Cryptocurrency treasury company ZeroStack has warned of 'substantial doubts' about its ability to continue operating over the next year. This is stated in a 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. For the first half of the year, ZeroStack incurred a net loss of $61.3 million.
The main reason was the decline in the value of digital assets. The company recorded an $82.5 million loss from the revaluation of cryptocurrencies at fair value.
Treasury Value Plunged 91%
ZeroStack held 75.1 million Zero Gravity (0G) tokens — the native tokens of the blockchain of the same name for decentralized AI infrastructure. The firm builds a treasury strategy around it: holding the coins, staking them, and selling the received rewards to fund operational expenses.
In the first half of the year, the company received 6.62 million 0G in rewards worth $3.8 million after validator commissions. To cover operating expenses, ZeroStack sold 4.94 million tokens from a separate rewards wallet and received $2.4 million.
The total acquisition cost of 0G was $163.3 million, but the fair value as of June 30 fell to $15.2 million. Including a small Bitcoin position, the total fair value of ZeroStack's digital assets is estimated at $15.218 million, compared to $163.432 million at acquisition cost.
In the report, the company indicated that it now relies on monetizing staking rewards to finance operations and meet obligations. If necessary, it may also sell a portion of its core digital assets.
However, the liquidity of such sources depends on the market price of 0G and trading activity. ZeroStack's management acknowledged that it cannot conclude that these measures are highly likely to resolve the doubts about the company's ability to continue operating.
Assessment Changed Over the Quarter
In the previous quarterly report, ZeroStack assessed the situation more mildly. The company believed that available sources of liquidity would be sufficient to meet obligations and working capital needs.
The new assessment became harsher following a further decline in the value of 0G. In the second quarter, the loss from revaluation of digital assets amounted to $21.8 million, and for the first half of the year — $82.5 million.
At the same time, the reporting was prepared based on the going concern principle. ZeroStack noted that the financial statements do not include adjustments to asset values and liability classifications that might be required if the outcome were different.
On July 20, the company closed a deal to purchase Texas Blocker Corp., adding approximately 148 million 0G to the treasury. After the deal, ZeroStack held about 223 million 0G, nearly all of which are staked and are expected to generate regular rewards.
Bloomberg: Crypto Treasuries Lost Tens of Billions Due to Bitcoin's Fall
Recall that in July, journalists pointed out a shift of crypto treasury companies towards AI.
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