10-K: Balance Labs, Inc. Reports Annual Results for Fiscal Year 2023, Cites Going Concern Uncertainty

Balance Labs, Inc., a consulting firm, reported a net loss of $381,571 for 2023 and its independent auditor has raised substantial doubt about the company's ability to continue as a going concern.

Summary

• Balance Labs, Inc., a consulting firm, reported a net loss of $381,571 for the fiscal year ended December 31, 2023, compared to a net loss of $768,351 in 2022.
• The company's revenue decreased to $0 in 2023 from $247,500 in 2022, primarily due to a reduction in consulting income from EZFill Holdings, Inc.
• General and administrative expenses increased by 68% to $35,571, while professional fees decreased by 82% to $25,085.
• The company's independent auditor has expressed substantial doubt about its ability to continue as a going concern due to a net loss, accumulated deficit of $5,355,098, and negative working capital of $4,542,883.
• Balance Labs is actively pursuing new client relationships and exploring financing options to address its liquidity concerns.
• The company's cash balance decreased from $235,311 in 2022 to $112,809 in 2023.
• The company had a working capital deficiency of $4,542,883 as of December 31, 2023.

Sentiment

Score: 2

Explanation: The document presents a very negative outlook due to the company's significant financial losses, lack of revenue, going concern issues, and ineffective internal controls. While there are some positive notes about cost-cutting and future plans, the overall sentiment is highly concerning from an investment perspective.

Positives

• The net loss decreased by 50% year-over-year, indicating some improvement in financial performance.
• Professional fees were significantly reduced, suggesting cost-cutting measures.
• The company is actively pursuing new client relationships and exploring financing options.

Negatives

• The company's revenue decreased to $0 in 2023, indicating a significant challenge in generating income.
• The independent auditor has expressed substantial doubt about the company's ability to continue as a going concern.
• The company has a significant working capital deficiency of $4,542,883.
• The company's cash balance has decreased significantly year-over-year.
• The company has a large accumulated deficit of $5,355,098.

Risks

• The company's ability to continue as a going concern is in doubt due to its financial condition.
• The company may not be able to secure additional financing to execute its business plan.
• The company faces significant competition in the consulting services market.
• The company relies heavily on key personnel, and their loss could negatively impact operations.
• The company's internal controls over financial reporting are deemed ineffective.
• The company is subject to the SEC's penny stock rules, which may reduce trading activity.
• The company is dependent on information technology and is vulnerable to cybersecurity incidents.

Future Outlook

The company plans to continue preparing clients for challenges, develop customized plans, and focus on marketing their services through personal contacts, online presence, and referrals. They aim to add and service a minimum of two to three new clients by the end of 2024.

Management Comments

• The Company is led by our President, CEO and Chairman of the Board, Michael D. Farkas, who is a seasoned entrepreneur and has worked in corporate finance and in assisting and developing businesses in multiple industries for the past twenty-six (26) years.
• Our business focuses on providing advice to entrepreneurs and assisting business owners so that their ideas can be fully developed and implemented.
• We utilize our knowledge in developing businesses, share practical experiences with our clients and introduce the business owners to different experienced professionals who could help these inexperienced entrepreneurs further implement their ideas.

Industry Context

The company operates in a competitive market with numerous established firms offering similar consulting services. The company's focus on startups and development-stage businesses positions it within a specific niche, but it faces competition from larger, more established firms and in-house capabilities of potential clients.

Comparison to Industry Standards

• The company's financial performance is significantly below industry standards for consulting firms, particularly in terms of revenue generation and profitability.
• The company's negative working capital and going concern issues are not typical for established consulting firms.
• The company's reliance on related-party transactions and debt financing is higher than industry norms.
• Compared to larger consulting firms like McKinsey, Bain, or BCG, Balance Labs lacks the scale, resources, and established client base.
• The company's lack of an audit committee and ineffective internal controls are also below industry best practices.

Corporate Governance

Legal Proceedings

• To the best of our knowledge, there are no material pending legal proceedings to which we are a party or of which any of our property is the subject.

Related Party Transactions

• The company has significant related party transactions, including loans from the CEO and companies controlled by the CEO, as well as consulting agreements and convertible notes.
• The company's CEO earns $10,000 per month under a consulting agreement.
• The company has a convertible note payable to 16th Avenue Associates, which was previously held by the Sammy Farkas Foundation, a related party.
• The company has a note payable to Balance Group LLC, a related party.
• The company has a convertible note payable to the CEO.
• The company has short-term advances from the CEO and companies controlled by the CEO.
• The company has an investment in EZFill Holdings, Inc., where the CEO is a significant shareholder.

Stakeholder Impact

• Shareholders face a high risk of losing their investment due to the company's financial instability and going concern issues.
• Employees may be concerned about job security due to the company's financial difficulties.
• Customers may be hesitant to engage with the company due to its financial instability.
• Creditors face a risk of not being repaid due to the company's financial difficulties.
• Suppliers may be concerned about the company's ability to pay for goods and services.

Next Steps

• The company plans to continue preparing clients for challenges and develop customized plans.
• The company plans to market its services through personal contacts, online presence, and referrals.
• The company aims to add and service a minimum of two to three new clients by the end of 2024.
• The company is actively pursuing multiple financing options to obtain the capital necessary to execute the company's business plan.

Key Dates

Keywords

consulting, business development, financial results, going concern, net loss, revenue, working capital, internal controls, financing, penny stock