10-K: ZeroStack Pivots to AI, Reports $119.7M Loss in 2025

ZeroStack Corp. transitioned to a decentralized AI treasury and asset management strategy in 2025, reporting a significant net loss of $119.7 million primarily due to digital asset fair value changes, while divesting its legacy cannabis business.

Summary

• ZeroStack Corp. (formerly Flora Growth Corp.) officially changed its name and Nasdaq ticker to 'ZSTK' on January 29, 2026, signaling a strategic pivot.
• The company has shifted its core business to a decentralized AI treasury and AI-focused asset management, with primary investments in 0G Tokens.
• ZeroStack continues to operate its global pharmaceutical distribution business through its wholly-owned German subsidiary, Phatebo GmbH.
• A net loss of $119.7 million was reported for the year ended December 31, 2025, a significant increase from the $15.9 million net loss in 2024.
• The substantial loss in 2025 was primarily driven by a $143.0 million loss from changes in the fair value of digital assets.
• As of December 31, 2025, digital asset holdings totaled $121.0 million, consisting mainly of 0G Tokens and a small amount of Bitcoin.
• The company disposed of its entire legacy hemp and cannabis business on September 26, 2025, in exchange for the cancellation of $2.2 million in promissory notes.
• Capital raises in 2025 included approximately $1.1 million net proceeds from a May Private Placement (used for Solana, Ethereum, Sui, Ripple purchases) and $13.5 million cash from a September Cash Private Placement (for 0G digital asset strategy).
• ZeroStack also received 71,766,135 0G Tokens in a Token Private Placement and 50,000,000 0G Tokens via a Zero Gravity Convertible Note, further bolstering its digital asset treasury.
• The PIPE Note, which involved 95,333 Solana, was settled on December 30, 2025, through a payment of 96,162 Solana, $1.75 million cash, and 111,550 Common Shares.
• The company successfully regained compliance with Nasdaq's minimum bid price and independent director requirements in 2025 and early 2026.
• Cash and cash equivalents stood at $5.6 million as of December 31, 2025, up from $5.2 million in 2024.
• The accumulated deficit reached $277.8 million by December 31, 2025.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a high-risk, transformative period for ZeroStack. While the strategic pivot to AI and digital assets is ambitious and has attracted significant capital, the substantial net loss driven by digital asset volatility and the accumulated deficit indicate significant financial challenges and execution risk in this new, unproven strategy.

Positives

• Successfully executed a strategic pivot to AI and digital asset treasury, accumulating $121.0 million in digital assets by year-end 2025.
• Secured significant capital through multiple private placements and an ATM offering in 2025, providing liquidity for its new strategy.
• Regained compliance with Nasdaq listing standards for both minimum bid price and board composition, reducing delisting risk.
• The pharmaceutical distribution business (Phatebo) continues to generate stable revenue, contributing $35.7 million in 2025.
• Realized a $37.9 million gain from the revaluation of the Zero Gravity Convertible and PIPE Notes in 2025.
• Achieved a $1.6 million gain on the settlement of the PIPE Note.
• Appointed new executive leadership, Daniel Reis-Faria as CEO and Michael Heinrich as Executive Chairman, both bringing extensive experience in AI and blockchain.
• Strengthened corporate governance with the appointment of Laurence Zeifman as an independent director and committee chair.

Negatives

• Reported a substantial net loss of $119.7 million for 2025, primarily due to a $143.0 million loss from changes in the fair value of digital assets.
• The accumulated deficit grew to $277.8 million as of December 31, 2025, indicating significant historical losses.
• Gross profit decreased to $1.6 million in 2025 from $2.2 million in 2024, with the gross margin declining from 6% to 5% in the pharmaceutical segment.
• Cash used in operating activities increased to $8.7 million in 2025 from $5.0 million in 2024.
• The disposal of the legacy hemp and cannabis business represents a divestment from previous core operations, potentially indicating challenges in that sector.
• A legal proceeding was initiated against the Company and its former subsidiary Vessel for $1.2 million in unpaid rent, leading to a provision being recorded.
• The company faces significant concentration risk with 93% of its total assets held in 0G cryptocurrency as of December 31, 2025.
• Increased operating expenses in 2025 totaled $156.3 million, up from $11.1 million in 2024, largely due to digital asset fair value changes.
• Incurred $0.3 million in bad debt expense in 2025 due to a credit loss from a customer in China.
• Severance payments to the former Chief Executive Officer contributed to higher consulting and management fees.

Risks

• Limited operating history and a history of net losses, with no assurance of achieving future profitability.
• Significant fluctuations in the market price of 0G Tokens and other digital assets could adversely affect financial results and stock price.
• The possibility that cryptocurrencies, including 0G Tokens, may be classified as 'securities' by regulators, leading to additional regulatory burdens and potential adverse impact on market price.
• Decreased liquidity of 0G Tokens or other digital assets could hinder the ability to convert holdings to cash when needed.
• The ability to continue as a going concern is dependent on access to sources of liquidity, which is not assured.
• Damage to the company's reputation due to negative publicity, whether accurate or not, could impact business relationships and investor confidence.
• Exposure to product liability claims, actions, litigation, and product recalls, particularly in the pharmaceutical and former cannabis businesses.
• Challenges in successfully integrating future acquired businesses, diverting management attention, and potentially diluting shareholder value.
• Inability to achieve economies of scale as operations expand.
• Difficulties in funding overhead expenses, including the substantial costs associated with being a publicly-listed company.
• Failure to maintain effective quality control systems could lead to regulatory enforcement actions and reputational harm.
• Risks associated with expanding into new jurisdictions, including unexpected regulatory requirements and operational barriers.
• Regulatory compliance risks are significant, especially in the evolving digital asset and AI landscapes.
• Potential delisting from Nasdaq could reduce the liquidity and market price of Common Shares.
• Cybersecurity risks, including loss or destruction of private keys for cryptocurrencies and cyberattacks, could lead to significant financial losses and data breaches.
• The possibility of being deemed an 'investment company' under the Investment Company Act of 1940, which would impose restrictions making current business segments impractical.
• Risks associated with the use of AI, including system failures, adversarial attacks, data breaches, inadvertent disclosure of sensitive information, and algorithmic bias.
• Competition from other digital assets and advancements in AI and blockchain technology could negatively impact the demand and price of 0G Tokens.
• Reliance of AI technology on third-party data, with risks of losing access or inaccuracies affecting efficacy.
• Disruptions in cryptocurrency networks could negatively impact the value of holdings.
• The strategy of acquiring 0G with capital exceeding working capital requirements may adversely affect financial results.
• Concentration of 0G holdings limits risk mitigation and amplifies the impact of price declines.
• Enhanced regulatory oversight of the 0G treasury strategy could impose significant costs or limit operations.
• Inability to develop new products and services to address the rapidly evolving digital asset market.
• Assumptions, estimates, and judgments related to critical accounting matters could significantly affect reported financial results.
• Exposure to foreign currency exchange rate fluctuations due to international operations.
• Tax risks in multiple jurisdictions, including potential IRS audits for historical cannabis businesses and the company's potential status as a 'passive foreign investment company' (PFIC) for U.S. investors.
• Limitations on the ability to use U.S. net operating loss carryforwards.
• Failure to develop and maintain effective internal controls over financial reporting as the company grows.
• Need for additional funding, which may not be available on satisfactory terms and could dilute shareholders or impose burdensome financial restrictions.
• Volatility in the market price of Common Shares, potentially preventing investors from selling at or above their purchase price.
• Political, social, and geopolitical conditions, including trade policies and global conflicts, can adversely affect business.
• Involvement in legal proceedings could consume resources and result in significant fines or damages.
• Dependence on senior management and key employees, with the loss of whom could materially affect operations.
• Inability to retain and acquire skilled personnel in a competitive market.
• Difficulties in managing organizational growth and changes in strategy.
• Significant ongoing costs and obligations related to infrastructure, growth, and regulatory compliance.
• Risk of insufficient insurance coverage for various business hazards.
• Security breaches at facilities could result in damage or theft of products and equipment.

Future Outlook

The company's near-term objective for its digital asset treasury strategy is to accumulate 0G Tokens to increase treasury holdings and shareholder value, with an intention to hold 0G for the long-term. It plans to explore and expand the use of the native AI functionality of the 0G Token to enhance its business. The company believes its current liquidity is sufficient for at least one year and is committed to achieving sustained growth to offset overhead costs and reach profitability. It will continue to monitor market conditions for additional cryptocurrency financings and may periodically sell cryptocurrency for general corporate purposes, debt repayment, or acquisitions. Strategies to create income streams or generate funds using cryptocurrency holdings are also contemplated.

Management Comments

• "ZeroStack's mission is to become one of the leading Nasdaq-listed, AI-focused, asset management companies."
• "Our Board and senior management have been examining potential uses of cash, including acquisitions of cryptocurrency. After studying various alternatives, we decided that investing in cryptocurrency is currently a better business strategy."
• "We view cryptocurrency potentially as a core holding and expect to accumulate cryptocurrency following this offering."
• "We intend to hold 0G for the long-term and expect to continue to accumulate 0G."
• "ZeroStack believes that the rise of AI represents the next industrial revolution in the business world."
• "We have assembled a team with deep knowledge of the regulatory and governance environments in which the Company operates."
• "With the closing of the private equity offerings in the third and fourth quarters of 2025, the Company believes that its existing cash and the staking rewards from its unrestricted digital assets are and will be sufficient to meet its working capital requirements and future obligations for at least one year after the issuance date of these consolidated financial statements."
• "We are committed to attaining a level of sustained growth that will effectively offset our overhead costs, thereby paving the path to achieving profitability."

Industry Context

StockSavvy.ai notes that ZeroStack's pivot to a decentralized AI treasury and asset management strategy aligns with the broader industry trend of integrating AI and blockchain technologies. The focus on 0G, a modular Layer 1 blockchain for decentralized AI workloads, positions the company in a rapidly growing but highly competitive 'cryptoeconomy' segment. The divestment of legacy cannabis assets reflects a strategic shift away from a highly regulated and often volatile sector towards emerging tech, mirroring moves by other companies seeking higher growth potential in AI and Web3. The company's pharmaceutical distribution arm provides a stable, albeit lower-growth, revenue stream amidst the speculative nature of its digital asset strategy.

Comparison to Industry Standards

• ZeroStack's net loss of $119.7 million in 2025, primarily driven by digital asset fair value changes, is significantly higher than its 2024 loss of $15.9 million, indicating substantial volatility inherent in its new digital asset treasury strategy. This contrasts with more stable, established asset management firms that typically exhibit lower earnings volatility.
• The gross margin of 5% in 2025 for its pharmaceutical distribution business is relatively low compared to industry benchmarks for specialized pharmaceutical distributors, which can range from 10-20% or higher depending on product mix and market.
• The concentration of 93% of total assets in 0G cryptocurrency as of December 31, 2025, represents an extremely high concentration risk compared to diversified investment funds or corporate treasuries, which typically limit exposure to highly volatile assets.
• The company's reliance on a limited number of digital asset custodians and trading platforms exposes it to counterparty risks that are generally mitigated by larger financial institutions through multi-custodian strategies and robust risk management frameworks.
• The rapid succession of capital raises (May 2025 Private Placement, September 2025 PIPE Offering, ATM Offering, ELOC Agreement) suggests an aggressive funding strategy to support its new digital asset focus, which is common for early-stage companies in emerging tech sectors but can lead to significant shareholder dilution.

Management Changes

Corporate Governance

Legal Proceedings

• A legal proceeding was brought against the Company and Vessel Brand Inc. (a former wholly-owned subsidiary) by a lessor in the Superior Court of California, County of San Diego, on June 2, 2025. The lessor is claiming breach of lease and written guaranty agreements, seeking $1.2 million in unpaid rent, 10% interest, and reasonable attorneys' fees. The Company has assessed the claims and accrued a provision of $1.2 million.
• The Company settled a legal dispute with a group representing the sellers of Just Brands LLC. On September 18, 2025, the Company paid the plaintiffs $1.8 million, and the plaintiffs forfeited claims to shares and released the Company from all known and unknown claims. This litigation is no longer active.
• Canadian Insolvent Entities (FGH, FCC, CBDMed Therapeutics Inc., Harmony Health One Inc., 1200325 B.C. Ltd., and Fayber Technologies Inc.) made voluntary assignments in bankruptcy on March 14, 2025. German Insolvent Entities (ACA Mueller ADAG Pharma Vertriebs GmbH, Sativa Verwaltungs GmbH, and Sativa Verwaltungs GmbH and Co. KG) filed for insolvency proceedings on March 18, 2025. These entities were deconsolidated, and the Company expects no distributions from their liquidations.

Related Party Transactions

• On January 30, 2025, the Company acquired United Beverage Distribution Inc. from a group of sellers, including Clifford Starke (former director/CEO), Sammy Dorf (former Executive Chairman), and Dany Vaiman (CFO). Consideration included 23,688 shares of the Company and $2.1 million in promissory notes.
• On September 20, 2025, the Company sold its legacy hemp and cannabis business to a group of Cannabis Investors, including Clifford Starke, Sammy Dorf, and Dany Vaiman. The consideration for this sale was the cancellation of $2.2 million in promissory notes owed to these investors.
• On October 9, 2025, Daniel Reis-Faria (current CEO) contributed 50,000,000 0G Tokens, valued at $113.3 million, in exchange for 5,954,743 PIPE Prefunded Warrants as part of the second closing of the PIPE Offering.
• On October 23, 2025, the Company received 50,000,000 0G Tokens from Zero Gravity Labs Inc. in exchange for the Zero Gravity Convertible Note. Michael Heinrich (current Executive Chairman and Director) is the Chief Executive Officer of Zero Gravity Labs Inc.
• Harmony Health One (a former subsidiary) had an Intellectual Property License Agreement with Hampstead Private Capital Limited, a corporation controlled by the former CEO of the Company and FGH, requiring a 3.5% royalty on gross revenues. No royalty amounts were recorded in 2024 or 2025, and Harmony subsequently became insolvent.

Stakeholder Impact

• Shareholders: Experienced significant dilution from multiple equity offerings and warrant issuances. Are exposed to high volatility due to the company's substantial digital asset holdings. The strategic pivot to AI and digital assets represents a high-risk, high-reward proposition. Regained Nasdaq compliance reduces delisting risk.
• Employees: Experienced management changes at the CEO and Executive Chairman levels. Equity-based compensation plans are in place to incentivize performance and retention.
• Customers (Pharmaceutical Distribution): Continue to receive pharmaceutical products, primarily in Europe, from the stable revenue-generating Phatebo subsidiary.
• Creditors: Promissory notes were settled through the sale of the cannabis business. The company maintains credit facilities in Germany.
• Digital Asset Investors: The company's strategy aims to increase shareholder value through 0G accumulation and AI functionality, but exposes them to significant market volatility and regulatory uncertainty in the crypto space.

Next Steps

• Continue to accumulate 0G Tokens for the digital asset treasury.
• Explore and expand the use of the native AI functionality of the 0G Token to enhance the business.
• Monitor ongoing developments in the regulatory environment around cryptocurrencies and modify treasury strategy as needed.
• Proactively evaluate the use of cash to ensure adequate working capital.
• Potentially issue additional debt or equity securities or engage in other capital raising transactions to purchase more cryptocurrency.
• Periodically sell cryptocurrency for general corporate purposes, including debt repayment, share repurchases, acquisitions, or tax benefits.
• Pursue strategies to create income streams or generate funds using cryptocurrency holdings.
• Develop new products and services to address the rapidly evolving market for digital assets.
• Continue to develop and improve internal control systems and procedures to manage growth.
• Address the legal proceeding against the Company and Vessel Brand Inc.

Key Dates

Recommendation

The company is undergoing a significant strategic transformation, pivoting from a legacy cannabis business to a decentralized AI treasury and asset management model heavily invested in 0G Tokens. While this pivot has attracted substantial capital and new leadership with relevant expertise, the financial results for 2025 show a massive net loss primarily due to the volatility of digital assets. The high concentration of assets in 0G Tokens introduces extreme risk. The pharmaceutical distribution segment provides some stability, but its margins are declining. Given the high uncertainty surrounding the regulatory landscape for digital assets, the inherent volatility of cryptocurrencies, and the early stage of the new AI strategy, a "hold" recommendation is appropriate. Investors should monitor the execution of the AI strategy, the stability of digital asset valuations, and regulatory developments before making further investment decisions. The potential for significant gains exists if the AI strategy succeeds and 0G Token value appreciates, but the downside risk from volatility and regulatory headwinds is substantial.

Keywords

AI, Decentralized AI, 0G Token, Cryptocurrency, Digital Assets, Asset Management, Pharmaceutical Distribution, SEC Filing, 10-K, Financial Results, Nasdaq, Corporate Governance, Risk Management, Capital Raise, Blockchain, Solana, Ethereum, Sui, Ripple, Cannabis Business Divestment