U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 333-69415
BALANCED LIVING, INC.
(Name of Small Business Issuer as specified in its charter)
Colorado 87-0575577
(State or other jurisdiction of (I.R.S. employer identification No.)
incorporation or organization)
6375 South Highland Drive, Suite D, Salt Lake City, Utah 84121
(Address of principal executive offices)
801-424-1624
(Registrants telephone no., including area code)
No Change
(Former name, former address, and former fiscal year,
if changed since last report.)
Securities registered pursuant to Section 12(b) of the Exchange Act:None
Securities registered pursuant to Section 12(g) of the Exchange Act:None
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
Common Stock outstanding at March 31, 2000:867,849 shares of $.001 par value
<PAGE>
BALANCED LIVING, INC.
[ A Development Stage Company ]
INDEX
PART I Financial Information
Item 1 Accountants' Review Report 3
Unaudited Condensed Consolidated Balance Sheets, March 31, 2000
and December 31, 1999 4
Unaudited Condensed Consolidated Statements of Operations, for
the three months ended March 31, 2000 and 1999 and from inception on
January 26, 1998 through March 31, 2000 5
Unaudited Condensed Consolidated Statements of Cash Flows, for
the three months ended March 31, 2000 and 1999 and from inception on
January 26, 1998 through March 31, 2000 6
Notes to Unaudited Condensed Consolidated Financial Statements 7 - 12
Item 2 Management's Discussion and Analysis 13
PART II Other Information
Item 1 Legal Proceedings 16
Item 2 Changes in Securities 16
Item 3 Defaults upon Senior Securities 16
Item 4 Submission of Matters to a vote of Security Holders 16
Item 5 Other Information 16
Item 6 Exhibits and Reports on Form 8-K 16
Signature page 16
2
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PART I FINANCIAL INFORMATION
Item 1 Financial Statements
ACCOUNTANTS' REVIEW REPORT
Board of Directors
BALANCED LIVING, INC. AND SUBSIDIARY
Salt Lake City, Utah
We have reviewed the accompanying condensed balance sheet of Balanced Living,
Inc. and Subsidiary [a development stage company] as of March 31, 2000 and the
related condensed statements of operations and cash flows for the three months
ended March 31, 2000 and for the period from inception on January 26, 1998
through March 31, 2000. These financial statements are the responsibility of the
Company's management. All information included in these financial statements is
the representation of management of Balanced Living, Inc. and Subsidiary.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review consists principally of
inquiries of Company personnel and analytical procedures applied to financial
data. It is substantially less in scope than an audit in accordance with
generally accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed financial statements reviewed by us, in order for them
to be in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that Balanced
Living, Inc. and Subsidiary will continue as a going concern. As discussed in
Note 12 to the financial statements, Balanced Living, Inc. and Subsidiary has
current liabilities in excess of current assets, has incurred losses since its
inception and has not yet been successful in establishing profitable operations,
raising substantial doubt about its ability to continue as a going concern.
Management's plans in regards to these matters are also described in Note 12.
The financial statements do not include any adjustments that might result from
the outcome of these uncertainties.
/s/ Pritchett, Siler & Hardy, P.C.
PRITCHETT, SILER & HARDY, P.C.
May 4, 2000
Salt Lake City, Utah
3
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<TABLE>
<CAPTION>
BALANCED LIVING, INC. AND SUBSIDIARY
[A Development Stage Company]
CONDENSED CONSOLIDATED BALANCE SHEETS
[Unaudited - See Accountants' Review Report]
ASSETS
March 31, December 31,
2000 1999
---------------- ----------------
CURRENT ASSETS:
<S> <C> <C>
Cash in bank $ 55,962 $ 5,772
Inventory 4,152 4,615
Prepaid expenses 600 600
---------------- ----------------
Total Current Assets 60,714 10,987
EQUIPMENT, net 3,417 3,620
---------------- ----------------
$ 64,131 $ 14,607
---------------- ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 11,553 $ 31,834
Notes payable - related party 255,000 105,000
Accrued liabilities 5,404 779
---------------- ----------------
Total Current Liabilities 271,957 137,613
---------------- ----------------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.001 par value,
10,000,000 shares authorized,
no shares issued and outstanding - -
Common stock, $.001 par value,
50,000,000 shares authorized,
867,849 shares issued and outstanding 868 868
Additional paid in capital 609,994 609,994
Deficit accumulated during the
development stage (818,688) (733,868)
---------------- ----------------
Total Stockholders' Equity (Deficit) (207,826) (123,006)
---------------- ----------------
$ 64,131 $ 14,607
---------------- ----------------
Note: The balance sheet at December 31, 1999 was taken from the audited financial statements at that date and condensed.
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
4
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<TABLE>
<CAPTION>
BALANCED LIVING, INC. AND SUBSIDIARY
[A Development Stage Company]
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
[Unaudited - See Accountants' Review Report]
For the Three From Inception
Months Ended on January 26,
March 31, 1998 Through
------------------------------ March 31,
2000 1999 2000
------------ ----------- -------------
<S> <C> <C> <C>
REVENUE $ 3,573 $ 9,869 $ 61,333
COST OF SALES 3,271 6,435 75,078
------------ ----------- -------------
GROSS PROFIT (LOSS) 302 3,434 (13,745)
------------ ----------- -------------
EXPENSES:
General and administrative 80,414 81,642 707,539
------------ ----------- -------------
OPERATING LOSS (80,112) (78,208) (721,784)
OTHER INCOME (EXPENSE):
Interest expense (4,708) 14,752 (97,404)
------------ ----------- -------------
LOSS BEFORE INCOME TAXES (84,820) (92,960) (818,688)
CURRENT TAX EXPENSE - - -
DEFERRED TAX EXPENSE - - -
------------ ----------- -------------
NET LOSS $ (84,820) $ (92,960) $ (818,688)
============ =========== =============
LOSS PER COMMON SHARE:
Basic loss per share $ (.10) $ (.16) $ (1.09)
============ =========== =============
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
</TABLE>
5
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<TABLE>
<CAPTION>
BALANCED LIVING, INC. AND SUBSIDIARY
[A Development Stage Company]
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
[Unaudited - See Accountants' Review Report]
For the Three From Inception
Months Ended on January 26,
March 31, 1998 Through
------------------------------ March 31,
2000 1999 2000
------------ ----------- -------------
Cash Flows From Operating Activities:
<S> <C> <C> <C>
Net loss $ (84,820) $ (92,960) $ (818,688)
Non-cash operating items - 30,000 67,500
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation 203 168 1,305
Non-cash expense - - 10,362
Changes in assets and liabilities:
(Increase) decrease in inventory 463 1,200 (4,152)
(Increase) decrease in prepaid assets - (19,438) (600)
Increase (decrease) in accounts payable (20,281) 2,156 11,553
Increase in accrued liabilities 4,625 436 5,404
------------ ----------- -------------
Net Cash Used by Operating
Activities (99,810) (78,438) (727,316)
------------ ----------- -------------
Cash Flows From Investing Activities:
Equipment purchases - (1,086) (4,722)
------------ ----------- -------------
Net Cash Used by Investing Activities - (1,086) (4,722)
------------ ----------- -------------
Cash Flows From Financing Activities:
Proceeds from options granted - - 5,000
Proceeds from common stock issuance - - 203,000
Proceeds from issuance of warrants
and notes payable 150,000 60,000 580,000
------------ ----------- -------------
Net Cash Provided by Financing
Activities 150,000 60,000 788,000
------------ ----------- -------------
Net Increase in Cash 50,190 (19,524) 55,962
Cash at Beginning of Period 5,772 56,663 -
------------ ----------- -------------
Cash at End of Period $ 55,962 $ 37,139 $ 55,962
============ =========== =============
Supplemental Disclosures of Cash Flow information:
Cash paid during the period for:
Interest $ - $ 4,190 $ 24,880
Income taxes $ - $ - $ -
Supplemental schedule of Noncash Investing and Financing Activities:
For the three months ended March 31, 2000:
None.
For the three months ended March 31, 1999:
None.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
</TABLE>
6
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BALANCED LIVING, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - The Balanced Woman, Inc. ("Subsidiary") was organized under
the laws of the State of Colorado on January 26, 1998. During July, 1998
the Company was reorganized through a stock for stock exchange with
Balanced Living, Inc. ("Parent") [See Note 2]. Balanced Living, Inc. a
Colorado corporation, was organized on July 1, 1998. The Company has not
raised significant revenue from planned principal operations and is
considered a development stage company as defined in SFAS No. 7. The
Company is engaged in the business of holding motivational seminars, and
selling books and other motivational products. The Company has, at the
present time, not paid any dividends and any dividends that may be paid in
the future will depend upon the financial requirements of the Company and
other relevant factors.
Consolidation - The consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiary, The Balanced Woman, Inc.
All significant intercompany transactions have been eliminated in
consolidation.
Condensed Financial Statements - The accompanying financial statements have
been prepared by the Company without audit. In the opinion of management,
all adjustments ( which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations
and cash flows at March 31, 2000 and 1999 and for the periods then ended
have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's December 31, 1999
audited financial statements. The results of operations for the periods
ended March 31, 2000 are not necessarily indicative of the operating
results for the full year.
Inventories - Inventories are stated at the lower of cost or market. Cost
is determined by the first-in, first-out method.
Equipment - Equipment is carried at cost and is depreciated over the
estimated useful life of the equipment using the straight line method.
Revenue Recognition - The company's revenue comes from holding motivational
seminars and selling motivational products (books, cards, CD's, etc.).
Revenue is recognized when the services are rendered or the product is
delivered.
Loss Per Share - The computation of loss per share is based on the weighted
average number of shares outstanding during the period presented in
accordance with SFAS No. 128 "Earnings Per Share". Diluted loss per share
is not presented because its effect is antidilutive.
Statement of Cash Flows - For purposes of the statement of cash flows, the
Company considers all highly liquid debt investments purchased with a
maturity of three months or less to be cash equivalents.
7
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BALANCED LIVING, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Continued]
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosures of contingent assets and
liabilities at the date of the financial statements, and the reported
amount of revenues and expenses during the reported period. Actual results
could differ from those estimated.
Recently Enacted Accounting Standards - Statement of Financial Accounting
Standards (SFAS) No. 132, "Employer's Disclosure about Pensions and Other
Postretirement Benefits", SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", SFAS No. 134, "Accounting for
Mortgage-Backed Securities...", SFAS No. 135, "Rescission of FASB Statement
No. 75 and Technical Corrections", SFAS No. 136, "Transfers of Assets to a
not for profit organization or charitable trust that raises or holds
contributions for others", and SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - deferral of the effective date of FASB
statement No. 133 ( an amendment of FASB Statement No. 133.)," were
recently issued. SFAS No. 132, 133, 134, 135, 136 and 137 have no current
applicability to the Company or their effect on the financial statements
would not have been significant.
NOTE 2 - BUSINESS REORGANIZATION
On July 14, 1998 the Company entered into an Agreement and Plan of
Reorganization wherein Parent acquired all the issued and outstanding
shares of common stock of Subsidiary in a stock for stock exchange. Parent
issued 500,000 shares of common stock in the exchange. Parent and
Subsidiary had similar ownership at the time of reorganization and were
considered to be entities under common control. Accordingly, the
reorganization has been recorded in a manner similar to a pooling of
interests.
NOTE 3 - INVENTORIES
Inventories consisted of finished goods in the amount of $8,152 at March
31, 2000. An allowance for obsolete or slow moving inventory of $4,000 was
recorded during 1999.
NOTE 4 - EQUIPMENT
Equipment consists of the following:
Estimated
Useful Lives March 31, December 31,
in Years 2000 1999
----------- --------- ---------
Office equipment 5 - 7 $ 4,722 $ 4,722
----------- --------- ---------
4,722 4,722
Accumulated depreciation (1,305) (1,102)
--------- ---------
$ 3,417 $ 3,620
--------- ---------
Depreciation expense for the periods ended March 31, 2000 was $203 and
$168.
8
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BALANCED LIVING, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - NOTES PAYABLE
During 1999, the Company issued subordinated demand notes payable to an
officer and shareholder, of the Company in the amount of $105,000. The
notes bear interest at a rate of 10% per annum with quarterly interest
payments, the notes are due on demand. Note-holders can demand payment of
the unpaid principal plus accrued interest in order to purchase other
equity opportunities in the Company of equal value at any time prior to the
maturity date. During the three months ended March 31, 2000 the Company
issued an additional $150,000. Accrued interest as of March 31, 2000 was
$5,404.
NOTE 6 - CAPITAL STOCK
Common Stock - In connection with its acquisition of Subsidiary on July 14,
1998, the Company issued 500,000 shares of its previously authorized, but
unissued common stock [See Note 2]. The Subsidiary had previously been
funded with $2,000.
During January, 1998, the Company issued 100,000 shares of common stock in
connection with the organization of the Company at $.01 per share. Total
proceeds amounted to $1,000.
Stock Warrants - During 1998, Subsidiary issued 165,000 common stock
warrants to various officers, directors and consultants in conjunction with
the issuance of subordinated notes payable [See Note 5]. Due to the
reorganization of the company [See note 2], the warrants of Subsidiary were
cancelled, and re-issued under the same terms by Parent during 1998. Each
warrant grants the holder the right to purchase one share of the Company's
common stock at a price of $1 per share. The warrants may be exercised at
any time prior to March 1, 2003. An additional 30,000 warrants were issued
subsequent to December, 1998. The Company has accrued additional interest
expense for warrants issued after November 1999 as the exercise price of
the warrants were less than the arbitrary value of $2.00 proposed for the
Company's upcoming stock offering. During 1998, $37,500 was capitalized as
prepaid interest expenses and is being amortized over the life of the note.
All amounts were expensed in 1999. An additional $30,000 was expensed in
1999 and will be amortized over the life of the note.
Stock Option Plan - During January, 1998 the Company implemented its 1998
stock option plan. The plan provides for 1,000,000 shares of common stock
to be reserved for issuance to officers, directors, employees and
consultants as employment incentives. As of March 31, 2000, no options have
been issued under the plan. Options granted under the plan vest over a five
year period.
Non-Qualified Stock Options - As of March 31, 2000, the Company has issued
a total of 500,000 options outside of the 1998 stock option plan to various
officers, directors and consultants of the Company. These options are
exercisable at $1 per share, and vest over a five-year period, based upon
certain conditions specified in the option agreement. The options expire
five years from the date of vesting. As of March 31, 2000, no options had
vested.
9
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BALANCED LIVING, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - CAPITAL STOCK [Continued]
Public Offering of Common Stock - The Company filed a registration
statement with the United States Securities and Exchange Commission on Form
SB-2 under the Securities Act of 1933. The Company sold 100,000 "Units" at
a price of $2 per Unit, which price was arbitrarily determined by the
Company. Each Unit consists of one share of the Company's $.001 par value
common stock sold at $2 per share, one "Class A Warrant" to purchase one
share of common stock at $3 per share, one "Class B Warrant" to purchase
one share of common stock at $5 per share, and one "Class C Warrant" to
purchase one share of common stock at $10 per share. All warrants issued
under the offering will expire on December 31, 2003. The warrants are
callable if, after one year from the issuance date, public trading develops
and trading occurs for at least 20 consecutive days. The warrants are
callable at $.01 per warrant upon 30 days notice by the Company to warrant
holders. The Units will be offered and sold by officers of the Company, who
will receive no sales commissions or other compensation in connection with
the offering, except for reimbursement of expenses actually incurred on
behalf of the Company in connection with the offering.
Retirement of Notes Payable - During 1999, the Company retired $330,000 of
the principal balance of Subordinated Demand Notes Payable and $5,362 of
accrued interest for the issuance of common stock at $2.00 per share for a
total of 167,849 shares of common stock issued. Partial shares were rounded
up to the next whole share. The Company also issued with each share of
common stock, one "Class A Warrant" to purchase one share of common stock
at $3 per share, one "Class B Warrant" to purchase one share of common
stock at $5 per share, and one "Class C Warrant" to purchase one share of
common stock at $10 per share. All warrants issued will expire on December
31, 2003. The warrants are callable if, after one year from the issuance
date, public trading develops and trading occurs for at least 20
consecutive days. The warrants are callable at $.01 per warrant upon 30
days notice by the Company to warrant holders. Although Management believes
the issuance of stock and warrants to reduce this debt is exempt from
registration with the Securities and Exchange Commission, the possibility
exists that it may ultimately be determined that the exchange of stock and
warrants for debt was not exempt.
NOTE 7 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes". SFAS
109 requires the Company to provide a net deferred tax asset/liability
equal to the expected future tax benefit/expense of temporary reporting
differences between book and tax accounting methods and any available
operating loss or tax credit carryforwards. At March 31, 2000 the Company
has available unused operating loss carryforwards of approximately
$818,000, which may be applied against future taxable income and which
expire in 2019.
The amount of and ultimate realization of the benefits from the operating
loss carryforwards for income tax purposes is dependent, in part, upon the
tax laws in effect, the future earnings of the Company, and other future
events, the effects of which cannot be determined. Because of the
uncertainty surrounding the realization of the loss carryforwards the
Company has established a valuation allowance equal to the tax effect of
the loss carryforwards and, therefore, no deferred tax asset has been
recognized for the loss carryforwards. The net deferred tax assets are
approximately $300,000 as of March 31, 2000 with an offsetting valuation
allowance of the same amount resulting in a change in the valuation
allowance of approximately $31,000 during the three months ended March 31,
2000.
10
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BALANCED LIVING, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - LOSS PER SHARE
The following data show the amounts used in computing loss per share and
the effect on income and the weighted average number of shares of dilutive
potential common stock for the periods presented:
For the Three From Inception
Months Ended on January 26,
March 31, 1998 Through
--------------------- March 31,
2000 1999 1999
--------- --------- ----------
Loss from continuing
operations applicable to
common shareholders
(Numerator) $ (84,820) $ (92,960) $ (818,688)
--------- --------- ----------
Weighted average number of
common shares outstanding
used in loss per share during
the period (Denominator) 867,849 600,000 753,392
--------- --------- ----------
Dilutive earnings (loss) per share was not presented, as its effect is
anti-dilutive.
The Company had at March 31,2000, options and warrants to purchase
1,333,547 and 80,000 shares of common stock , respectively, at prices of
$1.00 through $10.00 per share, that were not included in the computation
of diluted loss per share because their effect was anti-dilutive
NOTE 9 - COMMITMENTS
The Company has agreed to compensate a majority shareholder, who is also an
independent contractor to the Company, for her services to the Company in
shares of the Company's restricted common stock. The exact number of shares
has yet to be negotiated with the board of directors of the Company, and
may be subject to vesting rights imposed by the Company. No amounts have
been accrued in the accompanying financial statements for this agreement to
issue stock.
NOTE 10 - SUB-LEASE AGREEMENT
During 1998, the Company entered into an agreement to sub-lease office
space. The term of the lease is 10.5 months, with no option to renew. The
agreement terminated on June 1, 1999. Total base rent amounts to $6,300 and
is due in monthly installments of $600. During 1999, the Company renewed
the lease for an additional year at $620 a month.
11
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BALANCED LIVING, INC. AND SUBSIDIARY
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - RELATED PARTY TRANSACTIONS
Management Compensation - The Company paid $12,000 in salary to the
Company's President/Secretary-Treasurer during the period ended March 31,
2000.
Notes Payable - As of March 31, 2000 the Company had outstanding
subordinated demand notes payable to an officers, directors, shareholders
totaling $255,000 [See Note 5].
NOTE 12 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplate continuation of
the Company as a going concern. However, the Company has current
liabilities in excess of current assets, has incurred losses since its
inception and has not yet been successful in establishing profitable
operations. Further, the Company has a stockholders deficit. These factors
raise substantial doubt about the ability of the Company to continue as a
going concern. In this regard, management is hopeful that it can generate
adequate capital through improved operations and reductions in
expenditures. If necessary, management will raise additional funds through
loans and/or through additional sales of its common stock. There is no
assurance that the Company will be successful in raising this additional
capital or achieving profitable operations. The financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.
12
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PART I FINANCIAL INFORMATION
ITEM 2 Management's Discussion and Analysis.
Balanced Living is a new enterprise and a development stage company.
In the first quarter of 2000 we presented one (1) seminar, compared to six (6)
seminars presented in the same quarter last year. Management was occupied with
developing the new stand alone products described in the Annual Report on form
10-KSB for the year ended December 31, 1999, and decided to devote the available
funds and time to that project rather than additional seminars. We hope to begin
to schedule seminars in the second quarter of 2000 and to recommence that aspect
of our business continuously thereafter.
We have not yet sold any products outside of our seminars, although development
of such products is on track for projected sales commencing as early as the
second quarter of 2000.
Balanced Living continues to operate at a loss, although at a lower loss level
than during the first quarter of 1999. The reason for the lower loss in the
first quarter of 2000 than in the same quarter last year is the lower cost of
sales resulting from the absence of seminars presented in the first quarter of
2000, as well as a modest cutback in general expenses.
We continue to anticipate achieving increasing average seminar revenue per
attendee during 2000; and as a result of that and opportunities to offer and
sell products outside of seminars, we believe we can become profitable by the
end of the third quarter in 2000. This timing of profitability may not happen
due to risks inherent in our business. Such risks include:
o the failure of our new stand alone products to gain customer attention and
satisfaction,
o competition from better financed sources of intellectual property,
o changes in consumer spending on personal improvement products and services,
and
o the inability of Balanced Living to achieve enough funding from revenue or
loans to enable continued operation of the Company and the acquisition of
sufficient inventory to support continued sales and seminar offerings.
We began to raise needed equity capital through our public offering, which
closed on August 15, 1999. This offering raised $200,000. Unfortunately, we
began trying to raise this money in late 1998, and we were not able to commence
the offering until June 1999. It took us another 45 days to raise the funds from
investors. By the time the money came in, we needed to use almost all of it to
pay overdue short term credit lines, accounts payable, and to fund the
regulatory steps to commence and support a public market in our shares for the
benefit of our shareholders. (The challenges and costs of this public market
listing effort continued through the end of 1999 and into 2000). Since
commencing and then concluding our public offering, we have engaged in valuable
revised business planning and projections, which have considered both the
current level of growth, upcoming new revenue sources, and the level of overhead
and advertising that will be needed to maximize the business opportunities
facing us.
We recognize the need for additional capital funding beyond the amount netted
from the public offering. In this regard we borrowed an additional $150,000 from
affiliates during the first quarter of 2000, increasing our outstanding related
party debt to ($255,000). Our current liabilities are well above the level of
our current assets, and the cash on hand at March 31, 2000 is not enough to
cover operating expenses much past the end of the second quarter. The level of
current liabilities is because the notes we have issued to affiliates to
represent the funds borrowed over time are demand notes, and thus are
13
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characterized as current liabilities. These affiliates will treat these loans in
a much different way than would a third party bank lender under the same terms,
and we do not anticipate foreclosure or legal proceedings to collect on these
affiliate notes notwithstanding it is unlikely that these notes will be paid
during 2000.
We are currently exploring avenues for achieving added financial support,
including seeking additional equity or debt infusions from certain existing
shareholders or from one or more new private investors, and/or a strategic
business combination or relationship that could bring the strength of another
company to aid in the success of Balanced Living. There are no commitments or
plans now in place with respect to any of the avenues being explored.
Forward Looking Statements and Risks
The information other than historical information in this report, and
specifically the information set out in this section, is forward looking
information presenting management's beliefs and estimates about the future.
These beliefs, plans and estimates are subject to significant risks, including
an inability to recruit, hire, and retain skilled seminar facilitators, or a
copyright infringement of Balanced Living's unique curriculum materials and
products and resulting litigation, as well as risks from the general economic
conditions within which the Company must operate.. Other risks could also
negatively effect Balanced Living's ability to meet its projections for 2000.
These risks include:
Balanced Living's limited operating history increases the risk of loss
to investors.
Balanced Living was formed in July 1998, and is in the development
stages of its business plan. It has no significant assets, has just
begun business operations, and considers 1998 and early 1999 to be a
period of research and development. Upon completion of this offering it
will still be uncertain as to whether we can continue successfully
implementing our business plan or that we will ever operate profitably.
If Balanced Living does not obtain enough money to continue to operate,
investors will lose their investment.
We have no significant assets or operating capital. Balanced Living's
auditors deem us a going concern, being totally dependent upon receipt
of the proceeds of this offering to provide the working capital
necessary to continue the development of our business plan. We have no
commitments for additional cash funding beyond what we have obtained to
date. In the event that our current resources are not sufficient to
move us to internal funding and profitability, we may need to seek
additional financing from commercial lenders or other sources,
including additional sales of equity, for which it presently has no
commitments or arrangements. Additional financing may not be available
to Balanced Living on acceptable terms, if at all.
We rely on Rose Blackham and her continuing service to Balanced Living
for the success of the Company.
Balanced Living also relies heavily on the training, teaching methods,
and curriculum of Rose Blackham, which is provided to Balanced Living
by independent contract. Currently, Ms. Blackham is the chief
facilitator of our seminars, although not an officer or director. The
stability and growth of Balanced Living would be significantly
compromised if Ms. Blackham were unable or unwilling to perform these
responsibilities. We do not carry key person life insurance with
respect to any employee or contractor, and we have no employment
agreements.
14
<PAGE>
If Balanced Living's managers spend too much time in their other
pursuits, or if they use related companies to profit from dealings with
Balanced Living, the investors may lose their investment .
Many of the services and goods acquired by Balanced Living have been
and will likely come from sources connected in some way with members of
our management team. Some members of the management team have other
interests which could give rise to conflicts with respect to the amount
of time devoted to Balanced Living. We presently have no way of knowing
if any conflicts of time and interests will be resolved favorably to
Balanced Living.
Investors' money may be lost if Balanced Living's products and services
are not accepted by women in the market place.
Balanced Living's business plan is based upon the experience of the
Balanced Woman Seminars given to date and the observed market
acceptance of related products and services. We can not determine with
any accuracy the exact market share, if any, that we will be able to
achieve for Balanced Living's products and services. Balanced Living's
business will be subject to all the risks associated with the packaging
and introduction of new seminars and product lines for sale into the
competitive self- improvement seminar market for women.
An investment in Balanced Living may be lost if our proprietary works
and concepts are stolen or infringed.
Balanced Living relies primarily on copyright laws and employee and
third party nondisclosure agreements to protect its intellectual
property. We have completed the registration and copyright of our
trademarks, word mark, service mark, and the copyright of all of the
materials used in the seminars. Rose Blackham has transferred all
rights to any pre-existing concepts and materials to Balanced Living.
Unauthorized copying of its products and services could damage us
significantly. Although we are not aware that any of our products and
services are materially infringing the rights of others, it is possible
they are. If so, we could have to modify our products and services, at
substantial possible cost. Balanced Living might be subject to lawsuits
if it is alleged that it is infringing on the property rights of
others. To combat intellectual property risks, we have secured the
assistance of an intellectual rights attorney and are taking every
measure possible to protect and copyright all of our intellectual
property and proprietary products and seminar materials.
An economic slowdown or change in consumer spending habits could cause
you to lose your investment in Balanced Living.
Balanced Living provides products and services that are not essential
to the support of life. In the event of significant economic downturns
in the United States or the World caused by any or all of a number of
potential causes, the demand for our seminars and products may be
significantly reduced and we may not be able to generate enough revenue
to maintain operations.
15
<PAGE>
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings
None
ITEM 2 Changes in Securities
None
ITEM 3 Defaults on Senior Securities
None
ITEM 4 Submission of Matters to a Vote of Security Holders
None
ITEM 5 Other Information
None
ITEM 6 Exhibits and Reports on Form 8-K
a) Exhibits
None
b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BALANCED LIVING, INC.
/s/ Jeannene Barhalm May 12, 2000
- ------------------------- ---------------
President Date
16
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This schedule contains financial information extracted from financial reference
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<PERIOD-END> MAR-31-2000
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<COMMON> 868
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<SALES> 3,573
<TOTAL-REVENUES> 3,573
<CGS> 3,271
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<OTHER-EXPENSES> 80,414
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<INTEREST-EXPENSE> 4,708
<INCOME-PRETAX> (84,820)
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