Sphere 3D(US:ANY)2024-11-14 21:13Financial Performance - Total revenues for the three months ended September 30, 2024, were $2,355,000, 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, an increase of 10.9% from $12,592,000 in the same period of 2023[9]. - The company reported a net income of $104,000 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, 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 $13,529,000 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 $2.2 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 $13,510,000 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 $45,663,000 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 $26,523,000 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 $24.166 million at December 31, 2023[54]. - Total other current assets decreased to $2.522 million as of September 30, 2024, from $11.938 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 $586,000 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 $0.6 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) 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 $8,335,000 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 $29,056,000 in the same period of 2023[9]. - General and administrative expenses decreased to $9.5 million in the first nine months of 2024 from $10.5 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 $0.9 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].