, independent accounting and financial advisors to identify those areas in which changes should be made to our financial and management control systems to manage our growth and our obligations as a public company. These areas include corporate governance, corporate control, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas. However, we anticipate that the expenses that will be required in order to adequately prepare for being a public company could be material. We estimate that the aggregate cost of increased legal services; accounting and audit functions; personnel, such as a chief financial officer familiar with the obligations of public company reporting; consultants to design and implement internal controls; and financial printing alone will be a few hundred thousand dollars per year and could be several hundred thousand dollars per year. In addition, if and when we retain independent directors and/or additional members of senior management, we may incur additional expenses related to director compensation and/or premiums for directors’ and officers’ liability insurance, the costs of which we cannot estimate at this time. We may also incur additional expenses associated with investor relations and similar functions, the cost of which we also cannot estimate at this time. However, these additional expenses individually, or in the aggregate, may also be material.
In addition, being a public company could make it more difficult or more costly for us to obtain certain types of insurance, including directors’ and officers’ liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.
The increased costs associated with operating as a public company may decrease our net income or increase our net loss, and may cause us to reduce costs in other areas of our business or increase the prices of our products or services to offset the effect of such increased costs. Additionally, if these requirements divert our management’s attention from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations.
IF WE FAIL TO MAINTAIN EFFECTIVE INTERNAL CONTROLS OVER FINANCIAL REPORTING, THE PRICE OF OUR COMMONG STOCK MAY BE ADVERSELY AFFECTED.
We are required to establish and maintain appropriate internal controls over financial reporting. During the year ended December 31, 2021, we carried out an evaluation, under the supervision and with the participation of our management, including the principal executive officer and the principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation and due to the lack of segregation of duties due to small Company staff size our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this report. Failure to establish those controls, or any failure of those controls once established, could adversely affect our public disclosures regarding our business, prospects, financial condition or results of operations. In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.
Risks Related to Our Common Stock
THERE IS A LIMITED PUBLIC MARKET FOR OUR SECURITIES
Our common stock is not listed on any national securities exchange. Accordingly, investors may find it more difficult to buy and sell our shares than if our common stock was traded on an exchange. Although our common stock is quoted on the OTC Pink, it is an unorganized, inter-dealer, over-the-counter market which provides significantly less liquidity than the NASDAQ Capital Market or other national securities exchange. These factors may have an adverse impact on the trading and price of our common stock. And our common stock may be less attractive for margin loans, for investment by financial institutions, as consideration in future capital raising transactions or other purposes.
NOT LIKELY TO PAY DIVIDENDS
We currently intend to retain any future earnings for use in the operation and expansion of our business. Accordingly, we do not expect to pay any dividends in the foreseeable future, but will review this policy as circumstances dictate.
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WE ARE SUBJECT TO THE SEC’S “PENNY STOCK” RULES
We are subject to the SEC’s “penny stock” rules if our shares of Common Stock sell below $5.00 per share. Penny stocks generally are equity securities with a price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer’s confirmation.
In addition, the penny stock rules require that prior to a transaction, the broker dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for shares of our Common Stock. As long as our shares of Common Stock are subject to the penny stock rules, the holders of such shares of Common Stock may find it more difficult to sell their securities.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
The Company’s mailing address is 407 Lincoln Road, Suite 701, Miami Beach, FL. Our telephone number is (305) 907-7600.
Item 3. Legal Proceedings.
To the best of our knowledge, there are no material pending legal proceedings to which we are a party or of which any of our property is the subject. From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
Item 4. Mine Safety Disclosures.
Not Applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
The Company’s common stock is currently quoted on the OTC Market Pink under symbol BLNC. Our stock is thinly traded and there is no active trading market developed for our shares of common stock. The following table sets forth the high and low bid prices per share of common stock for the periods indicated. These prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.
| Common Stock | ||||||||
| High | Low | |||||||
| Fiscal Year Ended December 31, 2020: | ||||||||
| Fiscal Quarter Ended March 31, 2020 | $ | 0.75 | $ | 0.75 | ||||
| Fiscal Quarter Ended June 30, 2020 | $ | 0.75 | $ | 0.75 | ||||
| Fiscal Quarter Ended September 30, 2020 | $ | 0.75 | $ | 0.30 | ||||
| Fiscal Quarter Ended December 31, 2020 | $ | 1.00 | $ | 0.30 | ||||
| Fiscal Year Ended December 31, 2021: | ||||||||
| Fiscal Quarter Ended March 31, 2021 | $ | 1.25 | $ | 0.75 | ||||
| Fiscal Quarter Ended June 30, 2021 | $ | 1.25 | $ | 0.51 | ||||
| Fiscal Quarter Ended September 30, 2021 | $ | 1.00 | $ | 1.00 | ||||
| Fiscal Quarter Ended December 31, 2021 | $ | 0.72 | $ | 0.72 | ||||
Holders
As of March 31, 2022, we had approximately 52 holders of our common stock.
Dividends
To date, we have not declared or paid any dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future on our common stock. Although we intend to retain our earnings, if any, to finance the exploration and growth of our business, our Board of Directors has the discretion to declare and pay dividends in the future.
Payment of dividends in the future will depend upon our earnings, capital requirements, and any other factors that our Board of Directors deems relevant.
Equity Compensation Plan Information:
The Company does not have any equity compensation plan.
Recent Sales of Unregistered Securities:
On June 27, 2021, the Company received $50,000 from its 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 was recorded as a discount and is being amortized over the life of the note. Additionally, the note comes with a beneficial conversion feature which was also recorded as a discount and is being amortized over the life of the note. As of December 31, 2021 the remaining discount on the note is $3,428 and the Company has accrued interest of $3,253.
The Company relied upon the exemption from registration provided under Section 4(a)(2) under the Securities Act for transactions not involving a public offering.
Item 6. Selected Financial Data.
Smaller reporting companies are not required to provide the information for this item.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.
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.
| 13 |
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.
| 14 |
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.
| 15 |
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.
| 16 |
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.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Not required for smaller reporting companies.
Item 8. Financial Statements.
| 17 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of:
Balance Labs, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Balance Labs, Inc. and Subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the consolidated financial statements). In our opinion the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statement, the Company has experienced net losses since inception and negative cash flows from operations and has relied on loans from related parties to fund its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Revenues received from related party in exchange for services
As described in Note 3 to the consolidated financial statements, the Company received investment securities in the form of shares as well as cash payment from a related party in exchange for past and current consulting services provided to a related party. The Company recognized the revenues from related party during the year ended December 31, 2021.
Evaluating the identification of related party transaction and auditing the revenue recognized in the form of shares is highly judgmental as it involves a high degree of auditor judgment and subjectivity due to the management’s assessment and methodologies used in the valuation and the significant assumptions used by the Company.
To test the proper revenue recognition and identification of related party transaction, we performed audit procedures that included, among others, performing substantive testing on the existence of customer arrangements, inquiring of management to gain an understanding of the nature and scope of the related consulting service, reading public filings of the related party and evaluating the sufficiency of audit evidence obtained by assessing the results of procedures performed over the identification of related party transactions. To test the proper valuation of the investment securities, we performed audit procedures that included, among others, not limited to, evaluating the methodologies used in the valuation and the significant assumptions used by the Company.
Valuation and impairment of investment
As described in Note 3 to the consolidated financial statements, the Company recorded the investments, at fair value, categorized as Level 1 through Level 3 within the fair value hierarchy. The fair value of these investments is determined by management using the valuation techniques and significant observable and unobservable inputs depending on the fair value hierarchy. The Company also recorded impairment of investment during the year ended December 31, 2021 due to the change in the investment securities.
Auditing the fair value of the Company’s investments within the fair value hierarchy involved a high degree of auditor judgment and subjectivity due to the management’s assessments of significant observable and unobservable inputs depending on the fair value hierarchy and methodologies used in the valuation and the significant assumptions and used by the Company.
To test the proper valuation and impairment of the investment, we performed audit procedures that included, among others, not limited to, evaluating the methodologies used in the valuation and the significant assumptions and inputs used by the Company.
Deconsolidation of Subsidiary
As described in Note 3 to the consolidated financial statements, the Company deconsolidated one of its subsidiaries upon entering into a share exchange agreement. The difference between the carrying value of the assets and liabilities of the subsidiary that were deconsolidated resulted in a gain from deconsolidation. The Company received shares of common stock in the publicly traded entity from the share exchange agreement.
Auditing the fair value of the Company’s carrying value of assets and liabilities at the date of deconsolidation involved a high degree of auditor judgment specifically on the management’s assessments on valuation of the shares received from the share exchange agreement and the carrying value of the subsidiary’s assets and liabilities.
To test the accounting for the deconsolidation of the subsidiary, we performed audit procedures that included, among others, obtaining and evaluating the share exchange agreement and other information that corroborated management’s assessment of the carrying value of the subsidiary’s assets and liabilities. We then compared them to our assessments.
To test the valuation of the shares received from the share exchange agreement, we performed audit procedures that included, among others, inquiring of management to gain an understanding of the nature and scope of the share exchange agreement, reading the filing of the publicly traded entity the Company entered into the share exchange with, and evaluating the methodologies used in the valuation, and the significant assumptions and inputs used by the Company.
/s/
We have served as the Company’s auditor since 2015.
PCAOB
ID:
March 31, 2022
| F-1 |
Balance Labs, Inc. and Subsidiaries
Consolidated Balance Sheets
| December 31, 2021 | December 31, 2020 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | - | |||||||
| Prepaid expenses | - | |||||||
| Interest receivable | - | |||||||
| Note receivable, net of discount of $ | - | |||||||
| Total Current Assets | ||||||||
| Property and equipment, net | - | |||||||
| Other Assets | ||||||||
| Due from related party | ||||||||
| Investment at fair value - related party | ||||||||
| Investment | - | |||||||
| Trademark | - | |||||||
| Total Other Assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accounts payable - related party | ||||||||
| Short -term advances - related party | ||||||||
| Convertible note payable | ||||||||
| Convertible notes payable - related party, note of debt discount of $ | ||||||||
| Notes payable - related party - net of debt discount of $ | ||||||||
| Accumulated losses of unconsolidated investees in excess of investment | ||||||||
| Note payable - current | - | |||||||
| Total Current Liabilities | ||||||||
| Long Term Liabilities | ||||||||
| Notes payable, net of current | - | |||||||
| Convertible note payable, net of debt discount of $ | ||||||||
| Total Long Term Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Note 7) | ||||||||
| Stockholders’ Deficit | ||||||||
| Preferred stock, $ par value, shares authorized, issued and outstanding as of December 31, 2021 and December 31, 2020 | - | - | ||||||
| Common stock, $ par value: authorized , and shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Non-controlling interest | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements
| F-2 |
Balance Labs, Inc. and Subsidiaries
Consolidated Statement of Operations
| For the Years Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Revenues - related party | $ | $ | ||||||
| Costs and expenses | ||||||||
| General and administrative expenses | ||||||||
| Professional fees | ||||||||
| Salaries and wages | ||||||||
| General and administrative expenses - related party | ||||||||
| Total operating expenses | ||||||||
| Income from operations | ||||||||
| Other income (expense) | ||||||||
| Unrealized gain (loss) on available for sale securities | ( | ) | ||||||
| Net loss allocated from equity method investee | ( | ) | ( | ) | ||||
| Accreted interest income and interest income on note receivable | - | |||||||
| Interest expense (includes amortization of debt discount) | ( | ) | ( | ) | ||||
| Impairment of an investment - Bang Holdings Corp. | ( | ) | - | |||||
| Gain on forgiveness of PPP loan | - | |||||||
| Gain on deconsolidation of Krypto Ventures, Inc. | - | |||||||
| Total other expense | ( | ) | ( | ) | ||||
| Net (Loss) Income | $ | ( | ) | $ | ||||
| Net loss attributable to non controlling interest | $ | ( | ) | $ | ( | ) | ||
| Net (Loss) Income attributable to the Company | $ | ( | ) | $ | ||||
| Net (Loss) Income per share - basic | $ | ( | ) | $ | ||||
| Net (Loss) Income per share - diluted | $ | ( | ) | $ | ||||
| Weighted average number of shares - basic | ||||||||
| Weighted average number of shares - diluted | ||||||||
The accompanying notes are an integral part of the consolidated financial statements
| F-3 |
Balance Labs, Inc. and Subsidiaries
Consolidated Statement of Cash Flows
| For the Years Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Operating activities | ||||||||
| Net (Loss) Income - including non-controlling interest | $ | ( | ) | $ | ||||
| Adjustments to reconcile net loss to net cash used in operations | ||||||||
| Amortization of debt discount | ||||||||
| Accreted interest income on note receivable | ( | ) | - | |||||
| Depreciation expense | ||||||||
| Amortization of website development costs | - | |||||||
| Impairment of an investment - Bang Holdings Corp. | - | |||||||
| Net loss from equity method investment | ||||||||
| Investment received in exchange for consulting services | ( | ) | ( | ) | ||||
| Unrealized loss(gain) on available - for - sale securities | ( | ) | ||||||
| Gain on deconsolidation of subsidiary (Krypto Ventures, Inc.) | ( | ) | - | |||||
| Gain on forgiveness of PPP loan and accrued interest | ( | ) | - | |||||
| Changes in operating assets and liabilities | ||||||||
| (Increase) decrease in | ||||||||
| Accounts receivable | ( | ) | - | |||||
| Interest receivable | ( | ) | - | |||||
| Prepaids | ||||||||
| Increase (decrease) in | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Accounts payable and accrued expenses - related party | ||||||||
| Accumulated (income) losses on unconsolidated investees in excess of investment | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing activities | ||||||||
| Notes receivable | ( | ) | - | |||||
| Website development cost | ( | ) | - | |||||
| Advance to a related party | - | ( | ) | |||||
| Cash disposed in deconsolidation of subsidiary | ( | ) | - | |||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing activities | ||||||||
| Proceeds from issuance of note payable | - | |||||||
| Proceeds from issuance of note payable, related party, net | - | |||||||
| Proceeds from issuance of convertible note payable, related party, net | - | |||||||
| Proceeds from short term advances, related parties | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash and cash equivalents - beginning of year | ||||||||
| Cash and cash equivalents - end of year | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income tax | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activities | ||||||||
| Investment at fair value received from issuance of note receivable | $ | $ | ||||||
| Beneficial conversion features on convertible notes payable - related party | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements
| F-4 |
Balance Labs, Inc. and Subsidiaries
Consolidated Statement of Changes in Stockholders’ Deficit
For the Years Ended December 31, 2021 and 2020
| Common Stock | Additional Paid-in | Non- controlling | Accumulated | Total Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Interest | Deficit | Deficit | |||||||||||||||||||
| December 31, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||||||||
| Net (loss) Income | - | - | - | ( | ) | |||||||||||||||||||
| December 31, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | ( | ) | ||||||||||||||
| Beneficial conversion | - | - | - | - | ||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||
| December 31, 2021 | | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of the consolidated financial statements
| F-5 |
BALANCE LABS, INC. and Subsidiaries
Notes to Consolidated Financial Statements
As of December 31, 2021 and 2020
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.
Note 2 – Going Concern
The
consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company used $
There is substantial doubt about the Company to continue as a going concern. The Company without additional sources of debt or equity capital would potentially need to cease operations. Management plans to raise additional capital within the next twelve months that is expected to 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 expects to begin a marketing campaign to market and sell its services. There can be no assurance that such a plan will successful.
The accompanying 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
December 31, 2021 and December 31, 2020, the Company has $
Use of Estimates
The preparation of the 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.
| F-6 |
Joint Venture
The Company uses the equity method to account for their financial interest in the following company:
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| iGrow Systems Inc. (a) | $ | $ | ||||||
| Total | $ | $ |
The
Company is a
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 at December 31, 2021 and December 31, 2020 is as follows:
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Total Assets | $ | $ | ||||||
| Total Liabilities | ||||||||
| Shareholders’ Deficit | ( | ) | ( | ) | ||||
| Income | ||||||||
| Expenses | ( | ) | ||||||
| Net Income (Loss) | $ | $ | ( | ) | ||||
The
Company’s portion of the net income for the year ended December 31, 2021 was $
| F-7 |
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, which occurs at a point in time. Additionally, at the time services are performed, the Company has satisfied its single performance obligation .
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 consolidated financial statements as of December 31, 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.
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) loss on the available-for-sale securities has been recorded in other income (expenses) on the consolidated statements of operations.
The Company accounts for its investment in EZFill Holdings, Inc. as available-for-sale securities pursuant to the S-1 Registration Statement declared effective on September 14, 2021, therefore, the unrealized (gain) loss on the available-for-sale securities during the years ended December 31, 2021 and 2020, has been recorded in Other Income (Expense) on the consolidated statement of operations.
| F-8 |
Investments – Related Parties
The Company holds two investments on its consolidated Balance Sheet as of December 31, 2021 and December 31, 2020.
During
the years 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 $
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 December 31, 2021 and December 31, 2020.
On November 18, 2020, the Company executed a two (2) year, consulting agreement for various corporate services with EZFill Holdings, Inc., a related party. In connection with this agreement, and with the effectiveness of the Company’s Form S-1 registration statement, the Company was entitled to compensation as follows:
● shares of common stock for past services provided through the effective date of consulting agreement,
●
$
●
During the first year of the agreement, $
●
During the second year of the agreement, $
● On each anniversary of the agreement, shares of common stock.
On December 2, 2020, the Company received shares from EZFill Holdings, Inc, a related party, for past services, with each share valued at $each based on a recent cash price of the related party. At the time of receiving these shares, EZFill Holdings, Inc. was not a publicly traded company.
On September 14, 2021, the S-1 Registration Statement for EZFill Holdings, Inc. was declared effective by the U.S. Securities and Exchange Commission. As a result of becoming a publicly traded company, our investment is now recorded at fair value as available-for-sale securities on December 31, 2021, with the gains and losses being recorded through other income (expense) on the consolidated statements of operations. In September 2021, EZFill Holdings, Inc. approved a one for reverse stock split. As a result, the Company’s shares were adjusted to shares.
On
November 18, 2021, on the anniversary of the agreement, the Company received (post reverse split adjusted) shares of common stock
having a fair value of $
At December 31, 2021, the fair value of the investment
in EZFill Holdings, Inc. was $
All of the Company’s revenues were earned from EZFill Holdings, Inc, a related
party, totaling $
Investments
The
Company owned a majority interest in Krypto Ventures Inc, formerly known as KryptoBank Co. On July 29, 2021, the Company exchanged shares of common stock in Krypto Ventures, Inc.
for shares of common stock in Descrypto Holdings,
Inc. (“Descrypto”) (formerly W Technologies Inc.), an unrelated party in a Share Exchange Agreement. 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 shares of Descrypto’s
Common Stock owned by the Company for total proceeds of $
As
of December 31, 2021, the investment in Descrypto has a fair value of $
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
shares of Descrypto’s Common Stock owned by the Company. Following the February Redemption Agreement, the
Company owned
shares of Descrypto’s Common Stock for total proceeds of $
On
January 29, 2021, the Company received
| F-9 |
Deconsolidation of Subsidiary
In accordance with ASC Topic 810-10-40, a parent company must deconsolidate a subsidiary as of the date the parent ceases to have a controlling interest in that subsidiary and recognize a gain or loss in net income at that time.
The
Company owned a majority interest in Krypto Ventures Inc, formerly known as KryptoBank Co. On July 29, 2021, the Company exchanged shares of common stock in Krypto Ventures, Inc.
for shares of common stock in Descrypto Holdings,
Inc. (“Descrypto”) (formerly W Technologies Inc.), an unrelated party having a fair value of $
| Consideration | ||||
| Shares of common stock - Descrypto | $ | |||
| Fair value of consideration received | $ | |||
| Recognized amounts of identifiable assets sold and liabilities assumed by Descrypto: | ||||
| Cash | $ | |||
| Trademark | ||||
| Intangible assets – net | ||||
| Total assets assigned to Descrypto | ||||
| Accounts payable and accrued expenses | ||||
| Due to Balance Labs, Inc. | ||||
| Due to Lyons Capital, LLC | ||||
| Note payable | ||||
| Total liabilities assumed by Descrypto | ||||
| Total net liabilities assumed by Descrypto | ||||
| Gain on deconsolidation of Krypto Ventures, Inc. | $ |
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 December 31, 2021 and December 31, 2020, the carrying value of marketable securities was $
| F-10 |
Principles of Consolidation
The
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 former
The
Company has a non-controlling interest of
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 warrants and
| For the | ||||
| year ended | ||||
| December 31, 2020 | ||||
| Net income attributable to common stockholder | $ | |||
| Weighted average number of shares outstanding | ||||
| Basic earnings per share | $ | |||
The following tables are for the computation of diluted earnings per share:
| For the | ||||
| year ended | ||||
| December 31, 2020 | ||||
| Net income attributable to common stockholder | $ | |||
| Add: Interest expense attributable to convertible debt | ||||
| Adjusted net income attributable to common stockholder | $ | |||
| Weighted average number of shares outstanding | ||||
| Add: Shares issued upon conversion of debt | ||||
| Weighted average number of common and common equivalent shares | ||||
| Diluted earnings per share | $ | |||
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.
| F-11 |
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. |
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, 2021.
| Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Fair-value – equity securities | $ | $ | $ | - | $ | - | ||||||||||
| Total Assets measured at fair value | $ | $ | $ | $ | ||||||||||||
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 | $ | $ | - | $ | - | $ | ||||||||||
| Total Assets measured at fair value | $ | $ | $ | $ | ||||||||||||
The
Company accounts for its investment in EzFill Holdings, Inc. (“EzFill”) as available-for-sale securities. As of December
31, 2021, the Company reclassified its EzFill investment of $
The
Company accounts for its investment in Bang Holdings, Corp as available-for-sale securities as level 3 due to unobservable inputs in
which little or no market data exists. The 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 $
| F-12 |
Business Segments
The
Company operates in
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 consolidated statement of operations. For the years ended December 31, 2021 and December 31, 2020, advertising,
marketing, and promotion expense was $
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
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 December 31, 2021 and December 31, 2020 consisted of the following:
| December 31, 2021 | December 31, 2020 | |||||||
| Website | $ | $ | ||||||
| Computer equipment Software | ||||||||
| Furniture | ||||||||
| Total | ||||||||
| Less Accumulated Depreciation | ( | ) | ( | ) | ||||
| Property and Equipment, net | $ | $ | ||||||
Depreciation
expense for the years ended December 31, 2021, and 2020 totaled $
During
the years ended December 31, 2021, the Company incurred $
During
the year ended December 31, 2021, the Company recorded $
| F-13 |
Intangible Assets
Intangible Assets as of December 31, 2021 and December 31, 2020 consisted of the following:
| Type | December 31, 2021 | December 31, 2020 | ||||||
| Trademarks | $ | $ | ||||||
| Total – net | $ | - | $ | |||||
There were no additions to Intangible Assets during the year ended December 31, 2021.
During the year ended December 31, 2021, the Company trademark was deconsolidated on July 29, 2021 (See Note 3).
Recently Issued Accounting Pronouncements
Changes to accounting principles are established by the FASB in the form of ASU’s to the FASB’s Codification. We consider the applicability and impact of all ASU’s on our financial position, results of operations, stockholders’ deficit, cash flows, or presentation thereof.
In June 2016, the FASB issued ASU 2016-13 - Financial Instruments-Credit Losses-Measurement of Credit Losses on Financial Instruments. Codification Improvements to Topic 326, Financial Instruments – Credit Losses, have been released in November 2018 (2018-19), November 2019 (2019-10 and 2019-11) and a January 2020 Update (2020-02) that provided additional guidance on this Topic. This guidance replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For SEC filers meeting certain criteria, the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For SEC filers that meet the criteria of a smaller reporting company (including this Company) and for non-SEC registrant public companies and other organizations, the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently in the process of its analysis of the impact of this guidance on its financial statements, however, the adoption of this standard will not have a material effect on the Company’s financial statements.
In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” This guidance, among other provisions, eliminates certain exceptions to existing guidance related to the approach for intra period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This guidance also requires an entity to reflect the effect of an enacted change in tax laws or rates in its effective income tax rate in the first interim period that includes the enactment date of the new legislation, aligning the timing of recognition of the effects from enacted tax law changes on the effective income tax rate with the effects on deferred income tax assets and liabilities. Under existing guidance, an entity recognizes the effects of the enacted tax law change on the effective income tax rate in the period that includes the effective date of the tax law. ASU 2019-12 is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. We adopted this pronouncement on January 1, 2021; however, the adoption of this standard did not have a material effect on the Company’s financial statements.
In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”, to reduce complexity in applying U.S. GAAP to certain financial instruments with characteristics of liabilities and equity. ASU 2020-06 is effective for interim and annual periods beginning after December 15, 2023, with early adoption permitted. We adopted this pronouncement on January 1, 2021; however, the adoption of this standard did not have a material effect on the Company’s financial statements.
| F-14 |
Note 4 – Stockholders’ Equity
Authorized Capital
The Company is authorized to issue shares of common stock, $ par value, and shares of preferred stock, $ par value.
Non-Controlling Interest
On
December 28, 2017, the Company sold a non-controlling interest in its former subsidiary, Krypto Ventures Inc, formerly known as KryptoBank
Co. for $
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
shares of Descrypto’s Common Stock owned by the Company for total proceeds of $
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
shares of Descrypto’s Common Stock owned by the Company for total proceeds of $
Warrants
During
2015, the Company issued
During
2016, Balance Group LLC loaned the Company $
On
October 3, 2019, the Company received $
The following tables summarize warrants outstanding as of December 31, 2021 and 2020 and the related changes during the years are presented below.
| Number of Warrants | Weighted Average Exercise Price | |||||||
| Balance at December 31, 2019 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Expired | ( | ) | ||||||
| Balance at December 31, 2020 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Expired | ( | ) | ||||||
| Balance at December 31, 2021 | $ | |||||||
As of December 31, 2021 the warrants had intrinsic value.
| F-15 |
Note 5 – Note Receivable
On
September 30, 2021, Balance Labs Inc. made a loan to Four Acquisition, Ltd., an unrelated party in the principal amount of $
On
June 29, 2021, Balance Labs Inc. made a loan to Krypto Ventures, Inc, formerly known as KryptoBank Co., a related party in the principal
amount of $
On
January 29, 2021, Balance Labs Inc. made a loan to Four Acquisitions Ltd., an unrelated party in the principal amount of $
For
the year ended December 31, 2021, the Company recorded $
Note 6 – Related Party Transactions
The
Company’s CEO earns $
On
April 1, 2016, the Company received $
On
September 30, 2016, Balance Group LLC loaned $
During
2016, 2017, and 2019 Balance Group LLC loaned an additional $
On
June 27, 2021, the Company received $
On
July 9, 2021, Krypto Ventures, Inc. formerly known as KryptoBank Co. issued an unsecured promissory note in the amount of $
| F-16 |
On
June 29, 2021, Balance Labs Inc. made a loan to Krypto Ventures, Inc, formerly known as KryptoBank Co., a related party in the principal
amount of $
As
of December 31, 2021, the CEO and companies controlled by the CEO have loaned the Company a total of $
Krypto
Ventures Inc, formerly known as KryptoBank Co., as part of its initial funding, borrowed an additional $
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
On
October 3, 2019, the Company received $
On December 2, 2020, the Company received 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 $each. The shares received are not publicly traded. Each share valued at $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. On September 14, 2021, the S-1 Registration Statement for EZFill Holdings, Inc. was declared effective by Securities and Exchange Commission. This investment is recorded at fair value as available-for-sale securities as of December 31, 2021, and using cost method as of December 31, 2020, with the gains and losses being recorded through other income (expense) on the consolidated income statement for the year then ended.
During
January 2021, The Farkas Group, a related party, loaned the Company $
During
February 2021, The Farkas Group, a related party, loaned the Company $
During
March 2021, The Farkas Group, a related party, loaned the Company $
| F-17 |
During
April 2021, The Farkas Group, a related party, loaned the Company $
During
May 2021, The Farkas Group, a related party, loaned the Company $
During
June 2021, The Farkas Group, a related party, loaned the Company $
During
August 2021, The Farkas Group, a related party, loaned the Company $
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 consolidated financial position or results of operations.
Consulting Fees
The
Company will continue to accrue its CEO $
Note 8 – Convertible Notes and Notes Payable
Notes Payable
As
of December 31, 2021, the CEO and companies controlled by the CEO have loaned the Company a total of $
On
July 9, 2021, Krypto Ventures, Inc. formerly known as KryptoBank Co. issued an unsecured promissory note in the amount of $
During
2016, 2017, and 2019, Balance Group loaned an additional $
Krypto
Ventures Inc, formerly known as KryptoBank Co., as part of its initial funding, borrowed an additional $
On
October 3, 2019, The Company received $
| F-18 |
On
May 7, 2020, the Company (the “Borrower”) received a note payable in the amount of $
During
January 2021, The Farkas Group, a related party, loaned the Company $
During
February 2021, The Farkas Group, a related party, loaned the Company $
During
March 2021, The Farkas Group, a related party, loaned the Company $
During
April 2021, The Farkas Group, a related party, loaned the Company $
During
May 2021, The Farkas Group, a related party, loaned the Company $
During
June 2021, The Farkas Group, a related party, loaned the Company $
On
August 4, 2021, The Farkas Group, a related party, loaned the Company $
Convertible Notes Payable
On
December 23, 2015, the Company issued a secured convertible promissory note in the amount of $
On
April 1, 2016, the Company received $
| F-19 |
On
September 30, 2016, Balance Group LLC loaned the Company $
On
June 27, 2021, the Company received $
Note 9 – Income Taxes
The Company has the following net deferred tax asset:
As of December 31, 2021 | As of December 31, 2020 | |||||||
| Temporary Differences | $ | $ | ||||||
| Unrealized gains | ||||||||
| Impairment losses on investment | - | |||||||
| Net operating loss carryforward | ||||||||
| Total deferred tax assets | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax assets | $ | $ | ||||||
A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:
For the Year ended December 31, 2021 | For the Year ended December 31, 2020 | |||||||
| Expected federal statutory rate | ( | )% | ( | )% | ||||
| State Effect on tax rate, net of federal benefit | ( | )% | ( | )% | ||||
| Permanent differences | ( | )% | ( | )% | ||||
| Change in valuation allowance | % | % | ||||||
| Income tax provision (benefit) | - | - | ||||||
The Company, after considering all available evidence, fully reserved its deferred tax assets since it is more likely than not that such benefits may be realized in future periods. The Company has not yet established that it can generate taxable income. The Company will continue to evaluate its deferred tax assets to determine whether any changes in circumstances could affect the realization of their future benefit. If it is determined in future periods that portions of the Company’s deferred tax assets satisfy the realization standards, the valuation allowance will be reduced accordingly.
Note 10 – Subsequent events
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 Holdings, Inc. (“Descrypto”) (formerly W Technologies, Inc.) agreed to
purchase, an aggregate of shares
of Descrypto’s Common Stock owned by the Company for total proceeds of $
| F-20 |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
(a) Evaluation of Disclosure and Control Procedures
Based on their evaluation as of the end of the period covered by this annual Report on Form 10-K, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(c) and 15d-15(e) under the Exchange Act) are not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Management’s Report on Internal Control over Financial Reporting
This Company’s management is responsible for establishing and maintaining internal controls over financial reporting and disclosure controls. Internal Control Over Financial Reporting is a process designed by, or under the supervision of, the Company’s Principal Executive Officer and Principal Financial Officer, or persons performing similar functions, and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
| (1) | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer; |
| (2) | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the registrant; and |
| (3) | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements. |
Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is appropriately recorded, processed, summarized, and reported within the specified time periods.
Management has conducted an evaluation of the effectiveness of our internal control over financial reporting as of the end of the period covered by this annual Report on Form 10-K, based on the framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO 2013”).
Based on this assessment, management concluded that as of the year covered by this annual Report on Form 10-K, it had material weaknesses in its internal control procedures.
As of the year covered by this annual Report on Form 10-K, we have concluded that our internal control over financial reporting was ineffective. The Company’s assessment identified certain material weaknesses which are set forth below:
Functional Controls, Lack of Audit Committee and Segregation of Duties
Because of the Company’s limited resources, there are limited controls over information processing.
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The Company does not have an audit committee and therefore there is no independent review and independent oversight over the Company’s financial reporting.
There is an inadequate segregation of duties consistent with control objectives. Our Company’s management is composed of a small number of individuals resulting in a situation where limitations on segregation of duties exist. In order to remedy this situation, we would need to hire additional staff to provide greater segregation of duties. Currently, it is not feasible to hire additional staff to obtain optimal segregation of duties. Management will reassess this matter at end of the fiscal year to determine whether improvement in segregation of duty is feasible.
Accordingly, as the result of identifying the above material weakness we have concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the Company’s internal controls.
Management believes that the material weaknesses set forth above were the result of the scale of our operations and are intrinsic to our small size. Management believes these weaknesses did not have a material effect on our financial results and intends to take remedial actions upon receiving funding for the Company’s business operations.
This annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report herein.
(c) Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal year that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
The following sets forth information about our directors and executive officers as of the date of this report:
| Name | Age | Positions | ||
| Michael D. Farkas | 49 | President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board | ||
| Carmen Villegas | 34 | Secretary and Director | ||
| Aviv Hillo | 56 | Director |
Michael D. Farkas, President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board
Mr. Farkas is serving as the President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board of the Company.
Mr. Farkas has served as the Chief Executive Officer and Member of the Board of Directors of Car Charging Group, Inc. since 2010. Mr. Farkas is the founder and manager of The Farkas Group, a privately held investment firm. Mr. Farkas also currently holds the position of Chairman and Chief Executive Officer of the Atlas Group, where its subsidiary, Atlas Capital Services, a broker-dealer, has successfully raised capital for a number of public and private clients until it withdrew its FINRA registration in 2007. Over the last 20 years, Mr. Farkas has established a track record as a principal investor across a variety of industries, including telecommunications, technology, aerospace and defense, agriculture, and automotive retail.
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Carmen Villegas, Secretary and Director
Ms. Villegas began serving as Secretary and Director of Balance Labs, Inc. since January 15, 2015. Ms. Villegas is currently the Executive Assistant at Blink Charging, Inc., a publicly traded company and the Farkas Group, Inc. At both companies, Ms. Villegas assists the President and CEO in matters such as meeting schedules, appointments, conferences and travel arrangements. Ms. Villegas also assists the accounting department with file/database maintenance and record-keeping. Ms. Villegas also helps the executives receive and distribute correspondence to the appropriate department and personnel, as well as other administrative tasks in support of the companies’ daily operations.
Ms. Villegas holds an Associate in Arts Degree in Business Administration Accounting and is currently pursuing a Bachelor’s Degree in Business Administration with a minor in Psychology at Florida International University.
Aviv Hillo, Director
Mr. Hillo is co-founder of Ariel Photonics Assembly Ltd., a leading laser-based products and applications company in Israel, and has been its Deputy CEO, Legal Advisor and Business Advisor since August 2007. Mr. Hillo has been a partner at Schechter Hillo Law Offices (previously Yerushalmi Hillo Law Offices) since 2004, and is the CEO and founder of Edison Capital Ltd. since 2013. He is a skilled international business lawyer with a 20-year established track record both in Israel and New York, handling cross-border transactions and litigations. Mr. Hillo is also an experienced executive and investor across a variety of industries including defense technology, real estate, biotechnology, mobile apps, and internet marketplace platforms. During the years of 1998 to 2003, he practiced law at Yerushalmi Associate as an associate and partner in New York City. He served as the CEO and director of Ensave 2000, LLC, and as legal advisor and director in Mobile Homes International, LLC. Mr. Hillo was a shareholder and legal advisor for LSL Biotechnologies, Inc. He served on the board of “Misdar Dorshei Tov”, an Israeli non-for profit organization between 1994 and 1996. Mr. Hillo graduated from the Tel Aviv School of Law in 1993, and received his Master’s Degree (cum laude) in Banking, Corporate and Finance Law at Fordham School of Law in 2001. He was admitted to the Israeli Bar in 1994 and to the New York State Bar in 1999. Mr. Hillo served in an elite Israeli military unit as a commander and officer (Major), and was honorably released in 2006.
Term of Office
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
We currently do not have employment agreements with our executive officers and directors.
Family Relationships
There is no family relationship among any of our directors or executive officers.
Director Independence
For purposes of determining director independence, we have applied the definitions set out in NASDAQ Rule 4200(a)(15). Under NASDAQ Rule 4200(a)(15), a director is not considered to be independent if he or she is also an executive officer or employee of the corporation or has been, at any time during the past three years, employed by the company. Accordingly, we do not have any independent director as of the date of this 10-K.
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Involvement in Certain Legal Proceedings
During the past ten years, none of our directors or executive officers has been:
| ● | the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; |
| ● | convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
| ● | subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or any Federal or State authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; |
| ● | found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law; |
| ● | the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of (a) any Federal or State securities or commodities law or regulation; (b) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or (c) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
| ● | the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Code of Ethics
The Company has not adopted a Code of Ethics applicable to its Principal Executive Officer and Principal Financial Officer.
Committees of the Board of Directors
The Company has not established any committees of the board.
Board of Directors Meetings and Attendance
The Board of Directors held no meeting in 2021. We have no formal policy regarding director attendance at the annual meeting of stockholders.
Compliance with Section 16(A) of the Exchange Act
Because we do not have a class of equity securities registered pursuant to Section 12 of the Exchange Act, we are not subject to Section.
Item 11. Executive Compensation.
The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by us during the years ended December 31, 2021 and December 31, 2020.
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SUMMARY COMPENSATION TABLE
| Non- | |||||||||||||||||||||||||||||||||||
Equity Incentive | Non- Qualified | All | |||||||||||||||||||||||||||||||||
| Name and | Stock | Option | Plan | Deferred | Other | ||||||||||||||||||||||||||||||
| Principal | Salary | Bonus | Awards | Awards | Compensation | Compensation | Compensation | Totals | |||||||||||||||||||||||||||
| Position | Year | ($) | ($) | ($) | ($) | ($) | Earnings ($) | ($) | ($) | ||||||||||||||||||||||||||
| Michael D. Farkas | 2021 | $ | 120,000 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 120,000 | ||||||||||||||||||
| President, CEO and CFO (1) | 2020 | $ | 120,000 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 120,000 | ||||||||||||||||||
| (1) | Mr. Farkas resigned as Chief Executive Officer on January 15, 2015 and reappointed as President, Chief Executive Officer and Chief Financial Officer on September 11, 2015. Pursuant to certain consulting agreement between Mr. Farkas and the Company, Mr. Farkas is entitled to a monthly consulting service fee of $10,000 per month. As of the date hereof, Mr. Farkas has not received any payment for his services provided and such amounts have been accrued. |
Option Grants Table
There were no individual grants of stock options to purchase our common stock made to the executive officers named in the Summary Compensation Table for the years ended December 31, 2021 and December 31, 2020.
Long-Term Incentive Plan Awards Table
None.
Employment Agreements and Consulting Agreements
Pursuant to certain consulting agreement between Mr. Farkas and the Company, Mr. Farkas is entitled to a monthly consulting service fee of $10,000 per month. As of the date hereof, Mr. Farkas has not received any payment for his services provided and such amounts have been accrued.
Other than the above, we currently we do not have an employment agreement in place with our officers and directors.
No retirement, pension, profit sharing, insurance programs, long-term incentive plans or other similar programs have been adopted by us for the benefit of our employees. We may however implement such long-term equity incentive plans in the future.
For the year ended December 31, 2021, no member of the Board of Directors was paid any compensation for serving on the board.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth certain information as of the date hereof with respect to the beneficial ownership of our ordinary shares, the sole outstanding class of our voting securities, by (i) each stockholder known to be the beneficial owner of 5% or more of the outstanding ordinary shares of the Company, (ii) each executive officer and director, and (iii) all executive officers and directors as a group. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Ordinary shares subject to options, warrants or convertible securities exercisable or convertible within 60 days as of the date hereof are deemed outstanding for computing the percentage of the person or entity holding such options, warrants or convertible securities but are not deemed outstanding for computing the percentage of any other person. Unless otherwise indicated, the address of all listed stockholders is c/o Balance Labs, Inc., 407 Lincoln Road, Suite 701, Miami Beach, FL 33139.
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| Name | Number of Shares Beneficially Owned (3)(4) | Percent of Class (1) | ||||||
| Michael D. Farkas (2) | 12,987,415 | 59.9 | % | |||||
| Carmen Villegas | 150,000 | * | ||||||
| Aviv Hillo | - | 0 | % | |||||
| All Executive Officers and Directors as a group (3 individuals) | 13,137,415 | 60.6 | % | |||||
| 5% or Greater Shareholders | ||||||||
| Balance Holdings LLC (2) | 11,888,889 | 54.99 | % | |||||
| Shilo Holding Group LLC (2) | 1,098,526 | 5.08 | % | |||||
| The Sammy Farkas Foundation | 5,614,000 | 25.9 | % | |||||
| (1) | Based on 21,674,000 shares of common stock outstanding as of March 31, 2022. |
| (2) | Michael D. Farkas holds 11,888,889, 1,400 and 1,098,526 shares of common stock through Balance Holdings, LLC, Shilo Security Solutions, Inc, and Shilo Holding Group LLC, respectively. |
| (3) | Beneficial ownership is determined in accordance with Rule 13D-3(a) of the Exchange Act and generally includes voting or investment power with respect to securities. |
| (4) | The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our common stock outstanding on that date and all shares of our common stock issuable to that holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by that person at that date which are exercisable within 60 days of that date. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent that power may be shared with a spouse. |
*Less than 1%
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Except as set forth in our discussion below none of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.
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: $120,000 and $120,000 for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, $851,659 of compensation was unpaid and was included in accounts payable – related parties on the balance sheet.
On December 31, 2016, the CEO 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 expired on October 1, 2019. The note is currently in default and has an accrued interest balance of $63,058. See Note 8.
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 $26,429.
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 the year ended December 31, 2021, the Company recorded $3,563, of amortization of debt discount. As of December 31, 2021 the remaining discount on the note is $3,428 and the Company has accrued interest of $3,253.
As of December 31, 2021, the CEO and companies controlled by the CEO have loaned the Company a total of $1,673,558 in addition to the convertible note 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 $345,737 on the loans. $1,265,399 of these loans are in default as of December 31, 2021.
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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.
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 December 31, 2020, accrued interest on the note is $237,354. 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 year ended December 31, 2021, the Company amortized $11,340 of debt discount. As of December 31, 2021, the remaining debt discount was $31,185.
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 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 promissory note has accrued interest of $13,637 as of December 31, 2021. The warrants have a relative fair value of $8,283, which was recorded as a debt discount and amortized over the life of the note. As of December 31, 2021, the note is in default and debt discount is fully amortized.
On September 14, 2021, the S-1 Registration Statement for EZFill Holdings, Inc. was declared effective by the U.S. Securities and Exchange Commission. As a result of becoming a publicly traded company, our investment is now recorded at fair value as available-for-sale securities on December 31, 2021, with the gains and losses being recorded through other income on the consolidated statements of operations for the three and nine months then ended. In September 2021, EZFill Holdings, Inc. approved a one for 3.763243 reverse stock split. As a result, the Company’s shares were adjusted to 265,728 shares.
On November 18, 2020, the Company executed a two (2) year, third-party consulting agreement for various corporate services. In connection with this agreement, and with the effectiveness of the Company’s Form S-1 registration statement, the Company was entitled to compensation as follows:
● 1,000,000 shares of common stock for past services provided through the effective date of consulting agreement,
● $200,000, upon completion of IP which was completed on September 14, 2021,
● During the first year of the agreement, $25,000 per month, with the 1st payment due 30 days after the completion of the Company’s IPO,
● During the second year of the agreement, $22,500 per month; and
● On each anniversary of the agreement, 500,000 shares of common stock.
On November 18, 2021, on the anniversary of the agreement, the Company received 132,864 (post reverse split adjusted) shares of common stock having a fair value of $352,090 ($2.65/share), based on the closing trading price.
All of the Company’s revenues were earned from EZFill Holdings, Inc, a related party, totaling $624,590 ($352,090 in form of shares of common stock in related party and $272,500 in cash payments upon completion of certain milestones per agreement) and $1,000,000 for the years ended December 31, 2021 and 2020, respectively.
Michael Farkas, the Company’s Chief Executive Officer, beneficially owns approximately 26.1% of the outstanding common stock of EZFill Holdings Inc.
From January 1, 2021 to December 31, 2021, entities controlled by the CEO made short term advances to the Company of $407,500.
Item 14. Principal Accountant Fees and Services.
The following table presents for each of the last two fiscal years the aggregate fees billed in connection with the audits of our consolidated financial statements and other professional services rendered by our independent registered public accounting firm Liggett Webb, PA.
| 2021 | 2020 | |||||||
| Audit Fees (1) | $ | 38,129 | $ | 29,775 | ||||
| Audit-Related Fees (2) | — | — | ||||||
| Tax Fees (3) | — | — | ||||||
| All Other Fees (4) | — | — | ||||||
| Total Accounting fees and Services | $ | 38,129 | $ | 29,775 | ||||
| 1) | Audit Fees. These are fees for professional services for the audit of our annual consolidated financial statements, and for the review of the consolidated financial statements included in our filings on Form 10-K and Form 10-Q, and for services that are normally provided in connection with statutory and regulatory filings or engagements. |
| 2) | Audit-Related Fees. These are fees for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of the registrant’s consolidated financial statements. |
| 3) | Tax Fees. These are fees for professional services rendered by the principal accountant with respect to tax compliance, tax advice and tax planning. |
| 4) | All Other Fees. These are fees for products and services provided by the principal accountant, other than the services reported above. |
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PART IV
Item 15. Exhibits, Financial Statement Schedules.
| * | Filed herewith |
| (1) | Incorporated by reference to the Registration Statement on Form S-1 filed with the SEC on March 24, 2015. |
| (2) | Incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on November 16, 2015. |
| (3) | Incorporated by reference to the Current Report on Form 8-K filed with the SEC on April 8, 2016. |
| (4) | Incorporated by reference to the Annual Report on Form 10-K filed with the SEC on Mary 28, 2020. |
| (5) | Incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on November 19, 2021. |
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SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 31 of March, 2022.
| BALANCE LABS, INC. | ||
| By: | /s/ Michael D. Farkas | |
| Michael D. Farkas | ||
| President, Chief Executive Officer, Chief Financial Officer and Chairman of the Board | ||
| (Principal Executive Officer and Principal Financial and Accounting Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Michael D. Farkas | President, Chief Executive Officer, and | March 31, 2022 | ||
| Michael D. Farkas | Chief Financial Officer and Chairman of the Board | |||
| (Principal Executive Officer and Principal Financial Officer) | ||||
| /s/ Carmen Villegas | Secretary and Director | March 31, 2022 | ||
| Carmen Villegas | ||||
| /s/ Aviv Hillo | Director | March 31, 2022 | ||
| Aviv Hillo |
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