10-Q: Balance Labs Reports Narrowed Net Loss for Q1 2025, Cites Debt Settlement

Balance Labs, Inc. reports a reduced net loss for the first quarter of 2025, primarily due to the cancellation of an accounts payable balance, but going concern doubts persist.

Summary

• Balance Labs, Inc. reported a net loss of $6,406 for the three months ended March 31, 2025, compared to a net loss of $116,943 for the same period in 2024.
• The decrease in net loss is primarily attributed to the cancellation of an accounts payable balance by a professional services vendor.
• The company's general and administrative expenses increased slightly to $4,262, while professional fees rose to $25,035.
• The company had a working capital deficiency of $5,077,512 as of March 31, 2025.
• The company's independent auditor has expressed substantial doubt about its ability to continue as a going concern.
• Management plans to seek additional capital to sustain operations for the next year.
• The company is marketing its services through personal contacts and online channels, aiming to add two to three new clients by the end of 2025.
• The company settled an outstanding accounts payable balance with a law firm, resulting in a reduction of $127,579.
• The CEO and companies controlled by the CEO have loaned the company a total of $1,743,558, which are in default as of March 31, 2025.
• The company's disclosure controls and procedures were deemed ineffective as of March 31, 2025, due to material weaknesses.

Sentiment

Score: 4

Explanation: While the net loss has decreased, the company faces significant financial challenges, including a going concern warning and ineffective internal controls; the reliance on related-party debt and the need for additional capital raise concerns.

Positives

• The net loss decreased significantly from $116,943 in Q1 2024 to $6,406 in Q1 2025.
• The company recognized a gain of $127,579 from the settlement of accounts payable.
• The company is actively pursuing new client relationships and marketing its services.

Negatives

• The company's auditor has expressed substantial doubt about its ability to continue as a going concern.
• The company has a working capital deficiency of $5,077,512.
• The company's disclosure controls and procedures were deemed ineffective due to material weaknesses.
• The company is in default on loans from the CEO and related parties totaling $1,743,558.

Risks

• The company's ability to continue as a going concern is uncertain.
• The company's financial condition is weak, with a significant working capital deficiency.
• The company's internal controls are ineffective, increasing the risk of financial misstatements.
• The company is heavily reliant on debt financing from related parties, which is currently in default.
• The company's limited client base and reliance on personal referrals pose a risk to revenue generation.
• The company may face challenges in raising additional capital on favorable terms.

Future Outlook

The company plans to seek additional capital within the next twelve months to sustain its operations and intends to formalize relationships with subcontractors to offer turn-key business development products and services.

Management Comments

• 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 Companys business operations.

Industry Context

As a consulting firm providing business development services to start-ups, Balance Labs operates in a competitive market where many firms offer similar services; the company's success depends on its ability to differentiate itself and attract clients.

Comparison to Industry Standards

• It is difficult to compare Balance Labs to industry standards due to its small size and limited client base.
• Larger consulting firms often have diversified revenue streams and more robust internal controls, which Balance Labs currently lacks.
• The company's reliance on related-party debt is not typical of established consulting firms.

Related Party Transactions

• The CEO earns $10,000 per month under an agreement effective October 31, 2023.
• Balance Group LLC loaned an additional $66,850 to the Company during 2016, 2017, and 2019.
• On October 3, 2019, the Company received $40,000 from The Foundation in exchange for a promissory note.
• On June 27, 2021, the Company received $50,000 from the CEO in exchange for a convertible promissory note.
• As of March 31, 2025, the CEO and companies controlled by the CEO have loaned the Company a total of $1,743,558.

Stakeholder Impact

• Shareholders face the risk of dilution if the company raises capital through equity financing.
• Employees' job security is uncertain due to the company's going concern warning.
• Creditors face the risk of non-payment due to the company's financial difficulties.

Next Steps

• The company plans to seek additional capital to sustain operations.
• The company intends to formalize relationships with subcontractors.
• The company aims to add two to three new clients by the end of 2025.
• Management will reassess the matter of segregation of duties at the end of the fiscal year to determine whether improvement is feasible.

Key Dates

Keywords

going concern, net loss, financial statements, related party transactions, internal controls, working capital, consulting, Balance Labs