Author: Ezra Reguerra

Translation: ShenChao TechFlow

ShenChao Introduction: How did a publicly traded company that turned its main business into "crypto treasury" go from "cash enough to last a year" to "whether it can survive is a question" in just six months? The core is one sentence: it bet its life savings on a token (0G) it inflated itself; when the token price collapsed, the reported cost of 163 million dollars was reduced to only 15.2 million dollars, resulting in a loss of 82.5 million dollars. Even more embarrassing is that the money to pay salaries comes from staking rewards and selling tokens—while selling tokens further depresses the token price. This is almost a textbook-level risk demonstration of the "treasury company" business model, also exposing the absurd leap of Flora Growth from cannabis CBD to cryptocurrency.

The Nasdaq-listed crypto treasury company ZeroStack has warned that there are "substantial doubts" about its ability to continue operating for the next year, which is completely opposite to the assessment made three months prior.

In the 10-Q filing submitted to the U.S. Securities and Exchange Commission (SEC) on Friday, ZeroStack disclosed that as of June 30, the company had only 2.6 million dollars in cash, negative working capital of 600,000 dollars, and accumulated losses as high as 339.1 million dollars. Furthermore, the company reported a fair value loss of 82.5 million dollars on digital assets in the first half of the year, resulting in a net loss of 61.3 million dollars.

ZeroStack stated that the total cost of the 75.1 million Zero Gravity (0G) tokens it holds is 163.3 million dollars, while the fair value as of June 30 was only 15.2 million dollars, indicating a valuation decline of approximately 91% compared to the accounting cost.

ZeroStack’s operating funds are primarily reliant on staking rewards and token sales, which directly tie its fundraising capacity to the price and trading liquidity of 0G.

0G Strategy Faces Liquidity Challenge

ZeroStack reported that staking revenue reached 3.8 million dollars in the first half of the year, yielding about 6.6 million 0G tokens after deducting validator fees; to cover operating expenses, the company sold nearly 4.9 million tokens for 2.4 million dollars.

The company expects that its cash on hand and revenues from staking rewards will be sufficient to cover anticipated operating costs, stating that it could liquidate part of its treasury holdings if necessary. However, management acknowledged that they could not conclude that "these plans are sufficient to alleviate the doubts about continuing operations."

This latest assessment overturns the statements in the company’s previous two reports. In the first-quarter filing, ZeroStack had indicated that cash and staking rewards could meet operating capital needs and debt obligations for at least the coming year.

The company was formerly a cannabis and CBD product company, Flora Growth. On September 19 last year, Flora announced it had raised 401 million dollars for the 0G treasury strategy, which included 35 million dollars in cash and equivalent commitments, as well as over 366 million dollars in physical digital assets. The company then changed its name to ZeroStack, while retaining its Nasdaq listing status.