BLNC 10-K & 10-Q changes, risk factors and insider trading

Any uninsurable claim could have a material adverse effect on the Company’s financial condition and results of operations.

The markets for digital asset advisory services, tokenization strategy, blockchain infrastructure consulting and, if implemented, digital asset treasury activities are highly competitive and rapidly evolving. We compete with specialized digital asset advisory firms, traditional financial and consulting firms expanding into digital assets, software and infrastructure providers, trading, custody and staking service providers, and other market participants with substantially greater resources, longer operating histories, broader client relationships, stronger brand recognition and more established operating and compliance infrastructures than we have. In addition, some potential clients may choose to develop these capabilities internally rather than engage external advisors. If we are unable to differentiate our services, establish credibility in the market, attract and retain qualified personnel, or adapt to changing market conditions and client needs, our business, results of operations and prospects could be materially adversely affected.

Our ability to grow our advisory business depends in part on whether institutions, asset managers and corporate clients choose to engage external advisors for digital asset strategy, tokenization, blockchain-based program design, treasury framework development and related services. Some potential clients may determine that they lack sufficient budget, that market conditions do not justify deployment of digital asset initiatives, that regulatory uncertainty makes such initiatives premature, or that these functions can be handled internally or by other service providers. In addition, reductions in digital asset market activity, adverse regulatory developments or declines in client risk appetite could reduce demand for our services. If a sufficient number of prospective clients do not perceive a need for our services or are unwilling to pay for them, our revenue growth and business prospects would be materially adversely affected.

Our digital asset treasury strategy exposes us to substantial risks associated with digital assets, including price volatility, reduced liquidity and rapid changes in market conditions.

The Company has not yet deployed capital into digital assets as part of its treasury strategy, and any such deployment is contingent upon the availability of sufficient capital. If we deploy capital into digital assets in the future, our financial condition and results of operations may become increasingly exposed to the market prices of those assets. Digital assets have historically experienced, and may continue to experience, significant volatility over short periods of time. The value of any digital assets we may hold could decline materially due to market sentiment, macroeconomic conditions, technological developments, trading disruptions, exchange failures, protocol-specific events, fraud, manipulation, regulatory developments or other factors, many of which are beyond our control. Any material decline in the value of digital assets that we may hold could adversely affect our balance sheet, liquidity, access to capital, financial results and the market price of our common stock.

Bitcoin, Ethereum and other digital assets are subject to significant legal, commercial, regulatory and technical uncertainty, and adverse developments could materially affect our business and treasury strategy.

The legal and regulatory treatment of digital assets and digital asset-related activities remains uncertain and continues to evolve in the United States and internationally. Federal and state regulators, including the SEC, CFTC, FinCEN, the Internal Revenue Service and state banking and financial regulators, as well as non-U.S. regulators, may adopt new laws, regulations, interpretations or enforcement positions relating to digital assets, staking, custody, tokenization, trading, reporting or related matters. Such developments could adversely affect the value, liquidity, transferability or utility of digital assets, limit the availability of custodians, exchanges, execution providers or other service providers, increase our compliance costs, delay or impair implementation of our treasury strategy, or subject us or our counterparties to investigations, penalties or other adverse consequences.

If a significant portion of our treasury or available capital becomes concentrated in digital assets, we may be exposed to greater risk than a more diversified treasury model.

To the extent we allocate a significant portion of our capital to one or more digital assets, our treasury may become concentrated in assets that are highly volatile and subject to evolving market structure, regulatory uncertainty and operational risk. Such concentration would reduce the diversification benefits associated with more traditional treasury management approaches and may increase the impact of adverse market movements, custody failures, protocol events, liquidity constraints or negative developments affecting a particular asset, network or segment of the digital asset market. If our treasury strategy proves unsuccessful or market conditions deteriorate, our financial condition and the trading price of our common stock could be materially adversely affected.

Our digital asset activities may expose us to custody, execution, counterparty and staking-related risks, including loss of assets, operational failures and reduced access to critical third-party services.

Our business and treasury strategy may depend on third-party custodians, execution venues, wallet providers, market data providers, staking infrastructure providers, accounting platforms, tax and reporting vendors and other service providers. These counterparties may experience cybersecurity incidents, insolvency, financial distress, operational errors, technological failures, fraud, regulatory actions or service interruptions. In addition, digital assets are controllable only by the holder of the applicable private keys or through authorized access mechanisms, and any compromise, loss, theft or misuse of credentials, wallets or related infrastructure could result in partial or total loss of assets. If we engage in staking or other protocol-level activities, we may also be exposed to slashing, validator underperformance, lock-up periods, illiquidity, delayed withdrawals, smart contract vulnerabilities and other risks. Any of these events could materially adversely affect our business, financial condition and results of operations.

Balance Labs, Inc. (the Company) is a digital asset advisory firm providing consulting services to institutions navigating the digital asset economy. The Company intends to establish a rules-based digital asset corporate treasury, subject to availability of sufficient capital. Advisory engagements include both retainer-based and project-based arrangements. During the year ended December 31, 2025, the Company generated approximately $6,000 in revenue from advisory services provided in the fourth quarter. The Company recognized approximately $40,000 in advisory revenue during the first quarter of fiscal year 2026.

Year Ended December 31, 2025 compared to Year Ended December 31, 2024:

Revenue increased to $6,000 in 2025 from $0 in 2024 as the Company launched advisory service offerings in Q4 2025. Revenue of $6,000 was generated from advisory services.

Operating expenses increased to $13,111,607 in 2025 from $271,285 in 2024, primarily due to a substantial increase in salaries and wages to $12,893,767 from $186,004 in the prior year. The increase was driven by non-cash stock-based compensation of $12,700,399 recognized in connection with the following share issuances:

In August 2025, the Company appointed Alan Campbell as Chief Executive Officer under an employment agreement providing for an annual salary of $350,000 and an initial equity grant of 780,264 shares of common stock (3.6% of fully diluted common stock), vesting over three years. The Company recognized $479,100 of expense related to this grant during 2025 under the graded vesting method.

In connection with the November 2025 debt-to-equity conversion and additional equity transactions the Company issued an aggregate of 6,823,847 shares of common stock to officers, directors, and service providers in consideration of services rendered, valued at $1.57 per share.

As a result of the foregoing issuances and the debt conversion, the anti-dilution provision in Mr. Campbell’s employment agreement was triggered, resulting in the issuance of an additional 906,420 shares of common stock to Mr. Campbell at $1.57 per share, or $1,423,079 of stock-based non-cash compensation expense. In total, 1,686,684 shares were issued to Mr. Campbell during 2025.

Professional fees were $199,042 compared to $71,634 in 2024, and general and administrative expenses were $18,798 compared to $13,647 in 2024.

Unrealized losses on marketable securities increased to $43,845 in 2025 from $25,536 in 2024, reflecting changes in the value of the Company holdings of NextNRG shares. At December 31, 2025, the Company owned 26,573 shares of NextNRG Inc. (formerly known as EZFill Holdings, Inc.) with a fair value of $38,531, reported on the balance sheet as Marketable securities — related party. Michael Farkas, the Company’s Chairman, beneficially owns approximately 49% of the outstanding common stock of NextNRG Inc.

Interest expense decreased to $205,900 in 2025 from $231,402 in 2024 as the Company converted substantially all of its debt obligations in November 2025. The Company recognized a gain of $127,579 on the settlement of accounts payable related to prior legal fee obligations.

Debt-to-Equity Conversion and Non-Cash Charges

On November 5, 2025, the Company completed a comprehensive debt-to-equity conversion, converting $2,595,900 in principal and $1,571,105 in accrued interest (totaling $4,167,005) into 16,667,788 shares of common stock at a conversion price of $0.25 per share. Because the fair market value of the Company’s common stock on the conversion date was $1.57 per share, the Company recognized a non-cash loss on settlement of debt of $16,595,746, representing the difference between the fair value of the shares issued and the carrying value of the debt extinguished. This loss is entirely non-cash in nature and does not represent any cash outflow or operational expenditure by the Company.

This one-time conversion was a transformative event that eliminated substantially all of the Company’s outstanding debt obligations, significantly strengthening its balance sheet. As a result of the conversion, the Company’s total liabilities decreased from $5,166,681 at December 31, 2024 to $3,773,845 at December 31, 2025, while total stockholders’ deficit improved from $(5,071,106) to $(3,376,339).

In connection with the CEO employment agreement entered into in August 2025, the Company recorded a derivative liability of $3,425,796 related to an anti-dilution provision. At December 31, 2025, the derivative liability was remeasured using a Monte Carlo simulation model, resulting in a gain of $1,480,990, reflecting a decrease in the estimated fair value of the obligation. The derivative liability had a carrying value of $1,944,806 as of December 31, 2025 (see Note 11).

Total other expense, net, was $18,662,718 in 2025 compared to $256,938 in 2024. The increase was driven by the non-cash loss on settlement of debt of $16,595,746 and the initial recognition of the derivative liability of $3,425,796, partially offset by the gain on remeasurement of the derivative of $1,480,990 and the gain on settlement of accounts payable of $127,579.

Net Loss

● Stock-based compensation: $12,700,399

● Loss on settlement of debt: $16,595,746

● Loss on initial recognition of derivative: $3,425,796

● Gain on remeasurement of derivative: ($1,480,990)

In the aggregate, non-cash charges totaled $31,240,951 for the year ended December 31, 2025. Excluding these non-cash items, the Company’s cash-basis operating loss was approximately $527,000, consistent with the prior year. Management believes these non-cash charges reflect one-time balance sheet restructuring events that do not reflect the Company’s ongoing operational performance or cash requirements.

At December 31, 2025, the Company had cash of $358,975 compared to $13,199 at December 31, 2024, representing an increase of $345,776, or approximately 27 times the prior year balance. During the year ended December 31, 2025, the Company used $257,024 of cash in operating activities, a modest amount relative to the scale of business activity during the period. Financing activities provided cash of $602,800, consisting of $84,800 from advances from a related party (MF), $18,000 from a note payable to a related party (MF), and $500,000 from The Farkas Group in the form of two $250,000 promissory notes.

At December 31, 2025, the Company had total liabilities of $3,773,845 compared to $5,166,681 at December 31, 2024, a reduction of $1,393,836 or 27%. The reduction reflects the November 2025 debt-to-equity conversion, which eliminated substantially all of the Company’s legacy debt obligations. Remaining debt obligations at December 31, 2025 consist of the Chase Mortgage of approximately $25,000, related party debt of approximately $518,000, and accrued interest and other liabilities.

Stockholders’ deficit at December 31, 2025 was $(3,376,339) compared to $(5,071,106) at December 31, 2024, an improvement of $1,694,767. While the Company has an accumulated deficit of $(37,651,646) at December 31, 2025, the deficit is substantially comprised of non-cash charges, as summarized below:

These non-cash charges represent balance sheet restructuring and equity compensation events rather than operational cash losses. The Company continues to operate with a stockholders’ deficit position.

Going Concern

The Company has an accumulated deficit of $(37,651,646) at December 31, 2025 and stockholders deficit of $(3,376,339). The Company reported a net loss of $31,768,325 for the year ended December 31, 2025. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate revenue from its advisory services, obtain additional capital through equity or debt financings, and reduce operating expenses. Management intends to pursue these strategies; however, there is no assurance that the Company will be able to successfully implement these plans.

Our failure to repay matured promissory notes payable to a related party could adversely affect our liquidity and operations.

Two of our promissory notes payable to a related party, in the aggregate principal amount of $500,000, have matured and remain unpaid, and the holder may demand payment at any time. Our two promissory notes payable to The Farkas Group, Inc., an entity controlled by our Chairman, in the aggregate principal amount of $500,000, reached their stated maturities on May 3, 2026 and May 11, 2026 and were not repaid. As of June 30, 2026 the principal, together with accrued interest of $25,753, remains outstanding. Under the terms of the notes, upon our failure to tender payment on the maturity date the lender has the right, upon notice to us, to declare all outstanding principal and accrued interest immediately due and payable. As of the date of this report the lender has not delivered a notice of acceleration or a demand for payment, and given the related-party nature of the notes we anticipate that we will either repay them or negotiate an extension of the maturity dates. No agreement has been reached, however, and the lender retains its contractual right to demand payment at any time. We had $117,465 of cash at June 30, 2026 and no committed financing arrangement. If the lender were to demand payment we would not be able to satisfy the obligation from existing cash resources, which would have a material adverse effect on our liquidity, could require us to delay vendor payments or curtail operations, and could result in the exercise of remedies against us.

Our Chief Executive Officer’s anti-dilution right may result in substantial dilution to existing stockholders and volatility in our reported results.

Pursuant to his August 2025 employment agreement, our Chief Executive Officer, Alan Campbell, is entitled to receive additional shares of common stock to maintain a fixed ownership percentage until we have raised an aggregate of $1 billion in total capital. Any future equity issuance — whether for financing, debt conversion, acquisition, or compensation — will trigger additional issuances to Mr. Campbell, compounding the dilution to other stockholders. Because the $1 billion threshold has not been reached, the provision is expected to remain operative for the foreseeable future and may be triggered multiple times as we seek the additional capital necessary to continue operations. We account for this provision as a derivative liability under ASC 815, measured at fair value using a Monte Carlo simulation model. At June 30, 2026, the derivative liability was $962,301. Remeasurement of this liability resulted in a net gain of $982,505 for the six months ended June 30, 2026, which substantially offset our $988,644 loss from operations but does not reflect operational improvement. Future remeasurement may produce material non-cash gains or losses that cause significant volatility in our reported results. The liability is settled exclusively through share issuances, not cash, but its settlement will dilute existing stockholders.

As a result of the foregoing, we recognized a net loss of $236,841 for the three months ended June 30, 2026, compared to a net loss of $146,142 for the three months ended June 30, 2025.

Six Months Ended June 30, 2026 Compared with Six Months Ended June 30, 2025

Revenue.

During the six months ended June 30, 2026, we generated $40,000 of consulting revenue from advisory services. We did not generate any revenue during the six months ended June 30, 2025.

Operating Expenses.

Total operating expenses for the six months ended June 30, 2026 were $1,028,644, an increase of $870,546 from $158,098 for the six months ended June 30, 2025. Salaries and wages increased from $96,275 to $935,412, of which $661,963 represents non-cash stock-based compensation expense. Professional fees increased from $51,716 to $82,086, and general and administrative expenses increased from $10,107 to $11,146.

Other Income (Expense).

Total other income (expense), net was income of $929,606 for the six months ended June 30, 2026, compared to income of $5,550 for the six months ended June 30, 2025. The 2026 amount was driven primarily by a net non-cash gain of $982,505 on remeasurement of the derivative liability, partially offset by an unrealized loss of $29,225 on our holdings of NextNRG Inc. common stock and interest expense of $23,674. The 2025 amount included a one-time non-recurring gain of $127,579 on settlement of accounts payable and interest expense of $113,260.

Net Loss.

Maturity of Related-Party Promissory Notes

Our two promissory notes payable to The Farkas Group, Inc., a related party, in the aggregate principal amount of $500,000, reached their stated maturities on May 3, 2026 and May 11, 2026 and were not repaid at maturity. The principal, together with accrued interest of $25,753, remains outstanding as of June 30, 2026. The lender has not delivered a notice of acceleration or a demand for payment as of the date of this report. We anticipate that we will either repay the notes or negotiate an extension of the maturity dates with the lender; however, no agreement has been reached and the lender retains its contractual right to demand payment at any time. Any demand for payment would have a material adverse effect on our liquidity. See Note 6.