ZeroStack, a cryptocurrency treasury firm, has raised alarms about "significant doubts" regarding its ability to operate over the next year, according to its quarterly report submitted to the SEC.
As of June 30, the company reported having $2.6 million in cash, a negative working capital of $0.6 million, and an accumulated deficit of $339.1 million. For the first half of the year, ZeroStack recorded a net loss of $61.3 million.
Source: SEC.The primary cause of these losses was a decline in the value of digital assets, with the company reporting an $82.5 million loss from cryptocurrency revaluations.
Treasury Value Plummets by 91%
ZeroStack held 75.1 million Zero Gravity (0G) tokens, which are the native tokens of its blockchain designed for decentralized AI infrastructure. The company has developed a treasury strategy around these tokens by holding, staking, and selling rewards to cover operational expenses.
In the first half of the year, ZeroStack earned 6.62 million 0G in rewards, amounting to $3.8 million after validator fees. To fund its operations, the firm sold 4.94 million tokens from a separate rewards wallet, generating $2.4 million.
The total acquisition cost for the 0G tokens was $163.3 million, but by June 30, their fair value had dropped to $15.2 million. Including a minor Bitcoin position, the overall fair value of ZeroStack's digital assets is estimated at $15.218 million, significantly down from the acquisition cost of $163.432 million.
In its report, the company stated that it now relies on monetizing staking rewards to finance its operations and meet obligations. It also mentioned that it may need to sell portions of its core digital assets if necessary.
However, the liquidity of these sources will depend on the market price of 0G and trading activity. ZeroStack's management acknowledged that they cannot guarantee that these measures will dispel doubts about the company's ability to continue its operations.
Valuation Tightens Over the Quarter
In a previous quarterly report, ZeroStack had a more optimistic outlook, believing that existing liquidity sources would suffice to meet obligations and working capital needs.
The new assessment has become more stringent following a further drop in the value of 0G. In the second quarter, the loss from digital asset revaluation amounted to $21.8 million, contributing to a total of $82.5 million for the first half of the year.
Despite these challenges, the financial statements were prepared on a going concern basis. ZeroStack indicated that the financial reports do not include asset value adjustments or liability classifications that might be necessary under different circumstances.
On July 20, the company finalized a deal to acquire Texas Blocker Corp., which added approximately 148 million 0G tokens to its treasury. Following this acquisition, ZeroStack held around 223 million 0G tokens, most of which are staked and expected to generate regular rewards.
It is worth noting that in July, reporters highlighted a shift among cryptocurrency treasury firms towards AI initiatives.