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Balance Labs, Inc. - Quarter Report: 2015 September (Form 10-Q)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 

For the quarterly period ended September 30, 2015

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 

For the transition period from _______ to _______

 

Commission file number: 333-202959

 

BALANCE LABS, INC.

(Exact name of registrant as specified in its charter)

   
Delaware  
(State or other jurisdiction 47-1146785
of incorporation or organization) (I.R.S. Employer Identification No.)
   
1111 Lincoln Road, 4th Floor  
Miami Beach, Florida 33139
(Address of principal executive offices) (Zip Code)
   
Registrant’s telephone number, including area code 305-907-7600

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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. Yes x  No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x  No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ¨ Accelerated filer ¨
   
Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

 

As of November 12, 2015, the registrant had 20,620,000 shares of common stock, $0.0001 par value per share, issued and outstanding.

 

 
 

 

BALANCE LABS, INC.

 

FORM 10-Q

 

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2015

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION  
   
Item 1. Financial Statements.  
   
Condensed Balance Sheets as of September 30, 2015 (Unaudited) and December 31, 2014 1
   
Unaudited Condensed Statements of Operations for the Three Months Ended September 30, 2015 and 2014 and for the Nine Months Ended September 30, 2015 and the Period from June 5, 2014 (Inception) to September 30, 2014 2
   
Unaudited Condensed Statement of Changes in Stockholders’ Deficit for the Nine Months Ended September 30, 2015 3
   
Unaudited Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2015 and for the Period from June 5, 2014 (Inception) to September 30, 2014 4
   
Notes to Unaudited Condensed Financial Statements 5
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 9
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 12
   
Item 4. Controls and Procedures. 12
   
PART II - OTHER INFORMATION  
   
Item 1. Legal Proceedings. 13
   
Item 1A. Risk Factors. 13
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 13
   
Item 3. Defaults Upon Senior Securities. 13
   
Item 4. Mine Safety Disclosures. 13
   
Item 5. Other Information. 13
   
Item 6. Exhibits. 13
   
SIGNATURES 14

 

 
 

 

BALANCE LABS, INC. 

 

Condensed Balance Sheets

         
   September 30   December 31, 
   2015   2014 
   (Unaudited)     
Assets          
           
Current Assets:          
Cash  $43,085   $66,158 
Prepaid expenses   3,151     
Total Current Assets   46,236    66,158 
Investment - related party   500    500 
Total Assets  $46,736   $66,658 
           
Liabilities and Stockholders’ Deficit          
           
Current Liabilities:          
Accounts payable and accrued expenses  $6,053   $2,000 
Accounts payable - related parties   176,500    70,000 
Accrued interest - related party   536     
Short term advances - related parties   120    1,105 
Total Liabilities   183,209    73,105 
           
Commitments and contingencies          
           
Stockholders’ Deficit:          
Preferred stock, $0.0001 par value; Authorized, 50,000,000 shares; none issued and outstanding at September 30, 2015 and December 31, 2014        
Common stock, $0.0001 par value; Authorized, 500,000,000 shares; 20,620,000 and 20,000,000 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively   2,062    2,000 
Additional paid-in capital   109,978     
Accumulated deficit   (248,513)   (8,447)
Total Stockholders’ Deficit   (136,473)   (6,447)
Total Liabilities and Stockholders’ Deficit  $46,736   $66,658 

 

See the accompanying notes to these unaudited condensed financial statements

 

1
 

  

BALANCE LABS, INC.

 

Unaudited Condensed Statements of Operations

 

                For The   
    For The      For The      Period from  
    Three Months Ended     Nine Months     June 5, 2014  
    September 30,     Ended     (Inception) to  
   2015   2014   September 30, 2015   September 30, 2014 
                 
Revenues - related party  $   $46,500   $39,000   $46,500 
                     
Operating Expenses                    
General and administrative expenses   47,031    9,505    143,530    10,010 
General and administrative expenses - related parties   45,000    55,000    135,000    60,000 
                     
Total Operating Expenses   92,031    64,505    278,530    70,010 
                     
Loss From Operations   (92,031)   (18,005)   (239,530)   (23,510)
                     
Other Expense                    
Interest expense   (496)       (536)    
                     
Total Other Expense   (496)       (536)    
                     
Net Loss  $(92,527)  $(18,005)  $(240,066)  $(23,510)
                     
Net Loss Per Share - Basic and Diluted  $(0.00)  $(0.00)  $(0.01)  $(0.00)
                     
Weighted Average Number of Common Shares Outstanding - Basic and Diluted   20,388,497    20,000,000    20,431,086    20,000,000 

  

See the accompanying notes to these unaudited condensed financial statements

 

2
 

 

BALANCE LABS, INC.

 

Unaudited Condensed Statement of Changes in Stockholders’ Deficit

For The Nine Months Ended September 30, 2015

 

           Additional         
    Common Stock    Paid-In    Accumulated 
    Shares    Amount    Capital    Deficit    Total 
                          
Balance - December 31, 2014   20,000,000   $2,000   $   $(8,447)  $(6,447)
                          
Stock-based compensation   400,000    40            40 
                          
Common stock and warrants issued for cash   220,000    22    109,978        110,000 
                          
Net loss               (240,066)   (240,066)
                          
Balance - September 30, 2015   20,620,000   $2,062   $109,978   $(248,513)  $(136,473)

 

See the accompanying notes to these unaudited condensed financial statements

 

3
 

 

BALANCE LABS, INC. 

 

Unaudited Condensed Statements of Cash Flows

         
        For The   
    For The      Period from  
    Nine Months     June 5, 2014  
    Ended     (Inception) to  
   September 30, 2015   September 30, 2014 
Cash Flows From Operating Activities          
Net loss  $(240,066)  $(23,510)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:           
Stock-based compensation   40     
Issuance of founders’ shares       2,000 
Changes in operating assets and liabilities:          
Accounts receivable       (6,500)
Prepaid expenses   (3,151)    
Accounts payable and accrued expenses   4,053     
Accounts payable - related parties   106,500    60,000 
Accrued interest - related party   536     
           
Total Adjustments   107,978    55,500 
           
Net Cash (Used In) Provided By Operating Activities   (132,088)   31,990 
           
Cash Flows From Investing Activities          
 Investment in related party       (500)
           
Net Cash Used In Investing Activities       (500)
           
Cash Flows From Financing Activities          
Proceeds from short term advances - related parties   37,340    1,105 
Repayments of short term advances - related parties   (38,325)    
Sales of common stock and warrants for cash   110,000     
           
Net Cash Provided By Financing Activities   109,015    1,105 
           
Net (Decrease) Increase In Cash   (23,073)   32,595 
           
Cash - Beginning of Period   66,158     
           
Cash - End of Period  $43,085   $32,595 
           
Supplemental Disclosures of Cash Flow Information:          
Interest paid  $   $ 
Income taxes paid  $   $ 

  

See the accompanying notes to these unaudited condensed financial statements

 

4
 

 

BALANCE LABS, INC.

 

Notes to Unaudited Condensed Financial Statements

 

Note 1 – Organization, Operations and Basis of Presentation

 

Organization and 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.

 

The Company leverages its knowledge in developing businesses with entrepreneurs and start up companies’ management whereby it creates a customized plan for them to overcome obstacles so that they can focus on marketing their product(s) and/or service(s) to their potential customers.

 

Basis of Presentation

 

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited condensed financial position of Balance Labs as of September 30, 2015 and the unaudited condensed results of its operations and cash flows for the nine months ended September 30, 2015. The unaudited condensed results of operations for the three and nine months ended September 30, 2015 are not necessarily indicative of the operating results for the full year. It is recommended that these unaudited condensed financial statements be read in conjunction with the audited financial statements and related disclosures of the Company for the period from June 5, 2014 (inception) to December 31, 2014 which were filed with the Securities and Exchange Commission (“SEC”) on Amendment No. 3 to Form S-1 on June 5, 2015.

 

Note 2 – Going Concern and Management’s Plans

 

As of September 30, 2015, the Company had a working capital deficiency and stockholders’ deficit of $136,973 and $136,473, respectively. For the three and nine months ended September 30, 2015, the Company reported a net loss of $92,527 and $240,066, respectively. As of September 30, 2015, with regards to the Company’s professional service agreement that provided 100% of the Company’s revenues since inception, the Company and its client have fully satisfied their professional service and payment obligations under the agreement, respectively. The Company is actively pursuing new client relationships. The Company has not yet achieved profitability and the Company will need to add clients and generate additional revenues to achieve profitability. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

 

The Company may require additional capital to implement its business plan and support its operations. Currently, the Company has no established bank-financing arrangements. Therefore, depending on the revenue growth rate, the Company may need to seek additional financing through a future private offering of its equity or debt securities, or through strategic partnerships and other arrangements with corporate partners. The Company believes it will be successful in these efforts; however, there can be no assurance the Company will meet its internal revenue forecasts or, if necessary, be successful in raising additional debt or equity financing to fund its operations on terms agreeable to the Company. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The condensed financial statements do not include any adjustments that might be necessary if the Company were unable to continue as a going concern. The Company presently has enough cash on hand to sustain its operations on a month-to-month basis. 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, the Company 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 the Company could be forced to discontinue its operations, liquidate, and/or seek reorganization under the U.S. bankruptcy code.

 

5
 

 

BALANCE LABS, INC.

 

Notes to Unaudited Condensed Financial Statements

 

Note 3 – Summary of Significant Accounting Policies

 

Use of Estimates

 

The preparation of the financial statements in conformity with U.S. 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 accruals, stock-based compensation and income taxes. Actual results could materially differ from those estimates.

 

Concentrations and Credit Risk

 

One related party provided 100% of revenues during the nine months ended September 30, 2015, the three months ended September 30, 2014 and for the period from June 5, 2014 (inception) to September 30, 2014. See Note 5 – Related Party Transactions for additional details.

 

Revenue Recognition

 

The Company recognizes revenue related to its professional services to its customers when (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been rendered; (iii) the sales price is fixed or determinable; and (iv) collectability is reasonably assured.

 

Investment – Related Party

 

Investment – related party is recorded at cost.

 

Net Loss Per Common Share

 

Basic and diluted loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period.

 

The following securities are excluded from the calculation of weighted average dilutive common shares because their inclusion would have been anti-dilutive:

 

   September 30, 
   2015   2014 
Warrants   220,000     
Total potentially dilutive shares   220,000     

 

Stock-Based Compensation

 

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 interim 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 of time, 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.

 

Fair Value of Financial Instruments

 

The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

 

6
 

 

BALANCE LABS, INC.

 

Notes to Unaudited Condensed Financial Statements

 

Note 3 – Summary of Significant Accounting Policies – Continued

 

Fair Value of Financial Instruments – Continued

 

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

 

Level 1 — quoted prices in active markets for identical assets or liabilities

 

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

 

Level 3 — inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)

 

The carrying amounts of cash, accounts payable, and accrued liabilities approximate fair value due to the short-term nature of these instruments.

 

Reclassifications

 

Certain prior period amounts have been reclassified for comparative purposes to conform to the fiscal 2015 presentation. These reclassifications have no impact on the previously reported net loss.

 

Recently Issued Accounting Pronouncements

 

The Company has evaluated all new accounting standards that are in effect and may impact its condensed consolidated financial statements and does not believe that there are any other new accounting standards that have been issued that might have a material impact on its financial position or results of operations.

 

Note 4 – Stockholders’ Deficit

 

Common Stock and Warrant Offering

 

On September 17, 2015, the Company issued an aggregate of 220,000 shares of common stock at $0.50 per unit to investors for aggregate gross proceeds of $110,000. In connection with the purchases, the Company issued three-year warrants to purchase an aggregate of 220,000 shares of common stock at an exercise price of $2.00 per share. The warrants had an aggregate grant date fair value of $54,010, which was computed using the following assumptions: expected volatility of 282%, risk-free rate of 1.00%, expected term of 3.00 years, and expected dividends of 0.00%.

 

Stock Warrants

 

See Note 4 – Stockholders’ Deficit – Common Stock and Warrant Offering for details associated with the issuance of warrants during the nine months ended September 30, 2015. The weighted average estimated fair value of the warrants granted during the three and nine months ended September 30, 2015 was $0.25 per share.

 

As of September 30, 2015, warrants to purchase an aggregate of 220,000 shares of common stock at an exercise price of $2.00 per share were outstanding and exercisable. The warrants had a weighted average remaining life of 2.97 years and had no intrinsic value.

 

Stock-Based Compensation

 

On January 15, 2015, the Company’s Board of Directors approved the issuance of 250,000 and 150,000 shares of the Company’s common stock to the Company’s then-Chief Executive Officer, plus the Secretary, respectively. The common stock had de minimus issuance date fair value.

 

7
 

 

BALANCE LABS, INC.

 

Notes to Unaudited Condensed Financial Statements

 

Note 5 – Related Party Transactions

 

On August 22, 2014, the Company entered into a one-year agreement to provide business development and corporate planning services to Bang Holdings Corporation (“Bang Holdings”), in which the Company’s Chairman of the Board and, effective September 11, 2015, the Company’s Chief Executive Officer (“CEO”) has an indirect 19% interest. Bang Holdings shall pay the Company $150,000 over the term of the agreement. During the three and nine months ended September 30, 2015, the Company recognized $0 and $39,000, respectively, of revenues related to the agreement. During the three months ended September 30, 2014 and during the period from June 4, 2014 (inception) to September 30, 2014, the Company recognized $46,500 of revenues related to the agreement. Pursuant to the agreement, the Company received 500,000 shares of common stock of Bang Holdings as consideration for a $500 investment in cash recorded at cost. The agreement expired on August 22, 2015.

 

In connection with services performed related to the above business development agreement, the Company’s CEO earned $10,000 per month. The following compensation was recorded within general and administrative expenses - related parties on the condensed statements of operations: $30,000 and $90,000 during the three and nine months ended September 30, 2015, respectively, $40,000 during the three months ended September 30, 2014 and $40,000 during the period from June 4, 2014 (inception) to September 30, 2014. As of September 30, 2015, $156,500 of compensation was unpaid and was included in accounts payable – related parties on the condensed balance sheet.

 

During the three and nine months ended September 30, 2015, the Company paid $5,000 per month ($15,000 and $45,000 during the three and nine months ended September 30, 2015, respectively, and $15,000 and $20,000 during the three months ended September 30, 2014 and during the period from June 4, 2014 (inception) to September 30, 2014, respectively) to Balance Holdings LLC, an entity controlled by the Company’s CEO, for rent and office services, which was included in general and administrative expenses – related party in the condensed statement of operations. As of September 30, 2015, $20,000 was unpaid and was included in accounts payable – related parties on the condensed balance sheet.

 

During the nine months ended September 30, 2015, the Company’s CEO provided the Company unsecured short-term advances aggregating $37,340. The advances earn interest at a rate of 8% per annum and are payable on demand. During the nine months ended September 30, 2015, the Company repaid an aggregate of $38,325 of short-term advances to the Company’s CEO and entities controlled by the Company’s CEO ($37,220 to the Company’s CEO, $600 to The Farkas Group, Inc. and $550 to Balance Holdings LLC) to fund the Company’s early formation expenses. As of September 30, 2015, there was $120 of short term advances outstanding.

 

8
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following discussion and analysis of the condensed results of operations and financial condition of Balance Labs, Inc. (“Balance Labs” or the “Company”) as of September 30, 2015 and December 31, 2014, for the three and nine months ended September 30, 2015, for the three months ended September 30, 2014 and for the period from June 4, 2014 (inception) to September 30, 2014 should be read in conjunction with our condensed financial statements and the notes thereto that are included elsewhere in this Quarterly Report on Form 10-Q. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us,” “we,” “our,” and similar terms refer to Balance Labs. This Quarterly Report includes forward-looking statements, as that term is defined in the federal securities laws, based upon current expectations that involve risks and uncertainties, such as plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. Words such as “anticipate,” “estimate,” “plan,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions are used to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain risk factors discussed in our registration statement on Amendment No. 3 to Form S-1 (the “Risk Factors”) filed with the Securities and Exchange Commission (the “SEC”) on June 5, 2015 and declared effective by the SEC on June 15, 2015. Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.

 

Overview

 

We were incorporated on June 5, 2014 under the laws of the State of Delaware. We are a consulting firm that provides business development and consulting services to startup and development-stage businesses. 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.

 

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 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”.

 

Plan of Operations

 

Our plan is to prepare our clients for the many inevitable challenges they will encounter and to develop a customized plan for them to overcome these obstacles, so that they can focus on marketing their product(s) and/or service(s) to their potential customers.

 

Although we’ve only worked with one client since inception, our goal is to add and service a minimum of two to three new clients between now and the end of 2015. We’re marketing our services through both personal contact and online by (a) mining our existing network of professional contacts via personal outreach programs, which will also target international prospects that may wish to enter the US market; (b) expanding our network by attending targeted conferences and professional gatherings; and (c) utilizing our website at www.balancelabs.co, plus engaging potential clients on social media, including LinkedIn, Facebook and Twitter. However, because we have a limited budget allocated for our year one on-line marketing campaign, we anticipate that professionals within our professional network and personal referrals from companies that are satisfied with our professional services are likely to be our most significant and efficient near-term form of marketing.

 

We believe that we can support our year one clients with our existing full-time staff, supplemented with part-time sub-contracted professionals and service providers, as necessary. Importantly, between now and the end of 2015, we intend to formalize our relationships with these sub-contractors so that we can offer our clients turn-key business development products and services.

 

Our primary requirement for funding is for working capital in order to accommodate temporary imbalances between cash receipts and cash expenditures (see “Liquidity and Capital Resources”).

 

9
 

 

Recent Developments

 

On September 11, 2015, Raphael Perez (“Former CEO”) tendered his resignation as the President, CEO, Chief Financial Officer (“CFO”) and Director of the Company by providing a notice to the Company’s Board of Directors.

 

Effective September 11, 2015, the Board of Directors appointed Michael D. Farkas (“CEO”), the Company’s Chairman of the Board, as the President, CEO and CFO of the Company.

 

Effective September 11, 2015, the Board of Directors appointed Aviv Hillo as a director of the Company.

 

On September 17, 2015, we issued an aggregate of 220,000 shares of common stock at $0.50 per unit to investors for aggregate gross proceeds of $110,000. In connection with the purchases, we issued three-year warrants to purchase an aggregate of 220,000 shares of common stock at an exercise price of $2.00 per share.

 

Results of Operations

 

Three Months Ended September 30, 2015 Compared With Three Months Ended September 30, 2014

 

Overview

 

We reported a net loss of $92,527 and $18,005 for the three months ended September 30, 2015 and 2014, respectively, an increase of $74,522, or 414%, primarily due to a $46,500 reduction in revenues and increased operating expenses of $27,526.

 

Revenues

 

For the three months ended September 30, 2014, we generated $46,500 of revenues which resulted from our professional service agreement with an entity in which our CEO has an indirect 19% interest. We had no revenues during the three months ended September 30, 2015.

 

General and administrative expenses

 

General and administrative expenses were $92,031 and $64,505 for the three months ended September 30, 2015 and 2014, respectively, an increase of $27,526, or 43%, primarily due to an increase of approximately $14,000 of professional fees associated with our filings with the Securities and Exchange Commission (“SEC”) and an increase of approximately $17,000 of payroll expenses.

 

Interest expense

 

Interest expense for the three months ended September 30, 2015 and 2014 was $496 and $0, respectively, which was attributable to the short term advances provided by our CEO.

 

Nine Months Ended September 30, 2015

 

Overview

 

We reported a net loss of $240,066 for the nine months ended September 30, 2015, which resulted primarily from operating expenses of $278,530, partially offset by revenues of $39,000.

 

Revenues

 

Our revenues for the nine months ended September 30, 2015 were $39,000, which resulted from our professional service agreement with an entity in which our CEO has an indirect 19% interest.

 

10
 

 

General and administrative expenses

 

General and administrative expenses were $278,530 for the nine months ended September 30, 2015, which were primarily comprised of $90,000 attributable to compensation earned by our CEO in connection with services performed related to our client, approximately $55,000 of professional fees associated with the filing of our registration statement and other SEC filings, approximately $61,000 of payroll expenses and approximately $45,000 of rent and office services expense related to an entity controlled by our CEO.

 

Interest expense

 

Interest expense for the nine months ended September 30, 2015 was $536 which was attributable to the short term advances provided by our CEO.

 

Period from June 5, 2014 (Inception) to September 30, 2014

 

Overview

 

We reported a net loss of $23,510 for the period from June 5, 2014 (inception) to September 30, 2014, which resulted primarily from operating expenses of $70,010, partially offset by revenues of $46,500.

 

Revenues

 

Our revenues for the period from June 5, 2014 (inception) to September 30, 2014 were $46,500, which resulted from our professional service agreement with an entity in which our CEO has an indirect 19% interest.

 

General and administrative expenses

 

General and administrative expenses were $70,010 during the period from June 5, 2014 (inception) to September 30, 2014, of which $40,000 was attributable to compensation earned by our CEO in connection with services performed related to our client and $20,000 was related to rent and office services expense paid to an entity controlled by our CEO.

 

Liquidity and Capital Resources

 

Liquidity

 

We measure our liquidity in a number of ways, including the following:

 

   September 30,   December 31, 
   2015   2014 
   (Unaudited)     
           
Cash  $43,085   $66,158 
Working capital deficiency  $(136,973)  $(6,947)

 

Availability of Additional Funds

 

Except for the monthly consulting fee to our CEO and Chairman of the Board and the month-to-month lease of our office space, as described elsewhere in this Quarterly Report, we currently do not have any material commitments for capital expenditures. In addition, as of September 30, 2015, with regards to our professional service agreement that provided 100% of our revenues since inception, we and our client have fully satisfied our professional service and payment obligations under the agreement, respectively. 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 to raise additional capital in order to have sufficient working capital in reserve. 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. If there are significant delays in bringing in new clients before we raise additional capital, it may be necessary to delay our vendor payments to related parties. If we’re not successful in obtaining new clients, we may exhaust our capital reserves and need to suspend our operations until we obtain sufficient funding.

 

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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 us. These matters raise substantial doubt about our ability to continue as a going concern, as was noted by our independent auditors in their audit opinion associated with our December 31, 2014 financial statements. 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.

 

Our condensed financial statements included elsewhere in this Quarterly Report have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate our continuation as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The condensed financial statements do not include any adjustment that might result from the outcome of this uncertainty.

 

During the nine months ended September 30, 2015, our sources and uses of cash were as follows:

 

Net Cash Used in Operating Activities

 

We experienced negative cash flow from operating activities for the nine months ended September 30, 2015 in the amount of $132,088. The net cash used in operating activities was primarily due to cash used to fund a net loss of $240,066 adjusted for non-cash expenses of $40, partially offset by $107,938 of net cash provided by changes in working capital balances, primarily due to an increase in accrued expenses and other current liabilities.

 

Net Cash Provided by Financing Activities

 

Net cash provided by financing activities during the nine months ended September 30, 2015 was $109,015 related to $110,000 of proceeds from the sale of common stock and warrants and $37,340 of proceeds from short term advances from related parties partially offset by the repayment of $38,325 of short term advances from related parties.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements.

 

Critical Accounting Policies and Estimates

 

There are no material changes from the critical accounting policies set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our registration statement on Amendment No. 3 to Form S-1 which was filed with the SEC on June 5, 2015 and declared effective by the SEC on June 15, 2015. Please refer to that document for disclosures regarding the critical accounting policies related to our business.

 

Recent Accounting Standards

 

We have implemented all new accounting standards that are in effect and may impact our 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 3.  Quantitative And Qualitative Disclosures About Market Risk.

 

Not applicable.

 

Item 4. Controls and Procedures.

 

Disclosure Controls and Procedures

 

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Principal Executive and Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Internal controls are procedures which are designed with the objective of providing reasonable assurance that (1) our transactions are properly authorized, recorded and reported; and (2) our assets are safeguarded against unauthorized or improper use, to permit the preparation of our condensed financial statements in conformity with United States generally accepted accounting principles.

 

In connection with the preparation of this Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, management, with the participation of our Principal Executive and Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)). Based upon that evaluation, our Principal Executive and Financial Officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective.

 

Changes in Internal Controls

 

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 under the Exchange Act that occurred during the quarter ended September 30, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Limitations of the Effectiveness of Control

 

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations of any control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. 

 

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PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results. From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters that may harm our business could arise from time to time.

 

Item 1A. Risk Factors.

 

Smaller reporting companies are not required to provide the information required by this item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

On September 17, 2015, we issued an aggregate of 220,000 shares of common stock at $0.50 per unit to investors for aggregate gross proceeds of $110,000. In connection with the purchases, we issued three-year warrants to purchase an aggregate of 220,000 shares of common stock at an exercise price of $2.00 per share.

 

We relied on the exemption from registration provided by section 4(a)(2) of the Securities Act of 1933, as amended.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

Exhibit        
Number       Description

4.1

 

*

 

Form of Warrant dated September 17, 2015 to Purchase Common Stock

10.1

 

*

 

Form of Securities Purchase Agreement dated September 17, 2015, by and between Balance Labs, Inc. and certain investors

31.1   *   Certification of President, Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1   *  

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2   *   Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS   *   XBRL Instance Document
101.SCH   *   XBRL Schema Document
101.CAL   *   XBRL Calculation Linkbase Document
101.DEF   *   XBRL Definition Linkbase Document
101.LAB   *   XBRL Label Linkbase Document
101.PRE   *   XBRL Presentation Linkbase Document
         
    *   Filed herewith.
    **   In accordance with the SEC Release 33-8238, deemed being furnished and not filed.

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  BALANCE LABS, INC.  
       
Dated:  November 16, 2015 By: /s/ Michael D. Farkas  
    Name: Michael D. Farkas  
    Title:

President, Chief Executive Officer and Chief Financial Officer (Principal Executive and Financial Officer)

 

 

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