Company: MSTR
Filing Date: 2025-02-18
Form Type: 10-K
Source: 0000950170-25-021814
Chunk: 241

Company: Strategy Inc
Filing Date: 2025-02-18
Form: 10-K
Item: Item 1A
Chunk 241
---
 preferred stock;

•the impact of war, terrorism, infectious diseases (such as COVID-19), natural disasters and other global events, and government responses to such events, on the global economy and the market for and price of bitcoin;

•significant changes to our software business, including significant changes in our software sales or operating expenses, or the timing of announcements of new offerings or research and development projects by us or our competitors;

•our profitability and expectations for future profitability and their effect on our deferred tax balances and net income for the period in which any adjustment to our net deferred tax asset valuation allowance may be made; and

•increases or decreases in our unrecognized tax benefits. 

Limited Ability to Adjust Expenses. We base our operating expense budgets on expected revenue trends and strategic objectives. Many of our expenses, such as interest expense on our debt, dividend obligations on our preferred stock, tax liabilities, office leases and certain personnel costs, are relatively fixed. We may be unable to adjust spending quickly enough to offset any unexpected shortfall in our cash flow. Accordingly, we may be required to take actions to pay expenses, such as selling bitcoin or using proceeds from equity or debt financings, some of which could cause significant variation in operating results in any quarter.

Based on the above factors, we believe quarter-to-quarter comparisons of our operating results are not a good indication of our future performance. It is possible that in one or more future quarters, our operating results may be below the expectations of public market analysts and investors. In that event, the market price of our listed securities may fall.

16

We may not be able to regain profitability in future periods

We generated a net loss for the fiscal year ended December 31, 2024, primarily due to $1.790 billion of digital asset impairment losses. We may not be able to regain profitability in future periods, particularly if we incur significant fair value losses related to our digital assets. As a result, our results of operations and financial condition may be materially adversely affected.

As of December 31, 2024, we had $1.525 billion of deferred tax assets. The largest deferred tax asset relates to the impairment on our bitcoin holdings, which was reversed upon our adoption of ASU 2023-08. If the market value of bitcoin at a future reporting date is less than the average cost basis of our bitcoin holdings at such reporting date, we may be required to establish a valuation allowance against our U.S. deferred tax assets. A significant increase in the valuation allowance could result in