Sphere 3D Corp.
Annual Report 2018

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-Kx ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018 ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from___________________________to ___________________________Commission File Number: 001-36532__________________________________Sphere 3D Corp.(Exact name of Registrant as specified in its charter)__________________________________Ontario, Canada 98-1220792(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.) 895 Don Mills Road, Bldg. 2, Suite 900 Toronto, Ontario, Canada, M3C 1W3 (Address of principal executive offices) (408) 283-4754(Registrant’s Telephone Number, Including Area Code)Securities registered pursuant to Section 12(b) of the Act:Title of Each Class Name of Each Exchange on Which RegisteredCommon Shares NASDAQ Capital MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files). Yes x No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the bestof registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form10-K. ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, oremerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filer ¨ Accelerated filer ¨Non-accelerated filer ¨ Smaller reporting company x(Do not check if a smaller reporting company) Emerging growth company xIf an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. xIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2018 was approximately $5.0million. Shares of common stock held by each officer and director and by each person who is known to own 10% or more of the outstanding common stockhave been excluded in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusivedetermination for other purposes.As of March 20, 2019, there were 2,258,071 shares of the registrant’s common stock outstanding. TABLE OF CONTENTS PagePART IItem 1.Business1Item 1A.Risk Factors7Item 1B.Unresolved Staff Comments19Item 2.Properties19Item 3.Legal Proceedings19Item 4.Mine Safety Disclosures20PART IIItem 5.Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities21Item 6.Selected Financial Data21Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations22Item 7A.Quantitative and Qualitative Disclosures About Market Risk30Item 8.Financial Statements and Supplementary Data30Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure30Item 9A.Controls and Procedures30Item 9B.Other Information31PART IIIItem 10.Directors, Executive Officers and Corporate Governance32Item 11.Executive Compensation34Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters43Item 13.Certain Relationship and Related Transactions, and Director Independence45Item 14.Principal Accounting Fees and Services48PART IVItem 15.Exhibits, Financial Statement Schedules49Item 16.Form 10-K Summary53SIGNATURES54PART IFORWARD-LOOKING INFORMATIONThis Annual Report on Form 10-K contains forward-looking information that involves risks and uncertainties. This forward-looking informationincludes, but is not limited to, statements with respect to management’s expectations regarding the future growth, results of operations, performance andbusiness prospects of Sphere 3D. This forward-looking information relates to, among other things, the Company’s future business plans and businessplanning process, the Company’s uses of cash, and may also include other statements that are predictive in nature, or that depend upon or refer to futureevents or conditions.The words “could”, “expects”, “may”, “will”, “anticipates”, “assumes”, “intends”, “plans”, “believes”, “estimates”, “guidance”, and similarexpressions are intended to identify statements containing forward-looking information, although not all forward-looking statements include such words. Inaddition, any statements that refer to expectations, projections or other characterizations of future events or circumstances contain forward-lookinginformation. Statements containing forward-looking information are not historical facts but instead represent management’s expectations, estimates andprojections regarding future events.Although forward-looking statements in this Annual Report reflect the good faith judgment of our management, such statements can only be based onfacts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results andoutcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause orcontribute to such differences in results and outcomes include without limitation those discussed under the heading “Risk Factors” in Part I, Item 1A below,as well as those discussed elsewhere in this Annual Report. Readers are urged not to place undue reliance on these forward-looking statements, which speakonly as of the date of this Annual Report. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event orcircumstance that may arise after the date of this Annual Report. Readers are urged to carefully review and consider the various disclosures made in thisAnnual Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations andprospects.Any reference to the “Company”, “Sphere 3D”, “Sphere”, “we”, “our”, “us”, or similar terms refers to Sphere 3D Corp. and its subsidiaries. Unlessotherwise indicated, all dollar amounts are expressed in U.S. dollars and references to “$” are to the lawful currency of the United States (“U.S.”). Referencesto “Notes” are Notes included in our Notes to Consolidated Financial Statements.Item 1. BusinessSphere 3D provides solutions for standalone storage and technologies that converge the traditional silos of compute, storage and network into oneintegrated hyper-converged or converged solution. We provide enterprise storage management solutions, and the ability to connect to public cloud servicessuch as Microsoft Azure for additional delivery options and hybrid cloud capabilities. Our solutions are tightly integrated and include a patented portfoliofor operating systems for storage, proprietary virtual desktop orchestration software, and proprietary application container software. Our software, combinedwith commodity x86 servers, or purpose built appliances, deliver solutions designed to provide application mobility, security, data integrity and simplifiedmanagement. These solutions can be deployed through a public, private or hybrid cloud and are delivered through a global reseller network and professionalservices organization. We have a portfolio of brands including SnapServer®, HVE ConneXions and UCX ConneXions, dedicated to helping customersachieve their IT goals. In November 2018, we divested ourselves of Overland Storage, Inc. and its subsidiaries and affiliated product portfolio for both longterm archive as well as the RDX removable disk product portfolio. We undertook this divestiture in order to facilitate the elimination of secured debt and toallow us to focus greater resources to our converged and hyper-converged product portfolio.1Discontinued Operations On February 20, 2018, the Company, Overland Storage, Inc., a California corporation and a wholly owned subsidiary of the Company at such time(“Overland”), and Silicon Valley Technology Partners, Inc. (formerly Silicon Valley Technology Partners LLC) (“SVTP”), a Delaware corporation establishedby Eric Kelly, the Company’s former Chief Executive Officer and Chairman of the Board of Directors, entered into a share purchase agreement (as amendedby that certain First Amendment to Share Purchase Agreement dated August 21, 2018, and as further amended by that certain Second Amendment to SharePurchase Agreement dated November 1, 2018, the “Purchase Agreement”), pursuant to which the Company agreed to sell to SVTP all of the issued andoutstanding shares of capital stock of Overland.On November 13, 2018, pursuant the Purchase Agreement, the Company sold to SVTP all of the issued and outstanding shares of capital stock ofOverland in consideration for (i) the issuance to the Company of shares of Series A Preferred Stock of SVTP representing 19.9% of the outstanding shares ofcapital stock of SVTP as of the closing with a value of $2.1 million, (ii) the release of the Company from outstanding debt obligations totaling $41.7 millionassumed by SVTP, and (iii) $1.0 million in cash proceeds from SVTP.In connection with the closing of the Purchase Agreement, we filed an articles of amendment to our articles of amalgamation setting forth the rights,privileges, restrictions and conditions of a new series of non-voting preferred shares of the Company (the “Series A Preferred Shares”) and entered into aConversion Agreement, by and between the Company and FBC Holdings, pursuant to which $6.5 million of the Company’s outstanding secured debt wasconverted into 6,500,000 Series A redeemable Preferred Shares (the “Preferred Shares”).The full text of the Purchase Agreement is filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on February 21, 2018, the full textof the First Amendment to Share Purchase Agreement is filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on August 21, 2018, and thefull text of the Second Amendment to Share Purchase Agreement is filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on November 2,2018.Warrant Exchange AgreementOn March 16, 2018, the Company entered into warrant exchange agreements, in a privately negotiated exchange under Section 4(a)(2) of theSecurities Act of 1933, as amended, pursuant to which the Company issued 178,875 common shares in exchange for the surrender and cancellation of theCompany’s outstanding March 24, 2017 warrants (the “Exchange”). Immediately after the Exchange, the previously issued warrants became null and void.MF Ventures, LLC, a related party, participated in the Exchange by acquiring 37,500 common shares in exchange for a warrant to purchase 34,091 commonshares.Reverse Stock SplitOn October 24, 2018, the Board of Directors of the Company authorized a share consolidation (also known as a reverse stock split) of the Company’sissued and outstanding common shares at a ratio of 1-for-8, which became effective on November 5, 2018. All share and per share amounts in theaccompanying consolidated financial statements and the notes thereto have been restated for all periods to reflect the share consolidation.On July 5, 2017, the Board of Directors of the Company authorized a share consolidation (also known as a reverse stock split) of the Company’s issuedand outstanding common shares at a ratio of 1-for-25, which became effective on July 11, 2017. All share and per share amounts in the accompanyingconsolidated financial statements and the notes thereto have been restated for all periods to reflect the share consolidation.2UCX and HVE AcquisitionIn January 2017, we completed our acquisition of all of the outstanding equity interests of UCX and HVE (the “January 2017 acquisition”). UCX andHVE provide information technology consulting services and hardware solutions around cloud computing, data storage and server virtualization tocorporate, government, and educational institutions primarily in the southern central United States. By adding UCX’s products, technologies, professionalservices and engineering talent, and HVE’s engineering and virtualization expertise, we believe we can now focus our efforts on expanding our virtualizationofferings as well as enhance our ability to support the delivery of hybrid cloud solutions to customers.We have included UCX and HVE’s product revenue with our disk systems products. The business activities of UCX and HVE may result in individualtransactions that are more significant than those that normally result from our legacy business lines. Those significant transactions may involve multipleelements and may involve circumstances where, based on customer requests, equipment may be delivered either to the end customer location or to a third-party location specified by the customer.Products and ServiceDisk SystemsHVE Converged and Hyper-converged InfrastructureIn 2017, we acquired HVE, a technology provider of next generation converged and hyper-converged infrastructure dedicated to creating Manageable,Scalable, Reproducible, and Predictable (“MSRP”) solutions based on virtualization technologies running on high-performance, next generation platforms.HVE solutions are engineered, purpose-built converged and hyper-converged virtual workspace and server solutions that support a distributed architecture,scalable with predictable performances, and come bundled with continuous active monitoring. HVE product can include support for our Desktop CloudOrchestrator™ (“DCO”) based on customer requirements.•The HVE-STACK high density server provides the computer and storage appliance for the data center and is ideal for high performance computing(“HPC”), cloud computing and virtual desktop infrastructure (“VDI”). The modular design and swappable components include hard drives andpower supplies intended to improve the efficiency of data center deployment.•The HVE-VELOCITY High Availability Dual Enclosure storage area network (“SAN”) provides data reliability and integrity for optimal datastorage, protection and recovery. It also provides a unified network attached storage (“NAS”) and SAN solution with thin provisioning, compressionand deduplication. The HVE-VELOCITY platform is designed to eliminate single points of failure. The 12GSAS SSD design allows for faster accessto data. It is optimized for mission-critical, enterprise-level storage applications.•The HVE 3DGFX is a VDI solution that offers hardware and software technologies to provide an appliance that can handle from eight to up to 128high demand users in a single 2U appliance. The HVE 3DGFX was designed and engineered as a purpose-built solution based upon the MSRPengineering approach.G-Series Appliance and G-Series CloudThe G-Series appliance powered by Glassware containerization technology is designed to simplify Windows application migration and to enableaccess from any device including Macintosh, Windows, iOS, Chrome OS, and Android. The G-Series appliance is optimized for simplicity, flexibility andscalability. Through Glassware, a Microsoft Windows® based container technology, organizations looking to migrate applications to the cloud can quicklydeploy a solution for virtualizing 16-bit, 32-bit, or 64-bit applications with their native functionality intact. For the provisioning of a 16-bit application tothe G-Series appliance, users will often require advanced technical skills to set-up the application, or can contract professional services from the Company, orone of our certified system integrators. End users can access the containerized applications from cloud-connected devices (iOS, Android or Windows),through a lightweight downloadable app or simply from a browser. The G-Series appliance is designed to eliminate the complex tasks of designing,implementing, and maintaining application hosting environments and provides improved application session density and scale when compared to traditionalhypervisor-based virtualization solutions.3G-Series Cloud is an offering available through Microsoft Azure and was developed to provide a virtual appliance that can be deployed from the AzureMarketplace to eliminate the task of designing, implementing, and maintaining localized application-hosting environments and their related hardware. G-Series Cloud is pre-configured, can be deployed in minutes and provides for a billing model based on usage.Glassware Open Virtual Appliance and Open Virtual FormatOur most recent version of Glassware is compatible with the Open Virtual Appliance (“OVA”) and Open Virtual Format (“OVF”) open standards,supporting deployments of existing VMWare environments. Similar to the G-Series Cloud offering, OVA and OVF versions were developed to provide accessto a virtual appliance from within VMWare virtual machines. While Glassware is not open source software, OVA and OVF open standards are supported fordeployment. All Glassware products are delivered with a user interface allowing quick application deployments and integration with existing work flows andtechnologies.SnapServer® Network Attached Storage SolutionsOur SnapServer® solutions are a platform for primary or nearline storage, and deliver stability and integration with Windows®, UNIX/Linux, andMacintosh environments. For virtual servers and database applications, the SnapServer® family supports iSCSI block-level access with Microsoft VSS andVDS integration to simplify Windows management. For data protection, the SnapServer® family offers RAID protection, and snapshots for point-in-time datarecovery. The SnapServer XSR Series™ products support DynamicRAID® and traditional RAID levels 0, 1, 5, 6, and 10. The Snap family of products,SnapCLOUD®, and SnapServer®, have integrated data mobility tools to enable customers to build private clouds for sharing and synchronizing data foranytime, anywhere access.•The SnapServer® XSR40 is a 1U server that can be configured with up to four SATA III and SSD drives, and can scale to 400 TB of storagecapacity by adding up to three SnapExpansion XSR™ enclosures.•The SnapServer® XSR120 is a 2U server that can be configured with up to 12 SATA III, SAS and SSD drives, and can scale to 960 TB of storagecapacity by adding up to seven SnapExpansion XSR™ enclosures.Our GuardianOS® storage software is designed for the SnapServer® family of enterprise-grade NAS systems and delivers simplified data managementand consolidation throughout distributed information technology environments by combining cross-platform file sharing with block-level data access on asingle system. The flexibility and scalability of GuardianOS® reduces the total cost of ownership of storage infrastructures for small and medium businessesto large Fortune 500 enterprises. In addition to a unified storage architecture, GuardianOS® offers highly differentiated data integrity and storage scalabilitythrough features such as DynamicRAID®, centralized storage management, and a comprehensive suite of data protection tools.Our Snap Enterprise Data Replicator (“Snap EDR”) provides multi-directional WAN-optimized replication. Administrators can automatically replicatedata between SnapServer®, Windows, and Linux systems for data distribution, data consolidation, and disaster recovery.During 2017, we announced the availability of our SnapServer® Hybrid and All Flash Array solutions, which is designed to allow informationtechnology departments to modernize their data center, as well as provide the small and medium businesses (“SMBs”) access to the reliability, security, andperformance of flash. In addition, we launched our SnapServer® solutions pre-configured and optimized to work with IP video surveillance cameras andcreate a new standard for simplicity and integration between IP networked video surveillance systems and data storage.ServiceCustomer service and support are key elements of our strategy and critical components of our commitment in making enterprise-class support andservices available to companies of all sizes. Our technical support staff is trained to assist our customers with deployment and compatibility for anycombination of virtual desktop infrastructures, hardware platforms, operating systems and backup, data interchange and storage management software. Ourapplication engineers are trained to assist with more complex customer issues. We maintain global toll-free service and support phone lines. Additionally, wealso provide self-service and support through our website support portal and email.4Our service offerings provide for on-site service and installation options, round-the-clock phone access to solution experts, and proof of concept andarchitectural design offerings. We are able to provide comprehensive technical assistance on a global scale.Discontinued OperationsThe following product lines were part of the Overland divestiture completed in November 2018 and are not included in the above Product and Servicedisclosures.•Disk Systems - RDX® Removable Disk Solutions•Tape Automation Systems - NEO® Tape-Based Backup and Long-Term Archive Solutions•Tape Drives and MediaProductionA significant number of our components and finished products are manufactured or assembled, in whole or in part, by a limited number of third parties.For certain products, we control the design process internally and then outsource the manufacturing and assembly in order to achieve lower production costs.We purchase disk drives and chassis from outside suppliers. We carefully select suppliers based on their ability to provide quality parts andcomponents which meet technical specifications and volume requirements. We actively monitor these suppliers but we are subject to substantial risksassociated with the performance of our suppliers. For certain components, we qualify only a single source, which magnifies the risk of shortages and maydecrease our ability to negotiate with that supplier. For a more detailed description of risks related to suppliers, see Item 1A. Risk Factors.Sales and Distribution•Distribution channel - We have distribution partners in North America. We sell through a two-tier distribution model where distributors sell ourproducts to system integrators, VARs or DMRs, who in turn sell to end users. We support these distribution partners through our dedicated salesforce and engineers. In 2018, two distribution partners accounted for, in the aggregate, 25.4% of net revenue.•Reseller channel - Our worldwide reseller channel includes systems integrators, VARs and DMRs. Our resellers may package our products as partof complete application and desktop virtualization solutions data processing systems or with other storage devices to deliver complete enterpriseinformation technology infrastructure solutions. Our resellers also recommend our products as replacement solutions when systems are upgraded,or bundle our products with storage management software specific to the end user’s system. We support the reseller channel through ourdedicated sales representatives, engineers and technical support organizations.•Cloud Marketplace - Since 2015, we have utilized the Microsoft Azure Cloud Marketplace as an additional channel for our cloud solutions tosell to end-users directly with the pay-per-use model, supported through the Microsoft Azure Cloud.Patents and Proprietary RightsWe rely on a combination of patents, trademarks, trade secret and copyright laws, as well as contractual restrictions, to protect the proprietary aspectsof our products and services. Although every effort is made to protect Sphere 3D’s intellectual property, these legal protections may only afford limitedprotection.5We may continue to file for patents regarding various aspects of our products, services and delivery method at a later date depending on the costs andtiming associated with such filings. We may make investments to further strengthen our copyright protection going forward, although no assurances can begiven that it will be successful in such patent and trademark protection endeavors. We seek to limit disclosure of our intellectual property by requiringemployees, consultants, and partners with access to our proprietary information to execute confidentiality agreements and non-competition agreements(when applicable) and by restricting access to our proprietary information. Due to rapid technological change, we believe that establishing and maintainingan industry and technology advantage in factors such as the expertise and technological and creative skills of our personnel, as well as new services andenhancements to our existing services, are more important to our company’s business and profitability than other available legal protections.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our services or to obtain and use informationthat we regard as proprietary. The laws of many countries do not protect proprietary rights to the same extent as the laws of the U.S. or Canada. Litigation maybe necessary in the future to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rightsof others or to defend against claims of infringement. Any such litigation could result in substantial costs and diversion of resources and could have amaterial adverse effect on our business, operating results and financial condition. There can be no assurance that our means of protecting our proprietaryrights will be adequate or that our competitors will not independently develop similar services or products. Any failure by us to adequately protect ourintellectual property could have a material adverse effect on our business, operating results and financial condition. See Item 1A. Risk Factors under thesection Risks Related to Intellectual Property.Competitive ConditionsWe believe that our products are unique and innovative and afford us various advantages in the market place; however, the market for informationtechnology is highly competitive. Competitors vary in size from small start-ups to large multi-national corporations which may have substantially greaterfinancial, research and development, and marketing resources. Competitive factors in these markets include performance, functionality, scalability,availability, interoperability, connectivity, time to market enhancements, and total cost of ownership. Barriers to entry vary from low, such as those intraditional disk-based backup products, to high, in virtualization software. The markets for all of our products are characterized by price competition and assuch we may face price pressure for our products. For a more detailed description of competitive and other risks related to our business, see Item 1A. RiskFactors.EmployeesThe Company had 41 employees at December 31, 2018.61A. Risk FactorsAn investment in our Company involves a high degree of risk. Each of the following risk factors in evaluating our business and prospects as well as aninvestment in our Company should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks anduncertainties not presently known to us or that we currently consider immaterial may also impair our business operations. If any of the following risks occur,our business and financial results could be harmed and the trading price of our common shares could decline.Risks Related to our BusinessOur cash and other sources of liquidity will not be sufficient to fund our operations beyond May 31, 2019. We may not be successful in raisingadditional capital necessary to meet expected increases in working capital needs. If we raise additional funding through sales of equity or equity-basedsecurities, your shares will be diluted. If we need additional funding for operations and we are unable to raise it, we may be forced to liquidate assetsand/or curtail or cease operations or seek bankruptcy protection or be subject to an involuntary bankruptcy petition.Management has projected that cash on hand will not be sufficient to allow the Company to continue operations beyond May 31, 2019 if we areunable to raise additional funding for operations. We expect our working capital needs to increase in the future as we continue to expand and enhance ouroperations. Our ability to raise additional funds through equity or debt financings or other sources may depend on the financial success of our currentbusiness and successful implementation of our key strategic initiatives, financial, economic and market conditions and other factors, some of which arebeyond our control. No assurance can be given that we will be successful in raising the required capital at reasonable cost and at the required times, or at all.Further equity financings may have a dilutive effect on shareholders and any debt financing, if available, may require restrictions to be placed on our futurefinancing and operating activities. If we require additional capital and are unsuccessful in raising that capital, we may not be able to continue our businessoperations and advance our growth initiatives, which could adversely impact our business, financial condition and results of operations.Significant changes from the Company’s current forecasts, including but not limited to: (i) failure to comply with the financial covenants in its debtfacilities; (ii) shortfalls from projected sales levels; (iii) unexpected increases in product costs; (iv) increases in operating costs; (v) changes in the historicaltiming of collecting accounts receivable; and (vi) inability to maintain compliance with the requirements of the NASDAQ Capital Market and/or inability tomaintain listing with the NASDAQ Capital Market could have a material adverse impact on the Company’s ability to access the level of funding necessary tocontinue its operations at current levels. If any of these events occurs or the Company is unable to generate sufficient cash from operations or financingsources, the Company may be forced to liquidate assets where possible and/or curtail, suspend or cease planned programs or operations generally or seekbankruptcy protection or be subject to an involuntary bankruptcy petition, any of, which would have a material adverse effect on the Company’s business,results of operations, financial position and liquidity.If we raise additional funds by selling additional shares of our capital stock, or securities convertible into shares of our capital stock, the ownershipinterest of our existing shareholders will be diluted. The amount of dilution could be increased by the issuance of warrants or securities with other dilutivecharacteristics, such as anti-dilution clauses or price resets.We urge you to review the additional information about our liquidity and capital resources in the “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” section of this report. If our business ceases to continue as a going concern due to lack of available capital orotherwise, it could have a material adverse effect on our business, results of operations, financial position, and liquidity.7We have granted security interests over certain of our assets in connection with various debt arrangements.We have granted security interests over certain of our assets in connection with our related party note payable and line of credit, and we may grantadditional security interests to secure future borrowings. If we are unable to satisfy our obligations under these arrangements, we could be forced to sellcertain assets that secure these loans, which could have a material adverse effect on our ability to operate our business. In the event we are unable to maintaincompliance with covenants set forth in these arrangements or if these arrangements are otherwise terminated for any reason, it could have a material adverseeffect on our ability to access the level of funding necessary to continue operations at current levels. If any of these events occur, management may be forcedto make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. Any ofthese actions could materially harm our business, results of operations and future prospects.We face a selling cycle of variable length to secure new purchase agreements for our products and services, and design wins may not result in purchaseorders or new customer relationships.We face a selling cycle of variable lengths to secure new purchase agreements. Even if we succeed in developing a relationship with a potential newcustomer and/or obtaining design wins, we may not be successful in securing new sales for our products or services, or new customers. In addition, we cannotaccurately predict the timing of entering into purchase agreements with new customers due to the complex purchase decision processes of some largeinstitutional customers, such as healthcare providers or school districts, which often involve high-level management or board approvals. Consequently, wehave only a limited ability to predict the timing of specific new customer relationships.We have a history of net losses. We may not achieve or maintain profitability.We have limited non-recurring revenues derived from operations. Sphere 3D’s near-term focus has been in actively developing reference accounts andbuilding sales, marketing and support capabilities. UCX and HVE, which we acquired in January 2017, also has a history of net losses. We expect to continueto incur net losses and we may not achieve or maintain profitability. We may see continued losses during 2019 and as a result of these and other factors, wemay not be able to achieve, sustain or increase profitability in the near future.Sphere 3D is subject to many risks common to early-stage enterprises, including under-capitalization, cash shortages, limitations with respect topersonnel, financial, and other resources, technology, and market acceptance issues. There is no assurance that we will be successful in achieving a return onshareholders’ investment and the likelihood of success must be considered considering our stage of operations.Our plans for growth will place significant demands upon our resources. If we are unsuccessful in achieving our plan for growth, our business could beharmed.We are actively pursuing a plan to market our products domestically and internationally. The plan will place significant demands upon managerial,financial, and human resources. Our ability to manage future growth will depend in large part upon several factors, including our ability to rapidly:•build or leverage, as applicable, a network of channel partners to create an expanding presence in the evolving marketplace for our products andservices;•build or leverage, as applicable, a sales team to keep end-users and channel partners informed regarding the technical features, issues and key sellingpoints of our products and services;•attract and retain qualified technical personnel in order to continue to develop reliable and flexible products and provide services that respond toevolving customer needs;•develop support capacity for end-users as sales increase, so that we can provide post-sales support without diverting resources from productdevelopment efforts; and•expand our internal management and financial controls significantly, so that we can maintain control over our operations and provide support toother functional areas as the number of personnel and size increases.8Our inability to achieve any of these objectives could harm our business, financial condition and results of operations.Our market is competitive and dynamic. New competing products and services could be introduced at any time that could result in reduced profitmargins and loss of market share.The technology industry is very dynamic, with new technology and services being introduced by a range of players, from larger established companiesto start-ups, on a frequent basis. Our competitors may announce new products, services, or enhancements that better meet the needs of end-users or changingindustry standards. Further, new competitors or alliances among competitors could emerge. Increased competition may cause price reductions, reduced grossmargins and loss of market share, any of which could have a material adverse effect on our business, financial condition and results of operations.Furthermore, the worldwide storage market is intensely competitive. A number of manufacturers of disk-based storage solutions compete for a limitednumber of customers. Barriers to entry are relatively low in these markets, and some of our competitors in this market have substantially greater financial andother resources, larger research and development staffs, and more experience and capabilities in manufacturing, marketing and distributing products.Ongoing pricing pressure could result in significant price erosion, reduced profit margins and loss of market share, any of which could have a materialadverse effect on our business, results of operations, financial position and liquidity.Our success depends on our ability to anticipate technological changes and develop new and enhanced products.The markets for our products are characterized by rapidly changing technology, evolving industry standards and increasingly sophisticated customerrequirements. The introduction of products embodying new technology and the emergence of new industry standards can negatively impact themarketability of our existing products and can exert price pressures on existing products. It is critical to our success that we are able to anticipate and reactquickly to changes in technology or in industry standards and to successfully develop, introduce, manufacture and achieve market acceptance of new,enhanced and competitive products on a timely basis and cost-effective basis. We invest substantial resources towards continued innovation; however, therecan be no assurance that we will successfully develop new products or enhance and improve our existing products, that new products and enhanced andimproved existing products will achieve market acceptance or that the introduction of new products or enhanced existing products by others will notnegatively impact us. Our inability to develop products that are competitive in technology and price and that meet end-user needs could have a materialadverse effect on our business, financial condition or results of operations.Development schedules for technology products are inherently uncertain. We may not meet our product development schedules, and developmentcosts could exceed budgeted amounts. Our business, results of operations, financial position and liquidity may be materially and adversely affected if theproducts or product enhancements that we develop are delayed or not delivered due to developmental problems, quality issues or component shortageproblems, or if our products or product enhancements do not achieve market acceptance or are unreliable. We or our competitors will continue to introduceproducts embodying new technologies, such as new sequential or random access mass storage devices. In addition, new industry standards may emerge. Suchevents could render our existing products obsolete or not marketable, which would have a material adverse effect on our business, results of operations,financial position and liquidity.Our business is dependent on the continued market acceptance and usage of disk-based solutions. The impact of recent storage technology trends on ourbusiness is uncertain.The industry in which we operate has experienced significant historical growth due to the continuing increase in the demand for storage by consumers,enterprises and government bodies around the world. While information technology spending has fluctuated periodically due to technology transitions andchanging economic and business environments, overall growth in demand for storage has continued. Recent technology trends, such as the emergence ofhosted storage, software as a service and mobile data access are driving significant changes in storage architectures and solution requirements. The impact ofthese trends on overall long-term growth patterns is uncertain. Nevertheless, if the general level of historic industry growth, or if the growth of the specificmarkets in which we compete, were to decline, our business and results of operations could suffer.9Our management team continually reviews and evaluates our product portfolio, operating structure, and markets to assess the future viability of ourexisting products and market positions. We may determine that the infrastructure and expenses necessary to sustain an existing product offering are greaterthan the potential contribution margin that we would realize. As a result, we may determine that it is in our best interest to exit or divest one or more existingproduct offerings, which could result in costs incurred for exit or disposal activities and/or impairments of long-lived assets. Moreover, if we do not identifyother opportunities to replace discontinued products or operations, our revenues would decline, which could lead to further net losses and adversely impactthe market price of our common shares.In addition, we could incur charges for excess and obsolete inventory. The value of our inventory may be adversely affected by factors that affect ourability to sell the products in our inventory. Such factors include changes in technology, introductions of new products by us or our competitors, the currentor future economic downturns, or other actions by our competitors. If we do not effectively forecast and manage our inventory, we may need to write offinventory as excess or obsolete, which adversely affects cost of sales and gross profit. Our business has previously experienced, and we may in the futureexperience, reductions in sales of older generation products as customers delay or defer purchases in anticipation of new products that we or our competitorsmay introduce. We have established reserves for slow moving or obsolete inventory. These reserves, however, may prove to be inadequate, which wouldresult in additional charges for excess or obsolete inventory.Our products may contain defects in components or design, and our warranty reserves may not adequately cover our warranty obligations for theseproducts.Although we employ a vigorous testing and quality assurance program, our products may contain defects or errors, particularly when first introducedor as new versions are released. We may not discover such defects or errors until after a solution has been released to a customer and used by the customer andend-users. Defects and errors in our products could materially and adversely affect our reputation, result in significant costs, delay planned release dates andimpair our ability to sell our products in the future. The costs incurred in correcting any solution defects or errors may be substantial and could adverselyaffect our operating margins. While we plan to continually test our products for defects and errors and work with end-users through our post-sales supportservices to identify and correct defects and errors, defects or errors in our products may be found in the future.We have also established reserves for the estimated liability associated with product warranties. However, we could experience unforeseencircumstances where these or future reserves may not adequately cover our warranty obligations. For example, the failure or inadequate performance ofproduct components that we purchase could increase our warranty obligations beyond these reserves.The failure to attract, hire, retain and motivate key personnel could have a significant adverse impact on our operations.Our success depends on the retention and maintenance of key personnel, including members of senior management and our technical, sales andmarketing teams. Achieving this objective may be difficult due to many factors, including competition for such highly skilled personnel; fluctuations inglobal economic and industry conditions; changes in our management or leadership; competitors’ hiring practices; and the effectiveness of our compensationprograms. The loss of any of these key persons could have a material adverse effect on our business, financial condition or results of operations. As anexample, in the first quarter of 2019, our financial controller, and certain other members of our finance team, resigned from employment to seek otheropportunities, which has required us to retain finance consultants while we search for full-time replacements, and we cannot guaranty that we will be able toretain such consultants or find adequate replacements.Our success is also dependent on our continuing ability to identify, hire, train, motivate and retain highly qualified management, technical, sales,marketing and finance personnel. Any such new hire may require a significant transition period prior to making a meaningful contribution. Competition forqualified employees is particularly intense in the technology industry, and we have in the past experienced difficulty recruiting qualified employees. Ourfailure to attract and to retain the necessary qualified personnel could seriously harm our operating results and financial condition. Competition for suchpersonnel can be intense, and no assurance can be provided that we will be able to attract or retain highly qualified technical and managerial personnel in thefuture, which may have a material adverse effect on our future growth and profitability. We do not have key person insurance.10Our financial results may fluctuate substantially for many reasons, and past results should not be relied on as indications of future performance.Our revenues and operating results may fluctuate from quarter to quarter and from year to year due to a combination of factors, including, but notlimited to:•varying size, timing and contractual terms of orders for our products, which may delay the recognition of revenue;•competitive conditions in the industry, including strategic initiatives by us or our competitors, new products or services, product or serviceannouncements and changes in pricing policy by us or our competitors;•market acceptance of our products and services;•our ability to maintain existing relationships and to create new relationships with channel partners;•the discretionary nature of purchase and budget cycles of our customers and end-users;•the length and variability of the sales cycles for our products;•general weakening of the economy resulting in a decrease in the overall demand for our products and services or otherwise affecting the capitalinvestment levels of businesses with respect to our products or services;•timing of product development and new product initiatives;•changes in customer mix;•increases in the cost of, or limitations on, the availability of materials;•fluctuations in average selling prices;•changes in product mix; and•increases in costs and expenses associated with the introduction of new products.Further, the markets that we serve are volatile and subject to market shifts that we may be unable to anticipate. A slowdown in the demand forworkstations, mid-range computer systems, networks and servers could have a significant adverse effect on the demand for our products in any given period.In the past, we have experienced delays in the receipt of purchase orders and, on occasion, anticipated purchase orders have been rescheduled or have notmaterialized due to changes in customer requirements. Our customers may cancel or delay purchase orders for a variety of reasons, including, but not limitedto, the rescheduling of new product introductions, changes in our customers’ inventory practices or forecasted demand, general economic conditionsaffecting our customers’ markets, changes in our pricing or the pricing of our competitors, new product announcements by us or others, quality or reliabilityproblems related to our products, or selection of competitive products as alternate sources of supply.Thus, there can be no assurance that we will be able to reach profitability on a quarterly or annual basis. We believe that our revenue and operatingresults will continue to fluctuate, and that period-to-period comparisons are not necessarily indications of future performance. Our revenue and operatingresults may fail to meet the expectations of public market analysts or investors, which could have a material adverse effect on the price of our common shares.In addition, portions of our expenses are fixed and difficult to reduce if our revenues do not meet our expectations. These fixed expenses magnify the adverseeffect of any revenue shortfall.Our plans for implementing our business strategy and achieving profitability are based upon the experience, judgment and assumptions of our keymanagement personnel, and available information concerning the communications and technology industries. If management’s assumptions prove to beincorrect, it could have a material adverse effect on our business, financial condition or results of operations.11We rely on indirect sales channels to market and sell our branded products. Therefore, the loss of, or deterioration in, our relationship with one ormore of our distributors or resellers could negatively affect our operating results.We have relationships with third party resellers, OEMs, system integrators and enterprise application providers that facilitate our ability to sell andimplement our products. These business relationships are important to extend the geographic reach and customer penetration of our sales force and ensurethat our products are compatible with customer network infrastructures and with third party products.We believe that our success depends, in part, on our ability to develop and maintain strategic relationships with resellers, independent softwarevendors, OEMs, system integrators, and enterprise application providers. Should any of these third parties go out of business, or choose not to work with us,we may be forced to increase the development of those capabilities internally, incurring significant expense and adversely affecting operating margins. Anyof these third parties may develop relationships with other companies, including those that develop and sell products that compete with ours. We could losesales opportunities if we fail to work effectively with these parties or they choose not to work with us. Most of our distributors and resellers also carrycompeting product lines that they may promote over our products. A distributor or reseller might not continue to purchase our products or market themeffectively, and each determines the type and amount of our products that it will purchase from us and the pricing of the products that it sells to end usercustomers. Further, the long-term success of any of our distributors or resellers is difficult to predict, and we have no purchase commitments or long-termorders from any of them to assure us of any baseline sales through these channels.Therefore, the loss of, or deterioration in, our relationship with one or more of our distributors or resellers could negatively affect our operating results.Our operating results could also be adversely affected by a number of factors, including, but not limited to:•a change in competitive strategy that adversely affects a distributor’s or reseller’s willingness or ability to stock and distribute our products;•the reduction, delay or cancellation of orders or the return of a significant amount of our products;•the loss of one or more of our distributors or resellers; and•any financial difficulties of our distributors or resellers that result in their inability to pay amounts owed to us.If our suppliers fail to meet our manufacturing needs, it would delay our production and our product shipments to customers and this could negativelyaffect our operations.Some of our products have a large number of components and subassemblies produced by outside suppliers. We depend greatly on these suppliers foritems that are essential to the manufacture of our products, including disk drives and chassis. We work closely with our regional, national and internationalsuppliers, which are carefully selected based on their ability to provide quality parts and components that meet both our technical specifications and volumerequirements. For certain items, we qualify only a single source, which magnifies the risk of shortages and decreases our ability to negotiate with that supplieron the basis of price. From time to time, we have in the past been unable to obtain as many drives as have needed due to drive shortages or quality issues fromcertain of our suppliers. If these suppliers fail to meet our manufacturing needs, it would delay our production and our product shipments to customers andnegatively affect our operations.We are subject to laws, regulations and similar requirements, changes to which may adversely affect our business and operations.We are subject to laws, regulations and similar requirements that affect our business and operations, including, but not limited to, the areas ofcommerce, intellectual property, income and other taxes, labor, environmental, health and safety, and our compliance in these areas may be costly. While wehave implemented policies and procedures to comply with laws and regulations, there can be no assurance that our employees, contractors, suppliers oragents will not violate such laws and regulations or our policies. Any such violation or alleged violation could materially and adversely affect our business.Any changes or potential changes to laws, regulations or similar requirements, or our ability to respond to these changes, may significantly increase our12costs to maintain compliance or result in our decision to limit our business or products, which could materially harm our business, results of operations andfuture prospects.The Dodd-Frank Wall Street Reform and Consumer Protection Act includes provisions regarding certain minerals and metals, known as conflictminerals, mined from the Democratic Republic of Congo and adjoining countries. These provisions require companies to undertake due diligence proceduresand report on the use of conflict minerals in its products, including products manufactured by third parties. Compliance with these provisions will cause us toincur costs to certify that our supply chain is conflict free and we may face difficulties if our suppliers are unwilling or unable to verify the source of theirmaterials. Our ability to source these minerals and metals may also be adversely impacted. In addition, our customers may require that we provide them with acertification and our inability to do so may disqualify us as a supplier.We have made a number of acquisitions in the past and we may make acquisitions in the future. Our ability to identify complementary assets, productsor businesses for acquisition and successfully integrate them could affect our business, financial condition and operating results.In the future, we may continue to pursue acquisitions of assets, products or businesses that we believe are complementary to our existing businessand/or to enhance our market position or expand our product portfolio. There is a risk that we will not be able to identify suitable acquisition candidatesavailable for sale at reasonable prices, complete any acquisition, or successfully integrate any acquired product or business into our operations. We are likelyto face competition for acquisition candidates from other parties including those that have substantially greater available resources. Acquisitions mayinvolve a number of other risks, including:•diversion of management’s attention;•disruption to our ongoing business;•failure to retain key acquired personnel;•difficulties in integrating acquired operations, technologies, products or personnel;•unanticipated expenses, events or circumstances;•assumption of disclosed and undisclosed liabilities; and•inappropriate valuation of the acquired in-process research and development, or the entire acquired business.If we do not successfully address these risks or any other problems encountered in connection with an acquisition, the acquisition could have amaterial adverse effect on our business, results of operations and financial condition. Problems with an acquired business could have a material adverse effecton our performance or our business as a whole. In addition, if we proceed with an acquisition, our available cash may be used to complete the transaction,diminishing our liquidity and capital resources, or shares may be issued which could cause significant dilution to existing shareholders.We have implemented cost reduction efforts. We may need to implement additional cost reduction efforts, which could materially harm our business.We have implemented certain cost reduction efforts. There can be no assurance that these cost reduction efforts will be successful. As a result, we mayneed to implement further cost reduction efforts across our operations, such as further reductions in the cost of our workforce and/or suspending or curtailingplanned programs, either of which could materially harm our business, results of operations and future prospects.13Risks Related to Intellectual PropertyOur ability to compete depends in part on our ability to protect our intellectual property rights.Our success depends in part on our ability to protect our rights in our intellectual property. We rely on various intellectual property protections,including copyright, trade-mark and trade secret laws and contractual provisions, to preserve our intellectual property rights. We have filed a number ofpatent applications and have historically protected our intellectual property through trade secrets and copyrights. As our technology is evolving and rapidlychanging, current intellectual property rights may not adequately protect us.Intellectual property rights may not prevent competitors from developing products that are substantially equivalent or superior to our products.Competitors may independently develop similar products, duplicate our products or, if patents are issued to us, design around these patents. To the extentthat we have or obtain patents, such patents may not afford meaningful protection for our technology and products. Others may challenge our patents and, asa result, our patents could be narrowed, invalidated or declared unenforceable. The patents that are material to our business began expiring in November2015. In addition, our current or future patent applications may not result in the issuance of patents in the U.S. or foreign countries.Although we believe we have a proprietary platform for our technologies and products, we may in the future become subject to claims for infringementof intellectual property rights owned by others. Further, to protect our own intellectual property rights, we may in the future bring claims forinfringement against others.Our commercial success depends, in part, upon not infringing intellectual property rights owned by others. Although we believe that we have aproprietary platform for our technologies and products, we cannot determine with certainty whether any existing third party patents or the issuance of anythird party patents would require us to alter our technology, obtain licenses or cease certain activities. We may become subject to claims by third parties thatour technology infringes their intellectual property rights. While we provide our customers with a qualified indemnity against the infringement of third partyintellectual property rights, we may become subject to these claims either directly or through indemnities against these claims that we routinely provide toour end-users and channel partners.Further, our customers may use our products in ways that may infringe the intellectual property rights or third parties and/or require a license from thirdparties. Although our customers are contractually obligated to use our products only in a manner that does not infringe third party intellectual propertyrights, we cannot guarantee that such third parties will not seek remedies against us for providing products that may enable our customers to infringe theintellectual property rights of others.In addition, we may receive in the future, claims from third parties asserting infringement, claims based on indemnities provided by us, and otherrelated claims. Litigation may be necessary to determine the scope, enforceability and validity of third party proprietary or other rights, or to establish ourproprietary or other rights. Furthermore, despite precautions, it may be possible for third parties to obtain and use our intellectual property without ourauthorization. Policing unauthorized use of intellectual property is difficult, and some foreign laws do not protect proprietary rights to the same extent as thelaws of Canada or the U.S. To protect our intellectual property, we may become involved in litigation. In addition, other companies may initiate similarproceedings against us. The patent position of information technology firms is highly uncertain, involves complex legal and factual questions, and continuesto be the subject of much litigation. No consistent policy has emerged from the U.S. Patent and Trademark Office or the courts regarding the breadth of claimsallowed or the degree of protection afforded under information technology patents.Some of our competitors have, or are affiliated with companies having, substantially greater resources than us and these competitors may be able tosustain the costs of complex intellectual property litigation to a greater degree and for a longer period of time than us. Regardless of their merit, any suchclaims could:•divert the attention of our management, cause significant delays, materially disrupt the conduct of our business or materially adversely affect ourrevenue, financial condition and results of operations;•be time consuming to evaluate and defend;14•result in costly litigation and substantial expenses;•cause product shipment delays or stoppages;•subject us to significant liabilities;•require us to enter into costly royalty or licensing agreements;•require us to modify or stop using the infringing technology; or•result in costs or other consequences that have a material adverse effect on our business, results of operations and financial condition.Risks Related to Our Public Company Status and Our Common SharesIf our common shares are delisted from the NASDAQ Capital Market, our business, financial condition, results of operations and share price could beadversely affected, and the liquidity of our common shares and our ability to obtain financing could be impaired.On November 12, 2018, we received a letter from the Nasdaq Listing Qualifications department of The Nasdaq Stock Market LLC notifying us that wewere not in compliance with the requirement of Nasdaq Marketplace Rule 5550(b)(1) for continued inclusion on the NASDAQ Capital Market because theCompany’s stockholders’ equity of $707,000 reported in the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2018, is belowthe required minimum of $2.5 million. This notification has no effect on the listing of the Company’s common shares at this time. In accordance with Nasdaqlisting rules, the Company had 45 calendar days, or until December 27, 2018, to submit a plan to regain compliance, which plan was timely submitted by theCompany and was accepted by Nasdaq on January 11, 2019. If the Company does not regain compliance by May 13, 2019, or if the Company fails to satisfyanother Nasdaq requirement for continued listing, Nasdaq staff could provide notice that the Company’s common shares will become subject to delisting. Insuch event, Nasdaq rules permit the Company to appeal any delisting determination to a Nasdaq Hearings Panel. Accordingly, there can be no guarantee thatthe Company will be able to maintain its Nasdaq listing. Such notice, or the actual delisting of our shares, could materially and adversely affect our businessby, among other things, making it more difficult to access additional capital from investors who prefer to purchase shares listed on an actively traded market,and may cause investors to find our common shares less attractive, either of which could result in a less active trading market for our common shares andmake our share price more volatile.We have in the past failed to comply with the minimum $1.00 per share closing bid price requirement for continued listing on the NASDAQ CapitalMarket. Maintaining the listing of our common shares on the NASDAQ Capital Market requires that we comply with the closing bid price requirement,amongst other certain listing requirements. If our common shares cease to be listed for trading on NASDAQ for any reason, it may harm our share price,increase the volatility of our share price, decrease the level of trading activity and make it more difficult for investors to buy or sell shares of our commonshares. Our failure to maintain a listing on NASDAQ may constitute an event of default under our outstanding indebtedness as well as any futureindebtedness, which would accelerate the maturity date of such debt or trigger other obligations. In addition, certain institutional investors that are notpermitted to own securities of non-listed companies may be required to sell their shares, which would adversely affect the trading price of our common shares.If we are not listed on NASDAQ, we will be limited in our ability to raise additional capital we may need.On May 29, 2018, we received a letter from the Nasdaq Listing Qualifications department of The Nasdaq Stock Market LLC notifying us that we werenot in compliance with the requirement of Nasdaq Marketplace Rule 5550(a)(2) for continued inclusion on the NASDAQ Capital Market as a result of theclosing bid price for the Company’s common stock being below $1.00 for 30 consecutive business days. On October 31, 2018, the Company held a specialmeeting and passed a special resolution authorizing the filing of an amendment to the Company's articles to effect a share consolidation (also known as areverse stock split). On October 24, 2018, the Board of Directors authorized a share consolidation (also known as a reverse stock split) of the Company’sissued and outstanding common shares at a ratio of one-for-eight, which became effective on November 5, 2018. On November 20, 2018, we received a letterfrom the Nasdaq Listing Qualifications department of Nasdaq noting that the Company had regained compliance with the requirement of NasdaqMarketplace Rule 5550(a)(2).15Sales of common shares issuable upon exercise of outstanding warrants, the conversion of outstanding preferred shares, or the effectiveness of ourregistration statement may cause the market price of our common shares to decline. Currently outstanding preferred shares could adversely affect therights of the holders of common shares.As of December 31, 2018, we have 6,500,000 Preferred Shares outstanding. The conversion of these outstanding Preferred Shares will result insubstantial dilution to our common shareholders. Pursuant to our articles of amalgamation, the Board has the authority to fix and determine the voting rights,rights of redemption and other rights and preferences of preferred stock. Pursuant to the articles of amendment governing the rights and preferences ofoutstanding shares of Preferred Shares, each preferred share (i) subject to prior shareholder approval, are convertible into our common shares, at a conversionrate equal to $1.00 per share, plus accrued and unpaid dividends, divided by an amount equal to 0.85 multiplied by a 15-day volume weighted average priceper Common Share prior to the date the conversion notice is provided, subject to a conversion price floor of $0.80, (ii) carry a cumulative preferred dividendat a rate of 8.0% of the subscription price per Series A Preferred Share, (iii) are subject to mandatory redemption for cash at the option of the holders thereofafter a two-year period, and (iv) carry a liquidation preference equal to the subscription price per Series A Preferred Share plus any accrued and unpaiddividends. Additionally, as of December 31, 2018 we have warrants outstanding for the purchase of up to 208,187 common shares having a weighted-averageexercise price of $41.15 per share. The sale of our common shares upon exercise of our outstanding warrants, the conversion of the Preferred Shares intocommon shares, or the sale of a significant amount of the common shares issued or issuable upon exercise of the warrants in the open market, or theperception that these sales may occur, could cause the market price of our common shares to decline or become highly volatile.Future sales of our securities under certain circumstances may trigger price-protection provisions in outstanding warrants, which would dilute yourinvestment and could result in a decline in the trading price of our common shares.In connection with our registered direct offering in December 2015, we issued a warrant exercisable to purchase up to 7,500 common shares thatcontains certain price protection provisions. If we, at any time while these warrants are outstanding, effect certain variable rate transactions and the issueprice, conversion price or exercise price per share applicable thereto is less than the exercise price then in effect for the warrants, then the exercise price of thewarrants will be reduced to equal such price. The triggering of these price protection provisions, together with the exercise of these warrants, could causeadditional dilution to our shareholders.The market price of our common shares is volatile.The market price for common shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond ourcontrol, including the following:•price and volume fluctuations in the overall stock market from time to time;•volatility in the market prices and trading volumes of technology stocks;•changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;•future capital raising activities;•sales of common shares by holders thereof or by us;•failure of securities analysts to maintain coverage of Sphere 3D, changes in financial estimates by securities analysts who follow Sphere 3D, or ourfailure to meet these estimates or the expectations of investors;•the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections;•market acceptance of our products and technologies;•announcements by us or our competitors of new products or services;16•the public’s reaction to our press releases, other public announcements and filings with the SEC and the applicable Canadian securities regulatoryauthorities;•rumors and market speculation involving us or other companies in our industry;•actual or anticipated changes in our operating results or fluctuations in our operating results;•actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally;•litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors;•developments or disputes concerning our intellectual property or other proprietary rights;•announced or completed acquisitions of businesses or technologies by us or our competitors;•new laws or regulations or new interpretations of existing laws or regulations applicable to us and our business;•changes in accounting standards, policies, guidelines, interpretations or principles;•any significant change in our executive officers and other key personnel or Board of Directors;•general economic conditions and slow or negative growth of our markets;•release of transfer restrictions on certain outstanding common shares; and•news reports relating to trends, concerns or competitive developments, regulatory changes and other related issues in our industry or target markets.Financial markets may experience price and volume fluctuations that affect the market prices of equity securities of companies and that are unrelatedto the operating performance, underlying asset values or prospects of such companies. Accordingly, the market price of the common shares may decline evenif our operating results, underlying asset values or prospects have not changed. As well, certain institutional investors may base their investment decisions onconsideration of our governance and social practices and performance against such institutions’ respective investment guidelines and criteria, and failure tomeet such criteria may result in a limited or no investment in our common shares by those institutions, which could adversely affect the trading price of ourcommon shares. There can be no assurance that fluctuations in price and volume will not occur due to these and other factors.In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of itssecurities. We may in the future be a target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divertmanagement’s attention from day-to-day operations and consume resources, such as cash. In addition, the resolution of those matters may require us to issueadditional common shares, which could potentially result in dilution to our existing shareholders. Expenses incurred in connection with these matters (whichinclude fees of lawyers and other professional advisors and potential obligations to indemnify officers and directors who may be parties to such actions)could adversely affect our cash position. See Item 18 “Financial Statements”, Note 16 “Commitments and Contingencies”.We must comply with the financial reporting requirements of a public company, as well as other requirements associated with being listed on NASDAQ.Sphere 3D is subject to reporting and other obligations under applicable Canadian securities laws, SEC rules and the rules of the NASDAQ CapitalMarket. These reporting and other obligations, including National Instrument 52-102 - Continuous Disclosure Obligations and National Instrument 52-109 -Certification of Disclosure in Issuers’ Annual and Interim Filings, place significant demands on our management, administrative, operational and accountingresources. Moreover, any failure to maintain effective internal controls could cause us to fail to meet our reporting obligations or result in materialmisstatements in our consolidated financial statements. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating resultscould be materially harmed, which could also cause investors to lose confidence in our reported financial information, which could result in a lower tradingprice of our common shares.17Management does not expect that our disclosure controls and procedures and internal controls over financial reporting will prevent all errors and allfraud. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that its objectives will be met.Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to theircosts. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within a companyare detected. The inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simpleerrors or mistakes. Controls can also be circumvented by individual acts of some persons, by collusion of two or more people or by management override ofthe controls. Due to the inherent limitations in a cost-effective control system, misstatements due to error, or fraud may occur and not be detected.Sphere 3D is an “emerging growth company” as defined in the Jumpstart Our Business Startups (“JOBS”) Act, enacted on April 5, 2012, and Sphere 3Dwill continue to qualify as an “emerging growth company” until the earliest to occur of: (a) the last day of the fiscal year during which Sphere 3D has totalannual gross revenues of $1.07 billion or more; (b) the last day of the fiscal year of Sphere 3D following the fifth anniversary of the date of the first sale ofcommon equity securities of Sphere 3D pursuant to an effective registration statement under the Securities Act; (c) the date on which Sphere 3D has, duringthe previous three-year period, issued more than $1.0 billion in nonconvertible debt; or (d) the date on which Sphere 3D is deemed to be a ‘large acceleratedfiler’.For so long as Sphere 3D continues to qualify as an emerging growth company, it will be exempt from the requirement to include an auditor attestationreport relating to internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act (“SOA”) in its annual reports filed under theExchange Act, even if it does not qualify as a “smaller reporting company”. In addition, section 103(a)(3) of the SOA has been amended by the JOBS Act toprovide that, among other things, auditors of an emerging growth company are exempt from any rules of the Public Company Accounting Oversight Boardrequiring a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financialstatements of the registrant (auditor discussion and analysis).Sphere 3D is and will remain through December 31, 2019, an “emerging growth company” within the meaning under the JOBS Act, and until Sphere3D ceases to be an emerging growth company Sphere 3D may take advantage of certain exemptions from various reporting requirements that are applicableto other public companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the SOA.Investors may find our common shares less attractive because Sphere 3D relies on these exemptions. If some investors find our common shares less attractiveas a result, there may be a less active trading market for our common shares and our share price may be more volatile.We may be treated as a Passive Foreign Investment Company.There is also an ongoing risk that Sphere 3D may be treated as a Passive Foreign Investment Company, or PFIC, for U.S. federal income tax purposes. Anon-U.S. corporation generally will be considered to be a PFIC for any taxable year in which 75% or more of its gross income is passive income, or 50% ormore of the average value of its assets are considered “passive assets” (generally, assets that generate passive income). This determination is highly factual,and will depend upon, among other things, Sphere 3D’s market valuation and future financial performance. Sphere 3D believes that it was classified as a PFICduring the tax year ended December 31, 2013. However, based on current business plans and financial expectations, Sphere 3D expects that it will not be aPFIC for its current tax years ended December 31, 2018 and 2017, as well as current business plans and financial expectations, Sphere 3D expects that it willnot be a PFIC for its current tax year ending December 31, 2019 and for the foreseeable future. If Sphere 3D were to be classified as a PFIC for any futuretaxable year, holders of Sphere 3D common shares who are U.S. taxpayers would be subject to adverse U.S. federal income tax consequences.18Certain of our directors, officers and management could be in a position of conflict of interest.Certain of the directors, officers and members of management of Sphere 3D may also serve as directors and/or officers of other companies. We maycontract with such directors, officers, members of management and such other companies or with affiliated parties or other companies in which such directors,officers or members of management own or control. These persons may obtain compensation and other benefits in transactions relating to Sphere 3D.Consequently, there exists the possibility for such directors, officers and members of management to be in a position of conflict. Any decision made by any ofsuch directors, officers and members of management involving Sphere 3D are being made in accordance with their duties and obligations to deal fairly and ingood faith with a view to the best interests of Sphere 3D.Future sales of common shares by directors, officers and other shareholders could adversely affect the prevailing market price for common shares.Subject to compliance with applicable securities laws, officers, directors and other shareholders and their respective affiliates may sell some or all oftheir common shares in the future. No prediction can be made as to the effect, if any, such future sales will have on the market price of the common sharesprevailing from time to time. However, the future sale of a substantial number of common shares by Sphere 3D’s officers, directors and other shareholders andtheir respective affiliates, or the perception that such sales could occur, could adversely affect prevailing market prices for the common shares.We may issue an unlimited number of common shares. Future sales of common shares will dilute your shares.Sphere 3D’s articles permit the issuance of an unlimited number of common shares, and shareholders will have no pre-emptive rights in connectionwith such further issuances. The directors of Sphere 3D have the discretion to determine the price and the terms of issue of further issuances of common sharesin accordance with applicable laws.Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesWe lease a 19,413 square foot facility in Plano, Texas. The lease expires in July 2021. This facility houses operations, repair services, research anddevelopment and technical support. We also lease additional smaller sales offices and research and development facilities throughout the U.S. andinternationally.Item 3. Legal ProceedingsThe Company is, from time to time, subject to claims and suits arising in the ordinary course of business. In the opinion of management, the ultimateresolution of such pending proceedings will not have a material effect on the Company’s results of operations, financial position or cash flows.Patent Litigation Funding AgreementIn December 2010, Overland entered into a litigation funding agreement (the “Funding Agreement”) with Special Situations Fund III QP, L.P., SpecialSituations Private Equity Fund, L.P., Special Situations Technology Fund, L.P., and Special Situations Technology Fund II, L.P. (collectively, the “SpecialSituations Funds”) pursuant to which the Special Situations Funds agreed to fund certain patent litigation brought by Overland. In May 2014, the SpecialSituations Funds filed a complaint against Overland in the Supreme Court for New York County, alleging breach of the Funding Agreement. The SpecialSituations Funds alleged that Overland’s January 2014 acquisition of Tandberg Data entitled the Special Situation Funds to a $6.0 million payment underthe Funding Agreement, and therefore Overland’s refusal to make the payment constituted a breach of the Funding Agreement by Overland. In November2014, the Special Situations Funds amended their complaint to allege that Overland breached the Funding Agreement’s implied covenant of good faith andfair dealing by settling the patent litigation with BDT in bad faith to avoid a payment obligation under the Funding Agreement. The Special SituationsFunds sought $6.0 million in contractual damages as well as costs and fees. On October 10, 2017, the Court entered an order granting Overland’s motion forsummary judgment and19dismissing the Special Situations Funds’ complaint in its entirety with prejudice, and in April 2018, the parties entered into a settlement agreement endingthe litigation that did not require payment from either party.OtherIn January 2018, Mr. Vito Lupis filed a statement of claim in the Ontario Court of Justice alleging, among other things, breach of contracts, deceit andnegligence against Mr. Giovanni J. Morelli, a former officer of the Company, and vicarious liability against the Company, in connection with stock purchaseagreements and other related agreements that would have been entered into between Mr. Lupis and the Company in 2012. The Company and Mr. Lupis haveinitiated settlement discussions to resolve the matter.In April 2015, we filed a proof of claim in connection with bankruptcy proceedings of V3 Systems, Inc. (“V3”) based on breaches by V3 of the AssetPurchase Agreement entered into between V3 and the Company dated February 11, 2014 (the “APA”). On October 6, 2015, UD Dissolution Liquidating Trust(“UD Trust”), the apparent successor to V3, filed a complaint against us and certain of our current and former directors in the U.S. Bankruptcy Court for theDistrict of Utah Central Division objecting to our proof of claim and asserting claims for affirmative relief against us and our directors. This complaintalleges, among other things, that Sphere 3D breached the APA and engaged in certain other actions and/or omissions that caused V3 to be unable to timelysell the Sphere 3D common shares received by V3 pursuant to the APA. The plaintiff seeks, among other things, monetary damages for the loss of thepotential earn-out consideration, the value of the common shares held back by us pursuant to the APA and costs and fees. We believe the lawsuit to bewithout merit and intend to vigorously defend against the action.On December 23, 2015, we filed a motion seeking to dismiss the majority of the claims asserted by the UD Trust. On January 13, 2016, we filed acounterclaim against the UD Trust in which we allege that V3 breached numerous provisions of the APA. On July 22, 2016, we filed a motion seeking totransfer venue of this action to the United States District Court for the District of Delaware. The Bankruptcy Court granted our motion to transfer venue onAugust 30, 2016, and the case was formally transferred to the Delaware District Court on October 11, 2016. On November 13, 2018, the Delaware DistrictCourt referred the case to the Delaware Bankruptcy Court. The Delaware Bankruptcy Court has not yet set a hearing on our motion to dismiss.In March 2018, UD Trust filed a complaint in U.S. District Court, Northern California District (“California Complaint”) asserting that two transactionsinvolving the Company constitute fraudulent transfers under federal and state law. First, UD Trust alleges that the consolidation of the Company’s and itssubsidiaries’ indebtedness to the Cyrus Group into a debenture between FBC Holdings and the Company in December 2014 constitutes a fraudulent transfer.Second, UD Trust alleges that the Share Purchase Agreement constitutes a fraudulent transfer, and seeks to require that the proceeds of the transaction beplaced in escrow until the V3 litigation is resolved. The California Complaint also asserts a claim against the Company’s former CEO for breach of fiduciaryduty, and a claim against the Cyrus Group for aiding and abetting breach of fiduciary duty. We believe the lawsuit to be without merit and intend tovigorously defend against the action. On July 25, 2018, we filed a motion seeking to dismiss all of the claims asserted against the Company and its formerCEO. On the same day, the Cyrus Group filed a motion seeking to dismiss all claims asserted against the Cyrus Group.Item 4. Mine Safety DisclosuresNot applicable.20PART IIItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesOur common shares are listed on the NASDAQ Capital Market under the symbol “ANY”. The following table sets forth the high and low sales pricesper share of our common stock during each quarter of the two most recent fiscal years: 2018 2017 High Low High LowFirst Quarter $24.32 $7.00 $112.00 $40.20Second Quarter $9.12 $2.56 $58.00 $22.00Third Quarter $5.76 $1.06 $52.80 $17.05Fourth Quarter $8.70 $1.52 $31.60 $15.20On March 20, 2019, the closing sales price of our common stock on the NASDAQ Capital Market was $2.65 per share. As of March 20, 2019, we hadapproximately 28 shareholders of record and beneficial owners of our common shares.On October 24, 2018, the Board of Directors of the Company authorized a share consolidation of the Company’s issued and outstanding commonshares at a ratio of 1-for-8, which became effective on November 5, 2018. On July 5, 2017, the Board of Directors of the Company authorized a shareconsolidation of the Company’s issued and outstanding common shares at a ratio of 1-for-25, which became effective on July 11, 2017. All share and pershare amounts in the accompanying consolidated financial statements and the notes thereto were restated for all periods to reflect the share consolidations.DividendsThe Company has not declared or paid any dividends on its common shares to date. The Company’s current intention is to retain any future earningsto support the development of the business of Sphere 3D and does not anticipate paying cash dividends in the foreseeable future. Payment of any futuredividends will be at the discretion of the Board of Directors of Sphere 3D after taking into account various factors, including but not limited to the financialcondition, operating results, cash needs, growth plans and the terms of any credit agreements that Sphere 3D may be a party to at the time. Accordingly,investors must rely on sales of their Sphere 3D common shares after price appreciation, which may never occur, as the only way to realize a return on theirinvestment.The Company’s outstanding 6,500,000 Series A redeemable Preferred Shares (the “Preferred Shares”) accrue dividends at a rate of 8.0% per annum.Dividends on Preferred Shares shall be paid on such date or dates as and when decided by the board of directors out of moneys properly applicable to thepayment of such dividends. If not previously converted, the Preferred Shares mature two years from the issuance date at which time the Company would haveto redeem the Preferred Shares for the issuance price of $1.00, as adjusted, together with all accrued and unpaid dividends on such shares.Recent Sales of Unregistered SecuritiesOn November 13, 2018, the Company and Silicon Valley Technology Partners, Inc. (“SVTP”) closed the transactions contemplated by the previouslyannounced Purchase Agreement. In connection with the closing of the transaction, the Company filed an articles of amendment to its articles ofamalgamation setting forth the rights, privileges, restrictions and conditions of a new series of non-voting preferred shares of the Company (the “Series APreferred Shares”) and entered into a Conversion Agreement, by and between the Company and FBC Holdings S.a r.l. (“FBC Holdings”), pursuant to which$6.5 million of the Company’s outstanding debenture was converted into 6,500,000 Preferred Shares.Item 6. Selected Financial DataNot applicable.21Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion and analysis should be read in conjunction with our consolidated financial statements and notes included in the AnnualReport on Form 10-K. In addition to historical information, the following discussion contains forward-looking statements that are subject to risks anduncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to risks described inthe Part I, Item 1A, Risks Factors, and elsewhere in this Annual Report. References to “Notes” are Notes included in our Notes to Consolidated FinancialStatements.OverviewSphere 3D provides solutions for standalone storage and technologies that converge the traditional silos of compute, storage and network into oneintegrated “hyper-converged” or converged solution. We provide enterprise storage management solutions, and the ability to connect to public cloudservices such as Microsoft Azure for additional delivery options and hybrid cloud capabilities. Our solutions are tightly integrated and include a patentedportfolio for operating systems for storage, proprietary virtual desktop orchestration software, and proprietary application container software. Our software,combined with commodity x86 servers, or purpose built appliances, deliver solutions designed to provide application mobility, security, data integrity andsimplified management. These solutions can be deployed through a public, private or hybrid cloud and are delivered through a global reseller network andprofessional services organization. We have a portfolio of brands including SnapServer®, HVE ConneXions and UCX ConneXions, dedicated to helpingcustomers achieve their IT goals.Discontinued OperationsOn November 13, 2018, pursuant the Purchase Agreement, we sold to SVTP all of the issued and outstanding shares of capital stock of Overland inconsideration for (i) the issuance to the Company of shares of Series A Preferred Stock of SVTP representing 19.9% of the outstanding shares of capital stockof SVTP as of the closing with a value of $2.1 million, (ii) the release of the Company from outstanding debt obligations totaling $41.7 million assumed bySVTP, and (iii) $1.0 million in cash proceeds from SVTP. In connection with the closing of the Purchase Agreement, the Company entered into a ConversionAgreement with FBC Holdings, pursuant to which $6.5 million of the Company’s outstanding secured debt was converted into 6,500,000 Preferred Shares. In2018, the Company recorded a loss on the divestiture of $4.3 million. See Note 3 - Discontinued Operations for additional details.We undertook this divestiture in order to facilitate the elimination of secured debt and to allow us to focus greater resources to our converged andhyper-converged product portfolio. The financial results of Overland are presented as discontinued operations in our consolidated statements of operationsfor the years ended December 31, 2018 and 2017.Recent Developments•On November 14, 2018, the Board of Directors of the Company appointed Peter Tassiopoulos to serve as the Company’s Chief Executive Officer andPrincipal Executive Officer. The appointment decision was made in connection with the Company’s completion of the sale of Overland. As a resultof such appointment, Eric Kelly ceased to serve as the Company’s Chief Executive Officer and no longer holds any positions with the Company. OnNovember 14, 2018, the Board of Directors of the Company appointed Joseph O’Daniel as President of the Company, to succeed Mr. Tassiopoulosin such position. •On November 12, 2018, we received a letter from the Nasdaq Listing Qualifications department of The Nasdaq Stock Market LLC notifying us thatwe were not in compliance with the requirement of Nasdaq Marketplace Rule 5550(b)(1) for continued inclusion on the NASDAQ Capital Marketbecause the Company’s stockholders’ equity of $707,000 reported in the Company’s Quarterly Report on Form 10-Q for the period ended September30, 2018, is below the required minimum of $2.5 million.22Results of OperationsThe following table sets forth certain financial data as a percentage of net revenue: Year Ended December 31, 2018 2017Net revenue100.0 % 100.0 %Cost of revenue81.4 75.0Gross profit18.6 25.0Operating expenses: Sales and marketing37.4 27.0Research and development37.9 46.6General and administrative83.0 76.6Impairment of acquired intangible assets— 18.2 158.3 168.4Loss from operations(139.7) (143.4)Interest expense(0.8) —Other income, net0.1 14.3Loss before income taxes(140.4) (129.1)Benefit from income taxes— (6.8)Net loss from continuing operations(140.4) (122.3)Net loss from discontinued operations(149.7) (85.4)Net loss(290.1)% (207.7)% A summary of the sales mix by product follows (in thousands): Year Ended December 31, 2018 2017 ChangeDisk systems$6,108 $9,698 (37.0)%Service2,922 2,901 0.7 %Total$9,030 $12,599 (28.3)%We divide our worldwide sales into three geographical regions: Americas; APAC, consisting of Asia Pacific countries; and EMEA consisting ofEurope, the Middle East and Africa.The following table summarizes net revenue by geographic area (in thousands): Year Ended December 31, 2018 2017 ChangeAmericas$8,044 $11,121 (27.7)%APAC534 823 (35.1)%EMEA452 655 (31.0)%Total$9,030 $12,599 (28.3)%23Comparison of Years Ended December 31, 2018 and 2017Net RevenueWe had revenue of $9.0 million during 2018 compared to $12.6 million during 2017. The $3.6 million decrease in net revenue is primarily a result of adecrease in product revenue of $2.2 million due to a decline in sales units for disk systems from the HVE product line, and a $1.1 million decrease in ourSnap product line. Overall, the decrease in revenue was partially due to our divestiture in Overland and our limited liquidity which delayed shipments. Inaddition, in 2017 there was a significant product transaction related to a one-time opportunity resulting in $2.2 million of product revenue that did notreoccur in 2018.Product RevenueNet product revenue decreased to $6.1 million during 2018 from $9.7 million during 2017, a decrease of $3.6 million. Revenue from disk systemsdecreased by $3.6 million primarily related to a decrease in product revenue of $2.2 million due to a decline in sales units for disk systems from the HVEproduct line, and a $1.1 million decrease in our Snap product line. Overall, the decrease in revenue was due to our divestiture in Overland and our limitedliquidity which delayed shipments. In addition, in 2017 there was a significant product transaction related to a one-time opportunity resulting in $2.2 millionof revenue that did not reoccur in 2018.Service RevenueNet service revenue was $2.9 million during both 2018 and 2017.Gross ProfitGross profit and margin were as follows (in thousands, unless otherwise noted): Year Ended December 31, 2018 2017 ChangeGross profit $1,679 $3,145 (46.6)%Gross margin 18.6% 25.0% (6.4)ptGross profit - product $627 $1,471 (57.4)%Gross margin - product 10.3% 15.2% (4.9)ptGross profit - service $1,052 $1,674 (37.2)%Gross margin - service 36.0% 57.7% (21.7)ptIn 2018, gross profit for product decreased due to lower sales volume in our disk system revenues primarily related to a 2017 significant producttransaction related to a one-time opportunity that did not reoccur in 2018. In addition, 2018 was a transitional year as the Company completed its divestiturein Overland which represented a significant portion of the Company’s product and service revenue.Operating ExpensesSales and Marketing ExpenseSales and marketing expenses were $3.4 million for both of the years ended December 31, 2018 and 2017.Research and Development ExpenseResearch and development expenses were $3.4 million and $5.9 million for the years ended December 31, 2018 and 2017, respectively. The 2018decrease of $2.5 million was primarily due to a decrease of $1.1 million in employee and related expenses related to a reduction in headcount and a $1.1million decrease in share-based compensation.24General and Administrative ExpenseGeneral and administrative expenses were $7.5 million and $9.7 million for the years ended December 31, 2018 and 2017, respectively. The 2018decrease of $2.2 million was primarily due to a $1.6 million decrease in amortization expense related to a fully amortized intangible asset for acquiredtechnology, a $1.0 million decrease in employee related expenses, and a $1.3 million decrease in share-based compensation expense. These decreases wereoffset by a $1.8 million increase in legal and advisory expenses primarily related to transactional matters related to the disposition of Overland.Impairment of Acquired Intangible AssetsImpairment of acquired intangible assets were zero and $2.3 million for the years ended December 31, 2018 and 2017, respectively. In 2017, as a resultprimarily of the Company’s change in revenue projection for its Snap product line, it was determined the carrying value of indefinite-lived intangible assetsexceeded its estimated fair value. The Company compared the indicated fair value to the carrying value of its indefinite-lived assets, and as a result of theanalysis, an impairment charge of $2.0 million was recorded to indefinite-lived trade names for the year ended December 31, 2017. In addition, the Companyrecorded an impairment of $0.3 million related to developed technology for the year ended December 31, 2017.Non-Operating ExpensesOther Income, Net.Other income, net, in 2018 and 2017 was minimal and $1.8 million income, net, respectively. In 2018, other income, net, primarily related to a net gainon the revaluation of warrants of $0.3 million, offset by a $0.3 million realized foreign currency loss. In 2017, other income, net, primarily related to a netgain on the revaluation of warrants of $2.2 million and realized foreign currency gain of $0.7 million, which was offset by a $1.1 million loss from therevaluation of our investment in connection with our January 2017 acquisition.Income TaxFor the year ended December 31, 2018, there was no income tax expense (benefit) as the deferred tax assets were fully reserved. Income tax benefit was$0.9 million for the year ended December 31, 2017, which related to a reduction in deferred tax liabilities for developed technology and indefinite-livedtrade names that were impaired.Discontinued OperationsOn November 13, 2018, we closed the Purchase Agreement related to our divestiture of Overland. Beginning in the fourth quarter of 2018, thefinancial results of Overland have been reflected in our consolidated statements of operations as discontinued operations. Additionally, the assets andliabilities associated with the discontinued operations in the consolidated balance sheet as of December 31, 2017 are classified as discontinued operations.The Company’s statements of cash flows are presented on a combined basis, including continuing and discontinued operations.Foreign Currency RiskWe conduct business on a global basis. Our sales in international markets are typically denominated in U.S. dollars. Purchase contracts are typically inU.S. dollars.25Liquidity and Capital ResourcesWe have recurring losses from operations and a net working capital deficiency. Our primary source of cash flow is generated from sales of our diskautomation systems. We have financed our operations through gross proceeds from private sales of equity securities and with borrowings under our debtfacilities. At December 31, 2018, we had cash from continuing operations of $0.3 million compared to cash of $0.6 million at December 31, 2017. As ofDecember 31, 2018, we had a working capital deficit of $6.1 million, reflecting a decrease in current assets of $72.9 million and a decrease in currentliabilities of $60.9 million compared to December 31, 2017, which included the reclassification of assets and liabilities held for sale. The decrease in currentassets and liabilities was primarily related to the divestiture of Overland in November 2018. As part of consideration for the transaction, the Company wasrelieved as obligor of $41.7 million of debt. Cash management and preservation continue to be a top priority. We expect to incur negative operating cashflows as we continue to maintain and increase our sales volume, and maintain operational efficiencies.Management has projected that cash on hand will not be sufficient to allow the Company to continue operations beyond May 31, 2019 if we areunable to raise additional funding for operations. We expect our working capital needs to increase in the future as we continue to expand and enhance ouroperations. Our ability to raise additional funds through equity or debt financings or other sources may depend on the financial success of our currentbusiness and successful implementation of our key strategic initiatives, financial, economic and market conditions and other factors, some of which arebeyond our control. No assurance can be given that we will be successful in raising the required capital at reasonable cost and at the required times, or at all.Further equity financings may have a dilutive effect on shareholders and any debt financing, if available, may require restrictions to be placed on our futurefinancing and operating activities. If we require additional capital and are unsuccessful in raising that capital, we may not be able to continue our businessoperations and advance our growth initiatives, which could adversely impact our business, financial condition and results of operations.Significant changes from the Company’s current forecasts, including but not limited to: (i) failure to comply with the financial covenants in its debtfacilities; (ii) shortfalls from projected sales levels; (iii) unexpected increases in product costs; (iv) increases in operating costs; (v) changes in the historicaltiming of collecting accounts receivable; and (vi) inability to maintain compliance with the requirements of the NASDAQ Capital Market and/or inability tomaintain listing with the NASDAQ Capital Market could have a material adverse impact on the Company’s ability to access the level of funding necessary tocontinue its operations at current levels. If any of these events occurs or the Company is unable to generate sufficient cash from operations or financingsources, the Company may be forced to liquidate assets where possible and/or curtail, suspend or cease planned programs or operations generally or seekbankruptcy protection or be subject to an involuntary bankruptcy petition, any of, which would have a material adverse effect on the Company’s business,results of operations, financial position and liquidity.As a result of our recurring losses from operations and negative cash flows, the report from our independent registered public accounting firm regardingour consolidated financial statements for the year ended December 31, 2018 includes an explanatory paragraph expressing substantial doubt about ourability to continue as a going concern.The following table shows a summary of our cash flows (used in) provided by operating activities, investing activities and financing activities (inthousands): Year Ended December 31, 2018 2017Net cash used in operating activities $(7,621) $(8,965)Net cash provided by (used in) investing activities $944 $(1,174)Net cash provided by financing activities $2,444 $9,534The use of cash during 2018 was primarily a result of our net loss of $26.2 million offset by $12.0 million in non-cash items, which included a $4.3million on the loss on divestiture of Overland, share-based compensation, depreciation and amortization, payment in-kind interest expense, amortization ofdebt issuance costs and fair value adjustment of warrants.26During 2018, net cash provided by investing activities were primarily related proceeds from our divestiture. During 2017, net cash used in investingactivities were primarily related to our January 2017 acquisition.During 2018, we received $1.9 million net, from the issuance of common shares, $0.5 million from the issuance of notes payable, $0.1 million from ourline of credit, and $0.1 million from warrants exercised, offset by $0.2 million in payments to holders of related party debt. During 2017, we received $9.8million net, from the issuance of common shares and $2.0 million from a note payable with a related party, offset by $2.3 million in payments to holders ofrelated party debt.Off-Balance Sheet InformationDuring the ordinary course of business, we may provide standby letters of credit to third parties as required for certain transactions initiated by us. Asof December 31, 2018, we had no standby letters of credit outstanding.Contractual ObligationsThe following schedule summarizes our contractual obligations to make future payments at December 31, 2018 (in thousands):Contractual Obligations Total Less than1 year 1-3 years 3-5 years After 5yearsSeries A redeemable preferred shares $6,571 $— $6,571 $— $—Debt — related party, including interest(1) 503 503 — — —Line of credit 100 100 — — —Operating lease obligations (2) 346 168 178 — —Purchase obligations(3) 546 546 — — —Total contractual obligations $8,066 $1,317 $6,749 $— $—________________(1)Interest payments have been calculated using the amortization profile of the debt outstanding at December 31, 2018, taking into account the fixedrate paid at year end.(2)Represents contractual lease obligations under non-cancelable operating leases.(3)Represents purchase orders for inventory and non-inventory items entered into prior to December 31, 2018, with purchase dates extending beyondJanuary 1, 2019. Some of these purchase obligations may be canceled.Critical Accounting EstimatesThe discussion and analysis of our financial position and results of operations are based on our consolidated financial statements, which have beenprepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of our consolidated financial statements requiresus to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assetsand liabilities. We review our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that webelieve to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.Actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are outlined in Note 2 to theConsolidated Financial Statements included in this Annual Report on Form 10-K. We believe the following accounting policies to be critical to thejudgments and estimates used in the preparation of our consolidated financial statements.27Revenue RecognitionThe Company generates revenue primarily from: (i) solutions for standalone storage and integrated hyper-converged storage; (ii) professional services;and (iii) warranty and customer services. As of January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue fromContracts with Customers, which affects how the Company recognizes revenue in these arrangements. The Company applied the provisions of Topic 606using the modified retrospective approach, with the cumulative effect of the adoption recognized as of January 1, 2018, to all contracts that had not beencompleted as of that date.Approximately 70% of the Company’s revenue is recognized when performance obligations under the terms of a contract with a customer are satisfiedat a point in time. These contracts are generally comprised of a single performance obligation to transfer products. Accordingly, the Company recognizesrevenue when change of control has been transferred to the customer, generally at the time of shipment of products. The Company sells its products bothdirectly to customers and through distributors generally under agreements with payment terms typically less than 45 days. Revenue on direct product sales,excluding sales to distributors, are not entitled to any specific right of return or price protection, except for any defective product that may be returned underour standard product warranty. Product sales to distribution customers that are subject to certain rights of return, stock rotation privileges and priceprotections, contain a component of “variable consideration.” Revenue is measured as the amount of consideration the Company expects to receive inexchange for transferring products and is generally based upon a negotiated fixed price and is net of estimates for variable considerations.For performance obligations related to warranty and customer services, such as extended product warranties, the Company transfers control andrecognizes revenue on a time-elapsed basis. The performance obligations are satisfied as services are rendered typically on a stand-by basis over the contractterm, which is generally 12 months.In limited circumstances where a customer is unable to accept shipment and requests products be delivered to, and stored on, the Company’s premises,also known as a “bill-and-hold” arrangements, revenue is recognized when: (i) the customer has requested delayed delivery and storage of the products, (ii)the goods are segregated from the inventory, (iii) the product is complete, ready for shipment and physical transfer to the customer, and (iv) the Companydoes not have the ability to use the product or direct it to another customer.The Company also enters into revenue arrangements that may consist of multiple performance obligations of its product and service offerings such asfor sales of hardware devices and extended warranty services. The Company allocates contract fees to the performance obligations on a relative stand-aloneselling price basis. The Company determines the stand-alone selling price based on its normal pricing and discounting practices for the specific productand/or service when sold separately. When the Company is unable to establish the individual stand-alone price for all elements in an arrangement byreference to sold separately instances, the Company may estimate the stand-alone selling price of each performance obligation using a cost plus a marginapproach, by reference to third party evidence of selling price, based on the Company’s actual historical selling prices of similar items, or based on acombination of the aforementioned methodologies; whichever management believes provides the most reliable estimate of stand-alone selling price.Inventory ValuationInventories are stated at the lower of cost and net realizable value using the first-in-first-out method. Net realizable value is the estimated selling pricein the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. We assess the value of inventoriesperiodically based upon numerous factors including, among others, expected product or material demand, current market conditions, technologicalobsolescence, current cost, and net realizable value. If necessary, we write down our inventory for obsolete or unmarketable inventory by an amount equal tothe difference between the cost of the inventory and the net realizable value.28Goodwill and Intangible AssetsGoodwill represents the excess of consideration paid over the value assigned to the net tangible and identifiable intangible assets acquired. Forintangible assets purchased in a business combination, the estimated fair values of the assets received are used to establish their recorded values. Forintangible assets acquired in a non-monetary exchange, the estimated fair values of the assets transferred (or the estimated fair values of the assets received, ifmore clearly evident) are used to establish their recorded values. Valuation techniques consistent with the market approach, income approach and/or costapproach are used to measure fair value.Purchased intangible assets are amortized on a straight-line basis over their economic lives of six to 25 years for channel partner relationships, three tonine years for developed technology, three to eight years for capitalized development costs, and two to 25 years for customer relationships as this methodmost closely reflects the pattern in which the economic benefits of the assets will be consumed.Impairment of Goodwill and Intangible AssetsGoodwill and intangible assets are tested for impairment on an annual basis at December 31, or more frequently if there are indicators of impairment.Triggering events for impairment reviews may be indicators such as adverse industry or economic trends, restructuring actions, lower projections ofprofitability, or a sustained decline in our market capitalization. Intangible assets are quantitatively assessed for impairment, if necessary, by comparing theirestimated fair values to their carrying values. If the carrying value exceeds the fair value, the difference is recorded as an impairment.Recent Accounting PronouncementsOn January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers and all the related amendments, or ASC Topic 606.Under Topic 606, an entity is required to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects theconsideration to which the entity expects to be entitled in exchange for those goods or services. Topic 606 defines a five-step process in order to achieve thiscore principle, which may require the use of judgment and estimates, and also requires expanded qualitative and quantitative disclosures relating to thenature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including significant judgments and estimates used.The adoption of the new standard requires the recognition of revenues generally upon shipment to our customers for both direct consumers and distributors.The Company previously recognized contract consideration associated with its distributors on the “sell-through basis”, or when the purchased goods orservices transferred to the ultimate end user customer. Under Topic 606, contract consideration will be recognized on a “sell-in basis” or when control of thepurchased goods or services transfer to the distributor. The Company elected to adopt this guidance using the modified retrospective method and it resultedin a cumulative adjustment reducing our accumulated deficit by approximately $0.3 million. Comparative prior periods were not adjusted and continue to bereported under FASB ASC Topic 605, Revenue Recognition.In connection with the adoption of Topic 606, the Company is required to capitalize certain contract acquisition costs consisting primarily ofcommissions paid when customer contracts are finalized. The Company elected to follow a Topic 606 practical expedient and expense the incremental costsof obtaining a contract (sales commissions) when incurred as the capitalized long-term contract costs are not significant. For certain performance obligationsrelating to services, extended warranty, and other service agreements that are settled over time, the Company has elected to apply the practical expedient andforgo adjusting the transaction price for the consideration of the effects of time value of money for prepaid services wherein the period between transfer ofany good or service in the contract and when the customer pays for that good or service is one year or less. The impact of the adoption of ASC 606 on ourconsolidated balance sheet and our consolidated statements of operations, comprehensive loss, equity (deficit) and cash flows was not material. We do notexpect the adoption of this guidance to have a material effect on our results of operations in future periods.See Note 2 - Significant Accounting Policies for additional details.29ITEM 7A. Quantitative and Qualitative Disclosures About Market RiskMarket risk represents the risk of loss that may impact our financial position, results of operations, or cash flows due to adverse changes in financialand commodity market prices and rates. We are exposed to market risk from changes in foreign currency exchange rates as measured against the U.S. dollar.These exposures are directly related to our normal operating and funding activities. Historically, we have not used derivative instruments or engaged inhedging activities.Foreign Currency Risk. We conduct business on a global basis. Our sales in international markets are typically denominated in U.S. dollars. Purchasecontracts are typically in U.S. dollars.Credit Risk. Credit risk is the risk that the counterparty to a financial instrument fails to meet its contractual obligations, resulting in a financial loss tous. We sell to a diverse customer base over a global geographic area. We evaluate collectability of specific customer receivables based on a variety of factorsincluding currency risk, geopolitical risk, payment history, customer stability and other economic factors. Collectability of receivables is reviewed on anongoing basis by management and the allowance for doubtful receivables is adjusted as required. Account balances are charged against the allowance fordoubtful receivables when we determine that it is probable that the receivable will not be recovered. We believe that the geographic diversity of the customerbase, combined with our established credit approval practices and ongoing monitoring of customer balances, mitigates this counterparty risk.Liquidity Risk. Liquidity risk is the risk that we will not be able to meet our financial obligations as they come due. We continually monitor our actualand projected cash flows and believe that our internally generated cash flows will not provide us with sufficient funding to meet all working capital andfinancing needs for at least the next 12 months.Item 8. Financial Statements and Supplemental DataOur consolidated financial statements and supplementary data required by this item are set forth at the pages indicated in Item 15(a)(1) and 15(a)(2),respectively.Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNot applicable.Item 9A. Controls and ProceduresDisclosure Controls and ProceduresUnder the supervision and with the participation of our management, including our principal executive officer and principal financial officer, weconducted an evaluation of our disclosure controls and procedures, as such term is defined under Rules 13a-15(e) or 15d-15(e) under the Exchange Act.Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures wereeffective to give reasonable assurance that information required to be publicly disclosed is recorded, processed, summarized and reported on a timely basis asof the end of the period covered by this annual report.Management’s Report on Internal Control Over Financial ReportingManagement is responsible for establishing and maintaining adequate internal control over our financial reporting. In order to evaluate theeffectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment,including testing, using the criteria in Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations of the TreadwayCommission (“COSO”). Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.30Based on our evaluation under the framework in Internal Control-Integrated Framework, our Chief Executive Officer and Chief Financial Officerconcluded that our internal control over financial reporting was effective as of December 31, 2018. Because of its inherent limitations, internal control overfinancial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the riskthat controls may become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financialreporting. Management's report on internal control over financial reporting was not subject to attestation by our independent registered public accountingfirm pursuant to rules of the SEC that permit us to provide only management's report in this annual report.This report on internal control over financial reporting shall not be deemed to be filed for purposes of Section 18 of the Exchange Act, or otherwisesubject to the liabilities of that section, and is not incorporated by reference into any of our filings, whether made before or after the date hereof, regardless ofany general incorporation language in such filing.Changes in Internal Control over Financial ReportingIn November 2018, the Company discontinued the majority of its operations and disposed of Overland Storage, Inc. and its subsidiaries. Along withthis change the Company; (i) replaced its chief executive officer, (ii) entered into a transition services agreement with Overland, under which, among otherthings, the chief financial officer of Overland is providing ongoing service to the Company as its interim chief financial officer, and (iii) engaged anaccounting and advisory firm to supplement our internal resources related to preparation and review of our consolidated financial statements. Based on thesechanges, there were significant changes in our internal control over financial reporting during the year ended December 31, 2018.Item 9B. Other InformationNone.31PART IIIItem 10. Directors, Executive Officers and Corporate GovernanceThe following table sets forth the name, age, and position of our directors and executive officers as of March 20, 2019:Name Age Director Since Positions with our Company Cheemin Bo-Linn(1) 65 April 17, 2017 Director, Chair of Audit CommitteeVivekanand Mahadevan(1) 65 December 1, 2014 Director, Chair of Nominating and Governance CommitteeDuncan McEwan(1) 65 May 10, 2017 Director, Chair of Compensation CommitteePeter Tassiopoulos 50 March 7, 2014 Chief Executive Officer and DirectorKurt L. Kalbfleisch 53 N/A Senior Vice President, Chief Financial Officer and SecretaryJoseph L. O’Daniel 48 N/A President_______________(1)Member of Audit Committee, Compensation Committee and Nominating and Governance Committee.Each of the above-listed directors served in such capacities for all of fiscal 2018. There are no family relationships between any of our directors orexecutive officers, and there are no arrangements or understandings between any of the directors and any other person pursuant to which such director was oris selected as a director.Dr. Cheemin Bo-Linn is the Chief Executive Officer and President of Peritus Partners Inc., an international consulting group recognized for leadingcompanies to increasing business valuation or next level growth or merger and acquisition (“M&A”) and has held this position since January 2013. FromSeptember 2010 to November 2012, she was Chief Marketing Officer, Chief Revenue Officer and consultant at NetLine Corporation, a global online multi-channel digital media network, mobile applications and content marketing services company. From July 2006 to August 2010, she was President of PeritusPartners Inc./BL Group. From June1980 to June 2006, she held a number of senior executive business management roles including at IBM as Vice-Presidentof Electronics, and other roles with responsibilities ranging from strategy, marketing, sales, operations and investments across storage and software productsand consulting services. She presently serves as a member of the Board of Directors of SNOMED, a global software language. She previously served as amember of the Board of Directors of multiple public and private companies. She holds a Doctorate in Education focused on “Computer-based ManagementInformation Systems and Organizational Change” from the University of Houston.Vivekanand Mahadevan has been the Chief Executive Officer of Dev Solutions, Inc., a consulting firm that helps technology startups build next-generation market leaders in data analytics, security, storage and cloud markets since March 2012. Mr. Mahadevan was the Chief Strategy Officer for NetApp,Inc., a supplier of enterprise storage and data management software and hardware products and services, from November 2010 until February 2012. Prior tothat time served as Vice President of Marketing for LSI Corporation, an electronics company that designs semiconductors and software that accelerate storageand networking, from January 2009 to September 2010. Prior to LSI Corporation, he was Chief Executive Officer of Deeya Energy, Inc., and has also heldsenior management positions with leading storage and systems management companies including BMC Software, Compaq, Ivita, and Maxxan Systems. Mr.Mahadevan previously served as a member of the Board of Directors of Violin Memory, Inc. Mr. Mahadevan holds an M.B.A. in Marketing and MS inEngineering from the University of Iowa as well a degree in Mechanical Engineering from the Indian Institute of Technology.32Duncan J. McEwan is president of Diligent Inc., a consulting company he founded in 1991 specializing in M&A and strategic advice for technology-based clients. Mr. McEwan was Executive Vice President and Chief Strategy Officer of Call-Net Enterprises Inc., a provider of long-distance telephoneservices until it merged into Rogers Communication Inc. (2004-2005); President and Chief Operating Officer of Sprint Canada Inc., an integrated, nationaltelecommunications provider (2001-2004); Chief Executive Officer of Northpoint Canada Communications, a provider of high-speed data and Internet (DSL)lines (2000-2001); Vice President of Business Development of Canadian Satellite Communications (“Cancom”) (1996-1998); and President and ChiefExecutive Officer of Cancom (1998-2000). Mr. McEwan has been Chairman of the Board of Geminare, Inc. since 2010, an emerging global leader in businesscontinuity and cloud-based software systems and has previously served on a number of other public and private company boards. Mr. McEwan is a graduateof the University of Toronto.Peter Tassiopoulos has served as the Chief Executive Officer of the Company since November 14, 2018. Mr. Tassiopoulos served as President of theCompany from December 1, 2014 until his appointment to Chief Executive Officer. Mr. Tassiopoulos previously served as the Chief Executive Officer of theCompany from March 2013 until December 1, 2014. Mr. Tassiopoulos has extensive experience in information technology business development and globalsales as well as leading early-stage technology companies. He was also actively involved as a business consultant prior to his tenure with the Company,including acting as Chief Operating Officer and then Chief Executive Officer of BioSign Technologies Inc. from September 2009 to April 2011 and ChiefExecutive Officer of IgeaCare Systems Inc. from February 2003 to December 2008.Kurt L. Kalbfleisch has served as Senior Vice President and Chief Financial Officer of the Company since December 1, 2014, and is now serving inthese positions in an interim role since the Overland Divestiture on November 13, 2018 while the Company looks for his replacement. In November 2018, theCompany entered into a transition services agreement with Overland, under which Mr. Kalbfleisch is providing ongoing services to the Company as itsinterim chief financial officer. Mr. Kalbfleisch has served as Overland's Senior Vice President since June 2012, Chief Financial Officer since February 2008,and Secretary since October 2009. Prior to that, he served as Overland's Vice President of Finance from July 2007 to June 2012. Mr. Kalbfleisch also serves onthe board of Paladin Group.Joseph L. O’Daniel has served as President of the Company since November 14, 2018. Since January 2017, Mr. O’Daniel, served as a Vice Presidentand President of Virtualization and Professional Services for the Company. He previously served as president and chief executive officer of UnifiedConneXions, Inc. from 2001 and as founder of HVE ConneXions, LLC from April 2013 until their acquisitions by the Company in January 2017. Mr.O’Daniel has over 20 years of experience in the virtualization and technology industry and has extensive experience in executive leadership positions.Section 16(a) Beneficial Ownership Reporting ComplianceSection 16(a) of the Exchange Act requires our directors, executive officers and beneficial owners of more than 10% of our common stock to filereports of ownership and changes in ownership with the SEC. Based solely on copies of these reports provided to us and written representations from ourexecutive officers and directors that no other reports were required, we believe that these persons met all of the applicable Section 16(a) filing requirementsduring fiscal 2018, with the exception of one late Form 4 filing related to one transaction for Jenny Yeh, the Company’s former Senior Vice President andGeneral Counsel.Code of EthicsWe have adopted a code of ethics that applies to the members of our board of directors, executive officers and all employees. Such code is posted onthe Company’s website and is available at www.sphere3d.com. If we make any substantive amendments to the Code of Business Conduct and Ethics Policyor grant any waiver from a provision of the code applying to our principal executive officer or our principal financial or accounting officer, we will disclosethe nature of such amendment or waiver on our website or in a current report on Form 8-K.33Audit CommitteeWe have a standing audit committee as defined in Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. The members of the AuditCommittee are Cheemin Bo-Linn, Duncan L. McEwan and Vivekanand Mahadevan.In addition to being independent under NASDAQ Marketplace Rule 5605(a)(2), all members of the Audit Committee must meet the additionalindependence standards for audit committee members set forth in Rule 10A-3(b)(1) of the Exchange Act and NASDAQ Marketplace Rule 5605(c)(2)(A). TheBoard of Directors has determined that Dr. Bo-Linn qualifies as an audit committee financial expert as defined in Item 407(d)(5) of Regulation S-K under theExchange Act.Item 11. Executive CompensationSummary Compensation TableThe following table summarizes the compensation earned during the fiscal years ended December 31, 2018 and 2017 by our current and formerprincipal executive officers, and our other most highly compensated executive officers (referred to as our “named executive officers”).Name and Principal Position Year Salary($) Share-basedAwards($) Non-equityIncentive PlanCompensation(1)($) All OtherCompensation(2) ($) TotalCompensation($) Peter Tassiopoulos(3)(4) 2018 239,938 — — 404,831(5)644,769Chief Executive Officer 2017 237,548 157,000(6)59,387 4,643 458,578Eric L. Kelly(7) 2018 364,615 — — 199,224(8)563,839Former Chief Executive Officer 2017 400,000 889,900(9)100,000 61,718 1,451,618Kurt L. Kalbfleisch 2018 300,000 — — 522,828(10)822,828Senior Vice President and Chief Financial Officer 2017 300,000 478,912(11)45,000 36,984 860,896Joseph L. O’Daniel(12) 2018 200,000 181,284(13)— 11,856 393,140President _______________(1)The amounts shown in the “Non-equity Incentive Plan Compensation” column represent bonuses awarded to the named executive officer for theapplicable year under our bonus program in effect for that year.(2)The amounts shown in the “All Other Compensation” column reflect amounts we paid on each named executive officers’ behalf for healthinsurance and life insurance premiums and certain out-of-pocket medical expenses, unless otherwise footnoted.(3)As a result of the Overland Divestiture, on November 14, 2018, Mr. Tassiopoulos ceased to serve as the Company’s President and was appointed asthe Company’s Chief Executive Officer.(4)The dollar amounts reported for Mr. Tassiopoulos in the above table are presented after conversion from Canadian dollars to U.S. dollars. For 2018and 2017, the average U.S. dollar to Canadian dollar conversion rate in effect was 1.292 and 1.305, respectively.(5)This amount includes accrued severance and change of control benefits in the amount of $400,000 that may be payable to Mr. Tassiopoulos underthe compensation arrangements described below as a result of the Overland Divestiture. These benefits are being negotiated with Mr. Tassiopoulosand are contingent upon his providing the Company with a general release of all claims.(6)This award is a restricted stock unit which was granted on July 10, 2017 and was valued at $31.40 per share on the grant date (the closing marketprice for a share of our common stock on that date). Mr. Tassiopoulos irrevocably declined this award subsequent to Board approval.34(7)As a result of the Overland Divestiture, Mr. Kelly’s employment concluded with the Company effective November 14, 2018.(8)This amount includes a negotiated payment of $160,000 in satisfaction of Mr. Kelly’s rights to certain cash payments under the compensationagreements described below as a result of the Overland Divestiture. This amount is being paid over 24 months.(9)This amount is comprised of two awards: i) a restricted stock unit for 6,000 shares granted on July 10, 2017 and was valued at $31.40 per share onthe grant date (the closing market price for a share of our common stock on that date); and ii) a restricted stock unit for 35,937 shares granted onDecember 18, 2017 and was valued at $19.52 per share on the grant date (the closing market price for a share of our common stock on that date).Mr. Kelly irrevocably declined his restricted stock unit granted on July 10, 2017 subsequent to Board approval.(10)This amount includes accrued severance and change of control benefits in the amount of $450,000 that may be payable to Mr. Kalbfleisch underthe compensation arrangements described below as a result of the Overland Divestiture. A portion of the accrued severance is expected to be paidby Overland. These benefits are being negotiated with Mr. Kalbfleisch and are contingent upon his providing the Company with a general releaseof all claims. In addition, this amount includes certain expenses reimbursed by the Company for a vacation that Mr. Kalbfleisch was required tocancel during 2018 and an additional payment by the Company to cover his tax liabilities with respect to these reimbursed expenses.(11)This amount is comprised of two awards: i) a restricted stock unit for 4,000 shares granted on July 10, 2017 and was valued at $31.40 per share onthe grant date (the closing market price for a share of our common stock on that date); and ii) a restricted stock unit for 18,100 shares granted onDecember 18, 2017 and was valued at $19.52 per share on the grant date (the closing market price for a share of our common stock on that date).(12)Mr. O’Daniel was appointed as the Company’s President on November 14, 2018.(13)This is a restricted stock award which was granted on February 20, 2018 and was valued at $18.72 per share on the grant date (the closing marketprice for a share of our common stock on that date).35Outstanding Equity Awards at 2018 Fiscal Year-EndThe following table provides information about the current holdings of stock and option awards by our named executive officers at December 31,2018.Name Option-based Awards Stock Awards Grant Date Number ofSecuritiesUnderlyingUnexercised Options(#)Number ofSecuritiesUnderlyingUnexercisedOptions (#) OptionExercisePrice(1)($)OptionExpirationDate Number of Unitsof Stock NotVested (#) Market Valueof Units ofStock NotVested(2)($) ExercisableUnexercisable Peter Tassiopoulos 9/16/2013 500 — 414.86 9/15/2023 — —Eric L. Kelly 7/9/2013 4,250 — 100.62 7/8/2023(3)— — 9/16/2013 125 — 414.86 9/15/2023(3)— — 8/26/2015 700 — 542.00 8/26/2021(3)— — 12/18/2017 29,947(4) 91,338Kurt L. Kalbfleisch 8/26/2015 500 — 542.00 8/26/2021 — — 12/18/2017 — — — — 12,066(5) 36,801_______________(1)The exercise prices reported for the options expiring in 2023 for Messrs. Kelly and Tassiopoulos in the table above are presented after conversionfrom Canadian dollars to U.S. dollars based on an exchange rate of 1.292 Canadian dollars to one U.S. dollar, which is the average conversion ratein effect for 2018.(2)Computed by multiplying the number of unvested shares by $3.05, the closing market price of our common shares on December 31, 2018.(3)These options were cancelled on February 14, 2019 due to Mr. Kelly’s termination of employment on November 14, 2018. Under the optionagreements, Mr. Kelly had three months from his termination date to exercise his vested options.(4)These shares were subject to accelerated vesting pursuant to the terms of the RSU agreement as a result of the Overland Divestiture; however,acceleration of these shares was contingent upon Mr. Kelly providing us with a general release of all claims. Mr. Kelly provided the Companywith a signed release in February 2019, at which time the shares vested and were released to Mr. Kelly.(5)This stock award is scheduled to vest in bi-annual installments beginning on June 18, 2019 and ending on December 18, 2020. These shares aresubject to accelerated vesting pursuant to the terms of the RSU agreement as a result of the Overland Divestiture; however, acceleration of theseshares is being negotiated with Mr. Kalbfleisch and is subject to his providing us with a general release of all claims.36Executive Officer CompensationOur executive compensation programs are determined by the Compensation Committee, within the scope of the authority delegated to it by our Boardof Directors and subject to applicable law. The goals of our program are to attract and retain highly qualified and experienced executives and to providecompensation opportunities that are linked to corporate and individual performance. Decisions by the Compensation Committee on our executivecompensation programs are subjective and the result of its business judgment, which is informed by the experiences of its members. The named executiveofficers do not have any role in determining their own compensation, although the Compensation Committee does consider the recommendations of theChief Executive Officer in setting compensation levels for the named executive officers other than himself. The primary components of our executivecompensation program are base salary, performance bonuses and long-term equity incentive awards. As described in more detail below, the Board approvedcertain changes to our executive compensation program in December 2017, including certain severance arrangements and those described under “Stay BonusAgreements” and “Sale Bonus Plan”. As noted above, the benefits that may be payable under these arrangements in connection with the Overland Divestiturehave been under negotiation with the named executive officers.Base Salaries. Base salaries are primarily intended to attract and retain highly qualified executives by providing them with fixed, predictable levels ofcompensation. The named executive officers’ salary levels are specified in their employment agreements (other than for Mr. Tassiopoulos who is not a partyto an employment agreement with the Company) and are subject to periodic review and adjustment by the Compensation Committee.Performance Bonuses. The Compensation Committee approved a bonus plan for fiscal 2018. The bonus plan was divided into two bonus periods, withthe first period consisting of the first two quarters of 2018 and the second period consisting of the last two quarters of fiscal 2018. The bonus amounts weredetermined based on our revenue and operating expenses for each bonus period against performance targets established by the Compensation Committee forthat period. The Compensation Committee also approved the following target bonuses for the named executive officers participating in the plan (in each caseexpressed as a percentage of the executive’s annual base salary: Mr. Kelly - 100%; Mr. Tassiopoulos - 100%; Mr. O’Daniel - 100%; and Mr. Kalbfleisch -60%. No bonuses were paid to the named executive officers for fiscal 2018 under the plan.Long-Term Equity Incentive Awards. Long-term equity incentives are intended to align the named executive officers’ interests with those of ourshareholders as the ultimate value of these awards depends on the value of the Company’s shares. The Company has historically granted equity awards in theform of stock options with an exercise price that is equal to the per-share closing price of our common shares on the grant date. In recent years, restricted stockunits have also been granted as provided for under the Company’s 2015 Plan. The Compensation Committee believes that stock options are an effectivevehicle for aligning the interests of our executives with those of our shareholders as the executive will only realize value on their options if the share priceincreases during the period between the grant date and the date the stock option is exercised. The stock options and restricted stock units function as aretention incentive for the named executive officers as they typically vest over a multi-year period following the date of grant. Restricted stock units, whichare payable in our common shares, also link the interests of the award recipient with those of our shareholders as the potential value of the award is directlylinked to the value of our common shares. The named executive officers’ equity awards are subject to accelerated vesting in certain circumstances under theiragreements with the Company described below.Stay Bonus Agreements. In December 2017, the Board approved stay bonus agreements for each of our named executive officers and certain other keyemployees. Under these agreements, one-half of the executive’s stay bonus will be payable if the executive remains employed with us through a change incontrol of the Company, and the other one-half of the stay bonus will be payable if the executive remains employed with us for three months after the changein control. If the executive’s employment is terminated by the Company without cause or by the executive for good reason (as such terms are defined in theagreement), any portion of the stay bonus that has not previously been paid will be payable on the executive’s termination (regardless of whether a change incontrol has occurred). The aggregate stay bonus opportunity for each of the executive officers is as follows: Mr. Kelly - $800,000; Mr. Kalbfleisch -$268,000; and Mr. Tassiopoulos - $330,000. In each case, payment of the stay bonus is contingent upon the executive providing the Company with a releaseof claims.37Sale Bonus Plan. To provide an additional incentive for our named executive officers and certain other key employees to achieve a sale of theCompany, we adopted a sale bonus plan in 2017 that provides for participants to receive a specified percentage of the net consideration from one or morequalifying transactions. For purposes of the plan, a “qualifying transaction” is generally a sale of a majority of the Company’s stock or a sale of any of itsassets, and the “net consideration” is generally (1) the total proceeds to be paid to the Company or its stockholders in the qualifying transaction, less (2) theCompany’s net debt at the time of the transaction, less (3) amounts payable by the Company under the stay bonus agreements described above and theCompany’s other expenses incurred in the transaction. Upon a qualifying transaction, a bonus pool equal to 20% of the net consideration in the transaction isestablished, with each participant being entitled to receive his or her specified percentage of the bonus pool (subject to the terms and conditions of the plan).The specified percentage of the bonus pool that is currently allocated to each of the executive officers is as follows: Mr. Kelly - 30%; Mr. Kalbfleisch - 20%;Mr. Tassiopoulos - 20%; and Mr. O’Daniel - 20%. A participant must be employed with the Company at the time of the qualifying transaction (or have beenterminated by the Company without cause or resigned for good reason within the period of 120 days prior to the qualifying transaction) to be eligible for abonus with respect to the qualifying transaction. If a participant resigns (other than for good reason) or otherwise forfeits his or her interest under the bonusplan, the forfeited interest may be regranted by the Board as one or more new awards under the plan or, to the extent not re-granted before the time of aqualifying transaction, would be reallocated to the other participants on a pro-rata basis. Bonuses under the plan would generally be paid in connection withthe closing of the qualifying transaction, but may be subject to any deferred payment arrangement (such as an escrow or earn-out provision) that applies tothe consideration paid in the transaction to the Company or its stockholders. No bonuses were payable to any of the named executive officers under the salebonus plan in connection with the Overland Divestiture.Employment, Severance and Change in Control AgreementsPeter Tassiopoulos. In December 2017, the Board approved certain compensation arrangements for Mr. Tassiopoulos. Pursuant to these arrangements,if Mr. Tassiopoulos’ employment continues through a change in control of the Company (or if his employment is terminated by the Company without causeor he resigns for good reason (as such terms are defined in the agreement) prior to the change in control), he will be entitled to receive a lump sum payment of$360,000, and his outstanding and unvested equity-based awards granted by the Company will fully accelerate. In addition, if at any time his employment isterminated by the Company without cause or he resigns for good reason, he will be entitled to receive an amount equal to the estimated premiums he wouldbe required to pay to continue health insurance coverage under our insurance plans for himself and his eligible dependents under COBRA for 12 monthsfollowing the date of his termination. The benefits described above are contingent upon Mr. Tassiopoulos providing us with a general release of all claimsand the entry into a settlement and release agreement by Mr. Tassiopoulos with respect to his prior bonus and severance arrangements with the Company.Eric L. Kelly. In connection with the Overland Divestiture, Mr. Kelly ceased to serve as the Company’s Chief Executive Officer and no longer holdsany positions with the Company. Prior to his termination and in connection with our acquisition of Overland, we assumed the employment agreement then ineffect between Overland and Mr. Kelly, who had been serving as Overland’s President and Chief Executive Officer and was appointed our Chairman andChief Executive Officer, effective December 1, 2014. The agreement provided for Mr. Kelly to earn a base salary of $400,000 and to be eligible to receive anannual bonus based upon the achievement of financial and management objectives reasonably established by our Board of Directors or an authorizedcommittee of our Board of Directors. His annual bonus target was 100% of the greater of $400,000 or his base salary as of the end of the applicable fiscalquarter or year in which the bonus is earned, and he had the opportunity to earn an annual bonus of up to 150% of the target bonus. To the extent that anytravel, lodging or auto-expense reimbursements we make to Mr. Kelly are taxable to him, we will provide him with a tax restoration payment so that he willbe put in the same after-tax position as if such reimbursements had not been subject to tax. Mr. Kelly’s employment agreement automatically renewed eachyear for an additional one-year term.38Mr. Kelly’s employment agreement also provided that if we terminate his employment without cause or if he resigned from employment for goodreason (other than in the circumstances contemplated by his retention agreement described below), we would be obligated to pay him an aggregate severancepayment equal to the sum of (i) 150% of the greater of his base salary then in effect or his original base salary, (ii) a portion of his target bonus prorated basedon the number of days he was employed during the period on which the target bonus is based (such pro-rated target bonus to also be paid if his terminationwere due to his death or disability), (iii) an amount equal to the estimated premiums he would be required to pay to continue health insurance coverage underour insurance plans for himself and his eligible dependents under COBRA for 18 months following the date of his termination, and (iv) the estimated amountnecessary for him to continue life, accident, medical and dental insurance benefits for himself and his eligible dependents in amounts substantially similar tothose which he received immediately prior to the date of his termination for a period of 18 months following his termination (reduced by the amount of anypayment for COBRA premiums as described in clause (iii) above). For these purposes, the terms “cause” and “good reason” are defined in the agreement, anda termination of employment by us without cause included a termination by us at the end of the term then in effect. The severance payment would be made inequal monthly installments over 18 months in accordance with our regular payroll practices. In addition, Mr. Kelly would be entitled to accelerated vestingfor any unvested portion of his then outstanding stock options and any other equity-based awards that would otherwise have vested during the 12-monthperiod following his termination. In the case of vested stock options, he would be permitted to exercise such options in whole or in part at any time withinone year of the date of his termination, subject to earlier termination upon the expiration of the maximum term of the applicable options under the applicableplan or upon a change in control. The severance benefits described above are contingent upon Mr. Kelly providing us with a general release of all claims. Mr.Kelly’s employment agreement was assigned to Overland following the Overland Divestiture.In addition, in connection with our acquisition of Overland, we also assumed the retention agreement then in effect between Overland and Mr. Kelly.In December 2017, the Board approved an amended and restated version of this agreement with Mr. Kelly. The amended retention agreement provides that ifMr. Kelly’s employment continues through a change in control of the Company (or if his employment is terminated by the Company without cause or heresigns for good reason (as such terms are defined in the agreement) within sixty days prior to the change in control), he will be entitled to a lump sumpayment equal to 150% of the sum of his base salary at the time of the consummation of the change of control or his termination date (whichever is higher)and his annual target bonus. Mr. Kelly will also be entitled to accelerated vesting of his then-outstanding and unvested stock options and other equity-basedawards granted by the Company, and he will be permitted to exercise vested stock options for one year of the date of his termination, subject to earliertermination upon the expiration of the maximum term of the option or upon a change of control. In addition, if his employment is terminated by theCompany without cause or he resigns for good reason within the sixty-day period before a change in control or any time after the change in control, Mr. Kellywill be entitled to a lump sum payment of (i) an amount equal to the estimated premiums he would be required to pay to continue health insurance coverageunder our insurance plans for himself and his eligible dependents under COBRA for 18 months following the date of his termination, and (ii) the estimatedamount necessary for him to continue life, accident, medical and dental insurance benefits for himself and his eligible dependents in amounts substantiallysimilar to those which he received immediately prior to the date of his termination for a period of 18 months following his termination (reduced by theamount of any payment for COBRA premiums as described in clause (i) above). If any portion of any payment under Mr. Kelly’s retention agreement wouldconstitute an “excess parachute payment” within the meaning of Section 280G of the U.S. Internal Revenue Code, then that payment will be reduced to anamount that is one dollar less than the threshold for triggering the tax imposed by Section 4999 of the U.S. Internal Revenue Code if such reduction wouldresult in a greater benefit for Mr. Kelly on an after-tax basis. The benefits provided under Mr. Kelly’s retention agreement are contingent upon him providingus a general release of claims. In no event will Mr. Kelly be entitled to both the benefits provided under his retention agreement and the severance benefitsprovided under his employment agreement.The Overland Divestiture constituted a change in control under the retention agreement. Mr. Kelly provided the Company with a general release ofclaims in February 2019 which provided for accelerated vesting of his restricted stock units and a negotiated payment of $160,000 in satisfaction of his rightsto certain cash payments under the retention agreement and other compensation arrangements described above.39Kurt L. Kalbfleisch. In connection with our acquisition of Overland, we assumed the employment agreement then in effect between Overland and Mr.Kalbfleisch, who had been serving as Overland’s Senior Vice President and Chief Financial Officer and was appointed our Senior Vice President and ChiefFinancial Officer, effective December 1, 2014. In December 2017, the Board approved an amended and restated version of this agreement with Mr.Kalbfleisch. The restated agreement provides for Mr. Kalbfleisch to earn a base salary of $300,000. Mr. Kalbfleisch’s employment agreement automaticallyrenews each year for an additional one-year term. We may unilaterally modify Mr. Kalbfleisch’s cash compensation at any time, subject to Mr. Kalbfleisch’sright to terminate his employment for good reason. If we terminate Mr. Kalbfleisch’s employment without cause or he resigns his employment for good reason(as such terms are defined in the agreement), in either case more than sixty days before a change in control of the Company, he will be entitled to anaggregate severance payment equal to the sum of (i) the greater of his annual base salary then in effect or his original base salary of $300,000, (ii) a portion ofany target bonus prorated based on the number of days he was employed during the period on which the target bonus is based (such pro-rated target bonus toalso be paid if his termination were due to his death or disability), (iii) an amount equal to the estimated premiums he would be required to pay to continuehealth insurance coverage under our insurance plans for himself and his eligible dependents under COBRA for 12 months following the date of histermination, and (iv) the estimated amount necessary for him to continue life, accident, medical and dental insurance benefits for himself and his eligibledependents in amounts substantially similar to those which he received immediately prior to the date of his termination for a period of 12 months followinghis termination (reduced by the amount of any payment for COBRA premiums as described in clause (iii) above). The severance payment will be made inequal monthly installments over the 12 months following termination of employment. In addition, Mr. Kalbfleisch will be entitled to accelerated vesting ofany unvested portion of his then outstanding stock options and other equity-based awards that would otherwise have vested during the 12-month periodfollowing his termination. In the case of vested stock options, he will be permitted to exercise such options in whole or in part at any time within one year ofthe date of his termination, subject to earlier termination upon the expiration of the maximum term of the applicable options under the applicable plan orupon a change in control.Mr. Kalbfleisch’s restated employment agreement also provides that if his employment continues through a change in control of the Company (or ifhis employment is terminated by the Company without cause or he resigns for good reason (as such terms are defined in the agreement) within sixty daysprior to the change in control), he will be entitled to a lump sum payment equal to 150% of his base salary then in effect. Mr. Kalbfleisch will also be entitledto accelerated vesting of his then-outstanding and unvested stock options and other equity-based awards granted by the Company, and he will be permittedto exercise vested stock options for one year of the date of his termination, subject to earlier termination upon the expiration of the maximum term of theoption or upon a change of control. In addition, if his employment is terminated by the Company without cause or he resigns for good reason within thesixty-day period before a change in control or any time after the change in control, Mr. Kalbfleisch will be entitled to a lump sum payment of (i) an amountequal to the estimated premiums he would be required to pay to continue health insurance coverage under our insurance plans for himself and his eligibledependents under COBRA for 12 months following the date of his termination, and (ii) the estimated amount necessary for him to continue life, accident,medical and dental insurance benefits for himself and his eligible dependents in amounts substantially similar to those which he received immediately priorto the date of his termination for a period of 12 months following his termination (reduced by the amount of any payment for COBRA premiums as describedin clause (i) above). If any payment under Mr. Kalbfleisch’s employment agreement would constitute an “excess parachute payment” within the meaning ofSection 280G of the U.S. Internal Revenue Code, then that payment will be reduced to an amount that is one dollar less than the threshold for triggering thetax imposed by Section 4999 of the U.S. Internal Revenue Code if such reduction would result in a greater benefit for Mr. Kalbfleisch on an after-tax basis. Ineach case, the severance and change in control benefits provided under Mr. Kalbfleisch’s employment agreement are contingent upon him providing us witha general release of all claims.40Joseph L. O’Daniel. Mr. O’Daniel, who became our President in November 2018, is an at-will employee and his employment may be terminated by usfor any reason, with or without notice. Mr. O’Daniel currently earns an annual salary of $200,000 per year and is eligible to receive an annual bonus basedupon the achievement of financial and management objectives reasonably established by our Board of Directors or an authorized committee of our Board ofDirectors. His annual bonus target is 100% of the greater of $200,000 or his base salary as of the end of the applicable fiscal quarter or year in which thebonus is earned. Upon his joining us in January 2017, we entered into an offer letter with Mr. O’Daniel that provided for him to be paid a retention bonus inthe amount of $700,442 if he continued employment with us through January 12, 2018. In February 2018, Mr. O’Daniel received an award of fully vestedshares of our common stock valued at $181,284 in lieu of cash for a portion of the retention bonus. The remaining amount of the retention bonus has not yetbeen paid and is being renegotiated by the parties. Mr. O’Daniel’s offer letter also provided that if his employment was terminated by us without cause beforethe second anniversary of his January 2017 start date, then he would be eligible to receive severance benefits consisting of the retention bonus and the basesalary he would have received for the period from the date of termination until the second anniversary of his start date. This severance provision has nowexpired and Mr. O’Daniel is no longer eligible for such severance.Discontinued OperationsAs previously disclosed, in November 2018, the Company sold all of the issued and outstanding shares of capital stock of Overland Storage, Inc (the“Overland Divestiture”). The Overland Divestiture constituted a change in control as defined in each of the foregoing arrangements, and each of our namedexecutive officers remained employed with us through the closing of the transaction. Accordingly, each named executive officer would be entitled to theapplicable payments and benefits under these arrangements on the terms described above. Mr. Kelly’s employment agreement has been assigned to Overland.Any other benefits to which each named executive officer may be entitled are being negotiated and are contingent upon the named executive officerproviding us with a general release of all claims.2015 Performance Incentive PlanEmployees, officers, directors and consultants that provide services to us or one of our subsidiaries may be selected to receive awards under the 2015Plan. Our Board of Directors has broad authority to administer the 2015 Plan, including the authority to select participants and determine the types of awardsthat they are to receive, determine the grants levels, vesting and other terms and conditions of awards, and construe and interpret the terms of the 2015 Planand any agreements relating to the plan.A total of 640,843 common shares are authorized for issuance with respect to awards granted under the 2015 Plan (not including shares subject toterminated awards under our Second Amended and Restated Stock Option Plan that become available for issuance under the 2015 Plan). In addition, theshare limit will automatically increase on the first trading day of April 2019 by an amount equal to the lesser of (i) ten percent (10%) of the total number ofcommon shares issued and outstanding on March 31, 2019 or (ii) such number of common shares as may be established by the Board, and will automaticallyincrease on the first trading day in January of each calendar year thereafter during the term of the 2015 Plan (commencing with January 2020) by an amountequal to the lesser of (i) ten percent (10%) of the total number of common shares issued and outstanding on December 31 of the immediately precedingcalendar year, or (ii) such number of common shares as may be established by the Board. Awards under the 2015 Plan may be in the form of incentive ornonqualified stock options, stock appreciation rights, stock bonuses, restricted stock, stock units and other forms of awards including cash awards. Awardsunder the plan generally will not be transferable other than by will or the laws of descent and distribution, except that the plan administrator may authorizecertain transfers.The number and type of shares available under the 2015 Plan and any outstanding awards, as well as the exercise or purchase prices of awards, aresubject to customary adjustments in the event of stock splits, stock dividends and certain other corporate transactions. Generally, and subject to limitedexceptions set forth in the 2015 Plan, if we dissolve or undergo certain corporate transactions such as a merger, business combination or other reorganization,or a sale of all or substantially all of our assets, all awards then-outstanding under the 2015 Plan will become fully vested or paid, as applicable, and willterminate or be terminated in such circumstances, unless the Board of Directors provides for the assumption, substitution or other continuation of the award.The Board of Directors also has the discretion to establish other change in control provisions with respect to awards granted under the 2015 Plan.41The Board of Directors may amend or terminate the 2015 Plan at any time, but no such action will affect any outstanding award in any mannermaterially adverse to a participant without the consent of the participant. Plan amendments will be submitted to stockholders for their approval as required byapplicable law or deemed advisable by the Board of Directors. If not earlier terminated by the Board of Directors, the 2015 Plan will terminate on May 14,2025. The 2015 Plan is not exclusive - the Board of Directors may grant stock and performance incentives or other compensation, in stock or cash, underother plans or authority.401(k) PlanOur On-Track 401(k) Savings Plan covers all of our U.S. employees, provided they meet the requirements of the plan. Our 401(k) plan is intended toqualify under Section 401 of the Internal Revenue Code so that employee contributions and income earned on such contributions are not taxable toemployees until withdrawn. Employees may elect to defer up to 60% of their eligible compensation (not to exceed the statutorily prescribed annual limit) inthe form of elective deferral contributions to our 401(k) plan. However, our named executive officers qualify as highly compensated employees and may onlyelect to defer up to 8.5% of their eligible compensation (not to exceed the statutorily prescribed annual limit) in the form of elective deferral contributions toour 401(k) plan. Our 401(k) plan also has a catch up contribution feature for employees aged 50 or older (including those who qualify as highly compensatedemployees) who can defer amounts over the statutory limit that applies to all other employees. Our 401(k) Plan permits but does not require matchingcontributions by us on behalf of participants.Compensation of DirectorsThe following table provides compensation information for the members of our Board of Directors during 2018 who were not employed by us or any ofour subsidiaries (“non-employee directors”). Eric Kelly and Peter Tassiopoulos are each named executive officers who also served on the Board of Directorsduring 2018. The 2018 compensation information for each of these individuals is presented in the Summary Compensation Table above and they were notentitled to any additional compensation for their service on the Board during fiscal 2018.Name Fees Earned($) Stock Awards(1)($) All OtherCompensation($) Total($) Cheemin Bo-Linn 135,000 12,367(2)— 147,365Vivekanand Mahadevan 135,000 12,367(2)— 147,365Duncan McEwan 125,000 12,367(2)— 137,365_______________(1)At the end of fiscal 2018, our non-employee directors did not have any outstanding equity awards.(2)These amounts are comprised of two awards: i) a stock award for 561 shares granted on March 28, 2018 and was valued at $7.92 per share on thegrant date (the closing market price for a share of our common stock on that date); and ii) a stock award for 1,981 shares granted on May 8, 2018and was valued at $4.00 per share on the grant date (the closing market price for a share of our common stock on that date). The stock awards werefully vested on grant and paid in lieu of cash for fees associated with services on the Special Committee as described below.The non-employee board members are paid $10,000 per quarter for their service on the Board except that the Chair of the Audit Committee and theLead Board member are paid $12,500 per quarter for their service on the Board. During 2018, the Board also granted restricted stock units to certain non-employee directors as described in the notes to the table above. The Board retains complete discretion to adopt or modify our programs for providing cashand/or equity-based compensation to our non-employee directors as it deems appropriate from time to time.In August 2017, the Board formed a special committee (the “Special Committee”) to evaluate strategic options for the Company and appointed Messrs.Mahadevan and McEwan, and Dr. Bo-Linn to the Special Committee. Each member earned $10,000 per month for their service on the Special Committee.Beginning in January 2018 and through April 2018, the $10,000 per month was paid 50% in cash and 50% in common shares. The Special Committee wasterminated in November 2018.42Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersEquity Compensation Plan InformationThe following table provides information about our equity compensation plans as of the last day of fiscal 2018, unless otherwise footnoted below. TheCompany maintains its 2012 Option Plan (“2012 Plan”), 2015 Performance Incentive Plan (“2015 Plan”), and 2015 Employee Stock Purchase Plan (“ESPP”),which have been approved by the Company’s shareholders. No new awards may be granted under the 2012 Plan.Plan Category (a)Number of Common Sharesto be IssuedUpon Exerciseof OutstandingOptions and Rights (b)Weighted-averageExercise Priceof OutstandingOptions and Rights(1) (c)Number of CommonShares RemainingAvailable for FutureIssuance UnderEquity CompensationPlans (ExcludingShares Reflectedin Column (a)) Equity compensation plans approved by our shareholders(2) 71,404 $322.57 179,956Equity compensation plans not approved by our shareholders(3) 1,650 — —Total 73,054 179,956_________________(1)The weighted-average exercise prices do not reflect shares subject to outstanding awards of restricted stock units.(2)Of the aggregate number of shares that are to be issued upon exercise of outstanding options and rights as reported in column (c), 142,456 wereavailable under the 2015 Plan and 37,500 were available under the ESPP. The 2015 Plan permits the granting of the following types of incentiveawards: stock options, stock appreciation rights, restricted shares, and stock units.(3)These figures represent stock units (the “Inducement Stock Units”) granted to certain employees as an inducement to their commencingemployment with us as provided under the Nasdaq listing rules. The Inducement Stock Units are generally subject to the same terms as stock unitsgranted under the 2015 Plan. The Inducement Stock Units vest over three years and are subject to earlier termination in the case of termination ofthe employee’s employment or a change in control of the Company.43SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTThe following table sets forth certain information with respect to the beneficial ownership of our common shares as of March 20, 2019 by eachshareholder known to us to beneficially own more than 5% of our common shares, each director, and each executive officer named in the SummaryCompensation table above, and all directors and executive officers of Sphere 3D as a group:Beneficial Owner(1) Number of SharesBeneficiallyOwned(2) Percent(3) Cyrus Capital Partners, L.P. 270,618(4)12.0%65 East 55 Street, 35th Floor New York, NY 10022 MF Ventures, LLC 226,821(5)9.9%201 Spear Street, 14th Floor San Francisco, CA 94105 Peter Tassiopoulos 1,000(6)*Eric L. Kelly 39,745(7)1.8%Kurt L. Kalbfleisch 7,902(8)*Joseph O'Daniel 10,625*Cheemin Bo-Linn 4,544*Duncan McEwan 3,596*Vivekanand Mahadevan 3,185*Current directors and executive officers as a group (6 persons) 30,852(9)1.4%_______________* Less than 1%(1)Except as otherwise indicated, the persons named in this table have sole voting and investment power with respect to all common shares shown asbeneficially owned by them. Unless otherwise noted, the address for each beneficial owner is: c/o Sphere 3D Corp., 895 Don Mills Road, Bldg.2,Suite 900, Toronto, Ontario, Canada M3C 1W3.(2)Under the rules of the Securities and Exchange Commission, a person is deemed to be the beneficial owner of shares that can be acquired by suchperson within 60 days upon the exercise of options or warrants and vesting of stock awards.(3)Calculated on the basis of 2,258,071 shares of common stock outstanding as of March 20, 2019, provided that any additional shares of commonstock that a stockholder has the right to acquire within 60 days after March 20, 2019 are deemed to be outstanding for the purpose of calculatingthat stockholder’s percentage beneficial ownership.(4)Information was obtained from Cyrus Capital Partners, L.P. pursuant to Schedule 13D/A filed on EDGAR on November 16, 2018 and Companyrecords. Certain funds and affiliates managed by Cyrus, directly and indirectly own these shares (the “Cyrus Group”). The Cyrus Group iscomprised of Cyrus Capital Partners, L.P., a Delaware limited partnership, (“Cyrus”), Crescent 1, L.P., a Delaware limited partnership (“Crescent”),CRS Master Fund, L.P., a Cayman Islands exempted limited partnership, (“CRS”), Cyrus Opportunities Master Fund II, Ltd., a Cayman Islandsexempted limited company, (“Cyrus Opportunities)”, Cyrus Select Opportunities Master Fund, Ltd., a Cayman Islands exempted limited company,(“Cyrus Select”), Cyrus Capital Partners GP, L.L.C., a Delaware limited partnership, (“Cyrus GP”), Cyrus Capital Advisors, L.L.C., a Delawarelimited liability company, (“Cyrus Advisors”), and Mr. Stephen C. Freidheim. Each of Crescent, CRS, Cyrus Opportunities and Cyrus Select, orcollectively the Cyrus Funds, are private investment funds engaged in the business of acquiring, holding and disposing of investments in variouscompanies. Cyrus is the44investment manager of each of the Cyrus Funds. Cyrus GP is the general partner of Cyrus. Cyrus Advisors is the general partner of Crescent andCRS. Mr. Freidheim is the managing member of Cyrus GP and Cyrus Advisors and is the Chief Investment Officer of Cyrus. Crescent, CRS, CyrusOpportunities, Cyrus Select and Mr. Freidheim have entered into an investment management agreement with Cyrus giving Cyrus full voting anddisposition power over the shares of common stock held by the Cyrus Group. Does not include 6,500,000 Preferred Shares which may becomeexercisable into shares of common stock, if later approved by the shareholders no sooner than May 13, 2019.(5)Information was obtained from MF Ventures, LLC pursuant to an Early Warning Report filed on SEDAR on March 8, 2019. These shares includethe right to acquire 37,500 shares upon exercise of warrants. MF Ventures, LLC is a limited liability company formed to make one or moreinvestments in business ventures or activities deemed appropriate by Victor B. MacFarlane, as Manager of MF Ventures, LLC. Mr. MacFarlane asManager of MF Ventures, LLC and Thaderine D. MacFarlane as a controlling member of MF Ventures, LLC share voting power over the shares ofcommon stock held by MF Ventures, LLC.(6)These shares include the right to acquire shares upon exercise of 500 stock options.(7)Information is based upon a Form 4 filed on EDGAR by Mr. Kelly on June 20, 2018, as adjusted for the share consolidation in November 2018,and Company records related to a release of vested RSU shares in February 2019.(8)These shares include the right to acquire shares upon exercise of 500 stock options. Does not include the release of restricted stock awards that areeligible for accelerated vesting as a result of the Overland Divestiture. Under the terms of the retention agreement with Mr. Kalbfleisch, unvestedrestricted stock awards were eligible for accelerated vesting at the closing of the Overland Divestiture, provided he executes a release of claims.(9)These shares include the right to acquire shares upon exercise of 1,000 stock options beneficially owned by our executive officers. Does notinclude release of restricted stock awards that are eligible for accelerated vesting as a result of the Overland Divestiture.Item 13. Certain Relationships and Related Transactions, and Directors IndependencePurchase Agreement. On February 20, 2018, the Company, Overland Storage, Inc., a California corporation and a wholly owned subsidiary of theCompany at such time (“Overland”), and Silicon Valley Technology Partners, Inc. (formerly Silicon Valley Technology Partners LLC) (“SVTP”), a Delawarecorporation established by Eric Kelly, the Company’s former Chief Executive Officer and Chairman of the Board of Directors, entered into a share purchaseagreement (the “Purchase Agreement”).On November 13, 2018, pursuant the Purchase Agreement, the Company sold to SVTP all of the issued and outstanding shares of capital stock ofOverland in consideration for (i) the issuance to the Company of shares of Series A Preferred Stock of SVTP representing 19.9% of the outstanding shares ofcapital stock of SVTP as of the closing with a value of $2.1 million, (ii) the release of the Company from outstanding debt obligations totaling $41.7 millionassumed by SVTP, and (iii) $1.0 million in cash proceeds from SVTP. In connection with the closing, the Company filed an articles of amendment to itsarticles of amalgamation setting forth the rights, privileges, restrictions and conditions of a new series of non-voting preferred shares of the Company (the“Series A Preferred Shares”) and entered into a Conversion Agreement, by and between the Company and FBC Holdings, pursuant to which $6.5 million ofthe Company’s outstanding secured debt was converted into 6,500,000 Series A Preferred Shares (the “Preferred Shares”).Related party note payable. The Company entered into a $0.5 million note payable held by SVTP. The note payable bears an interest at a rate of 8.0%per annum. The principal amount of the note payable along with any unpaid interest is due on May 13, 2019. The obligations under the note payable aresecured by the SVTP Preferred Shares held by the Company.45Series A Redeemable Preferred Shares. The Preferred Shares (i) are convertible into the Company’s common shares, subject to prior shareholderapproval, at a conversion rate equal to $1.00 per share, plus accrued and unpaid dividends, divided by an amount equal to 0.85 multiplied by a 15-dayvolume weighted average price per common share prior to the date the conversion notice is provided (the “Conversion Rate”), subject to a conversion pricefloor of $0.80, (ii) carry a cumulative preferred dividend at a rate of 8% of the subscription price per preferred share, (iii) are subject to mandatory redemptionfor cash at the option of the holders thereof after a two-year period, and (iv) carry a liquidation preference equal to the subscription price per preferred shareplus any accrued and unpaid dividends.The common shares issuable upon the conversion of the Preferred Shares may constitute more than 20% of the common shares of the Companycurrently outstanding and may result in a change of control of the Company, and therefore the Company will seek shareholder approval for the issuance of allcommon shares issuable upon conversion of the Preferred Shares; provided, however, that the Company shall not seek shareholder approval unless suchapproval would occur after the six-month anniversary of the initial issue date of the Preferred Shares. In the event shareholder approval is not obtained, FBCHoldings and its affiliates will not be entitled to convert such Preferred Shares into common shares, but any unaffiliated transferee may convert all or any partof the Preferred Shares held by such transferee into the number of fully paid and non-assessable common shares that is equal to the number of Preferred Sharesto be converted multiplied by the Conversion Rate in effect on the date of conversion; provided that, (x) after such conversion, the common shares issuableupon such conversion, together with all Common Shares held by such third party transferee that are or would be deemed to be aggregated under the rules ofthe Nasdaq Stock Market, in the aggregate would not exceed 19.9% of the total number of common shares of the Company then outstanding and (y) suchconversion and issuance would not otherwise violate or cause the Company to violate the Company’s obligations under the rules or regulations of theNasdaq Stock Market.Exchange and Buyout Agreement. In November 2018, in connection with the divestiture of Overland, the Company the entered into an Exchange andBuy-Out Agreement (the “Exchange Agreement”), between the Company, FBC Holdings, SVTP, and MF Ventures LLC (“MFV”). Under the terms of theExchange Agreement, (i) the Company granted FBC Holdings the right to exchange up to 2,500,000 of the Company’s Preferred Shares held by FBCHoldings for up to all of the SVTP Preferred Shares held by the Company (the “Exchange Right”), with such Exchange Right expiring within two years of theNovember 2018 closing, and (ii) MFV and SVTP have the right to purchase up to 2,120,301 of the SVTP Series A Preferred Shares held by FBCHoldings plus up to 2,500,000 Preferred Shares held by FBC Holdings (or, following exercise of the Exchange Right by FBC Holdings, the SVTP shares heldby FBC Holdings) (the “Buy-out Right”), with such Buy-out Right expiring within one year of the November 2018 closing. If MFV or SVTP exercise theirBuy-out Right prior to FBC Holdings’s exercise of its Exchange Right, then any Preferred Shares subject to the exercise of the Buy-out Right willautomatically be exchanged for the same number of SVTP Preferred Shares that would have been issued to FBC Holdings had the Exchange Right beenexercised prior to the buy-out.In connection with the Exchange Agreement, the Company entered into a security and pledge agreement between the Company and FBC Holdings,pursuant to which, among other things, the Company granted a security interest to FBC Holdings in all the SVTP Preferred Shares held by the Company tosecure the Company’s obligations under the Exchange Agreement.Assignment of Credit Agreement. In April 2016, the Company entered into a Credit Agreement with Opus Bank for a term loan. On June 6, 2018, theCredit Agreement was assigned by Opus Bank to Colbeck. On August 16, 2018, the Credit Agreement was assigned by Colbeck to FBC Holdings, a relatedparty. The Credit Agreement had a 13.25% simple annual interest rate. On November 13, 2018, the Company closed the transactions contemplated by thePurchase Agreement and, in connection therewith, SVTP assumed the obligations of the Company under the Credit Agreement, which had an outstandingbalance, including accrued interest and debt cost, of $20.4 million at such time. Further, in connection with of the closing of the Purchase Agreement,Overland, Tandberg Data GMBH, SVTP, and FBC Holdings amended and restated the Credit Agreement pursuant to which the Company was a third partybeneficiary of certain provisions therein.46For the year ended December 31, 2018, interest expense, including amortization of debt costs, on the credit facilities was $2.8 million, of which $0.5million was related party interest expense, and is included on in the statement of operation in net loss from discontinued operations.Private Placement. In August 2017, the Company entered into a securities purchase agreement with certain investors pursuant to which the Companyissued (i) 75,000 common shares, of which 49,375 common shares were issued to related parties, and (ii) warrants for the purchase of up to 75,000 commonshares, of which 49,375 warrants were issued to related parties, in a private placement in exchange for a cash payment of $3.0 million. The purchase price was$40.00 per common share and warrant to purchase one common share, and the exercise price of the warrants is $42.00 per warrant share.Related Party Warrant Exchange Agreement. In July 2017, the Company entered into amended and restated warrant agreements with certain holdersof warrants previously issued in March 2016 (the “Amended March 2016 Warrant”) and between December 2016 and March 2017 (the “Amended March2017 Warrants” and together with the Amended March 2016 Warrant, the “Amended and Restated Warrants”). Pursuant to the amended and restated warrantagreements, the Company issued an aggregate of 202,240 common shares, of which 164,423 common shares were issued to related parties, in exchange forthe cancellation of such warrants. Immediately after the exchange, the amended and restated warrant agreements became null and void.Registered Direct Offering and Concurrent Private Placement. On March 24, 2017, the Company entered into a securities purchase agreement withcertain investors party thereto, pursuant to which the Company issued to the investors, in the aggregate, 102,273 of the Company’s common shares, of which22,727 common shares and warrants to purchase 22,727 shares were issued to a related party, for gross proceeds of $4.5 million. The security purchaseagreement also provided for the concurrent private placement of warrants exercisable to purchase up to 108,409 common shares. Each warrant had an exerciseprice of $60.00 per warrant share. In August 2017, the Company issued additional common shares, which triggered a price adjustment for the March 2017warrants from $60.00 to $40.00 and the Company issued, in the aggregate, additional warrants exercisable to purchase up to 54,205 common shares, of whicha related party received 11,364 warrants exercisable to purchase common shares. In March 2018, the Company entered into warrant exchange agreements, ina privately negotiated exchange under Section 4(a)(2) of the Securities Act of 1933, as amended, pursuant to which the Company issued 178,875 commonshares in exchange for the surrender and cancellation of the Company’s outstanding March 24, 2017 warrants (the “Exchange”). Immediately after theExchange, the previously issued warrants became null and void. A related party participated in the Exchange by acquiring 37,500 common shares inexchange for the cancellation of a warrant to purchase 34,091 common shares.Private Placement. Between December 2016 and March 16, 2017, the Company completed a private placement and issued a total of 90,700 “Units” ata purchase price of $60.00 per Unit. Each Unit consisted of one common share and one warrant from each of two series of warrants. The Company receivedgross proceeds of $5.4 million in connection with the sale of the Units. The warrants were exercisable to purchase 181,400 common shares in the aggregate.In July 2017, the warrants issued between December 30, 2016 and March 16, 2017 were null and void as a result of the Amended and Restated Warrantsagreement.Related Party Secured Note. In April 2016, the Company modified its secured note with FBC Holdings, pursuant to which the holder made anadditional advance and principal amount under the secured note amount was increased to $24.5 million. The secured note had a 8.0% simple annual interestrate. The obligations under the secured note were secured by substantially all assets of the Company. On November 13, 2018, in connection with the closingof the Purchase Agreement, the Company entered into a Conversion and Royalty Agreement, by and among the Company, SVTP and FBC Holdings pursuantto which, among other things, SVTP assumed the obligations and liabilities of the Company with regard to $19.0 million of the secured note, includingaccrued interest expense, and effective upon the execution of such Conversion and Royalty Agreement, the Company and its subsidiaries were automaticallyreleased as obligors and guarantors under the secured note. Further, in connection with the closing, the Company entered into a Conversion Agreement, byand between the Company and FBC Holdings, pursuant to which the remaining $6.5 million of the Company’s secured debt was converted into 6,500,000Preferred Shares.For the years ended December 31, 2018 and 2017, we issued 219,434 and 73,287 common shares, respectively, for the settlement of fees associatedwith 2018 amendments to the loan and accrued interest expense. For the years ended December 31, 2018 and 2017, interest expense, including amortizationof debt costs, on the convertible note was $2.5 million and $2.2 million, respectively, and is included on in the statements of operations in net loss fromdiscontinued operations.47Related Party Debt. In December 2017, the Company entered into a $2.0 million subordinated promissory note with MF Ventures, LLC. Thepromissory note had a 12.5% simple annual interest rate. On November 13, 2018, pursuant to the Purchase Agreement, the promissory note balance of $2.3million, including interest paid in kind, was assumed by SVTP. For the year ended December 31, 2018, interest expense, including amortization of debt costs,on the related party promissory note was $0.3 million and is included in the statement of operation in net loss from discontinued operations.In September 2016, the Company entered into a $2.5 million term loan agreement with FBC Holdings. In January 2018 the loan was paid in full perthe term loan agreement. The term loan bore interest at a 20.0% simple annual interest rate. At December 31, 2018 the term loan was paid in full. For the yearsended December 31, 2017, interest expense, including amortization of debt costs, on the term loan was $0.3 million and is included in the statement ofoperation in net loss from discontinued operations.Indemnification of Our Executive Officers and DirectorsIn accordance with the by-laws of the Company, directors and officers are each indemnified by the Company against all liability and costs arising outof any action or suit against them from the execution of their duties, provided that they have carried out their duties honestly and in good faith with a view tothe best interests of the Company and have otherwise complied with the provisions of applicable corporate law.Director IndependenceThe Board has determined that the following current directors are independent within the meaning of NI 58-101 and NI 52-110 and NASDAQMarketplace Rule 5605(a)(2): Cheemin Bo-Linn, Vivekanand Mahadevan and Duncan McEwan. The Board has determined that Peter Tassiopoulos is notindependent because of his position as Chief Executive Officer of the Company. As a result, the Board is currently comprised of three independent directorsand a majority of independent directors.Item 14. Principal Accounting Fees and ServicesThe aggregate fees incurred by the Company’s current external auditor, Moss Adams, in each of the last two years for audit and other fees are as follows(in thousands): 2018 2017 Audit fees(1) $482 $525Audit related fees(2) 46 59Tax fees(3) 30 1All other fees(4) — — $558 $585___________________(1)Audit fees consist of fees billed for professional services rendered in connection with the audit of our annual consolidated financial statements,which were provided in connection with statutory and regulatory filings or engagements.(2)Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review ofour consolidated financial statements, and are not reported under audit fees.(3)Tax fees consist of fees billed for professional services rendered for IRS Section 302 net operating loss limitation study.(4)All other fees consist of fees for products and services other than the services reported above. There were no such services rendered to us.Pre-Approval Policies and ProceduresThe Audit Committee has the authority to pre-approve all non-audit services to be provided to the Company by its independent auditor. All servicesprovided by Moss Adams during the years 2018 and 2017 were pre-approved by the Audit Committee.48PART IVItem 15. Exhibits, Financial Statements Schedules(a) Documents filed as part of this report.(1) Financial Statements.Report of Independent Registered Public Accounting Firm F-1Consolidated Balance Sheets as of December 31, 2018 and 2017 F-3Consolidated Statements of Operations for the Years Ended December 31, 2018 and 2017 F-4Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2018 and 2017 F-5Consolidated Statements of Cash Flows for the Years Ended December 31, 2018 and 2017 F-6Consolidated Statements of Shareholders' Equity (Deficit) for the Years Ended December 31, 2018 and 2017 F-8Notes to Consolidated Financial Statements F-9(2) Financial Statement Schedules.Schedules not listed above have been omitted because they are not applicable or are not required or the information required to be set forth therein isincluded in the consolidated financial statements or notes thereto.(3) Exhibits.List of Exhibits required by Item 601 of Regulation S-K. See part (b) below.49(b) Exhibits.Exhibit FiledIncorporated by ReferenceNumberDescriptionHerewithFormFile No.Date Filed 1.1Underwriting Agreement, dated April 13, 2018 by and among the Companyand the several underwriters named in Schedule I thereto 8-K001-365324/17/2018 2.1*Share Purchase Agreement dated February 20, 2018 between Sphere 3D Corp.,Overland Storage, Inc., and Silicon Valley Technology Partners LLC 8-K001-365322/21/2018 2.2Amendment to Share Purchase Agreement, by and among Sphere 3D Corp.,Overland Storage, Inc., and Silicon Valley Technology Partners, Inc., dated asof August 21, 2018 8-K001-365328/21/2018 2.3Second Amendment to Share Purchase Agreement, by and among Sphere 3DCorp., Overland Storage, Inc., and Silicon Valley Technology Partners, Inc.,dated as of November 1, 2018 8-K001-3653211/2/2018 3.1Certificate and Articles of Amalgamation 6-K001-365323/25/2015 3.2Certificate of Amendment to the Articles of Amalgamation of the Company 6-K001-365327/17/2017 3.3Certificate of Amendment to the Articles of Amalgamation of the Company 8-K001-3653210/2/2018 3.4Certificate of Amendment to the Articles of Amalgamation of the Company 8-K001-3653211/5/2018 3.5Certificate of Amendment to the Articles of Amalgamation of the Company 8-K001-3653211/14/2018 3.6By-Law No. 1, as Amended 6-K001-365327/17/2017 3.7By-Law No. 2 6-K001-365325/12/2017 4.1Specimen certificate evidencing Common Shares F-3333-2107354/13/2016 4.2Form of Warrant 6-K001-365326/2/2015 4.3Form of Warrant 6-K001-3653210/7/2015 4.4Form of Warrant 6-K001-365328/15/2017 4.5Form of Warrant 8-K001-365324/17/2018 10.18% Senior Secured Convertible Debenture dated December 1, 2014 betweenthe Company and FBC Holdings S.A.R.L. 6-K001-3653212/16/2014 10.2First Amendment to 8% Senior Secured Convertible Debenture datedNovember 30, 2015 between the Company and FBC Holdings S.A.R.L. 6-K001-3653212/2/2015 10.3Second Amendment to 8% Senior Secured Convertible Debenture dated April6, 2016 between the Company and FBC Holdings S.A.R.L. 6-K001-365324/7/2016 50Exhibit FiledIncorporated by ReferenceNumberDescriptionHerewithFormFile No.Date Filed10.4Third Amendment to 8% Senior Secured Convertible Debenture dated March30, 2018 between the Company and FBC Holdings S.A.R.L. 10-Q001-365325/10/2018 10.5Fourth Amendment to 8% Senior Secured Convertible Debenture dated June 1,2018 between the Company and FBC Holdings S.A.R.L. 10-Q001-365328/14/2018 10.6Fifth Amendment to 8% Senior Secured Convertible Debenture dated June 4,2018 between the Company and FBC Holdings S.A.R.L. 10-Q001-365328/14/2018 10.7Sixth Amendment to 8% Senior Secured Convertible Debenture dated June 15,2018 between the Company and FBC Holdings S.A.R.L. 10-Q001-365328/14/2018 10.8Seventh Amendment to 8% Senior Secured Convertible Debenture dated June29, 2018 between the Company and FBC Holdings S.A.R.L. 10-Q001-365328/14/2018 10.9Eighth Amendment to 8% Senior Secured Convertible Debenture dated July13, 2018 between the Company and FBC Holdings S.A.R.L. 10-Q001-365328/14/2018 10.10Ninth Amendment to 8% Senior Secured Convertible Debenture dated July 23,2018 between the Company and FBC Holdings S.A.R.L. 10-Q001-365328/14/2018 10.11Form of Purchase Agreement 6-K001-365326/2/2015 10.12Form of Subscription Agreement 6-K001-3653210/7/2015 10.13Conversion Agreement, dated November 13, 2018, by and between Sphere 3DCorp. and FBC Holdings S.A.R.L. 8-K001-3653211/14/2018 10.14Conversion and Royalty Agreement, dated November 13, 2018, by and among,Sphere 3D Corp., FBC Holdings S.A.R.L. and Silicon Valley TechnologyPartners, Inc. 8-K001-3653211/14/2018 10.15Share Exchange and Buy-Out Agreement, dated November 13, 2018, by andamong Sphere 3D Corp., FBC Holdings S.A.R.L, MF Ventures LLC. 8-K001-3653211/14/2018 10.16Security and Pledge Agreement, dated November 13, 2018, by and betweenSphere 3D Corp. and FBC Holdings S.A.R.L. 8-K001-3653211/14/2018 10.17Secured Promissory Note, dated November 13, 2018 by and among Sphere 3DCorp., HVE Inc., and Overland Storage, Inc. 8-K001-3653211/14/2018 10.18Pledge Agreement dated November 13, 2018 by and among Sphere 3D andOverland Storage, Inc. 8-K001-3653211/14/2018 10.19Sphere 3D Second Amended and Restated Stock Option Plan F-4333-1975697/23/2014 10.20Sphere 3D Corp. 2015 Performance Incentive Plan, as amended S-8333-21460511/14/2018 10.21Form of Inducement Restricted Stock Unit Agreement S-8333-2092512/1/2016 51Exhibit FiledIncorporated by ReferenceNumberDescriptionHerewithFormFile No.Date Filed10.22Form of Executive Inducement Restricted Stock Unit Agreement S-8333-2092512/1/2016 10.23Sphere 3D Corp. Employee Stock Purchase Plan, as amended S-8333-2052361/29/2018 10.24+Employment Agreement between Overland Storage, Inc. and Eric Kelly datedAugust 3, 2011 8-K000-220718/4/2011 10.25+Amended and Restated Retention Agreement between Sphere 3D Corp. andEric Kelly dated December 18, 2017 10-K001-365323/21/2018 10.26+Amended and Restated Employment Agreement between Sphere 3D Corp. andKurt Kalbfleisch dated December 18, 2017 10-K001-365323/21/2018 10.27+Form of Stay Bonus Letter Agreement dated December 18, 2017 betweenSphere 3D Corp. and Eric Kelly, Kurt Kalbfleisch and Peter Tassiopoulos 10-K001-365323/21/2018 10.28+Sale Bonus Plan dated December 18, 2017 and Form of Award Agreementbetween Sphere 3D Corp. and Eric Kelly, Kurt Kalbfleisch and PeterTassiopoulos 10-K001-365323/21/2018 10.29+Form of Restricted Stock Unit Agreement dated December 18, 2017 betweenSphere 3D Corp. and Eric Kelly and Kurt Kalbfleisch 10-K001-365323/21/2018 10.30+Retention Agreement between Sphere 3D Corp. and Peter Tassiopoulos datedDecember 18, 2017 10-K001-365323/21/2018 10.31+Form of Executive Stock Option Agreement 10-K001-365323/21/2018 10.32Plano, Texas Lease Agreement dated March 25, 2016 between UnifiedConneXions, Inc. and Prologis TLF (Dallas), LLC 10-K001-365323/21/2018 10.33+Offer of Employment Letter between Sphere 3D Corp. and Joseph O’Danieldated January 25, 2017X 10.34Form of Officer and Director Indemnity AgreementX 10.35+General Release between Sphere 3D Corp. and Eric Kelly effective January 14,2019X 10.36Transition Services Agreement dated November 13, 2018 between theCompany and Overland Storage, Inc.X 10.37Promissory Note and Security Agreement dated December 19, 2018 betweenHVE Inc., a subsidiary of Sphere 3D Corp., and Citizens National Bank ofTexasX 14.1Code of Business Conduct and Ethics Policy 6-K001-365324/1/2015 21.1Subsidiaries of RegistrantX 23.1Consent of Independent Registered Public Accounting FirmX 31.1Certification of Chief Executive Officer pursuant to Section 302 of theSarbanes-Oxley Act of 2002X 52Exhibit FiledIncorporated by ReferenceNumberDescriptionHerewithFormFile No.Date Filed31.2Certification of Chief Financial Officer pursuant to Section 302 of theSarbanes-Oxley Act of 2002X 32.1Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002X 32.2Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002X 101.INSXBRL Instance DocumentX 101.SCHXBRL Taxonomy Extension SchemaX 101.CALXBRL Taxonomy Extension Calculation LinkbaseX 101.DEFXBRL Taxonomy Extension Definition LinkbaseX 101.LABXBRL Taxonomy Extension Label LinkbaseX 101.PREXBRL Taxonomy Presentation LinkbaseX _______________* All schedules to the Purchase Agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby agrees to furnishsupplementary a copy of any omitted schedule to the SEC upon request.+ Management contract or compensation plan or arrangement.Item 16. Form 10-K SummaryNone.53SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized.Sphere 3D Corp. /s/ Peter TassiopoulosPeter TassiopoulosChief Executive OfficerDate: March 29, 2019POWER OF ATTORNEYEach person whose signature appears below constitutes and appoints Peter Tassiopoulos and Kurt L. Kalbfleisch, jointly and severally, as his attorney-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this annual report on Form 10-K and to file the same,with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all thateach of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Exchange Act,this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ PETER TASSIOPOULOS Chief Executive Officer (Principal Executive Officer) March 29, 2019Peter Tassiopoulos /s/ KURT L. KALBFLEISCH Chief Financial Officer (Principal Financial and Accounting Officer) March 29, 2019 Kurt L. Kalbfleisch /s/ CHEEMIN BO-LINN Director March 29, 2019Cheemin Bo-Linn /s/ VIVEKANAND MAHADEVAN Director March 29, 2019Vivekanand Mahadevan /s/ DUNCAN MCEWAN Director March 29, 2019Duncan McEwan 54Report of Independent Registered Public Accounting FirmTo the Shareholders and the Board of Directors ofSphere 3D Corp.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Sphere 3D Corp. (the “Company”) as of December 31, 2018 and 2017, the relatedconsolidated statements of operations, comprehensive loss, cash flows, and shareholders’ equity for the years then ended, and the related notes (collectivelyreferred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, theconsolidated financial position of the Company as of December 31, 2018 and 2017, and the consolidated results of their operations and their cash flows forthe years then ended, in conformity with accounting principles generally accepted in the United States of America.Going Concern UncertaintyThe accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note1 to the consolidated financial statements, the Company has suffered recurring losses from operations, has a net working capital deficiency, and may not beable to amend, refinance, or pay off its debt and credit facilities, that raise substantial doubt about its ability to continue as a going concern. Management’splans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from theoutcome of this uncertainty.Change in Accounting PrincipleAs discussed in Note 2 to the consolidated financial statements, in 2018 the Company changed its method of accounting for revenue recognition due to theadoption of Accounting Standards Codification Topic No. 606.Emphasis of a MatterAs discussed in Notes 1 and 3 to the consolidated financial statements, on November 13, 2018, the Company completed a transaction resulting in thedisposition of its formerly wholly owned subsidiary, Overland Storage, Inc. The balance sheet as of December 31, 2017 and operating results for the yearsended December 31, 2018 and 2017, of Overland Storage, Inc. have been presented as discontinued operations in the accompanying consolidated financialstatements.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’sconsolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required tohave, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain anunderstanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internalcontrol over financial reporting. Accordingly, we express no such opinion.F-1Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud,and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures inthe consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, aswell as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ Moss Adams LLPSan Diego, CaliforniaMarch 29, 2019We have served as the Company’s auditor since 2015.F-2Sphere 3D Corp.Consolidated Balance Sheets(in thousands of U.S. dollars, except shares) December 31, 2018 December 31, 2017Assets Current assets: Cash and cash equivalents$341 $600Accounts receivable, net1,142 1,911Inventories1,230 1,449Other current assets784 418Assets of discontinued operations— 72,009Total current assets3,497 76,387Investment in affiliate2,100 —Property and equipment, net6 24Intangible assets, net3,348 5,198Goodwill1,385 1,385Other assets950 286Total assets$11,286 $83,280Liabilities and Shareholders’ (Deficit) Equity Current liabilities: Accounts payable$4,600 $3,079Accrued liabilities1,711 1,261Accrued payroll and employee compensation1,717 1,319Deferred revenue988 1,119Debt, related party500 —Line of credit100 —Other current liabilities23 22Liabilities of discontinued operations— 63,780Total current liabilities9,639 70,580Series A redeemable preferred shares6,571 —Deferred revenue, long-term667 552Deferred income taxes16 16Other non-current liabilities— 1,669Total liabilities16,893 72,817Commitments and contingencies (Note 17) Shareholders’ (deficit) equity: Common shares, no par value; 2,219,141 and 889,461 shares issued and outstanding as of December 31,2018 and 2017, respectively183,524 173,871Accumulated other comprehensive loss(1,816) (1,981)Accumulated deficit(187,315) (161,427)Total shareholders’ (deficit) equity(5,607) 10,463Total liabilities and shareholders’ (deficit) equity$11,286 $83,280See accompanying notes to consolidated financial statements.F-3Sphere 3D Corp.Consolidated Statements of Operations(in thousands of U.S. dollars, except share and per share amounts) Year Ended December 31, 2018 2017Net revenue: Product revenue$6,108 $9,698Service revenue2,922 2,901 9,030 12,599Cost of product revenue5,481 8,227Cost of service revenue1,870 1,227Gross profit1,679 3,145Operating expenses: Sales and marketing3,375 3,402Research and development3,425 5,867General and administrative7,499 9,653Impairment of acquired intangible assets— 2,294 14,299 21,216Loss from operations(12,620) (18,071)Other income (expense): Interest expense, related party(76) —Other income, net10 1,799Loss before income taxes(12,686) (16,272)Benefit from income taxes— (852)Net loss from continuing operations(12,686) (15,420)Net loss from discontinued operations(13,522) (10,764)Net loss$(26,208) $(26,184)Net loss per share: Continuing operations$(7.65) $(24.78)Discontinued operations(8.15) (17.30)Net loss per share basic and diluted$(15.80) $(42.08)Shares used in computing net loss per share: Basic and diluted1,658,862 622,203See accompanying notes to consolidated financial statements.F-4Sphere 3D Corp.Consolidated Statements of Comprehensive Loss(in thousands of U.S. dollars) Year Ended December 31, 2018 2017Net loss$(26,208) $(26,184)Other comprehensive income (loss): Foreign currency translation adjustment34 (416)Foreign currency reclassification to discontinued operations131 —Total other comprehensive income (loss)165 (416)Comprehensive loss$(26,043) $(26,600)See accompanying notes to consolidated financial statements.F-5Sphere 3D Corp.Consolidated Statements of Cash Flows(in thousands of U.S. dollars) Year Ended December 31, 2018 2017Operating activities: Net loss$(26,208) $(26,184)Adjustments to reconcile net loss to cash used in operating activities: Loss on disposal of discontinued operations4,281 —Impairment of acquired intangible assets— 2,524Depreciation and amortization3,857 6,087Share-based compensation1,637 7,795Provision for losses on accounts receivable88 12Amortization of debt issuance costs1,532 2,241Fair value adjustment of warrants(259) (2,249)Payment in-kind interest expense, related party875 15Deferred tax benefit— (2,114)Loss on revaluation of investment— 1,145Changes in operating assets and liabilities (net of effects of acquisition): Accounts receivable2,867 1,377Inventories645 2,048Accounts payable and accrued liabilities7,076 1,398Accrued payroll and employee compensation(933) 785Deferred revenue(1,221) (808)Other assets and liabilities, net(1,858) (3,037)Net cash used in operating activities(7,621) (8,965)Investing activities: Proceeds from divestiture1,000 —Acquisition, net of cash acquired— (1,051)Purchase of fixed assets(56) (123)Net cash provided by (used in) investing activities944 (1,174)Financing activities: Proceeds from issuance of common shares and warrants2,310 10,862Payment for issuance costs(421) (1,020)Proceeds from debt, related party500 2,000Payments on debt, related party(192) (2,308)Proceeds from exercise of outstanding warrants147 —Proceeds from line of credit100 —Net cash provided by financing activities2,444 9,534Effect of exchange rate changes on cash(24) 147Net decrease in cash and cash equivalents(4,257) (458)Cash and cash equivalents, beginning of period4,598 5,056Cash and cash equivalents, end of period341 4,598Less: Cash and cash equivalents, discontinued operations— 3,998Cash and cash equivalents of continuing operations, end of period$341 $600F-6Sphere 3D Corp.Consolidated Statements of Cash Flows (continued)(in thousands of U.S. dollars) Year Ended December 31, 2018 2017Supplemental disclosures of cash flow information: Cash paid for income taxes$1,102 $215Cash paid for interest$762 $1,681Supplemental disclosures of non-cash investing and financing activities: Conversion of secured debt to Series A redeemable preferred shares$6,500 $—Issuance of common shares for settlement of liabilities$2,160 $184Issuance of common shares for related party liabilities$1,393 $1,960Costs accrued for issuance of common shares$174 $94Issuance of common shares for acquisition$— $332Issuance of warrants in relation to settlement of liabilities$— $181See accompanying notes to consolidated financial statements.F-7Sphere 3D Corp.Consolidated Statements of Shareholders’ Equity (Deficit)(in thousands of U.S. dollars, except shares) Common Shares AccumulatedOtherComprehensiveLoss AccumulatedDeficit TotalShareholders'Equity (Deficit) Shares Amount Balance at January 1, 2017332,988 $157,254 $(1,565) $(135,243) $20,446Issuance of common shares and warrants for cash, net233,306 9,993 — — 9,993Issuance of common shares for acquisition11,029 332 — — 332Issuance of common shares for settlement of related partyinterest expense73,287 1,960 — — 1,960Allocation of warrants to liability— (3,647) — — (3,647)Issuance of common shares for warrant exchange202,240 — — — —Issuance of common shares pursuant to the vesting ofrestricted stock units29,694 — — — —Issuance of restricted stock awards6,917 184 — — 184Share-based compensation— 7,795 — — 7,795Other comprehensive loss— — (416) — (416)Net loss— — — (26,184) (26,184)Balance at December 31, 2017889,461 173,871 (1,981) (161,427) 10,463Adoption of accounting standards (see note 2)— — — 320 320Issuance of common shares and warrants for cash, net492,600 2,097 — — 2,097Exercise of warrants26,250 147 — — 147Issuance of common shares for warrant exchange178,875 1,364 — — 1,364Issuance of common shares for settlement of related party interest expense219,434 1,393 — — 1,393Issuance of common shares pursuant to the vesting of restricted stock units71,579 — — — —Issuance of restricted stock awards340,942 2,160 — — 2,160Share-based compensation— 2,492 — — 2,492Other comprehensive income— — 165 — 165Net loss— — — (26,208) (26,208)Balance at December 31, 20182,219,141 $183,524 $(1,816) $(187,315) $(5,607)See accompanying notes to consolidated financial statements.F-8Sphere 3D Corp.Notes to Consolidated Financial Statements1.Organization and BusinessSphere 3D Corp. (the “Company”) was incorporated under the Business Corporations Act (Ontario) on May 2, 2007 as T.B. Mining Ventures Inc. OnMarch 24, 2015, the Company completed a short-form amalgamation with a wholly-owned subsidiary. In connection with the short-form amalgamation, theCompany changed its name to “Sphere 3D Corp.”The Company delivers data management, and desktop and application virtualization solutions through hybrid cloud, cloud and on premiseimplementations by its global reseller network. The Company achieves this through a combination of containerized applications, virtual desktops, virtualstorage and physical hyper-converged platforms. The Company’s products allow organizations to deploy a combination of public, private or hybrid cloudstrategies while backing them up with the latest storage solutions. The Company has a portfolio of brands including SnapCLOUD®, SnapServer®,SnapSync™, HVE, Glassware 2.0™, and V3®.On February 20, 2018, the Company, Overland Storage, Inc., a California corporation and a wholly owned subsidiary of the Company at such time(“Overland”), and Silicon Valley Technology Partners, Inc. (formerly Silicon Valley Technology Partners LLC) (“SVTP”), a Delaware corporation establishedby Eric Kelly, the Company’s former Chief Executive Officer and Chairman of the Board of Directors, entered into a share purchase agreement (as amendedby that certain First Amendment to Share Purchase Agreement dated August 21, 2018, and as further amended by that certain Second Amendment to SharePurchase Agreement dated November 1, 2018, the “Purchase Agreement”), pursuant to which the Company agreed to sell to SVTP all of the issued andoutstanding shares of capital stock of Overland. On November 13, 2018, the Company closed the Purchase Agreement in consideration for (i) the issuance tothe Company of shares of Series A Preferred Stock of SVTP (“SVTP Preferred Shares”) representing 19.9% of the outstanding shares of capital stock of SVTPas of the closing with a value of $2.1 million, (ii) the release of the Company from outstanding debt obligations totaling $41.7 million assumed by SVTP, and(iii) $1.0 million in cash proceeds from SVTP. In connection with the closing of the Purchase Agreement, the Company filed an articles of amendment to itsarticles of amalgamation setting forth the rights, privileges, restrictions and conditions of a new series of non-voting preferred shares of the Company (the“Series A Preferred Shares”). The Company entered into a Conversion Agreement between the Company and FBC Holdings S.a r.l. (“FBC Holdings”),pursuant to which $6.5 million of the Company’s outstanding secured debt was converted into 6,500,000 Series A Preferred Shares (the “Preferred Shares”).Management has projected that cash on hand will not be sufficient to allow the Company to continue operations beyond May 31, 2019 if we areunable to raise additional funding for operations. We expect our working capital needs to increase in the future as we continue to expand and enhance ouroperations. Our ability to raise additional funds through equity or debt financings or other sources may depend on the financial success of our currentbusiness and successful implementation of our key strategic initiatives, financial, economic and market conditions and other factors, some of which arebeyond our control. No assurance can be given that we will be successful in raising the required capital at reasonable cost and at the required times, or at all.Further equity financings may have a dilutive effect on shareholders and any debt financing, if available, may require restrictions to be placed on our futurefinancing and operating activities. If we require additional capital and are unsuccessful in raising that capital, we may not be able to continue our businessoperations and advance our growth initiatives, which could adversely impact our business, financial condition and results of operations.F-9Significant changes from the Company’s current forecasts, including but not limited to: (i) failure to comply with the financial covenants in its debtfacilities; (ii) shortfalls from projected sales levels; (iii) unexpected increases in product costs; (iv) increases in operating costs; (v) changes in the historicaltiming of collecting accounts receivable; and (vi) inability to maintain compliance with the requirements of the NASDAQ Capital Market and/or inability tomaintain listing with the NASDAQ Capital Market could have a material adverse impact on the Company’s ability to access the level of funding necessary tocontinue its operations at current levels. If any of these events occurs or the Company is unable to generate sufficient cash from operations or financingsources, the Company may be forced to liquidate assets where possible and/or curtail, suspend or cease planned programs or operations generally or seekbankruptcy protection or be subject to an involuntary bankruptcy petition, any of, which would have a material adverse effect on the Company’s business,results of operations, financial position and liquidity.The Company incurred losses from operations and negative cash flows from operating activities for the 12 months ended December 31, 2018, and suchlosses might continue for a period of time. Based upon the Company's current expectations and projections for the next year, the Company believes that itwill not have sufficient liquidity necessary to sustain operations beyond May 31, 2019. These factors, among others, raise substantial doubt that theCompany will be able to continue as a going concern. The accompanying consolidated financial statements have been prepared on a going concern basis,which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.Reverse Stock SplitOn October 24, 2018, the Board of Directors of the Company authorized a share consolidation (also known as a reverse stock split) of the Company’sissued and outstanding common shares at a ratio of 1-for-8, which became effective on November 5, 2018. All share and per share amounts in theaccompanying consolidated financial statements and the notes thereto have been restated for all periods to reflect the share consolidation.On July 5, 2017, the Board of Directors of the Company authorized a share consolidation of the Company’s issued and outstanding common shares ata ratio of 1-for-25, which became effective on July 11, 2017. All share and per share amounts in the accompanying consolidated financial statements and thenotes thereto were restated for all periods to reflect the share consolidation.2.Significant Accounting PoliciesPrinciples of ConsolidationThe consolidated financial statements of the Company have been prepared by management in accordance with accounting principles generallyaccepted in the United States of America (“GAAP”), applied on a basis consistent for all periods. These consolidated financial statements include theaccounts of the Company and its subsidiaries, all of which are wholly owned. All intercompany balances and transactions have been appropriately eliminatedin consolidation.On November 13, 2018, the Company closed the Purchase Agreement related to its divestiture of Overland. Beginning in the fourth quarter of 2018,the financial results of Overland have been reflected in the Company’s consolidated statements of operations as discontinued operations. Additionally, theassets and liabilities associated with the discontinued operations in the consolidated balance sheet as of December 31, 2017 are classified as discontinuedoperations. The Company’s statements of cash flows are presented on a combined basis, including continuing and discontinued operations. Unless it isotherwise disclosed, all other disclosures in the consolidated financial statements are related to continuing operations.Use of EstimatesThe preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts ofassets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenuesand expenses during the reporting period. Significant areas requiring the use of management estimates relate to the determination of provisions forimpairment assessments of goodwill, other indefinite-lived intangible assets and long-lived assets; deferred revenue; allowance for doubtful receivables;inventory valuation; warranty provisions; deferred income taxes; and litigation claims. Actual results could differ from these estimates.F-10Foreign Currency TranslationThe financial statements of foreign subsidiaries, for which the functional currency is the local currency, are translated into U.S. dollars using theexchange rate at the consolidated balance sheet date for assets and liabilities and a weighted-average exchange rate during the year for revenue, expenses,gains and losses. Translation adjustments are recorded as other comprehensive income (loss) within shareholders’ (deficit) equity. Gains or losses from foreigncurrency transactions are recognized in the consolidated statements of operations. Such transactions resulted in a loss of $0.3 million in 2018 and a gain of$0.7 million in 2017.Cash EquivalentsHighly liquid investments with insignificant interest rate risk and original maturities of three months or less, when purchased, are classified as cashequivalents. Cash equivalents are composed of money market funds. The carrying amounts approximate fair value due to the short maturities of theseinstruments.Accounts ReceivableAccounts receivable is recorded at the invoiced amount and is non-interest bearing. We estimate our allowance for doubtful accounts based on anassessment of the collectability of specific accounts and the overall condition of the accounts receivable portfolio. When evaluating the adequacy of theallowance for doubtful accounts, we analyze specific trade and other receivables, historical bad debts, customer credits, customer concentrations, customercredit-worthiness, current economic trends and changes in customers’ payment terms and/or patterns. We review the allowance for doubtful accounts on aquarterly basis and record adjustments as considered necessary. Customer accounts are written-off against the allowance for doubtful accounts when anaccount is considered uncollectable. At December 31, 2018 and 2017, allowance for doubtful accounts of $0.1 million and $1.5 million, respectively, wasrecorded. The change in the allowance for doubtful accounts balance was related to continuing operations.InventoriesInventories are stated at the lower of cost and net realizable value using the first-in-first-out method. Net realizable value is the estimated selling pricein the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. We assess the value of inventoriesperiodically based upon numerous factors including, among others, expected product or material demand, current market conditions, technologicalobsolescence, current cost, and net realizable value. If necessary, we write down our inventory for obsolete or unmarketable inventory by an amount equal tothe difference between the cost of the inventory and the net realizable value.Investment in AffiliateThe Company holds an investment in equity securities of a nonpublic company for business and strategic purposes. The equity securities do not havea readily determinable fair value and are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderlytransactions for the identical or a similar investment of the same issuer. The Company reviews its investment on a regular basis to determine if the investmentis impaired. For purposes of this assessment, the Company considers the investee’s cash position, earnings and revenue outlook, liquidity and managementownership, among other factors, in its review. If management’s assessment indicates that an impairment exists, the Company estimates the fair value of theequity investment and recognizes in current earnings an impairment loss that is equal to the difference between the fair value of the equity investment and itscarrying amount.Property and EquipmentProperty and equipment are recorded at cost. Depreciation expense is computed using the straight-line method. Leasehold improvements aredepreciated over the shorter of the remaining estimated useful life of the asset or the term of the lease.Expenditures for normal maintenance and repair are charged to expense as incurred, and improvements are capitalized. Upon the sale or retirement ofproperty or equipment, the asset cost and related accumulated depreciation are removed from the respective accounts and any gain or loss is included in theresults of operations.F-11The continuing operations of the Company had a nominal amount of property and equipment at both December 31, 2018 and 2017.Estimated useful lives are typically as follows:Furniture and fixtures5 yearsComputer equipment and software1-5 yearsGoodwill and Intangible AssetsGoodwill represents the excess of consideration paid over the value assigned to the net tangible and identifiable intangible assets acquired. Forintangible assets purchased in a business combination, the estimated fair values of the assets received are used to establish their recorded values. Forintangible assets acquired in a non-monetary exchange, the estimated fair values of the assets transferred (or the estimated fair values of the assets received, ifmore clearly evident) are used to establish their recorded values. Valuation techniques consistent with the market approach, income approach and/or costapproach are used to measure fair value.Purchased intangible assets are amortized on a straight-line basis over their economic lives of six to 25 years for channel partner relationships, three tonine years for developed technology, three to eight years for capitalized development costs, and two to 25 years for customer relationships as this methodmost closely reflects the pattern in which the economic benefits of the assets will be consumed.Impairment of Goodwill and Intangible AssetsGoodwill and intangible assets are tested for impairment on an annual basis at December 31, or more frequently if there are indicators of impairment.Triggering events for impairment reviews may be indicators such as adverse industry or economic trends, restructuring actions, lower projections ofprofitability, or a sustained decline in our market capitalization. Intangible assets are quantitatively assessed for impairment, if necessary, by comparing theirestimated fair values to their carrying values. If the carrying value exceeds the fair value, the difference is recorded as an impairment.Revenue RecognitionThe Company generates revenue primarily from: (i) solutions for standalone storage and integrated hyper-converged storage; (ii) professional services;and (iii) warranty and customer services. As of January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue fromContracts with Customers, which affects how the Company recognizes revenue in these arrangements. The Company applied the provisions of Topic 606using the modified retrospective approach, with the cumulative effect of the adoption recognized as of January 1, 2018, to all contracts that had not beencompleted as of that date.Approximately 70% of the Company’s revenue is recognized when performance obligations under the terms of a contract with a customer are satisfiedat a point in time. These contracts are generally comprised of a single performance obligation to transfer products. Accordingly, the Company recognizesrevenue when change of control has been transferred to the customer, generally at the time of shipment of products. The Company sells its products bothdirectly to customers and through distributors generally under agreements with payment terms typically less than 45 days. Revenue on direct product sales,excluding sales to distributors, are not entitled to any specific right of return or price protection, except for any defective product that may be returned underour standard product warranty. Product sales to distribution customers that are subject to certain rights of return, stock rotation privileges and priceprotections, contain a component of “variable consideration.” Revenue is measured as the amount of consideration the Company expects to receive inexchange for transferring products and is generally based upon a negotiated fixed price and is net of estimates for variable considerations.For performance obligations related to warranty and customer services, such as extended product warranties, the Company transfers control andrecognizes revenue on a time-elapsed basis. The performance obligations are satisfied as services are rendered typically on a stand-ready basis over thecontract term, which is generally 12 months.F-12In limited circumstances where a customer is unable to accept shipment and requests products be delivered to, and stored on, the Company’s premises,also known as a “bill-and-hold” arrangements, revenue is recognized when: (i) the customer has requested delayed delivery and storage of the products, (ii)the goods are segregated from the inventory, (iii) the product is complete, ready for shipment and physical transfer to the customer, and (iv) the Companydoes not have the ability to use the product or direct it to another customer.The Company also enters into revenue arrangements that may consist of multiple performance obligations of its product and service offerings such asfor sales of hardware devices and extended warranty services. The Company allocates contract fees to the performance obligations on a relative stand-aloneselling price basis. The Company determines the stand-alone selling price based on its normal pricing and discounting practices for the specific productand/or service when sold separately. When the Company is unable to establish the individual stand-alone price for all elements in an arrangement byreference to sold separately instances, the Company may estimate the stand-alone selling price of each performance obligation using a cost plus a marginapproach, by reference to third party evidence of selling price, based on the Company’s actual historical selling prices of similar items, or based on acombination of the aforementioned methodologies; whichever management believes provides the most reliable estimate of stand-alone selling price.Warranty and Extended WarrantyWe record a provision for standard warranties provided with all products. If future actual costs to repair were to differ significantly from estimates, theimpact of these unforeseen costs or cost reductions would be recorded in subsequent periods.Separately priced extended on-site warranties and service contracts are offered for sale to customers on all product lines. We contract with third partyservice providers to provide service relating to on-site warranties and service contracts. Extended warranty and service contract revenue and amounts paid inadvance to outside service organizations are deferred and recognized as service revenue and cost of service, respectively, over the period of the serviceagreement. The Company will typically apply the practical expedient to agreements wherein the period between transfer of any good or service in thecontract and when the customer pays for that good or service is one year or less. Advanced payments for long-term maintenance and warranty contracts do notgive rise to a significant financing component. Rather, such payments are required by the Company primarily for reasons other than the provision of financeto the entity.Shipping and HandlingAmounts billed to customers for shipping and handling are included in product revenue, and costs incurred related to shipping and handling areincluded in cost of product revenue.Advertising CostsAdvertising costs are expensed as incurred. Advertising expenses were $0.1 million for each of the years ended December 31, 2018 and 2017.Research and Development CostsResearch and development expenses include payroll, employee benefits, share-based compensation expense, and other headcount-related expensesassociated with product development. Research and development expenses also include third party development and programming costs, localization costsincurred to translate software for international markets, and the amortization of purchased software code and services content. Such costs related to softwaredevelopment are included in research and development expense until the point that technological feasibility is reached, which for our software products, isgenerally shortly before the products are released to manufacturing. Once technological feasibility is reached, such costs are capitalized and amortized to costof revenue over the estimated lives of the products. During 2018 and 2017, no development costs were capitalized.F-13Segment InformationWe report segment data based on the management approach. The management approach designates the internal reporting that is used by managementfor making operating and investment decisions and evaluating performance as the source of our reportable segments. We use one measurement ofprofitability and do not disaggregate our business for internal reporting. We operate in one segment providing data management, and desktop andapplication virtualization solutions for small and medium businesses and distributed enterprises. We disclose information about products and services,geographic areas, and major customers.Income TaxesWe provide for income taxes utilizing the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes representthe future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxesgenerally represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differencesbetween the financial and tax basis of our assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuationallowances are recorded to reduce deferred tax assets when a judgment is made that it is considered more likely than not that a tax benefit will not be realized.A decision to record a valuation allowance results in an increase in income tax expense or a decrease in income tax benefit. If the valuation allowance isreleased in a future period, income tax expense will be reduced accordingly.The calculation of tax liabilities involves evaluating uncertainties in the application of complex global tax regulations. The impact of an uncertainincome tax position is recognized at the largest amount that is “more likely than not” to be sustained upon audit by the relevant taxing authority. Anuncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. If the estimate of tax liabilities proves to be lessthan the ultimate assessment, a further charge to expense would result.Comprehensive LossComprehensive loss and its components encompass all changes in equity other than those arising from transactions with shareholders, including netloss and foreign currency translation adjustments, and is disclosed in a separate consolidated statement of comprehensive loss.Concentration of Credit RisksFinancial instruments that potentially subject us to concentrations of credit risk consist primarily of trade accounts receivable, which are generally notcollateralized. To reduce credit risk, we perform ongoing credit evaluations of its customers and maintain allowances for potential credit losses for estimatedbad debt losses.At December 31, 2018, there were four customers that made up 71.0% of accounts receivable. At December 31, 2017, there was one customer that madeup 36.0% of accounts receivable. There were two customers that made up in the aggregate 25.4% of net revenue for the year ended December 31, 2018. Therewas one customer that made up 22.2% of net revenue for the year ended December 31, 2017.Share-based CompensationWe account for share-based awards, and similar equity instruments, granted to employees, non-employee directors, and consultants under the fair valuemethod. Share-based compensation award types include stock options and restricted stock. We use the Black-Scholes option pricing model to estimate thefair value of option awards on the measurement date, which generally is the date of grant. The expense is recognized over the requisite service period (usuallythe vesting period) for the estimated number of instruments for which service is expected to be rendered. The fair value of restricted stock units (“RSUs”) isestimated based on the market value of the Company’s common shares on the date of grant. The fair value of options granted to non-employees is estimatedat the measurement date using the Black-Scholes option pricing model and the unvested options remeasured at each reporting date, with changes in fair valuerecognized in expense in the consolidated statement of operations.F-14Share-based compensation expense for options with graded vesting is recognized pursuant to an accelerated method. Share-based compensationexpense for RSUs is recognized over the vesting period using the straight-line method. Share-based compensation expense for an award with performanceconditions is recognized when the achievement of such performance conditions are determined to be probable. If the outcome of such performance conditionis not determined to be probable or is not met, no compensation expense is recognized and any previously recognized compensation expense is reversed.Forfeitures are recognized in share-based compensation expense as they occur.We have not recognized, and do not expect to recognize in the near future, any tax benefit related to share-based compensation cost as a result of thefull valuation allowance of our net deferred tax assets and its net operating loss carryforward.Recently Issued Accounting PronouncementsFrom time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) that are adopted by theCompany as of the specified effective date. If not discussed, the Company believes that the impact of recently issued standards, which are not yet effective,will not have a material impact on the Company’s consolidated financial statements upon adoption.In August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820). The new guidanceremoves, modifies and adds to certain disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. The update is effective forannual reporting periods, including interim periods, beginning after December 15, 2019, with early adoption permitted. We do not expect the adoption ofASU 2018-13 to have a material effect on our consolidated financial statements and related disclosures.In June 2018, the FASB issued ASU No. 2018-07, ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to NonemployeeShare-Based Payment Accounting (“ASU 2018-07). The update aligns measurement and classification guidance for share-based payments to nonemployeeswith the guidance applicable to employees. Under the new guidance, the measurement of equity-classified nonemployee awards will be fixed at the grantdate. The update is effective for annual reporting periods, including interim periods, beginning after December 15, 2018, with early adoption permitted. Wedo not expect the adoption of ASU 2018-07 to have a material effect on our consolidated financial statements and related disclosures.In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment(“ASU 2017-04”). The update simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. An entity shouldperform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and recognize an impairmentcharge for the amount by which the carrying amount exceeds the reporting unit's fair value, if applicable. The loss recognized should not exceed the totalamount of goodwill allocated to the reporting unit. The same impairment test also applies to any reporting unit with a zero or negative carrying amount. Anentity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The update iseffective for annual reporting periods, including interim periods, beginning after December 15, 2019, on a prospective basis. Early adoption is permitted forinterim or annual goodwill impairment tests performed after January 1, 2017. We do not expect the adoption of ASU 2017-04 to have a material effect on ourconsolidated financial statements and related disclosures.In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), as amended. The update increases transparency andcomparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and requires disclosing key information aboutleasing arrangements. The update is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. An entity will berequired to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. We do not expect theadoption of ASU 2016-02 to have a material effect on our consolidated financial statements and related disclosures due to the Company’s limited number oflease commitments.F-15Recently Adopted Accounting PronouncementsOn January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers and all the related amendments, or ASC Topic 606.Under Topic 606, an entity is required to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects theconsideration to which the entity expects to be entitled in exchange for those goods or services. Topic 606 defines a five-step process in order to achieve thiscore principle, which may require the use of judgment and estimates, and also requires expanded qualitative and quantitative disclosures relating to thenature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including significant judgments and estimates used.The adoption of the new standard requires the recognition of revenues generally upon shipment to our customers for both direct consumers and distributors.The Company previously recognized contract consideration associated with its distributors on the “sell-through basis”, or when the purchased goods orservices transferred to the ultimate end user customer. Under Topic 606, contract consideration will be recognized on a “sell-in basis” or when control of thepurchased goods or services transfer to the distributor. The Company elected to adopt this guidance using the modified retrospective method and it resultedin a cumulative adjustment reducing our accumulated deficit by approximately $0.3 million. Comparative prior periods were not adjusted and continue to bereported under FASB ASC Topic 605, Revenue Recognition.In connection with the adoption of Topic 606, the Company is required to capitalize certain contract acquisition costs consisting primarily ofcommissions paid when customer contracts are finalized. The Company elected to follow a Topic 606 practical expedient and expense the incremental costsof obtaining a contract (sales commissions) when incurred as the capitalized long-term contract costs are not significant. For certain performance obligationsrelating to services, extended warranty, and other service agreements that are settled over time, the Company has elected to apply the practical expedient andforgo adjusting the transaction price for the consideration of the effects of time value of money for prepaid services wherein the period between transfer ofany good or service in the contract and when the customer pays for that good or service is one year or less. The impact of the adoption of ASC 606 on ourconsolidated balance sheet and our consolidated statements of operations, comprehensive loss, equity (deficit) and cash flows was not material. We do notexpect the adoption of this guidance to have a material effect on our results of operations in future periods.In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and CashPayments (“ASU 2016-15”). The update addresses eight cash flow classification issues and how they should be reported in the statement of cash flows. Theupdate is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The adoption ofthe new standard on January 1, 2018 did not have a material effect on our cash flows.In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718) - Scope of Modification Accounting (“ASU 2017-09”). The update provides clarity and is expected to reduce both diversity in practice and the cost and complexity when accounting for a change to the termsof a stock-based award. The update is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2017, on aprospective basis. The adoption of the new standard on January 1, 2018 did not have a material effect on our financial position, results of operations or cashflows.In July 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities fromEquity (Topic 480); Derivatives and Hedging (Topic 815) (“ASU 2017-11”). The update changes the classification of certain equity-linked financialinstruments (or embedded features) with down round features. The update also clarifies existing disclosure requirements for equity-classified instruments. Theupdate is effective retrospectively for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period.We early adopted the new standard effective January 1, 2018 and it did not have a material effect on our financial position, results of operations or cash flows.F-163.Discontinued OperationsIn May 2018, the shareholders approved the divestiture of Overland. In November 2018, the Company exchanged all the issued and outstandingshares of capital stock of Overland to SVTP in consideration for (i) the issuance to the Company of shares of Series A Preferred Stock of SVTP representing19.9% of the outstanding shares of capital stock of SVTP as of the closing with a value of $2.1 million, (ii) the release of the Company from outstanding debtobligations totaling $41.7 million assumed by SVTP, and (iii) $1.0 million in cash proceeds from SVTP. In addition, the Company entered into a ConversionAgreement with FBC Holdings, pursuant to which $6.5 million of the Company’s outstanding related party secured note was converted into 6,500,000Preferred Shares. In 2018, the Company recorded a loss on the divestiture of Overland of $4.3 million which is included in net loss of discontinuedoperations. At December 31, 2018, accrued payroll and employee compensation included $1.0 million for accrued one-time employee related costsassociated with the divestiture, which is included in the loss on the disposal of discontinued operations.The Company and the buyer entered into a transition service agreement (“TSA”) to facilitate an orderly transition process. The TSA has terms rangingfrom six months to 24 months depending on the service. Expense incurred by the Company related to the TSA was approximately $149,000 for the yearended December 31, 2018, and was included in continuing operations.The results of operations for Overland for the period ended November 13, 2018 and year ended December 31, 2017 have been reflected asdiscontinued operations in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2018 and 2017, and consistof the following (in thousands): Year Ended December 31, 2018 2017Revenue of discontinued operations: Product revenue $50,285 $63,122Service revenue 4,445 5,803 54,730 68,925Cost of product revenue 34,493 44,546Cost of service revenue 1,543 2,471Gross profit of discontinued operations 18,694 21,908Sales and marketing 10,987 15,281Research and development 982 1,783General and administrative 7,761 10,459Impairment of acquired intangible assets — 230 19,730 27,753Loss from operations of discontinued operations (1,036) (5,845)Other (expense) income of discontinued operations: Loss on disposal of discontinued operations (4,281) —Interest expense, related party (3,390) (2,520)Interest expense (2,321) (3,391)Other (expense) income (920) 212Loss before income taxes of discontinued operations (11,948) (11,544)Provision for (benefit from) income taxes of discontinued operations 1,574 (780)Net loss of discontinued operations $(13,522) $(10,764)F-17Assets and liabilities from discontinued operations related to the divestiture of Overland consisted of the following amounts (in thousands): December 31, 2017Assets: Cash and cash equivalents $3,998Accounts receivable, net 9,570Inventories 6,917Other current assets 1,411Property and equipment, net 2,718Intangible assets, net 36,275Goodwill 10,205Other assets 915Total assets of discontinued operations $72,009Liabilities: Accounts payable $6,283Accrued liabilities 4,816Deferred revenue 4,666Debt, related party 44,808Other liabilities 3,207Total liabilities of discontinued operations $63,780Certain cash flows from discontinued operations consisted of the following amounts (in thousands): Year Ended December 31, 2018 2017Depreciation and amortization $2,137 $2,688Share-based compensation $855 $—Capital expenditures $64 $123F-184.Business CombinationUCX and HVE AcquisitionIn December 2016, the Company acquired 19.9% of the outstanding equity interests of Unified ConneXions, Inc. (“UCX”) and HVE ConneXions, LLC(“HVE”) for the purchase price of $1.5 million. The Company issued 19,737 shares of its common shares in satisfaction of payment. In January 2017, theCompany completed its acquisition of all of the remaining outstanding equity interests of UCX and HVE, for $1.1 million in cash and issued 11,029 commonshares with an approximate value of $0.3 million. In 2017, the Company recognized a $1.1 million loss, included in other expense, as a result of theremeasurement to fair value of the equity interest held immediately before the business combination. The valuation was based on the Company’s privateplacement completed as of January 26, 2017.UCX and HVE provide information technology consulting services and hardware solutions around cloud computing, data storage and servervirtualization to corporate, government, and educational institutions primarily in the southern central United States. By adding UCX’s technologies,professional services and engineering talent, and HVE’s products, engineering and virtualization expertise, the Company intends to expand its virtualizationofferings as well as enhance its ability to accelerate the delivery of hybrid cloud solutions to customers. We incurred acquisition related expenses of $34,000,which consisted primarily of due diligence, legal and other one-time charges and are included in general and administrative expense in the consolidatedstatements of operations.A summary of the estimated fair values of the assets acquired and liabilities assumed as of the closing date were as follows (in thousands):Cash $49Accounts receivable 582Inventory 206Identifiable intangible assets 1,260Other assets 45Total identifiable assets acquired 2,142Accounts payable and accrued liabilities (359)Deferred revenue (518)Net identifiable assets acquired 1,265Goodwill 522Net assets acquired $1,787Goodwill is primarily comprised of a trained assembled workforce. The fair value estimates for the assets acquired and liabilities assumed for theacquisition were based on estimates and analysis, including work performed by third party valuation specialists. The goodwill recognized upon acquisition isnot deductible for tax purposes.The results of operations related to this acquisition have been included in our consolidated statements of operations from the acquisition date. Proforma results of operations have not been presented because at this time it is impracticable to provide as the information is not available at the level of detailrequired.F-19The identified intangible assets as of the date of acquisition consisted of the following (in thousands): Estimated Fair Value Weighted-AverageUseful Life (years)Channel partner relationships $730 6.0Customer relationships 380 3.2Developed technology 150 3.0Total identified intangible assets $1,260 5.Investment in AffiliateIn November 2018, in connection with the divestiture of Overland, the Company received 1,879,699 SVTP Preferred Shares representing 19.9% of theoutstanding shares of capital stock of SVTP with a fair value of $2.1 million. The fair value of this investment was estimated using discounted cash flows andconsideration of the Exchange Agreement described below. The Company concluded it does not have a significant influence over the investee. There wereno known identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment at December 31, 2018.In November 2018, the Company also entered into an Exchange and Buy-Out Agreement (the “Exchange Agreement”), between the Company, FBCHoldings, SVTP, and MF Ventures LLC (“MFV”). Under the terms of the Exchange Agreement, (i) the Company granted FBC Holdings the right to exchangeup to 2,500,000 of the Company’s Preferred Shares held by FBC Holdings for up to all of the SVTP Preferred Shares held by the Company (the “ExchangeRight”), with such Exchange Right expiring within two years of the November 2018 closing, and (ii) MFV and SVTP have the right to purchase up to2,500,000 Preferred Shares held by FBC Holdings (or, following exercise of the Exchange Right by FBC Holdings, the SVTP shares held by FBC Holdings)(the “Buy-out Right”), with such Buy-out Right expiring within one year of the November 2018 closing. If MFV or SVTP exercise their Buy-out Right priorto FBC Holdings’s exercise of its Exchange Right, then any Preferred Shares subject to the exercise of the Buy-out Right will automatically be exchanged forthe same number of SVTP Preferred Shares that would have been issued to FBC Holdings had the Exchange Right been exercised prior to the buy-out.In connection with the Exchange Agreement, the Company entered into a security and pledge agreement between the Company and FBC Holdings,pursuant to which, among other things, the Company granted a security interest to FBC Holdings in all the SVTP Preferred Shares held by the Company tosecure the Company’s obligations under the Exchange Agreement.F-206.Certain Balance Sheet ItemsThe following table summarizes inventories (in thousands): December 31, 2018 2017Raw materials$255 $84Work in process282 253Finished goods693 1,112 $1,230 $1,449The following table summarizes other current assets (in thousands): December 31, 2018 2017Deferred cost - service contracts$385 $153Prepaid insurance and services344 62Other55 203 $784 $418The following table summarizes property and equipment (in thousands): December 31, 2018 2017Computer equipment$281 $954Leasehold improvements— 83Furniture and fixtures— 31 281 1,068Accumulated depreciation and amortization(275) (1,044) $6 $24Depreciation and amortization expense for property and equipment was $13,000 and $110,000 for the years ended December 31, 2018 and 2017,respectively.The following table summarizes other assets (in thousands): December 31, 2018 2017Prepaid Insurance$653 $—Deferred cost – service contracts270 190Other27 96 $950 $286F-217.Intangible Assets and GoodwillThe following table summarizes intangible assets, net (in thousands): December 31, 2018 2017Developed technology$13,383 $13,383Channel partner relationships730 730Capitalized development costs(1)2,918 3,166Customer relationships380 380 17,411 17,659Accumulated amortization: Developed technology(12,222) (11,145)Channel partner relationships(233) (112)Capitalized development costs(1)(1,655) (1,409)Customer relationships(303) (145)(14,413) (12,811)Total finite-lived assets, net2,998 4,848Indefinite-lived intangible assets - trade names350 350Total intangible assets, net$3,348 $5,198________________(1)Includes the impact of foreign currency exchange rate fluctuations.Amortization expense of intangible assets was $1.7 million and $3.3 million for the years ended December 31, 2018 and 2017, respectively. Estimatedamortization expense for intangible assets is approximately $1.0 million, $0.9 million, $0.5 million, $0.3 million and $34,000 in fiscal 2019, 2020, 2021,2022 and 2023, respectively.GoodwillThe changes in the carrying amount of goodwill were as follows (in thousands):Balance as of January 1, 2017 $863Goodwill acquired 522Balance as of December 31, 2017 $1,385ImpairmentIn 2017, primarily as a result of the Company’s change in revenue projection for its Snap product line, it was determined the carrying value ofindefinite-lived intangible assets exceeded its estimated fair value. In measuring fair value, the Company used income and market approaches. The Companycompared the indicated fair value to the carrying value of its indefinite-lived assets, and as a result of the analysis, an impairment charge of $2.0 million wasrecorded to indefinite-lived trade names for the year ended December 31, 2017. In addition, the Company recorded an impairment of $0.3 million related todeveloped technology for the year ended December 31, 2017.F-228.DebtRelated party note payableIn November 2018, in connection with the divestiture of Overland, the Company entered into a $0.5 million note payable held by SVTP. The notepayable bears an interest at a rate of 8.0% per annum. The principal amount of the note payable along with any unpaid interest is due on May 13, 2019. Theobligations under the note payable are secured by the SVTP Preferred Shares held by the Company.Line of creditThe Company has a line of credit agreement with a bank with a maximum borrowing limit of $0.4 million. Borrowings under this agreement bearinterest at an interest rate of 6.0% per annum. The line of credit expires on December 19, 2019. The outstanding balance was $0.1 million as of December 31,2018. Borrowings under the line of credit are secured by the inventory and accounts receivable balances of the Company.Related Party Secured NoteIn April 2016, the Company modified its secured note with FBC Holdings, pursuant to which the holder made an additional advance and principalamount under the secured note amount was increased to $24.5 million. The secured note had a simple annual interest rate of 8.0%, payable semi-annually.The obligations under the secured note were secured by substantially all assets of the Company. On November 13, 2018, in connection with the closing ofthe Purchase Agreement, the Company entered into a Conversion and Royalty Agreement, between the Company, SVTP and FBC Holdings which SVTPassumed $19.0 million of the obligations and liabilities of the secured note, including accrued interest expense, and the Company was released as obligorsand guarantors of the secured note. Further, in connection with the closing, the Company entered into a Conversion Agreement, between the Company andFBC Holdings which the remaining $6.5 million of the Company’s secured debt was converted into 6,500,000 Preferred Shares.For the years ended December 31, 2018 and 2017, the Company issued 219,434 and 73,287 common shares, respectively, for the settlement of feesassociated with 2018 amendments to the loan and accrued interest expense. For the years ended December 31, 2018 and 2017, interest expense, includingamortization of debt costs, on the convertible note was $2.5 million and $2.2 million, respectively, and is included in net loss from discontinued operations.Related Party DebtIn December 2017, the Company entered into a $2.0 million subordinated promissory note with MF Ventures, LLC, a related party. The promissorynote bore interest at a 12.5% simple annual interest rate, payable quarterly in arrears. Interest shall be paid in kind by increasing the principal amount of thenote on each quarterly interest payment date. On November 13, 2018, pursuant to the Purchase Agreement, the promissory note balance of $2.3 million,including interest paid in kind, was assumed by SVTP. For the year ended December 31, 2018, interest expense, including amortization of debt costs, on thepromissory note was $0.3 million and is included in the net loss from discontinued operations.In September 2016, the Company entered into a $2.5 million agreement with FBC Holdings. In January 2018, the loan was paid in full per the termloan agreement. The term loan had a 20.0% simple annual interest rate. For the years ended December 31, 2017, interest expense, including amortization ofdebt costs, on the term loan was $0.3 million and is included in the net loss from discontinued operations.F-23Credit AgreementIn April 2016, the Company entered into a Credit Agreement with Opus Bank for a term loan. On June 6, 2018, the Credit Agreement was assigned byOpus Bank to Colbeck. On August 16, 2018, the Credit Agreement was assigned by Colbeck to FBC Holdings, a related party. The credit facilities had a13.25% simple annual interest rate. On November 13, 2018, the Company closed the transactions contemplated by the Purchase Agreement and, inconnection therewith, SVTP assumed the obligations of the Company under the Credit Agreement, which had an outstanding balance, including accruedinterest and debt cost, of $20.4 million at such time.For the year ended December 31, 2018, interest expense, including amortization of debt costs, was $2.8 million, of which $0.5 million was relatedparty interest expense, and is included in the net loss from discontinued operations. For the year ended December 31, 2017, interest expense, includingamortization of debt costs, was $3.4 million and is included in the net loss from discontinued operations.9.Preferred SharesSeries A Redeemable Preferred SharesIn 2018, the Company filed an articles of amendment to its articles of amalgamation setting forth the rights, privileges, restrictions and conditions of anew series of non-voting preferred shares of the Company. On November 13, 2018, in connection with the disposition of Overland, the Company entered intoa Conversion Agreement with FBC Holdings and $6.5 million of the outstanding principal amount of its secured note held by FBC Holdings was convertedinto 6,500,000 Preferred Shares. The Preferred Shares (i) are convertible into the Company’s common shares, subject to prior shareholder approval, at aconversion rate equal to $1.00 per share, plus accrued and unpaid dividends, divided by an amount equal to 0.85 multiplied by a 15-day volume weightedaverage price per common share prior to the date the conversion notice is provided (the “Conversion Rate”), subject to a conversion price floor of $0.80, (ii)carry a cumulative preferred dividend at a rate of 8.0% of the subscription price per preferred share, (iii) are subject to mandatory redemption for cash at theoption of the holders thereof after a two-year period, and (iv) carry a liquidation preference equal to the subscription price per preferred share plus anyaccrued and unpaid dividends.The common shares issuable upon the conversion of the Preferred Shares may constitute more than 20% of the common shares of the Companycurrently outstanding and may result in a change of control of the Company, and therefore the Company will seek shareholder approval for the issuance of allcommon shares issuable upon conversion of the Preferred Shares; provided, however, that the Company shall not seek shareholder approval unless suchapproval would occur after the six-month anniversary of the initial issue date of the Preferred Shares. In the event shareholder approval is not obtained, FBCHoldings and its affiliates will not be entitled to convert such Preferred Shares into common shares, but any unaffiliated transferee may convert all or any partof the Preferred Shares held by such transferee into the number of fully paid and non-assessable common shares that is equal to the number of Preferred Sharesto be converted multiplied by the Conversion Rate in effect on the date of conversion; provided that, (x) after such conversion, the common shares issuableupon such conversion, together with all Common Shares held by such third party transferee that are or would be deemed to be aggregated under the rules ofthe Nasdaq Stock Market, in the aggregate would not exceed 19.9% of the total number of common shares of the Company then outstanding and (y) suchconversion and issuance would not otherwise violate or cause the Company to violate the Company’s obligations under the rules or regulations of theNasdaq Stock Market.F-2410.Fair Value MeasurementsThe authoritative guidance for fair value measurements establishes a three tier fair value hierarchy, which prioritizes the inputs used in measuring fairvalue. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted pricesin active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists,therefore requiring an entity to develop its own assumptions.Assets and Liabilities that are Measured at Fair Value on a Recurring BasisOur financial instruments include cash equivalents, accounts receivable, prepaid expenses, accounts payable, accrued expenses, debt, related partydebt and preferred shares. Fair value estimates of these instruments are made at a specific point in time, based on relevant market information. These estimatesmay be subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. The carryingamount of cash equivalents, accounts receivable, prepaid expenses, accounts payable and accrued expenses are generally considered to be representative oftheir respective fair values because of the short-term nature of those instruments. The carrying value of debt and related party debt approximates its fair valueas the borrowing rates are substantially comparable to rates available for loans with similar terms. The Company estimates the fair value of the preferredshares utilizing Level 2 inputs, including market yields for similar instruments.The following table provides information by level for liabilities that are measured at fair value using significant unobservable inputs (Level 3) (inthousands):Warrant liability as of January 1, 2017 $200Additions to warrant liability 4,677Change in fair value of warrants (2,249)Reclassification to equity (959)Warrant liability as of December 31, 2017 1,669Adoption of accounting guidance (46)Change in fair value of warrants (259)Reclassification to equity resulting from warrant exchange agreement (1,364)Warrant liability as of December 31, 2018 $—The Company determined the estimated fair value of the warrant liability using a Black-Scholes model using similar assumptions as disclosed in Note12 - Equity Incentive Plan.Assets and Liabilities that are Measured at Fair Value on a Nonrecurring BasisThe Company's non-financial assets such as investment in affiliate, goodwill, intangible assets and property and equipment are recorded at fair valuewhen an impairment is recognized or at the time acquired in a business combination. As discussed in Note 7 - Intangible Assets and Goodwill, at December31, 2017, the Company recorded impairment charges associated with acquired intangible assets, and reduced the carrying amount of such assets subject tothe impairment to their estimated fair value.F-2511.Share CapitalIn April 2018, the Company closed an underwritten public offering and issued 412,500 common shares and warrants to purchase up to an aggregate of123,750 common shares at an aggregate purchase price of $5.60 per common share and accompanying warrant, as well as a concurrent closing of warrants topurchase an additional 14,063 common shares pursuant to the partial exercise of the over-allotment option granted to the underwriter. Gross proceeds, beforeunderwriting discounts and commissions and other offering expenses, were approximately $2.3 million.In May 2018, the Company issued 80,100 common shares to satisfy payment obligations incurred by the Company in the aggregate amount of $0.3million. The obligations were related to the Share Purchase Agreement entered into in February 2018.Reverse Stock SplitOn October 24, 2018, the Board of Directors of the Company authorized a share consolidation (also known as a reverse stock split) of the Company’sissued and outstanding common shares at a ratio of 1-for-8, which became effective on November 5, 2018. All share and per share amounts in theaccompanying consolidated financial statements and the notes thereto have been restated for all periods to reflect the share consolidation.On July 5, 2017, the Board of Directors of the Company authorized a share consolidation of the Company’s issued and outstanding common shares ata ratio of 1-for-25, which became effective on July 11, 2017. All share and per share amounts were restated for all periods to reflect the share consolidation.The Company has unlimited authorized shares of common shares at no par value. At December 31, 2018, the Company had the following outstandingwarrants to purchase common shares:Date issued Contractual life(years) Exercise price pershare Number outstanding ExpirationMay 2015 5 $800.00 4,200 May 31, 2020October 2015 5 $466.00 2,010 October 14, 2020December 2015 5 $500.00 5,138 December 15, 2020December 2015 5 $216.00 7,500(1)December 4, 2020February 2016 3 $324.00 2,500 February 26, 2019March 2016 5 $500.00 150 March 4, 2021November 2016 3 $400.00 125 November 8, 2019August 2017 5 $42.00 37,500 August 11, 2022August 2017 5 $42.00 11,876 August 16, 2022August 2017 5 $42.00 25,625 August 22, 2022April 2018 5 $5.60 111,563 April 17, 2023 208,187(2) _______________(1)If the Company or any subsidiary thereof, at any time while this warrant is outstanding, enters into a Variable Rate Transaction (“VRT”) (as definedin the purchase agreement) and the issue price, conversion price or exercise price per share applicable thereto is less than the warrant exercise pricethen in effect, the exercise price shall be reduced to equal the VRT price.(2)Includes 40,000 of warrants to purchase common shares, in the aggregate, outstanding to related parties at December 31, 2018.F-26Related Party Share Capital TransactionsIn August 2017, the Company entered into a securities purchase agreement with certain investors pursuant to which the Company issued (i) 75,000common shares, of which 49,375 common shares were issued to related parties, and (ii) warrants for the purchase of up to 75,000 common shares, of which49,375 warrants were issued to related parties, in a private placement in exchange for a cash payment of $3.0 million. The purchase price was $40.00 percommon share and warrant to purchase one common share, and the exercise price of the warrants is $42.00 per warrant share. The warrants were subject tocertain anti-dilution adjustments through December 2017.In July 2017, the Company entered into amended and restated warrant agreements with certain holders of warrants previously issued in March 2016(the “Amended March 2016 Warrant”) and between December 2016 and March 2017 (the “Amended March 2017 Warrants” and together with the AmendedMarch 2016 Warrant, the “Amended and Restated Warrants”). Pursuant to the amended and restated warrant agreements, the Company issued an aggregate of202,240 common shares, of which 164,423 common shares were issued to related parties, in exchange for the cancellation of such warrants. Immediately afterthe exchange, the amended and restated warrant agreements became null and void.In March 2017, the Company entered into a securities purchase agreement with certain investors party thereto, pursuant to which the Company issuedto the investors, in the aggregate, 102,273 of the Company’s common shares, of which 22,727 common shares and warrants to purchase 22,727 shares wereissued to a related party, for gross proceeds of $4.5 million. The securities purchase agreement also provided for the concurrent private placement of warrantsexercisable to purchase up to 108,409 common shares. Each warrant had an exercise price of $60.00 per warrant share. In August 2017, the Company issuedadditional common shares, which triggered a price adjustment for the March 2017 warrants from $60.00 to $40.00 and the Company issued, in the aggregate,additional warrants exercisable to purchase up to 54,205 common shares, of which a related party received 11,364 warrants exercisable to purchase commonshares. In March 2018, the Company entered into warrant exchange agreements, in a privately negotiated exchange under Section 4(a)(2) of the SecuritiesAct of 1933, as amended, pursuant to which the Company issued 178,875 common shares in exchange for the surrender and cancellation of the Company’soutstanding March 24, 2017 warrants (the “Exchange”). Immediately after the Exchange, the previously issued warrants became null and void. A relatedparty participated in the Exchange by acquiring 37,500 common shares in exchange for the cancellation of a warrant to purchase 34,091 common shares.Between December 30, 2016 and March 16, 2017, the Company completed a private placement and issued a total of 90,700 “Units” at a purchase priceof $60.00 per Unit of which 71,792 were issued to related parties. Each Unit consisted of one common share and one warrant from each of two series ofwarrants. The Company received gross proceeds of $5.4 million in connection with the sale of the Units. The warrants were exercisable to purchase 181,400common shares in the aggregate. In July 2017, the warrants issued between December 30, 2016 and March 16, 2017 were null and void as a result of theAmended and Restated Warrants agreement.12.Equity Incentive PlansIn 2018, the shareholders approved the amendment of our 2015 Performance Incentive Plan (“2015 Plan”) which increased the 2015 Plan by 382,500shares. The 2015 Plan, as amended, authorizes the Board of Directors to grant stock and options awards of up to 640,843 common shares to directors,employees and consultants. As of December 31, 2018, the Company had approximately 142,456 share-based awards available for future grant.The Company’s Employee Stock Purchase Plan (“ESPP”) authorizes the purchase of up to 37,500 common shares by employees under the plan. As ofDecember 31, 2018 and 2017, there were no offering periods available to employees.F-27Stock OptionsThe fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model, which uses the weighted-averageassumptions noted in the following table: Year Ended December 31, 2018 2017Expected volatility— 120.0%Risk-free interest rate— 2.1%Dividend yield— —Expected term (in years)— 4.7The expected volatility was based on the Company’s historical share price. The risk-free interest rate is determined based upon a constant maturity U.S.Treasury security with a contractual life approximating the expected term of the option. The expected term of options granted is estimated based on a numberof factors, including but not limited to the vesting term of the award, historical employee exercise behavior, the expected volatility of the Company’scommon shares and an employee’s average length of service.Options typically vest over a three-year period from the original grant date. The exercise price of each award is based on the market price of theCompany’s common shares at the date of grant. Option awards can be granted for a maximum term of up to ten years. Option activity is summarized below: Shares Weighted-AverageExercisePrice Weighted-AverageRemainingContractualTerm (years) AggregateIntrinsicValue Options outstanding at January 1, 2017 16,258 $434.00 Granted 10,924 $31.76 Exercised — $— Forfeited (3,646) $502.64 Options outstanding at December 31, 2017 23,536 $251.20 Granted — $— Exercised — $— Forfeited (3,486) $132.23 Options outstanding at December 31, 2018 20,050 $199.06 3.3 $—Vested and expected to vest at December 31, 2018 20,050 $199.06 3.3 $—Exercisable at December 31, 2018 20,028 $199.25 3.3 $—The following table summarizes information about the Company’s stock options: Year Ended December 31, 2018 2017Weighted-average grant date fair value per share$— $25.84Intrinsic value of options exercised$— $—Cash received upon exercise of options$— $—F-28Restricted Stock UnitsThe following table summarizes information about RSU activity: Number ofShares WeightedAverageGrant Date FairValueOutstanding — January 1, 201718,948 $516.00Granted151,405 $31.68Vested and released(29,694) $263.25Forfeited(14,690) $111.12Outstanding — December 31, 2017125,969 $39.12Granted50 $20.00Vested and released(71,579) $50.88Forfeited(1,436) $77.80Outstanding — December 31, 201853,004 $31.21The estimated fair value of RSUs was based on the market value of the Company’s common shares on the date of grant. RSUs typically vest over athree-year period from the original date of grant. The total grant date fair value of RSUs vested during the years ended December 31, 2018 and 2017 wasapproximately $3.6 million and $8.0 million, respectively. The fair value of RSUs vested during the years ended December 31, 2018 and 2017 wasapproximately $0.7 million and $1.2 million, respectively.Outside of 2015 Equity Incentive PlanOn March 26, 2019, the Board of Directors of the Company approved and granted 100,000 RSUs outside of the 2015 Plan to an employee. The RSUshave an estimated fair value of $2.51 per unit and vest over 1.5 years.In 2017, the Board of Directors of the Company approved and granted 25,780 RSUs outside of the 2015 Plan to certain employees. The RSUs have anestimated fair value of $70.00 per unit and vest over one to three years.Restricted Stock AwardsDuring 2018 and 2017, the Company granted restricted stock awards (“RSA”) to certain employees, directors and consultants in lieu of cash paymentfor services performed. The estimated fair value of the RSAs was based on the market value of the Company’s common shares on the date of grant. The RSAswere fully vested on the date of grant. The fair value of the RSAs vested during the years ended December 31, 2018 and 2017 was approximately $2.2 millionand $0.2 million, respectively.The following table summarizes information about RSA activity: Number ofShares WeightedAverageGrant Date FairValueOutstanding — January 1, 2017— $—Granted6,917 $26.54Vested(6,917) $26.54Outstanding — December 31, 2017— $—Granted340,942 $6.33Vested(340,942) $6.33Outstanding — December 31, 2018— $—F-29Share-Based Compensation ExpenseThe Company recorded the following compensation expense related to its share-based compensation awards, including amounts related todiscontinued operations (in thousands): Year Ended December 31, 2018 2017Cost of sales$47 $370Sales and marketing310 2,095Research and development210 1,431General and administrative1,070 3,899Total share-based compensation expense$1,637 $7,795As of December 31, 2018, there was a total of $0.5 million of unrecognized compensation expense related to unvested equity-based compensationawards. The expense associated with non-vested restricted stock units and options awards granted as of December 31, 2018 is expected to be recognized overa weighted-average period of 1.3 years.13.Net Loss per ShareBasic net loss per share is computed by dividing net loss applicable to common shareholders by the weighted-average number of common sharesoutstanding during the period. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstandingdue to the Company’s net loss position.Anti-dilutive common share equivalents excluded from the computation of diluted net loss per share were as follows: December 31, 2018 2017Redeemable preferred shares6,500,000 —Common share purchase warrants208,187 274,390Restricted stock not yet vested or released53,004 125,969Options outstanding20,050 23,536Convertible notes— 40,833Convertible notes interest— 40,94514.Income TaxesThe Company is subject to taxation in Canada and also in certain foreign tax jurisdictions. The Company's tax returns for calendar year 2012 andforward are subject to examination by the Canadian tax authorities. The Company's tax returns for fiscal year 2006 and forward are subject to examination bythe U.S. federal and state tax authorities.The Company recognizes the impact of an uncertain income tax position on its income tax return at the largest amount that is “more likely than not”to be sustained upon audit by the relevant taxing authority. An uncertain tax position will not be recognized if it has less than a 50% likelihood of beingsustained.At December 31, 2018, there were no unrecognized tax benefits. The Company believes it is reasonably possible that, within the next 12 months, theamount of unrecognized tax benefits may remain unchanged. The Company recognizes interest and penalties related to unrecognized tax benefits in itsprovision for income taxes. The Company had no material accrual for interest and penalties on its consolidated balance sheets at December 31, 2018 and2017, and recognized no interest and/or penalties in the consolidated statements of operations for the years ended December 31, 2018 and 2017.F-30The components of loss before income taxes were as follows (in thousands): Year Ended December 31, 2018 2017Domestic$(11,872) $(5,295)Foreign(743) (10,977)Total$(12,615) $(16,272)The benefit from income taxes includes the following (in thousands): Year Ended December 31, 2018 2017Deferred: Foreign$— $(852)Total deferred tax benefit— (852)Benefit from income taxes$— $(852)A reconciliation of income taxes computed by applying the federal statutory income tax rate of 26.5% to loss before income taxes to the total incometax benefit reported in the accompanying consolidated statements of operations is as follows (in thousands): Year Ended December 31, 2018 2017Income tax at statutory rate$(3,343) $(4,312)Foreign rate differential— (182)Change in tax rate— 1,664Change in valuation allowance1,329 3,433Share-based compensation expense44 193Prior year true-ups111 —Other differences1,859 (1,648)Benefit from income taxes$— $(852)F-31Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are shown below. Avaluation allowance has been recorded, as realization of such assets is uncertain. Deferred income taxes are comprised as follows (in thousands): December 31, 2018 2017Deferred tax assets: Net operating loss carryforward$9,610 $8,450Intangible assets2,280 2,270Share-based compensation52 94Other1,256 1,056Deferred tax assets, gross13,198 11,870Valuation allowance for deferred tax assets(13,198) (11,870)Deferred tax assets, net of valuation allowance— —Deferred tax liabilities: Indefinite-lived intangible assets(16) (16)Deferred tax liabilities(16) (16)Net deferred tax liabilities$(16) $(16)At December 31, 2018, the Company had Canadian net operating loss carryforwards of $32.4 million. These carryforwards will begin expiring in 2031,unless previously utilized. At December 31, 2018, the Company had U.S. federal net operating loss carryforwards of $4.8 million. The remaining federal netoperating loss will begin expiring in 2024, unless previously utilized.For Canadian tax purposes there is an overall capital loss on the Company’s divestiture of Overland. The amount of the loss is dependent on theCompany’s basis in the stock of Overland, which the Company has not completed its analysis to determine such amount. Due to the incomplete analysis, theCompany has not recorded a benefit for the capital loss. The Company expects to finalize the determination of the basis and corresponding capital loss withthe filing of its Canadian tax returns. Due to the Company’s full valuation allowance, any benefit recorded in future periods upon completion of an analysiswill have no impact on continuing operations.15.Related Party TransactionsIn November 2018, the Company entered into a transition service agreement to facilitate an orderly transition process for the divestiture of Overland.The transition service agreement has terms ranging from six months to 24 months depending on the service. Net expense incurred by the Company related tosuch agreement was approximately $149,000 for the year ended December 31, 2018, and was included in continuing operations.Professional services provided by affiliates of the Company included in net loss from discontinued operations were $0.8 million and none during theyears ended December 31, 2018 and 2017, respectively. As of December 31, 2018 and 2017, accounts payable and accrued liabilities included $0.2 millionand none, respectively, due to related parties.16.401K PlanThe Company maintains an employee savings and retirement plan (the “401(k) Plan”) covering all of the Company’s U.S. employees, provided theymeet the requirements of the plan. The 401(k) Plan permits but does not require matching contributions by the Company on behalf of participants. TheCompany has not made any matching contributions.F-3217.Commitments and ContingenciesLeasesThe Company leases various office space under non-cancelable operating leases that expire in various years through 2021. Future minimum leasepayments as of December 31, 2018 under these arrangements are as follows (in thousands): MinimumLeasePayments 2019 $1682020 1122021 66Total $346Rent expense under non-cancelable operating leases is recognized on a straight-line basis over the respective lease terms and was $0.3 million for eachof the years ended December 31, 2018 and 2017, respectively.Letters of creditDuring the ordinary course of business, the Company provides standby letters of credit to third parties as required for certain transactions initiated bythe Company. As of December 31, 2018, the Company’s had no outstanding standby letters of credit.Warranty and Extended WarrantyThe Company had $0.7 million and $0.4 million in deferred costs included in other current and non-current assets related to deferred service revenueat December 31, 2018 and 2017, respectively. Changes in the liability for product warranty and deferred revenue associated with extended warranties andservice contracts were as follows (in thousands): ProductWarranty DeferredRevenueLiability at January 1, 2017$— $749Liabilities assumed from acquisition— 518Settlements made during the period(23) (1,296)Change in liability for warranties issued during the period24 1,566Change in liability for pre-existing warranties21 —Liability at December 31, 201722 1,537Settlements made during the period— (1,417)Change in liability for warranties issued during the period— 1,351Change in liability for pre-existing warranties— —Liability at December 31, 2018$22 $1,471Current liability$22 $825Non-current liability— 646Liability at December 31, 2018$22 $1,471LitigationThe Company is, from time to time, subject to claims and suits arising in the ordinary course of business. In the opinion of management, the ultimateresolution of such pending proceedings will not have a material effect on the Company’s results of operations, financial position or cash flows.F-33Patent Litigation Funding AgreementIn December 2010, Overland entered into a litigation funding agreement (the “Funding Agreement”) with Special Situations Fund III QP, L.P., SpecialSituations Private Equity Fund, L.P., Special Situations Technology Fund, L.P., and Special Situations Technology Fund II, L.P. (collectively, the “SpecialSituations Funds”) pursuant to which the Special Situations Funds agreed to fund certain patent litigation brought by Overland. In May 2014, the SpecialSituations Funds filed a complaint against Overland in the Supreme Court for New York County, alleging breach of the Funding Agreement. The SpecialSituations Funds allege that Overland’s January 2014 acquisition of Tandberg Data entitled the Special Situation Funds to a $6.0 million payment under theFunding Agreement, and therefore Overland’s refusal to make the payment constitutes a breach of the Funding Agreement by Overland. In November 2014,the Special Situations Funds amended their complaint to allege that Overland breached the Funding Agreement’s implied covenant of good faith and fairdealing by settling the patent litigation with BDT in bad faith to avoid a payment obligation under the Funding Agreement. The Special Situations Fundswere seeking $6.0 million in contractual damages as well as costs and fees. On October 10, 2017, the Court entered an order granting Overland’s motion forsummary judgment and dismissing the Special Situations Funds’ complaint in its entirety with prejudice, and in April 2018, the parties entered into asettlement agreement ending the litigation that did not require payment from either party.OtherIn January 2018, Mr. Vito Lupis filed a statement of claim in the Ontario Court of Justice alleging, among other things, breach of contracts, deceit andnegligence against Mr. Giovanni J. Morelli, a former officer of the Company, and vicarious liability against the Company, in connection with stock purchaseagreements and other related agreements that would have been entered into between Mr. Lupis and the Company in 2012. The Company and Mr. Lupis haveinitiated settlement discussions to resolve the matter.In April 2015, we filed a proof of claim in connection with bankruptcy proceedings of V3 Systems, Inc. (“V3”) based on breaches by V3 of the AssetPurchase Agreement entered into between V3 and the Company dated February 11, 2014 (the “APA”). On October 6, 2015, UD Dissolution Liquidating Trust(“UD Trust”), the apparent successor to V3, filed a complaint against us and certain of our current and former directors in the U.S. Bankruptcy Court for theDistrict of Utah Central Division objecting to our proof of claim and asserting claims for affirmative relief against us and our directors. This complaintalleges, among other things, that Sphere 3D breached the APA and engaged in certain other actions and/or omissions that caused V3 to be unable to timelysell the Sphere 3D common shares received by V3 pursuant to the APA. The plaintiff seeks, among other things, monetary damages for the loss of thepotential earn-out consideration, the value of the common shares held back by us pursuant to the APA and costs and fees. We believe the lawsuit to bewithout merit and intend to vigorously defend against the action.On December 23, 2015, we filed a motion seeking to dismiss the majority of the claims asserted by the UD Trust. On January 13, 2016, we filed acounterclaim against the UD Trust in which we allege that V3 breached numerous provisions of the APA. On July 22, 2016, we filed a motion seeking totransfer venue of this action to the United States District Court for the District of Delaware. The Bankruptcy Court granted our motion to transfer venue onAugust 30, 2016, and the case was formally transferred to the Delaware District Court on October 11, 2016. On November 13, 2018, the Delaware DistrictCourt referred the case to the Delaware Bankruptcy Court. The Delaware Bankruptcy Court has not yet set a hearing on our motion to dismiss.In March 2018, UD Trust filed a complaint in U.S. District Court, Northern California District (“California Complaint”) asserting that two transactionsinvolving the Company constitute fraudulent transfers under federal and state law. First, UD Trust alleges that the consolidation of the Company’s and itssubsidiaries’ indebtedness to the Cyrus Group into a debenture between FBC Holdings and the Company in December 2014 constitutes a fraudulent transfer.Second, UD Trust alleges that the Share Purchase Agreement constitutes a fraudulent transfer, and seeks to require that the proceeds of the transaction beplaced in escrow until the V3 litigation is resolved. The California Complaint also asserts a claim against the Company’s former CEO for breach of fiduciaryduty, and a claim against the Cyrus Group for aiding and abetting breach of fiduciary duty. We believe the lawsuit to be without merit and intend tovigorously defend against the action. On July 25, 2018, we filed a motion seeking to dismiss all of the claims asserted against the Company and its formerCEO. On the same day, the Cyrus Group filed a motion seeking to dismiss all claims asserted against the Cyrus Group.F-3418.Segmented InformationThe Company reports segment information as a single reportable business segment based upon the manner in which related information is organized,reviewed, and managed. The Company operates in one segment providing data storage and desktop virtualization solutions for small and medium businessesand distributed enterprises. The Company conducts business globally, and its sales and support activities are managed on a geographic basis. Ourmanagement reviews financial information presented on a consolidated basis, accompanied by disaggregated information it receives from its internalmanagement system about revenues by geographic region, based on the location from which the customer relationship is managed, for purposes of allocatingresources and evaluating financial performance.Information about Products and ServicesThe following table summarizes net revenue (in thousands): Year Ended December 31, 2018 2017Disk systems $6,108 $9,698Service 2,922 2,901 $9,030 $12,599Information about Geographic AreasThe Company markets its products domestically and internationally. Revenue is attributed to the location to which the product was shipped. TheCompany divides its worldwide sales into three geographical regions: Americas; APAC, consisting of Asia Pacific countries; and EMEA consisting ofEurope, the Middle East and Africa.The following table summarizes net revenue by geographic area (in thousands): Year Ended December 31, 2018 2017Americas$8,044 $11,121APAC534 823EMEA452 655Total$9,030 $12,599F-35Exhibit 10.33January 25, 2017Joseph O’DanielDear Joseph,Overland Storage, a subsidiary of Sphere3D Storage, Corp. ("Sphere3D'') is pleased to extend the following offer of employment under the general terms setforth below:Position: President - Virtualization & Professional ServicesLocation: 5151 Samuell Blvd., Suite 130, Dallas, TX 75228Reports to: CEO - Eric KellyCompensation:$200,000 annual base salary paid in accordance with our normal payroll practices and subject to normal withholding. You will beeligible to participate in the executive incentive plan upon final approval of the Compensation Committee of the Board ofDirectors (the "Committee"). Management currently intends to propose an executive incentive plan based on corporate andindividual goals to be established by the Committee with a target incentive of 100% of your annual base salary.Retention Bonus:As additional consideration for your employment and as an inducement for you to join Sphere3D, and provided that youremployment with Sphere 3D or Overland continues through January 12, 2018 (or is terminated by Sphere3D or Overland withoutCause (as defined below) prior to such date and you provide a Release as contemplated below under "Severance and Change ofControl"), we agree to pay you a Retention Bonus in the amount of:$700.442 (subject to applicable tax withholding),The Retention Bonus will be paid on January 12, 2018.Restricted Stock Units:As additional consideration for your employment and as an inducement for you to join Sphere 3D, we agree to issue you thefollowing Restricted Stock Units (“RSUs") promptly following the start of your employment (subject to adjustment as set forthbelow):(1)1,144,513 RSUs (the "Initial RSUs"), which shall vest in one installment on March 1, 2017, provided you remaincontinuously employed by Sphere 3D or Overland through such date (or your employment is terminated without Causeprior to such date und you provide a Release as contemplated below under "Severance and Change of Control'").Notwithstanding the foregoing, if, on the trading day immediately preceding the date of delivery of the Initial RSUs, thecalculated price of Sphere 3D's common shares based on a 45 day VWAP (the “Initial RSU Adjustment Price") exceeds$0.34, then the number of Initial RSUs shall be adjusted to (x) 228,903 plus the product of (y) 915,610 multiplied by afraction, the numerator of which is $0.34 and the denominator of which is the Initial RSU Adjustment Price. Formula asJoseph O’DanielOffer of EmploymentJanuary 25, 2017Page 2follows: X+(Y*.34/Initial RSU Adjustment Price). If an adjustment is not made pursuant to the immediately precedingsentence and you sell all of the shares delivered to you following vesting of the Initial RSUs (excluding shares withheld orsold to cover tax withholding for such vesting event) within twenty (20) calendar days of the delivery date for a price that isless than $0.34, then Sphere 3D will pay you in cash within 15 days an amount equal to (a) $389,134 minus (b) theaggregate gross sale price you receive for the sale of the shares underlying the Initial RSUs (including any shares sold tocover tax withholding before deduction for any sales commissions, underwriters discounts, broker fees or similar expenses).(2)572,256 RSUs (the "Second RSUs’), which shall vest in one installment on June I, 2017, provided you remain continuouslyemployed by Sphere 3D or Overland through such date (or your employment is terminated without Cause prior to such dateand you provide a Release as contemplated below under “Severance and Change of Control"). Notwithstanding theforegoing, if, on the trading day immediately preceding the date of delivery of the Second RSUs, the calculated price ofSphere 3D's common shares based on a 45 day VWAP (the "Second RSU Adjustment Price") exceeds $0.34, then the numberof Second RSUs shall be adjusted to (x) 114.451 plus the product of (y) 457,805 multiplied by a fraction, the numerator ofwhich is $0.34 and the denominator of which is the Second RSU Adjustment Price. Formula as follows: X+(Y*.34/SecondRSU Adjustment Price).(3)572,256 RSUs (the Third RSUs"), which shall vest in one installment on September 1, 2017, provided you remaincontinuously employed by Sphere 3D or Overland through such date (or your employment is terminated without Causeprior to such date and you provide a Release as contemplated below under "Severance and Change of Control").Notwithstanding the foregoing, if, on the trading day immediately preceding the date of delivery of the Third RSUs, thecalculated price of Sphere 3D's common shares based on a 45 day VWAP (the "'Third RSU Adjustment Price'') exceeds$0.34, then the number of Third RSUs shall be adjusted to (x) 114,451 plus the product of (y) 457,805 multiplied by afraction, the numerator of which is $0.34 and the denominator of which is the Third RSU Adjustment Price. Formula asfollows: X+(Y*.34/Third RSU Adjustment Price).(4)572,256 RSUs (the "Final RSUs"), which shall vest in one installment on January 3, 2018, provided you remaincontinuously employed by Sphere 3D or Overland through such date (or your employment is terminated without Causeprior to such date and you provide a Release as contemplated below under "Severance and Change of Control").Notwithstanding the foregoing, if, on the trading day immediately preceding the date of delivery of the Final RSUs, thecalculated price of Sphere 3D's common shares based on a 45 day VWAP (the "Final RSU Adjustment Price") exceeds $0.34,then the number of Final RSUs shall be adjusted to (x) 114,451 plus the product of (y) 457,805 multiplied by a fraction, thenumerator of which is $0.34 and the denominator of which is the Final RSU Adjustment Price. Formula as follows: X+(Y*.34/Final RSU Adjustment Price).Joseph O’DanielOffer of EmploymentJanuary 25, 2017Page 3In each case. the RSUs that vest will be paid on the thirtieth (30th) day after the applicable vesting date (or, if such day isnot a business day, on the next business day thereafter). All payments in respect of the foregoing RSU grants are subject toapplicable tax withholding. All share and per share numbers and amounts contained herein shall be subject to adjustmentfor any share splits, combinations, share dividends, recapitalizations and the like with respect to the common shares ofSphere 3D effected after the date hereof. These RSU grants will be subject to the terms and conditions of Sphere 30'sstandard form of award agreement for “inducement grants" of RSUs to newly-hired employees (as modified to reflect theterms hereof); provided, however, that any contingency or conditional issuance provisions with respect to such“inducement grants" (other than the initiation of your employment with Overland) shall not apply.Change of Control:"Change of Control" will be defined to have occurred if, and only if, during the term of your employment with Sphere3D:(i)any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity orperson, or any syndicate or group deemed to be a person under Section 14(d)(2) of the Securities Exchange Act of1934 ("Exchange Act) is or becomes the "Beneficial Owner” (as defined in Rule 13d-3 of the General Rules andRegulations under the Exchange Act), directly or indirectly, of securities of the Company representing 50% ormore of the combined voting power of the Company's then outstanding securities entitled to vote in the election ofdirectors of the Company (other than as a result of a purchase of shares directly from the Company in a capital-raising transaction);(ii)there occurs a reorganization, merger, consolidation or other corporate transaction involving the Company("Transaction”), in each case, with respect to which the shareholders of the Company immediately prior to suchTransaction do not, immediately after the Transaction, own more than fifty percent (50%) of the combined votingpower of the Company or other corporation resulting from such Transaction; or(iii)all or substantially all of the assets of the Company are sold, liquidated or distributed;If your employment is terminated by Sphere3D within the first two years of this agreement for any reason other than for Cause;then, subject to your signing and delivering to Sphere 3D a general release of claims in the form provided by Sphere 3D (a"Release") within 21 days following your receipt thereof, Sphere3D will be obligated to pay your base salary for the timeremaining calculated from the date of termination until the second anniversary of this agreement. The remaining base salary willbe paid in accordance with Sphere3D's standard payroll procedures over that period of time. If the termination described in thisparagraph occurs on or after a change of control, then the amount you receive pursuant to the immediately preceding paragraphshall reduce, dollar-for-dollar, the amount you are entitled to receive under this paragraph.Joseph O’DanielOffer of EmploymentJanuary 25, 2017Page 4If, for any reason, Sphere3D fails to timely pay the Retention Bonus, you will be immediately released from all Non-Competitionobligations contained in that certain Equity Purchase Agreement by and among Sphere 3D, Overland Storage, UnifiedConneXions, lnc., HVE ConneXions, LLC, you and the other Holders (as defined therein) dated as of January 20, 2017 (the"Equity Purchase Agreement"). The foregoing sentence does not constitute an election of waiver of remedies and shall not preventyou from seeking any other recourse against Sphere3D."Cause" shall mean any of the following: (i) your final, non-appealable conviction or entry of a plea of nolo contendere for fraud, theft or embezzlement, orany felony or crime of moral turpitude; or (ii) your willful neglect of duties which you fail to reasonably cure within 30 days after receiving written noticefrom Sphere3D that specifies the specific duties that you have failed to perform (if such conduct is curable).At Sphere3D we strive to maintain a safe, drug-free work environment conducive to effective business operations. We require that our personnel andoperating practices be consistent with the highest standards of health and safety.The Immigration Reform and Control Act of 1986 require employers to provide verification of a new employee's identity and employment eligibility on theirfirst day of employment. It is necessary, therefore, that you complete the US Government and Employment Eligibility Verification Form (1-9) and providedocumentation to verify your identity and employment eligibility.In order to document your acceptance of this mutually binding agreement, please countersign this letter no later than close of business on Wednesday,January 25, 2017 and return to Eric Kelly. Your employment is conditioned on our receipt of your executed copy of this letter and an executed copy of theCompany's form of Proprietary Information and Inventions Assignment Agreement, a copy of which has been provided to you.Joseph, we look forward to you joining the Sphere 3D Executive Management Team.Sincerely/s/ Eric KellyEric KellyPresident and Chief Executive OfficerAcceptance: /s/ Joseph O’Daniel Date: 1-25-17 By signing, I understand, acknowledge and agree to all of the terms of this offer.Exhibit 10.34INDEMNITY AGREEMENTTHIS AGREEMENT is made as of the ___ day of ______, 20__.BETWEEN:SPHERE 3D CORP, a corporation existing under the laws of the Province of Ontario (the "Corporation")-and-_____________ an individual principally residing at ________________ (the "Indemnified Party").RECITALS:A.The Indemnified Party is a duly elected or appointed director or officer of the Corporation;B.The Corporation considers it desirable and in the best interests of the Corporation to enter into this Agreement to set out thecircumstances and manner in which the Indemnified Party may be indemnified in respect of certain liabilities, expenses and/or otherexposures which the Indemnified Party may incur as a result of acting as a director or officer of the Corporation; andC.The by-laws of the Corporation contemplate that the Indemnified Party be indemnified or receive advancement of expenses in certaincircumstances.THEREFORE, in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, thereceipt and sufficiency whereof is mutually acknowledged, the Indemnified Party and the Corporation covenant and agree as follows:1.IndemnitySubject to Section 4 and Section 8 of this Agreement, the Corporation agrees to indemnify the Indemnified Party and save the IndemnifiedParty harmless against any and all Liabilities (as defined below)."Liabilities" means any and all losses, liabilities, claims, damages, costs, charges and expenses which are incurred by the IndemnifiedParty in respect of any Proceeding (as defined below), including, without limitation:(a)an amount paid to settle an action or satisfy a judgment in respect of any Proceeding;(b)all reasonable legal and other professional fees and disbursements incurred in connection with any Proceeding or appeal thereof;(c)all reasonable out-of-pocket expenses incurred by the Indemnified Party to prepare for any Proceeding or appeal thereof, includingout-of-pocket expenses for attending discoveries, trials, hearings, and meetings;(d)any fines or other financial penalties imposed against the Indemnified Party in connection with any Proceeding or appeal thereof;and(e)the full amount of any income taxes that the Indemnified Party is required to pay as a consequence of receiving any paymentmade by the Corporation pursuant to this Agreement, except to the extent that, in computing income for income tax purposes theIndemnified Party is entitled to deduct amounts paid by the Indemnified Party on account of Liabilities for which the IndemnifiedParty has been indemnified by the Corporation (or its insurers) under this Agreement."Proceeding" means any civil, criminal, administrative, investigative or other proceeding (including, without restriction, any claim, action,suit, application, litigation, charge, complaint, prosecution, assessment, reassessment, investigation, inquiry or hearing of any nature or kind)which (i) is made or asserted against or affects the Indemnified Party or in which the Indemnified Party is required by law to participate or in whichthe Indemnified Party participates at the request of the Corporation or where the Indemnified Party is made a witness or participant in any otherrespect in any such proceeding, and (ii) arises because the Indemnified Party is a director or officer (or serves in a similar capacity) of theCorporation or a former director or officer (or serves in a similar capacity) of the Corporation). Without limiting the generality of the foregoing, aProceeding shall include any and every claim for liability and/or any legal, regulatory or investigative action or proceeding by any governmental orregulatory authority or any person, firm, corporation or other entity whatsoever, whether such action, proceeding or investigation be current,pending, anticipated, threatened or completed.2.Claims Process(a)The Indemnified Party shall, as a condition precedent to the right of the Indemnified Party to be indemnified under this Agreement,give the Chief Financial Officer of the Corporation (or any officer performing similar functions) written notice (an "IndemnificationNotice") as soon as reasonably practicable of any Proceeding made or threatened to be made against the Indemnified Party forwhich indemnification may be sought hereunder, provided, however, that the failure to give notice in a timely fashion shall notdisentitle the Indemnified Party to the right to indemnity under this Agreement except to the extent the Corporation suffersprejudice by reason of a delay.(b)The Indemnified Party shall permit the Corporation to assume the defence of any claim or action described in the IndemnificationNotice with counsel of its choice. Whether or not such defence is assumed by the Corporation, the Corporation will not be subjectto any liability for any settlement made without its consent. The Corporation, if it assumes such defence, will not consent to anyjudgment or order or enter into any settlement that does not include, as an unconditional term thereof, the giving by the claimantor plaintiff to the Indemnified Party of a release from all liability with respect to such claim, action or proceeding. If the Corporationis not entitled to, or does not elect to, assume the defence of a claim, action or proceeding, the Corporation will not be obligated topay the costs, fees and expenses of more than one counsel (which for these purposes includes a legal firm) for the IndemnifiedParty and any other directors or officers of the Corporation who are indemnified pursuant to similar indemnity agreements withrespect to such claim, action or proceeding, unless a conflict of interest shall exist between the Indemnified Party and any otherindemnified party with respect to such claim, action or proceeding, in which event the Corporation will be obligated to pay the feesand expenses of an additional counsel for each indemnified party or group of indemnified parties with whom a conflict of interestexists. In addition, the Indemnified Party shall give the Corporation such information and cooperation as it may reasonably require.If the Corporation becomes aware of any Proceeding or reasonably expects that a Proceeding will be made, the Corporation willgive the Indemnified Party notice in writing promptly of such Proceeding or potential Proceeding.- 2-3.Advance of CostsThe Corporation shall, as soon as reasonably practicable following a written request from the Indemnified Party, advance monies to theIndemnified Party for all costs, charges and expenses to be actually and reasonably incurred by the Indemnified Party in the monitoring,investigation, defence or appeal of any Proceeding in advance of the final disposition of the Proceeding (subject to Section 8). Such writtenrequest shall include or be preceded or accompanied by a written undertaking by or on behalf of the Indemnified Party that if, pursuant to Section 4of this Agreement, the Corporation has no obligation or liability to indemnify the Indemnified Party under this Agreement, the Indemnified Partyagrees to repay promptly any monies that have been advanced to the Indemnified Party by the Corporation pursuant to this Agreement.4.Limitation(a)The indemnity described in this Agreement shall not apply to (i) claims initiated by the Indemnified Party against the Corporationexcept for claims relating to the enforcement of this Agreement or (ii) claims initiated by the Indemnified Party against any otherperson or entity unless the Corporation has joined with the Indemnified Party in or consented to the initiation of that Proceeding.(a)The Corporation will have no obligation or liability to indemnify the Indemnified Party under this Agreement, unless (i) theIndemnified Party acted honestly and in good faith with a view to the best interests of the Corporation; and (ii) in the case of acriminal or administrative action or proceeding that is enforced by a monetary penalty, the Indemnified Party had reasonablegrounds for believing that his or her individual conduct was lawful.(b)If after being reimbursed in respect of Liabilities pursuant to this Agreement, the Indemnified Party subsequently receivesindemnification or reimbursement in respect of all or any part of such Liabilities from a source other than the Corporation, theamounts so advanced and paid by the Corporation shall be repaid by the Indemnified Party to the Corporation as soon asreasonably practicable following a written request for repayment to the extent that the Indemnified Party has receivedindemnification or reimbursement from such other source. For greater certainty, the Indemnified Party shall be entitled toindemnification hereunder solely to the extent that the indemnification received by the Indemnified Party under any directors' andofficers' liability insurance policy maintained by the Corporation does not fully indemnify the Indemnified Party in respect ofLiabilities.5.Absence of PresumptionFor the purposes of Section 4 hereof, the termination of any civil, criminal or administrative action or other Proceeding by judgment, order,settlement, conviction or similar or other result shall not, of itself, create a presumption either that the Indemnified Party did not act honestly and ingood faith with a view to the best interests of the Corporation or that, in the case of a criminal or administrative action or other Proceeding that isenforced by a monetary penalty, the Indemnified Party did not have reasonable grounds for believing that his or her individual conduct was lawful.6.Mandatory Obligation to IndemnifyNothing in this Agreement, including Section 4 hereof, or otherwise, shall, directly or indirectly, in any way adversely affect or diminish theobligation of the Corporation to indemnify the Indemnified Party pursuant to Section 136 of the Business Corporations Act (Ontario) and theCorporation agrees to indemnify and shall indemnify the Indemnified Party pursuant to Section 136 of the Business Corporations Act (Ontario),- 3-and any re-enactment, replacement and successor thereof, and otherwise in accordance with the provisions of this Agreement.7.Former Directors and Officers and Access to Information(a)The Indemnified Party shall continue to be entitled to indemnification hereunder, even though the Indemnified Party may no longerbe acting as a director or officer (or in a similar capacity) of the Corporation;(b)The Indemnified Party and its advisors shall at all times be entitled to review during regular business hours all documents, recordsand other information with respect to the Corporation which are under the Corporation's control and which may be reasonablynecessary in order to defend itself against any Proceeding that relates to, arises from or is based on its discharge of its duties inan indemnified capacity, provided that the Indemnified Party shall maintain all such information in strictest confidence except tothe extent necessary for its defence. This Section 7(b) shall not apply where the Proceeding is initiated by the Corporation norshall it apply where the review by the Indemnified Party and/or its advisors of any such documents, records or other informationwould, in the opinion of legal counsel to the Corporation, cause the Corporation to lose its entitlement to claim any legal privilege(solicitor/client/litigation or otherwise) with respect to the disclosure of same in any proceeding in any jurisdiction.8.Application to CourtIn respect of an action or other Proceeding by or on behalf of the Corporation to procure judgment in its favour to which the IndemnifiedParty is made a party by reason of being or having been a director or officer (or serving in a similar capacity) of the Corporation, the Corporationshall make application for, and use its reasonable best efforts to obtain, approval of the court in the applicable jurisdiction to indemnify theIndemnified Party against all Liabilities reasonably incurred by the Indemnified Party in connection with such action or Proceeding if:(a)the Indemnified Party acted honestly and in good faith with a view to the best interests of the Corporation; and(b)in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the Indemnified Party hadreasonable grounds for believing that his or her individual conduct was lawful.In respect of an action or other Proceeding by or on behalf of the Corporation to procure judgment in its favour in respect of which theCorporation is obligated by this Section 8 to make application for approval of the court in the applicable jurisdiction to indemnify the IndemnifiedParty, the Corporation shall advance monies pursuant to Section 3 and pay all such expenses in respect of the final disposition of the action orProceeding in question.9.WaiverNo waiver of any of the provisions of this Agreement will constitute a waiver of any other provision (whether or not similar). No waiver willbe binding unless executed in writing by the party to be bound by the waiver. A party's failure or delay in exercising any right under this Agreementwill not operate as a waiver of that right. A single or partial exercise of any right will not preclude a party from any other or further exercise of thatright or the exercise of any other right it may have.- 4-10.Successors and AssignsThis Agreement becomes effective only when executed by all of the parties hereto. After that time, this Agreement and the benefit of allcovenants herein contained will be binding upon and enure to the benefit of the parties and their respective successors, heirs, legal personalrepresentatives, executors, administrators and permitted assigns.Neither this Agreement nor any of the rights or obligations under this Agreement are assignable or transferable by the Indemnified Partywithout the prior written consent of the Corporation. The Corporation shall not assign this Agreement nor any of the rights or obligations under thisAgreement without the prior written consent of the Indemnified Party; provided, however that this Agreement may be assigned by the Corporationto any successor (whether direct or indirect, and whether by purchase, merger, consolidation or otherwise) to all, substantially all or a substantialpart of the business or assets of the Corporation.11.Directors' and Officers' InsuranceThe Corporation shall maintain an insurance policy or policies providing liability insurance for its current and former directors, officers orpersons serving in a similar capacity for the Corporation and the Indemnified Party shall be covered by such policy or policies in accordance withits or their terms to the maximum extent of the coverage available under any such policy or policies. The Corporation shall use its reasonableefforts to include the Indemnified Party as an insured under such insurance policy or policies. Upon receipt of a notice of a claim pursuant to theterms hereof, the Corporation shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the proceduresset forth in the respective policies. The Corporation shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalfof the Indemnified Party all amounts payable as a result of such proceeding in accordance with the terms of such policies.The Corporation shall, upon request of the Indemnified Party, provide a copy of each insurance policy providing the coveragecontemplated by this Section promptly after coverage is obtained, and will promptly notify the Indemnified Party if the insurer cancels, makesmaterial changes to coverage or refuses to renew coverage (or any part of the coverage). The Corporation will advise the Indemnified Partypromptly after it becomes aware of any material change in or withdrawal or lapse in coverage of any directors' and officers' liability insurance policymaintained by the Corporation, details of any claim made under such a policy and the triggering of any extended reporting period applicable to anysuch policy.12.Further AssurancesNo amendment, alteration or repeal of this Agreement or any provision hereof shall limit or restrict any right of the Indemnified Party underthis Agreement in respect of any action taken or omitted by such Indemnified Party prior to such amendment, alteration or repeal.This Agreement shall continue in full force and effect after the Indemnified Party has ceased to be a director or officer (or serving in asimilar capacity) of the Corporation, and shall survive until thirty (30) days following the expiration of the statute of limitations applicable to any andall claims. This Agreement shall be deemed to have been in effect during all periods that the Indemnified Party is acting as a director or officer (orserving in a similar capacity) of the Corporation.The parties shall do and perform and cause to be done and performed such further and other acts and things as may be necessary ordesirable to give effect to this Agreement.13.Subrogation- 5-To the extent permitted by law, the Corporation shall be subrogated to all rights which the Indemnified Party may have under all policies ofinsurance or other contracts pursuant to which the Indemnified Party may be entitled to reimbursement of, or indemnification in respect of, anyLiabilities borne by the Corporation pursuant to this Agreement. All of the actions of the Indemnified Party to assist the Corporation in securing andenforcing its subrogation rights shall themselves be subject to the terms of this Agreement.14.SeverabilityIf any provision of this Agreement is determined to be illegal, invalid or unenforceable by any court of competent jurisdiction from which noappeal exists or is taken, that provision will be severed from this Agreement and the remaining provisions will remain in full force and effect.15.Governing LawThis Agreement will be governed by, interpreted and enforced in accordance with the laws of the Province of Ontario and the federal lawsof Canada applicable therein.16.CounterpartsThis Agreement may be executed in any number of counterparts (including counterparts by facsimile or electronic transmission) and allsuch counterparts taken together will be deemed to constitute one and the same instrument.17.Rights Not ExcludedThis Agreement shall not operate to abridge or exclude any other rights to which the Indemnified Party may be entitled by operation of lawor under any statute, by-law of the Corporation, Agreement, vote of shareholders of the Corporation, vote of disinterested directors of theCorporation or otherwise. This Agreement is to be deemed consistent wherever possible with relevant provisions of the by-laws of the Corporation;provided, however, that in the event of a conflict between this Agreement and such provisions, including any future amendment, modification,revocation or deletion thereof, the provisions of this Agreement shall control. To the extent that a change in applicable law, whether by statute orjudicial decision, permits greater indemnification than would be afforded currently under the by-laws and/or this Agreement, it is the intent of theparties hereto that the Indemnified Party shall enjoy by this Agreement the greater benefits afforded by such change.18.Partial IndemnificationIf the Indemnified Party is entitled under any provision of this Agreement to indemnification by the Corporation for some or a portion of theLiabilities reasonably incurred by the Indemnified Party in respect of any Proceeding, but not, however, for the total amount thereof, theCorporation shall nevertheless indemnify and hold harmless the Indemnified Party for that portion for which the Indemnified Party is entitled toindemnification.[Signature page follows]- 6-Yours truly,SPHERE 3D CORP.Per: [Name] [Title]Acknowledged and Agreed to on _____________________,20__ [Name]Exhibit 10.35GENERAL RELEASEThis General Release (“Release”) is entered into effective as of January 14, 2019 (the “Effective Date”) between Sphere 3D Corp., a corporationincorporated under the laws of the Province of Ontario and all of its subsidiaries, affiliates, agents or related entities, including but not limited to OverlandStorage, Inc., a corporation incorporated under the laws of California (the “Company”), and Eric Kelly, an individual (“Employee”) with reference to thefollowing facts:1. Consideration. In consideration of the release and other agreements and covenants of the Employee contained herein, provided that theEmployee does not revoke this release within the seven-day period following the Effective Date, the Company shall pay to Employee pursuant to ExhibitA, attached.2. Release. Employee, for himself and his heirs, successors and assigns, fully releases and discharges the Company, and each of its and itssubsidiaries’ officers, directors, employees, shareholders, attorneys, accountants, other professionals, insurers and agents (collectively, “Agents”), and allentities related to any such party, including, but not limited to, heirs, executors, administrators, personal representatives, assigns, parent, subsidiary andsister corporations, affiliates, partners and co-venturers (collectively, “Related Entities”), from all rights, claims, demands, actions, causes of action,liabilities and obligations of every kind, nature and description whatsoever, Employee now has, owns or holds or has at any time had, owned or held or mayhave against the Company, Agents or Related Entities from any source whatsoever, whether or not arising from or related to the facts recited in this Release.Employee specifically releases and waives any and all claims arising under any express or implied contract, rule, regulation or ordinance, including,without limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans with Disabilities Act, the California FairEmployment and Housing Act, the California Labor Code and the Age Discrimination in Employment Act, as amended (“ADEA”). Employee acknowledgesthat the Company has paid Employee all wages, bonuses, accrued unused vacation pay (except as otherwise set forth on (Exhibit A) options, benefits andmonies owed by the Company to Employee, other than wages earned for the payroll period (ending November 15, 2018). This release does not waive anyclaims for (a) indemnification and/or payment of related expenses under (i) any applicable law and/or (ii) the Company’s bylaws or articles of incorporation;(b) Employee’s ownership of any Company stock, vested stock units or stock options, and/or Employee’s rights as an existing shareholder of the Company;(c) any rights Employee has under any applicable stock option plan of the Company and/or any stock option, stock unit, stock purchase or otherstockholder agreements with Company; (d) any vested rights or claims Employee may have under any Company-sponsored benefit plans (includingwithout limitation, any medical, dental, disability, life insurance or retirement plans); (e) any rights Employee may have to obtain continued healthinsurance coverage or other benefits pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), and/or anysimilar state law; (f) any claims Employee may have against the Company for reimbursement of business or other expenses incurred in connection withEmployee’s employment with Company (which expenses are not in excess of $1,000); or (g) any other claim which as a matter of law cannot be waived. Forthe avoidance of doubt, this release releases any and all claims for severance pay, including without limitation, any and all rights under that certainRetention Agreement by and between the Company and Employee (the “Agreement”), except as set forth in Exhibit A hereto. Notwithstanding anything tothe contrary herein, nothing in this Release prohibits Employee from filing a charge with or participating in an investigation conducted by any state orfederal government agencies. However, Employee does waive, to the maximum extent permitted by law, the right to receive any monetary or other recovery,should any agency or any other person pursue any claims on Employee’s behalf arising out of any claim released pursuant to this Release. For clarity, and asrequired by law, such waiver does not prevent Employee from accepting a whistleblower award from the Securities and Exchange Commission pursuant toSection 21F of the Securities Exchange Act of 1934, as amended. Employee acknowledges and agrees that he has received any and all leave and otherbenefits that he has been and is entitled to pursuant to the Family and Medical Leave Act of 1993. Employee represents and warrants to the Companythat he has not heretofore assigned or transferred to any person not a party to this Release any released matter or any part or portion thereof.3. Section 1542 Waiver. This Release is intended as a full and complete release and discharge of any and all claims that Employee may haveagainst the Company, Agents or Related Entities. In making this release, Employee intends to release each of the Company, Agents and Related Entitiesfrom liability of any nature whatsoever for any claim of damages or injury or for equitable or declaratory relief of any kind, whether the claim, or any factson which such claim might be based, is known or unknown to her. Employee expressly waives all rights under Section1542 of the California Civil Code, which Employee understands provides as follows:A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST INHIS OR HERFAVORAT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVEMATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.Employee acknowledges that he may discover facts different from or in addition to those that he now believes to be true with respect to this Release.Employee agrees that this Release shall remain effective notwithstanding the discovery of any different or additional facts.4. ADEA Waiver. Employee expressly acknowledges and agrees that by entering into this Release, he is waiving any and all rights or claims thathe may have arising under the Age Discrimination in Employment Act of 1967, as amended (the “ADEA”), and that this waiver and release is knowing andvoluntary. Employee and the Company agree that this waiver and release does not apply to any rights or claims that may arise under the ADEA after thedate Employee signs this Release. Employee further expressly acknowledges and agrees that:(a) In return for this Release, he will receive consideration beyond that which he was already entitled to receive before executing this Release;(b) He is hereby advised in writing by this Release to consult with an attorney before signing this Release;(c) He was given a copy of this Release on December 3, 2018, and informed that he had twenty-one (21) days within which to consider this Releaseand that if he wished to execute this Release prior to the expiration of such 21-day period he will have done so voluntarily and with full knowledgethat he is waiving his right to have twenty-one (21) days to consider this Release; and that such twenty-one (21) day period to consider this Releasewould not and will not be re-started or extended based on any changes, whether material or immaterial, that are or were made to this Release in suchtwenty-one (21) day period after he received it;(d) He was informed that he had seven (7) days following the date of execution of this Release in which to revoke this Release, and this Releasewill become null and void if Employee elects revocation during that time. Any revocation must be in writing and must be received by the Companyduring the seven-day revocation period. In the event that Employee exercises this revocation right, neither the Company nor Employee will haveany obligation under this Release. Any notice of revocation should be sent by Employee in writing to the Company’s Board of Directors (attentionVic Mahadevan, lead director, by email to vic.mahadevan@gmail.com), so that it is received within the seven-day period following execution ofthis Release by Employee.A-2(e) Nothing in this Release prevents or precludes Employee from challenging or seeking a determination in good faith of the validity of thiswaiver under the ADEA, nor does it impose any condition precedent, penalties or costs for doing so, unless specifically authorized by federal law.5. No Undue Influence. This Release is executed voluntarily and without any duress or undue influence. Employee acknowledges that he has readthis Release and executed it with his full and free consent. No provision of this Release shall be construed against any party by virtue of the fact that suchparty or its counsel drafted such provision or the entirety of this Release.6. Governing Law. This Release is made and entered into in the State of California and accordingly the rights and obligations of the partieshereunder shall in all respects be construed, interpreted, enforced and governed in accordance with the laws of the State of California as applied to contractsentered into by and between residents of California to be wholly performed within California.7. Severability. If any provision of this Release is held to be invalid, void or unenforceable, the balance of the provisions of this Release shall,nevertheless, remain in full force and effect and shall in no way be affected, impaired or invalidated.8. Counterparts. This Release may be executed simultaneously in one or more original, facsimile, or .PDF counterparts, each of which shall bedeemed an original, but all of which together shall constitute one and the same instrument. This Release may be executed by facsimile, with originals tofollow by overnight courier.9. Dispute Resolution Procedures. Employee and the Company agree to arbitrate any claim or dispute (“Dispute”) arising out of or in any wayrelated to this Release, the employment relationship between the Company and Employee or the termination of Employee’s employment, except asprovided in Section 9.1, to the fullest extent permitted by law. Except as provided in Section 9.1, this method of resolving Disputes shall be the sole andexclusive remedy of the parties. Accordingly, the parties understand that, except as provided herein, they are giving up their rightsto have their disputesdecided in a court of law and, if applicable, by a jury, and instead agree that their disputes shall be decided by an arbitrator.9.1 Scope of the Agreement. A Dispute shall include all disputes or claims between Employee and Company arising out of, concerning orrelating to Employee’s employment by Company, including, without limitation: claims for breach of contract, tort, discrimination,harassment, wrongful termination, demotion, discipline, failure to accommodate, compensation or benefits claims, constitutionalclaims and claims for violation of any local, state or federal law, or common law, to the fullest extent permitted by law. A Dispute shallnot include any dispute or claim, whether brought by either Employee or Company, for: (a) workers’ compensation or unemploymentinsurance benefits; or (b) the exclusions from arbitration specified in the California Arbitration Act, California Code of Civil Proceduresection 1281.8. For the purpose of this Section 9, references to “Company” include Company and all related or affiliated entities andtheir employees, supervisors, officers, directors, owners, shareholders, agents, pension or benefit plans, pension or benefit plansponsors, fiduciaries, administrators, and the successors and assigns of any of them, and this Section 9 shall apply to them to the extentthat Employee’s claims arise out of or relate to their actions on behalf of Company.9.2 Consideration. The parties agree that their mutual promise to arbitrate any and all disputes between them, except as provided inSection 9.1, rather than litigate them before the courts or other bodies, provides adequate consideration for this Section 9.A-39.3 Initiation of Arbitration. Either party may initiate an arbitration proceeding by providing the other party with written notice of anyand all claims forming the basis of such proceeding in sufficient detail to inform the other party of the substance of such claims. In noevent shall the request for arbitration be made after the date when institution of legal or equitable proceedings based on such claimswould be barred by the applicable statute of limitations.9.4 Arbitration Procedure. The arbitration will be conducted by JAMS pursuant to its Rules for the Resolution of Employment Disputesin Santa Clara, California by a single, neutral arbitrator. The parties are entitled to representation by an attorney or other representativeof their choosing. The arbitrator shall have the power to enter any award that could be entered by a judge of the Superior Court of theState of California, as applicable to the cause of action, and only such power. The arbitrator shall issue a written and signed statementof the basis of the arbitrator’s decision, including findings of fact and conclusions of law. The parties agree to abide by and performany award rendered by the arbitrator. Judgment on the award may be entered in any court having jurisdiction thereof.9.5 Costs of Arbitration. If Employee initiates arbitration against the Company, Employee must pay a filing fee equal to the current filingfee in the appropriatecourt had Employee’s claim been brought there, and the Company shall bear the remaining costs of the filingfees and arbitration forum, including arbitrator fees, case management fees, and forum hearing fees (the “Arbitration Fees”). If theCompany initiates arbitration against Employee, the Company shall bear the entire cost of the Arbitration Fees. (Such costs do notinclude costs of attorneys, discovery, expert witnesses, or other costs which Employee would have been required to bear had the matterbeen filed in a court.) The arbitrator may award attorneys’ fees and costs to the prevailing party, except that Employee shall have noobligation to pay any of the Arbitration Fees even if Company is deemed the prevailing party. If there is any dispute as to whether theCompany or Employee is the prevailing party, the arbitrator will decide that issue. Any postponement or cancellation fee imposed bythe arbitration service will be paid by the party requesting the postponement or cancellation, unless the arbitrator determines that suchfee would cause undue hardship on the party. At the conclusion of the arbitration, each party agrees to promptly pay any arbitrationaward imposed against that party.9.6 Governing Law. All Disputes between the parties shall be governed, determined and resolved by the internal laws of the State ofCalifornia, including the California Arbitration Act, California Code of Civil Procedure 1280 et seq.9.7 Discovery. The parties may obtain discovery in aid of the arbitration to the fullest extent permitted under law, including CaliforniaCode of Civil Procedure Section 1283.05. All discovery disputes shall be resolved by the arbitrator.10. Entire Agreement. This Release constitutes the entire agreement of the parties with respect to the subject matter of this Release, and supersedesall prior and contemporaneous negotiations, agreements and understandings between the parties, oral or written, including, without limitation, theAgreement, between the Company and Employee.11. Modification: Waivers. No modification, termination or attempted waiver of this Release will be valid unless in writing, signed by the partyagainst whom such modification, termination or waiver is sought to be enforced.12. Amendment. This Release may be amended or supplemented only by a writing signed by Employee and the Company.A-4Dated: February 15, 2019 /s/ Eric Kelly Printed Name: Eric Kelly Agreed and Acknowledged:Sphere 3D Corp./s/ Peter Tassiopoulos Date: February 4, 2019 Name: Peter TassiopoulosTitle: CEOA-5Exhibit A•Employee was granted RSUs of the Company. Acceleration of vesting of entire unvested portion of the following Restricted Stock Units initiallygranted to Employee by the Board of Directors of the Company on the dates indicated below:Date of Grant ofRSUTotal RSUsVested as of Date of thisAgreementUnvested as of Date of this Agreement, andAccelerated pursuant tothe terms hereof 12/18/201735,9375,99029,947•A cash amount equal to $160,000 less applicable withholdings. Such payment shall be paid monthly for 24 months to Employee upon execution ofthe general release.A-6Exhibit 10.36TRANSITION SERVICES AGREEMENTThis TRANSITION SERVICES AGREEMENT (this “Agreement”) is entered into as of November 13, 2018 by and among Sphere 3D. Corp andsubsidiaries, an Ontario corporation (“Seller”) and, Overland Storage, Inc., a California corporation (“Overland / Buyer”). Seller, Overland and Buyer arereferred to collectively as the “Parties” or individually as a “Party.” Each capitalized term used herein and not otherwise defined will have the meaningascribed to such term in the Share Purchase Agreement (as hereinafter defined).RECITALSA.Seller, Overland and Buyer have entered into that certain Share Purchase Agreement dated February 20, 2018 (as amended by thatcertain First Amendment to Share Purchase Agreement dated as of August 21, 2018, the “Share Purchase Agreement”) pursuant to which Seller will sell toBuyer, and Buyer will purchase, all of the issued and outstanding shares of Overland, upon and subject to the terms therein.B.In connection with the consummation of the transactions contemplated by the Share Purchase Agreement, Seller, Overland and Buyerdesire to execute and deliver this Agreement providing for Overland’s provision of certain transition services to Seller, and Seller’s provision of certaintransition services to Overland, after the Closing.AGREEMENTIn consideration of the mutual covenants set forth in this Agreement and other good and valuable consideration, the receipt of which are herebyacknowledged, each Party hereby agrees as follows:1. Transition Services and Third Party Agreements.(a) Upon the terms and conditions contained in this Agreement and Schedule A attached hereto (the “Schedule”), during the Term,Overland will, or Buyer will cause one or more of its Affiliates to, provide following the Closing to Seller those services described in the Schedule (eachsuch service, a “Service”, and, collectively, the “Services”), and Seller will pay for the Services in accordance with the terms of this Agreement.(b) Overland, or any of its Affiliates providing Services at any time, may hire or engage one or more third-party service providers (the“Third Party Providers”) to perform any or all of its obligations (the “Third Party Services”) under this Agreement pursuant to licenses or othercontractual arrangements (the “Third Party Provider Agreements”). Seller acknowledges that, as of the date hereof, Overland engages Third PartyProviders to perform certain obligations in connection the Business, including warehousing, logistics and customer support services , and Seller herebyconsents to Overland’s continued use of such Third Party Providers to perform Services under this Agreement. Any obligation of Overland to Seller underthis Agreement, which obligation is performed, satisfied or fulfilled by an Affiliate of Overland or any Third Party Provider, will be deemed to have beenperformed, satisfied or fulfilled by Overland.(c) The Parties understand, acknowledge and agree that in some cases, the continued participation of Third Party Providers under ThirdParty Provider Agreements may require certain consents, approvals, permissions or licenses (collectively, “Authorizations”), that certain Authorizationsmay be required in order for Overland to provide the Services pursuant to this Agreement, and that obtaining the foregoing Authorizations may involveadditional out of pocket costs, expenses, fees, charges or commissions (“Authorization Expenses”). The Parties agree to cooperate to obtain allAuthorizations sufficient to enable Overland or its Third Party Providers to perform the Services in accordance with this Agreement. Seller agrees to pay orreimburse Overland, as applicable, for any and all reasonable and necessary Authorization Expenses it incurs in connection with the provision of Services orsatisfaction of its obligations under this Agreement. Subject to Section 9 and each Party’s agreement of cooperation set forth in this Section 1(c), failure toobtain any such Authorization, and any resulting failure to provide Serviceshereunder, will not be deemed a breach of this Agreement and Overland will be under no obligation to provide such Service if the Authorization cannot beobtained.(d) Seller hereby grants to Overland and its Affiliates providing Services hereunder, on behalf of itself, a non-exclusive, royalty-free,fully paid license under all intellectual property of Seller (other than trademarks, service marks, trade names, trade dress and domain names) as necessary for,and solely for the purpose of, the provision of Services by Overland and its Affiliates hereunder.(e) Upon the terms and conditions contained in this Agreement and Schedule B attached hereto, during the Term, Seller will, or willcause one or more of its Affiliates to, provide following the Closing to Overland those services described in Schedule B (the “Seller Services”), andOverland will pay for the Seller Services in accordance with the terms of this Agreement. Any obligation of Seller to Overland under this Agreement, whichobligation is performed, satisfied or fulfilled by an Affiliate of Seller, will be deemed to have been performed, satisfied or fulfilled by Seller.2. Standard of Performance; Limitations on Providing Services.(a) Each Seller and Overland covenants that it will perform, and will cause to be performed, the Services or the Seller Services, asapplicable, at a level of quality, speed and diligence consistent in all material respects with past practices of their respective businesses and in accordancewith the terms of this Agreement and applicable law. Each of Seller and Overland will not be required to provide any Service or Seller Service, as applicable,to the extent performance of such Seller Service by Seller or such Service by Overland is prohibited by, or would require Seller or Overland, as applicable, toviolate, any applicable laws. EXCEPT AS EXPRESSLY SET FORTH HEREIN, EACH OF SELLER AND OVERLAND DISCLAIMS ALL WARRANTIES,STATUTORY, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULARPURPOSE IN CONNECTION WITH THE PERFORMANCE OF THE SERVICES AND THE SELLER SERVICES, AS APPLICABLE, HEREUNDER.(b) Each of Seller and Overland will provide, or cause to be provided, the Seller Services or the Services, as applicable, withoutinterruption. In the event that Seller or Overland is wholly or partially prevented from, or delayed in, providing one or more Seller Services or Services, asapplicable, or one or more Seller Services or Services, as applicable, are interrupted or suspended, by reason of events beyond its reasonable control(including acts of God, act of governmental authority, act of the public enemy or due to fire, explosion, accident, floods, embargoes, epidemics, war, acts ofterrorism, nuclear disaster, labor difficulty, civil unrest and/or riots, civil commotion, insurrection, severe or adverse weather conditions, lack of or shortageof electrical power, malfunctions of equipment or software programs or any other cause beyond the reasonable control of Overland) (each, a “ForceMajeure Event”), Seller and Overland, as applicable, will not be obligated to deliver the affected Seller Services or Services, as applicable during suchperiod, and Overland and Seller, as applicable, will not be obligated to pay for any Seller Services or Services, as applicable, not delivered; provided that,during the duration of a Force Majeure Event, Seller and Overland, as applicable, will use commercially reasonable efforts to (i) avoid or remove such ForceMajeure Event, (ii) resume its performance under this Agreement with the least practicable delay, and (iii) cooperate with Overland’s or Seller’s insuranceproviders, as applicable, with respect to matters relating to Seller’s or Overland’s performance of the Seller Services or Services, as applicable.3. Payment of Fees and Charges. In consideration for the Seller Services and Services, as applicable, provided hereunder, Seller will pay toOverland the amounts for such Services as specified in the Schedule (the “Overland Charges”) and Overland will, and Buyer will cause Overland to, pay toSeller the amounts for such Seller Services as specified in Schedule B (the “Seller Charges”). Overland will invoice Seller monthly for Services provided,and amounts invoiced will be payable within 30 days of the date of invoice except as expressly contemplated in the Schedule. Payroll and payroll relatedexpenses will be billed and paid at cost at the time it is due. Any travel expenses incurred by Overland upon Seller’s request will be billed at actual cost.Any project-based fees for Services will be negotiated between Seller and Overland. Seller will not withhold any payments to Overland under thisAgreement, notwithstanding any dispute that may be pending between them, in order to offset payments due to Seller pursuant to this Agreement, the SharePurchase Agreement or otherwise, unless such withholding is mutually agreed by the Parties or is provided for in the final ruling of a court havingjurisdiction pursuant to the terms of this Agreement. Seller will invoice Overland monthly for Seller Services provided, and amounts invoiced will bepayable within 30 days of the date of invoice except as expressly contemplated in Schedule B. Payroll and payroll related expenses will be billed and paidat cost at the time it is due. Any travel expenses incurred by Seller upon Overland’s request will be billed at actual cost. Any project-based fees for SellerServices will be negotiated between Seller and Overland. Overland will, and Buyer will cause Overland to, not withhold any payments to Seller under thisAgreement, notwithstanding any dispute that may be pending between them, in order to offset payments due to Overland pursuant to this Agreement, theShare Purchase Agreement or otherwise, unless such withholding is mutually agreed by the Parties or is provided for in the final ruling of a court havingjurisdiction pursuant to the terms of this Agreement.4. Taxes. Seller will be responsible for all sales, use, excise, services and other similar taxes, levies and charges not otherwise included in theOverland Charges (other than taxes based, in whole or in part, on the net income, profits or employees of Overland) imposed by applicable law on theprovision of Services to Seller hereunder and upon receipt of an invoice for such taxes, levies and charges. If Overland is required to pay any such taxes,levies or charges in connection with its provision of Services under this Agreement, Seller will promptly reimburse Overland therefor or pay such amountdirectly to the applicable taxing authority as provided by applicable law. Overland will use commercially reasonable efforts to cooperate with Seller infiling any reasonably requested documentation and certificates that would reduce any taxes on Services or result in a refund of such taxes. Overland will beresponsible for all sales, use, excise, services and other similar taxes, levies and charges not otherwise included in the Seller Charges (other than taxes based,in whole or in part, on the net income, profits or employees of Seller) imposed by applicable law on the provision of Seller Services to Overland hereunderand upon receipt of an invoice for such taxes, levies and charges. If Seller is required to pay any such taxes, levies or charges in connection with itsprovision of Seller Services under this Agreement, Overland will promptly reimburse Seller therefor or pay such amount directly to the applicable taxingauthority as provided by applicable law. Seller will use commercially reasonable efforts to cooperate with Overland in filing any reasonably requesteddocumentation and certificates that would reduce any taxes on Seller Services or result in a refund of such taxes.5. Term; Termination; Survival.(a) The following Sections will survive any termination, cancellation or expiration of this Agreement or a particular Service: [Section1(d)(ii) (until the expiration or termination of each of the agreements referred to in such clause), Section 1(d)(iii) (until the earlier of the receipt of theOutstanding Third Party Consent or the expiration or termination of each of the agreements referred to in such clause)], Section 3 and Section 4 (in eachcase, to the extent of Overland Charges or Seller Charges and taxes accrued prior to termination, cancellation or expiration), and Sections 7 through 22. Forclarity and avoidance of doubt, in the event of termination with respect to one or more but less than all Seller Services or Services, this Agreement willcontinue in full force and effect with respect to any Seller Services or Services not terminated thereby.6. Administration of Services.(a) Each of Seller and Overland will designate one or more persons in Schedule C who are authorized to bind Seller and Overland,respectively (each, a “Representative”) with respect to matters contemplated by this Agreement, including the facilitation and administration of thisAgreement and resolution of any disputes arising hereunder. Each Party may treat an act of a Representative of the other Party as being authorized by suchother Party without inquiring about such act or ascertaining whether such Representative had authority to so act. Each Party will have the right at any timeand from time to time to replace its Representative by giving notice in writing to the other Party setting forth the name of (i) the Representative to bereplaced and (ii) the replacement person, and certifying that the replacement Representative is authorized to act for the Party in respect of the matterscontemplated by this Agreement.(b) Seller acknowledges and agrees that on and after the date hereof, it may own or control certain properties and premises to whichOverland may need access in order to provide some or all of the Services. In order for Overland to perform its obligations under this Agreement, Seller agreesto provide reasonable access to such properties and premises to Overland during normal business hours to the extent necessary to enable Overland to furnishthe Services contracted for hereunder. Overland acknowledges and agrees that on and after the date hereof, it may own or control certain properties andpremises to which Seller may need access in order to provide some or all of the Seller Services. In order for Seller to perform its obligations under thisAgreement, Overland agrees to provide reasonable access to such properties and premises to Seller during normal business hours to the extent necessary toenable Seller to furnish the Seller Services contracted for hereunder.7. Relationship of the Parties. In providing the Seller Services or Services hereunder, Seller or Overland, as applicable, and any third partiesacting on behalf of Seller or Overland, as applicable, will act solely as independent contractors. Nothing herein will constitute, be construed as, or create inany way or for any purpose a partnership, joint venture or principal-agent relationship between Overland and Seller. No Party will have any power to controlthe activities and/or operations of the other Party. No Party will have any power or authority to bind, commit or act as agent for the other Party. In providingthe Services hereunder, Overland’s employees and agents will not be considered employees or agents of Seller, nor will Overland’s employees or agents beeligible or entitled to any compensation, benefits, perquisites or privileges (including severance) given or extended to any of Seller’s employees. Inproviding the Seller Services hereunder, Seller’s employees and agents will not be considered employees or agents of Overland, nor will Seller’s employeesor agents be eligible or entitled to any compensation, benefits, perquisites or privileges (including severance) given or extended to any of Overland’semployees.8. Intellectual Property and Data. Overland and Seller will each retain ownership of their Intellectual Property and data existing as of the datehereof, except as may otherwise be provided for in the Share Purchase Agreement or the other agreements contemplated thereby. Unless otherwise agreed inwriting, each Party hereto agrees that any Intellectual Property or data of the other Party or its licensors made available to such Party in connection with theprovision of Seller Services or Services will remain the sole property of the Party that is the owner of such Intellectual Property or data; provided, that, asbetween Overland and Seller, (a)(i) Seller will own any derivative works, additions, modifications, translations or enhancements to Seller’s IntellectualProperty that Overland makes or has made on Seller’s behalf, and (ii) Seller will exclusively own any and all data generated with respect to, and in thecourse of, the provision of the Services by Overland and (b)(i) Overland will own any derivative works, additions, modifications, translations orenhancements to Overland’s Intellectual Property that Seller makes or has made on Overland’s behalf, and (ii) Overland will exclusively own any and alldata generated with respect to, and in the course of, the provision of the Seller Services by Seller.9. Commercially Reasonable Efforts; Further Assurances. Each Party will use commercially reasonable efforts to cooperate with the other Partyin performing its obligations hereunder, subject to the standards of performance described in Section 2 hereof. Such cooperation will include exchanginginformation, providing electronic access to systems and platforms used in connection with the Seller Services and Services, and, subject to the terms hereof,using commercially reasonable efforts to obtain all consents, licenses, sublicenses or approvals necessary to permit each Party to perform its obligationshereunder. The Representatives of each Party will consult with each other from time to time and the Parties will use commercially reasonable efforts tocooperate with each other in order to effect an efficient transition and to minimize the expense thereof and the disruption of the business of the Parties.Without limiting the foregoing, such cooperation will include the execution and delivery of such further instruments or documents as may be reasonablyrequested by the other Party to enable the full performance of each Party’s obligations hereunder.10. Confidentiality.(a) For purposes of this Agreement (i) “Confidential Information” means any confidential or proprietary information of either Party orany member of its Group, whether relating to customer information, trade data, trade secrets, or business practices of the other Party, that either Party or anymember of its Group, obtains in connection with the provision or receipt of Seller Services or Services under this Agreement (whether prior to, on orfollowing the date hereof) from the other Party or its Group, and(ii)“Group” means, with respect to either Party, such Party’s Affiliates, employees, agents, subcontractors or vendors and, with respect to Overland, anyof its Third Party Providers.(b) Each Party agrees not to disclose the other Party’s Confidential Information to (i) any third party, or (ii) any other member of suchParty’s Group who does not need such Confidential Information in connection with performing or receiving the Seller Services or Services. No Party willuse Confidential Information of the other Party for any purpose other than as contemplated by this Agreement (whether for its own benefit or for the benefitof any other Person).(c) Notwithstanding the foregoing, if a Party or one of its Group members is legally required, by order of a court of competentjurisdiction or other governmental authority, to disclose Confidential Information of the other Party (a “Compelled Party”), such Compelled Party will, iflegally permitted to do so, provide the disclosing Party whose Confidential Information is being subjected to compelled disclosure (the “Subject Party”)with prior written notice of such legal requirement or request to disclose. If the Subject Party so requests, the Compelled Party will cooperate at the expenseof the Subject Party in seeking any protective arrangements reasonably requested by the Subject Party. If a protective arrangement is not obtained, theCompelled Party (i) may thereafter disclose or provide such Confidential Information to the extent required by applicable law (as so advised by counsel),lawful process or governmental authority, without liability therefor and (ii) will exercise commercially reasonable efforts to have confidential treatmentaccorded to any such Confidential Information so provided or furnished.(d) It is expressly understood that no information will be subject to these confidentiality provisions, or otherwise deemed to beConfidential Information, if: (i) the Party or Group receiving such Confidential Information legally learned of such Confidential Information from a thirdparty, provided such third party is not known by the receiving Party or Group to be bound by any confidentiality obligation regarding such information andthe receiving Party or Group does not owe any confidentiality obligation to such third party, (ii) a Party or Group independently had knowledge of suchConfidential Information prior to the date hereof and without a duty of confidentiality to any Person, (iii) such Confidential Information is availablethrough the public domain, other than through improper disclosure by the recipient or its Group, or (iv) was independently developed without use of, orreference to, any of the Confidential Information furnished by or on behalf of the disclosing Party in connection with this Agreement.(e) Notwithstanding the foregoing, each of the Parties acknowledge their respective obligations under Section 6.2(a) (Confidentiality) ofthe Share Purchase Agreement, the terms of which are incorporated herein by reference.(f) The terms of this Section 10 will survive the termination or expiration of this Agreement and will remain in full force and effect for solong as (i) Seller or its Group retains any of Overland’s or Buyer’s Confidential Information or (ii) Overland, Buyer or their respective Groups retain any ofSeller’s Confidential Information.(g) Each Party hereby agrees to promise the performance by each member of such Party’s Group with the obligations set forth in thisSection 10.11. Limitation on Liability. Overland’s entire aggregate liability pursuant to this Agreement will be limited to amounts actually paid by Sellerpursuant to this Agreement, except as otherwise contemplated herein. Seller’s entire aggregate liability pursuant to this Agreement will be limited toamounts actually paid by Overland and Buyer pursuant to this Agreement, except as otherwise contemplated herein. In no event will Overland or Seller beliable for any punitive damages or any special, incidental, indirect or consequential damages of any kind or nature (including lost profits for businessinterruption or otherwise), or any diminution in value, regardless of the form of action through which such damages are sought. Notwithstanding theforegoing, no limitation of either Party’s liability will apply to damages arising under Sections 8 (Intellectual Property and Data) or 10 (Confidentiality).12. Indemnification.(a) Subject to Section 11 (Limitation on Liability), Buyer and Overland will indemnify and hold harmless Seller and its Affiliates andeach of their respective officers, directors, members, partners, managers and employees (collectively, the “Seller Indemnified Parties”) from and against anylosses, costs or expenses (including reasonable attorneys’ fees and expenses), judgments, fines, claims, damages and assessments (“Losses”) that areimposed on or incurred by the Seller Indemnified Parties arising directly from Overland’s or Buyer’s provision of Services hereunder or otherwise arisingdirectly as a result of the performance by Overland or Buyer of its obligations under this Agreement to the extent such Losses are caused by the grosslynegligent acts or willful misconduct in Overland’s or Buyer’s provision of Services under this Agreement (as determined by a court of competentjurisdiction upon entry of a final judgment rendered and unappealable or not timely appealed), unless such acts or omissions:(i) were taken by Overland or Buyer at the express instruction of Seller; or(ii) were taken by Overland or Buyer in good faith and were consistent with the advice of Overland’s attorneys, accountants, orother professional advisors.(b) Subject to Section 11 (Limitation on Liability), Seller will indemnify and hold harmless Buyer, Overland and their respectiveAffiliates and each of their respective officers, directors, members, partners, managers and employees (collectively, the “Overland Indemnified Parties”)from and against any Losses that are imposed on or incurred by the Overland Indemnified Parties arising directly from Seller’s provision of Seller Serviceshereunder or otherwise arising directly as a result of the performance by Seller of its obligations under this Agreement to the extent such Losses are causedby the grossly negligent acts or willful misconduct in Seller’s provision of Seller Services under this Agreement (as determined by a court of competentjurisdiction upon entry of a final judgment rendered and unappealable or not timely appealed), unless such acts or omissions:(i) were taken by Seller at the express instruction of Overland or Buyer; or(ii) were taken by Seller in good faith and were consistent with the advice of Seller’s attorneys, accountants, or otherprofessional advisors.13. Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery ifdelivered personally, by messenger service or by electronic mail, (b) on the date of confirmation of receipt (or, the first (1st) Business Day following suchreceipt if the date is not a Business Day) of transmission by facsimile, (c) on the date of transmission if sent by email (provided, that such email states that itis a notice delivered pursuant to this Section 10.1) or (d) on the date of confirmation of receipt (or, the first (1st) Business Day following such receipt if thedate is not a Business Day) if delivered by a nationally recognized courier service. All notices hereunder shall be delivered as set forth below, or pursuant tosuch other instructions as may be designated in writing by the party to receive such notice:if to Buyer or Overland, to:Overland Storage125 S Market StreetSan Jose, CA 95113Attention: Eric KellyEmail: ekelly@overlandtandberg.com if to Seller to:Sphere 3D Corp.4542 Ruffner Street, Suite 250San Diego, California 92111Attention: Peter Tassiopoulos, PresidentEmail: peter.tassiopoulos@sphere3d.com14. Interpretation. For purposes of this Agreement, the words “include,” “includes” and “including,” when used herein, shall be deemed in eachcase to be followed by the words “without limitation.” The headings contained in this Agreement are for reference purposes only and shall not affect in anyway the meaning or interpretation of this Agreement.15. Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreementand shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood thatall parties need not sign the same counterpart.16. Entire Agreement; Third-Party Beneficiaries. This Agreement (i) constitutes the entire agreement among the parties with respect to thesubject matter in this Agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to thesubject matter in this Agreement, and (ii) is not intended to confer upon any other Person any rights or remedies hereunder, except as specifically providedherein.17. Severability. In the event that any provision of this Agreement or the application thereof, becomes or is declared by a court of competentjurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provisionto other Persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such voidor unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the greatest extent possible, the economic,business and other purposes of such void or unenforceable provision.18. Governing Law; Consent to Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State ofCalifornia, regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof. Each of Buyer, Overland and Sellerirrevocably submits to the exclusive jurisdiction of (a) the Superior Courts of the State of California, Santa Clara County, and (b) the United States DistrictCourt in Santa Clara, California, for the purposes of any suit, action or other proceeding arising out of this Agreement.19. Rules of Construction. The parties hereto agree that they have been represented by counsel during the negotiation and execution of thisAgreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or otherdocument will be construed against the party drafting such agreement or document.20. Assignment. No party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior writtenapproval of each of the other parties. Any purported assignment in violation of this Section 20 shall be void. Subject to the preceding sentence, thisAgreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.21. Waiver of Jury Trial. SUBJECT TO THE LIMITATIONS IMPOSED BY APPLICABLE LAW, EACH OF BUYER, OVERLAND ANDSELLER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHERBASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF BUYER,OVERLAND OR SELLER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.[Signature page follows]IN WITNESS WHEREOF, the parties hereto have caused this Transition Services Agreement to be executed as of the date first written above bytheir respective officers thereunto duly authorized.OVERLAND STORAGE, INC.By: /s/ Peter Tassiopoulos Name: Peter Tassiopoulos Title: DirectorSPHERE 3D CORP.By: /s/ Peter Tassiopoulos Name: Peter Tassiopoulos Title: PresidentSchedule A1: BuyerDescription Facilities ServicesOverland will, or Buyer will cause one or more of its Affiliates to, provide following the Closing and during the Term to Seller thoseservices described in this Schedule A. Overland will only be obligated to perform the services described in this Schedule A if and tothe extent that, in its sole discretion, it has access to the personnel and other resources reasonably necessary to perform the servicesin a manner that does not substantially interfere with the business of Overland; provided, that Overland shall not take actions with theprimary purpose of ceasing to have access to the personnel and other resources reasonably necessary to perform the services in thisSchedule A. Seller will use its commercially reasonable efforts to arrange to replace the services provided by Overland hereunder assoon as reasonably practicable after the Closing with services it provides for itself or with services it obtains from third parties. Inconsideration for the services provided hereunder, Seller will pay to Overland the amounts for such services as specified in thisSchedule A..1.Facilitiesa.Term:i.6 months from deal close1.Note: San Jose has two facilitiesa.through the end of December 125 South Market facilityb.for remainder of term, Interim San Jose facilityb.Scope / Description of Facilities and Services to be provided. Shared facilities described below in this section. Seller andBuyer’s facilities use are highly integrated and cannot be separated piecemeal immediately on deal close.Therefore, Overland will perform these services as an inseparable package until Seller is ready to transition to itsown facilities on an agreed upon transition date, which will be no later than the expiration of the TermFacilityOwned by*% allocation to SellerDescription of Seller useSan Diego 4542 Ruffner(sq. feet: 5164 workspace,400 Lab space )Overland / BuyerSphere 3D50% of workspace(excludes lab)0% of lab and electrical• Workspace for employeeresources shared withOverlandSan Jose 125 South Market(9898 sq ft 13th floor); (384sq ft 2nd floor)Overland / Buyer(until December 31, 2018)Sphere 3D10% of 13th floor workspace& parking100% of 2nd floor lab &electrical• Sphere 3D 2nd floor lab• Workspace for 3 Sphere 3Demployees (SnapEngineering & techsupport)San Jose Interim Facility(Regus 117 Park Ave)Overland / Buyer(effective: January 1, 2019)Sphere 3D10% workspace & parkingfor 3• Workspace for 3 Sphere 3Demployees (SnapEngineering & techsupport)Lease Agreement datedbetween Prologis TLF(Dallas), LLC and UnifiedConneXions, Inc. (PlanoDistribution Center)Sphere 3D / Seller100% allocation to Sphere3D• Sphere 3D 100% utilized* Footnote: If by deal close either the San Jose lease and/or the Plano leases assignments per the SPA Assignment schedules has not been completed, bothparties agree to honor payments per the allocations listed above.Fees and ExpensesDuring the Term, Seller will pay to Overland Monthly Service Fees set forth below:a)San Jose 125 South Market Facilities Fees (until December 31, 2018)a.Workspace facilities fee: $4,666i.[(Sphere 3D headcount allocation percentage) x (the monthly lease of San Jose 13th floor facility)]+ [(S3Dheadcount) x (parking fee)]b.Lab Facilities fee: $3,421i.(2nd floor computer room lease) + (computer room electrical / utility fee)b)San Jose Interim Facility Fees (starts January 1, 2019)a.Workspace facilities fee: $868i.[(Sphere 3D headcount allocation percentage) x (the monthly lease of San Jose interim location)]+ [(S3Dheadcount) x (parking fee)]c)San Diego 4542 Ruffner Facilities Fees**a.Shared Utilities fee: $548i.Utilities fee = (S3D headcount allocation percentage) x [(utilities estimate) minus (lab electrical estimate)]b.Shared Workspace fee: Starting February 1, 2019**, pay monthly fee of $4567 for employee workspace based on thefollowing formulasi.Workspace fee = (S3D headcount allocation percentage) x (workspace square footage) x (lease cost per squarefoot)1.Workspace square footage = (total San Diego square footage) minus (Lab square footage)**Footnote: Per the terms of the San Diego Facility Lease agreement, the first 3 months are free with facilities Lease payments starting February 2019.Schedule A2Description of Buyer Services: SnapServer Tech Support & LogisticsOverland will, or Buyer will cause one or more of its Affiliates to, provide following the Closing and during the Term to Seller thoseservices described in this Schedule A. Overland will only be obligated to perform the services described in this Schedule A if and tothe extent that, in its sole discretion, it has access to the personnel and other resources reasonably necessary to perform the servicesin a manner that does not substantially interfere with the business of Overland; provided, that Overland shall not take actions with theprimary purpose of ceasing to have access to the personnel and other resources reasonably necessary to perform the services in thisSchedule A. Seller will use its commercially reasonable efforts to arrange to replace the services provided by Overland hereunder assoon as reasonably practicable after the Closing with services it provides for itself or with services it obtains from third parties. Inconsideration for the services provided hereunder, Seller will pay to Overland the amounts for such services as specified in thisSchedule A.1.SnapServer Tech Support & Logistics Servicesa.Term 12 months from deal close datei.However, by mutual agreement, 60 days’ notice can be given by seller or buyer o terminate before the term dateb.Seller Transition plan: transition to Sphere 3D Service Support and Logistics Infrastructure and 3rd-party serviceagreements. Overland will provide the reasonable support to transition the services to Seller by the term datec.Scope / Description of Services to be provided. Business processes described below in this section performed by Overlandon behalf of Seller. Seller and Overland's SnapServer support processes are highly integrated across multiple entitiesand regions and cannot be separated piecemeal immediately on deal close. Therefore, Overland will perform theseservices as an inseparable package until Seller is ready to take on all of this work on an agreed upon transition date,which will be no later than the expiration of the Term#Description1Introductions to end-users, customers and 3rd Party Services providers:Overland will facilitate (i) communications between Seller and the customers and end-users, and (ii) introductions to3rd-party Services and Logistics Providers of the Business. In connection with these services, Overland will alsotransfer basic knowledge and data to Seller exclusively related to the Services and Logistics processes and business#Description2SnapServer Service / Logistics processes:a) Customer serviceb) Order fulfillmentc) Customer, supplier and materials database administrationd) Product servicee) Returned goods processing and administrationf) Warranty administrationg) Technical Supporth) Consignment inventory controli) Supply chain management3Reliance on Overland IT systems:Use of Overland IT software and hardware systems for each work day during which Overland processes service,support and logistics activity on Seller’s behalf• Tech Support Telephony Phone Tree System Recommend dedicated Snap line• Tech Support Clientele Tech support / CRM tool• Ops Agile Doc control (BOM, part #s, etc)• Ops Baan ERP,MRP• Ops GSB ERP / MRP• Ops TD HK / GTEC SAP• Development IT backups, other IT managed systems Backup of critical systems in the lab. snapftp, IT hostedVMs• Sales/Mktg SnapServer related parts of Company Web and Partner Portal Snapserver.com domain, other snaprelated domain names, Online help, knowledge base (JIVE), customer support portal, Partner FastTrackPortal etc., Sharepoint, Documentation, Tech Pubs4Logistics and support provided by third party suppliers. Examples could include:a) 3rd party warehousesb) Freight and freight planning including the repositioning of inventory to the Seller’slocationsc) Returned goods processing provided by a 3rd partyd) In-bound and out-bound freight costse) Customs clearancef) 3rd party Overland Authorized Service Providers5Use of Overland facilities:Use of Overland office facilities by former Overland employees that work for or contract with Seller on a temporaryor full time basis. Includes facility access and use of conference rooms and phones.#Description6Contract Manufacturer:Overland will work with Seller, and the contract manufacturers, to transition supply to the Seller. Overland willplace any new purchase orders to the manufacturer or other supplier on Overland’s account as requested. For orderson behalf of the Seller, Seller agrees that Overland will not be required to submit any orders unless the obligation tothe supplier is expressly agreed to be the Seller’s.Manufacturing AIC XSR 40 and 120Manufacturing GTEC / THDK XSD 40Fees and ExpensesDuring the Term, Seller will pay to Overland Monthly Service Fees as set forth below. These fees will continue until the expiration ofthis agreement1.Flat Monthly fee of $15,000 to receive the services and support as outlined in the scope and description of services table above.NamePosition% Allocated to Seller Europe /APAC / Japan TechSupport100% Snap Escalations & logisticsmgmt.20% US order entry25% Europe order entry25% Asia order entry25% Tandberg order entry25% Pipeline & forecast mgmt25% Materials Planning25% Manuf. Quality30% WW logistics20% Americas Logistics20% EMEA / Tandberg Logistics10% Service inventory mgmt20% Customer Service / WarrantyContracts10% Customer Service / RMAlogistics20% RMA Logitstics20% Customer Services / Contractsadmin20% Warranty Sales support(Europe, APAC, Japan)20% Warranty Sales SupportAmericas20% WW procurement25%2.A monthly fee to support the SNAP service contract services through 3rd-party ASPs, Logistics and Freight. This fee will becalculated as followsa.specific identification will be used to bill to Sphere the exact amounts from what is invoiced from the 3rd party to Overland.This will be delivered to Seller as an itemized invoice with this information monthly.i. Example: 3rd-party Invoices for Dispatch of onsite service and RMA parts shipment and replacement would beidentified by the unique serial part number, service contract identifier, and the 3rd party vendorSchedule A3Description of Buyer Services: HROverland will, or Buyer will cause one or more of its Affiliates to, provide following the Closing and during the Term to Seller thoseservices described in this Schedule A. Overland will only be obligated to perform the services described in this Schedule A if and tothe extent that, in its sole discretion, it has access to the personnel and other resources reasonably necessary to perform the servicesin a manner that does not substantially interfere with the business of Overland; provided, that Overland shall not take actions with theprimary purpose of ceasing to have access to the personnel and other resources reasonably necessary to perform the services in thisSchedule A. Seller will use its commercially reasonable efforts to arrange to replace the services provided by Overland hereunder assoon as reasonably practicable after the Closing with services it provides for itself or with services it obtains from third parties. Inconsideration for the services provided hereunder, Seller will pay to Overland the amounts for such services as specified in thisSchedule A.2.HR & Payroll Servicesa.Term: 24 months from deal close datei.After 6 months, However, with 60 days’ notice, seller or buyer has the right to terminate before the term dateb.Seller Transition plan: transition to a Seller resourced HR support. Overland will provide the reasonable support totransition the services to Seller by the term datec.Scope / Description of Services to be provided are as follows#Description1Reliance on Overland HR systems:Use of Overland IT software and hardware systems for each work day during which Overland processes HRsupport and activity on Seller’s behalfe.g, ADP2HR Services• Benefits processing and support• HR counsel• Recruiting / Hiring Support• Employee Termination supportFees and Expenses•During the Term, Seller will pay to Overland a Monthly Service Fee set forth below:1.$2500 fee for both 1) the allocated employees on the Overland payroll as listed below and 2) the HR Services / Systemslisted above (e.g. ADP Payroll & benefits processing and management)NamePosition% Allocated to Seller HR executive10%2.Monthly Reimbursement fee for the HVE employee health benefit payments made by Overland on behalf of Sphere 3D.Schedule A4Description of Services: LegalOverland will, or Buyer will cause one or more of its Affiliates to, provide following the Closing and during the Term to Seller thoseservices described in this Schedule A. Overland will only be obligated to perform the services described in this Schedule A if and tothe extent that, in its sole discretion, it has access to the personnel and other resources reasonably necessary to perform the servicesin a manner that does not substantially interfere with the business of Overland; provided, that Overland shall not take actions with theprimary purpose of ceasing to have access to the personnel and other resources reasonably necessary to perform the services in thisSchedule A. Seller will use its commercially reasonable efforts to arrange to replace the services provided by Overland hereunder assoon as reasonably practicable after the Closing with services it provides for itself or with services it obtains from third parties. Inconsideration for the services provided hereunder, Seller will pay to Overland the amounts for such services as specified in thisSchedule A.1.Legal Servicesa.Term 3 months from deal close date; with automatic monthly renewal until cancelled per terms belowi.with 30 days notice before the term date, seller has the right to terminateb.Scope / Description of Services to be provided. Legal Services and Support described below in this sectioni.Services from Buyer on behalf of Seller (General Counsel)1.Public company compliance/corporate governancea.E.g., periodic reports, filings, Nasdaq related compliance, shareholder meetings2.Ongoing litigation3.Board meetings and minutes4.Stock related mattersFees and ExpensesDuring the Term and where applicable, Seller will Pay Monthly Service Fees which represent a percentage allocation of Salary withbenefits burden for the legal services provided by the Overland employee as set forth below and at a rate mutually agreed to inwriting by both parties. These fees will continue until the expiration of this agreement.NamePositionEmployed by:Monthly % Allocation to Seller General CounselOverland / Buyer50%Schedule A5Buyer Services: FinanceOverland will, or Buyer will cause one or more of its Affiliates to, provide following the Closing and during the Term to Seller thoseservices described in this Schedule A. Overland will only be obligated to perform the services described in this Schedule A if and tothe extent that, in its sole discretion, it has access to the personnel and other resources reasonably necessary to perform the servicesin a manner that does not substantially interfere with the business of Overland; provided, that Overland shall not take actions with theprimary purpose of ceasing to have access to the personnel and other resources reasonably necessary to perform the services in thisSchedule A. Seller will use its commercially reasonable efforts to arrange to replace the services provided by Overland hereunder assoon as reasonably practicable after the Closing with services it provides for itself or with services it obtains from third parties. Inconsideration for the services provided hereunder, Seller will pay to Overland the amounts for such services as specified in thisSchedule A.2.Finance Servicesa.Term: 6 months from deal close datei.However, with 30 days notice, seller has the right to terminate before the term dateb.Seller Transition plan: transition to a Sphere 3D resourced finance and audit team. Buyer will provide the reasonablesupport to transition the services to Sphere 3Dby the term datei.After the first 30 days of the term, buyer and seller have the right to periodically review the scope of work andservices and mutually agree to adjust the scope of services and fees1.Example: After the first 90 days, Sphere 3D engages own audit firm and accounting director. Both partiesthen agree to lower the allocations and fees to remove use of the correspondingSphere 3D allocated resource that is no longer needed by Overlandc.Scope / Description of Services to be provided. Business processes described below in this section performed by Overlandon behalf of Seller. Seller and Overland's finance and accounting processes are highly integrated across multipleentities and regions and cannot be separated piecemeal immediately on deal close. Therefore, Overland will performthese services as an inseparable package until Sphere is ready to take on all of this work on an agreed upon transitiondate, which will be no later than the expiration of the Term:#Description1Financial reporting- Including public reporting process and obligations2Accounting / Transactional finance services- Account Receivable & collections- Accounts Payable- Sales & Use tax collection and processing- All general ledger accounting3Reviews and Audits with Auditors4Reliance on Overland IT systems:- Use of Overland IT software and hardware systems for each work day during which Overland processesbusiness activity on Seller’s behalf5Payroll processingFees and Expenses1)Services provided by Overland to Sphere 3D: During the Term, Seller will pay to Buyer Monthly Service Fees as set forth below.These fees will continue until either 1) Seller chooses to hire the Buyer resource(s) as an employee (where applicable) or 2) theexpiration of this agreementa)Monthly fee of $50,000 for the services provided by employees and contractors on the Overland payrollDuring the Term, Sphere 3D will have access and use Overland’s Business systems for finance, accounting, and businessoperations2)Services provided by Sphere 3D to Overland:a)Monthly Audit Fee paid based on the following formulai)50% of Audit Firm (Moss Adams) fees invoiced to SellerSchedule B1Seller Services: ITSphere 3D will, or Seller will cause one or more of its Affiliates to, provide following the Closing and during the Term to Overlandthose services described in this Schedule B. Seller will only be obligated to perform the services described in this Schedule B if and tothe extent that, in its sole discretion, it has access to the personnel and other resources reasonably necessary to perform the services in amanner that does not substantially interfere with the business of Seller; provided, that Seller shall not take actions with the primarypurpose of ceasing to have access to the personnel and other resources reasonably necessary to perform the services in this Schedule B.Overland will use its commercially reasonable efforts to arrange to replace the services provided by Seller hereunder as soon asreasonably practicable after the Closing with services it provides for itself or with services it obtains from third parties. In considerationfor the services provided hereunder, Overland will pay to Seller the amounts for such services as specified in this Schedule B.1.IT Servicesa.Term: 9 months from deal close datei.However, with 30 days’ notice buyer has the right to terminate before the term dateb.Buyer Transition plan:ItemSupport Requirement DescriptionNotes / scope estimate1Maintain/Support virtual server environment Dortmund, Germany3 Hypervisors, 20 Virtual Servers, 2 StorageAppliances San Diego, CA5 Hypervisors, 43 Virtual Servers, 5 StorageAppliances Northern CA5 Hypervisors, 30 Virtual Servers, 3 StorageAppliances Westminster, CO4 Hypervisors, 58 Virtual Servers, 2 StorageAppliances2Maintain/Support telephony solutions San Diego, CA Northern CA Westminster, CO 3Maintain/Support Active Directory 4Application Support (System Level) Mailbox support217 users Maintain/Support Email Filtering217 mailboxes Maintain/Support Office 365 Sharepoint support217 users and 12 site collections OneDrive support217 users Skype for Business support217 users5Maintain Domains - Management and Registrations Owned Domains Managing DNS SSL Certificates21 SSL certificates6Maintain/Support Helpdesk Daily management of Spiceworks helpdesk tickets 7Maintain/Support infrastructure monitoring Dortmund, Germany – 54 devices monitored54 devices monitored GTEC – 3 devices monitored3 devices monitored San Diego, CA – 61 devices monitored61 devices monitoredItemSupport Requirement DescriptionNotes / scope estimate Northern CA – 49 devices monitored49 devices monitored Westminster, CO – 68 devices monitored68 devices monitored Internal user support Dortmund, Germany – Primary support Andrii Boiarynov, UCX backup supportPrimary support Andrii Boiarynov, UCXbackup support San Diego, CA –UCX primary supportPrimary support UCX Northern CA – Primary support UCXPrimary support UCX Westminster, CO – Primary support UCXPrimary support UCX8Maintain infrastructure backups 9Maintain site-to-site VPN tunnels Site-to-Site IPSec VPN tunnels between all sites 10License Management and Upgrades Microsoft Enterprise Agreement Office365 MSDN Vmware ESET AntiVirus GoToMeeting Backup and Replication Software Others 11Virus / Malware ESET AntiVirus support 12Quarterly Audits w. Deliverables incl. Risk View, Recommendations for HW and SW, Upgrades 13Desktop Support Image Management and Deployment Remote / SoHo User Support Print & Other Device Management 14Centralized Business Infrastructure Upgrade / Modernization support (e.g., Clientele, Baan,SAP, etc….) Fees and ExpensesDuring the Term, Overland will pay to Seller a Monthly Service Fee set forth below. These fees will continue until the expiration ofthis agreementb)A flat rate of $15,000 per services rendered in the IT services table aboveExhibit 10.37INITIALS MESLOAN PURPOSE CommercialNOTE DATE 12/19/18MATURITY DATE 12/19/19RATE 6.000%ACCT. NUMBERLOAN NAME HVE INC.INDEX (w/Margin)Not ApplicableLOAN NUMBER 120011219NOTE AMOUNT $400,000.00Creditor Use OnlyPROMISSORY NOTE(Commercial - Revolving Draw)DATE AND PARTIES. The date of this Promissory Note (Note) is December 19, 2018. The parties and their addresses are:LENDER:CITIZENS NATIONAL BANK OF TEXAS200 North Elm, PO Box 717Waxahachie, TX 75168Telephone: (972) 938-4300BORROWER:HVE INC.a Delaware Corporation 100 EXECUTIVE CT STE 2WAXAHACHIE, TX 751651.DEFINITIONS. As used in this Note, the terms have the following meanings:A. Pronouns. The pronouns "I," "me," and "my" refer to each Borrower signing this Note, individually and together with their heirs,successors and assigns, and each other person or legal entity (including guarantors, endorsers, and sureties) who agrees to pay this Note."You" and "Your" refer to the Lender, any participants or syndicators, successors and assigns, or any person or company that acquires aninterest in the Loan.B.Note. Note refers to this document, and any extensions, renewals, modifications and substitutions of this Note.C. Loan. Loan refers to this transaction generally, including obligations and duties arising from the terms of all documents prepared orsubmitted for this transaction such as applications, security agreements, disclosures or notes, and this Note.D.Loan Documents. Loan Documents refer to all the documents executed as a part of or in connection with the Loan.E. Property. Property is any property, real, personal or intangible, that secures my performance of the obligations of this Loan.F.Percent. Rates and rate change limitations are expressed as annualized percentages.G.Dollar Amounts. All dollar amounts will be payable in lawful money of the United States of America.2.PROMISE TO PAY. For value received, I promise to pay you or your order, at your address, or at such other location as you maydesignate, amounts advanced from time to time under the terms of this Note up to the maximum outstanding principal balance of $400,000.00(Principal), plus interest from the date of disbursement, on the unpaid outstanding Principal balance until this Note is paid in full and you haveno further obligations to make advances to me under the Loan.I may borrow up to the Principal amount more than one time.3.ADVANCES. Advances under this Note are made according to the following terms and conditions.A. Requests for Advances. My requests are a warranty that I am in compliance with all the Loan Documents. When required by you for aparticular method of advance, my requests for an advance must specify the requested amount and the date and be accompanied with anyagreements, documents, and instruments that you require for the Loan. Any payment by you of any check, share draft or other chargemay, at your option, constitute an advance on the Loan to me. All advances will be made in United States dollars. I will indemnify you andhold you harmless for your reliance on any request for advances that you reasonably believe to be genuine. To the extent permitted by law,I will indemnify you and hold you harmless when the person making any request represents that I authorized this person to request anadvance even when this person is unauthorized or this person's signature is not genuine.I or anyone I authorize to act on my behalf may request advances by the following methods.(1)I make a request in person.(2)I make a request by phone.B. Advance Limitations. In addition to any other Loan conditions, requests for, and access to, advances are subject to the followinglimitations.(1)Obligatory Advances. You will make all Loan advances subject to this Agreement's terms and conditions.(2) Advance Amount. Subject to the terms and conditions contained in this Note, advances will be made in exactly the amount Irequest.(3)Maximum Frequency. Advances will be made no more frequently than Daily.(4) Cut-Off Time. Requests for an advance received before 4:00:00 PM will be made on any day that you are open for business, onthe day for which the advance is requested.(5) Disbursement of Advances. On my fulfillment of this Note's terms and conditions, you will disburse the advance in any manner asyou and I agree.(6) Credit Limit. I understand that you will not ordinarily grant a request for an advance that would cause the unpaid principal of myLoan to be greater than the Principal limit. You may, at your option, grant such a request without obligating yourselves to do so in thefuture. I will pay any overadvances in addition to my regularly scheduled payments. I will repay any overadvance by repaying you infull within 10 days after the overadvance occurs.(7) Records. Your records will be conclusive evidence as to the amount of advances, the Loan’s unpaid principal balances and theaccrued interest.C.Additional Conditions. Upon borrower request and loan officer approval4.INTEREST. Interest will accrue on the unpaid Principal balance of this Note at the rate of 6.000 percent {Interest Rate).A.Post-Maturity Interest. After maturity or acceleration, interest will accrue at the highest rate allowed by law per annum.B. Maximum Interest Amount. Any amount assessed or collected as interest under the terms of this Note will be limited to themaximum lawful amount of interest allowed by applicable law. Amounts collected in excess of the maximum lawful amount will be appliedfirst to the unpaid Principal balance. Any remainder will be refunded to me.C. Statutory Authority. The amount assessed or collected on this Note is authorized by the Texas usury laws under Tex. Fin. Code, Ch.303. The provisions of Tex. Fin. Code, Ch. 346 do not apply to this Note.D.Accrual. Interest accrues using an Actual/360 days counting method.5.ADDITIONAL CHARGES. As additional consideration, I agree to pay, or have paid, these additional fees and charges.A. Nonrefundable Fees and Charges. The following fees are earned when collected and will not be refunded if I prepay this Note beforethe scheduled maturity date.UCC Search/Filing. A(n) UCC Search/Filing fee of $186 .00 payable from separate funds on or before today's date.Certificate of Status. A(n) Certificate of Status fee of $10.00 payable from separate funds on or before today's date.6.REMEDIAL CHARGES. In addition to interest or other finance charges, I agree that I will pay these additional fees based on my methodand pattern of payment. Additional remedial charges may be described elsewhere in this Note.A. Late Charge. If a payment is more than 10 days late, I will be charged 5.000 percent of the Amount of Payment. However, this chargewill not be greater than $1,500.00. I will pay this late charge promptly but only once for each late payment.7.PAYMENT. I agree to pay all accrued interest on the balance outstanding from time to time in regular payments beginning January 19,2019, then on the same day of each month thereafter. A final payment of the entire unpaid outstanding balance of Principal and interest will bedue December 19, 2019.Payments will be rounded to the nearest $.01. With the final payment I also agree to pay any additional fees or charges owing and the amountof any advances you have made to others on my behalf. Payments scheduled to be paid on the 29th, 30th or 31st day of a month thatcontains no such day will, instead, be made on the last day of such month.Interest payments will be applied first to any charges I owe other than late charges, then to accrued, but unpaid interest, then to late charges.Principal payments will be applied first to the outstanding Principal balance, then to any late charges. If you and I agree to a differentapplication of payments, we will describe our agreement on this Note. The actual amount of my final payment will depend on my paymentrecord.8.PREPAYMENT. I may prepay this Loan in full or in part at any time. Any partial prepayment will not excuse any later scheduledpayments until I pay in full.9.LOAN PURPOSE. The purpose of this Loan is for working capital.10.ADDITIONAL TERMS. The interest rate on this loan may be increased by 2% for any violation or violations of the stated terms andconditions of this loan. The increased rate will stay in effect until the violation or violations are corrected to the satisfaction of the Bank.11.SECURITY. The Loan is secured by separate security instruments prepared together with this Note as follows:Document NameSecurity Agreement - HVE INC.Parties to DocumentHVE INC.Date of Security DocumentDecember 19, 201812.LIMITATIONS ON CROSS-COLLATERAUZATION. The Line of Credit is not secured by a previously executed security instrument if anon-possessory, non-purchase money security interest is created in "household goods" in connection with a "consumer loan," as those termsare defined by federal law governing unfair and deceptive credit practices. The Line of Credit is not secured by a previously executed securityinstrument if you fail to fulfill any necessary requirements or fail to conform to any limitations of the Real Estate Settlement Procedures Act,(Regulation X), that are required for loans secured by the Property or if, as a result, the other debt would become subject to Section 670 of theJohn Warner National Defense Authorization Act for Fiscal Year 2007.The Line of Credit is not secured by a previously executed security instrument if you fail to fulfill any necessary requirements or fail toconform to any limitations of the Truth in Lending Act, (Regulation Z), that are required for loans secured by the Property.13.DEFAULT. I will be in default if any of the following events (known separately and collectively as an Event of Default) occur:A.Payments. I fail to make a payment in full when due.B. Insolvency or Bankruptcy. The death, dissolution or insolvency of, appointment of a receiver by or on behalf of, application of anydebtor relief law, the assignment for the benefit of creditors by or on behalf of, the voluntary or involuntary termination of existence by, orthe commencement of any proceeding under any present or future federal or state insolvency, bankruptcy, reorganization, composition ordebtor relief law by or against me or any co-signer, endorser, surety or guarantor of this Note or any other obligations I have with you.C. Business Termination. I merge, dissolve, reorganize, end my business or existence, or a partner or majority owner dies or is declaredlegally incompetent.D. New Organizations. Without your written consent, I organize, merge into, or consolidate with an entity; acquire all or substantially allof the assets of another; materially change the legal structure, management, ownership or financial condition; or effect or enter into adomestication, conversion or interest exchange.E.Failure to Perform. I fail to perform any condition or to keep any promise or covenant of this Note.F.Other Documents. A default occurs under the terms of any other Loan Document.G.Other Agreements. I am in default on any other debt or agreement I have with you.H. Misrepresentation. I make any verbal or written statement or provide any financial information that is untrue, inaccurate, or concealsa material fact at the time it is made or provided.I.Judgment. I fail to satisfy or appeal any judgment against me.J.Forfeiture. The Property is used in a manner or for a purpose that threatens confiscation by a legal authority.K.Name Change. I change my name or assume an additional name without notifying you before making such a change.L Property Transfer. I transfer all or a substantial part of my money or property.M.Property Value. You determine in good faith that the value of the Property has declined or is impaired.N.Material Change. Without first notifying you, there is a material change in my business, including ownership, management, andfinancial conditions.O.Insecurity. You determine in good faith that a material adverse change has occurred in my financial condition from the conditions setforth in my most recent financial statement before the date of this Note or that the prospect for payment or performance of the Loan isimpaired for any reason.14.DUE ON SALE OR ENCUMBRANCE. You may, at your option, declare the entire balance of this Note to be immediately due andpayable upon the creation of, or contract for the creation of, any lien, encumbrance, transfer or sale of all or any part of the Property. This rightis subject to the restrictions imposed by federal law, as applicable. However, if I am in default under this Agreement, I may not sell theinventory portion of the Property even in the ordinary course of business.15.WAIVERS AND CONSENT. To the extent not prohibited by law, I waive protest, presentment for payment, demand, notice ofacceleration, notice of intent to accelerate and notice of dishonor.A. Additional Waivers By Borrower. In addition, I, and any party to this Note and Loan, to the extent permitted by law, consent tocertain actions you may take, and generally waive defenses that may be available based on these actions or based on the status ofa party to this Note.(1)You may renew or extend payments on this Note, regardless of the number of such renewals or extensions.(2)You may release any Borrower, endorser, guarantor, surety, accommodation maker or any other co-signer.(3)You may release, substitute or impair any Property securing this Note.(4)You, or any institution participating in this Note, may invoke your right of set-off.(5) You may enter into any sales, repurchases or participations of this Note to any person in any amounts and I waive noticeof such sales, repurchases or participations.(6) I agree that any of us signing this Note as a Borrower is authorized to modify the terms of this Note or any instrumentsecuring, guarantying or relating to this Note.B. No Waiver By Lender. Your course of dealing, or your forbearance from, or delay in, the exercise of any of your rights,remedies, privileges or right to insist upon my strict performance of any provisions contained in this Note, or any other LoanDocument, shall not be construed as a waiver by you, unless any such waiver is in writing and is signed by you.16.REMEDIES. After I default, you may at your option do any one or more of the following.A.Acceleration. You may make all or any part of the amount owing by the terms of this Note immediately due.B.Sources. You may use any and all remedies you have under state or federal law or in any Loan Document.C. Insurance Benefits. You may make a claim for any and all insurance benefits or refunds that may be available on my default.D. Payments Made On My Behalf. Amounts advanced on my behalf will be immediately due and may be added to the balance owingunder the terms of this Note, and accrue interest at the highest post-maturity interest rate.E. Termination. You may terminate my rights to obtain advances or other extensions of credit by any of the methods provided in thisNote.F. Set-Off. You may use the right of set-off. This means you may set-off any amount due and payable under the terms of this Noteagainst any right I have to receive money from you.My right to receive money from you includes any deposit or share account balance I have with you; any money owed to me on an itempresented to you or in your possession for collection or exchange; and any repurchase agreement or other non-deposit obligation. "Anyamount due and payable under the terms of this Note" means the total amount to which you are entitled to demand payment under theterms of this Note at the time you set-off.Subject to any other written contract, if my right to receive money from you is also owned by someone who has not agreed to pay thisNote, your right of set-off will apply to my interest in the obligation and to any other amounts I could withdraw on my sole request orendorsement.Your right of set-off does not apply to an account or other obligation where my rights arise only in a representative capacity. It also doesnot apply to any Individual Retirement Account or other tax-deferred retirement account.You will not be liable for the dishonor of any check when the dishonor occurs because you set-off against any of my accounts. I agree tohold you harmless from any such claims arising as a result of your exercise of your right of set-off.G. Waiver. Except as otherwise required by law, by choosing any one or more of these remedies you do not give up your right to use anyother remedy. You do not waive a default if you choose not to use a remedy. By electing not to use any remedy, you do not waive yourright to later consider the event a default and to use any remedies if the default continues or occurs again.17.COLLECTION EXPENSES AND ATTORNEYS' FEES. On or after the occurrence of an Event of Default, to the extent permitted bylaw, I agree to pay all expenses of collection, enforcement or protection of your rights and remedies under this Note or any other LoanDocument. Expenses include, but are not limited to, reasonable attorneys' fees, court costs, and other legal expenses. These expenses aredue and payable immediately. If not paid immediately, these expenses will bear interest from the date of payment until paid in full at thehighest interest rate in effect as provided for in the terms of this Note. All fees and expenses will be secured by the Property I have granted toyou, if any. In addition , to the extent permitted by the United States Bankruptcy Code, I agree to pay the reasonable attorneys' fees incurredby you to protect your rights and interests in connection with any bankruptcy proceedings initiated by or against me.18.COMMISSIONS. I understand and agree that you (or your affiliate) will earn commissions or fees on any insurance products, and mayearn such fees on other services that I buy through you or your affiliate.19.WARRANTIES AND REPRESENTATIONS. I make to you the following warranties and representations which will continue as long asthis Note is in effect:A. Power. I am duly organized, and validly existing and in good standing in all jurisdictions in which I operate. I have the power andauthority to enter into this transaction and to carry on my business or activity as it is now being conducted and, as applicable, am qualifiedto do so in each jurisdiction in which I operate.B. Authority. The execution, delivery and performance of this Note and the obligation evidenced by this Note are within my powers, havebeen duly authorized, have received all necessary governmental approval, will not violate any provision of law, or order of court orgovernmental agency, and will not violate any agreement to which I am a party or to which I am or any of my Property is subject.C. Name and Place of Business. Other than previously disclosed in writing to you I have not changed my name or principal place ofbusiness within the last 10 years and have not used any other trade or fictitious name. Without your prior written consent, I do not and willnot use any other name and will preserve my existing name, trade names and franchises.20.INSURANCE. I agree to obtain the insurance described in this Loan Agreement.A. Property Insurance. I will insure or retain insurance coverage on the Property and abide by the insurance requirements of any securityinstrument securing the Loan.B. Insurance Warranties. I agree to purchase any insurance coverages that are required, in the amounts you require, as described in thisor any other documents I sign for the Loan. I will provide you with continuing proof of coverage. I will buy or provide insurance from a firmlicensed to do business in the State where the Property is located. I will have the insurance company name you as loss payee on anyinsurance policy. You will apply the insurance proceeds toward what I owe you on the outstanding balance. I agree that if the insuranceproceeds do not cover the amounts I still owe you, I will pay the difference. I will keep the insurance until all debts secured by thisagreement are paid. If I want to buy the insurance from you, I have signed a separate statement agreeing to this purchase.21.APPLICABLE LAW. This Note is governed by the laws of Texas, the United States of America, and to the extent required, by the lawsof the jurisdiction where the Property is located, except to the extent such state laws are preempted by federal law. In the event of a dispute,the exclusive forum, venue and place of jurisdiction will be in Texas, unless otherwise required by law.22.JOINT AND INDIVIDUAL LIABILITY AND SUCCESSORS. My obligation to pay the Loan is independent of the obligation of any otherperson who has also agreed to pay it. You may sue me alone, or anyone else who is obligated on the Loan, or any number of us together, tocollect the Loan. Extending the Loan or new obligations under the Loan, will not affect my duty under the Loan and I will still be obligated topay the Loan. This Note shall inure to the benefit of and be enforceable by you and your successors and assigns and shall be binding uponand enforceable against me and my personal representatives, successors, heirs and assigns.23.AMENDMENT, INTEGRATION AND SEVERABILITY. This Note may not be amended or modified by oral agreement. No amendmentor modification of this Note is effective unless made in writing. This Note and the other Loan Documents are the complete and final expressionof the agreement. If any provision of this Note is unenforceable, then the unenforceable provision will be severed and the remaining provisionswill still be enforceable. No present or future agreement securing any other debt I owe you will secure the payment of this Loan if, with respectto this loan, you fail to fulfill any necessary requirements or fail to conform to any limitations of the Truth in Lending Act (Regulation Z) or theReal Estate Settlement Procedures Act (Regulation X) that are required for loans secured by the Property or if, as a result, this Loan wouldbecome subject to Section 670 of the John Warner National Defense Authorization Act for Fiscal Year 2007.24.INTERPRETATION. Whenever used, the singular includes the plural and the plural includes the singular. The section headings are forconvenience only and are not to be used to interpret or define the terms of this Note.25.NOTICE, FINANCIAL REPORTS AND ADDITIONAL DOCUMENTS. Unless otherwise required by law, any notice will be given bydelivering it or mailing it by first class mail to the appropriate party's address listed in the DATE AND PARTIES section, or to any otheraddress designated in writing. Notice to one Borrower will be deemed to be notice to all Borrowers. I will inform you in writing of any change inmy name, address or other application information. I will provide you any correct and complete financial statements or other information yourequest. I agree to sign, deliver, and file any additional documents or certifications that you may consider necessary to perfect, continue, andpreserve my obligations under this Loan and to confirm your lien status on any Property. Time is of the essence.26.CREDIT INFORMATION. I agree to supply you with whatever information you reasonably feel you need to decide whether to continuethis Loan. You will make requests for this information without undue frequency, and will give me reasonable time in which to supply theinformation.27.ERRORS AND OMISSIONS. I agree, if requested by you, to fully cooperate in the correction, if necessary, in the reasonable discretionof you of any and all loan closing documents so that all documents accurately describe the loan between you and me. I agree to assume allcosts including by way of illustration and not limitation, actual expenses, legal fees and marketing losses for failing to reasonably comply withyour requests within thirty (30) days.28.WAIVER OF JURY TRIAL All of the parties to this Note knowingly and intentionally, irrevocably and unconditionally, waive any and allright to a trial by jury in any litigation arising out of or concerning this Note or any other Loan Document or related obligation. All of theseparties acknowledge that this section has either been brought to the attention of each party's legal counsel or that each party had theopportunity to do so.THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND, TO THE EXTENTPERMITTED BY LAW, MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORALAGREEMENTS OF THE PARTIES.THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.29.SIGNATURES. By signing, I agree to the terms contained in this Note. I also acknowledge receipt of a copy of this Note.BORROWER:HVE INC.By /s/ Joseph O’Daniel Date 12/20/18 JOSEPH O’DANIEL, PresidentBy /s/ Christopher Cunningham Date 12/20/18 CHRISTOPHER CUNNINGHAM, Senior Vice PresidentSECURITY AGREEMENTDATE AND PARTIES. The date of this Security Agreement (Agreement) is December 19, 2018. The parties and their addresses are:SECURED PARTY:CITIZENS NATIONAL BANK OF TEXAS200 North Elm, PO Box 717Waxahachie, TX 75168DEBTOR:HVE INC.a Delaware Corporation100 EXECUTIVE CT STE 2 WAXAHACHIE, TX 75165Definitions. For the purposes of this document, the following terms have the following meanings."Line of Credit" refers to this transaction generally, including obligations and duties arising from the terms of all documents prepared orsubmitted for this transaction.The pronouns "you" and "your" refer to the Secured Party. The pronouns "I," "me" and "my" refer to each person or entity signing thisAgreement as Debtor and agreeing to give the Property described in this Agreement as security for the Secured Debts.1.SECURED DEBTS. The term "Secured Debts" includes and this Agreement will secure each of the following:A. Specific Debts. The following debts and all extensions, renewals, refinancings, modifications and replacements. A promissory note orother agreement, No. 120011219, dated December 19, 2018, from me to you, in the amount of$400,000.00.B. All Debts. All present and future debts from me to you, even if this Agreement is not specifically referenced, the future debts are alsosecured by other collateral, or if the future debt is unrelated to or of a different type than this debt. If more than one person signs thisAgreement, each agrees that it will secure debts incurred either individually or with others who may not sign this Agreement. Nothing in thisAgreement constitutes a commitment to make additional or future loans or advances. Any such commitment must be in writing.This Agreement will not secure any debt which is also secured by real property or for which a non-possessory, non-purchase moneysecurity interest is created in "household goods" in connection with a "consumer loan,” as those terms are defined by federal law governingunfair and deceptive credit practices. In addition, this Agreement will not secure any other debt if, with respect to such other debt, you failto fulfill any necessary requirements or fail to conform to any limitations of the Truth in Lending Act (Regulation Z) or the Real EstateSettlement Procedures Act (Regulation X) that are required for loans secured by the Property or if, as a result, the other debt wouldbecome subject to Section 670 of the John Warner National Defense Authorization Act for Fiscal Year 2007.C.Sums Advanced. All sums advanced and expenses incurred by you under the terms of this Agreement. Loan Documents refer to allthe documents executed in connection with the Secured Debts.2.LIMITATIONS ON CROSS-COLLATERAUZATION. The Line of Credit is not secured by a previously executed security instrument if anon-possessory, non-purchase money security interest is created in "household goods" in connection with a "consumer loan," as those termsare defined by federal law governing unfair and deceptive credit practices. The Line of Credit is not secured by a previously executed securityinstrument if you fail to fulfill any necessary requirements or fail to conform to any limitations of the Real Estate Settlement Procedures Act,(Regulation X), that are required for loans secured by the Property or if, as a result, the other debt would become subject to Section 670 of theJohn Warner National Defense Authorization Act for Fiscal Year 2007.The Line of Credit is not secured by a previously executed security instrument if you fail to fulfill any necessary requirements or fail toconform to any limitations of the Truth in Lending Act, (Regulation Z), that are required for loans secured by the Property.3.SECURITY INTEREST. To secure the payment and performance of the Secured Debts, I grant you a security interest in all of theProperty described in this Agreement that I own or have sufficient rights in which to transfer an interest, now or in the future, wherever theProperty is or will be located, and all proceeds and products from the Property (including, but not limited to, all parts, accessories, repairs,replacements, improvements, and accessions to the Property). Property is all the collateral given as security for the Secured Debts anddescribed in this Agreement, and includes all obligations that support the payment or performance of the Property. "Proceeds" includes cashproceeds, non-cash proceeds and anything acquired upon the sale, lease, license, exchange, or other disposition of the Property; any rightsand claims arising from the Property; and any collections and distributions on account of the Property.This Agreement remains in effect until terminated in writing, even if the Secured Debts are paid and you are no longer obligated to advancefunds to me under any loan or credit agreement.4.PROPERTY DESCRIPTION. The Property is described as follows:A. Inventory. All inventory which I hold for ultimate sale or lease, or which has been or will be supplied under contracts of service, or whichare raw materials, work in process, or materials used or consumed in my business. "Inventory" means goods, other than farm products,which: (A) are leased by a person as lessor; (B) are held by a person for sale or lease or to be furnished under a contract of service; (C) arefurnished by a person under a contract of service; or (D) consist of raw materials, work in process, or materials used or consumed in abusiness. The term "Inventory" is as defined by the Uniform Commercial Code and further as modified or amended by the laws of thejurisdiction which governs this transaction.B. Accounts and Other Rights to Payment. All rights I have now or in the future to payments including, but not limited to, payment forproperty or services sold, leased, rented, licensed, or assigned, whether or not I have earned such payment by performance. This includesany rights and interests (including all liens and security interests) which I may have by law or agreement against any Account Debtor orobligor of mine. "Account" means a right to payment of a monetary obligation, whether or not earned by performance, (i) for property thathas been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for a policyof insurance issued or to be issued, (iv) for a secondary obligation incurred or to be incurred, (v) for energy provided or to be provided, (vi)for the use or hire of a vessel under a charter or other contract, (vii) arising out of the use of a credit or charge card or information containedon or for use with the card, or (viii) as winnings in a lottery or other game of chance operated or sponsored by a State, governmental unit ofa State, or person licensed or authorized to operate the game by a State or governmental unit of a State. The term includes health-care-insurance receivables. The term "Accounts" does not include (i) rights to payment evidenced by chattel paper or an instrument, (ii)commercial tort claims, (iii) deposit accounts, (iv) investment property, (v) letter-of-credit rights or letters of credit or (vi) rights to paymentfor money or funds advanced or sold, other than rights arising out ofthe use of a credit or charge card or information contained on or for use with the card. The term "Accounts" is as defined by the UniformCommercial Code and further as modified or amended by the laws of the jurisdiction which governs this transaction.5.WARRANTIES AND REPRESENTATIONS. I make to you the following warranties and representations which will continue as long as thisAgreement is in effect:A. Power. I am duly organized, and validly existing and in good standing in all jurisdictions in which I operate. I have the power andauthority to enter into this transaction and to carry on my business or activity as it is now being conducted and, as applicable, am qualifiedto do so in each jurisdiction in which I operate.B. Authority. The execution, delivery and performance of this Agreement and the obligation evidenced by this Agreement are within mypowers, have been duly authorized, have received all necessary governmental approval, will not violate any provision of law, or order ofcourt or governmental agency, and will not violate any agreement to which I am a party or to which I am or any of my property is subject.C.Name and Location. My name indicated in the DATE AND PARTIES section is my exact legal name. I am an entity organized andregistered under the laws of Texas. I will provide verification of registration and location upon your request. I will provide you with at least30 days notice prior to any change in my name, address, or state of organization or registration.D.Business Name. Other than previously disclosed in writing to you I have not changed my name or principal place of business withinthe last 10 years and have not used any other trade or fictitious name. Without your prior written consent, I do not and will not use anyother name and will preserve my existing name, trade names and franchises.E.Ownership of Property. I represent that I own all of the Property. Your claim to the Property is ahead of the claims of any othercreditor, except as disclosed in writing to you prior to any advance on the Secured Debts. I represent that I am the original owner of theProperty and, if I am not, that I have provided you with a list of prior owners of the Property.6.DUTIES TOWARD PROPERTY.A. Protection of Secured Party's Interest. I will defend the Property against any other claim. I agree to do whatever you require to protectyour security interest and to keep your claim in the Property ahead of the claims of other creditors. I will not do anything to harm yourposition.I will keep books, records and accounts about the Property and my business in general. I will let you examine these and make copies atany reasonable time. I will prepare any report or accounting you request which deals with the Property.B. Use, Location, and Protection of the Property. I will keep the Property in my possession and in good repair. I will use it only forcommercial purposes. I will not change this specified use without your prior written consent. You have the right of reasonable access toinspect the Property and I will immediately inform you of any loss or damage to the Property. I will not cause or permit waste to theProperty.I will keep the Property at my address listed in the DATE AND PARTIES section unless we agree I may keep it at another location. If theProperty is to be used in other states, I will give you a list of those states. The location of the Property is given to aid in the identification ofthe Property. It does not in any way limit the scope of the security interest granted to you. I will notify you in writing and obtain your priorwritten consent to any change in location of any of the Property. I will not use the Property in violation of any law. I will notify you in writingprior to any change in my address, name or, if an organization, any change in my identity or structure.Until the Secured Debts are fully paid and this Agreement is terminated, I will not grant a security interest in any of the Property withoutyour prior written consent. I will pay all taxes and assessments levied or assessed against me or the Property and provide timely proof ofpayment of these taxes and assessments upon request.C.Selling, Leasing or Encumbering the Property. I will not sell, offer to sell, lease, or otherwise transfer or encumber the Propertywithout your prior written permission, except for Inventory sold in the ordinary course of business at fair market value, or at a minimumprice established between you and me. If I am in default under this Agreement, I may not sell the Inventory portion of the Property even inthe ordinary course of business. Any disposition of the Property contrary to this Agreement will violate your rights. Your permission to sellthe Property may be reasonably withheld without regard to the creditworthiness of any buyer or transferee. I will not permit the Property tobe the subject of any court order affecting my rights to the Property in any action by anyone other than you. If the Property includes chattelpaper or instruments, either as original collateral or as proceeds of the Property, I will note your security interest on the face of the chattelpaper or instruments.D.Additional Duties Specific to Accounts. I will not settle any Account for less than its full value without your written permission. Untilyou tell me otherwise, I will collect all Accounts in the ordinary course of business. I will not dispose of the Accounts by assignmentwithout your prior written consent. I will keep the proceeds from all the Accounts and any goods which are returned to me or which I takeback. I will not commingle them with any of my other property. I will deliver the Accounts to you at your request. If you ask me to pay youthe full price on any returned items or items retaken by me, I will do so. I will make no material change in the terms of any Account, and Iwill give you any statements, reports, certificates, lists of Account Debtors (showing names, addresses and amounts owing), invoicesapplicable to each Account, and other data in any way pertaining to the Accounts as you may request.7.INSURANCE. I agree to keep the Property insured against the risks reasonably associated with the Property. I will maintain this insurancein the amounts you require. This insurance will last until the Property is released from this Agreement. I may choose the insurance company,subject to your approval, which will not be unreasonably withheld.I will have the insurance company name you as loss payee on any insurance policy. I will give you and the insurance company immediatenotice of any loss. You may apply the insurance proceeds toward what is owed on the Secured Debts. You may require added security as acondition of permitting any insurance proceeds to be used to repair or replace the Property.If you acquire the Property in damaged condition, my right to any insurance policies and proceeds will pass to you to the extent of theSecured Debts.I will immediately notify you of cancellation or termination of insurance. If I fail to keep the Property insured, you may obtain insurance toprotect your interest in the Property and I will pay for the insurance on your demand. You may demand that I pay for the insurance all at once,or you may add the insurance premiums to the balance of the Secured Debts and charge interest on it at the rate that applies to the SecuredDebts. This insurance may include lesser or greater coverages than originally required of me, may be written by a company other than one Iwould choose, and may be written at a higher rate than I could obtain if I purchased the insurance. I acknowledge and agree that you or one ofyour affiliates may receive commissions on the purchase of this insurance.8.COLLATERAL PROTECTION INSURANCE. Property Insurance is required. I agree to buy insurance on the Property in the amountyou specify, subject to applicable law. I shall have the option of furnishing any required insurance either through existing policies ofinsurance owned or controlled by me or procuring and furnishing the equivalent coverage through any insurance companyauthorized to do business in Texas or an eligible surplus line insurer to the extent permitted by law. I will name you as loss payeeunder the policy. I may be required to deliver to you a copy of the collateral protection insurance policy and proof of payment of premiums. If Ifail to meet any of these requirements, you may obtain collateral protection insurance on my behalf. You are not required to purchase any typeor amount of insurance. To the extent permitted by law, you may obtain insurance that will cover either the actual amount of unpaidindebtedness or the replacement cost of improvements, subject to policy limits. If you purchase insurance for the Property, I will beresponsible for the cost of that insurance, including interest and any othercharges incurred by you in connection with the placement of collateral protection insurance to the extent permitted by law. I understand thatinsurance you obtain may cost significantly greater than the cost of insurance I could have obtained. Amounts that I owe are due and payableupon demand or on such other terms as you require to the extent permitted by law.9.COLLECTION RIGHTS OF THE SECURED PARTY. Account Debtor means the person who is obligated on an account, chattel paper, orgeneral intangible. I authorize you to notify my Account Debtors of your security interest and to deal with the Account Debtors' obligations atyour discretion. You may enforce the obligations of an Account Debtor, exercising any of my rights with respect to the Account Debtors'obligations to make payment or otherwise render performance to me, including the enforcement of any security interest that secures suchobligations. You may apply proceeds received from the Account Debtors to the Secured Debts or you may release such proceeds to me.I specifically and irrevocably authorize you to exercise any of the following powers at my expense, without limitation, until the Secured Debtsare paid in full:A.demand payment and enforce collection from any Account Debtor or Obligor by suit or otherwise.B.enforce any security interest, lien or encumbrance given to secure the payment or performance of any Account Debtor or anyobligation constituting Property.C.file proofs of claim or similar documents in the event of bankruptcy, insolvency or death of any person obligated as an AccountDebtor.D.compromise, release, extend, or exchange any indebtedness of an Account Debtor.E.take control of any proceeds of the Account Debtors' obligations and any returned or repossessed goods.F.endorse all payments by any Account Debtor which may come into your possession as payable to me.G.deal in all respects as the holder and owner of the Account Debtors' obligations.10.AUTHORITY TO PERFORM. I authorize you to do anything you deem reasonably necessary to protect the Property, and perfect andcontinue your security interest in the Property. If I fail to perform any of my duties under this Agreement or any other Loan Document, you areauthorized, without notice to me, to perform the duties or cause them to be performed.These authorizations include, but are not limited to, permission to:A.pay and discharge taxes, liens, security interests or other encumbrances at any time levied or placed on the Property.B.pay any rents or other charges under any lease affecting the Property.C.order and pay for the repair, maintenance and preservation of the Property.D.file any financing statements on my behalf and pay for filing and recording fees pertaining to the Property.E.place a note on any chattel paper indicating your interest in the Property.F. take any action you feel necessary to realize on the Property, including performing any part of a contract or endorsing it in my name.G.handle any suits or other proceedings involving the Property in my name.H.prepare, file, and sign my name to any necessary reports or accountings.I.make an entry on my books and records showing the existence of this Agreement.J. notify any Account Debtor or Obligor of your interest in the Property and tell the Account Debtor or Obligor to make payments to you orsomeone else you name.If you perform for me, you will use reasonable care. If you exercise the care and follow the procedures that you generally apply to thecollection of obligations owed to you, you will be deemed to be using reasonable care. Reasonable care will not include: any steps necessaryto preserve rights against prior parties; the duty to send notices, perform services or take any other action in connection with the managementof the Property;or the duty to protect, preserve or maintain any security interest given to others by me or other parties. Your authorization to perform for mewill not create an obligation to perform and your failure to perform will not preclude you from exercising any other rights under the law or thisLoan Agreement. All cash and non-cash proceeds of the Property may be applied by you only upon your actual receipt of cash proceedsagainst such of the Secured Debts, matured or unmatured, as you determine in your sole discretion.If you come into actual or constructive possession of the Property, you will preserve and protect the Property. For purposes of this paragraph,you will be in actual possession of the Property only when you have physical, immediate and exclusive control over the Property and youhave affirmatively accepted that control. You will be in constructive possession of the Property only when you have both the power and theintent to exercise control over the Property.11.DEFAULT. I will be in default if any of the following events (known separately and collectively as an Event of Default} occur:A.Payments. I fail to make a payment in full when due.B. Insolvency or Bankruptcy. The death, dissolution or insolvency of, appointment of a receiver by or on behalf of, application of anydebtor relief law, the assignment for the benefit of creditors by or on behalf of, the voluntary or involuntary termination of existence by, orthe commencement of any proceeding under any present or future federal or state insolvency, bankruptcy, reorganization, composition ordebtor relief law by or against me, Obligor, or any co-signer, endorser, surety or guarantor of this Agreement or any other obligationsObligor has with you.C. Business Termination. I merge, dissolve, reorganize, end my business or existence, or a partner or majority owner dies or is declaredlegally incompetent.D.Failure to Perform. I fail to perform any condition or to keep any promise or covenant of this Agreement.E.Other Documents. A default occurs under the terms of any other Loan Document.F.Other Agreements. I am in default on any other debt or agreement I have with you.G. Misrepresentation. I make any verbal or written statement or provide any financial information that is untrue, inaccurate, or conceals amaterial fact at the time it is made or provided.H.Judgment. I fail to satisfy or appeal any judgment against me.I.Forfeiture. The Property is used in a manner or for a purpose that threatens confiscation by a legal authority.J.Name Change. I change my name or assume an additional name without notifying you before making such a change.K.Property Transfer. I transfer all or a substantial part of my money or property.L. Property Value. You determine in good faith that the value of the Property has declined or is impaired.M.Material Change. Without first notifying you, there is a material change in my business, including ownership, management, andfinancial conditions.N.Insecurity. You determine in good faith that a material adverse change has occurred in my financial condition from the conditions setforth in my most recent financial statement before the date of this Agreement or that the prospect for payment or performance of theSecured Debts is impaired for any reason.12.DUE ON SALE OR ENCUMBRANCE. You may, at your option, declare the entire balance of this Agreement to be immediately dueand payable upon the creation of, or contract for the creation of, any lien, encumbrance, transfer or sale of all or any part of the Property. Thisright is subject to the restrictions imposed by federal law, as applicable. However, if I am in default under this Agreement, I may not sell theinventory portion of the Property even in the ordinary course of business.13.REMEDIES. After I default, you may at your option do any one or more of the following.A.Acceleration. You may make all or any part of the amount owing by the terms of the Secured Debts immediately due.B.Sources. You may use any and all remedies you have under state or federal law or in any Loan Document.C. Insurance Benefits. You may make a claim for any and all insurance benefits or refunds that may be available on my default.D. Payments Made On My Behalf. Amounts advanced on my behalf will be immediately due and may be added to the Secured Debts.E.Assembly of Property. You may require me to gather the Property and make it available to you in a reasonable fashion.F. Repossession. You may repossess the Property so long as the repossession does not involve a breach of the peace. You may sell,lease or otherwise dispose of the Property as provided by law. You may apply what you receive from the disposition of the Property to yourexpenses, your attorneys' fees and legal expenses (where not prohibited by law), and any debt I owe you. If what you receive from thedisposition of the Property does not satisfy the debt, I will be liable for the deficiency (where permitted by law). In some cases, you maykeep the Property to satisfy the debt.Where a notice is required, I agree that ten days prior written notice sent by first class mail to my address listed in this Agreement will bereasonable notice to me under the Texas Uniform Commercial Code. If the Property is perishable or threatens to decline speedily in value,you may, without notice to me, dispose of any or all of the Property in a commercially reasonable manner at my expense following anycommercially reasonable preparation or processing (where permitted by law).If any items not otherwise subject to this Agreement are contained in the Property when you take possession, you may hold these itemsfor me at my risk and you will not be liable for taking possession of them (where permitted by law).G. Use and Operation. You may enter upon my premises and take possession of all or any part of my property for the purpose ofpreserving the Property or its value, so long as you do not breach the peace. You may use and operate my property for the length of timeyou feel is necessary to protect your interest, all without payment or compensation to me.H. Waiver. By choosing any one or more of these remedies you do not give up your right to use any other remedy. You do not waive adefault if you choose not to use a remedy. By electing not to use any remedy, you do not waive your right to later consider the event adefault and to use any remedies if the default continues or occurs again.14.WAIVER OF CLAIMS. I waive all claims for loss or damage caused by your acts or omissions where you acted reasonably and in goodfaith.15.PERFECTION OF SECURITY INTEREST AND COSTS. I authorize you to file a financing statement and/or security agreement, asappropriate, covering the Property. I will comply with, facilitate, and otherwise assist you in connection with obtaining perfection or control overthe Property for purposes of perfecting your security interest under the Uniform Commercial Code. I agree to pay all taxes, fees and costs youpay or incur in connection with preparing, filing or recording any financing statements or other security interest filings on the Property. I agreeto pay all actual costs of terminating your security interest.16.APPLICABLE LAW. This Agreement is governed by the laws of Texas, the United States of America, and to the extent required, bythe laws of the jurisdiction where the Property is located, except to the extent such state laws are preempted by federal law. In the event of adispute, the exclusive forum, venue and place of jurisdiction will be in Texas, unless otherwise required by law.17.JOINT AND INDIVIDUAL LIABILITY AND SUCCESSORS. Each Debtor's obligations under this Agreement are independent of theobligations of any other Debtor. You may sue each Debtor individually or together with any other Debtor. You may release any part of theProperty and I will still be obligated underthis Agreement for the remaining Property. Debtor agrees that you and any party to this Agreement may extend, modify or make any changein the terms of this Agreement or any evidence of debt without Debtor's consent. Such a change will not release Debtor from the terms of thisAgreement. If you assign any of the Secured Debts, you may assign all or any part of this Agreement without notice to me or my consent, andthis Agreement will inure to the benefit of your assignee to the extent of such assignment. You will continue to have the unimpaired right toenforce this Agreement as to any of the Secured Debts that are not assigned. This Agreement shall inure to the benefit of and be enforceableby you and your successors and assigns and any other person to whom you may grant an interest in the Secured Debts and shall be bindingupon and enforceable against me and my personal representatives, successors, heirs and assigns.18.AMENDMENT, INTEGRATION AND SEVERABILITY. This Agreement may not be amended or modified by oral agreement. Noamendment or modification of this Agreement is effective unless made in writing. This Agreement and the other Loan Documents are thecomplete and final expression of the understanding between you and me. If any provision of this Agreement is unenforceable, then theunenforceable provision will be severed and the remaining provisions will still be enforceable.19.INTERPRETATION. Whenever used, the singular includes the plural and the plural includes the singular. The section headings are forconvenience only and are not to be used to interpret or define the terms of this Agreement.20.NOTICE AND ADDITIONAL DOCUMENTS. Unless otherwise required by law, any notice will be given by delivering it or mailing it byfirst class mail to the appropriate party's address listed in the DATE AND PARTIES section, or to any other address designated in writing.Notice to one Debtor will be deemed to be notice to all Debtors. I will inform you in writing of any change in my name, address or otherapplication information. I will provide you any other, correct and complete information you request to effectively grant a security interest on theProperty. I agree to sign, deliver, and file any additional documents or certifications that you may consider necessary to perfect, continue, andpreserve my obligations under this Agreement and to confirm your lien status on any Property. Time is of the essence.21.WAIVER OF JURY TRIAL All of the parties to this Agreement knowingly and intentionally, irrevocably and unconditionally,waive any and all right to a trial by jury in any litigation arising out of or concerning this Agreement or any other Loan Document orrelated obligation. All of these parties acknowledge that this section has either been brought to the attention of each party's legalcounsel or that each party had the opportunity to do so.THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND, TO THE EXTENTPERMITTED BY LAW, MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORALAGREEMENTS OF THE PARTIES.THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIESSIGNATURES. By signing, I agree to the terms contained in this Agreement. I also acknowledge receipt of a copy of this Agreement.DEBTOR:HVE INC.By /s/ Joseph O’Daniel Date 12/20/18 JOSEPH O’DANIEL, PresidentBy /s/ Christopher Cunningham Date 12/20/18 CHRISTOPHER CUNNINGHAM, Senior Vice PresidentExhibit 21.1Subsidiaries of the Company Name of subsidiary Jurisdiction of Incorporationor OrganizationSphere 3D Inc. Ontario, CanadaV3 Systems Holdings, Inc. Delaware, United StatesHVE Inc. Delaware, United StatesExhibit 23.1CONSENT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form F-3 (No. 333-206357, No. 333-206358, No. 333-206359, No. 333-207384, No. 333-210735, No. 333-219383) and Form S-8 (No. 333-203149, No. 333-203151, No. 333-205236, No. 333-209251, No. 333-214605, No. 333-216209, No. 333-220152, No. 333-222771, No. 333-228380) of Sphere 3D Corp. (the “Company”) of our report dated March 29, 2019, relating to theconsolidated financial statements of the Company (which report expresses an unqualified opinion and includes an explanatory paragraph regarding theCompany’s going concern uncertainty), appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with theSecurities and Exchange Commission./s/ Moss Adams LLP Moss Adams LLP San Diego, California, U.S.AMarch 29, 2019Exhibit 31.1CERTIFICATIONI, Peter Tassiopoulos certify that: 1.I have reviewed this annual report on Form 10-K of Sphere 3D Corp.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periodcovered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report; 4.The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-15(f) and 15d-15(f)) for the company and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known tous by others within those entities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based onsuch evaluation; and (d)Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the periodcovered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internalcontrol over financial reporting; and 5.The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalentfunctions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financialinformation; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’sinternal control over financial reporting.Date: March 29, 2019/s/ Peter TassiopoulosPeter TassiopoulosChief Executive OfficerExhibit 31.2CERTIFICATIONI, Kurt L. Kalbfleisch, certify that: 1.I have reviewed this annual report on Form 10-K of Sphere 3D Corp.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periodcovered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report; 4.The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-15(f) and 15d-15(f)) for the company and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known tous by others within those entities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based onsuch evaluation; and (d)Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the periodcovered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internalcontrol over financial reporting; and 5.The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalentfunctions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financialinformation; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’sinternal control over financial reporting.Date: March 29, 2019/s/ Kurt L. KalbfleischKurt L. KalbfleischSenior Vice-President andChief Financial OfficerExhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION. 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the filing of the Annual Report of Sphere 3D Corp. (the “Registrant”) on Form 10-K for the fiscal year ended December 31, 2018, asfiled with the Securities and Exchange Commission on the date hereof (the “Report”), I, Peter Tassiopoulos, Chief Executive Officer of the Registrant, certifypursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:• the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and• the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany.Date: March 29, 2019/s/ Peter TassiopoulosPeter TassiopoulosChief Executive OfficerExhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION. 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the filing of the Annual Report of Sphere 3D Corp. (the “Registrant”) on Form 10-K for the fiscal year ended December 31, 2018, asfiled with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kurt L. Kalbfleisch, Senior Vice-President and Chief FinancialOfficer of the Registrant, certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:• the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and• the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany.Date: March 29, 2019/s/ Kurt L. KalbfleischKurt L. KalbfleischSenior Vice-President andChief Financial Officer

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