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 March 31, 2022 and December 31, 2021, the Company has $2,000 and $2,000 in cash equivalents, respectively.

BALANCE LABS, INC. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

As of March 31, 2022

(Unaudited)

Use of Estimates

The preparation of the unaudited condensed 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.

Joint Venture

The Company uses the equity method to account for their financial interest in the following company:

 Schedule of Equity Method Investments

The Company is a 43.15% owner of iGrow Systems Inc., as of March 31, 2022 and December 31, 2021 respectively.

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 March 31, 2022 and December 31, 2021 is as follows:

 Schedule of Joint Venture of Financial Information

The Company’s portion of the net loss for the three months ended March 31, 2022 was $613, which exceeded its investment in the joint venture by $102,451 as of March 31, 2022 which is recorded as accumulated losses of unconsolidated investees in excess of investment on the condensed consolidated balance sheets.

BALANCE LABS, INC. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

As of March 31, 2022

(Unaudited)

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 unaudited condensed consolidated financial statements as of March 31, 2022. The Company does not expect any significant changes in its unrecognized tax benefits within twelve months of the reporting date. The Company’s, 2019, 2020, and 2021 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 three months ended March 31, 2022 and 2021, has been recorded in Other Income (Expense) on the consolidated statement of operations.

BALANCE LABS, INC. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

As of March 31, 2022

(Unaudited)

Investments – Related Parties

When the fair value of an investment is indeterminable, the Company accounts for its investments that are under 20% of the total equity outstanding using the cost method. For investments in which the Company holds between 20-50% equity and is non-controlling are accounted for using the equity method. For any investments in which the Company holds over 50% of the outstanding stock, the Company consolidates those entities into their consolidated financial statements herein.

The Company holds two investments on its consolidated Balance Sheet as of March 31, 2022 and December 31, 2021.

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.

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 March 31, 2022 and December 31, 2021.

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:

● 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 1^st 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 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 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 March 31, 2022, 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 3.763243 reverse stock split. As a result, the Company’s shares were adjusted to 265,728 shares.

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.

At March 31, 2022, the fair value of the investment in EZFill Holdings, Inc. was $418,522 ($1.05/share).

All of the Company’s revenues were earned from EZFill Holdings, Inc, a related party, totalling $67,500 and $0 for the three months ended March 31, 2022 and 2021, respectively.

Investments

The Company owned a majority interest in Descrypto Holdings, Inc. formerly known as Krypto Ventures, and 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 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 83,709,315 shares of Descrypto’s Common Stock owned by the Company for total proceeds of $84. No proceeds were received from this redemption by the Company.

Following the November Redemption Agreement, the Company owned 35,875,421 shares of Descrypto’s Common Stock.

BALANCE LABS, INC. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

As of March 31, 2022

(Unaudited)

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. Following the February Redemption Agreement, the Company owned 7,175,084 shares of Descrypto’s Common Stock for total proceeds of $287.

In addition, on April 1, 2022, the full principal balance of note receivable of $25,000 and $2,217 of interest receivable were fully converted by Descrypto Holdings, Inc. in exchange of 68,045 shares of Common Stock of Descrypto Holdings, Inc. (See Note 10).

As of March 31, 2022, the investment in Descrypto has a fair value of $0, due to the stock being illiquid, and it is recorded on our consolidated balance sheet using the equity method. In connection with the November redemption agreement, the Company’s investment, initially accounted for under the equity method, decreased below 20%, as a result, this investment is now valued using the cost method.

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 6). As of March 31, 2022, the investment has a fair value of $13,271 and it is recorded on our consolidated balance sheet using the equity method. During the three months ended March 31, 2022, the Company recorded $5,541 of unrealized loss from this investment.

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 March 31, 2022 and December 31, 2021, the carrying value of marketable securities was $418,522 and $550,057, respectively. The securities are included in the Investment at Fair Value – Related Party on the consolidated balance sheets, which consist of common shares held in one (1) investment which currently is trading on the Over-the-Counter Bulletin Board (OTCBB). On September 14, 2021, the S-1 Registration Statement for EZFill Holdings, Inc., a related party, was declared effective by Securities and Exchange Commission. As of March 31, 2022 and December 31, 2021, the Company has classified this as Level 1 asset on the fair value hierarchy because the investment is valued based on quoted market price using observable inputs.

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 51% majority owned subsidiary Descrypto Holdings, Inc. formerly known as Krypto Ventures, Inc, and KryptoBank Co., from December 28, 2017, which was deconsolidated on July 29, 2021; however, all results of operations for KryptoBank have been included through the date of deconsolidation. All intercompany transactions are eliminated. The Company’s four subsidiaries, Balance AgroTech Co., Advanced AutoTech Co., Balance Cannabis Co., and Balance Medical Marijuana Co. are dormant.

The Company has a non-controlling interest of 43.15% in iGrow Systems Inc., which is not included in this consolidation for the three months ended March 31, 2022 and 2021, respectively.

Net Income (Loss) Per Common Share

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 40,000 warrants and 3,583,119 shares issuable from convertible notes payable for the three months ended March 31, 2022 and 640,000 warrants and 3,279,236 shares issuable from convertible notes payable for the three months ended March 31, 2021, respectively, were excluded from the computation of diluted weighted average shares outstanding as they would be anti-dilutive. These common stock equivalents may be dilutive in the future.

BALANCE LABS, INC. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

As of March 31, 2022

(Unaudited)

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 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.

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:

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 March 31, 2022.

 Schedule of Fair Value of Assets on Recurring Basis

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.

BALANCE LABS, INC. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

As of March 31, 2022

(Unaudited)

The Company accounts for its investment in EzFill Holdings, Inc. (“EzFill”) as available-for-sale securities. As of March 31, 2022 and December 31, 2021, the Company classified its EzFill investment of $418,522 and $550,057, respectively, of available-for-sale securities, to Level 1 assets on the fair value hierarchy because the investment is valued based on quoted market price using observable inputs.

Business Segments

The Company operates in one segment and therefore segment information is not presented.

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 three months ended March 31, 2022 and March 31, 2021, advertising, marketing, and promotion expense was $48 and $1,956, respectively.

Property and equipment

Property and equipment consist 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 three to five years.

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 March 31, 2022 and December 31, 2021 consisted of the following:

 Schedule of Property and Equipment

Depreciation expense for the three months ended March 31, 2022 and 2021 totalled $0 and $40, respectively.

BALANCE LABS, INC. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

As of March 31, 2022

(Unaudited)

Recently Issued Accounting Pronouncements

Changes to accounting principles are established by the FASB in the form of ASUs to the FASB’s Codification. We consider the applicability and impact of all ASUs on our financial position, results of operations, stockholders’ deficit, cash flows, or presentation thereof. Management has evaluated all recent accounting pronouncements as issued by the FASB in the form of Accounting Standards Updates (“ASU”) through the date these financial statements were available to be issued and found no recent accounting pronouncements issued, but not yet effective accounting pronouncements, when adopted, will have a material impact on the financial statements of the Company.

In August 2020, FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity; Own Equity (“ASU 2020-06”), as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Among other changes, the new guidance removes from GAAP separation models for convertible debt that require the convertible debt to be separated into a debt and equity component, unless the conversion feature is required to be bifurcated and accounted for as a derivative or the debt is issued at a substantial premium. As a result, after adopting the guidance, entities will no longer separately present such embedded conversion features in equity and will instead account for the convertible debt wholly as debt. The new guidance also requires use of the “if-converted” method when calculating the dilutive impact of convertible debt on earnings per share, which is consistent with the Company’s current accounting treatment under the current guidance. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted, but only at the beginning of the fiscal year. The Company adopted the guidance under ASU 2020-06 on January 1, 2022. The adoption of this guidance and had no material impact on the Company’s financial statements.