Note 3 – Summary of Significant Accounting Policies

Reclassification

Non-controlling interest related to the deconsolidated of KryptoBank was re-classed to retained earnings. This reclassifications had no effect on the reported results of operations.

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 September 30, 2022, and December 31, 2021, the Company has $2,000 in cash equivalents, respectively.

Use of Estimates

The preparation of the 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.

BALANCE LABS, INC. and Subsidiaries

Notes to Consolidated Financial Statements

As of September 30, 2022

(Unaudited)

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

Balance Labs, Inc. and subsidiaries use the equity method to account for their financial interest.

For the nine months ending September 30, 2022, the investment in iGrow Systems Inc was disposed and we recognized a gain of $83,064 on the investment in iGrow Systems which is included as Gain on disposal of non-controlling interest on the accompanying statement of operations. iGrow Systems Inc has closed and is no longer in operations as of September 30, 2022.

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 consulting 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.

BALANCE LABS, INC. and Subsidiaries

Notes to Consolidated Financial Statements

As of September 30, 2022

(Unaudited)

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 September 30, 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, in 2021 the unrealized gain (loss) on the available-for-sale securities has been recorded in other income on the condensed 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 and nine months ended September 30, 2022, and 2021 has been recorded in Other Income.

BALANCE LABS, INC. and Subsidiaries

Notes to Consolidated Financial Statements

As of September 30, 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 condensed consolidated financial statements herein.

The Company holds one investment as of September 30, 2022, and two investments as of December 31, 2021.

In 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 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 three and nine months then ended.

On November 18, 2020, the Company executed a two (2) year, third-party consulting agreement for various corporate services. In connection with this agreement, and with the effectiveness of the Company’s Form S-1 registration statement, the Company was entitled to compensation as follows:

● 1,000,000 shares of common stock having a fair value of $1,000,000 ($1.00/share), each based on a recent cash price of the related party,

● $200,000,

● 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

At September 30, 2022, the Company owned 398,592 shares 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 $245,533 ($0.62/share). Recorded an adjustment of $304,238 for the nine months ending September 30, 2022, as unrealized loss on securities.

Investments

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 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. During three and nine months ended September 30, 2022, the Company had no unrealized gain or losses from this investment. 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 (see Note 9).

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 September 30, 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. During each three and nine months ended September 30, 2022, the Company recorded $0 and $14,278, respectively, of unrealized loss from this investment.

BALANCE LABS, INC. and Subsidiaries

Notes to Consolidated Financial Statements

As of September 30, 2022

(Unaudited)

Deconsolidation of Subsidiary

In accordance with ASC Topic 810-10-40, a parent company must deconsolidate a subsidiary as of the date the parent ceases to have a controlling interest in that subsidiary and recognize a gain or loss in net income at that time.

The Company owned a majority interest in Krypto Ventures Inc, formerly known as KryptoBank Co. On July 29, 2021, the Company exchanged 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 having a fair value of $0 due to the stock being illiquid. As a result, Krypto Ventures, Inc was deconsolidated. The Company recognized a gain on deconsolidation of $153,907 as follows:

 Schedule of Fair Value and Recognized Gain Loss on Deconsolidation of Subsidiary

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 September 30, 2022, and December 31, 2021, the carrying value of marketable securities was $245,533 and $318,874, 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. was declared effective by Securities and Exchange Commission. The Company has reclassified this investment from Level 3 to 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 Krypto Ventures Inc, formerly known as 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 had a non-controlling interest of 43.15% in iGrow Systems Inc., which is not included in this consolidation for the periods ended September 30, 2022, and 2021, respectively.

The Company has a non-controlling interest of 46.10% in W Technologies, which is not included in this consolidation for the periods ended September 30, 2022, and 2021, respectively.

BALANCE LABS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As of September 30, 2022

(Unaudited)

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 and 740,000 warrants and 3,698,494 and 3,358,644 shares from convertible notes payable for the nine months ended September 30, 2022, and 2021, respectively.

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:

BALANCE LABS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As of September 30, 2022

(Unaudited)

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 September 30, 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.

The Company accounts for its investment in EzFill Holdings, Inc. (“EzFill”) as available-for-sale securities. As of September 30, 2022, the Company reclassified its EzFill investment of $245,533 of available-for-sale securities previously reported as Level 3 to Level 1 assets on the fair value hierarchy because the investment is valued based on quoted market price using observable inputs after an IPO on September 14, 2021.

The Company accounts for its investment in Bang Holdings, Corp as available-for-sale securities as level 3 due to unobservable inputs in which little or no market data exists. In 2021, the investment in Bang Holdings Corp. was fully impaired due to the Company being delisted from OTC Pink Sheets and not having a liquid trading market at that time. The Company recorded an impairment expense of $195,000 in 2021.

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 unaudited condensed consolidated statement of operations. For the nine months ended September 30, 2022, and September 30, 2021, advertising, marketing, and promotion expense was $48 and $3,730, respectively. For the three months ended September 30, 2022, and September 30, 2021, advertising, marketing, and promotion expense was $48 and $401, 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 September 30, 2022, and December 31, 2021 consisted of the following:

Schedule of Property and Equipment 

BALANCE LABS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

As of September 30, 2022

(Unaudited)

Depreciation expense for the three months ended September 30, 2022, and 2021 totaled $0 and $0, respectively.

Depreciation expense for the nine months ended September 30, 2022, and 2021 totaled $0 and $80, respectively.

During the nine months ended September 30, 2021, the Company incurred $9,500 of capitalized costs towards the update of the website which was deconsolidated on July 29, 2021 (See Note 3).

During the three and nine months ended September 30, 2022, the Company recorded $0 of amortization on website development costs.

Recently Issued Accounting Pronouncements

The Company has evaluated all new accounting standards that are in effect and may impact its unaudited 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.