Plan of Operations
Our plan of operations over the next 12 months is to continue to prepare our
clients for the many inevitable challenges they will encounter and to develop a
customized plan for them to help overcome these obstacles, so that they can
focus on marketing their product(s) and/or service(s) to their potential
customers.
Although we've only worked with three clients since inception, our goal is to
add and service a minimum of two to three new clients between now and the end of
2023. 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.
12
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, 2022, this
investment has no value based on the equity method of accounting. iGrow Systems,
Inc., was developing a plant growing device for home use. iGrow Systems Inc has
closed and is no longer in operations as of December 31, 2022.
The Company owned a majority interest in Krypto Ventures Inc, formerly known as
KryptoBank Co. 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
W Technologies Inc. ("W Tech"), an unrelated party in a Share Exchange
Agreement. As of September 30, 2021, the investment had a fair value of $0, due
to the stock being illiquid, and it is recorded on our consolidated balance
sheet using the equity method. On November 17, 2021, W Tech repurchased all the
shares owned by the Company and the Company no longer owns any portion of Krypto
Ventures Inc.'s and W Tech's outstanding shares of common stock.
On December 2, 2020, the Company received 1,000,000 shares from EZFill Holdings,
Inc, a related party, for past services, with each share valued at $1 each. At
the time of acquiring 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 September 30, 2022, with the
gains and losses being recorded through other income on the consolidated
statements of operations for the year ended December 31, 2022.
On November 18, 2020, the Company executed a two (2) year, third-party
consulting agreement with EzFill Holdings Inc for various corporate services.
The current service agreement has expired effective November 18, 2022. 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 having a fair value of $1,000,000
($1.00/share), each based on a recent cash price of the related party,
? and a one time payment of $200,000 upon completion of the Company's IPO.
? 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.
At December 31, 2022, the Company owned 531,539 shares after a reverse stock
split adjustment of 1 for 3.763243 and the fair value of the investment in
EZFill Holdings, Inc. was reported on the balance sheet as Investment at fair
value - related party totaling $148,808 ($0.28/share). Recorded an adjustment of
$401,250 for the twelve months ending December 31, 2022, as unrealized loss on
securities.
On January 29, 2021, the Company received 20% ownership of Pharmacy No, 27, Ltd,
a company based in Israel, as part of a Note Receivable from a third party (see
Note 5). As of December 31, 2022, the investment has a fair value of $0, based
upon the quoted closing trading price and it is recorded on our consolidated
balance sheet using the equity method. In addition, the interest receivable
associated with this note has fully been reserved in the amount of $21,958 as of
December 31, 2022.
13
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, 2022 and December 31, 2021.
Overview
We reported a net loss attributable to the Company of $768,351 and a net loss
attributable to the Company of $809,404 for the years ended December 31, 2022
and 2021, respectively, a difference of $(41,053) or 5%, 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, 2022 and December 31, 2021, we generated
$247,500 and $624,590, respectively in revenue. The primary reason for the
decrease in revenue was due to a decrease of the consulting income received from
EZFill Holdings, Inc.
General and Administrative Expenses
General and administrative expenses were $21,236 and $29,963 for the years ended
December 31, 2022 and 2021, respectively, a decrease of $8,727 or 29% primarily
due to decrease in office expenses.
Professional Fees
Professional fees were $139,263 and $104,729 for the years ended December 31,
2022 and 2021, respectively, an increase of $34,534 or 33% due to an increase in
legal and accounting fees.
Salaries and Wages
Wages were $49,837 and $145,472 for the years ended December 31, 2022 and 2021,
respectively, a decrease of $95,635 or 66% due to a decrease in salaries
expense.
Other Income and Expense
Other expenses for the year ended December 31, 2022 was $745,515. Other expenses
for the year ended December 31, 2021, was $1,033,830. This represents a
difference of 28% which was attributable to less unrealized losses associated
with the sale of securities.
Unrealized gain or loss on available for sale securities
Unrealized loss on available for sale securities for the year ended December 31,
2022, was $401,250. Unrealized gain on available for sale securities for the
year ended December 31, 2021, was $822,533. This represents a decrease of
$421,283 or 51% attributable to less losses associated with the sales of
securities.
Net Loss allocated from Equity Method Investee
Net loss allocated from Equity Method Investee for the year ended December 31,
2022 and December 31, 2021 was $47,255 and $13,591 respectively, an increase of
247 % primarily due to an increase in expenses from operating expenses by the
investees.
14
Liquidity and Capital Resources
We measure our liquidity in a number of ways, including the following.
December 31, 2022 December 31, 2021
Cash $ 235,311 $ 227,558
Working capital (deficiency) $ (3,681,157 ) $ (2,962,958 )
Availability of Additional Funds
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, 2022, the Company had a working capital deficiency of
$3,681,157. The Company net cash provided in operations was $7,753. 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.
Net Cash Used in Operating Activities
We experienced positive cash flows from operating activities for the year ended
December 31, 2022 of $7,753. This was primarily due to an unrealized gain of
$401,249 on available for sale securities, with an increase in bad debt of
$151,714, a net loss of $768,351. The negative cash flows of $56,896 for the
year ended December 31, 2021 was primarily due to an unrealized loss of $822,533
on available for sale securities, $352,090 of investment received in exchange,
gain on deconsolidation of subsidiary of 153,907 and a partially offset by an
increase in accounts payable and accrued expenses by $269,989.
Net Cash Used in Investing Activities
Net cash used in investing activities during the year ended December 31, 2022
and December 31, 2021 was $0 and $203,678, respectively. During the year ended
December 31, 2021, $144,000 of cash used in investing activities were for 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.
Net Cash Provided by Financing Activities
Net cash provided by financing activities during the year ended December 31,
2022 and December 31, 2021 was $0 and $482,500, respectively. Cash provided by
financing activities during the year ended December 31, 2021, increase of
proceeds of $407,500 from related parties, and note payable an increase of
$75,000 compared to $0 and $0 respectively, in the year ended December 31, 2022.
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, 2022. 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.
15
Therefore, we will need to raise additional capital in the future to continue
our operations There can be no 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. We will be required to pursue sources of additional
capital through various means, including debt or equity financings. Future
financings through equity investments are likely to be dilutive to existing
stockholders. Also, the terms of securities we may issue in future capital
transactions may be more favorable for new investors. Newly issued securities
may include preferences, superior voting rights, the issuance of warrants or
other derivative securities, and the issuances of incentive awards under equity
employee incentive plans, which may have additional dilutive effects. Further,
we may incur substantial costs in pursuing future capital and/or financing,
including investment banking fees, legal fees, accounting fees, printing and
distribution expenses and other costs. We may also be required to recognize
non-cash expenses in connection with certain securities we may issue, such as
convertible notes and warrants, which will adversely impact our financial
condition. Our ability to obtain needed financing may be impaired by such
factors as the capital markets and our history of losses, which could impact the
availability or cost of future financings .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, over time or point of time.
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.
Recently Issued Accounting Pronouncements
We have implemented all new accounting standards that are in effect and may
impact our consolidated financial statements and do not believe that there are
any other new accounting standards that have been issued that might have a
material impact on our financial position or results of operations.
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BALANCE LABS, INC. 
