Quarterly report pursuant to Section 13 or 15(d)

Convertible Notes and Notes Payable

v3.21.2
Convertible Notes and Notes Payable
6 Months Ended
Jun. 30, 2021
Debt Disclosure [Abstract]  
Convertible Notes and Notes Payable

Note 8 – Convertible Notes and Notes Payable

 

Notes Payable

 

As of June 30, 2021, the CEO and companies controlled by the CEO have loaned the Company a total of $1,658,558 in addition to the convertible notes discussed above. The loans carry an interest rate of 8% and mature one year and one day from the date of the loan. The Company accrued interest of $271,917 on the loans. $1,169,899 of these loans are in default as of June 30, 2021.

 

During 2016, 2017, and 2019, Balance Group loaned an additional $66,850 at an interest rate of 8%. The notes are currently in default and have an accrued interest balance of $22,528.

 

Krypto Ventures Inc, formerly known as KryptoBank Co., as part of its initial funding, borrowed an additional $100,000 from its shareholders during the years ended December 31, 2018 and 2017. The notes have a stated interest rate of 12% compounded annually and are due on demand. The balance outstanding as of June 30, 2021 is $112,167. The Company has accrued interest of $37,524 as of June 30, 2021.

 

On October 3, 2019, The Company received $40,000 from The Foundation in exchange for a promissory note which bears 12% interest per annum and matured on October 10, 2020 or upon the Company raising $500,000 from outside investors, whichever occurs first. The promissory note is currently in default, and as of June 30, 2021, accrued interest on the note is $8,280. The promissory note comes with a warrant to purchase 40,000 shares of the Company’s stock with an exercise price of $1.00 per share and expires on October 10, 2022. The warrants have a relative fair value of $8,283, which was recorded as a debt discount which has been fully amortized.

 

On May 7, 2020, the Company (the “Borrower”) received a note payable in the amount of $34,500 from Wells Fargo Bank (the “Lender”) as part of the Paycheck Protection Program under the CARES Act. The interest rate is 1%. Payments shall be due and payable monthly in the amount of $1,463.85 commencing on September 2021. The note shall mature on May 3, 2022, at which time all unpaid principal, accrued interest, and any other unpaid amounts shall be due and payable in full. Unless otherwise agreed, all sums received from the borrower may be applied to interest, fees, principal, or any other amounts due to Lender in any order at Lender’s sole discretion. The Borrower may apply for the loan to be forgiven in whole or in part. As of June 30, 2021, the accrued interest on the note is $398. Furthermore, the Company applied for Loan Forgiveness. On August 13, 2021, the Company received notification that the loan along with accrued interest were fully forgiven (See Note 9).

 

During January 2021, The Farkas Group, a related party, loaned the Company $73,500, unsecured, for one year and one day at an interest rate of 8%.

 

During February 2021, The Farkas Group, a related party, loaned the Company $165,000, unsecured for one year and one day at an interest rate of 8%.

 

During March 2021, The Farkas Group, a related party, loaned the Company $10,000, unsecured for one year and one day at an interest rate of 8%.

 

During April 2021, The Farkas Group, a related party, loaned the Company $82,000, unsecured for one year and one day at an interest rate of 8%.

 

During May 2021, The Farkas Group, a related party, loaned the Company $10,000, unsecured for one year and one day at an interest rate of 8%.

 

During June 2021, The Farkas Group, a related party, loaned the Company $52,000, unsecured for one year and one day at an interest rate of 8%.

 

 

BALANCE LABS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

As of June 30, 2021

(Unaudited)

 

Convertible Notes Payable

 

On December 23, 2015, the Company issued a secured convertible promissory note in the amount of $25,000. The note carries a rate of 8% and was due on March 23, 2016. It is secured by all the assets of the Company. The note further contains a provision that the lender may convert any part of the note, including accrued interest, that is unpaid into the Company’s common stock at an exercise price of $0.50 per share. The note also contains a five-year warrant to purchase 100,000 shares of common stock at an exercise price of $0.50 per share until December 23, 2020. As of March 23, 2016, the note is in default and the interest rate has been increased to 18%. On April 14, 2021 the Company paid the full balance of the note, for a total of $52,545 which included $27,545 of accrued interest.

 

On April 1, 2016, the Company received $500,000 from Newell Trading Group in exchange for a convertible debenture due April 2, 2017 bearing interest at 10% and convertible into common stock at $.25 per share unless the note is paid by the Company prior to the election of the holder to convert. The Company recognized a beneficial conversion feature expense of $500,000 that has been fully amortized. As of June 30, 2021, accrued interest on the note is $262,354. On October 3, 2019, Newell Trading Group assigned its rights and interests in its $500,000 convertible debenture to the Sammy Farkas Foundation Inc., (the “Foundation”), a related party. The Foundation then entered into an agreement with the Company to extend the maturity date of the convertible debenture to October 10, 2024 in exchange for 54,000 shares of the Company’s stock. The shares have a fair value of $56,700 which was recorded as a debt discount and amortized over the life of the extension. On November 11, 2019, The Sammy Farkas Foundation transferred all the rights and interests of the note to another party, 16th Avenue Associates. The terms remain the same and the transfer has no effect on the financial statements. During the three and six months ended June 30, 2021, the Company amortized $2,836 and $5,671 of debt discount. During the three and six months ended June 30, 2020, the Company amortized $2,835 and $5,670 of debt discount. As of June 30, 2021, the remaining debt discount was $36,855.

 

On September 30, 2016, Balance Group LLC loaned the Company $120,000 with an interest rate of 10% and is convertible into common stock at $1.00. In addition, the Company issued the CEO 600,000 warrants and recorded a debt discount of $111,428, which has been fully amortized. The Company valued the warrants using the Black-Scholes option pricing model with the following assumptions: Expected volatility of 514%, expected life of five years, risk free rate of return of 1.14% and an expected divided yield of 0%. The warrants had a fair value of $85,714. The note is currently in default and has an accrued interest balance of $57,016 as of June 30, 2021.

 

On June 27, 2021, the Company received $50,000 from the CEO in exchange for a convertible promissory note with a face value of $53,192 which bears 12% interest per annum and matures on June 27, 2022 or upon the Company raising $250,000 from investors, whichever occurs first. The difference between the amount received and the face value of $3,192 was recorded as a discount and is being amortized over the life of the note. Additionally, the note comes with a beneficial conversion feature of $3,799 which was also recorded as a discount and is being amortized over the life of the note. For each three and six months ended June 30, 2021, the Company recorded $17 of amortization of debt discount. As of June 30, 2021 the remaining discount on the note is $6,974 and the Company has accrued interest of $35.