10-Q: Balance Labs Q2 Loss Narrows Amid Debt Settlement

Balance Labs, Inc. reported a reduced net loss for Q2 2025, primarily driven by a significant gain from settling an old accounts payable, despite ongoing operational losses and a critical going concern warning.

Summary

• Net loss for the six months ended June 30, 2025, decreased to $152,548 from $217,643 in the prior year, a 30% improvement.
• This improvement was largely due to a $127,579 gain on the settlement of an accounts payable balance with a law firm.
• Operational losses worsened, increasing to $158,098 for the six months ended June 30, 2025, from $123,589 in the same period last year.
• Professional fees significantly increased by 111% to $51,716 for the six months ended June 30, 2025, primarily due to higher legal and accounting fees.
• Cash and cash equivalents declined to $3,625 as of June 30, 2025, from $13,199 at December 31, 2024.
• The company continues to operate with a substantial working capital deficiency of $5,223,654 and an accumulated deficit of $6,035,869 as of June 30, 2025.
• Used $57,574 in cash from operating activities during the six months ended June 30, 2025.

Sentiment

Score: 2

Explanation: The company faces severe financial distress, including a going concern warning, significant accumulated deficit, and worsening operational losses. While a one-time gain reduced the net loss, it does not address the fundamental lack of revenue and critical liquidity issues. The ineffective internal controls and reliance on related party debt further compound the negative outlook.

Positives

• Net loss for the six months ended June 30, 2025, decreased by 30% to $152,548 compared to $217,643 in the prior year.
• Realized a significant gain of $127,579 from the settlement of an outstanding accounts payable balance with a law firm.
• Cash used in operating activities improved slightly, decreasing to $57,574 for the six months ended June 30, 2025, from $69,015 in the same period last year.

Negatives

• No revenue generated for the three and six months ended June 30, 2025, and 2024.
• Operational losses increased to $158,098 for the six months ended June 30, 2025, from $123,589 in the prior year.
• Cash and cash equivalents significantly decreased to $3,625 as of June 30, 2025, from $13,199 at December 31, 2024.
• Working capital deficiency worsened to $5,223,654 as of June 30, 2025, from $5,071,106 at December 31, 2024.
• Accumulated deficit increased to $6,035,869 as of June 30, 2025.
• Professional fees increased by 111% to $51,716 for the six months ended June 30, 2025, primarily due to higher legal and accounting fees.
• Unrealized gain on available-for-sale securities shifted to a loss of $8,769 for the six months ended June 30, 2025, compared to a gain of $19,770 in the prior year.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern for the next twelve months due to significant cash usage, low cash balance, accumulated deficit, and working capital deficiency.
• The company may need to cease operations without additional sources of debt or equity capital.
• No assurance that future financing will be available or on satisfactory terms, and any financing may impose restrictions or cause substantial dilution to stockholders.
• Disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses including functional controls, lack of an audit committee, and inadequate segregation of duties.
• Reliance on a limited budget for online marketing, anticipating primary marketing through personal network and referrals, which may not be sufficient.
• The company has only worked with three clients since inception, indicating a lack of a diversified client base and potential for temporary imbalances between cash receipts and expenditures.
• Many related party notes and convertible notes are in default, totaling $2,059,100 in principal and $1,026,649 in accrued interest from related parties, plus $525,000 in principal and $510,843 in accrued interest from non-related parties.

Future Outlook

Management plans to seek additional debt or equity capital within the next twelve months to sustain operations and expects to begin a marketing campaign to market and sell its services. The company aims to add and service a minimum of two to three new clients by the end of 2025 and formalize relationships with subcontractors to offer turn-key business development products and services, including assisting clients with IPO preparations.

Management Comments

• We believe the expectations reflected in these forward-looking statements are reasonable, such statements are inherently subject to significant risks and uncertainties and we can give no assurances that our expectations will prove to be correct.
• Our plan is to prepare our clients for the many inevitable challenges they will encounter and to develop a customized strategy that allows them to navigate these obstacles efficiently.
• Although we've only worked with three clients since inception, our goal is to add and service a minimum of two to three new clients between now and the end of 2025.
• 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.
• Management plans to seek to raise additional capital within the next twelve months that is expected to sustain its operations for the next year.
• Management believes that the material weaknesses set forth above were the result of the scale of our operations and are intrinsic to our small size. Management believes these weaknesses did not have a material effect on our financial results and intends to take remedial actions upon receiving funding for the Company's business operations.

Industry Context

Balance Labs operates as a consulting firm specializing in business development for start-up and development-stage companies. This niche targets businesses often lacking resources and experienced management, providing services like business model refinement, sales/marketing plans, internal operations improvement, and introductions to professional services. The company's strategy to assist clients with IPO preparations suggests an ambition to serve high-growth potential ventures, positioning itself within the broader financial advisory and business services sector, albeit with a very limited client base and significant financial constraints.

Comparison to Industry Standards

• NA The filing does not provide specific comparable companies, projects, or results to assess against global benchmarks. The company's current operational scale (only three clients since inception) and lack of revenue make direct comparison to established industry standards challenging.

Corporate Governance

Related Party Transactions

• Accounts payable of $911,659 owed to the Chief Executive Officer (CEO) for consulting services from 2015 through 2022, with no formal repayment terms or accrued interest.
• Unpaid CEO compensation of $210,000 as of June 30, 2025, for services provided under a new agreement signed October 31, 2023, earning $10,000 per month.
• Balance Group LLC loaned an additional $66,850, with $43,807 in accrued interest, currently in default.
• The Foundation loaned $40,000, with $30,431 in accrued interest, currently in default.
• A convertible promissory note with the CEO for $53,192 (face value), with $25,584 in accrued interest, currently in default.
• A convertible note payable with Balance Group LLC for $120,000, with $105,041 in accrued interest, currently in default.
• Short-term advances from the CEO and companies controlled by the CEO totaling $1,779,058 in principal, with $820,452 in accrued interest, currently in default.
• Received an additional $48,000 in short-term advances from the CEO during the six months ended June 30, 2025.

Stakeholder Impact

• Shareholders: Face substantial dilution risk if equity financing is pursued, and potential loss of investment if the company cannot continue as a going concern. Existing shares are subject to significant accumulated deficit and working capital deficiency.
• Creditors (Related Party): Significant amounts of principal and accrued interest on loans from the CEO, Balance Group LLC, and The Foundation are in default, indicating high credit risk.
• Creditors (Non-Related Party): Convertible notes from Chase Mortgage, Inc. and 16th Avenue Associates are also in default, posing collection challenges.
• Employees/Management: The CEO has significant unpaid compensation and has provided substantial loans to the company, indicating a high level of personal financial exposure and reliance on the company's future success.
• Customers/Clients: The company's going concern issues and limited resources could impact its ability to deliver services effectively or expand its client base as planned.

Next Steps

• Seek additional debt or equity capital within the next twelve months.
• Begin a marketing campaign to market and sell services.
• Add and service a minimum of two to three new clients between now and the end of 2025.
• Formalize relationships with subcontractors to offer turn-key business development products and services.
• Reassess internal control material weaknesses at the end of the fiscal year to determine feasibility of improvement in segregation of duties.
• Take remedial actions regarding internal control weaknesses upon receiving funding for business operations.

Key Dates

Recommendation

Balance Labs, Inc. is in a precarious financial position, evidenced by a severe going concern warning from its auditors, a rapidly dwindling cash balance ($3,625), and a substantial working capital deficiency ($5.22 million). While the net loss decreased due to a one-time accounts payable settlement, operational losses worsened, indicating a fundamental lack of profitability in its core consulting business, which currently generates no revenue. The company is heavily reliant on related-party debt, much of which is in default, and faces significant risks related to its ability to raise future capital without substantial dilution. Furthermore, identified material weaknesses in internal controls raise concerns about financial reporting reliability. Given the severe liquidity crisis, lack of revenue, and high operational burn, the risk of business failure or significant shareholder value erosion is extremely high.

Keywords

Business Consulting, Startup Advisory, Development Stage Company, SEC Filing, 10-Q, Financial Performance, Going Concern, Liquidity, Related Party Debt, Internal Controls, Accumulated Deficit, Working Capital Deficiency