Crypto treasury firm ZeroStack has warned of “substantial doubts” about its ability to continue operations over the next year. This was stated in its quarterly report filed with the SEC.
As of June 30, the company had $2.6 million in cash, a negative working capital of $0.6 million, and an accumulated deficit of $339.1 million. ZeroStack reported a net loss of $61.3 million for the first half of the year.
The main reason was the decline in the value of digital assets. The company recorded an $82.5 million loss from the fair value revaluation of cryptocurrencies.
Treasury Declined by 91%
ZeroStack held 75.1 million Zero Gravity (0G) tokens, the native tokens of the blockchain for decentralized AI infrastructure. The firm builds its treasury strategy around these tokens: holding, staking, and selling rewards to fund operational expenses.
In the first half of the year, the company received 6.62 million 0G in rewards valued at $3.8 million after validator fees. To cover operational expenses, ZeroStack sold 4.94 million tokens from a separate rewards wallet, earning $2.4 million.
The total acquisition cost of 0G was $163.3 million, but the fair value as of June 30 had dropped to $15.2 million. Including a small position in Bitcoin, the total fair value of ZeroStack’s digital assets is estimated at $15.218 million compared to the $163.432 million acquisition cost.
The report indicated that the company now relies on monetizing staking rewards to fund operations and meet obligations. If necessary, it may also sell some core digital assets.
However, the liquidity of these sources depends on the market price of 0G and trading activity. ZeroStack’s management acknowledged that they cannot conclude that these measures will likely eliminate doubts about the company’s ability to continue operations.
Assessment Changed Over the Quarter
In the previous quarterly report, ZeroStack had a more optimistic view. The company believed that its liquidity sources would be sufficient to meet obligations and working capital needs.
The new assessment became more stringent following a further decline in the value of 0G. The revaluation loss of digital assets was $21.8 million for the second quarter and $82.5 million for the first half of the year.
The financial statements were prepared on a going concern basis. ZeroStack noted that the financial reports do not include adjustments to asset values and liability classifications that might be required under different circumstances.
On July 20, the company completed the acquisition of Texas Blocker Corp., adding approximately 148 million 0G to its treasury. Following the deal, ZeroStack held about 223 million 0G, nearly all of which are staked and expected to generate regular rewards.
In July, journalists highlighted the shift of crypto treasury companies towards AI.
