10-K: Balance Labs Reports Significant Net Loss, Focuses on Future Treasury Deployment

Balance Labs, Inc. filed its annual report for the fiscal year ended December 31, 2025, detailing a substantial net loss driven by non-cash charges, while outlining plans for a digital asset treasury and continued advisory services.

Summary

• Balance Labs, Inc. reported a net loss of $31,768,325 for the year ended December 31, 2025, a significant increase from the $528,223 loss in the prior year.
• The substantial net loss was primarily due to non-cash charges, including $12,700,399 in stock-based compensation, a $16,595,746 loss on the settlement of debt, and a $3,425,796 loss on the initial recognition of a derivative liability.
• Excluding these non-cash items, the company's cash-basis operating loss was approximately $527,000, consistent with the prior year.
• Revenue from advisory services was $6,000 for the year ended December 31, 2025, with an additional $40,000 recognized in the first quarter of fiscal year 2026.
• The company plans to deploy a rules-based digital asset corporate treasury, subject to sufficient capital availability, which will involve selecting digital assets, rebalancing holdings, and potentially deploying staking and yield-generating protocols.
• Operating expenses increased significantly to $13,111,607 in 2025 from $271,285 in 2024, largely due to increased salaries and wages, driven by stock-based compensation.
• The company's cash position improved to $358,975 at December 31, 2025, from $13,199 at December 31, 2024.
• A comprehensive debt-to-equity conversion occurred on November 5, 2025, converting $4,167,005 of debt and accrued interest into 16,667,788 shares of common stock, significantly reducing total liabilities.
• The company's independent auditor has raised substantial doubt about its ability to continue as a going concern due to its accumulated deficit and net loss.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this filing as negative due to the significant net loss, going concern warning, and ineffective internal controls, despite plans for future growth.

Positives

• Significant reduction in total liabilities by $1,393,836 due to a comprehensive debt-to-equity conversion, strengthening the balance sheet.
• Cash and cash equivalents increased substantially to $358,975 from $13,199, indicating improved liquidity.
• The company generated $6,000 in advisory revenue in Q4 2025 and $40,000 in Q1 2026, marking the beginning of revenue generation from advisory services.
• Plans to establish a digital asset corporate treasury, which could provide future revenue streams through staking and yield generation.
• The company has a clear plan for future operations, including deploying the digital asset treasury, enhancing compliance, and potentially uplisting to a national exchange.

Negatives

• Reported a net loss of $31,768,325 for the year ended December 31, 2025, a substantial increase from the previous year.
• The company's independent auditor has expressed substantial doubt about its ability to continue as a going concern.
• Operating expenses increased dramatically to $13,111,607 in 2025 from $271,285 in 2024, primarily due to non-cash stock-based compensation.
• Disclosure controls and procedures were found to be ineffective, with material weaknesses identified in functional controls, lack of an audit committee, and inadequate segregation of duties.
• The company has an accumulated deficit of $37,651,646 and a stockholders deficit of $3,376,339.
• The company's common stock is thinly traded on the OTC Market Pink, limiting liquidity for investors.
• The company is subject to SEC's penny stock rules, which can be burdensome and reduce trading activity.

Risks

• The company may fail if it does not obtain additional financing or sufficient revenues, as current operating funds are less than necessary to complete its business plan.
• The company's independent registered public accounting firm has raised substantial doubt about its ability to continue as a going concern.
• Additional financing through equity or convertible debt may dilute existing shareholders' ownership.
• The company's management has limited experience in managing and operating a public company.
• The company may be exposed to potential uninsured claims, which could have a material adverse effect on its financial condition.
• Complete control over the company by its largest shareholder, Balance Holdings, LLC, and Michael D. Farkas, may delay or prevent changes in control or management.
• Dependence on key personnel, including the CEO, Chairman, COO, and CFO, whose loss could materially affect operations.
• The digital asset advisory and treasury markets are highly competitive, with larger firms possessing greater resources.
• Potential clients may not have the funds or the need to outsource digital asset services, or may choose to develop capabilities internally.
• Compliance with SEC reporting requirements and the Sarbanes-Oxley Act is costly and may increase substantially.
• Failure to maintain effective internal controls over financial reporting could adversely affect the stock price.
• Interruption or failure of information technology systems could materially affect operations.
• The company's digital asset treasury strategy exposes it to substantial risks, including price volatility, reduced liquidity, and rapid market changes.
• The legal and regulatory treatment of digital assets remains uncertain and evolving, which could adversely affect the business.
• Concentration of capital in digital assets could lead to greater risk than a diversified treasury model.
• The company's business and treasury strategy may depend on third-party service providers, who could experience failures or disruptions.
• There is a limited public market for the company's securities, making it difficult to buy and sell shares.

Future Outlook

The company plans to deploy a rules-based digital asset corporate treasury, subject to capital availability, which will involve selecting digital assets, implementing rebalancing strategies, and potentially deploying staking and yield-generating protocols. They also aim to recruit treasury management personnel, maintain risk management frameworks, expand accounting and compliance resources, pursue capital formation, evaluate opportunities to uplist their stock, and appoint independent directors. Material revenue growth is not expected until the digital asset treasury is deployed at a scale sufficient to support consistent staking and yield-generating activities.

Management Comments

• Management believes the non-cash charges reflect one-time balance sheet restructuring events that do not represent the company's ongoing operational performance or cash requirements.
• Management intends to pursue strategies to continue operations, including generating revenue from advisory services, obtaining additional capital, and reducing operating expenses.
• Management believes the material weaknesses in internal controls were the result of the scale of operations and are intrinsic to the company's small size, and intends to take remedial actions upon receiving funding.

Industry Context

StockSavvy.ai notes that Balance Labs operates in the rapidly evolving digital asset advisory and treasury management space. The company's strategy to establish a rules-based digital asset treasury aligns with growing institutional interest in digital assets, but faces significant competition and regulatory uncertainty inherent in the industry.

Comparison to Industry Standards

• The company's revenue of $6,000 for the fiscal year 2025 is significantly below industry standards for established advisory firms, which typically generate millions in annual revenue.
• The substantial net loss and going concern warning are common among early-stage companies in the volatile digital asset sector, but contrast with the profitability of mature financial institutions.
• The company's reliance on related-party financing and services, while not uncommon in early-stage ventures, differs from the more diversified funding and operational structures of larger, publicly traded competitors.
• The lack of independent directors and formal board committees is a deviation from corporate governance best practices expected of public companies, particularly those aiming for uplisting to national exchanges.

Management Changes

Corporate Governance

Legal Proceedings

• To the best of management's knowledge, there are no material pending legal proceedings to which the company is a party or of which any of its property is the subject.
• The company may become involved in various lawsuits and legal proceedings in the ordinary course of business, but management believes the ultimate disposition will not have a material adverse effect.

Related Party Transactions

• The Farkas Group, Inc. provided $500,000 in financing through two promissory notes in 2025.
• Michael Farkas provided an $18,000 promissory note to the company in October 2025.
• Michael Farkas is owed $926,659 in accounts payable for consulting services provided from 2015-2022.
• Michael Farkas earned $80,000 in consulting fees in 2025 and $120,000 in 2024, with unpaid balances of $230,000 and $180,000 respectively.
• Related party notes and accrued interest totaling $2,011,100 and $938,775 respectively were converted to equity in November 2025.
• The company owns 26,573 shares of NextNRG Inc., valued at $38,531, where Michael Farkas beneficially owns approximately 49% of the outstanding common stock.
• Alexander Farkas, son of Chairman Michael D. Farkas, was appointed President and COO with a salary of $120,000 and bonus potential, representing a related person transaction.

Stakeholder Impact

• Shareholders may experience dilution if additional capital is raised through equity or convertible debt.
• Existing shareholders' control may be influenced by the significant ownership stake of Michael D. Farkas and affiliated entities.
• Employees may be impacted by the company's focus on scaling operations and potential future hiring, as well as the risk of material weaknesses in internal controls.
• Creditors' positions are impacted by the significant debt-to-equity conversion, which reduced overall liabilities.

Next Steps

• Deploy a rules-based digital asset treasury.
• Implement rebalancing treasury holdings using a proprietary methodology.
• Deploy staking and yield-generating protocols on select proof-of-stake networks.
• Evaluate third-party providers for custody, market data, execution, staking infrastructure, and digital asset accounting and tax reporting.
• Recruit digital asset treasury management personnel.
• Maintain risk management frameworks and internal controls.
• Expand accounting, audit, compliance, and management resources.
• Pursue capital formation activities.
• Evaluate opportunities to uplist the Company's common stock to a national securities exchange.
• Appoint independent members to the Board of Directors.

Key Dates

Recommendation

The company shows potential with its digital asset advisory services and plans for a treasury, but the significant net loss, going concern warning, and ineffective internal controls present substantial risks. A 'hold' recommendation is appropriate pending clearer signs of operational improvement, successful capital raises, and remediation of control deficiencies.

Keywords

Balance Labs, Form 10-K, Annual Report, Digital Asset Advisory, Digital Asset Treasury, Corporate Finance, SEC Filings, Financial Statements, Going Concern, Stock-based Compensation, Debt-to-Equity Conversion, Startup, Venture Capital