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Sphere 3D(ANY) - 2024 Q3 - Quarterly Report
ANYSphere 3D(ANY)2024-11-14 21:13

Financial Performance - Total revenues for the three months ended September 30, 2024, were 2,355,000,adecreaseof58.82,355,000, a decrease of 58.8% compared to 5,724,000 for the same period in 2023[9]. - Bitcoin mining revenue for the nine months ended September 30, 2024, was 13,967,000,anincreaseof10.913,967,000, an increase of 10.9% from 12,592,000 in the same period of 2023[9]. - The company reported a net income of 104,000forthethreemonthsendedSeptember30,2024,comparedtoanetlossof104,000 for the three months ended September 30, 2024, compared to a net loss of 6,314,000 for the same period in 2023[10]. - As of September 30, 2023, Sphere 3D Corp. reported a net loss of 6,314,000,comparedtoanetlossof6,314,000, compared to a net loss of 4,760,000 for the same period in 2022, indicating a worsening financial performance[15]. - The company reported proceeds from the sale of Bitcoin amounting to 13,529,000fortheninemonthsendedSeptember30,2024,comparedto13,529,000 for the nine months ended September 30, 2024, compared to 12,958,000 for the same period in 2023[15]. - The company reported a net loss of 2.2millionforthefirstninemonthsof2024,withongoingconcernsaboutcashflowsustainability[111].AssetsandLiabilities−Totalcurrentassetsincreasedto2.2 million for the first nine months of 2024, with ongoing concerns about cash flow sustainability[111]. Assets and Liabilities - Total current assets increased to 14,501,000 as of September 30, 2024, compared to 13,510,000asofDecember31,2023,reflectingagrowthof7.313,510,000 as of December 31, 2023, reflecting a growth of 7.3%[6]. - Total liabilities decreased to 44,255,000 as of September 30, 2024, down from 45,663,000asofDecember31,2023,indicatingareductionof3.145,663,000 as of December 31, 2023, indicating a reduction of 3.1%[7]. - The company’s total shareholders' equity increased to 35,848,000 as of September 30, 2024, compared to 26,523,000asofDecember31,2023,representingagrowthof35.326,523,000 as of December 31, 2023, representing a growth of 35.3%[7]. - The carrying amount of property and equipment, net, was 23.391 million as of September 30, 2024, compared to 24.166millionatDecember31,2023[54].−Totalothercurrentassetsdecreasedto24.166 million at December 31, 2023[54]. - Total other current assets decreased to 2.522 million as of September 30, 2024, from 11.938millionatDecember31,2023[53].CashFlowandLiquidity−Thecashandcashequivalentsincreasedsignificantlyto11.938 million at December 31, 2023[53]. Cash Flow and Liquidity - The cash and cash equivalents increased significantly to 4,950,000 as of September 30, 2024, compared to 586,000asofDecember31,2023[6].−Thecompanyhasprojectedthatcashonhandmaynotbesufficienttocontinueoperationswithin12monthsunlessadditionalfundingisraised,highlightingconcernsaboutitsgoingconcernstatus[19].−Cashandcashequivalentsroseto586,000 as of December 31, 2023[6]. - The company has projected that cash on hand may not be sufficient to continue operations within 12 months unless additional funding is raised, highlighting concerns about its going concern status[19]. - Cash and cash equivalents rose to 5.0 million as of September 30, 2024, from 0.6millionatDecember31,2023,reflectingimprovedliquidity[111].−Netcashusedinoperatingactivitieswas0.6 million at December 31, 2023, reflecting improved liquidity[111]. - Net cash used in operating activities was (3.1) million for the first nine months of 2024, compared to (6.0)millionin2023,indicatingreducedcashoutflow[112].MiningOperations−ThecompanyplanstocontinueexpandingitsBitcoinminingoperationsandexploringnewtechnologiestoenhanceefficiencyandprofitability[9].−ThecompanyhasestablishedaBitcoinminingoperationandaimstogrowitsenterprise−scaleminingcapabilitiesthroughequipmentprocurementandpartnerships[18].−ThecompanycurrentlyminesBitcoinonlyinMissouri,Texas,andIowa,butsimilarregulationsinotherstatescouldadverselyaffectoperations[126].−TheaverageenergyefficiencyofminersasofSeptember30,2024,was28.4J/th,witharangefrom21.5to38J/th,indicatingimprovedefficiencyinBitcoinminingoperations[89].−Thecompanyisintheprocessofreplacingoldermachineswithnewergenerationmodels[89].RegulatoryandMarketRisks−Thecompanyfacespotentialregulatoryrisksduetochangingenvironmentalregulations,whichcouldimposesignificantcostsrelatedtoenergyrequirementsandcompliance[120].−Atwo−yearmoratoriumoncertainBitcoinminingoperationsinNewYorkhighlightstheincreasingregulatoryscrutinyontheindustry[120].−Futureregulatorydevelopmentscouldrequirethecompanytoregisterandcomplywithextensiveregulations,potentiallyresultinginextraordinaryexpenses[126].−Thetradingpriceofthecompany′scommonsharesmustcomplywithNasdaqlistingrequirements,oritrisksdelisting,whichwouldlimitmarketaccessandfinancingoptions[128].ShareholderandEquityInformation−Thecompanyissued2,422,710commonsharesfortheconversionofpreferredshares,resultinginanincreaseof(6.0) million in 2023, indicating reduced cash outflow[112]. Mining Operations - The company plans to continue expanding its Bitcoin mining operations and exploring new technologies to enhance efficiency and profitability[9]. - The company has established a Bitcoin mining operation and aims to grow its enterprise-scale mining capabilities through equipment procurement and partnerships[18]. - The company currently mines Bitcoin only in Missouri, Texas, and Iowa, but similar regulations in other states could adversely affect operations[126]. - The average energy efficiency of miners as of September 30, 2024, was 28.4 J/th, with a range from 21.5 to 38 J/th, indicating improved efficiency in Bitcoin mining operations[89]. - The company is in the process of replacing older machines with newer generation models[89]. Regulatory and Market Risks - The company faces potential regulatory risks due to changing environmental regulations, which could impose significant costs related to energy requirements and compliance[120]. - A two-year moratorium on certain Bitcoin mining operations in New York highlights the increasing regulatory scrutiny on the industry[120]. - Future regulatory developments could require the company to register and comply with extensive regulations, potentially resulting in extraordinary expenses[126]. - The trading price of the company's common shares must comply with Nasdaq listing requirements, or it risks delisting, which would limit market access and financing options[128]. Shareholder and Equity Information - The company issued 2,422,710 common shares for the conversion of preferred shares, resulting in an increase of 4,327,000 in common shares[12]. - Sphere 3D Corp. issued common shares for the conversion of preferred shares, resulting in an increase of 2,699,136 shares and 8,335,000inequity[14].−Theweightedaveragecommonsharesoutstandingforbasicincomepershareincreasedfrom12,653,413in2023to20,733,022in2024[72].ExpensesandCosts−OperatingcostsandexpensesfortheninemonthsendedSeptember30,2024,totaled8,335,000 in equity[14]. - The weighted average common shares outstanding for basic income per share increased from 12,653,413 in 2023 to 20,733,022 in 2024[72]. Expenses and Costs - Operating costs and expenses for the nine months ended September 30, 2024, totaled 26,697,000, a decrease of 8.0% from 29,056,000inthesameperiodof2023[9].−Generalandadministrativeexpensesdecreasedto29,056,000 in the same period of 2023[9]. - General and administrative expenses decreased to 9.5 million in the first nine months of 2024 from 10.5millionin2023,primarilyduetoreducedoperatingcostsandoutsideservicesrelatedtocryptocurrencyexpansion[103].−Thecompanyincurredcostsof10.5 million in 2023, primarily due to reduced operating costs and outside services related to cryptocurrency expansion[103]. - The company incurred costs of 0.4 million under the Joshi Hosting Agreement for the three months ended September 30, 2024, compared to nil in the same period of 2023[75]. Investment and Impairment - The Company recorded an impairment charge of 0.9millionforidleminingequipmentduringtheninemonthsendedSeptember30,2024[54].−TheCompanyrecordeda0.9 million for idle mining equipment during the nine months ended September 30, 2024[54]. - The Company recorded a 20,000 decrease to the opening balance of accumulated deficit and an increase to digital assets due to the early adoption of ASU 2023-08[42]. - Unrealized gain on investment in equity securities was $4.1 million in 2024, compared to nil in 2023, linked to equity investment in Core Scientific Inc.[108]. Cybersecurity and Operational Risks - The company acknowledges the risk of becoming a target for cyber-attacks as it grows, which could adversely impact operations and profitability[132]. - Cryptocurrency holdings are stored in cold wallets with custodians like Bitgo and Coinbase, but access could be restricted due to cybercrime, impacting liquidity[132]. - The loss of private keys to digital wallets could result in irreversible loss of cryptocurrency holdings, significantly affecting the company's financial health[132].