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 two clients since inception, our goal is to add
and service a minimum of two to three new clients between now and the end of
2020. We're marketing our services through both personal contact and online by
(a) mining our existing network of professional contacts via personal outreach
programs, which will also target international prospects that may wish to enter
the US market; (b) expanding our network by attending targeted conferences and
professional gatherings; and (c) utilizing our website at www.balancelabs.co,
plus engaging potential clients on social media, including LinkedIn, Facebook
and Twitter. However, because we have a limited budget allocated for 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 six subsidiaries since 2016, BalanceLabs,
LLC., Balance AgroTech Co., Advanced AutoTech Co., Balance Cannabis Co., Balance
Medical Marijuana Co., and KryptoBank Co.
BalanceLabs LLC, is strictly a management company that provides necessary
administrative services to small companies. The Company's four subsidiaries,
Balance Agrotech Co., Advanced AutoTech Co., Balance Cannabis Co., and Balance
Medical Marijuana Co. are dormant as of December 31, 2019. Except for KryptoBank
Co., all of the subsidiaries are wholly owned by the Company.
In November 2018, the Company acquired a non-controlling minority interest in a
new startup company, iGrow Systems, Inc. As of December 31, 2019, this
investment has no value based on the equity method of accounting. iGrow Systems,
Inc., is developing a plant growing device for home use.
iGrow Systems, Inc., as part of its initial funding received $68,791 from
BalanceLabs LLC as an investment and $15,000 from KryptoBank Co. On July 15,
2019, KryptoBank Co., converted the $15,000 note into 150,000 shares of common
stock at a price of $0.10 per share.
KryptoBank Co., as part of its initial funding, borrowed an additional $95,000
from its shareholders during the year ended December 31, 2018. The notes have a
stated interest rate of 12% compounded annually and are due on demand. The
balance outstanding as of December 31, 2019 is $112,167.
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We believe that we can support our clients with our existing full-time staff,
supplemented with part-time sub-contracted professionals and service providers,
as necessary. Between now and the end of 2019, we intend to formalize our
relationships with these sub-contractors so that we can offer our clients
turn-key business development products and services.
Our primary requirement for funding is for working capital in order to
accommodate temporary negative cash flows from operations (see "Liquidity and
Capital Resources").
Results of Operations
For the years ended December 31, 2019 and December 31, 2018.
Overview
We reported a net loss of $884,217 and $547,678 for the years ended December 31,
2019 and 2018, respectively, an increase of $336,539, or 61%, primarily due to
an increase of $37,179 in interest expense, a decrease in the fair value of
available-for-sale securities of $43,000, a loss of $121,859 of equity method
investment, along with an increase of $26,130 in professional fees.
Revenues
For the year ended December 31, 2019, we generated $3,333 of revenue. For the
year ended December 31, 2018 we generated $6,667 in revenue from a related
party.
General and administrative expenses
General and administrative expenses were $60,990 and $82,883 for the years ended
December 31, 2019 and 2018, respectively, a decrease of $21,983 or 27%. The
decrease in cost was primarily due to a reduction in office and accounting
expenses.
Related party general and administrative expenses were $120,000 and $139,500
respectively, a decrease of $19,500 or 14%. The decrease in cost was due to a
reduction in directors' fees.
Interest expense
Interest expense for the years ended December 31, 2019 and 2018 was $167,087 and
$129,908, respectively, the increase is due to the issuance of new debt
instruments and amortization of warrants.
Professional Fees
Professional fees for the years ended December 31, 2019 and 2018 were $122,005
and $95,875 respectively, an increase of $26,130 or 27%. The increase was due to
an increase in legal fees from operations due to a new subsidiary and equity
method investee.
Liquidity and Capital Resources
We measure our liquidity in a number of ways, including the following
December 31, 2019 December 31, 2018
Cash $ 9,184 $ 27,223
Working capital (deficiency) $ (2,690,791 ) $ (2,369,758 )
Availability of Additional Funds
Except for the monthly consulting fee to our CEO and Chairman of the Board and
the month-to-month lease of our office space, as described elsewhere in this
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.
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As of December 31, 2019, the Company had a working capital deficiency of
$2,690,791. The Company used cash in operations of $365,608. The Company has
raised $421,200 in debt financing from related parties during the year ended
December 31, 2019. 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, 2019 to December 31, 2019, entities controlled by the CEO made
short term advances to the Company of $378,600.
Net Cash Used in Operating Activities
We experienced negative cash flows from operating activities for the years ended
December 31, 2019 and December 31, 2018 in the amount of $365,608 and $420,269
respectively. This was primarily due to an unrealized loss of $43,000 on
available for sale securities, $121,859 of accumulated losses from an equity
method investment, and a net loss of $889,888 partially offset by an increase in
accounts payable and accrued expenses by $351,902. The negative cash flow in
2018 was primarily due to a net loss of $592,963, offset by an unrealized gain
of $140,000 and an increase in accounts payable and accrued expenses of
$306,325.
Net Cash Used in Investing Activities
Net cash used in investing activities during the years ended December 31, 2019
and December 31, 2018 was $70,000 and $35,463, respectively. In 2018 cash used
in investing activities of $35,463 was for the development of a website,
equipment, trademarks and advances to related parties. In 2019, cash used in
investing activities was primarily as capital contributions to the Equity Method
Investee.
Net Cash Provided by Financing Activities
Net cash provided by financing activities during the years ended December 31,
2019 and December 31, 2018 was $417,569 and $475,600, respectively. In 2019,
cash received through financing activities as of December 31, 2019 was $418,600
from related parties and notes payable of $2,600 from our consolidated
subsidiary. For the year ended December 31, 2018 financing activities were
$380,850 of short term advances from related parties, $4,500 from the sales of
non controlling interest in our consolidated subsidiary and notes payable from a
related party of $9,500.
Our auditors have issued a going concern opinion
The Company's independent registered public accounting firm has expressed
substantial doubt as to the Company's ability to continue as a going concern as
of December 31, 2019. The 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.
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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
On January 1, 2018, the Company adopted 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. Results for reporting periods
beginning after January 1, 2018 are presented under ASC 606, while prior period
amounts are not adjusted and continue to be reported under the previous
accounting standards. There was no impact to revenues as a result of applying
ASC 606 for the years ended December 31, 2019 and 2018, and there have not been
any significant changes to our business processes, systems, or internal controls
as a result of implementing the standard.
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.
In February 2016, the FASB issued ASU 2016-02, Leases, which will amend current
lease accounting to require lessees to recognize (i) a lease liability, which is
a lessee's obligation to make lease payments arising from a lease, measured on a
discounted basis, and (ii) a right-of-use asset, which is an asset that
represents the lessee's right to use, or control the use of, a specified asset
for the lease term. ASU 2016-02 does not significantly change lease accounting
requirements applicable to lessors; however, certain changes were made to align,
where necessary, lessor accounting with the lessee accounting model. The Company
adopted this ASU on January 1, 2019 and the adoption became effective the same
day. After reviewing of this ASU we have determined it has no impact on our
results of operations, cash flows or financial condition. The Company is on a
month-to-month basis on its office lease.
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation:
Improvements to Employee Share Based Payment Accounting, which relates to the
accounting for employee share-based payments. This standard addresses several
aspects of the accounting for share-based payment award transactions, including:
(a) income tax consequences; (b) classification of awards as either equity or
liabilities; and (c) classification on the statement of cash flows. This
standard will be effective for fiscal years beginning after December 15, 2016,
including interim periods within those fiscal years. The company has reviewed
the standard and the change has no effect on our consolidated financial
statements.
The Company adopted 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,
requires public business entities to use the exit price notion when measuring
the fair value of financial instruments for disclosure purposes, requires
separate presentation of financial assets and financial liabilities by
measurement category and form of financial asset, and eliminates the requirement
for public business entities to disclose the method(s) and significant
assumptions used to estimate the fair value that is required to be disclosed for
financial instruments measured at amortized cost. The Company has evaluated the
potential impact this standard may have on the consolidated financial statements
and determined that it had a significant impact on the consolidated financial
statements. Since the Company accounts for its investment in Bang Holdings,
Corp. as available-for-sale securities, the fair value from of the securities
from the prior year has been reclassified to Retained Earnings from Other
Accumulated Comprehensive Income. The unrealized gain on the available-for-sale
securities during the year ended December 31, 2019 has been recorded in Other
Income on the Income Statement.
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BALANCE LABS, INC. 
