Notes
to Condensed Consolidated Financial Statements
As
of September 30, 2017
(unaudited)
Note
1 – Business Organization and Nature of Operations
Balance
Labs, Inc. (“Balance Labs” or the “Company”) was incorporated on June 5, 2014 under the laws of the State
of Delaware. Balance Labs is a consulting firm that provides business development and consulting services to start up and development
stage businesses. The Company offers services to help businesses in various industries improve and fine tune their business models,
sales and marketing plans and internal operations as well as make introductions to professional services such as business plan
writing, accounting firms and legal service providers.
The
Company leverages its knowledge in developing businesses with entrepreneurs and start up companies’ management whereby it
creates a customized plan for them to overcome obstacles so that they can focus on marketing their product(s) and/or service(s)
to their potential customers.
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they
do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of
management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary
for a fair presentation of the unaudited condensed consolidated financial position of Balance Labs as of September 30, 2017 and
the unaudited condensed consolidated results of its operations and cash flows for the three and nine months ended September 30,
2017. The unaudited condensed consolidated results of operations for the three and nine months ended September 30, 2017
are not necessarily indicative of the operating results for the full year. It is recommended that these unaudited condensed consolidated
financial statements be read in conjunction with the audited financial statements and related disclosures of the Company for the
year ended December 31, 2016, which was filed with the Securities and Exchange Commission on April 17, 2017.
Note
2 – Going Concern
The
condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company
has suffered losses from operations and has a working capital deficiency that raises substantial doubt about its ability to continue
as a going concern. The Company used $274,253 of cash in operating activities and currently has $13,134 in cash. This will not
sustain the Company without additional funds. Management plans to raise additional capital within the next twelve months that
will sustain its operations for the next year. In addition, the company will begin an active marketing campaign to market its
services.
Note
3 – Summary of Significant Accounting Policies
Cash
and Cash Equivalents
The
Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents.
At September 30, 2017 and December 31, 2016, the Company had no cash equivalents.
Use
of Estimates
The
preparation of the 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 and deferred tax assets. Actual results could materially differ from those estimates.
Revenue
Recognition
The
Company recognizes revenue related to its professional services to its customers when (i) persuasive evidence of an arrangement
exists; (ii) delivery has occurred or services have been rendered; (iii) the sales price is fixed or determinable; and (iv) collectability
is reasonably assured.
Beginning
in 2017 the Company began marketing products for a related company on a commission basis. The Company recognizes revenue when
products it has sold have been invoiced to the customer. The sales commission is fixed and the collectability is reasonably assured.
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 financial statements
as of September 30, 2017. The Company does not expect any significant changes in its unrecognized tax benefits within twelve months
of the reporting date. The Company’s 2014, 2015 and 2016 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
Investments
are recorded at fair value on September 30, 2017 and December 31, 2016.
The
Company holds marketable securities including common shares of BANG Holdings, Corp. which is currently listed on the Over-the-Counter
Bulletin Board (OTCBB). The Company classifies all of its marketable securities as other assets on the balance sheets because
they are available-for-sale and not available to fund current operations, marketable securities are stated at fair value with
their unrealized gains and losses included as a component of accumulated other comprehensive income (loss), which is a separate
component of stockholders’ equity, until such gains and losses are realized. If a decline in the fair value is considered
other-than-temporary, based on available evidence, the unrealized loss is transferred from other comprehensive income (loss) to
the statements of operations. Realized gains and losses are determined on the specific identification method and are included
in investment and other income, net.
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, the carrying value of marketable securities was $235,000 which consist of common
shares held in one (1) investment which currently is listed on the Over-the-Counter Bulletin Board (OTCBB). The Company has classified
this investment as a Level 3 of the fair value hierarchy because the investment is valued using unobservable inputs, due to the
fact that observable inputs are not available, or situations in which there is little, if any, market activity for the asset or
liability at the measurement date.
Other
Investment
The
Company has $2,000 in overnight cash deposits with COR Clearing.
Principles
of Consolidation
The
consolidated financial statements include the Company and its wholly owned corporate subsidiaries (Balance Labs LLC., 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. All significant 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.
Net
Loss Per Common Share
Basic
and diluted loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding
during the periods. The effect of 2,920,000 and 320,000 warrants and 2,496,887 and 0 shares from convertible notes payable for
the nine months ended September 30, 2017 and 2016, respectively were anti-dilutive and not included in loss per share.
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:
|
●
|
Level
1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
|
|
|
|
●
|
Level
2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar
assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are
not active.
|
|
|
|
|
●
|
Level
3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed
by us, which reflect those that a market participant would use.
|
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, 2016.
|
|
Total
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
Fair-value
– equity securities
|
|
$
|
892,250
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
892,250
|
|
Overnight
sweep deposits
|
|
$
|
2,000
|
|
|
$
|
2,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total
Assets measured at fair value
|
|
$
|
894,250
|
|
|
$
|
2,000
|
|
|
$
|
-
|
|
|
$
|
892,250
|
|
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, 2017.
|
|
Total
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
Fair-value
– equity securities
|
|
$
|
235,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
235,000
|
|
Overnight
sweep deposits
|
|
$
|
2,000
|
|
|
$
|
2,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total
Assets measured at fair value
|
|
$
|
237,000
|
|
|
$
|
2,000
|
|
|
$
|
-
|
|
|
$
|
235,000
|
|
The
following is a reconciliation of the level 3 Assets:
Beginning
Balance as of December 31, 2016
|
|
$
|
892,250
|
|
|
|
|
|
|
Unrealized
loss on (level 3) investments September 30, 2017
|
|
|
(657,250
|
)
|
|
|
|
|
|
Ending
Balance as of September 30, 2017
|
|
$
|
235,000
|
|
Business
Segments
The
Company operates in one segment and therefore segment information is not presented.
Advertising,
Marketing and Promotional Cost
s
Advertising,
marketing and promotional expenses are expensed as incurred and are included in selling, general and administrative expenses on
the accompanying statement of operations. For the nine months ended September 30, 2017 and September 30, 2016, advertising, marketing
and promotion expense was $489 in 2017 and $6,595 in 2016, respectively.
Property
and equipment
Property
and equipment consists 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, 2017 and December 31, 2016 consisted of the following:
|
|
Estimated
|
|
|
|
|
|
|
|
|
Useful
Lives
|
|
2017
|
|
|
2016
|
|
Computer
equipment & Software
|
|
3
yrs SL
|
|
$
|
5,358
|
|
|
$
|
5,358
|
|
|
|
|
|
|
|
|
|
|
|
|
Furniture
|
|
3
yrs SL
|
|
|
4,622
|
|
|
|
4,622
|
|
Total
|
|
|
|
|
9,980
|
|
|
|
9,980
|
|
Less
Accumulated Depreciation
|
|
|
|
|
4,055
|
|
|
|
1,327
|
|
Property
and Equipment, net
|
|
|
|
|
5,925
|
|
|
$
|
8,653
|
|
Depreciation
expense for the nine months ended September 30, 2017 and 2016 totaled $2,728 and $604 respectively.
Reclassifications
Certain
2016 amounts have been reclassified for comparative purposes to conform to the fiscal 2017 presentation. These reclassifications
have no impact on the previously reported net loss.
Recently
Issued Accounting Pronouncements
The
Company has evaluated all new accounting standards that are in effect and may impact its 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.
In
February 2016, the FASB issued ASU 2016-02,
Leases
, which will amend current lease accounting to require lessees to recognize
(i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted
basis, and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of,
a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors;
however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. This standard
will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We
are currently evaluating the impact of this standard on our financial statements.
In
March 2016, the FASB issued ASU 2016-09,
Compensation – Stock Compensation: Improvements to Employee Share-Based Payment
Accounting
, which relates to the accounting for employee share-based payments. This standard addresses several aspects of
the accounting for share-based payment award transactions, including: (a) income tax consequences; (b) classification of awards
as either equity or liabilities; and (c) classification on the statement of cash flows. This standard will be effective for fiscal
years beginning after December 15, 2016, including interim periods within those fiscal years. The adoption of this standard did
not have any impact on our results of operations, cash flows or financial condition.
In
April 2016, the FASB issued ASU 2016–10 Revenue from Contract with Customers (Topic 606): identifying Performance Obligations
and Licensing”. The amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the
amendments in this Update clarify the following two aspects of Topic 606: identifying performance obligations and the licensing
implementation guidance, while retaining the related principles for those areas. Topic 606 includes implementation guidance on
(a) contracts with customers to transfer goods and services in exchange for consideration and (b) determining whether an entity’s
promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied
at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). The amendments
in this Update are intended render more detailed implementation guidance with the expectation to reduce the degree of judgement
necessary to comply with Topic 606. We are currently evaluating the impact of this standard on our financial statements.
Note
4 – Stockholders’ Equity
Authorized
Capital
The
Company is authorized to issue 500,000,000 shares of common stock, $0.0001 par value, and 50,000,000 shares of preferred stock,
$0.0001 par value.
Common
Stock and Warrant Offering
On
September 17, 2015, the Company issued an aggregate of 220,000 shares of common stock at $0.50 per unit to investors for aggregate
gross proceeds of $110,000. In connection with the purchases, the Company issued three-year warrants to purchase an aggregate
of 220,000 shares of common stock at an exercise price of $2.00 per share. The warrants expire September 17, 2018.
Warrants
During
2015, the Company issued 100,000 warrants as part of a convertible note offering. The fair value of the warrants was $19,965.
The warrants expire December 23, 2020. Under an investment agreement dated April 1, 2016, warrants to purchase 2,000,000 shares
of the Company’s common stock at an exercise price of $3.50 per share expiring on March 23, 2019. On September 30, 2016,
The Company’s CEO loaned the Company $120,000 in addition to paying interest at 10%, the Company issued 600,000 warrants
at an exercise price of $1.00 per share.
|
|
2017
|
|
|
2016
|
|
Risk-free
interest rate
|
|
|
-
|
|
|
|
1.14
|
%
|
Expected
dividend yield
|
|
|
-
|
|
|
|
-
|
|
Expected
term (in years)
|
|
|
-
|
|
|
|
2
- 5
|
|
Expected
volatility
|
|
|
-
|
|
|
|
514
|
%
|
The
following table summarizes warrants outstanding as of September 30, 2017 and 2016, and the related changes during the periods
are presented below.
|
|
|
|
|
Weighted
|
|
|
|
Number
of
|
|
|
Average
|
|
|
|
Warrants
|
|
|
Exercise
Price
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2016
|
|
|
2,920,000
|
|
|
|
2.77
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance
at September 30, 2017
|
|
|
2,920,000
|
|
|
$
|
2.77
|
|
There
has been no equity transactions since December 31, 2016.
Note
5 – Related Party Transactions
The
Company’s CEO earned $10,000 per month. The following compensation was recorded within general and administrative expenses
– related parties on the statements of operations: $90,000 and $90,000 for the nine months ended September 30, 2017 and
2016, respectively. As of September 30, 2017, $336,659 of compensation was unpaid and was included in accounts payable –
related parties on the balance sheet.
For
the nine months ended Sept 30, 2017 and 2016, the Company expensed $0 and $35,000, respectively, for rent and office services
which are included in general and administrative expenses related party to Balance Holdings LLC, an entity controlled by the Company’s
CEO. As of Sept 30, 2017, $5,000 was owed.
On
September 30, 2016, the CEO loaned $120,000 as a convertible note payable to the Company at an interest rate of 10%, due on October
1, 2017. In addition, the Company issued 600,000 warrants at an execution price of $1.00 which expire on October 1, 2019. (See
Note 7). $12,025 in interest has been accrued as of September 30, 2017. The loan is in default as of September 30, 2017.
On
December 5, 2016, the CEO loaned $5,000 to the company and an additional $40,000 on December 9, 2016. Both notes were at an interest
rate of 8% and are due on October 1, 2017. For the nine months ended September 30, 2017, the company accrued interest of $2,924.
Both loans are in default as of September 30, 2017.
On
May 4, 2016, the company began compensating its board member Aviv Hillo, $2,500 per month for his consulting and advisory services.
The expense for the nine months ended September 30, 2017 was $22,500 compared to $22,500 for 2016. In addition, Mr. Hillo was
paid $4,000 for legal services related to the purchase of Pimi Agro in 2016.
During
the nine months ended September 30, 2017, the company’s CEO and entities controlled by the Company’s CEO made loans
to the company in the amount of $213,800. The loans have an interest rate of 8% and mature in one year from the date of the loan.
$4,282 has been accrued as of September 30, 2017. As of September 30, 2017 $15,000 of these loans are now in default.
During
the nine months ended September 30, 2017 a company controlled by the company’s CEO made loans to the company in the amount
of $57,530. The loans have a rate of interest of 8% and mature on December 31, 2017. $2,976 has been accrued in interest as of
September 30, 2017.
The
company on July 27, 2016 signed a sublease with an entity partially owned by a related party to sub-lease approximately 2,200
square feet 1691 Michigan Ave, Miami Beach, Fl. 33139, beginning August 1, 2016 and ending December 31, 2018 at a monthly base
rental of $7,741 per month until July 31, 2017, $7,973 per month from August 1, 2017 to July 31, 2018, and $8,212 from August
1, 2018 to the sublease termination date. In addition to base rent, the company will have to pay 50% of the CAM charges as additional
rent. On or about January 15, 2017, The Company was made aware that the master lease for the office space was in default. Consequently,
the Company ceased payments. On or about March, 31, 2017, The Company was served with an eviction notice as the Master Lease was
still in default. The Company owes two months’ rent to the master lease holder which has been accrued. The Company has used
its security deposit to partially pay its delinquent rent. On Friday, May 12, 2017 the Company moved its headquarters to 350 Lincoln
Road, 2nd Floor, Miami Beach, FL 33139. The Company pays $2,248 per month rent and is committed to pay rent until October 31,
2017. Beginning November 1, 2017, the Company will occupy the space on a month to month basis. In addition, the company had to
pay a security deposit of $7,375. The company is currently looking for permanent office space to relocate.
Note
6 – Commitments and Contingencies
Litigation,
Claims and Assessments
In
the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary
course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. In the opinion
of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated
financial position or results of operations.
Consulting
Fees
The
Company will continue to pay its CEO $10,000 per month as compensation on a month to month basis. In addition, the company pays
Aviv Hillo, a director, $2,500 per month as compensation. They will be recorded in general and administrative expenses-related
parties on the statement of operations.
Rent
The
Company has discontinued paying a related company $5,000 a month as rent on a month to month basis as of July 31, 2016. It has
been recorded in general and administrative expenses-related parties on the statement of operations for the year ended December
31, 2016. The company on July 27, 2016 signed a sublease with entity partially owned by a related party to sub-lease approximately
2200 square feet 1691 Michigan Ave, Miami Beach, Fl. 33139, beginning August 1, 2016 and ending December 31, 2018 at a monthly
base rental of $7,741 per month until July 31, 2017, $7,973 per month from August 1, 2017 to July 31, 2018, and $8,212 from August
1, 2018 to the sublease termination date. In addition to base rent, the company will have to pay 50% of the CAM charges as additional
rent. However, this lease is no longer in effect as the Master Lease has been terminated as of May 15, 2017.
The
company has an action pending in the 11th Judicial Circuit Court of Miami-Dade County, Case # 17-000447-CC-24, for procession
and damages of its offices at 1691 Michigan Avenue, Miami Beach, FL 33139, Suite 601. This is an action for eviction from the
company’s offices at 1691 Michigan Ave., Miami Beach, FL 33139. The master tenant under the lease has defaulted under the
lease by failing to pay the monthly rent. The lessor has demanded judgement for possession of the leased premises. The company
has accrued $12,306 to cover any losses. The company vacated the premises on May 15, 2017. However, the action is still pending
for monetary damages.
On
May 18, 2017, the company moved to a temporary office located at 350 Lincoln Road, Miami Beach, FL 33139, while it looks for a
permanent office. It occupies approximately 1,500 square feet of space at a monthly rate of $2,240. As of November 1, 2017, the
space is leased on a month to months basis.
Note
7 – Notes Payable
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. As of September
30, 2017, the accrued interest on the note is $7,363.
On
April 1, 2016, the Company received $500,000 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 will be amortized over the life of
the note. The Company expensed $500,000 of the debt discount. As of September 30, 2017, accrued interest on the note is $75,000
and the debt discount has been fully amortized.
On
April 1, 2016, the Company entered into an investment agreement (the “Investment Agreement”) with Newel Trading Group
LLC, a Delaware limited liability company (“Newel”) whereby Newel is obligated, providing the Company has met certain
conditions including the filing of a Registration Statement for the shares to be acquired, to purchase up to Twenty-Five Million
Dollars ($25,000,000) of the Company’s common stock at the rates set forth in the Investment Agreement. Under the Investment
Agreement, the shares are purchased at the discretion of the Company by issuing a Put Notice when funds are needed. In consideration
for the execution and delivery of the Investment Agreement, Company issued 1,000,000 non-registrable shares of Company’s
common stock with a fair value of $125,000 and three year warrants to purchase 2,000,000 shares of the Company’s common
stock at an exercise price of $3.50 per share, expiring March 23, 2019. The black scholes option pricing model with the following
assumptions were used to value the warrants. Expected volatility of 559%, expected life of 3 years, risk free rate of return of
0.9% and expected dividend yield of 0%. The warrants had a fair value of $250,000.
On
September 30, 2016 the Company’s CEO 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 with a value of $111,428. 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 Company
also has a beneficial conversion discount of $25,714 related to the note issuance. The Company has expensed $111,428 of the debt
discount and has an unamortized balance of $0 as of September 30, 2017.
Notes
Payable
During
the nine months ended September 30, 2017, the company’s CEO loaned the Company an additional $213,800, of which $25,000
was repaid. The loans have an interest rate of 8% and mature one year from the date of issue. $4,282 has been accrued in interest
as of September 30, 2017.
On
December 5, 2016, the CEO loaned $5,000 to the company and an additional $40,000 on December 9, 2016. Both notes were at an interest
rate of 8% and are due on October 1, 2017. For the nine months ended September 30, 2017, the company accrued interest of $2,924.
Both loans are in default as of September 30, 2017.
During
the nine months ended September 30, 2017 a company controlled by the company’s CEO made loans to the company in the amount
of $57,530. The loans have a rate of interest of 8% and mature on December 31, 2017. $2,976 has been accrued in interest as of
September 30, 2017. As of September 30, 2017 $15,000 of these loans are now in default.
Note
8 - Subsequent Events
On
October 1, 2017 the company’s CEO made an additional advance to the company of $2,500. These funds have an interest rate
of 8% and are due one year from the date of receipt of the funds.
On
October 3, 2017 the company’s CEO made an additional advance to the company of $1,000. These funds have an interest rate
of 8% and are due one year from the date of receipt of the funds.
On
October 5, 2017 the company’s CEO made an additional advance to the company of $1,000. These funds have an Interest of 8%
and are due one year from the date of receipt.
On
October 6, 2017 the company’s CEO made an additional advance to the company of $600. These funds have an interest rate of
8% and are due one year from the date of receipt.
On
October 10-12, 2017 the company’s CEO made an additional advance to the company of $750. These funds have an Interest of
8% and are due one year from the date of receipt.
On
October 19, 2017 the company’s CEO made an additional advance to the company of $1,500. These funds have an Interest of
8% and are due one year from the date of receipt.
On
October 20, 2017 the company’s CEO made an additional advance to the company of $10,000. These funds have an Interest of
8% and are due one year from the date of receipt.
On
October 27, 2017 the company’s CEO made an additional advance to the company of $10,000. These funds have an Interest of
8% and are due one year from the date of receipt.
On
November 2, 2017 the company’s CEO made an additional advance to the company of $3,000. These funds have an Interest of
8% and are due one year from the date of receipt.
On
November 8, 2017 the company’s CEO made an additional advance to the company of $1,500. These funds have an Interest of
8% and are due one year from the date of receipt.