Sphere 3D(US:ANY)2020-11-16 22:01Revenue Performance - Revenue for Q3 2020 was $0.9 million, a decrease of $0.5 million from $1.4 million in Q3 2019, primarily due to a decrease in sales units for disk systems [80]. - Revenue for the first nine months of 2020 was $2.8 million, down from $4.5 million in the same period of 2019, reflecting a $1.7 million decrease due to reduced sales units for disk systems [84]. Profitability and Margins - Gross profit for Q3 2020 was $534,000, representing a gross margin of 60.0%, compared to $485,000 and a gross margin of 35.5% in Q3 2019, indicating a 69.0% increase in gross margin [81]. - Gross profit for the first nine months of 2020 was $1.439 million, a slight increase of 1.0% compared to $1.425 million in the same period of 2019 [85]. - Cost of revenue decreased to 40.0% of revenue in Q3 2020 from 64.5% in Q3 2019, contributing to improved gross profit margins [79]. Operating Expenses - Operating expenses for Q3 2020 were 246.2% of revenue, compared to 132.4% in Q3 2019, with significant increases in general and administrative expenses [79]. - General and administrative expenses rose to $4.4 million in the first nine months of 2020 from $2.8 million in 2019, mainly due to increased contractor fees [86]. - Sales and marketing expenses decreased to $0.3 million in Q3 2020 from $0.6 million in Q3 2019, primarily due to reduced share-based compensation [82]. - Research and development expenses decreased to $0.3 million in Q3 2020 from $0.5 million in Q3 2019, primarily due to lower employee-related expenses [83]. Net Loss and Financial Position - The net loss for Q3 2020 was 133.9% of revenue, compared to a net loss of 64.7% in Q3 2019, reflecting increased operational challenges [79]. - The company reported a net working capital deficit of $3.2 million as of September 30, 2020, an improvement from $4.7 million at the end of 2019 [87]. - Cash on hand increased to $2.9 million as of September 30, 2020, compared to $149,000 at December 31, 2019 [87]. - Net cash used in operating activities for the first nine months of 2020 was $1.996 million, compared to $1.436 million in the same period of 2019 [97]. - The company anticipates that cash on hand and the equity purchase agreement may not be sufficient to continue operations beyond December 31, 2020, without additional funding [90]. Strategic Developments - The company entered into a merger agreement to acquire Rainmaker Worldwide Inc., focusing on transforming into a Water-as-a-Service provider, with expected completion by December 31, 2020 [75]. - The company raised $3.0 million through the issuance of Series E Preferred Shares in a private placement transaction [77]. - A settlement agreement was reached with O'Melveny & Myers LLP, resulting in a secured promissory note of $1.1 million, maturing on December 30, 2020 [77]. - The company entered into a Securities Purchase Agreement on September 14, 2020, for proceeds of $3.0 million from the issuance of preferred shares [87]. - The company recorded a gain on forgiveness of liabilities amounting to $0.6 million, included in other income [77].