Sphere 3D Corp.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024                
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For 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
(Jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
243 Tresser Blvd, 17th Floor
Stamford, CT 06901
(Address of principal executive offices)
(647) 952-5049
(Registrant’s telephone, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common Shares
ANY
 Nasdaq Capital Market
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
Indicate 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 ☒
Indicate 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 1934
during 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 filing
requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or
emerging 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 ☒
        Emerging growth company ☐
If 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 or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by
any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of  June  28, 2024  was
approximately $21.3 million based on the closing price on The Nasdaq Capital Market reported for such date.
As of March 24, 2025, there were 26,178,282 shares of the registrant’s common shares outstanding.

SPHERE 3D CORP.
TABLE OF CONTENTS
Page
PART I
Item 1.
Business
1
Item 1A.
Risk Factors
7
Item 1B.
Unresolved Staff Comments
29
Item 1C.
Cybersecurity
29
Item 2.
Properties
29
Item 3.
Legal Proceedings
29
Item 4.
Mine Safety Disclosures
29
PART II
Item 5.
Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
     of Equity Securities
30
Item 6.
[Reserved]
30
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
30
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
36
Item 8.
Financial Statements and Supplementary Data
36
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
36
Item 9A.
Controls and Procedures
36
Item 9B.
Other Information
37
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
37
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
37
Item 11.
Executive Compensation
37
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
37
Item 13.
Certain Relationship and Related Transactions, and Director Independence
37
Item 14.
Principal Accounting Fees and Services
37
PART IV
Item 15.
Exhibits and Financial Statement Schedules
38
Item 16.
Form 10-K Summary
42
SIGNATURES
43

This Annual Report on Form 10-K contains forward-looking information that involves risks and uncertainties. This forward-looking information includes,
but is not limited to, statements with respect to management’s expectations regarding the future growth, results of operations, performance and business
prospects of Sphere 3D. This forward-looking information relates to, among other things, future business plans and business planning process, uses of cash, and
may also include other statements that are predictive in nature, or that depend upon or refer to future events or conditions. The words “could”, “expects”, “may”,
“will”, “anticipates”, “assumes”, “intends”, “plans”, “believes”, “estimates”, “guidance”, and similar expressions are intended to identify statements containing
forward-looking information, although not all forward-looking statements include such words. In addition, any statements that refer to expectations, projections
or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not
historical facts but instead represent management’s expectations, estimates and projections 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 on
facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and
outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or
contribute 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 speak only 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 or circumstance
that may arise after the date of this Annual Report. Readers are urged to carefully review and consider the various disclosures made in this Annual Report, which
attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects. References to
“Notes” are to the notes included in our Notes to Consolidated Financial Statements.
Any reference to “Sphere 3D”, “the Company”, “we”, “our”, “us”, or similar terms refers to Sphere 3D Corp. and its wholly owned subsidiaries. The
information, including any financial information, disclosed in this Annual Report on Form 10-K (the “Annual Report”) is stated as at December 31, 2024 or for
the year ended December 31, 2024, as applicable, unless otherwise indicated. Unless otherwise indicated, all dollar amounts are expressed in U.S. dollar and
references to “$” are to the lawful currency of the United States (“U.S.”).
PART I
Item 1. Business
Overview
Sphere 3D was incorporated under the Business Corporations Act (Ontario) on May 2, 2007 as T.B. Mining Ventures Inc. On March 24, 2015, we
completed a short-form amalgamation with a wholly-owned subsidiary. In connection with the short-form amalgamation, we changed our name to “Sphere 3D
Corp.” Any reference to the “Company”, “Sphere 3D”, “we”, “our”, “us”, or similar terms refers to Sphere 3D Corp. and its subsidiaries. In December 2014, we
completed the acquisition of Overland Storage, Inc. (“Overland”) to grow our business in the containerization and virtualization technologies along with data
management products that enabled workload-optimized solutions. In November 2018, we sold our Overland business. In January 2022, we commenced
operations of our Bitcoin mining business and are dedicated to becoming a leader in the blockchain and cryptocurrency industry. We have established and plan
to continue to grow an enterprise-scale mining operation through the procurement of mining equipment and partnering with experienced service providers. On
December 28, 2023, we sold our Service and Product segment, which included HVE ConneXions and Unified ConneXions, and plan to focus on growing our
Bitcoin mining operation.
1

Bitcoin and Blockchain
Bitcoin is a decentralized digital currency that operates on a peer-to-peer network, allowing users to send and receive payments without relying on banks
or central authorities. It runs on a public blockchain, a distributed ledger where all transactions are recorded and secured through cryptographic verification.
Within the Bitcoin ecosystem, there are three key participants: users, miners, and nodes. Users are individuals or businesses that send, receive, or store Bitcoin,
typically using wallets. Miners are participants who use computational power to solve complex mathematical puzzles, validating transactions and adding them to
the blockchain in exchange for newly minted Bitcoin and transaction fees as a reward for their work. Nodes are computers that maintain a full copy of the
blockchain and help verify transactions, ensuring the network remains secure and decentralized. Together, these participants enable Bitcoin to function as a
trustless, borderless, and censorship-resistant financial system.
In the Bitcoin network, transactions must be validated before they are added to the blockchain. When a user initiates a transaction, it is broadcast to the
network and enters the mempool, where it awaits confirmation. Full nodes verify the transaction by checking the sender’s balance and digital signature against
the blockchain’s history. Once verified, miners compete to include the transaction in a new block through a process called Proof of Work, where they solve a
complex cryptographic puzzle to find a valid hash that meets the network’s difficulty requirements. The first miner to solve the puzzle broadcasts the new block
to the network, and if other nodes verify its validity, it is permanently added to the blockchain. As a reward for securing the network, the winning miner receives
a block reward, which consists of newly minted Bitcoin—currently 3.125 BTC as of 2024—along with transaction fees paid by users. Over time, as the block
reward continues to halve approximately every four years, transaction fees will become an increasingly important incentive for miners to continue securing the
network. This system ensures Bitcoin remains decentralized, secure, and resistant to inflation.
As of December 31, 2024, we held approximately 14.9 Bitcoin. The fair value of our Bitcoin as of December 31, 2024 was approximately $1.4 million on
our consolidated balance sheet.
Construction in Progress
In September 2024, we entered into a letter of intent with Simple Mining LLC (“Simple Mining”) to build-out a 12.5 megawatt (“MW”) site in Iowa with
Simple Mining managing the build-out of the infrastructure for the new mining site. Due to delays in permitting and timeline, we shifted to a different site, under
the same construct and power cost assumptions, reducing the overall capacity from 12.5 MW to 8 MW. For the year ended December 31, 2024, we made
payments of $1.4 million towards the infrastructure.
Subsequent to December 31, 2024, we incurred additional costs of $1.4 million towards the infrastructure of the new 8 MW mining site in Iowa. The 8
MW site was energized on March 10, 2025. In March 2025, we entered into a Managed Services Agreement with Simple Mining to operate the site on our
behalf.
Bitcoin Mining
We obtain Bitcoin as a result of our mining operations, and when necessary we sell Bitcoin to support our operations and strategic growth. We mine
Bitcoin in Missouri, Texas and Iowa, which do not have any material state-specific regulatory restrictions on the mining of Bitcoin. However, it is possible that
these states or other states in which we may seek to operate may create laws that would impede Bitcoin mining. We do not currently plan to engage in regular
trading of Bitcoin other than sales to convert our Bitcoin into U.S. dollars. Decisions to hold or sell our Bitcoin are currently made by management by analyzing
forecasts and monitoring the market in real time. We have a hybrid treasury strategy to hold Bitcoin when possible, and sell to fund working capital
requirements.
A key component of the Bitcoin mining business segment is to acquire highly specialized computer servers (known in the industry as “miners”), which
operate application-specific integrated circuit (“ASIC”) chips designed specifically to mine Bitcoin, and deploy such miners at-scale utilizing our hosting
agreements. ASIC miners are the most effective and energy-efficient machines available today, and we believe deploying them at-scale, will enable us to
continue growing our hashrate and optimize the output and longevity of our miners as they are deployed.
2

Our Bitcoin mining operation is focused on maximizing our ability to successfully mine Bitcoin by growing our hashrate (the amount of computer power
we devote to supporting the Bitcoin blockchain), to increase our chances of successfully creating new blocks on the Bitcoin blockchain (a process known as
“proof of work”). Generally, the greater share of the Bitcoin blockchain’s total network hashrate (the aggregate hashrate deployed to solving a block on the
Bitcoin blockchain) a miner’s hashrate represents, the greater that miner’s chances of solving a block and, therefore, earning the block reward. As the
proliferation of Bitcoin continues and the market price for Bitcoin increases, we expect additional miner operators to enter the market in response to an increased
demand for Bitcoin which we anticipate to follow increased Bitcoin prices. As these new miner operators enter the market and as increasingly powerful miners
are deployed in an attempt to solve a block, the Bitcoin blockchain’s network hashrate grows, meaning an existing miner must increase its hashrate at pace
commensurate with the growth of network hashrate to maintain its relative chance of solving a block and earning a block reward. As we expect this trend to
continue, we will need to continue growing our hashrate to compete in our dynamic and highly competitive industry.
As of December 31, 2024, we owned approximately 14,000 miners, of which approximately 6,300 were in service, and a total hashrate capacity of 0.76
exahash per second (“EH/s”). We are strategizing for our future growth by refreshing a significant portion of our fleet with newer-generation machines to bolster
efficiency and developing a 8 MW site in Iowa. Vertically integrating with self owned facilities, like the Iowa site, allows us to reduce our reliance on third-
parties and decrease our overall cost to mine a Bitcoin. As a result of our strategic changes, during the third and fourth quarter of 2024 mining production
decreased as we focused on our long-term strategic goals of transitioning to lower-cost hosting sites, vertically integrating to own our own sites, and refreshing
our fleet with newer-generation machines.
In 2024, we mined 286.3 Bitcoin, which represented a decrease of 57.1% over the 667.4 Bitcoin we mined in 2023. The decrease was primarily due to the
halving event in April 2024 and our strategic plan to transition to lower-cost hosting sites and refresh our fleet with newer-generation machines. Based on our
existing operations and expected deployment of miners we have purchased, we anticipate having approximately 1.5 EH/s of total hashrate in operation during
2025. We plan to continue to acquire new generation miners as we expand our exahash. We do not have scheduled downtime for our miners. We periodically
perform both scheduled and unscheduled maintenance on our miners. Depending on the type of repair, the miner may run at a reduced speed or be taken offline.
We use multiple software programs to monitor the performance of our machines. The miners owned as of December 31, 2024 have an average efficiency (joules
per terahash – “J/th”) of 27.1 J/th. The miner efficiency is an indication of how efficiently we can earn Bitcoin and minimize cost to run the miner. Currently, we
intend only to mine Bitcoin and we hold no other cryptocurrency other than Bitcoin. We do not have any power purchase agreements for the supply of power.
Mining Pools
A mining pool is a service operated by a mining pool operator that pools the resources of individual miners to share their processing power over a
network. Mining pools emerged in response to the growing difficulty and network hash rate competing for Bitcoin rewards on the Bitcoin blockchain as a way of
lowering costs and reducing the risk of an individual miner’s mining activities. The mining pool operator coordinates the computing power of the independent
mining enterprises participating in the mining pool. Mining pools are subject to various risks such as disruption and down time. In the event that a pool we
utilize experiences down time or is not yielding returns, our results may be impacted.
We are engaged with Bitcoin mining pool operators as our customers, to provide a service to perform hash calculations for the mining pool operator,
which is our only performance obligation. Providing hash calculation services is an output of our ordinary activities. We have service agreements with Foundry
Digital LLC and Luxor Technology Corporation, each a mining pool operator, to provide a service to perform hash calculations. In exchange for providing the
service, we are entitled to Full Pay Per Share (“FPPS”), which is a fractional share of the fixed Bitcoin award the mining pool operator receives, plus a fractional
share of the transaction fees attached to that blockchain less net Bitcoin fees due to the mining pool operator over the measurement period, as applicable. The
pay-outs received are based on the expected value from the block reward plus the transaction fee reward, regardless of whether the mining pool operator
successfully records a block to the blockchain.
3

Our fractional share is based on a contractual formula, which primarily calculates the hashrate provided to the mining pool as a percentage of total
network hashrate and other inputs. The contracts, which are less than 24 hours and continuously renew throughout the day, are terminable at any time by either
party without compensation and our enforceable right to compensation only begins when we start providing the service to the mining pool operator, which
begins daily at midnight Universal Time Coordinated (“UTC”). The terms, conditions, and compensation are at the current market rates, and accordingly the
renewal option is not a material right. The contract arises at the point that we provide hash calculation services to the mining pool operator, which is the
beginning of the contract day at midnight UTC time (contract inception), as customer consumption is in tandem with daily earnings of delivery of the service.
According to the customer contract, daily earnings are calculated from midnight-to-23:59:59 UTC time, and the payout is made one hour later at 1:00 AM UTC
time.
Hosting Agreements
On April 19, 2024, we entered into a Master Hosting Agreement with Simple Mining LLC (“Simple Mining”) for rack space, network services, electrical
connections, routine facility maintenance, and technical support of certain of the Company’s mining equipment. On September 25, 2024, we entered into
Amendment No. 2 to the Master Hosting Agreement (“Simple Mining Hosting”) for certain of our mining machines to be hosted at Simple Mining’s facility in
Iowa. The Simple Mining Hosting agreement has a term of two years and can be terminated by us with a 30 day advance notice. On September 25, 2024, we
entered into Amendment No. 3 to the Master Hosting Agreement (“Simple Mining XP Hosting”) for certain of our mining machines to be hosted at Simple
Mining’s facility in Iowa until the new facility Simple Mining and Sphere are developing is completed (see Note 8 Certain Balance Sheet Items - Construction in
Progress for additional details). The Simple Mining XP Hosting agreement can be terminated by us with a 30 day advance notice. We paid Simple Mining a
deposit of $0.1 million in 2024 and an additional deposit of $0.5 million in 2025, collectively representing 30 days of estimated service fees.
On October 18, 2023, we entered into a Hosting Agreement with Joshi Petroleum, LLC (the “Joshi Hosting Agreement”) for rack space, network services,
electrical connections, routine facility maintenance, and technical support of certain of our mining equipment. The Joshi Hosting Agreement has an initial term
of three years with subsequent one year renewal periods until either party provides written notice to the other party of its desire to avoid and given renewal term
at least 30 days in advance of the conclusion of the prior initial term or renewal period. As required by the Joshi Hosting Agreement, we paid a deposit of
$0.3 million representing the last two months of estimated service fees.
On April 4, 2023, we entered into a Master Hosting Services Agreement with Rebel Mining Company, LLC (the “Rebel Hosting Agreement”) for rack
space, network services, electrical connections, routine facility maintenance, and technical support of certain of our mining equipment. The Rebel Hosting
Agreement has a term of three years with subsequent one year renewal periods. As required by the Rebel Hosting Agreement, we paid a deposit of $2.6 million
representing the last two months of estimated service fees. During the year ended December 31, 2024, we recorded a $0.9 million impairment to prepaid service
fees held by Rebel Mining Company and is included in impairment of other assets on the consolidated statement of operations. On January 16, 2025, we
terminated the Rebel Hosting Agreement and agreed to a settlement amount of $2.4 million payable to us in satisfaction of all obligations of the Rebel Hosing
Agreement and it constitutes a final settlement of all amounts owed by either party of the Rebel Hosting Agreement.
On February 8, 2023, we entered into a Hosting Agreement with Lancium FS 25, LLC (the “Lancium Hosting Agreement”) for rack space, network
services, electrical connections, routine facility maintenance, and technical support of certain of our mining equipment. The Lancium Hosting Agreement has a
term of two years with subsequent one year renewal periods. As required by the Lancium Hosting Agreement, we paid a deposit of $0.2 million representing a
partial payment towards the last two months of estimated service fees. On November 15, 2024, both parties terminated the Lancium Hosting Agreement, which
resulted in the return of our deposit, and waiving of outstanding service fees in exchange for the mining equipment in immersion. We recorded a $2.3 million
loss on equipment retained by Lancium, as agreed upon in the Termination Agreement, and is included in loss on disposal of property and equipment on the
consolidated statement of operations.
4

On June 3, 2022, we entered into a Master Agreement with Compute North LLC (the “Compute North MA”) for, the colocation, management, and other
services of certain of our mining equipment. In December 2022, the Compute North MA was assigned to GC Data Center Granbury, LLC (the “GC Data Center
MA”). In the first quarter of 2024, Marathon Digital Holdings acquired GC Data Center Granbury Equity Holdings, LLC and assumed the GC Data Center MA.
The GC Data Center MA had a term of five years beginning December 2022. The monthly service fee was payable based on the actual hashrate performance of
the equipment per miner type per location as a percentage of the anticipated monthly hashrate per miner type. As required by the service agreement, we paid a
deposit of $0.5 million representing the last two months of monthly service fees. On August 28, 2024, we and GC Data Center Granbury, LLC (the “Host”)
mutually entered into a termination agreement effective August 31, 2024, and the Host paid a termination fee to us of $3.0 million to settle all matters pertaining
to the GC Data Center MA including all services and deposit prepayment for estimated services fees, which is included within other income (expense) in our
consolidated statements of operations.
Master Services Agreement
On August 19, 2021, we entered into a Master Services Agreement (the “Gryphon MSA”) with Gryphon Digital Mining, Inc. (“Gryphon”), under which
Gryphon agreed to be the exclusive provider of any and all management services for all of our blockchain and cryptocurrency-related operations including but
not limited to services relating to all mining equipment owned, purchased, leased, operated, or otherwise controlled by us at any location (collectively, the
“Services”) unless the Gryphon MSA is terminated by us. As consideration for the Gryphon MSA, Gryphon received the equivalent of 22.5% of the net
operating profit, as defined in the Gryphon MSA, of all of our blockchain and cryptocurrency related operations as a management fee. In addition, any costs
Gryphon incurred on our behalf were reimbursed to Gryphon as defined in the Gryphon MSA. On April 7, 2023, the Company filed litigation against Gryphon
outlining several breaches to the Gryphon MSA, including but not limited to, several fiduciary and operational breaches. On October 6, 2023, in accordance with
the cure period, the Company terminated the Gryphon MSA. On March 7, 2025, we reached a settlement with Gryphon Digital Mining, Inc. to resolve all claims
against each other on mutually satisfactory terms that will result in the complete dismissal of the outstanding litigation. We were required to make no payments
under the settlement agreement.
On March 19, 2024, the Company filed a lawsuit against Gryphon in the U.S. District Court for the Southern District of New York. The Company alleged
that Gryphon converted certain Bitcoin of Sphere’s after the termination of the Gryphon MSA. After the Company filed the lawsuit, Gryphon returned proceeds
stemming from the sale of Bitcoin. The Company subsequently dismissed the suit without prejudice. In March 2024, the Company received $1.5 million in
proceeds from the sale of Bitcoin, which are included in the statements of cash flows within investing activities.
Hosting Sub-License
On October 5, 2021, we entered into a Sub-License and Delegation Agreement (“Hosting Sub-Lease”) by and between Gryphon and the Company, which
assigned to us a certain Master Services Agreement, dated as of September 12, 2021 (the “Core Scientific MSA”), by and between Core Scientific, Inc. (“Core
Scientific”), and Gryphon and Master Services Agreement Order #2 (“Order 2”). On December 29, 2021, the Company and Gryphon entered into Amendment
No. 1 to the Sub-Lease Agreement (the “Sub-Lease Amendment”) to provide Gryphon the right to recapture the usage of up to 50% of the hosting capacity to be
managed by Core Scientific. The agreement allowed for approximately 230 MW of carbon neutral Bitcoin mining hosting capacity to be managed by Core
Scientific as hosting partner.
On October 31, 2022, we filed an arbitration request against Core Scientific regarding the Hosting Sub-Lease. We requested that certain advanced
deposits paid be refunded back to it as a result of the modification to the Company’s machine purchase agreement with FuFu Technology Limited (now Ethereal
Tech Pte. Ltd.). On January 16, 2024, we reached a settlement agreement (the “Settlement Agreement”) with Core Scientific for $10.0  million of Core
Scientific’s equity, which was approved by a United States Bankruptcy Judge as part of Core Scientific’s emergence from bankruptcy. The Settlement
Agreement includes access to potential additional funds for interest as well as an additional equity pool if the value of Core Scientific’s equity decreases below
plan value in the 18 months after the date of the Settlement Agreement commensurate with the other unsecured creditors. On January 23, 2024, we received
2,050,982 shares of Core Scientific Inc. common stock trading under the Nasdaq symbol CORZ, which was included in investment in equity securities.
5

At-the-Market Offering Program
On January 3, 2025, the Company entered into a sales agreement (the “AGP Agreement”) with A.G.P./Alliance Global Partners (the “Sales Agent”). In
accordance with the terms of the AGP Agreement, the Company may offer and sell from time to time through or to the Sales Agent, as agent or principal, the
Company's common shares having an aggregate offering price of up to $8.0 million (the “Placement Shares”). The AGP Agreement can be terminated by either
party by giving two days written notice.
Neither the Company nor the Sales Agent are obligated to sell any Placement Shares pursuant to the AGP Agreement. Subject to the terms and conditions
of the AGP Agreement, the Sales Agent will use commercially reasonable efforts, consistent with its normal trading and sales practices and applicable state and
federal law, rules and regulations and the rules of The Nasdaq Capital Market (“Nasdaq”), to sell the Placement Shares from time to time based upon the
Company’s instructions, including any price, time or size limits or other customary parameters or conditions the Company may impose. Sales of the Placement
Shares, if any, will be made on Nasdaq at market prices by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 of the
Securities Act of 1933, as amended.
Disposal of Service and Product
On December 28, 2023, we entered into a share purchase agreement with Joseph O’Daniel (“Purchaser”), a related party, under which we sold our Service
and Product segment, including HVE ConneXions and Unified ConneXions, for $1.00 and the transfer of outstanding assets and liabilities. As a result of the
share purchase agreement, the Purchaser, who served as our President, resigned effective December 28, 2023. Through December 28, 2023, the Service and
Product segment provided network operations center (“NOC”) services to its customers. NOC revenues were for monthly services performed for the customer
that are performed either in-house or at the customer’s site. The Service and Product segment also delivered data management and desktop and application
virtualization solutions through hybrid cloud, cloud and on premise implementations by a reseller network. We recognized a noncash gain of $0.7 million related
to the transfer of net liabilities to the Purchaser.
Intellectual Property
We actively use specific hardware and software for our Bitcoin mining operations. We do not currently own, and do not have any current plans to seek,
any patents in connection with our Bitcoin mining operations.
Competitive Conditions
Our business is highly competitive and operates 24 hours a day, seven days a week. The primary drivers of competition are demand for Bitcoin and the
ability to execute miner deployments to generate the highest returns while incurring the lowest costs to mine, thereby achieving maximum efficiency.
Our competition in the Bitcoin mining space fluctuates due to a number of factors, including, but not limited to, the value of Bitcoin rewards for mining,
the amount of network hashrate, and the price of Bitcoin. We anticipate that over the long-term there will be a significant increase in the number of Bitcoin
miners attempting to enter into, and expand, their Bitcoin mining activities. Our main competitors generally include other Bitcoin mining companies, both
publicly listed and private. As more Bitcoin miners enter the mining industry, we expect additional pressure on the industry, with greater competition for access
to mining rewards, competition for power and high-quality industrial scale mining infrastructure which is in limited supply.
We rely on both owned mining facilities (our new 8 MW hosting site in Iowa was energized in March 2025) and hosting arrangements to conduct our
business, and the availability and stability of these arrangements remain uncertain and highly competitive. Hosting arrangements, in particular, may be affected
by changes in regulations across different countries, while owned facilities present additional risks, including operational challenges, infrastructure maintenance,
and energy costs. Significant competition for suitable mining data centers is expected to persist, and government regulations—such as local permitting
requirements—could further restrict the ability of both hosted and owned mining operations to begin or continue operating in certain locations. These factors
could impact our ability to secure adequate infrastructure to support some of our hashrate and maintain profitable mining operations.
For a more detailed description of competitive and other risks related to our business, see Item 1A. Risk Factors.
6

Industry Trends
During 2024 and 2023, the Bitcoin mining industry experienced record growth as the price of Bitcoin increased from the lows seen in early 2023. The
rising Bitcoin price created renewed opportunities for public companies to access capital markets to fund growth, leading to unprecedented expansion in mining
operations. As a result, the size of provisioned hash calculation services on the network increased, as measured by total hashrate. We expect competition within
the mining industry to persist as long as Bitcoin prices remain elevated or continue to rise.
The price of Bitcoin increased during the first quarter of 2024 due to a new source of demand, the eleven Bitcoin spot Exchange Traded Funds (“ETFs”),
which were approved to begin trading by the SEC on January 11, 2024. One such ETF earned recognition as the fastest ETF ever to surpass $10 billion in assets
under management since its launch. The ETFs, as investment vehicles, provide a new access point for investors to gain exposure to Bitcoin through more
traditional methods.
The Bitcoin mining industry recently experienced an increase in transaction fees on the Bitcoin network, as well as an increase in overall demand for
Bitcoin. Various protocols on the Bitcoin network gained popularity during 2023, and at various times temporarily resulted in a significant increase in the
transaction fees paid to add a certain Bitcoin transaction to the blockchain. These transaction fees are volatile in nature but are paid directly to miners and are
representative of public interest in transacting in Bitcoin. Transaction fees are packaged with the block subsidy issued by the Bitcoin network to combine for the
total reward paid to miners upon solving a block.
Governmental Regulations
We operate in a complex and rapidly evolving regulatory environment and are subject to a wide range of laws and regulations enacted by U.S. federal,
state and local governments, governmental agencies and regulatory authorities, including the SEC, the Federal Trade Commission and the Financial Crimes
Enforcement Network of the U.S. Department of the Treasury, as well as similar entities in other countries. Other regulatory bodies, governmental or semi-
governmental, have shown an interest in regulating or investigating companies engaged in the blockchain or cryptocurrency businesses.
Regulations may substantially change in the future and it is presently not possible to know how those regulations will apply to our businesses, or when
they will be effective. As the regulatory and legal environment evolves, we may become subject to new laws and further regulation by the SEC and other
agencies, which may affect our mining and other activities. For instance, various bills have been proposed in the U.S. Congress related to our business, which
may be adopted and have an impact on us. Additionally, governmental agencies and regulatory authorities, such as the SEC, the Federal Trade Commission and
the Financial Crimes Enforcement Network of the U.S. Department of the Treasury, may also enact further regulations related to our business, which may have
an impact on us. For additional discussion regarding our belief about the potential risks existing and future regulation pose to our business, see Item 1A. Risk
Factors—Risks Related to Our Business.
Employees
As of December 31, 2024, we had four employees, two of which were full time.
Item 1A. Risk Factors
An 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 an
investment in our Company should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and
uncertainties 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.
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Risks Related to Our Business
Our total revenue is substantially dependent on the price of Bitcoin and volume of Bitcoin transactions. If such price or volume declines, our business,
operating results, and financial condition would be adversely affected.
We generate all of our revenue from Bitcoin mining. As such, any declines in the volume of Bitcoin transactions, the price of Bitcoin, or market liquidity
for Bitcoin generally may result in lower total revenue. The price of Bitcoin and associated demand for buying, selling, and trading Bitcoin have historically
been subject to significant volatility. The price and trading volume of Bitcoin is subject to significant uncertainty and volatility, depending on a number of
factors, including:
•
market conditions of, and overall sentiment towards, Bitcoin;
•
changes in liquidity, market-making volume, and trading activities;
•
trading activities on other cryptocurrency trading platforms worldwide, many of which may be unregulated, and may include manipulative activities;
•
investment and trading activities of highly active retail and institutional users, speculators, miners, and investors;
•
the speed and rate at which Bitcoin is able to gain adoption as a medium of exchange, utility, store of value, consumptive asset, security instrument, or
other financial assets worldwide, if at all;
•
decreased investor confidence in Bitcoin and cryptocurrency trading platforms;
•
negative media publicity and events relating to the cryptocurrency economy;
•
unpredictable social media coverage or “trending” of, or other rumors and market speculation regarding Bitcoin;
•
the ability for cryptocurrency to meet user and investor demands;
•
the functionality and utility of Bitcoin and its associated ecosystems and networks;
•
increased competition from other payment services or other cryptocurrency that exhibit better speed, security, scalability, or other characteristics;
•
regulatory or legislative changes and updates affecting the cryptocurrency economy;
•
the maintenance, troubleshooting, and development of the blockchain networks underlying assets, including by miners, validators, and developers
worldwide;
•
the ability for cryptocurrency networks to attract and retain miners or validators to secure and confirm transactions accurately and efficiently;
•
ongoing technological viability and security of cryptocurrency and their associated smart contracts, applications and networks, including vulnerabilities
against hacks and scalability;
•
fees and speed associated with processing Bitcoin transactions, including on the underlying blockchain networks and on cryptocurrency trading
platforms;
•
financial strength of market participants;
•
the availability and cost of funding and capital;
•
the liquidity of cryptocurrency trading platforms;
•
interruptions in service from or failures of major cryptocurrency trading platforms;
•
availability of an active derivatives market for Bitcoin;
•
availability of banking and payment services to support cryptocurrency-related projects;
•
level of interest rates and inflation; and
•
environmental, social, and governance (ESG) concerns about power and water consumption.
8

There is no assurance that Bitcoin will maintain its value or that there will be meaningful levels of trading activities. In the event that the price of Bitcoin
or the demand for trading Bitcoin decline, our business, operating results, and financial condition would be adversely affected.
Our operating results have and will significantly fluctuate due to the highly volatile nature of Bitcoin.
Our operating results are dependent on Bitcoin and the broader cryptocurrency economy. Due to the highly volatile nature of the cryptocurrency economy
and the prices of Bitcoin, our operating results have fluctuated, and will continue to fluctuate from quarter to quarter in accordance with market sentiments and
movements in the broader cryptocurrency economy. Our operating results will continue to fluctuate significantly as a result of a variety of factors, many of
which are unpredictable and in certain instances are outside of our control, including:
•
our dependence on offerings that are dependent on Bitcoin trading activity, including trading volume and the prevailing trading prices for Bitcoin,
whose trading prices and volume can be highly volatile;
•
market conditions of, and overall sentiment towards, the cryptocurrency economy; and
•
system failure, outages, or interruptions, including with respect to third-party cryptocurrency trading platforms.
As a result of these factors, it is challenging for us to forecast growth trends accurately and our business and future prospects are difficult to evaluate,
particularly in the short term. Further, any decrease in the price of Bitcoin creates a risk of increased losses or impairments. In view of the rapidly evolving
nature of our business and the cryptocurrency economy, period-to-period comparisons of our operating results may not be meaningful, and you should not rely
upon them as an indication of future performance. Quarterly and annual expenses reflected in our financial statements may be significantly different from
historical or projected rates. Our operating results in one or more future quarters may fall below the expectations of securities analysts and investors. As a result,
the trading price of our common shares may increase or decrease significantly.
Significant disruption in the cryptocurrency market, such as those experienced in the second half of 2022, may harm our reputation.
During the second half of 2022, the price of Bitcoin decreased significantly and various Bitcoin related companies filed for bankruptcy or otherwise
restructured. Due to these disruptions in the cryptocurrency market, among others, our customers, suppliers and other business partners may deem our business
to be risky and lose confidence to enter into business transactions with us on terms that we deem acceptable. For example, our suppliers may require higher
deposits or advance payments from us. In addition, new regulations may subject us to investigation, administrative or regulatory proceedings, and civil or
criminal litigation, all of which could harm our reputation and negatively affect our business operation and the value of our common shares. As of the date of
this annual report, we do not believe that our operations or financial conditions associated have been materially impacted by any reputational harm that we may
face in light of the recent disruption in the cryptocurrency market. However, there is no guarantee that such disruption or any reputational harm resulting
therefrom will not have a material adverse effect on our business, financial condition and results of operations in the future.
The future development and growth of cryptocurrency is subject to a variety of factors that are difficult to predict and evaluate. If cryptocurrency does
not grow as we expect, our business, operating results, and financial condition could be adversely affected.
Cryptocurrency built on blockchain technology were only introduced in 2008. Cryptocurrency is designed for different purposes. Bitcoin, for instance,
was designed to serve as a peer-to-peer electronic cash system, while Ethereum was designed to be a smart contract and decentralized application platform.
Many other cryptocurrency networks, ranging from cloud computing to tokenized securities networks, have only recently been established. The further growth
and development of any cryptocurrency and their underlying networks and other cryptographic and algorithmic protocols governing the creation, transfer, and
usage of cryptocurrency represents a new and evolving paradigm that is subject to a variety of factors that are difficult to evaluate, including:
•
many cryptocurrency networks have limited operating histories, have not been validated in production, and are still in the process of developing and
making significant decisions that will affect the design, supply, issuance, functionality, and governance of their respective cryptocurrency and
underlying blockchain networks, any of which could adversely affect their respective cryptocurrency;
9

•
many cryptocurrency networks are in the process of implementing software upgrades and other changes to their protocols, which could introduce bugs,
security risks, or adversely affect the respective cryptocurrency networks;
•
security issues, bugs, and software errors have been identified with many cryptocurrencies and their underlying blockchain networks, some of which
have been exploited by malicious actors. There are also inherent security weaknesses in some cryptocurrencies, such as when creators of certain
cryptocurrency networks use procedures that could allow hackers to counterfeit tokens. Any weaknesses identified with cryptocurrency could adversely
affect its price, security, liquidity, and adoption. If a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked
software coordinating the actions of the computers) obtains a majority of the compute or staking power on a cryptocurrency network, as has happened
in the past, it may be able to manipulate transactions, which could cause financial losses to holders, damage the network’s reputation and security, and
adversely affect its value;
•
if rewards and transaction fees for miners or validators on any particular cryptocurrency network are not sufficiently high to attract and retain miners, a
cryptocurrency network’s security and speed may be adversely affected, increasing the likelihood of a malicious attack; and
•
many cryptocurrency networks are in the early stages of developing partnerships and collaborations, all of which may not succeed and adversely affect
the usability and adoption of the respective cryptocurrency.
Various other technical issues have also been uncovered from time to time that resulted in disabled functionalities, exposure of certain users’ personal
information, theft of users’ assets, and other negative consequences, and which required resolution with the attention and efforts of their global miner, user, and
development communities. If any such risks or other risks materialize, and in particular if they are not resolved, the development and growth of cryptocurrency
may be significantly affected and, as a result, our business, operating results, and financial condition could be adversely affected.
Changing environmental regulation and public energy policy may expose our business to new risks.
Our Bitcoin mining operations require a substantial amount of power and can only be successful, and ultimately profitable, if the costs we incur, including
for electricity, are lower than the revenue we generate from our operations. As a result, any mine we establish can only be successful if we can obtain sufficient
electrical power for such mine on a cost-effective basis, and our establishment of new mines requires us to find locations where that is the case. For instance, our
plans and strategic initiatives for expansion are based, in part, on our understanding of current environmental and energy regulations, policies, and initiatives
enacted by regulators, and any such regulations that may be adopted in the future. Although we are not currently subject to environmental and energy
regulations, policies or initiatives related to our Bitcoin mining operations in Missouri, Texas and Iowa, the states in which we mine Bitcoin, if new regulations
in these jurisdictions are imposed, or if we begin mining Bitcoin in other jurisdictions that have such regulations, policies or initiatives, the assumptions we
made underlying our plans and strategic initiatives may be inaccurate, and we may incur additional costs to adapt our planned business, if we are able to adapt at
all, to such regulations.
There continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty for our business because the Bitcoin
mining industry, with its high energy demand, may become a target for future environmental and energy regulation. New legislation and increased regulation
regarding climate change could impose significant costs on us and our suppliers, including costs related to increased energy requirements, capital equipment,
environmental monitoring and reporting, and other costs to comply with such regulations. Further, any future climate change regulations could also negatively
impact our ability to compete with companies situated in areas not subject to such limitations. One such example is the recently passed legislation in the state of
New York imposing a two-year moratorium on certain Bitcoin mining operations that run carbon-based power.
Given the political significance and uncertainty around the impact of climate change and how it should be addressed, we cannot predict how legislation
and regulation will affect our financial condition and results of operations. Further, even without such regulation, increased awareness and any adverse publicity
in the global marketplace about potential impacts on climate change by us or other companies in our industry could harm our reputation. Any of the foregoing
could result in a material adverse effect on our business and financial condition.
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Bitcoin mining activities are energy-intensive, which may restrict the geographic locations of miners and have a negative environmental impact.
Government regulators may potentially restrict the ability of electricity suppliers to provide electricity to mining operations, such as ours, or even fully
or partially ban mining operations.
Mining Bitcoin requires large amounts of electrical power, and electricity costs are expected to account for a significant portion of our overall costs. The
availability and cost of electricity may restrict the geographic locations of our mining activities. Any shortage of electricity supply or increase in electricity costs
in any location where we plan to operate may negatively impact the viability and the expected economic return for Bitcoin mining activities in that location and
may negatively impact our business model. While the increase in cost of power is mitigated by our fixed price contracts, we are unable to control power outages
due to factors such as inclement weather or state requests to curtail our use of power may impact our gross profit. Although we do not have any power purchase
contracts directly with any utilities, we have been advised by our hosting partners that they have such contracts. In most cases we have a fixed cost of power
built into our contracts with our hosting partners.
Further, our business model can only be successful and our mining operations can only be profitable if the costs, including electrical power costs,
associated with Bitcoin mining are lower than the price of Bitcoin itself. As a result, any mining operation we establish can only be successful if we can obtain
sufficient electrical power for that site on a cost-effective basis, and our establishment of new mining data centers requires us to find sites where that is the case.
Even if our electrical power costs do not increase, significant fluctuations in, and any prolonged periods of, low Bitcoin prices will decrease our gross profit and
may also cause our electrical supply to no longer be cost-effective.
Furthermore, there may be significant competition for suitable cryptocurrency mining sites, and government regulators, including local permitting
officials, may potentially restrict our ability to set up cryptocurrency mining operations in certain locations. They can also restrict the ability of electricity
suppliers to provide electricity to mining operations in times of electricity shortage, or may otherwise potentially restrict or prohibit the provision of electricity to
mining operations. In addition, if cryptocurrency mining becomes more widespread, government scrutiny related to restrictions on cryptocurrency mining
facilities and their energy consumption may significantly increase. The considerable consumption of electricity by mining operators may also have a negative
environmental impact, including contribution to climate change, which could set the public opinion against allowing the use of electricity for Bitcoin mining
activities or create a negative consumer sentiment and perception of Bitcoin. This, in turn, could lead to governmental measures restricting or prohibiting
cryptocurrency mining or the use of electricity for Bitcoin mining activities. Any such development in the jurisdictions where we plan to operate could increase
our compliance burdens and have a material adverse effect on our business, prospects, financial condition, and operating results. Government regulators in other
countries may also ban or substantially limit their local cryptocurrency mining activities, which could have a material effect on our supply chains for mining
equipment or services and the price of Bitcoin. It could also increase our domestic competition as some of those cryptocurrency miners or new entrants in this
market may consider moving their cryptocurrency mining operations or establishing new operations in the United States.
Additionally, our mining operations could be materially adversely affected by power outages and similar disruptions. Given the power requirements for
our mining equipment, it would not be feasible to run this equipment on back-up power generators in the event of a government restriction on electricity or a
power outage. If we are unable to receive adequate power supply and are forced to reduce our operations due to the availability or cost of electrical power, it
would have a material adverse effect on our business, prospects, financial condition, and operating results.
Concerns about greenhouse gas emissions and global climate change may result in environmental taxes, charges, assessments, penalties or litigation,
and could have a material adverse effect on our business, financial condition and results of operations.
The effects of human activity on global climate change have attracted considerable public and scientific attention, as well as the attention of the United
States and other governments. Efforts are being made to reduce greenhouse gas emissions, particularly those from coal combustion power plants, upon which
some of our hosting facility suppliers may rely for power. The added cost of any environmental taxes, charges, assessments or penalties levied on such power
plants, or the cost of litigation filed against such power plants, could be passed on to us. Any enactment of laws or promulgation of regulations regarding
greenhouse gas emissions by the United States, or any domestic or foreign jurisdiction in which we conduct business, could have a material adverse effect on our
business, financial condition, or results of operations. In addition, as a result of negative publicity regarding environmental concerns associated with
11

Bitcoin mining, some companies have ceased accepting Bitcoin for certain types of purchases, and additional companies may do so in the future, which may
have a material adverse effect on our business, financial condition or results of operations.
We rely on hosting arrangements to conduct our business, and the availability of such hosting arrangements is uncertain and competitive and may be
affected by changes in regulation in one or more countries.
If we are unable to successfully enter into definitive hosting agreements with mining data centers on favorable terms or those counterparties fail to
perform their obligations under such agreements, we may be forced to seek alternative mining data centers to host its mining equipment.
Significant competition for suitable mining data centers is expected to continue, and other government regulators, including local permitting officials,
may potentially restrict the ability of potential mining data centers to begin or continue operations in certain locations. They can also restrict the ability of
electricity suppliers to provide electricity to mining operations in times of electricity shortage, or may otherwise potentially restrict or prohibit the provision of
electricity to mining operations.
We face risks of downtime at hosting sites due to excessive weather or heat, which could have an adverse effect on the mining of Bitcoin and impact our
revenues.
A disruption at hosting sites may affect the mining of Bitcoin. Generally, Bitcoin and our business of mining Bitcoin is dependent upon consistent
operations at hosting sites. A significant disruption in a hosting site's ability to function due to adverse weather could disrupt mining operations until the
disruption is resolved and have an adverse effect on our ability to mine Bitcoin, impacting our revenues.
We may be affected by price fluctuations in the wholesale and retail power markets.
Market prices for power, generation capacity and ancillary services, are unpredictable. Depending upon the effectiveness of any price risk management
activity undertaken by us, including but not limited to attempts to secure hosting services contracts at fixed fees, an increase in market prices for power,
generation capacity, and ancillary services may adversely affect our business, prospects, financial condition, and operating results. Long- and short-term power
prices may fluctuate substantially due to a variety of factors outside of our control, including, but not limited to:
•
increases and decreases in generation capacity;
•
changes in power transmission or fuel transportation capacity constraints or inefficiencies;
•
demand response/mandatory curtailments;
•
volatile weather conditions, particularly unusually hot or mild summers or unusually cold or warm winters;
•
technological shifts resulting in changes in the demand for power or in patterns of power usage, including the potential development of demand-side
management tools, expansion and technological advancements in power storage capability and the development of new fuels or new technologies for
the production or storage of power;
•
federal and state power, market and environmental regulation and legislation; and
•
changes in capacity prices and capacity markets.
If we are unable to secure consistent power supply at prices or on terms acceptable to it, it would have a material adverse effect on our business,
prospects, financial condition, and operating results.
As cryptocurrency may be determined to be investment securities, we may inadvertently violate the Investment Company Act of 1940 and incur large
losses and third party liabilities as a result and potentially be required to register as an investment company or terminate operations.
We believe that we are not engaged in the business of investing, reinvesting, or trading in securities, and we do not hold ourself out as being engaged in
those activities. However, under the Investment Company Act of 1940 (the “Investment Company Act”), a company may be deemed an investment company
under section 3(a)(1)(C) thereof if the value of its investment securities is more than 40% of its total assets (exclusive of government securities and cash items)
on an unconsolidated basis.
12

As a result of our investments and our mining activities, the investment securities we hold could exceed 40% of our total assets, exclusive of cash items
and, accordingly, we could determine that we have become an inadvertent investment company. The cryptocurrency that we own, acquire or mine may be
deemed an investment security by the SEC, and although we do not believe any of the cryptocurrency we own, acquire or mine are securities, any determination
we make regarding whether cryptocurrency is a security is a risk-based assessment, not a legal standard binding on a regulatory body or court, and does not
preclude legal or regulatory action. In general, novel or unique assets such as Bitcoin may be classified as securities if they meet the definition of investment
contracts under U.S. law. In recent years, the offer and sale of cryptocurrency other than Bitcoin, most notably Kik Interactive Inc.’s Kin tokens and Telegram
Group Inc.’s TON tokens, have been deemed to be investment contracts by the SEC. The SEC has also sued Genesis Global Capital LLC and Gemini Trust
Company LLC over their crypto-lending program that allegedly violated investor-protection laws. Therefore, we cannot provide any assurances that Bitcoin we
mine or otherwise acquire or hold for our own account will never be classified as a security under U.S. law. If Bitcoin were to be classified as a security under
U.S. law, we would be obligated to comply with certain requirements by the SEC, which would cause us to incur significant, non-recurring expenses which
would materially and adversely impact our business, prospects, financial condition, and operating results.
An inadvertent investment company can avoid being classified as an investment company if it can rely on one of the exclusions under the Investment
Company Act. One such exclusion, Rule 3a-2 under the Investment Company Act, allows an inadvertent investment company a grace period of one year from
the earlier of (a) the date on which an issuer owns securities and/or cash having a value exceeding 50% of the issuer’s total assets on either a consolidated or
unconsolidated basis and (b) the date on which an issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value of such
issuer’s total assets (exclusive of government securities and cash items) on an unconsolidated basis. As of the date of this report, we do not believe we are an
inadvertent investment company. We may take actions to cause the investment securities held by us to be less than 40% of our total assets, which may include
acquiring assets with our cash and Bitcoin on hand or liquidating our equity investment securities or B or seeking a no-action letter from the SEC if we are
unable to acquire sufficient assets or liquidate sufficient investment securities in a timely manner.
As the Rule 3a-2 exception is available to a company no more than once every three years, and assuming no other exclusion were available to us, we
would have to keep within the 40% limit for at least three years after we cease being an inadvertent investment company. This may limit our ability to make
certain investments or enter into joint ventures that could otherwise have a positive impact on our earnings. In any event, we do not intend to become an
investment company engaged in the business of investing and trading securities.
Classification as an investment company under the Investment Company Act requires registration with the SEC. If an investment company fails to
register, it would have to stop doing almost all business, and its contracts would become voidable. Registration is time consuming and restrictive and would
require a restructuring of our operations, and we would be very constrained in the kind of business we could do as a registered investment company. Further, we
would become subject to substantial regulation concerning management, operations, transactions with affiliated persons and portfolio composition, and would
need to file reports under the Investment Company Act regime. The cost of such compliance would result in us incurring substantial additional expenses, and the
failure to register if required would have a materially adverse impact to conduct our operations.
13

If regulatory changes or interpretations of our activities require registration as a money services business under the regulations promulgated by The
Financial Crimes Enforcement Network under the authority of the U.S. Bank Secrecy Act, we may be required to register and comply with such
regulations. If regulatory changes or interpretations of our activities require the licensing or other registration of us as a money transmitter (or
equivalent designation) under state law in any state in which we operate, we may be required to seek licensure or otherwise register and comply with
such state law. In the event of any such requirement, to the extent we decide to continue operating, the required registrations, licensure and regulatory
compliance steps may result in extraordinary, non-recurring expenses to us. We may also decide to cease operations. Any termination of certain
operations in response to the changed regulatory circumstances may be at a time that is disadvantageous to investors.
To the extent that our activities cause us to be deemed a money service business under the regulations promulgated by the Financial Crimes Enforcement
Network of the U.S. Treasury Department (“FinCEN”) under the authority of the U.S. Bank Secrecy Act, we may be required to comply with FinCEN
regulations, including those that would mandate us to implement anti-money laundering programs, make certain reports to FinCEN and maintain certain records.
To the extent that our activities cause us to be deemed a money transmitter or equivalent designation under state law in any state in which we operate, we
may be required to seek a license or otherwise register with a state regulator and comply with state regulations that may include the implementation of anti-
money laundering programs, maintenance of certain records and other operational requirements. Currently, the New York Department of Financial Services has
finalized its “BitLicense” framework for businesses that conduct Bitcoin business activity. We will continue to monitor for developments in New York
legislation, guidance, and regulations.
Such additional federal or state regulatory obligations may cause us to incur extraordinary expenses, possibly affecting our business in a material and
adverse manner. Furthermore, we and our service providers may not be capable of complying with certain federal or state regulatory obligations applicable to
money service businesses and money transmitters. If we are deemed to be subject to and determine not to comply with such additional regulatory and
registration requirements, we may act to dissolve and liquidate us. Any such action may adversely affect an investment in us.
Regulatory changes or actions in one or more countries or jurisdictions may alter the nature of an investment in us or restrict the use of
cryptocurrency in a manner that adversely affects our business, prospects or operations.
As cryptocurrency has grown in both popularity and market size, governments around the world have reacted differently, with certain governments
deeming cryptocurrency illegal, and others allowing their use and trade without restriction. In some jurisdictions, such as in the United States, cryptocurrency is
subject to extensive regulatory requirements. Several countries have taken and may continue to take regulatory actions in the future that could severely restrict
our right to mine, acquire, own, hold, sell or use cryptocurrency or to exchange for local currency. For example, in China it is illegal to accept payment in
Bitcoin and other cryptocurrency for consumer transactions and banking institutions are barred from accepting deposits of cryptocurrency.
Cryptocurrency is viewed differently by different regulatory and standards setting organizations globally as well as in the United States on the federal and
state levels. For example, the Financial Action Task Force (“FATF”) and the Internal Revenue Service (“IRS”) consider a cryptocurrency as currency or an asset
or property. Further, the IRS applies general tax principles that apply to property transactions to transactions involving cryptocurrency.
If regulatory changes or interpretations require the regulation of cryptocurrency under the securities laws of the United States or elsewhere, including the
Securities Act of 1933, the Exchange Act and the Investment Company Act or similar laws of other jurisdictions and interpretations by the SEC, the Commodity
Futures Trading Commission (“CFTC”), the IRS, Department of Treasury or other agencies or authorities, we may be required to register and comply with such
regulations, including at a state or local level. To the extent that we decide to continue operations, the required registrations and regulatory compliance steps may
result in extraordinary expense or burdens to us. Should compliance with these laws become overly burdensome and unprofitable we may decide to cease certain
operations and change our business model.
14

Current and future legislation and SEC rule-making and other regulatory developments, including interpretations released by a regulatory authority, may
impact the manner in which cryptocurrency is viewed or treated for classification and clearing purposes. In particular, cryptocurrency may not be excluded from
the definition of “security” by SEC rule making or interpretation requiring registration of all transactions unless another exemption is available, including
transacting in cryptocurrency among owners and require registration of trading platforms as “exchanges”.
Due to concerns around resource consumption and associated environmental concerns, particularly as such concerns relate to public utilities companies,
various countries, states, and cities have implemented, or are considering implementing, moratoriums on Bitcoin mining in their jurisdictions. Such moratoriums
would impede Bitcoin mining and/or Bitcoin use more broadly. For example, in November 2022, New York imposed a two-year moratorium on new proof-of-
work mining permits at fossil fuel plants in the state. Although we do not mine in New York (we mine Bitcoin in Missouri, Texas and Iowa) it is possible that
other states may create similar laws that could have a material adverse effect on our business, financial condition and results of operations.
We cannot be certain as to how future regulatory developments will impact the treatment of cryptocurrency under the law. If we fail to comply with such
additional regulatory and registration requirements, we may seek to cease certain of our operations or be subjected to fines, penalties, and other governmental
action. Such circumstances could have a material adverse effect on our ability to continue as a going concern or to pursue its business model at all, which could
have a material adverse effect on its business, prospects or operations and potentially the value of Bitcoin we plan to hold or expect to acquire for our own
account.
Our business is dependent on a small number of Bitcoin mining equipment suppliers.
Our business is dependent upon Bitcoin mining equipment suppliers providing an adequate supply of new generation Bitcoin mining machines at
economical prices to customers intending to purchase our hosting and other solutions. The growth in our business is directly related to increased demand for
hosting services and Bitcoin which is dependent in large part on the availability of new generation mining machines offered for sale at a price conducive to
profitable Bitcoin mining, as well as the trading price of Bitcoin. The market price and availability of new mining machines fluctuates with the price of
cryptocurrency and can be volatile. In addition, as more companies seek to enter the mining industry, the demand for machines may outpace supply and create
mining machine equipment shortages. There are no assurances that cryptocurrency mining equipment suppliers will be able to keep pace with any surge in
demand for mining equipment. We currently do not have an agreement with our suppliers to purchase additional machines, and therefore there is no guarantee
that we will be able to purchase machines on terms acceptable to us. We intend to complete one or more financings to provide liquidity to purchase additional
machines, at which point we expect to enter into an agreement with one or more machine suppliers to purchase additional machines. Further, manufacturing
mining machine purchase contracts are not favorable to purchasers and even if we do enter into agreements with our suppliers, we may have little or no recourse
in the event a mining machine manufacturer defaults on its mining machine delivery commitments. If we and our customers are not able to obtain a sufficient
number of Bitcoin mining machines at favorable prices, our growth expectations, liquidity, financial condition and results of operations will be negatively
impacted.
Bitcoin mining machines rely on components and raw materials that may be subject to price fluctuations or shortages, including ASIC chips that have
been subject to a significant shortage.
In order to build and sustain our self-mining operations we will depend on third parties to provide us with ASIC chips and other critical components for
our mining equipment, which may be subject to price fluctuations or shortages. For example, the ASIC chip is the key component of a mining machine as it
determines the efficiency of the device. The production of ASIC chips typically requires highly sophisticated silicon wafers, which currently only a small
number of fabrication facilities, or wafer foundries, in the world are capable of producing. We believe that the previous microchip shortage that the entire
industry experienced lead to price fluctuations and disruption in the supply of key miner components. Specifically, the ASIC chips have recently been subject to
a significant price increases and shortages.
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We do not currently have agreements in place for the supply of ASIC chips. There is a risk that a manufacturer or seller of ASIC chips or other necessary
mining equipment may adjust the prices based on fluctuations in cryptocurrency prices or otherwise, and the cost of new machines could become unpredictable
and extremely high. As a result, at times, we may be forced to obtain Bitcoin mining machines and other hardware at premium prices, to the extent they are even
available. Such events could have a material adverse effect on our business, prospects, financial condition, and operating results.
Banks and financial institutions may not provide banking services, or may cut off services, to businesses that engage in cryptocurrency-related
activities or that accept cryptocurrency as payment, including financial institutions of investors in our common shares.
A number of companies that engage in cryptocurrency-related activities have been unable to find banks or financial institutions that are willing to provide
them with bank accounts and other services. Similarly, a number of companies and individuals or businesses associated with cryptocurrency may have had and
may continue to have their existing bank accounts closed or services discontinued with financial institutions in response to government action. We also may be
unable to obtain or maintain these services for our business. The difficulty that many businesses that provide cryptocurrency-related activities have and may
continue to have in finding banks and financial institutions willing to provide them services may be decreasing the usefulness of cryptocurrency as a payment
system and harming public perception of cryptocurrency, and could decrease their usefulness and harm their public perception in the future.
The impact of geopolitical and economic events on the supply and demand for cryptocurrency is uncertain.
Geopolitical crises may motivate large-scale purchases of cryptocurrency, which could increase the price of cryptocurrency rapidly. This may increase the
likelihood of a subsequent price decrease as crisis-driven purchasing behavior dissipates, adversely affecting the value of our inventory following such
downward adjustment. Such risks are similar to the risks of purchasing commodities in uncertain times, such as the risk of purchasing, holding or selling gold.
Alternatively, as an emerging asset class with limited acceptance as a payment system or commodity, global crises and general economic downturns may
discourage investment in cryptocurrency as investors focus their investment on less volatile asset classes as a means of hedging their investment risk.
As an alternative to fiat currencies that are backed by central governments, cryptocurrency, which is relatively new, is subject to supply and demand
forces. How such supply and demand will be impacted by geopolitical events is largely uncertain but could be harmful to us. Political or economic crises may
motivate large-scale acquisitions or sales of cryptocurrency either globally or locally. Such events could have a material adverse effect on our ability to continue
as a going concern or to pursue our new strategy at all, which could have a material adverse effect on our business, prospects or operations and potentially the
value of Bitcoin that we mine or otherwise acquire or hold for our own account.
We may not be able to compete with other companies, some of whom have greater resources and experience.
We may not be able to compete successfully against present or future competitors. We do not have the resources to compete with larger providers of
similar services at this time. The cryptocurrency industry has attracted various high-profile and well-established operators, some of which have substantially
greater liquidity and financial resources than we do. With the limited resources we have available, we may experience great difficulties in expanding and
improving our network of computers to remain competitive. Competition from existing and future competitors, particularly those that have access to
competitively-priced energy, could result in our inability to secure acquisitions and partnerships that we may need to expand our business in the future. This
competition from other entities with greater resources, experience and reputations may result in our failure to maintain or expand our business, as we may never
be able to successfully execute our business plan. If we are unable to expand and remain competitive, our business could be negatively affected.
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The mining data centers at which we maintain our mining equipment may experience damages, including damages that are not covered by insurance.
The mining data centers at which we maintain our mining equipment are, and any future mining data centers at which we maintain our mining equipment
will be, subject to a variety of risks relating to physical condition and operation, including:
•
the presence of construction or repair defects or other structural or building damage;
•
any non-compliance with or liabilities under applicable environmental, health or safety regulations or requirements or building permit requirements;
•
any damage resulting from natural disasters, such as hurricanes, earthquakes, fires, floods, and windstorms; and
•
claims by employees and others for injuries sustained at our properties.
For example, the mining data centers at which we maintain our mining equipment could be rendered inoperable, temporarily or permanently, as a result of
a fire or other natural disaster or by a terrorist or other attack on the facilities where our mining equipment is located. Although we have multiple sites in an
effort to mitigate this risk, these and other measures we take to protect against these risks may not be sufficient. Any property insurance we obtain in the future
may not be adequate to cover any losses we suffer as a result of any of these events. In the event of an uninsured loss, including a loss in excess of insured limits,
at any of the mining data centers at which we maintain our mining equipment, such mining data centers may not be adequately repaired in a timely manner or at
all and we may lose some or all of the future revenues anticipated to be derived from our equipment located at such mining data centers.
The dynamic nature of cryptocurrency exchanges which Bitcoin, and other cryptocurrency, are traded on may cause disruptions in the cryptocurrency
markets, which may expose us to the effects of negative publicity resulting from fraudulent actors in the cryptocurrency space, and can adversely affect
an investment in us.
The cryptocurrency exchanges on which Bitcoin is traded are relatively new. Many cryptocurrency exchanges do not provide the public with significant
information regarding their ownership structure, management teams, corporate practices, or regulatory compliance. As a result, the marketplace may lose
confidence in, or may experience problems relating to, such cryptocurrency exchanges, including prominent exchanges handling a significant portion of the
volume of cryptocurrency trading. In the recent past, a number of companies in the cryptocurrency industry declared bankruptcy. Such bankruptcies have
contributed, at least in part, to further price volatility in most cryptocurrencies, a loss of confidence in the participants of the cryptocurrency ecosystem and
negative publicity surrounding cryptocurrencies more broadly, and other participants and entities in the cryptocurrency industry have been, and may continue to
be, negatively affected. These events have also negatively impacted the demand for the cryptocurrency markets. As a result of these events, many
cryptocurrency markets, including the market for Bitcoin, have experienced increased price volatility. The Bitcoin ecosystem may continue to be negatively
impacted and experience long term volatility if public confidence decreases. Further, we have been directly and indirectly impacted by certain of the recent
bankruptcies in the cryptocurrency space, and may in the future be directly or indirectly impacted by any future bankruptcies in the cryptocurrency space. For
example, we were adversely impacted by the December 2022 bankruptcy of Core Scientific, with whom we previously entered into a Sub-License and
Delegation Agreement. In addition, on June 3, 2022, we entered into a Master Agreement with Compute North LLC for co-location, management and other
services of certain of our mining equipment for an initial term of five years. Compute North filed for bankruptcy in September 2022. As a result, we recorded
provisions for losses on deposits due to vendor bankruptcy filings in the amounts of $8.5 million for the year ended December 31, 2023 as a result of those two
vendors filing for Chapter 11 bankruptcy.
These events are continuing to develop and it is not possible to predict, at this time, every risk that they may pose to us, our service providers, or the
cryptocurrency industry as a whole. A perceived lack of stability in the cryptocurrency exchange market and the closure or temporary shutdown of
cryptocurrency exchanges due to business failure, hackers or malware, government-mandated regulation, or fraud, may reduce confidence in cryptocurrency
networks and result in greater volatility in cryptocurrency values. These potential consequences of a cryptocurrency exchange's failure could adversely affect an
investment in us.
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It may be illegal now, or in the future, to acquire, own, hold, sell, or use cryptocurrency, participate in blockchains or utilize similar cryptocurrency in
one or more countries, the ruling of which would adversely affect us.
As cryptocurrency has grown in both popularity and market size, governments around the world have reacted differently to cryptocurrency; certain
governments have deemed them illegal, and others have allowed their use and trade without restriction, while in some jurisdictions, such as in the United States,
subject to extensive and evolving regulatory requirements. Until recently, little, or no regulatory attention has been directed toward cryptocurrency by U.S.
federal and state governments, foreign governments, and self-regulatory agencies. As cryptocurrency has grown in popularity and in market size, the Federal
Reserve Board, U.S. Congress, and certain U.S. agencies have begun to examine cryptocurrency in more detail.
One or more countries, including but not limited to China, which have taken harsh regulatory action in the past, may take regulatory actions in the future
that could severely restrict the right to acquire, own, hold, sell, or use cryptocurrency or to exchange for fiat currency. In many nations, particularly in China, it is
illegal to accept payment in cryptocurrency for consumer transactions and banking institutions are barred from accepting deposits of cryptocurrency. Such
restrictions may adversely affect us as the large-scale use of cryptocurrency as a means of exchange is presently confined to certain regions globally. Such
circumstances could have a material adverse effect on our ability to continue as a going concern or to pursue our strategy at all, which could have a material
adverse effect on our business, prospects, or operations, and potentially the value of Bitcoin that we mine or otherwise acquire or hold for our own account, and
harm investors.
Investors may not have the same protections that exist for traditional stock exchanges.
Traditional stock exchanges have listing requirements and vet issuers, requiring them to be subjected to rigorous listing standards and rules, and monitor
investors transacting on such platform for fraud and other improprieties. Depending on a ledger-based platform's controls and the other policies of the ledger-
based platform on which a given cryptocurrency trades, such cryptocurrency may not benefit from the protections afforded to traditional stock exchanges. For
ledger-based platforms that do not provide sufficient protections, there is a risk of fraud and manipulation. These factors may decrease liquidity or volume of a
given ledger-based platform or of the cryptocurrency industry in general or may otherwise increase volatility of investment securities or other assets trading on a
ledger-based system. Such potential decreased liquidity or volume, or increase in volatility may adversely affect us, and could have a material adverse effect on
our business, prospects, or operations and potentially the value of Bitcoin that we mine or otherwise acquire or hold for our own account and harm investors.
Our operations, investment strategies and profitability may be adversely affected by competition from other methods of investing in cryptocurrency.
We compete with other users and/or companies that are mining cryptocurrency and other potential financial vehicles, including securities backed by or
linked to cryptocurrency through entities similar to us. Market and financial conditions, and other conditions beyond our control, may make it more attractive to
invest in other financial vehicles, or to invest in cryptocurrency directly. The emergence of other financial vehicles and exchange-traded funds have been
scrutinized by regulators and such scrutiny and the negative impressions or conclusions resulting from such scrutiny could be applicable to us and impact our
ability to successfully pursue our strategy or operate at all, or to establish or maintain a public market for our securities. Such circumstances could have a
material adverse effect on our ability to continue as a going concern or to pursue our strategy at all, which could have a material adverse effect on our business,
prospects, or operations and potentially the value of Bitcoin that we mine or otherwise acquire or hold for our own account, and harm investors.
Cryptocurrency may be subject to loss, theft, or restriction on access.
There is a risk that some or all of our Bitcoin that we own could be lost or stolen. Cryptocurrency is stored in sites commonly referred to as “wallets” by
holders of cryptocurrency which may be accessed to exchange a holder’s cryptocurrency. Access to our Bitcoin could also be restricted by cybercrime (such as a
denial of service attack). Cold storage refers to any cryptocurrency wallet that is not connected to the Internet. Cold storage is generally more secure than hot
storage, but is not ideal for quick or regular transactions and we may experience lag time in our ability to respond to market fluctuations in the price of our
Bitcoin. We expect to hold our Bitcoin in a combination of insured
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institutional custody services and multi signature cold storage wallets, and maintain secure backups to reduce the risk of malfeasance, but the risk of loss of our
Bitcoin cannot be wholly eliminated. Any restrictions on access to our Bitcoin due to cybercrime or other reasons could limit our ability to convert
cryptocurrency to cash, potentially resulting in liquidity issues. Currently, we have Bitcoin wallets custodied by Bitgo and Coinbase (each, a “Custodian” and
together, the “Custodians”). All of our wallets held by the Custodians are cold wallets. Such arrangements are governed by each Custodian’s terms of service,
and we do not have an agreement with either Custodian other than such terms of service. When we decide to sell Bitcoin, we transfer it from our digital wallets
held by the applicable Custodian to our trading account wallet, which is held by us. We do not currently have a specific policy for how or when to sell Bitcoin
for fiat currency to fund our operations for growth or through what exchange we do so, or whether we should hold our mining rewards for investment purposes.
Currently, our Bitcoin is not held for long periods of time and it is generally sold nearly immediately in order to fund our operations. Transfers through Bitgo
over a certain size require video conference verification to ensure that the request came from one of our authorized signors, and that we in fact authorized the
transfer in question.
Hackers or malicious actors may launch attacks to steal, compromise or secure cryptocurrency. As we increase in size, we may become a more appealing
target of hackers, malware, cyber-attacks, or other security threats. Any of these events may adversely affect our operations and, consequently, our investments
and profitability. The loss or destruction of a private key required to access our digital wallets may be irreversible and we may be denied access for all time to
our Bitcoin holdings or the holdings of others held in those compromised wallets. Our loss of access to our private keys or a data loss relating to our digital
wallets could adversely affect our investments and assets.
Cryptocurrency is controllable only by the possessor of both the unique public and private keys relating to the local or online digital wallet in which they
are held, which wallet’s public key or address is reflected in the network’s public blockchain. To the extent such private keys are lost, destroyed, or otherwise
compromised, we will be unable to access our Bitcoin rewards and such private keys may not be capable of being restored by any network. Any loss of private
keys relating to digital wallets used to store our Bitcoin could have a material adverse effect on our ability to continue as a going concern or to pursue our new
strategy at all, which could have a material adverse effect on our business, prospects, or operations and potentially the value of Bitcoin that we mine or otherwise
acquire or hold for our own account.
Incorrect or fraudulent cryptocurrency transactions may be irreversible.
Cryptocurrency transactions are irrevocable and stolen or incorrectly transferred cryptocurrency may be irretrievable. As a result, any incorrectly executed
or fraudulent cryptocurrency transactions could adversely affect our investments and assets. Cryptocurrency transactions are not, from an administrative
perspective, reversible without the consent and active participation of the recipient of the cryptocurrency from the transaction. Once a transaction has been
verified and recorded in a block that is added to a blockchain, an incorrect transfer of a cryptocurrency or a theft thereof generally will not be reversible and we
may not have sufficient recourse to recover our losses from any such transfer or theft. It is possible that, through computer or human error, or through theft or
criminal action, our Bitcoin rewards could be transferred in incorrect amounts or to unauthorized third parties, or to uncontrolled accounts. Further, at this time,
there is no specifically enumerated U.S. or foreign governmental, regulatory, investigative or prosecutorial authority or mechanism through which to bring an
action or complaint regarding missing or stolen cryptocurrency. In the event of a loss, we would be reliant on existing private investigative entities to investigate
any such loss of our Bitcoin. To the extent that we are unable to recover our losses from such action, error or theft, such events could have a material adverse
effect on our ability to continue as a going concern or to pursue our new strategy at all, which could have a material adverse effect on our business, prospects, or
operations of and potentially the value of Bitcoin that we mine or otherwise acquire or hold for our own account.
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Our interactions with a blockchain may expose us to specially designated nationals or blocked persons or cause us to violate provisions of law that did
not contemplate distributed ledger technology.
The Office of Financial Assets Control of the U.S. Department of Treasury (“OFAC”) requires us to comply with its sanction program and not conduct
business with persons named on its specially designated nationals list. However, because of the pseudonymous nature of blockchain transactions, we may
inadvertently and without our knowledge engage in transactions with persons named on OFAC's specially designated nationals list. Our policy prohibits any
transactions with such specially designated national individuals, but we may not be adequately capable of determining the ultimate identity of the individual with
whom we transact with respect to selling cryptocurrency. We do not directly sell Bitcoin to individuals; rather our custodial partners sell Bitcoin on our behalf.
We require that our custodial partners who sell our cryptocurrency to have standard industry anti-money laundering (AML), know your customer (KYC) and
OFAC policies. To the extent government enforcement authorities literally enforce these and other laws and regulations that are impacted by decentralized
distributed ledger technology, we may be subject to investigation, administrative or court proceedings, and monetary fines and penalties, which could harm our
reputation.
The price of cryptocurrency may be affected by the sale of cryptocurrency by other vehicles investing in cryptocurrency or tracking cryptocurrency
markets.
The mathematical protocols under which cryptocurrency is mined permit the creation of a limited, predetermined amount of currency, while others have
no limit established on total supply. To the extent that other vehicles investing in cryptocurrency or tracking cryptocurrency markets form and come to represent
a significant proportion of the demand for a cryptocurrency, large redemptions of the securities of those vehicles and the subsequent sale of such cryptocurrency
by such vehicles could negatively affect the price and value of the cryptocurrency inventory we hold. Such events could have a material adverse effect on our
ability to continue as a going concern or to pursue our new strategy at all, which could have a material adverse effect on our business, prospects, or operations
and potentially the value of Bitcoin that we mine or otherwise acquire or hold for our own account.
Bitcoin is subject to halving, and our Bitcoin mining operations may generate less revenue as a result.
At mathematically predetermined intervals, the number of new Bitcoin awarded for solving a block is cut in half, which is referred to as “halving.”
Bitcoin halving occurred in April 2024, at which time the block rewards for Bitcoin halved from 6.25 to 3.125. While we cannot predict the exact date of the
next halving, as it is predicated on factors such as the block height and the network hashrate, halving happens every 210,000 blocks, and the next Bitcoin halving
is expected to occur in 2028. While Bitcoin prices have historically increased around these halving events, there is no guarantee that the price change will be
favorable or would compensate for the reduction in mining rewards. If a corresponding and proportionate increase in the price of Bitcoin does not follow the
upcoming or future halving events, the revenue we earn from our Bitcoin mining operations would see a decrease, which could have a material adverse effect on
our results of operations and financial condition.
The maximum number of Bitcoins that may be released into circulation is 21 million, and the number of Bitcoin currently in circulation is approximately
19.9 million. As the number of Bitcoin available to be mined narrows, we expect the fees for Bitcoin transactions to increase. Eventually, once the majority of
Bitcoin is mined and in circulation, we expect to see revenue from transaction fees to exceed the revenue from mining Bitcoin. Once this occurs, we may need to
find additional ways to increase our revenue, which could include entering into other areas within the cryptocurrency industry.
There are risks related to technological obsolescence, the vulnerability of the global supply chain to cryptocurrency hardware disruption, and difficulty
in obtaining new hardware which may have a negative effect on our business.
Our mining operations can only be successful and ultimately profitable if the costs of mining cryptocurrency, including hardware and electricity costs,
associated with mining cryptocurrency are lower than the price of cryptocurrency. As our mining facility operates, our miners experience ordinary wear and tear,
and may also face more significant malfunctions caused by a number of extraneous factors beyond our control. The physical degradation of our miners will
require us to, over time, replace those miners which are no longer functional. Additionally, as the technology evolves, we may be required to acquire newer
models of miners to remain competitive in the market.
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Also, because we expect to depreciate all new miners, our reported operating results will be negatively affected. Further, the global supply chain for
cryptocurrency miners is presently heavily dependent on China. Should disruptions to the China-based global supply chain for cryptocurrency hardware occur,
we may not be able to obtain adequate replacement parts for existing miners or to obtain additional miners from the manufacturer on a timely basis. Such events
could have a material adverse effect on our ability to pursue our new strategy, which could have a material adverse effect on our business.
We may not adequately respond to price fluctuations and rapidly changing technology, which may negatively affect our business.
Competitive conditions within the cryptocurrency industry require that we use sophisticated technology in the operation of our business. The industry for
blockchain technology is characterized by rapid technological changes, new product introductions, enhancements, and evolving industry standards. New
technologies, techniques or products could emerge that might offer better performance than the software and other technologies we currently utilize, and we may
have to manage transitions to these new technologies to remain competitive. We may not be successful, generally or relative to our competitors in the
cryptocurrency industry, in timely implementing new technology into our systems, or doing so in a cost-effective manner. As a result, our business and
operations may suffer.
The reward for mining cryptocurrency in the future may decrease, and the value of cryptocurrency may not adjust to compensate us for the reduction
in the rewards we receive from our mining efforts.
There is no guarantee that price fluctuations of cryptocurrency will compensate for the reduction in mining reward. If a corresponding and proportionate
increase in the trading price of a cryptocurrency or a proportionate decrease in mining difficulty does not follow the decrease in rewards, the revenue we earn
from our Bitcoin mining operations could see a corresponding decrease, which would have a material adverse effect on our business and operations.
The value of cryptocurrency may be subject to pricing risk and has historically been subject to wide swings.
Cryptocurrency market prices, which have historically been volatile and are impacted by a variety of factors (including those discussed below), are
determined primarily using data from various exchanges, over-the-counter markets, and derivative platforms. Furthermore, such prices may be subject to factors
such as those that impact commodities, more so than business activities, which could be subjected to additional influence from fraudulent or illegitimate actors,
real or perceived scarcity, and political, economic, regulatory, or other conditions. Pricing may be the result of, and may continue to result in, speculation
regarding future appreciation in the value of cryptocurrency, inflating and making its market prices more volatile or creating “bubble” type risks for
cryptocurrency.
We may not be able to realize the benefits of forks. Forks in a cryptocurrency network may occur in the future which may affect the value of
cryptocurrency held by us.
To the extent that a significant majority of users and miners on a cryptocurrency network install software that changes the cryptocurrency network or
properties of a cryptocurrency, including the irreversibility of transactions and limitations on the mining of new cryptocurrency, the cryptocurrency network
would be subject to new protocols and software. However, if less than a significant majority of users and miners on the cryptocurrency network consent to the
proposed modification, and the modification is not compatible with the software prior to its modification, the consequence would be what is known as a “fork”
of the network, with one prong running the pre-modified software and the other running the modified software. The effect of such a fork would be the existence
of two versions of the cryptocurrency running in parallel, yet lacking interchangeability and necessitating exchange-type transactions to convert currencies
between the two forks. A fork in a cryptocurrency could adversely affect our business because we may not be able to realize the economic benefit of a fork,
either immediately or ever, which could adversely affect our business. If we hold a cryptocurrency at the time of a hard fork into two cryptocurrencies, industry
standards would dictate that we would be expected to hold an equivalent amount of the old and new assets following the fork. However, we have not in the past,
and have no plans in the future, to use or participate in forks, and, as a result, we may not realize the economic benefit of a new asset created by a fork.
Additionally, laws, regulations or other factors may prevent us from benefiting from the new asset.
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If a malicious actor or botnet obtains control in excess of 50% of the processing power active on any cryptocurrency network, it is possible that such
actor or botnet could manipulate the blockchain in a manner that adversely affects an investment in us.
If a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers)
obtains a majority of the processing power dedicated to mining on any cryptocurrency network, it may be able to alter the blockchain by constructing alternate
blocks if it is able to solve for such blocks faster than the remainder of the miners on the blockchain can add valid blocks. In such alternate blocks, the malicious
actor or botnet could control, exclude, or modify the ordering of transactions, though it could not generate new cryptocurrency or transactions using such
control. Using alternate blocks, the malicious actor could “double-spend” its own cryptocurrency (i.e., spend the same cryptocurrency in more than one
transaction) and prevent the confirmation of other users’ transactions for so long as it maintains control. To the extent that such malicious actor or botnet does
not yield its majority control of the processing power or the cryptocurrency community does not reject the fraudulent blocks as malicious, reversing any changes
made to the blockchain may not be possible. Such changes could adversely affect an investment in us.
The approach towards and possible crossing of the 50% threshold indicate a greater risk that a single mining pool could exert authority over the validation
of cryptocurrency transactions. To the extent that the cryptocurrency ecosystems do not act to ensure greater decentralization of cryptocurrency mining
processing power, the feasibility of a malicious actor obtaining more than 50% of the processing power on any cryptocurrency network (e.g., through control of
a large mining pool or through hacking such a mining pool) will increase, which may adversely impact an investment in us.
Cryptocurrency, including those maintained by or for us, may be exposed to cybersecurity threats and hacks.
As with any computer code generally, flaws in cryptocurrency codes may be exposed by malicious actors. Several errors and defects have been found
previously, including those that disabled some functionality for users and exposed users’ information. Exploitation of flaws in the source code that allow
malicious actors to take or create money have previously occurred. Despite our efforts and processes to prevent breaches, our devices, as well as our miners,
computer systems and those of third parties that we use in our operations, are vulnerable to cybersecurity risks, including cyberattacks such as viruses and
worms, phishing attacks, denial-of-service attacks, physical or electronic break-ins, employee theft or misuse, and similar disruptions from unauthorized
tampering with our miners and computer systems or those of third parties that we use in our operations. Such events could have a material adverse effect our
business, prospects, or operations and potentially the value of Bitcoin that we mine or otherwise acquire or hold for our own account.
Malicious cyber-attacks, attempted cybersecurity breaches, and other adverse events affecting our operational systems or infrastructure, or those of
third parties, could disrupt our businesses and cause losses.
Despite defensive measures we have taken to protect, detect, respond, and recover from cyber threats, we experience cybersecurity threats and incidents
from time to time, and it is possible that such defensive measures will be unsuccessful in mitigating a cybersecurity event. These events may arise from external
factors such as governments, organized crime, hackers, and other third parties such as infrastructure-support providers and application developers, or may
originate internally from an employee or service provider to whom we have granted access to our computer systems. If our security measures are breached, our
business would suffer and we could incur material liability. Because techniques used to obtain unauthorized access or to sabotage computer systems change
frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventive
measures.
We also face the risk of operational disruption, failure or capacity constraints of any of the third-party service providers that facilitate our business
activities. In addition, the increased flexibility for our employees to work remotely post-Pandemic has amplified certain risks related to, among other things, the
increased demand on our information technology resources and systems, the increased risk of phishing and other cybersecurity attacks, and the increased number
of points of possible attack, such as laptops and mobile devices (both of which are now being used in increased numbers), to be secured.
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Our remediation costs and lost revenues could be significant if we fall victim to a cyber-attack. If an actual, threatened or perceived breach of our security
occurs, the market perception of the effectiveness of our security measures could be harmed. We may be required to expend significant resources to repair
system damage, pay a ransom, protect against the threat of future security breaches or to alleviate problems caused by any breaches.
Our cash and other sources of liquidity may not be sufficient to fund our operations and there is substantial doubt about our ability to continue as a
going concern within 12 months from the date of issuance of our financial statements and we may not be successful in raising additional capital
necessary to meet expected increases in working capital needs, and if we raise additional funding through sales of equity or equity-based securities your
shares will be diluted.
Management has projected that based on our recurring losses, negative cash flows from operating activities, and our hashing rate at December 31, 2024,
cash on hand may not be sufficient to allow us to continue operations and there is substantial doubt about our ability to continue as a going concern within 12
months from the date of issuance of our financial statements if we are unable to raise additional funding for operations. We expect our working capital needs to
increase in the future as we continue to expand and enhance our operations. Included in our working capital is an investment in equity securities that we can
liquidate as needed to assist in funding our operations. Our ability to raise additional funds for working capital through equity or debt financings or other sources
may depend on the financial success of our business and successful implementation of our key strategic initiatives, financial, economic and market conditions
and other factors, some of which are beyond our control. We require additional capital and if we are unsuccessful in raising that capital at a reasonable cost and
at the required times, or at all, we may not be able to continue our business operations in the cryptocurrency mining industry or we may be unable to advance our
growth initiatives, either of which could adversely impact our business, financial condition and results of operations. In an effort to mitigate these risks we
expect to take steps to lower our cost of mining and also refresh our mining fleet to increase our mining efficiency.
Significant changes from our current forecasts, including but not limited to: (i) shortfalls from projected mining earning levels; (ii) increases in operating
costs; (iii) decreases in the value of cryptocurrency; and (iv) if we do not maintain compliance with the requirements of The Nasdaq Capital Market (“Nasdaq”)
and/or we do not maintain our listing with Nasdaq could have a material adverse impact on our ability to access the level of funding necessary to continue its
operations at current levels. These factors, among others, should they occur may result in our inability to continue as a going concern within 12 months from the
date of issuance of our financial statements 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 and do not include any adjustments that might result from
the outcome of this uncertainty.
We have a history of net losses. We may not achieve or maintain profitability.
We have limited non-recurring revenues derived from operations. We have a history of net losses, and we expect to continue to incur net losses and we
may not achieve or maintain profitability. We may see continued losses during 2025 and as a result of these and other factors, we may not be able to achieve,
sustain or increase profitability in the near future.
We are subject to many risks common to early-stage enterprises, including under-capitalization, cash shortages, limitations with respect to personnel,
financial, and other resources. There is no assurance that we will be successful in achieving a return on shareholders’ investment and the likelihood of success
must be considered considering our stage of operations.
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. Achieving this objective may be
difficult due to many factors, including competition for such highly skilled personnel; fluctuations in global economic and industry conditions; changes in our
management or leadership; competitors’ hiring practices; and the effectiveness of our compensation programs. The loss of any of these key persons could have a
material adverse effect on our business, financial condition or results of operations.
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Our success is also dependent on our continuing ability to identify, hire, train, motivate and retain highly qualified management and finance personnel.
Any such new hire may require a significant transition period prior to making a meaningful contribution. Competition for qualified employees is particularly
intense in the technology industry, and we have in the past experienced difficulty recruiting qualified employees. Our failure to attract and to retain the necessary
qualified personnel could seriously harm our operating results and financial condition. Competition for such personnel 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 the future, which may have a material adverse effect on
our future growth and profitability. We do not have key person insurance.
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. 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 operating results will continue to fluctuate,
and that period-to-period comparisons are not necessarily indications of future performance. Our revenue and operating results 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 adverse effect of any revenue shortfall.
Our plans for implementing our business strategy and achieving profitability are based upon the experience, judgment and assumptions of our key
management personnel, and available information concerning the communications and technology industries. If management’s assumptions prove to be
incorrect, it could have a material adverse effect on our business, financial condition, or results of operations.
We have made a number of acquisitions in the past and we may make acquisitions in the future. Our ability to identify complementary assets, products
or 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 business and/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 candidates available for
sale at reasonable prices, complete any acquisition, or successfully integrate any acquired product or business into our operations. We are likely to face
competition for acquisition candidates from other parties including those that have substantially greater available resources. Acquisitions may involve a number
of other risks, including:
•
diversion of management’s attention;
•
disruption to our ongoing business;
•
failure to retain key acquired personnel;
•
failure to obtain required regulatory approvals;
•
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 a material
adverse effect on our business, results of operations and financial condition. Further, our success will depend, in part, on the extent to which we are able to
integrate acquired companies (and any additional businesses with which we may combine in the future) into a cohesive, efficient enterprise. This integration
process may entail significant costs and delays. Our failure to integrate the operations of companies successfully could adversely affect our business, financial
condition, results of operations and prospects. To the extent that any acquisition results in additional goodwill, it will reduce our tangible net worth, which might
adversely affect our business, financial condition, results of operations and prospects, as well as our credit capacity and if we proceed with an acquisition, our
24

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; however, these efforts may need to be modified, and if we need to implement additional cost reduction
efforts it 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 may
need to implement further cost reduction efforts across our operations, such as further reductions in the cost of our workforce and/or suspending or curtailing
planned programs, either of which could materially harm our business, results of operations and future prospects.
Risks Related to Our Public Company Status and Our Common Shares
Sales of common shares issuable upon exercise of outstanding warrants, the conversion of outstanding preferred shares, or the effectiveness of our
registration statement may cause the market price of our common shares to decline.
As of December 31, 2024 we had warrants outstanding for the purchase of up to 10,512,988 common shares having a weighted-average exercise price of
$10.86 per share. The sale of our common shares upon exercise of our outstanding warrants, or the sale of a significant amount of the common shares issued or
issuable upon exercise of the warrants in the open market, or the perception that these sales may occur, could cause the market price of our common shares to
decline or become highly volatile.
We may issue additional shares or other equity securities without your approval, which would dilute your ownership interest in us and may depress the
market price of our common shares.
We may issue additional shares or other equity securities in the future in connection with, among other things, future acquisitions, repayment of
outstanding indebtedness or grants without shareholder approval in a number of circumstances. The issuance of additional shares or other equity securities could
have one or more of the following effects:
•
our existing shareholders’ proportionate ownership interest will decrease;
•
the amount of cash available per share, including for payment of dividends in the future, may decrease;
•
the relative voting strength of each previously outstanding share may be diminished; and
•
the market price of our common shares may decline.
The market price of our common shares is volatile and it may decline significantly.
The market price for our common shares is volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our
control, including the following:
•
price and volume fluctuations in the overall stock market, the cryptocurrency market, and of Bitcoin mining stocks from time to time;
•
future capital raising activities;
•
sales of common shares by holders thereof or by us;
•
changes in financial estimates by securities analysts who follow us, or our failure 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;
•
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;
25

•
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;
•
any significant change in our executive officers and other key personnel or Board of Directors;
•
release of transfer restrictions on certain outstanding common shares; and
•
fluctuating or anticipated changes in power markets.
Financial markets may experience price and volume fluctuations that affect the market prices of equity securities of companies and that are unrelated to
the operating performance, underlying asset values or prospects of such companies. Accordingly, the market price of the common shares may decline even if our
operating results, underlying asset values or prospects have not changed. As well, certain institutional investors may base their investment decisions on
consideration of our governance and social practices and performance against such institutions’ respective investment guidelines and criteria, and failure to meet
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 our common
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 its
securities. We may in the future be a target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert
management’s attention from day-to-day operations and consume resources, such as cash. In addition, the resolution of those matters may require us to issue
additional common shares, which could potentially result in dilution to our existing shareholders. Expenses incurred in connection with these matters (which
include 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.
If our performance does not meet market expectations, the price of our common shares may decline.
If our performance does not meet market expectations, the price of our common shares may decline. The market value of our common shares may vary
significantly from the price of our common shares on the date of this Annual Report.
In addition, fluctuations in the price of our common shares could contribute to the loss of all or part of your investment. Any of the factors listed below
could have a material adverse effect on your investment in our common shares and our common shares may trade at prices significantly below the price you paid
for them. Factors affecting the trading price of our common shares may include:
•
actual or anticipated fluctuations in our financial results or the financial results of companies perceived to be similar to it;
•
changes in the market’s expectations about our operating results;
•
success of competitors;
•
our operating results failing to meet market expectations in a particular period;
•
changes in financial estimates and recommendations by securities analysts concerning us;
•
operating and share price performance of other companies that investors deem comparable to us;
•
changes in laws and regulations affecting our business;
•
commencement of, or involvement in, litigation involving us;
•
changes in our capital structure, such as future issuances of securities or the incurrence of debt;
•
the volume of our shares available for public sale;
26

•
any significant change in our board or management;
•
sales of substantial amounts of shares by our directors, executive officers or significant shareholders or the perception that such sales could occur; and
•
general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.
Broad market and industry factors may depress the market price of our common shares irrespective of our operating performance. The stock market in
general and Nasdaq have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the
particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in
the market for technology, Bitcoin mining or sustainability-related stocks or the stocks of other companies that investors perceive to be similar to us could
depress our share price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our common shares
also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.
If the trading price of our common shares fails to comply with the continued listing requirements of Nasdaq, we would face possible delisting, which
would result in a limited public market for our common shares and make obtaining future debt or equity financing more difficult for us.
Companies listed on Nasdaq are subject to delisting for, among other things, failure to maintain a minimum closing bid price of $1.00 per share for 30
consecutive business days pursuant to Nasdaq Listing Rule 5550(a)(2) and 5810(c)(3)(A) (the “Nasdaq Listing Rules”).
On March 6, 2025, we received a notice from the Nasdaq Listing Qualifications Department of the Nasdaq Stock Market LLC stating that the bid price of
our common shares for the last 30 consecutive trading days had closed below the minimum $1.00 per share required for continued listing under Listing Rule
5550(a)(2) (the “Listing Rule”). We have a period of 180 calendar days, or until September 2, 2025, to regain compliance with the Listing Rule.
If we cannot comply with the Nasdaq Listing Rules, our common shares would be subject to delisting and would likely trade on the over-the-counter
market. If our common shares were to trade on the over-the-counter market, selling our common shares could be more difficult because smaller quantities of
shares would likely be bought and sold, transactions could be delayed, and security analysts’ coverage of us may be reduced. In addition, broker-dealers have
certain regulatory burdens imposed upon them, which may discourage broker-dealers from effecting transactions in our common shares, further limiting the
liquidity of our common shares. As a result, the market price of our common shares may be depressed, and you may find it more difficult to sell our common
shares. Such delisting from Nasdaq and continued or further declines in our share price could also greatly impair our ability to raise additional necessary capital
through equity or debt financing.
We may be subject to securities litigation, which is expensive and could divert management attention.
Our share price may be volatile and, in the past, companies that have experienced volatility in the market price of their shares have been subject to
securities class action litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion
of management’s attention and resources, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Any adverse determination in litigation could also subject us to significant liabilities.
We will continue to incur substantial costs and obligations as a result of being a public company.
As a publicly-traded company, we will continue to incur significant legal, accounting, and other expenses. In addition, new and changing laws, regulations
and standards relating to corporate governance and public disclosure for public companies, including the Dodd-Frank Wall Street Reform and Consumer
Protection Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), regulations related thereto and the rules and regulations of the United States
Securities and Exchange Commission (“SEC”) and Nasdaq, have increased the costs and the time that must be devoted to compliance matters. We expect these
rules and regulations will increase our legal and financial costs and lead to a diversion of management time and attention from revenue-generating activities.
27

We must comply with the financial reporting requirements of a public company, as well as other requirements associated with being listed on Nasdaq.
We are subject to reporting and other obligations under applicable Canadian securities laws, SEC rules and the rules of Nasdaq. 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 accounting resources. Moreover, any failure to
maintain effective internal controls could cause us to fail to meet our reporting obligations or result in material misstatements in our consolidated financial
statements. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results could be materially harmed, which could also
cause investors to lose confidence in our reported financial information, which could result in a lower trading price of our common shares.
Management does not expect that our disclosure controls and procedures and internal controls over financial reporting will prevent all errors and all fraud.
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 their costs. Due
to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within a company are detected.
The inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or
mistakes. Controls can also be circumvented by individual acts of some persons, by collusion of two or more people or by management override of the controls.
Due to the inherent limitations in a cost-effective control system, misstatements due to error, or fraud may occur and not be detected.
We may be treated as a Passive Foreign Investment Company.
There is also an ongoing risk that we may be treated as a Passive Foreign Investment Company (“PFIC”), for U.S. federal income tax purposes. A non-
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% or more 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, our market valuation and future financial performance. Based on current business plans and financial expectations, we do not
believe we were a PFIC for our tax year ended December 31, 2024, and based on current business plans and financial expectations, we expect that we will not
be a PFIC for our current tax year ending December 31, 2025 or for the foreseeable future. If we were to be classified as a PFIC for any future taxable year,
holders of our common shares who are U.S. taxpayers would be subject to adverse U.S. federal income tax consequences.
Certain of our directors, officers and management could be in a position of conflict of interest.
Certain of our directors, officers and members of management may also serve as directors and/or officers of other companies. We may contract 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 us. Consequently, there exists the
possibility for such directors, officers, and members of management to be in a position of conflict.
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 of their
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 shares prevailing
from time to time. However, the future sale of a substantial number of common shares by our officers, directors and other shareholders and their respective
affiliates, or the perception that such sales could occur, could adversely affect prevailing market prices for the common shares.
28

We may issue an unlimited number of common shares. Future sales of common shares will dilute your shares.
Our articles permit the issuance of an unlimited number of common shares, and shareholders will have no preemptive rights in connection with such
further issuances. With limited exceptions, we are generally not restricted from issuing additional common shares, including any securities that are convertible
into or exchangeable for, or that represent the right to receive, common shares. The market price of our common shares could decline as a result of sales of
common shares or securities that are convertible into or exchangeable for, or that represent the right to receive, common shares after this offering or the
perception that such sales could occur.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 1C. Cybersecurity
We understand the importance of preventing, assessing, identifying, and managing material risks associated with cybersecurity threats. Cybersecurity
processes to assess, identify and manage risks from cybersecurity threats have been incorporated as a part of our overall risk assessment process and have been
embedded in our operating procedures, internal controls and information systems. We have engaged a third-party vendor to provide a variety of cybersecurity
services ranging from ongoing security advisory services to cybersecurity monitoring and response management.
We use a risk-based approach to identifying and overseeing cybersecurity risks presented by third parties, including vendors, service providers and other
external users of our systems, as well as the systems of third parties that could adversely impact our business in the event of a cybersecurity incident affecting
those third-party systems. For third parties that we rely upon for certain IT systems, we seek to use only reputable providers, to use the most recently reliable
versions of such systems, and monitor and address alerts for potential vulnerabilities to any such systems. We do not believe that risks from cybersecurity
threats, including as a result of any previous cybersecurity incidents, have materially affected us, including our business strategy, results of operations or
financial condition.
Our Board of Directors oversees management’s processes for identifying and mitigating risks, including cybersecurity risks, to help align our risk exposure
with our strategic objectives. Our Chief Executive Officer is responsible for assessing and managing cybersecurity risks, responding to any cybersecurity
incidents and reporting any such incidents to our Board of Directors, and periodically briefs our Board of Directors on our cybersecurity and information
security posture and on any cybersecurity incidents deemed to have a moderate or higher business impact. In the event of a material cybersecurity incident, our
cybersecurity consultant has extensive information technology and program management experience. We believe that we have implemented a governance
structure and processes that are equipped to assess, identify, manage and report cybersecurity risks. Refer to “Item 1A. Risk Factors” for a discussion of certain
of the cybersecurity risks that our business is subject to. As a smaller reporting company, with respect to compliance with Form 8-K incident disclosure
requirements, we were required to comply with the reporting requirements beginning June 15, 2024.
Item 2. Properties
We are a remote-first company, meaning our employees have the option to work remotely. As a result of this strategy, we do not maintain a corporate
headquarters. We believe that our remote working strategy is adequate to meet our needs for the immediate future, and that, should we need physical office
space, suitable space will be available in the future.
Item 3. Legal Proceedings
For a discussion of our legal proceedings, see Note 16. Commitments and Contingencies to our Consolidated Financial Statements.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common shares are listed on The Nasdaq Capital Market under the symbol “ANY”. As of March 24, 2025, we had approximately 35 shareholders of
record and beneficial owners of our common shares.
Dividends
We have not declared or paid any dividends on our common shares to date. Our current intention is to retain any future earnings to support the
development of the business of Sphere 3D and we do not anticipate paying cash dividends in the foreseeable future. Payment of any future dividends 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 financial condition, 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 their investment.
Recent Sales of Unregistered Securities
None.
Item 6. [Reserved]
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes included in the Annual Report
on Form 10-K. In addition to historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties.
Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to risks described in Part I, Item 1A.
Risks Factors, and elsewhere in this Annual Report. References to “Notes” are Notes included in our Notes to Consolidated Financial Statements.
Overview
In January 2022, we commenced operations of our Bitcoin mining business and are dedicated to becoming a leader in the blockchain and cryptocurrency
industry. We have established and continue to grow an enterprise-scale mining operation through the procurement of mining equipment and partnering with
experienced service providers. In addition to Bitcoin mining, through December 28, 2023, we delivered data management and desktop and application
virtualization solutions through hybrid cloud, cloud and on premise implementations by its reseller network. We achieved this through a combination of
containerized applications, virtual desktops, virtual storage and physical hyper-converged platforms. On December 28, 2023, we sold our Service and Product
segment which included HVE ConneXions and Unified ConneXions.
We obtain Bitcoin as a result of our mining operations, and when necessary we sell Bitcoin to support our operations and strategic growth. We mine
Bitcoin in Missouri, Texas and Iowa, which these states do not have any material state-specific regulatory restrictions on the mining of Bitcoin. However, it is
possible that these states or other states in which we may seek to operate may create laws that would impede Bitcoin mining. We do not currently plan to engage
in regular trading of Bitcoin other than sales to convert our Bitcoin into U.S. dollars. Decisions to hold or sell our Bitcoin is currently determined by
management by analyzing forecasts and monitoring the market in real time. We have a hybrid treasury strategy to hold Bitcoin when possible, and sell to fund
working capital requirements.
As of December 31, 2024, we owned approximately 14,000 miners, of which approximately 6,300 were in service, and a total hashrate capacity of 0.76
exahash per second (“EH/s”). We are strategizing for our future growth by refreshing a significant portion of our fleet with newer-generation machines to bolster
efficiency and developing a 8 megawatt (“MW”) site in Iowa. Vertically integrating with self owned facilities, like the Iowa site, allows us to reduce our reliance
on third-parties and decrease our overall cost to mine a Bitcoin. As a result of our strategic changes, during the third and fourth quarter of 2024 mining
production decreased as we focused on our long-term strategic goals of transitioning to lower-cost hosting sites, vertically integrating to own our own sites, and
refreshing our fleet with newer-generation machines.
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As of December 31, 2024, we held approximately 14.9 Bitcoin. The fair value of our Bitcoin as of December 31, 2024 was approximately $1.4 million on
our consolidated balance sheet. We account for Bitcoin as indefinite-lived intangible assets. Effective January 1, 2024, we early adopted ASU 2023-08,
Intangibles - Goodwill - and Other - Crypto Assets (Subtopic 350-60): Accounting For and Disclosure of Crypto Assets (“ASU 2023-08”) and recorded a
$20,000 decrease to the opening balance of accumulated deficit and an increase to cryptocurrency. The new guidance requires Bitcoin to be valued at fair value
each reporting period with changes in fair value recorded in operating expenses in the consolidated statement of operations. The fair value of Bitcoin is
measured using the period-end closing price from the Company’s principal market. When Bitcoin is sold, the gains and losses from such transactions are
measured as the difference between the cash proceeds and the carrying basis of the Bitcoin as determined on a first in-first out (“FIFO”) basis and are recorded
within the same line item, Change in fair value of Bitcoin, in the consolidated statements of operations.
Recent Key Events
•
On March 7, 2025, we reached a settlement with Gryphon Digital Mining, Inc. to resolve all claims against each other on mutually satisfactory terms
that will result in the complete dismissal of the outstanding litigation. We were required to make no payments under the settlement agreement.
•
On March 10, 2025, our new 8 MW hosting site in Iowa was energized.
•
On March 6, 2025, we received a notice from the Nasdaq Listing Qualifications Department of the Nasdaq Stock Market LLC stating that the bid price
of our common shares for the last 30 consecutive trading days had closed below the minimum $1.00 per share required for continued listing under
Listing Rule 5550(a)(2) (the “Listing Rule”). We have a period of 180 calendar days, or until September 2, 2025, to regain compliance with the Listing
Rule.
•
On January 29, 2025, we granted 1,684,783 restricted stock units with a fair value of $1.5 million and vesting periods of two years. On March 4, 2025,
we canceled 927,310 RSUs that were granted on January 29, 2025.
•
On January 21, 2025, we issued 507,000 common shares for the exercise of pre-funded warrants issued in November 2024.
•
On January 16, 2025, we ended our hosting agreement with Rebel Mining Company, LLC (the “Rebel Hosting Agreement”) and agreed to a
termination and settlement amount of $2.4 million payable to us in satisfaction of all obligations of the Rebel Hosting Agreement, and it constitutes a
final settlement of all amounts owed by either party.
•
On January 3, 2025, we entered into a sales agreement (the “AGP Agreement”) with A.G.P./Alliance Global Partners (the “Sales Agent”). In
accordance with the terms of the AGP Agreement, we may offer and sell from time to time through or to the Sales Agent, as agent or principal, the
Company's common shares having an aggregate offering price of up to $8.0 million. Subsequent to December 31, 2024, we sold 210,448 common
shares for approximately $0.1 million of net proceeds under the AGP Agreement.
Results of Operations - Comparison of Years Ended December 31, 2024 and 2023
Revenue
We had revenue of $16.6 million during 2024 compared to $21.9 million during 2023. The $5.3 million decrease in revenue is due to the decrease of $3.1
million in revenues from our Bitcoin mining operation and a decrease of $2.2 million in service and product. The Bitcoin mining revenue decreased primarily
due to one of our previous hosting providers taking approximately 3,300, or 22%, of our mining machines offline in the third quarter of 2024 to relocate them
and the majority of such machines are still pending redeployment. In addition, beginning the third quarter of 2024, we are in the process of removing our older
mining equipment and replacing it with newer generation machines. This is expected to be an ongoing process through 2025, which may result in further
fluctuations in exahash. There was also a decrease in revenues of $2.2 million related to our former Service and Product segment which was sold in December
2023.
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Operating Expenses
Cost of Revenue (exclusive of depreciation and amortization expense)
For the years ended December 31, 2024 and 2023, direct cost of revenues were $13.4 million and $15.9 million, respectively, representing a decrease of
$2.5 million primarily due to lower hosting fees due to machines being taken offline to be relocated and the transition of removing older mining machines and
replacing them with newer generation machines, as well the prior year disposal of our Service and Product segment.
Sales and Marketing Expense
Sales and marketing expenses were nil and $0.9 million for the years ended December 31, 2024 and 2023, respectively. The decrease of $0.9 million was
due to the sale of our Service and Product segment in December 2023 and we no longer have sales and marketing expenses.
Research and Development Expense
Research and development expenses were nil and $1.0 million for the years ended December 31, 2024 and 2023, respectively. The decrease of $1.0
million was due to the sale of our Service and Product segment in December 2023 and we no longer have research and development expense.
General and Administrative Expense
General and administrative expenses were $12.4 million and $15.8 million for the years ended December 31, 2024 and 2023, respectively. The decrease
of $3.4 million was primarily due to a decrease of $1.2 million in legal fees associated with the 2023 litigation with Core Scientific Inc. and Gryphon Digital
Mining Inc., a decrease of $0.9 million related to operating costs for our former special purpose acquisition company which no longer exists for 2024, a $0.7
million decrease associated with outside services related to our expansion into the cryptocurrency industry, a decrease of $0.6 million for employee and related
expenses, a decrease of $0.4 million in investor relations, and a decrease of $0.3 million in insurance cost. These decreases were offset by an increase of $0.5
million in share-based compensation primarily related to awards to certain executives, and a $0.3 million increase in costs related to strategic business growth.
Depreciation and Amortization Expense
Depreciation and amortization expense was $7.1 million and $6.2 million for the years ended December 31, 2024 and 2023, respectively. The increase of
$0.9 million was primarily due to depreciation related to our Bitcoin mining machines.
Loss on Disposal of Property and Equipment
Loss on disposal of property and equipment was $3.5 million and $1.0 million for the years ended December 31, 2024 and 2023, respectively, and related
to the sale of mining equipment. We sold 3,263 and 3,336 miners during the years ended December 31, 2024 and 2023, respectively, for proceeds of $1.0 million
and $4.5 million, respectively.
Impairment of Property and Equipment
Impairment of property and equipment was $1.1 million and nil for the years ended December 31, 2024 and 2023, respectively, and related to idle mining
equipment not expected to return to use.
Impairment of Other Assets
Impairment of other assets was $1.1 million and nil for the years ended December 31, 2024 and 2023, respectively, and primarily related to a $0.9 million
impairment to our prepaid service fees held by Rebel Mining Company, and a $0.2 million impairment for an uncollectible other receivable.
32

Change in Fair Value of Bitcoin
Change in fair value of Bitcoin was $0.7 million and nil for the years ended December 31, 2024 and 2023, respectively. Effective January 1, 2024, we
early adopted ASU 2023-08 and recorded a $20,000 decrease to the opening balance of accumulated deficit and an increase to digital assets. The gain in the year
ended December 31, 2024 is the change in fair value of the Bitcoin held, as well as the gains and losses from when the Bitcoin was sold. Sale transactions are
measured as the difference between the cash proceeds and the carrying basis of the Bitcoin as determined on a FIFO basis.
Provision for Losses on Deposits Due to Vendor Bankruptcy Filings
Provision for losses on deposits due to vendor bankruptcy filings was nil and $8.5 million for the years ended December 31, 2024 and 2023, respectively,
and in the prior year is primarily as a result of two vendors filing for Chapter 11 bankruptcy.
Impairment of Acquired Intangible Assets
Impairment of acquired intangible assets were nil and $3.0 million for the years ended December 31, 2024 and 2023, respectively. For the year ended
December 31, 2023, an impairment charge of $1.7 million was recorded for carbon credits held for future use due to a certain vendor who was not able to
perform under terms of the agreement. In addition, an impairment charge of $1.2 million was recorded for one supplier agreement due to an adverse change in
the business climate which indicated that an impairment triggering event occurred.
Realized Gain on Sale of Bitcoin
Realized gain on sale of Bitcoin was nil and $1.1 million for the years ended December 31, 2024 and 2023, respectively, and was due to the sale of
Bitcoin and the difference between the sales proceeds from the Bitcoin and the carrying amount. Typically gains are higher when Bitcoin prices are increasing
over a holding period. Effective January 1, 2024, we early adopted ASU 2023-08, and in accordance with the new guidance we no longer report impairment of
Bitcoin and realized gain on sale of Bitcoin separately. Instead, current period comparable information is reported in the line item Change in fair value of Bitcoin
in the consolidated statement of operations.
Impairment of Bitcoin
Impairment of Bitcoin was nil and $0.7 million for the years ended December 31, 2024 and 2023, respectively. Effective January 1, 2024, we early
adopted ASU 2023-08, and in accordance with the new guidance we no longer report impairment of Bitcoin and realized gain on sale of Bitcoin separately.
Instead, current period comparable information is reported in the line item Change in fair value of Bitcoin in the consolidated statement of operations.
Non-Operating Income and Expenses
Investment Income
Investment income was $9.0 million and nil for the years ended December 31, 2024 and 2023, respectively. In 2024, investment income related to a $4.1
million realized gain on the partial sale of our equity investment in Core Scientific Inc., and a $4.9 million unrealized gain on our equity investment in Core
Scientific Inc.
Other Income, Net
Other income, net, was $3.1 million and $1.1 million for the years ended December 31, 2024 and 2023, respectively. In 2024, other income, net, primarily
related to $2.9 million for the early termination of a hosting agreement and a $0.2 million fair value adjustment for warrant liabilities. In 2023, other income, net,
primarily related to a $1.0 million fair value adjustment for warrant liabilities, and $0.2 million in interest income from previously restricted funds that were held
in a trust, offset by $0.1 million in other miscellaneous expenses.
Gain on Deconsolidation of Special Purpose Acquisition Company
Gain on deconsolidation of MEOA, our SPAC, was nil and $6.1 million for the years ended December 31, 2024 and 2023, respectively. On December 19,
2023, our 3,162,500 shares of MEOA’s Class B common stock were cancelled, eliminating our ownership of MEOA, and we recognized a $6.1 million gain
related to the deconsolidation of MEOA.
33

Interest Expense
Interest expense was nil and $1.2 million for the years ended December 31, 2024 and 2023, respectively. In the current year we had no interest expense
and the prior year was related to $1.0 million for warrants issued with our LDA convertible debt and $0.2 million of debt costs and interest expense.
Gain on Disposal of Service and Product Segment- Related Party
Gain on disposal of Service and Product segment was nil and $0.7 million for the years ended December 31, 2024 and 2023, respectively. On December
28, 2023, Sphere 3D and Joseph O’Daniel (“Purchaser”), entered into a share purchase agreement under which we sold our Service and Product segment, which
included HVE ConneXions and Unified ConneXions, for $1.00 and the transfer of outstanding assets and liabilities. As a result of the share purchase agreement,
the Purchaser, who served as our President, resigned effective December 28, 2023. We recognized a noncash gain of $0.7 million related to the transfer of net
liabilities to the Purchaser.
Liquidity and Capital Resources
Our principal sources of liquidity are our existing cash, cash equivalents and available-for-sale equity securities. We expect to fund our operations going
forward with existing cash resources, anticipated revenue from our Bitcoin mining operation, and cash that we may raise through future financing transactions.
At December 31, 2024, we had cash and cash equivalents of $5.4 million compared to $0.6 million at December 31, 2023. As of December 31, 2024, we had
working capital of $13.9 million, reflecting an increase in current assets of $4.3 million and a decrease in current liabilities of $1.5 million primarily related to an
increase in cash and the unrealized gain on our investment in equity securities. Cash management continues to be a priority and we are phasing out high-cost
hosting contracts, leveraging our access to capital, and reducing our overall mining costs.
At-the-Market Offering Program. On January 3, 2025, we entered into a sales agreement (the “AGP Agreement”) with A.G.P./Alliance Global Partners
(the “Sales Agent”). In accordance with the terms of the AGP Agreement, we may offer and sell from time to time through or to the Sales Agent, as agent or
principal, the Company's common shares having an aggregate offering price of up to $8.0 million (the “Placement Shares”). The AGP Agreement can be
terminated by either party by giving two days written notice. We expect that any proceeds received from the facility will be used primarily for working capital
and general corporate purposes and in furtherance of our corporate strategy which may include to accelerate efficiency, for the purchase/upgrade of the
Company’s mining fleet, and vertical integration of infrastructure.
Neither us nor the Sales Agent are obligated to sell any Placement Shares pursuant to the AGP Agreement. Subject to the terms and conditions of the
AGP Agreement, the Sales Agent will use commercially reasonable efforts, consistent with its normal trading and sales practices and applicable state and federal
law, rules and regulations and the rules of The Nasdaq Capital Market (“Nasdaq”), to sell the Placement Shares from time to time based upon our instructions,
including any price, time or size limits or other customary parameters or conditions we may impose. Sales of the Placement Shares, if any, will be made on
Nasdaq at market prices by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 of the Securities Act of 1933, as
amended.
Securities Purchase Agreement. On November 19, 2024, we entered into a Securities Purchase Agreement with a single institutional investor pursuant to
which we issued and sold (i) 2,350,000 common shares of the Company (the “Shares”), and (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up
to 1,875,353 of our common shares (such offering, the “Registered Offering”). The Shares had a purchase price of $1.42 per share; and the Pre-Funded Warrants
had a purchase price of $1.4199 per share, have an exercise price of $0.0001 per share, are exercisable immediately, and will expire when exercised in full. The
net proceeds from the Registered Offering, after deducting the placement agent's fees and other offering expenses payable by us, was approximately
$5.4 million.
Management has projected that based on our recurring losses, negative cash flows from operating activities, and our hashing rate at December 31, 2024,
cash on hand may not be sufficient to allow us to continue operations and there is substantial doubt about our ability to continue as a going concern within 12
months from the date of issuance of our financial statements if we are unable to raise additional funding for operations. We expect our working capital needs to
increase in the future as we continue to expand and enhance our operations. Included in our working capital is an investment in equity securities that we can
liquidate as needed to assist in funding our operations. Our ability to raise additional funds for working capital through equity or debt financings or other sources
may depend on the financial
34

success of our business and successful implementation of our key strategic initiatives, financial, economic and market conditions and other factors, some of
which are beyond our control. We require additional capital and if we are unsuccessful in raising that capital at a reasonable cost and at the required times, or at
all, we may not be able to continue our business operations in the cryptocurrency mining industry or we may be unable to advance our growth initiatives, either
of which could adversely impact our business, financial condition and results of operations. In an effort to mitigate these risks we expect to take steps to lower
our cost of mining and also refresh our mining fleet to increase our mining efficiency.
Significant changes from our current forecasts, including but not limited to: (i) shortfalls from projected mining earning levels; (ii) increases in operating
costs; (iii) decreases in the value of cryptocurrency; and (iv) if we do not maintain compliance with the requirements of Nasdaq and/or we do not maintain our
listing with Nasdaq could have a material adverse impact on our ability to access the level of funding necessary to continue its operations at current levels. These
factors, among others, should they occur may result in our inability to continue as a going concern within 12 months from the date of issuance of our financial
statements. 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 and do not include any adjustments that might result from the outcome of this uncertainty.
The following table shows a summary of our cash flows (used in) provided by operating activities, investing activities and financing activities (in
thousands):
Year Ended December 31,
2024
2023
Net cash used in operating activities
$
(4,576)
$
(6,582)
Net cash provided by investing activities
$
4,028 
$
2,561 
Net cash provided by financing activities
$
5,387 
$
3,064 
Net cash used in operating activities. The use of cash during 2024 was primarily a result of our net loss of $9.5 million, offset by $6.4 million in noncash
items, which primarily included an unrealized gain on investment in equity securities, realized gain on investment in equity securities, depreciation and
amortization, share-based compensation expense, impairment of property and equipment, loss on disposal of property and equipment, impairment of other
assets, change in fair value of Bitcoin, Bitcoin issued for services, and change in fair value of warrant liabilities.
Net cash provided by investing activities. During 2024, we received $11.4 million from proceeds from the sale of investment in equity securities and $1.5
million from proceeds from the sale of Bitcoin, offset by $7.1 million of payments for the purchase of property and equipment consisting of newer generation
mining machines and $1.8 million in payments for construction in progress primarily for the mining site we have partnered with Simple Mining LLC to acquire
and operate. During 2023, we sold 3,336 miners originally included in mining equipment, for cash proceeds of $4.5 million, our SPAC received $10.3 million
from the redemption of the trust account and paid $10.4 million for the redemption of the redeemable non-controlling interest related to MEOA, and we paid
$1.6 million towards Bitcoin mining machines and shipping costs.
Net cash provided by financing activities. During 2024, we received $5.4 million, net, from the issuance of common shares and warrants. During 2023,
we received $3.0 million from the issuance of preferred shares and warrants, $0.8 million, net, from the issuance of a convertible note, and $0.6 million from the
exercise of stock options. These inflows were offset by $1.3 million of payments made on our convertible debt which was paid in full in August 2023.
Contractual Commitments
Construction in Progress
In September 2024, we entered into a letter of intent with Simple Mining LLC (“Simple Mining”) to build-out a 12.5 MW site in Iowa with Simple
Mining managing the build-out of the infrastructure for the new mining site. Due to delays in permitting and timeline, we shifted to a different site, under the
same construct and power cost assumptions, reducing the overall capacity from 12.5 MW to 8 MW. For the year ended December 31, 2024, we have made
payments of $1.4 million towards the infrastructure.
35

Subsequent to December 31, 2024, we incurred additional costs of $1.4 million towards the infrastructure of the new 8 MW mining site in Iowa. The 8
MW site was energized on March 10, 2025. In March 2025, we entered into a Managed Services Agreement with Simple Mining to operate the site on our
behalf.
Off-Balance Sheet Information
During the ordinary course of business, we may provide standby letters of credit to third parties as required for certain transactions initiated by us. As of
December 31, 2024, we have no standby letters of credit outstanding.
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been
prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of our consolidated financial statements requires us
to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and
liabilities. We review our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe 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 the Consolidated
Financial Statements included in this Annual Report on Form 10-K.
Recent Accounting Pronouncements
Refer to Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements for a discussion of recent accounting
pronouncements and their effect, if any, on us.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide the information required by this Item.
Item 8. Financial Statements and Supplementary Data
Our 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 Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we
conducted 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 were effective to give
reasonable assurance that information required to be publicly disclosed is recorded, processed, summarized and reported on a timely basis as of the end of the
period covered by this annual report.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over our financial reporting. In order to evaluate the effectiveness 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 the updated Internal Control-Integrated Framework, issued in 2013 by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”). Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
36

Based on our evaluation under the framework in Internal Control-Integrated Framework, our Chief Executive Officer and Chief Financial Officer
concluded that our internal control over financial reporting was effective as of December 31, 2024. Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk
that 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 financial
reporting. Management's report on internal control over financial reporting was not subject to attestation by our independent registered public accounting firm
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 otherwise
subject 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 of
any general incorporation language in such filing.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter ended December 31, 2024 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
During the three months ended December 31, 2024, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-rule 10b5-1
trading arrangement (as such terms are defined pursuant to Item 408 of Regulation S-K).
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2025 Annual Meeting of Stockholders, which
will be filed with the SEC no later than 120 days after December 31, 2024.
Insider Trading Policy: We have adopted an Insider Trading Policy which governs the purchase, sale, and/or other dispositions of our securities by
directors, officers, employees, and other covered persons and is designed to promote compliance with insider trading laws, rules, and regulations, and listing
standards applicable to us. A copy of our Insider Trading Policy is filed as Exhibit 19.1 to this Annual Report.
Item 11. Executive Compensation
The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2025 Annual Meeting of Stockholders, which
will be filed with the SEC no later than 120 days after December 31, 2024.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2025 Annual Meeting of Stockholders, which
will be filed with the SEC no later than 120 days after December 31, 2024.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2025 Annual Meeting of Stockholders, which
will be filed with the SEC no later than 120 days after December 31, 2024.
Item 14. Principal Accounting Fees and Services
The information required by this item is incorporated by reference to the definitive Proxy Statement for our 2025 Annual Meeting of Stockholders, which
will be filed with the SEC no later than 120 days after December 31, 2024.
37

PART IV
Item 15. Exhibit and Financial Statement Schedules
(a) Documents filed as part of this report.
(1) Financial Statements.
Report of Independent Registered Public Accounting Firm (PCAOB ID 206)
F-1
Consolidated Balance Sheets as of December 31, 2024 and 2023
F-3
Consolidated Statements of Operations for the Years Ended December 31, 2024 and 2023
F-4
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2024 and 2023
F-5
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2024 and 2023
F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023
F-7
Notes 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 is
included 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.
38

(b) Exhibits
Exhibit
Filed
Incorporated by Reference
Number
Description
Herewith
Form
File No.
Date Filed
3.1
Certificate and Articles of Amalgamation
6-K
001-36532
3/25/2015
3.2
Certificate of Amendment to the Articles of Amalgamation of the Company
6-K
001-36532
7/17/2017
3.3
Certificate of Amendment to the Articles of Amalgamation of the Company
8-K
001-36532
10/2/2018
3.4
Certificate of Amendment to the Articles of Amalgamation of the Company
8-K
001-36532
11/5/2018
3.5
Certificate of Amendment to the Articles of Amalgamation of the Company
8-K
001-36532
11/14/2018
3.6
Certificate of Amendment to the Articles of Amalgamation of the Company
8-K
001-36532
7/12/2019
3.7
Certificate of Amendment to the Articles of Amalgamation of the Company
8-K
001-36532
11/8/2019
3.8
Certificate of Amendment to the Articles of Amalgamation of the Company
8-K
001-36532
5/8/2020
3.9
Certificate of Amendment to the Articles of Amalgamation of the Company
8-K
001-36532
9/29/2020
3.10
Certificate of Amendment to the Articles of Amalgamation of the Company
6-K
001-36532
1/7/2021
3.11
Certificate of Amendment to the Articles of Amalgamation of the Company
6-K
001-36532
7/15/2021
3.12
Certificate of Amendment to the Articles of Amalgamation of the Company
6-K
001-36532
10/4/2021
3.13
Certificate of Amendment to the Articles of Amalgamation of the Company
8-K
001-36532
6/28/2023
3.14
By-Law No. 1, as Amended
6-K
001-36532
7/17/2017
3.15
By-Law No. 1 Amending Agreement
6-K
001-36532
2/1/2022
3.16
By-Law No. 1 Amending Agreement
8-K
001-36532
1/13/2023
3.17
By-Law No. 2
6-K
001-36532
5/12/2017
4.1
Specimen certificate evidencing Common Shares
F-3
333-210735
4/13/2016
4.2
Description of Securities
X
4.6
Form of Warrant
6-K
001-36532
9/9/2021
4.8
Common Share Purchase Warrant issued by the Company to LDA Capital Limited on
April 17, 2023
8-K
001-36532
4/21/2023
4.9
Form of Warrant
8-K
001-36532
8/14/2023
4.10
Form of Warrant
8-K/A
001-36532
8/23/2023
4.11
Senior Secured Convertible Promissory Note, dated September 14, 2020, between the
Company and Rainmaker Worldwide Inc.
8-K
001-36532
9/18/2020
10.1+
Sphere 3D Corp. 2015 Performance Incentive Plan, as amended
S-8
333-279866
5/31/2024
10.2+
Form of Inducement Restricted Stock Unit Award Agreement
S-8
333-209251
2/1/2016
10.3+
Form of Executive Inducement Restricted Stock Unit Award Agreement
S-8
333-209251
2/1/2016
39

Exhibit
Filed
Incorporated by Reference
Number
Description
Herewith
Form
File No.
Date Filed
10.4+
Form of Executive Stock Option Agreement
10-K
001-36532
3/21/2018
10.5+
Sphere 3D Corp. Employee Stock Purchase Plan, as amended
S-8
333-205236
1/29/2018
10.6+
Form of Officer and Director Indemnity Agreement
10-K
001-36532
4/1/2019
10.7+
Employment Agreement between Sphere 3D Corp. and Patricia Trompeter dated
January 15, 2024
8-K
001-36532
1/19/2024
10.8+
Amending Agreement between the Company and Patricia Trompeter dated March 18,
2024
8-K
001-36532
3/29/2024
10.9+
Second Amending Agreement between the Company and Patricia Trompeter dated
March 27, 2024
8-K
001-36532
3/29/2024
10.10+
Employment Agreement between the Company and Kurt Kalbfleisch dated March 27,
2024
8-K
001-36532
3/29/2024
10.11
Purchase Agreement, dated July 31, 2021, by and among Sphere 3D Corp. and
Hertford Advisors Ltd.
6-K
001-36532
8/6/2021
10.12
Amended and Restated Agreement between Sphere 3D Corp. and the Hertford Group
8-K
001-36532
8/14/2023
10.13#
Future Sales and Purchase Agreement between FuFu Technology Limited and Sphere
3D, dated July 30, 2021
F-4
333-262011
1/5/2022
10.14#
Supplemental Agreement to Future Sales and Purchase Agreement between FuFu
Technology Limited and Sphere 3D Corp, dated September 17, 2021
F-4
333-262011
1/5/2022
10.15#
Amendment to Future Sales and Purchase Agreement (Third Supplemental
Agreement) between Sphere 3D Corp. and Ethereal Tech Pte. Ltd (formerly known as
FuFu Technology Limited) dated October 19, 2022
6-K
001-36532
10/21/2022
10.16
Securities Purchase Agreement, by and among Sphere 3D Corp. and the investors
identified on the signature pages thereto, dated September 2, 2021
6-K
001-36532
9/9/2021
10.17#
Sub-License and Delegation Agreement, between Gryphon Digital Mining, Inc. and
Sphere 3D Corp., dated as of October 5, 2021
F-4
333-262011
1/5/2022
10.18
Amendment No. 1 to Sub-License and Delegation Agreement, between Gryphon
Digital Mining, Inc. and Sphere 3D Corp., dated as of December 29, 2021
6-K
001-36532
1/5/2022
10.19
Sales and Purchase Agreement dated February 3, 2022 between Sphere 3D Corp. and
NuMiner Global, Inc.
6-K
001-36532
2/4/2022
10.20
Securities Purchase Agreement between Sphere 3D Corp. and LDA Capital Limited,
dated April 17, 2023
8-K
001-36532
4/21/2023
10.21
Form of Purchase Agreement dated August 23, 2023
8-K/A
001-36532
8/23/2023
10.22
Form of Securities Purchase Agreement dated November 19, 2024
8-K
001-36532
11/21/2024
10.23
Placement Agent Agreement entered into by and between Sphere 3D Corp. and the
Placement Agent, dated November 19, 2024
8-K
001-36532
11/21/2024
10.24
Sales Agreement, dated as of January 3, 2025, by and between Sphere 3D Corp. and
A.G.P./Alliance Global Partners
8-K
001-36532
1/3/2025
10.25#
Master Agreement between Sphere 3D Corp. and Compute North LLC (as assigned to
GC Data Center Granbury, LLC) dated June 3, 2022
S-3/A
001-36532
7/24/2024
10.26#
Hosting Agreement between Sphere 3D Corp. and Lancium, FS 25, LLC dated
February 8, 2023
S-3/A
001-36532
7/24/2024
40

Exhibit
Filed
Incorporated by Reference
Number
Description
Herewith
Form
File No.
Date Filed
10.27#
Master Hosting Services Agreement between Sphere 3D Corp. and Rebel Mining
Company, LLC dated April 4, 2023
S-3/A
001-36532
7/24/2024
10.28#
Hosting Agreement between Sphere 3D Corp. and Joshi Petroleum, LLC dated
October 18, 2023
S-3/A
001-36532
7/24/2024
14.1
Code of Business Conduct and Ethics Policy
6-K
001-36532
4/1/2015
19.1
Sphere 3D Corp. Insider Trading Policy
X
21.1
Subsidiaries of Registrant
X
23.1
Consent of Independent Registered Public Accounting Firm
X
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
X
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
X
32.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
32.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
97.1
Executive Compensation Clawback Policy
X
101.INS
XBRL Instance Document - the instance document does not appear in the interactive
Data File because its XBRL tags are embedded within the Inline XBRL document.
X
101.SCH
XBRL Taxonomy Extension Schema
X
101.CAL
XBRL Taxonomy Extension Calculation Linkbase
X
101.DEF
XBRL Taxonomy Extension Definition Linkbase
X
101.LAB
XBRL Taxonomy Extension Label Linkbase
X
101.PRE
XBRL Taxonomy Presentation Linkbase
X
104
Cover Page Interactive Data File (formatted as inline XBRL as contained in Exhibit
101)
X
_______________
+ Management contract or compensation plan or arrangement.
# Certain confidential portions of this Exhibit were omitted pursuant to Item 601(b)(10)(iv) by means of marking such portions with brackets (“[***]”); the
identified confidential portions (i) are not material and (ii) are customarily and actually treated as private or confidential.
41

ITEM 16. FORM 10-K SUMMARY
None.
42

SIGNATURES
Pursuant 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 on its
behalf by the undersigned, thereunto duly authorized.
Sphere 3D Corp.
/s/ Kurt L. Kalbfleisch
Kurt L. Kalbfleisch
Acting Chief Executive Officer and CFO
Date:   March 28, 2025
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Kurt L. Kalbfleisch severally as their 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 that each 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/   KURT L. KALBFLEISCH
Acting Chief Executive Officer and Chief Financial Officer (Principal Executive Officer,
Principal Financial and Accounting Officer)
March 28, 2025
 Kurt L. Kalbfleisch
/s/   TIMOTHY HANLEY
Director
March 28, 2025
Timothy Hanley
/s/   SUSAN S. HARNETT
Director
March 28, 2025
Susan S. Harnett
/s/   DUNCAN J. MCEWAN
Director
March 28, 2025
Duncan J. McEwan
43

_______________________________________________
SPHERE 3D CORP.
For the Years Ended December 31, 2024 and 2023

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Sphere 3D Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Sphere 3D Corp. and its subsidiaries (collectively, the “Company”) as of December 31, 2024
and 2023, and the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows for the years then ended, and the
related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2024 and 2023, and the results of their operations and their cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.
Going Concern Matter
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has suffered recurring losses from operations and does not expect to have sufficient cash on hand to fund its operations that raises
substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s 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 the applicable 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 reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, 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 an understanding of internal
control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to
be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
F-1

Bitcoin Mining Revenue
As disclosed in Note 2 to the consolidated financial statements, the Company accounts for revenue in accordance with Topic 606, Revenue from Contracts with
Customers. The Company provides a service to perform hash calculations to third-party operated mining pools and in exchange for providing the service, the
Company earns non-cash consideration in the form of bitcoin based on the Full-Pay-Per-Share (“FPPS”) payout method set forth by the mining pool operators.
Bitcoin mining revenue is comprised of the block reward and transaction fees earned by the Company net of the mining pool fees charged by the mining pool
operators. During the years ended December 31, 2024 and 2023, the Company recognized bitcoin mining revenue of approximately $16.6 million and $19.7
million, respectively.
We identified the auditing of mining revenue as a critical audit matter due to the nature and extent of audit effort required to perform audit procedures over the
Company’s hash calculation service provided to the mining pool operators, the associated contractual payouts including the blockchain contractual inputs, the
Company’s valuation of bitcoin received from the mining pool operators and evaluating the results of those procedures.
The primary procedures we performed to address this critical audit matter included the following:
•
We independently confirmed with mining pool operators the significant contractual terms utilized in the determination of mining revenue, total mining
rewards earned by the Company, and the Company’s digital asset wallet addresses in which the rewards are deposited.
•
Using the Company’s digital asset wallet addresses confirmed by the mining pool operators, we reconciled the mining revenue earned from and paid by
the mining pool operators against on-chain transactions independently obtained from the blockchain.
•
We evaluated the reasonableness of the prices utilized by the Company to value bitcoin by obtaining independent bitcoin prices and comparing those to
the prices used by the Company.
•
We recalculated the Company’s recorded mining revenue per the calculation prescribed in the FPPS payout method, based on the hash calculation
service provided to the mining pool operators, using independently obtained blockchain contractual inputs and independent bitcoin prices.
•
We undertook an analytical review of total bitcoin mining revenue expected to be recognized by the Company by assessing the total hash rate
contributed onto the network by the Company against total block rewards and transaction fees issued over the year.
•
For the mining revenue generated through colocation facilities, we developed an expectation for the hash rate provided to the mining pool operators and
the mining revenue earned, and compared our expectation to the amount recorded by the Company.
/s/ MaloneBailey, LLP
www.malonebailey.com
We have served as the Company’s auditor since 2022.
Houston, Texas
March 28, 2025
F-2

Sphere 3D Corp.
Consolidated Balance Sheets
(in thousands of U.S. dollars, except shares)
December 31, 2024
December 31, 2023
Assets
Current assets:
Cash and cash equivalents
$
5,425 
$
586 
Bitcoin
1,394 
986 
Investment in equity securities
7,530 
— 
Other current assets
3,438 
11,938 
Total current assets
17,787 
13,510 
Property and equipment, net
21,967 
24,166 
Intangible assets, net
3,095 
4,581 
Other non-current assets
379 
3,406 
Total assets
$
43,228 
$
45,663 
Liabilities, Temporary Equity and Shareholders’ Equity
Current liabilities:
Accounts payable
$
1,167 
$
2,374 
Accrued liabilities
1,299 
1,179 
Accrued payroll and employee compensation
1,398 
1,482 
Other current liabilities
31 
311 
Total current liabilities
3,895 
5,346 
Commitments and contingencies (Note 16)
Temporary equity:
Series H preferred shares, no par value, unlimited shares authorized, 161 and 43,515 shares issued and outstanding at
December 31, 2024 and 2023, respectively
18 
13,794 
Shareholders’ equity:
Common shares, no par value; unlimited shares authorized, 25,453,327 and 15,373,616 shares issued and outstanding as
of December 31, 2024 and 2023, respectively
497,957 
475,702 
Accumulated other comprehensive loss
(1,821)
(1,808)
Accumulated deficit
(456,821)
(447,371)
Total shareholders’ equity
39,315 
26,523 
Total liabilities, temporary equity, and shareholders’ equity
$
43,228 
$
45,663 
See 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,
2024
2023
Revenues:
Bitcoin mining revenue
$
16,608 
$
19,730 
Service and product revenue
— 
2,176 
Total revenues
16,608 
21,906 
Operating costs and expenses:
Cost of Bitcoin mining revenue (exclusive of

     depreciation and amortization shown below)
13,378 
15,031 
Cost of service and product revenue
— 
913 
Sales and marketing
— 
948 
Research and development
— 
1,026 
General and administrative
12,445 
15,825 
Depreciation and amortization
7,113 
6,190 
Loss on disposal of property and equipment
3,545 
960 
Impairment of property and equipment
1,146 
— 
Impairment of other assets
1,074 
— 
Change in fair value of Bitcoin
(682)
— 
Provision for losses on deposits due to vendor bankruptcy filings
— 
8,509 
Impairment of acquired intangible assets
— 
2,952 
Realized gain on sale of Bitcoin
— 
(1,131)
Impairment of Bitcoin
— 
682 
Total operating expenses
38,019 
51,905 
Loss from operations
(21,411)
(29,999)
Other income (expense):
Investment income
8,980 
— 
Other income, net
3,111 
1,062 
Gain on deconsolidation of SPAC
— 
6,140 
Interest expense
— 
(1,183)
Gain on disposal of service and product segment - related party
— 
663 
Net loss before taxes
(9,320)
(23,317)
Provision for income taxes
150 
13 
Net loss
(9,470)
(23,330)
Less: Non-controlling interest - income
— 
76 
Net loss attributable to common shareholders
$
(9,470)
$
(23,406)
Net loss per share:
Basic and diluted
$
(0.48)
$
(1.93)
Shares used in computing net loss per share:
Basic and diluted
19,801,626 
12,129,302 
See 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,
2024
2023
Net loss
$
(9,470)
$
(23,330)
Other comprehensive loss:
Foreign currency translation adjustment
(13)
(9)
Total other comprehensive loss
(13)
(9)
Comprehensive loss
$
(9,483)
$
(23,339)
See accompanying notes to consolidated financial statements.
F-5

Sphere 3D Corp.
Consolidated Statements of Shareholders’ Equity
(in thousands of U.S. dollars, except shares)
Common Shares
Accumulated

Other

Comprehensive
Loss
Accumulated

Deficit
Non-controlling
Interest
Total

Shareholders'

Equity
Shares
Amount
Balance at January 1, 2023
9,804,609
456,402 
(1,799)
(419,732)
(306)
34,565 
Cumulative adjustment from adoption of ASU 2016-13
—
— 
— 
(3,821)
— 
(3,821)
Issuance of common share warrants, net
—
1,130 
— 
— 
— 
1,130 
Issuance of common shares for conversion of preferred

     shares
4,714,560
14,559 
— 
— 
— 
14,559 
Issuance of common shares for settlement of liabilities
89,654
214 
— 
— 
— 
214 
Issuance of common shares pursuant to the vesting of

     restricted stock units
410,988
— 
— 
— 
— 
— 
Exercise of warrants
123,806
411 
— 
— 
— 
411 
Exercise of stock options
229,999
556 
— 
— 
— 
556 
Share-based compensation
—
2,430 
— 
— 
— 
2,430 
Non-controlling interest
—
— 
— 
— 
230 
230 
Remeasurement of redeemable non-controlling interest
—
— 
— 
(412)
— 
(412)
Other comprehensive loss
—
— 
(9)
— 
— 
(9)
Net (loss) income
—
— 
— 
(23,406)
76 
(23,330)
Balance at December 31, 2023
15,373,616
475,702 
(1,808)
(447,371)
— 
26,523 
Cumulative adjustment from adoption of ASU 2023-08
—
— 
— 
20 
— 
20 
Issuance of common shares for conversion of preferred

     shares
6,193,416
13,775 
— 
— 
— 
13,775 
Issuance of common shares and warrants, net
2,350,000
5,387 
— 
— 
— 
5,387 
Issuance of common shares pursuant to the vesting of

     restricted stock units
1,055,345
— 
— 
— 
— 
— 
Exercise of warrants
281,353
— 
— 
— 
— 
— 
Issuance of common shares for settlement of liabilities
199,597
255 
— 
— 
— 
255 
Share-based compensation
—
2,838 
— 
— 
— 
2,838 
Other comprehensive loss
—
— 
(13)
— 
— 
(13)
Net loss
—
— 
— 
(9,470)
— 
(9,470)
Balance at December 31, 2024
25,453,327
$
497,957 
$
(1,821)
$
(456,821)
$
— 
$
39,315 
See accompanying notes to consolidated financial statements.
F-6

Sphere 3D Corp.
Consolidated Statements of Cash Flows
(in thousands of U.S. dollars)
Year Ended December 31,
2024
2023
Operating activities:
Net loss
$
(9,470)
$
(23,330)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
7,113 
6,190 
Unrealized gain on investment in equity securities
(4,917)
— 
Realized gain on sale of investment in equity securities
(4,063)
— 
Loss on disposal of property and equipment
3,545 
960 
Impairment of property and equipment
1,146 
— 
Share-based compensation
2,838 
2,430 
Impairment of other assets
1,074 
— 
Change in fair value of Bitcoin
(682)
— 
Bitcoin issued for services
538 
1,562 
Change in fair value of warrant liabilities
(174)
(976)
Provision for losses on deposits made due to vendor bankruptcy filings
— 
8,509 
Gain on deconsolidation of SPAC
— 
(6,140)
Impairment of acquired intangible assets
— 
2,952 
Realized gain on sale of Bitcoin
— 
(1,131)
Warrants issued with convertible debt
— 
976 
Impairment of Bitcoin
— 
682 
Gain on disposal of service and product segment - related party
— 
(663)
Issuance of common shares and warrants for settlement of liabilities
— 
214 
Extinguishment of debt
— 
63 
Noncash lease cost
— 
56 
Changes in operating assets and liabilities:
Proceeds from sale of Bitcoin
14,842 
19,326 
Mining of Bitcoin
(16,608)
(19,730)
Accounts receivable
— 
94 
Accounts payable and accrued liabilities
(262)
2,573 
Accrued payroll and employee compensation
171 
822 
Other assets
453 
(2,512)
Other liabilities
(120)
491 
Net cash used in operating activities
(4,576)
(6,582)
Investing activities:
Proceeds from sale of equity investment
11,450 
— 
Payments for purchase of property and equipment
(8,944)
(1,561)
Proceeds from sale of Bitcoin
1,522 
— 
Redemption of non-controlling interest
— 
(10,410)
Redemption of cash in trust account
— 
10,297 
Proceeds from sale of property and equipment
— 
4,468 
Cash related to deconsolidation of SPAC
— 
(204)
Cash related to disposal of service and product segment
— 
(29)
Net cash provided by investing activities
$
4,028 
$
2,561 
See accompanying notes to consolidated financial statements.
F-7

Sphere 3D Corp.
Consolidated Statements of Cash Flows (continued)
(in thousands of U.S. dollars)
Year Ended December 31,
2024
2023
Financing activities:
Proceeds from issuance of common shares and warrants
$
5,495 
$
— 
Payments for issuance costs for common shares and warrants
(108)
— 
Proceeds from issuance of preferred shares and warrants
— 
3,048 
Payments for convertible debt
— 
(1,285)
Proceeds from convertible debt, net of debt issuance costs
— 
779 
Proceeds from exercise of stock options
— 
556 
Payments for cost of preferred shares and warrants
— 
(34)
Net cash provided by financing activities
5,387 
3,064 
Net increase (decrease) in cash, and cash equivalents
4,839 
(957)
Cash, cash equivalents, and restricted cash, beginning of year
586 
1,543 
Cash, and cash equivalents, end of year
$
5,425 
$
586 
Supplemental disclosures of cash flow information:
Cash paid for income taxes
$
2 
$
16 
Cash paid for interest
$
— 
$
323 
Supplemental disclosures of noncash investing and financing activities:
Settlement of prepaid hosting services deposit with equity securities
$
10,000 
$
— 
Property and equipment exchanged for settlement of liabilities
$
825 
$
— 
Issuance of common shares for settlement of liabilities
$
255 
$
— 
Exercise of warrants
$
— 
$
411 
See accompanying notes to consolidated financial statements.
F-8

Sphere 3D Corp.
Notes to Consolidated Financial Statements
1.
Organization and Business
Sphere 3D Corp. was incorporated under the Business Corporations Act (Ontario) on May 2, 2007 as T.B. Mining Ventures Inc. On March 24, 2015, the
Company completed a short-form amalgamation with a wholly-owned subsidiary. In connection with the short-form amalgamation, the Company changed its
name to “Sphere 3D Corp.” Any reference to the “Company”, “Sphere 3D”, “we”, “our”, “us”, or similar terms refers to Sphere 3D Corp. and its subsidiaries. In
January 2022, the Company commenced operations of its Bitcoin mining business and is dedicated to becoming a leader in the blockchain and cryptocurrency
industry. The Company has established and plans to continue to grow an enterprise-scale mining operation through the procurement of mining equipment and
partnering with experienced service providers. On December 28, 2023, the Company sold its Service and Product segment which included HVE ConneXions
and Unified ConneXions.
Going Concern
Management has projected that based on our recurring losses, negative cash flows from operating activities, and our hashing rate at December 31, 2024,
cash on hand may not be sufficient to allow the Company to continue operations and there is substantial doubt about the Company’s ability to continue as a
going concern within 12 months from the date of issuance of the financial statements if we are unable to raise additional funding for operations. We expect our
working capital needs to increase in the future as we continue to expand and enhance our operations. Included in our working capital is an investment in equity
securities that we can liquidate as needed to assist in funding our operations. Our ability to raise additional funds for working capital through equity or debt
financings or other sources may depend on the financial success of our business and successful implementation of our key strategic initiatives, financial,
economic and market conditions and other factors, some of which are beyond our control. We require additional capital and if we are unsuccessful in raising that
capital at a reasonable cost and at the required times, or at all, we may not be able to continue our business operations in the cryptocurrency mining industry or
we may be unable to advance our growth initiatives, either of which could adversely impact our business, financial condition and results of operations. In an
effort to mitigate these risks we expect to take steps to lower our cost of mining and also refresh our mining fleet to increase our mining efficiency.
Significant changes from the Company’s current forecasts, including but not limited to: (i) shortfalls from projected mining earning levels; (ii) increases
in operating costs; (iii) decreases in the value of cryptocurrency; and (iv) if we do not maintain compliance with the requirements of The Nasdaq Capital Market
(“Nasdaq”) and/or we do not maintain our listing with Nasdaq could have a material adverse impact on the Company’s ability to access the level of funding
necessary to continue its operations at current levels. These factors, among others, should they occur may result in the Company’s inability to continue as a
going concern within 12 months from the date of issuance of the financial statements. 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 and do not include any
adjustments that might result from the outcome of this uncertainty.
2.
Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements of the Company have been prepared by management in accordance with accounting principles generally accepted in
the United States of America (“GAAP”), applied on a basis consistent for all periods. Subsidiaries in which controlling interests are maintained are consolidated.
All intercompany balances and transactions have been appropriately eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
F-9

Reclassifications
Certain prior period amounts have been reclassified for consistency with the current period presentation. The reclassifications did not have a material
impact on the Company's consolidated financial statements and related disclosures.
Foreign Currency Translation
The financial statements of the Company’s foreign subsidiary, for which the functional currency is the local currency, is translated into U.S. dollars using
the exchange 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 accumulated other comprehensive income (loss) within shareholders’ equity. Gains or losses from
foreign currency transactions are recognized in the consolidated statements of operations. Such transactions resulted in a minimal loss for both the years ended
December 31, 2024 and 2023.
Cash and Cash Equivalents
Highly liquid investments with insignificant interest rate risk and original maturities of three months or less, when purchased, are classified as cash
equivalents. Cash equivalents are composed of money market funds. The Company maintains cash and cash equivalent balances with financial institutions that
exceed federally insured limits. The Company has not experienced any losses related to these balances and believes credit risk to be minimal.
Investment in Equity Securities
The Company’s investments are in publicly held equity securities which have readily determinable fair values. These equity investments are recorded at
fair value with unrealized holding gains and losses recorded in other income or expense in the consolidated statement of operations.
Bitcoin
Bitcoin is included in current assets in the consolidated balance sheets as the Company has the ability to sell it in a highly liquid marketplace, and the sale
of Bitcoin is used to fund operating expenses to support operations. Bitcoin is expected to be realized in cash or sold during the Company’s normal operating
cycle. Bitcoin held are accounted for as intangible assets with indefinite useful lives. Bitcoin awarded to the Company through its mining activities was included
within operating activities on the consolidated statements of cash flows. The proceeds from the sale of Bitcoin are included within operating or investing
activities in the consolidated statements of cash flows depending on the length of time the Bitcoin is held. The Company adopted ASU 2023-08 effective
January 1, 2024, which requires Bitcoin to be valued at fair value at the end of each reporting period with changes in fair value recorded in operating expenses in
the consolidated statements of operations. The fair value of Bitcoin is measured using the period-end closing price from the Company’s principal market. When
Bitcoin is sold, the gains and losses from such transactions are measured as the difference between the cash proceeds and the carrying basis of the Bitcoin as
determined on a first in-first out (“FIFO”) basis and are recorded within the same line item, Change in Fair Value of Bitcoin, in the consolidated statements of
operations.
Prior to the adoption of ASU 2023-08, Bitcoin was accounted as an indefinite-lived asset and recorded at cost less impairment. An impairment analysis
was performed daily to determine if the fair value of Bitcoin was lower than the carrying value for Bitcoin until the Bitcoin was disposed of or until the end of
the reporting period, whichever came first. The fair value of Bitcoin was determined on a nonrecurring basis based on the lowest intraday quoted price as
reported in the Company’s principal market. If the carrying value of the Bitcoin exceeded the fair value, an impairment loss had occurred with respect to those
Bitcoin in the amount equal to the difference between their carrying values and the fair value determined. Impairment losses were recognized in operating
expenses in the consolidated statements of operations in the period in which the impairment was identified. The impaired Bitcoin were written down to their fair
value at the time of impairment and this new cost basis would not be adjusted upward for any subsequent increase in fair value. Gains were not recorded until
realized upon sale or disposition.
F-10

Property and Equipment
Property and equipment primarily consists of mining equipment and is stated at cost, including purchase price and all shipping and custom fees, and
depreciated using the straight-line method over the estimated useful lives of the assets, generally five years.
The Company reviews the carrying amounts of property and equipment when events or changes in circumstances indicate the assets may not be
recoverable. If any such indication exists, the fair value of the asset is estimated in order to determine the extent of the impairment loss, if any.
Intangible Assets
For intangible assets purchased in a business combination, the estimated fair values of the assets received are used to establish their recorded values. For
intangible assets acquired in a non-monetary exchange, the estimated fair values of the assets transferred (or the estimated fair values of the assets received, if
more clearly evident) are used to establish their recorded values. Valuation techniques consistent with the market approach, income approach and/or cost
approach are used to measure fair value.
Supplier agreements are amortized on a straight-line basis over their economic lives of five years as this method most closely reflects the pattern in which
the economic benefits of the assets will be consumed.
Impairment of Intangible Assets
The Company performs regular reviews of intangible assets to determine if any event has occurred that may indicate that intangible assets with finite
useful lives and other long-lived assets are potentially impaired. Triggering events for impairment reviews may be indicators such as adverse industry or
economic trends, restructuring actions, lower projections of profitability, or a sustained decline in the Company's market capitalization. Intangible assets are
quantitatively assessed for impairment, if necessary, by comparing their estimated fair values to their carrying values. If the carrying value exceeds the fair
value, the difference is recorded as an impairment.
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms
and applicable authoritative guidance. Warrants that meet the definition of a derivative financial instrument and the equity scope exception are classified as
equity and are not subject to remeasurement provided that the Company continues to meet the criteria for equity classification. Warrants that are classified for
liabilities are accounted for at fair value on the consolidated balance sheets, subject to remeasurement at each balance sheet date with changes in fair value
recognized in other income, net in the consolidated statements of operations. Warrant liabilities include a common share purchase warrant issued in connection
with previously outstanding convertible debt.
The classification of warrants, including whether warrants should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The fair value of liability-classified warrants is determined using the Black-Scholes options pricing model (“Black-Scholes model”) which includes Level 3
inputs.
Revenue Recognition
The Company accounts for revenue pursuant to ASU 2014-09, Revenue from Contracts with Customers and all the related amendments (“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 the
consideration to which the entity expects to be entitled in exchange for those goods or services, and contract consideration will be recognized on a “sell-in basis”
or when control of the purchased goods or services transfer to the distributor.
F-11

The Company is engaged with Bitcoin mining pool operators, its customers, to provide a service to perform hash calculations for the mining pool
operator, which is the Company’s only performance obligation. Providing hash calculation services is an output of the Company’s ordinary activities. The
Company has service agreements with Foundry Digital LLC and Luxor Technology Corporation, each a cryptocurrency mining pool operator, to provide a
service to perform hash calculations. In exchange for providing the service, the Company is entitled to Full Pay Per Share (“FPPS”), which is a fractional share
of the fixed Bitcoin award the mining pool operator receives, plus a fractional share of the transaction fees attached to that blockchain less net Bitcoin fees due
to the mining pool operator over the measurement period, as applicable. The pay-outs received are based on the expected value from the block reward plus the
transaction fee reward, regardless of whether the mining pool operator successfully records a block to the blockchain.
The Company’s fractional share is based on a contractual formula, which primarily calculates the hashrate provided to the mining pool as a percentage of
total network hashrate and other inputs. The contracts, which are less than 24 hours and continuously renew throughout the day, are terminable at any time by
either party without compensation and the Company’s enforceable right to compensation only begins when the Company starts providing the service to the
mining pool operator, which begins daily at midnight Universal Time Coordinated (“UTC”). The terms, conditions, and compensation are at the current market
rates, and accordingly the renewal option is not a material right. The contract arises at the point that the Company provides hash calculation services to the
mining pool operator, which is the beginning of the contract day at midnight UTC time (contract inception), as customer consumption is in tandem with daily
earnings of delivery of the service. According to the customer contract, daily earnings are calculated from midnight-to-23:59:59 UTC time, and the payout is
made one hour later at 1:00 AM UTC time.
The Company satisfies its performance obligation over time with daily settlement in Bitcoin. The Company’s performance is completed as it transfers the
hashrate computations over the continuously renewed contract periods, which are less than 24 hours. The Company has full control of the mining equipment
utilized in the mining pool and if the Company determines it will increase or decrease the processing power of its machines and/or fleet (i.e., for repairs or when
power costs are excessive) the service provided to the customer will be adjusted.
The transaction consideration the Company receives is noncash consideration in the form of Bitcoin, which the Company measures at fair value at
contract inception, midnight UTC time. The noncash consideration is variable, since the amount of block reward earned depends on the amount of hash
calculation services, the amount of transaction fees awarded, and operator fees over the same period. The Company does not constrain this variable
consideration because it is probable that a significant reversal in the amount of revenue recognized from the contract will not occur when the uncertainty is
subsequently resolved and recognizes the noncash consideration on the same day that control is transferred, which is the same day as contract inception. The fair
value used to calculate the noncash consideration is based on the Bitcoin spot price in the Company’s principal market at the beginning of the day (midnight
UTC time) at contract inception. Expenses associated with running the Bitcoin mining operations, such as hosting, operating supplies, utilities, and monitoring
services are recorded as cost of revenues.
Operating Segment
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the
chief operating decision maker (“CODM”), or decision–making group, in deciding how to allocate resources and assess performance. The Company’s CODM is
the Chief Executive Officer. The Company operates as one operating segment and uses net income as measures of profit or loss on a consolidated basis in
making decisions regarding resource allocation and performance assessment. Additionally, the Company’s CODM regularly reviews the Company’s expenses on
a consolidated basis. The financial metrics used by the CODM help make key operating decisions, such as determination of capital expenditure purchases and
significant acquisitions and allocation of budget between cost of revenues and general and administrative expenses. The measure of segment assets is reported
on the consolidated balance sheet as total consolidated assets. The significant expense categories regularly provided to the CODM include cost of revenue,
general and administrative expenses, depreciation and amortization, impairment of property and equipment, and change in fair value of Bitcoin. These expense
categories are reported as separate line items in the consolidated statements of operations.
F-12

Change in Reportable Segment
Previously, the Company operated in two reportable business segments: Bitcoin Mining and Service and Product. On December 28, 2023, the Company
sold its Service and Product segment. Commencing with the three months ended March 31, 2024, Service and Product no longer met the quantitative
requirements for a reportable segment, and the CODM ceased analyzing the performance of the Company’s legacy service and product operations. As such, the
Service and Product Segment has been eliminated as a separate reportable segment.
Income Taxes
The Company provides for income taxes utilizing the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes
represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes
generally represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences
between the financial and tax basis of the Company's assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted.
Valuation allowances 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
is released 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 uncertain income
tax position is recognized at the largest amount that is “more likely than not” to be sustained upon audit by the relevant taxing authority. An uncertain 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 less than the ultimate
assessment, a further charge to expense would result.
Comprehensive Income (Loss)
Comprehensive income (loss) and its components encompass all changes in equity other than those arising from transactions with shareholders, including
net loss and foreign currency translation adjustments, and is disclosed in a separate consolidated statement of comprehensive loss.
Concentration Risk
The Company is subject to credit risk from its cash and cash equivalents and investment in equity securities. The Company maintains its cash and cash
equivalent balances with two major commercial banks and its equity securities with one other financial institution. Deposits held with the financial institutions
exceed the amount of insurance provided on such deposits. We are exposed to credit risk in the event of a default by the financial institutions holding the
Company’s cash, cash equivalents and equity securities to the extent recorded on the consolidated balance sheets. The accounts offered by the custodian of the
Company’s Bitcoin are not insured by the Federal Deposit Insurance Corporation (FDIC). The Company has not experienced any losses in such accounts.
The Company has certain customers who individually represented 10% or more of the Company’s revenue. During the years ended December 31, 2024
and 2023, revenue is concentrated with two mining pool operators, Foundry Digital LLC and Luxor Technology Corporation, and all Bitcoin resided with one
custodian.
The Company is dependent on a small number of Bitcoin mining equipment suppliers to provide a supply of new generation Bitcoin mining machines. The
growth in the Company’s business is directly related to increased demand for hosting services and Bitcoin which is dependent in large part on the availability of
new generation mining machines offered for sale at a price conducive to profitable Bitcoin mining. As more companies seek to enter the mining industry, the
demand for machines may outpace supply and create mining machine equipment shortages. The Company currently does not have an agreement with its
suppliers to purchase additional machines, and therefore there is no guarantee that the Company will be able to purchase machines on terms acceptable to it.
F-13

Share-based Compensation
The Company accounts for share-based awards, and similar equity instruments, granted to employees, non-employee directors, and consultants in
accordance with the authoritative guidance for share-based compensation. Share-based compensation award types may include stock options and restricted stock
units (“RSUs”) and restricted stock awards (“RSAs”). Share-based compensation expense is recognized on a straight-lined basis over the requisite service period
(usually the vesting period) except for options with graded vesting which is recognized pursuant to an accelerated method. Forfeitures are recognized as a
reduction in share-based compensation expense as they occur.
Adoption and Pending Adoption of Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) that are adopted by the Company
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 November 2024, the FASB issued accounting standards update (“ASU”) No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense
Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The guidance is to improve the disclosure of expenses in
commonly presented expense captions. The new guidance requires a public entity to provide tabular disclosure, on an annual and interim basis, of amounts for
the following expense categories: (1) purchases of inventory, (2) employee compensation, (3) depreciation and (4) intangible asset amortization, as included in
each relevant expense caption. A relevant expense caption is an expense caption presented on the face of the income statement that contains any of the expense
categories noted. The guidance is effective for 2027 annual reporting, and in the first quarter of 2028 for interim reporting, with early adoption permitted, to be
applied on a prospective basis, with retrospective application permitted. The Company will adopt the guidance when it becomes effective, in its 2027 annual
reporting and each quarter thereafter, on a prospective basis. The Company is evaluating the impact the updated guidance will have on its disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires more detailed
income tax disclosures. The guidance requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded
information on income taxes paid by jurisdiction. The guidance is effective for fiscal year 2025 annual reporting, with early adoption permitted, to be applied on
a prospective basis, with retrospective application permitted. The Company will adopt the guidance when it becomes effective, in its 2025 annual reporting, on a
prospective basis. The Company is evaluating the impact the updated guidance will have on its disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”),
which requires public entities with a single reportable segment to provide all the disclosures required by this standard and all existing segment disclosures in
Topic 280 on an interim and annual basis, including new requirements to disclose significant segment expenses that are regularly provided to the chief operating
decision maker (“CODM”) and included within the reported measure(s) of a segment's profit or loss, the amount and composition of any other segment items,
the title and position of the CODM, and how the CODM uses the reported measure(s) of a segment's profit or loss to assess performance and decide how to
allocate resources. The new guidance also clarifies that if the CODM uses more than one measure of a segment’s profit or loss, one or more of those measures
may be reported and requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments in the guidance and
all existing segment disclosures. The Company adopted the guidance in its 2024 annual reporting on a retrospective basis.
F-14

In December 2023, the FASB issued ASU 2023-08, Intangibles - Goodwill - and Other - Crypto Assets (Subtopic 350-60): Accounting For and Disclosure
of Crypto Assets (“ASU 2023-08”), which requires that an entity measure cryptocurrency at fair value in the statement of financial position each reporting period
and recognize changes from remeasurement in net income. The amendments also require that an entity provide enhanced disclosures for both annual and interim
reporting periods to provide investors with relevant information to analyze and assess the exposure and risk of significant individual cryptocurrency holdings. In
addition, fair value measurement aligns the accounting required for holders of cryptocurrency with the accounting for entities that are subject to certain industry-
specific guidance and eliminates the requirement to test those assets for impairment, thereby reducing the associated cost and complexity of applying the current
guidance. The Company’s cryptocurrency is within the scope of the new guidance and the transition requires a cumulative-effect adjustment as of the beginning
of the current fiscal year for any difference between the carrying amount of the Company’s Bitcoin and fair value. Effective January 1, 2024, the Company early
adopted ASU 2023-08 and recorded a $20,000 decrease to the opening balance of accumulated deficit and an increase to Bitcoin.
3.
Disposal of Service and Product - Related Party Transaction
On December 28, 2023, the Company and Joseph O’Daniel (“Purchaser”), entered into a share purchase agreement under which the Company sold its
Service and Product segment, which included HVE ConneXions and Unified ConneXions, for $1.00 and the transfer of outstanding assets and liabilities. As a
result of the share purchase agreement, the Purchaser, who served as the Company’s President, resigned effective December 28, 2023 and is no longer a related
party of the Company. Through December 28, 2023, the Service and Product segment provided network operations center (“NOC”) services to its customers.
NOC revenues were for monthly services performed for the customer that are performed either in-house or at the customer’s site. The Service and Product
segment also delivered data management and desktop and application virtualization solutions through hybrid cloud, cloud and on premise implementations by a
reseller network. During the year ended December 31, 2023, the Company recognized a noncash gain of $0.7 million related to the transfer of net liabilities to
the Purchaser.
4.
Fair Value Measurements
The authoritative guidance for fair value measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair
value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in
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 Basis
The Company’s financial instruments include cash equivalents, investment in equity securities, accounts payable, accrued liabilities, and warrant
liabilities. Fair value estimates of these instruments are made at a specific point in time, based on relevant market information. These estimates may be
subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. The carrying amount of
cash equivalents, accounts payable and accrued liabilities are generally considered to be representative of their respective fair values because of the short-term
nature of those instruments.
F-15

The following tables provide a summary of the Company’s assets and liabilities that are measured at fair value on a recurring basis (in thousands):
December 31, 2024
Fair Value
Level 1
Level 2
Level 3
Assets:
Investment in equity securities
$
7,530  $
7,530  $
—  $
— 
Bitcoin
1,394 
1,394 
— 
— 
Total
$
8,924  $
8,924  $
—  $
— 
Liabilities:
Warrant liabilities
$
31  $
—  $
—  $
31 
December 31, 2023
Liabilities:
Fair Value
Level 1
Level 2
Level 3
Warrant liabilities
$
205  $
—  $
—  $
205 
The Company’s investment is in publicly held equity securities which have readily determinable fair values. During the year ended December 31, 2024,
the Company recognized an unrealized gain of $4.9 million within other income (expense) in its consolidated statements of operations related to the fair value
change of the investment in equity securities. During the year ended December 31, 2024, the Company recognized a realized gain of $4.1 million within other
income (expense) in its consolidated statements of operations related to the sale of equity securities.
The fair value of the warrant liabilities was measured using a Black Scholes valuation model with the following assumptions:
December 31,

2024
December 31,

2023
Common share price
$
0.94 
$
3.47 
Expected volatility
125.0 %
120.0 %
Risk-free interest rate
4.2 %
4.2 %
The following table presents the activities of warrant liabilities that are measured at fair value (in thousands):
Warrant liability as of January 1, 2023
$
864 
Issuance of LDA warrant
976 
Change in fair value MEOA warrant
(864)
Noncash exercise of LDA warrant
(411)
Change in fair value LDA warrant
(112)
Retired LDA warrant
(248)
Warrant liability as of December 31, 2023
205 
Change in fair value LDA warrant
(174)
Warrant liability as of December 31, 2024
$
31 
F-16

Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis
The Company's non-financial assets such as property and equipment and intangible assets are recorded at fair value when an impairment is recognized or
at the time acquired in an asset acquisition or business combination measured using significant unobservable inputs (Level 3). As discussed in Note 8, Certain
Balance Sheet Items, during the year ended December 31, 2024, the Company recorded impairment charges associated with property and equipment and reduced
the carrying amount of such assets subject to the impairment to their estimated fair value. As discussed in Note 9 - Intangible Assets, during the year ended
December 31, 2023, the Company recorded impairment charges associated with acquired intangible assets and reduced the carrying amount of such assets
subject to the impairment to their estimated fair value.
5.
Bitcoin
The following table presents the activities of Bitcoin (in thousands):
Balance at January 1, 2023
$
1,695 
Revenue recognized from Bitcoin mined
19,730 
Proceeds from sale of Bitcoin
(18,195)
Bitcoin issued for services
(1,562)
Impairment loss
(682)
Balance at December 31, 2023
986 
Cumulative effect upon adoption of ASU 2023-08
20 
Revenue recognized from Bitcoin mined
16,608 
Proceeds from sale of Bitcoin
(16,364)
Bitcoin issued for services
(538)
Change in fair value of Bitcoin
682 
Balance at December 31, 2024
$
1,394 
The following table presents Bitcoin holdings (in thousands except for number of Bitcoin):
December 31,

2024
Number of Bitcoin held
14.9 
Carrying basis of Bitcoin
$
1,450 
For the year ended December 31, 2024, the Company had a realized gain of approximately $0.7 million on the sale of Bitcoin.
All additions of Bitcoin were generated by the Company’s Bitcoin mining operations. All dispositions of Bitcoin were the result of sales on the open
market and used to fund the Company’s operations. The Company's Bitcoin holdings are not subject to sale restrictions and do not serve as collateral for any
agreements. As of December 31, 2024 and 2023, the Company held no other cryptocurrency.
F-17

6.
Special Purpose Acquisition Company
In April 2021, the Company sponsored a special purpose acquisition company (“SPAC”), Minority Equality Opportunities Acquisition Inc. (“MEOA”),
through the Company's wholly owned subsidiary, Minority Equality Opportunities Acquisition Sponsor, LLC (“SPAC Sponsor”). MEOA’s purpose is to focus
initially on transactions with companies that are minority owned businesses. On July 3, 2023, MEOA announced that it did not complete an initial business
combination on or prior to June 30, 2023, the deadline by which it must have completed an initial business combination. As of the close of business on July 3,
2023, MEOA’s redeemable public shares were deemed cancelled and represented only the right to receive the redemption amount. MEOA instructed Continental
Stock Transfer & Trust Company, the trustee of the trust account, to liquidate the redeemable securities held in the trust account. The redemption of MEOA’s
redeemable public shares for $10.4 million was completed in the third quarter of 2023. The Company received no proceeds from the trust account.
On December 19, 2023, the Company’s 3,162,500 shares of MEOA’s Class B common stock were cancelled, eliminating the Company’s ownership of
MEOA, and the Company recognized a $6.1 million gain related to the deconsolidation of MEOA. At December 31, 2023, the Company no longer owned a
controlling interest in MEOA and as such the non-controlling interest was no longer subject to consolidation with the Company.
7.
Notes Receivable
Rainmaker Promissory Note
In September 2020, the Company entered into a Senior Secured Convertible Promissory Note with Rainmaker (the “Rainmaker Note”), pursuant to which
the Company loaned Rainmaker the principal amount of $3.1 million. The Rainmaker Note is secured as a registered lien under the Uniform Commercial Code
and the Personal Property Security Act (Ontario) against the assets of Rainmaker and bears interest at the rate of 10% per annum. The Company has the right, at
any time, to convert all or any portion of the then outstanding and unpaid Rainmaker Note and interest into at the conversion price as defined in the Rainmaker
Note. In July 2024, the Company and Rainmaker entered into Amendment No. 3 to the Rainmaker Note and the principal amount was revised to $4.4 million
and the due date was extended to January 14, 2025, at which time all principal and accrued interest is due and payable. In January 2025, the Company and
Rainmaker entered into Amendment No. 4 to the Rainmaker Note and the principal amount was revised to $4.6 million and the due date was extended to
January 14, 2026.
On January 1, 2023, as a result of adopting ASU 2016-13, the Company recorded an allowance for credit losses of $3.8 million and reversed accrued
interest of $0.1 million. As of December 31, 2024 and 2023, the Rainmaker Note balance, including accrued interest, was nil.
8.
Certain Balance Sheet Items
The following table summarizes other current assets (in thousands):
December 31,
2024
2023
Bitcoin mining hosting deposit
$
2,490 
$
10,000 
Prepaid insurance
547 
575 
Prepaid services
270 
193 
Prepaid mining hosting services
100 
980 
Other
31 
190 
Other current assets
$
3,438 
$
11,938 
In January 2025, the Company terminated the Rebel Hosting Agreement and agreed to a settlement amount of $2.4 million, which is included in Bitcoin
mining hosting deposit at December 31, 2024. The December 31, 2023 Bitcoin mining hosting deposit was settled by shares of Core Scientific’s common stock
issued to the Company in January 2024 and was recorded as investment in equity securities.
F-18

The following table summarizes property and equipment, net (in thousands):
December 31,
2024
2023
Mining equipment
$
27,214 
$
30,122 
Construction in progress
1,750 
— 
Total
28,964 
30,122 
Accumulated depreciation
(6,997)
(5,956)
Property and equipment, net
$
21,967 
$
24,166 
Depreciation expense for property and equipment was $5.6 million and $4.2 million during the years ended December 31, 2024 and 2023, respectively.
The Company sold 3,263 and 3,336 miners during the years ended December 31, 2024 and 2023, respectively, that were included in mining equipment,
for proceeds of $1.0 million and $4.5 million, respectively. The Company had a loss on the sale of miners of $3.5 million and $1.0 million during the years
ended December 31, 2024 and 2023, respectively.
Construction in Progress
In September 2024, the Company and Simple Mining LLC (“Simple Mining”) entered into a letter of intent to build-out a 12.5 MW site in Iowa, with
Simple Mining managing the build-out of the infrastructure for the new mining site, subsequently modified to an 8 MW site. As of December 31, 2024, the
Company made payments of $1.4 million towards the infrastructure for the new mining site.
The remaining amount in construction in progress relates to equipment open to be determined deployment.
Impairment of Property and Equipment
For the year ended December 31, 2024, the Company recorded an impairment to property and equipment related to idle mining equipment not expected to
return to use. The Company compared the indicated fair value to the carrying value of the mining equipment, and as a result of the analysis, an impairment
charge of $1.1 million was recorded for the year ended December 31, 2024. The estimated fair value of the Company’s miners is classified in Level 3 of the fair
value hierarchy. The Company incurred no impairment charges for its mining equipment for the year ended December 31, 2023.
The following table summarizes other non-current assets (in thousands):
December 31,
2024
2023
Prepaid mining hosting services
$
308 
$
3,402 
Prepaid services
68 
— 
Other
3 
4 
Other non-current assets
$
379 
$
3,406 
F-19

9.
Intangible Assets
The following table summarizes intangible assets, net (in thousands):
December 31,
2024
2023
Finite-lived intangible assets:
Supplier agreements
$
37,525 
$
37,525 
Capitalized development costs
— 
103 
Total finite-lived intangible assets
37,525 
37,628 
Accumulated amortization:
Supplier agreements
(34,430)
(32,944)
Capitalized development costs
— 
(103)
Total accumulated amortization
(34,430)
(33,047)
Total intangible assets, net
$
3,095 
$
4,581 
Amortization expense of intangible assets was $1.5 million and $1.9 million for the years ended December 31, 2024 and 2023, respectively. Estimated
amortization expense for intangible assets is approximately $1.5 million, $1.5 million, and $0.1 million in fiscal year 2026, 2027, and 2028, respectively.
Impairment of Intangible Assets
During the year ended December 31, 2023, a certain vendor for the Company’s carbon credits was not able to perform under terms of the agreement,
which indicated that an impairment triggering event occurred for the carbon credits held for future use, and the Company determined the carrying value of the
indefinite-lived intangible asset exceeded its estimated fair value. The Company compared the indicated fair value to the carrying value of its indefinite-lived
asset, and as a result of the analysis, an impairment charge of $1.7  million was recorded for the carbon credits held for future use for the year ended
December 31, 2023.
During the year ended December  31, 2023, adverse changes in the business climate indicated that an impairment triggering event occurred for one
supplier agreement, and the Company determined the carrying value of the finite-lived intangible asset exceeded its estimated fair value. The Company
compared the indicated fair value to the carrying value of its finite-lived asset, and as a result of the analysis, an impairment charge of $1.2 million was recorded
for the supplier agreement for the year ended December 31, 2023.
10. Convertible Debt
On April 17, 2023, the Company entered into a Securities Purchase Agreement (the “LDA Purchase Agreement”) pursuant to which the Company issued
to an investor, LDA Capital Limited (the “Investor”), a senior convertible promissory note having an aggregate principal amount of $1.0 million (the “LDA
Note”), as amended April 25, 2023, and a common share purchase warrant (the “LDA Warrant”) to purchase up to 455,927 common shares of the Company (the
“LDA Warrant Shares”). The Company received proceeds of approximately $0.8 million, which were net of fees associated with the transaction, on April 18,
2023 (the “Closing Date”). The LDA Note had a term of 24 months after issuance, and an interest rate of 7.5% per annum.
On August 14, 2023, in accordance with the terms of the LDA Purchase Agreement prepayment option, the Company repaid the full amount of the LDA
Note, including interest and fees, in the amount of $1.3 million. As a result of the repayment, the Company redeemed from the holder of the LDA Warrant 40%
of the then outstanding LDA Warrant, or 182,371 LDA Warrant Shares. At December 31, 2023, the balance of the LDA Note was nil. The Company recognized
a loss on debt extinguishment of $63,000 which was included in the consolidated statement of operations in interest income and other expense, net.
The LDA Warrant is exercisable at an exercise price of $1.342 per share and expires three years from the date of issuance or earlier if the closing of a
Fundamental Transaction occurs (defined as merger or consolidation, any sale of substantially all of the Company’s assets, any tender offer or exchange offer
pursuant to which common shareholders can
F-20

tender or exchange their shares for other securities, cash or property, as well as any reclassification of common shares into other securities, cash or property).
The exercise price of the LDA Warrant is subject to adjustment for certain stock splits, stock combinations and dilutive share issuances. Pursuant to the terms of
the LDA Purchase Agreement, the Company will reserve for issuance 200% of the maximum aggregate number of common shares as are issuable upon exercise
in full of the LDA Warrant at any time.
On December 29, 2023, the Company issued 123,806 common shares with a value of $0.4 million for a cashless exercise of 200,000 LDA Warrant
Shares.
The LDA Warrant contains a contingent put option. In the event of a Fundamental Transaction, the Investor may, at the Investor’s option, require the
Company to purchase the LDA Warrant for an amount of cash equal to the Black Scholes value of the remaining unexercised portion of the warrant on the date
of consummation of such Fundamental Transaction. The Company has recorded the warrant as a liability and will adjust the warrant liability to fair value each
reporting period until settled.
On April 17, 2023, upon issuance of the LDA Note and LDA Warrant, which are accounted for as freestanding financial instruments, the Company
determined that the aggregate fair value of $2.0 million for the instruments issued exceeds the net proceeds received under the transaction. Accordingly, the
excess of the fair value over the proceeds received of $1.0 million was recognized as interest expense.
11. Preferred Shares
Series H Preferred Shares
On October 1, 2021, the Company filed articles of amendment to create a series of preferred shares, being, an unlimited number of Series H Preferred
Shares and to provide for the rights, privileges, restrictions and conditions attaching thereto. The Series H Preferred Shares are convertible provided (and only if
and to the extent) that prior shareholder approval of the issuance of all Sphere 3D common shares issuable upon conversion of the Series H Preferred Shares has
been obtained in accordance with the rules of Nasdaq, at any time from time to time, at the option of the holder thereof, into 142.857 Sphere 3D common shares
for every Series H Preferred Share. Each holder of the Series H Preferred Shares, may, subject to prior shareholder approval, convert all or any part of the Series
H Preferred Shares provided that after such conversion the common shares issuable, together with all the common shares held by the shareholder in the
aggregate would not exceed 9.99% of the total number of outstanding common shares of the Company. Each Series H Preferred Share has a stated value of
$1,000. The Series H Preferred Shares are non-voting and do not accrue dividends. These features include, in the event of the liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary, deemed liquidation or any other distribution of the assets of the Company among its shareholders
for the purpose of winding-up its affairs, the Series H Preferred Shares shall entitle each of the holders thereof to receive an amount equal to the Series H
subscription price per Series H Preferred Share, as defined in the agreement, to be paid before any amount is paid or any assets of the Company are distributed to
the holders of its common shares.
In November 2022, the Company entered into the Modified Hertford Agreement. Pursuant to the Modified Hertford Agreement, commencing January 1,
2023 and terminating on December 31, 2023, holders of Series H Preferred Shares were permitted to (a) convert Series H Preferred Shares in an aggregate
amount up to or equal to 3.0% of the aggregate number of Series H Preferred Shares outstanding on the first day of each such month and (b) sell the resulting
number (and no greater number) of such converted common shares within such month. Commencing January 1, 2024 and terminating on December 31, 2024,
holders of Series H Preferred Shares were permitted to (a) convert Series H Preferred Shares in an aggregate amount up to or equal to 10.0% of the aggregate
number of Series H Preferred Shares outstanding on the first day of each such month and (b) sell the resulting number (and no greater number) of such converted
common shares within such month.
In August 2023, the Company entered into an Amended and Restated Agreement (the “Hertford Amendment”) with Hertford Advisors Ltd. and certain
other parties listed in the Hertford Amendment (together, the “Hertford Group”), which amends and restates in its entirety the purchase agreement between the
Company and Hertford Advisors Ltd. dated July 31, 2021, as modified by the amendment to such agreement dated November 7, 2022 (together, the “Original
Hertford Agreement”). As an inducement to enter into the Hertford Amendment, the Company issued to Hertford 1,376 Series H Preferred Shares and 800,000
warrants with an aggregate fair value of $1.0 million. Pursuant to the Hertford
F-21

Amendment, Hertford exchanged 14,980 Series H Preferred Shares for Series H Preferred Shares held by other persons (the “Exchanged Series H Preferred
Shares”).
In August 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) pursuant to which the Company issued to two
investors a total of 13,764 of the Company’s Series H Preferred Shares and a total of 1,966,293 common share purchase warrants (the “Warrants”), each of
which entitled the holder to purchase one common share of the Company (the “Warrant Shares”). Pursuant to the terms of the Purchase Agreement, the
Company received gross proceeds of $3.0 million. The Company issued a total of 1,377 Series H Preferred Shares and 196,629 warrants as a finder’s fee for the
transaction with an aggregate fair value of $0.5 million. Pursuant to the terms of the Purchase Agreement, the Company will reserve for issuance the maximum
aggregate number of common shares that are issuable upon exercise in full of the Warrants at any time.
The offer and sale of the Series H Preferred Shares and the Warrants have not been registered under the Securities Act and may not be offered or sold in
the United States in the absence of an effective registration statement or exemption from the registration requirements, and in each case in compliance with
applicable state securities laws.
The Warrants issued in connection with the Hertford Amendment and the Purchase Agreement are exercisable beginning February 12, 2024 and February
23, 2024, respectively, at an initial exercise price of $2.75 per share and have a term of three years from the date of issuance. The exercise price of the Warrants
are subject to adjustment for certain stock splits, stock combinations and dilutive share issuances.
In accordance with the authoritative guidance for distinguishing liabilities from equity, the Company has determined that its Series H preferred shares
carry certain redemption features beyond the control of the Company. Accordingly, the Series H Preferred Shares are presented as temporary equity. For the
years ended December 31, 2024 and 2023, the Company issued 6,193,416 and 4,714,560 common shares, respectively, for the conversion of 43,354 and 33,002
Series H Preferred Shares, respectively. At December 31, 2024, there are no Series H Preferred Shares outstanding under the Modified Hertford Agreement or
the Hertford Amendment.
12. Share Capital
Registered Direct Offering and Concurrent Private Placement
On November 19, 2024, Company entered into a Securities Purchase Agreement (the “2024 Purchase Agreement”) with a single institutional investor (the
“Purchaser”) pursuant to which the Company issued and sold (i) 2,350,000 common shares of the Company (the “Shares”), and (ii) pre-funded warrants (the
“Pre-Funded Warrants”) to purchase up to 1,875,353 of the Company's common shares (such offering, the “Registered Offering”). The Shares had a purchase
price of $1.42 per share; and the Pre-Funded Warrants had a purchase price of $1.4199 per share, have an exercise price of $0.0001 per share, are exercisable
immediately, subject to the beneficial ownership limitations, and will expire when exercised in full. The Pre-Funded Warrants may also be exercised, in whole or
in part, by means of cashless exercise pursuant to the terms in the warrant agreement. A holder will not have the right to exercise any portion of the Pre-Funded
Warrants if the holder (together with its affiliates) would beneficially own in excess of 4.99% of the number of the Company's common shares outstanding
immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Pre-Funded Warrants. However,
upon notice from the holder to the Company as described in the 2024 Purchase Agreement, the holder may increase the beneficial ownership limitation, which
may not exceed 9.99% of the number of the Company's common shares outstanding immediately after giving effect to the exercise of Pre-Funded Warrants.
F-22

In a concurrent private placement (the “Private Placement” and together with the Registered Offering, the “Offerings”), the Company also agreed to issue
to the same Purchaser warrants to purchase up to 4,225,353 of its common shares (the “Common Warrants”). The Common Warrants have an exercise price of
$1.50 per share, will be exercisable commencing six months from the date of issuance, and will expire on May 21, 2030. The Common Warrants may also be
exercised, in whole or in part, by means of cashless exercise pursuant to the terms in the warrant agreement. The Common Warrants contain standard anti-
dilution adjustments to the exercise price including for share splits, share dividends, rights offerings and pro rata distributions. Similar to the Pre-Funded
Warrants, a holder will not have the right to exercise any portion of the Common Warrants if the holder (together with its affiliates) would beneficially own in
excess of 4.99% of the number of the Company's common shares outstanding immediately after giving effect to the exercise, as such percentage ownership is
determined in accordance with the terms of the Common Warrants. However, upon notice from the holder to the Company as described in the 2024 Purchase
Agreement, the holder may increase the beneficial ownership limitation, which may not exceed 9.99% of the number of the Company's common shares
outstanding immediately after giving effect to the exercise of Common Warrants.
The Registered Offering gross proceeds was $6.0 million, and net proceeds after deducting the placement agent's fees and other offering expenses paid by
the Company, was approximately $5.4 million. A.G.P./Alliance Global Partners (“Placement Agent”) acted as the sole placement agent in connection with the
Offerings pursuant to a Placement Agent Agreement, dated as of November 19, 2024, between the Company and the Placement Agent (the “Placement Agent
Agreement”). Pursuant to the Placement Agent Agreement, the Placement Agent was paid a 7.0% commission and reimbursement of certain Placement Agent
expenses for an aggregate amount of approximately $0.5 million. The Company paid an additional $0.1 million of costs related to the Offerings. The Company
expects to use the net proceeds from the Offerings to accelerate efficiency and for the purchase or upgrade of the Company's Bitcoin mining fleet, vertical
integration of infrastructure, as well as general corporate purposes.
In connection with the Offerings, the Company amended existing warrants to purchase up to 142,857 common shares of the Company, with an exercise
price of $66.50 per share, that were previously issued to the Purchaser participating in the Offerings. Effective at the closing date of the Offerings, such existing
warrants were amended to reduce the exercise price to $1.50 per share, change the initial exercise date to May 21, 2025, and change the expiration date to May
21, 2030. All the other terms of the prior warrants will remain unchanged. The Company accounted for the reduced exercise price and amended expiration date
of the existing warrants as a modification. As the nature of the modification was to induce exercise and raise additional capital, the modification was accounted
for as an equity issuance cost on the date the offer was accepted by the Purchaser, equal to the excess fair value of the modified warrants post modification of
$0.2  million. The existing warrants after the modification continue to remain classified within equity in accordance with authoritative guidance after the
amendment.
The Company assessed the terms of the Pre-Funded Warrants and Common Warrants (together the “Offering Warrants”) issued in connection with the
Registered Offering and determined that these should be classified as equity instruments. Furthermore, the exercise and settlement provisions of the Offering
Warrants do not preclude equity classification. Accordingly, the Offering Warrants were determined to be equity classified. The proceeds from the Registered
Offering were allocated to each of the equity instruments issued based on their relative fair values and recorded in common shares on the consolidated balance
sheets.
The fair value of the Common Warrants was calculated using a Black-Scholes model. The relative fair value assigned to the Common Warrants was
approximately $2.6 million.
For the year ended December 31, 2024, the Pre-Funded Warrants to purchase 281,353 common shares were exercised.
On June 28, 2023, the Company filed an Articles of Amendment to effect a share consolidation (also known as a reverse stock split) of its issued and
outstanding common shares on a one-for-seven basis. The share consolidation was effective on June 28, 2023.
F-23

Unlimited authorized shares of common shares at no par value are available to the Company. At December 31, 2024, the Company had the following
outstanding warrants to purchase common shares:
Date issued
Contractual life
(years)
Exercise price
Number outstanding
Expiration
September 2021
5.0
$66.50
1,471,441 
September 8, 2026
February 2022
5.0
$28.00
14,286 
February 7, 2027
February 2022
5.0
$35.00
14,286 
February 7, 2027
February 2022
5.0
$42.00
14,286 
February 7, 2027
April 2023
3.0
$1.342
73,556 
April 17, 2026
August 2023
3.0
$2.75
800,000 
August 11, 2026
August 2023
3.0
$2.75
2,162,922 
August 23, 2026
November 2024
5.5
$1.50
142,858 
May 21, 2030
November 2024
5.5
$1.50
4,225,353 
May 21, 2030
November 2024
—
$0.0001
1,594,000 
(1)
10,512,988 
_______________
(1) These Pre-Funded Warrants have no contractual life and expire when exercised in full.
13. Equity Incentive Plan
As of December  31, 2024, a total of 1,204,004 common shares are authorized for issuance with respect to awards granted under the 2015 Plan. In
addition, the share limit will automatically increase on the first trading day in January of each calendar year during the term of the 2015 Plan by an amount equal
to the lesser of (i) 10% of the total number of common shares issued and outstanding on December 31 of the immediately preceding calendar year, or (ii) such
number of common shares as may be established by the Board. The 2015 Plan authorizes the board of directors to grant stock and options awards to directors,
employees and consultants. As of December 31, 2024, the Company had approximately 399,000 share-based awards available for future grant.
The Company’s Employee Stock Purchase Plan (“ESPP”) authorizes the purchase of up to 5,357 common shares by employees under the plan. As of
December 31, 2024 and 2023, there were no offering periods available to employees.
Stock Options
The following table summarizes option activity during the year ended December 31, 2024:
 
Shares

Subject to Options
Weighted-

Average

Exercise

Price
Weighted-

Average

Remaining

Contractual

Term (years)
Aggregate

Intrinsic

Value

(in thousands)
Outstanding — January 1, 2024
395,241 
$
6.34 
Granted
371,465 
$
2.16 
Exercised
— 
$
— 
Forfeited
(323,536)
$
3.21 
Outstanding — December 31, 2024
443,170 
$
5.11 
4.3 $
— 
Vested and expected to vest — December 31, 2024
443,170 
$
5.11 
4.3 $
— 
Exercisable — December 31, 2024
283,035 
$
6.16 
3.9 $
— 
The weighted average grant date fair values of options granted during the years ended December 31, 2024 and 2023 were $1.67 per share and $0.58 per
share, respectively. For the year ended December 31, 2023, the intrinsic value for stock options exercised was $0.1 million. Cash received from stock option
exercises for the year ended December 31, 2023 was approximately $0.6 million.
F-24

The fair value of option awards are estimated on the date of grant using the Black-Scholes option pricing model. Expected volatility was based on
historical volatility of the Company’s common shares. The expected term of options granted was based on the simplified formula. The risk-free interest rate was
based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The dividend yield assumption was
based on the expectation of no future dividend payments. Option awards can be granted for a maximum term of up to ten years. The assumptions used in the
Black-Scholes model were as follows:
Year Ended December 31,
2024
2023
Expected volatility
124.3-126.1%
81.8-84.0%
Expected term (in years)
3.5
0.5
Risk-free interest rate
4.1-4.6%
5.3-5.5%
Dividend yield
—
—
Restricted Stock Units
The following table summarizes RSU activity during the year ended December 31, 2024:
 
Number of

Shares
Weighted Average

Grant Date Fair Value
Outstanding — January 1, 2024
58,929 
$
9.51 
Granted
1,757,250 
$
1.72 
Vested and released
(1,055,345)
$
1.97 
Forfeited
— 
$
— 
Outstanding — December 31, 2024
760,834 
$
1.98 
Vested and unreleased — December 31, 2024
105,469 
$
1.87 
The estimated fair value of RSUs was based on the closing market value of the Company’s common shares on the date of grant. RSUs typically vest over
a period of one year to three years from the original date of grant. The total grant date fair value of RSUs vested during the years ended December 31, 2024 and
2023 was approximately $2.3 million and $1.7 million, respectively. The fair value of RSUs vested during the years ended December 31, 2024 and 2023 was
approximately $1.6 million and $0.7 million, respectively.
Restricted Stock Awards
The Company granted restricted stock awards (“RSA”) to certain employees and consultants in lieu of cash payment for 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 RSAs were fully vested on the date
of grant. The fair value of the RSAs vested during the years ended December 31, 2024 and 2023 was approximately $0.3 million and $0.2 million, respectively.
The following table summarizes RSA activity during the year ended December 31, 2024:
 
Number of

Shares
Weighted Average

Grant Date Fair Value
Outstanding — January 1, 2024
— 
$
— 
Granted
199,597 
$
1.28 
Vested
(199,597)
$
1.28 
Outstanding — December 31, 2024
— 
$
— 
F-25

Share-Based Compensation Expense
The Company recorded the following compensation expense related to its share-based compensation awards (in thousands):
Year Ended December 31,
2024
2023
Sales and marketing
$
— 
$
103 
General and administrative
2,838 
2,327 
Total share-based compensation expense
$
2,838 
$
2,430 
Total unrecognized estimated compensation cost by type of award and the weighted-average remaining requisite service period over which such expense
is expected to be recognized (in thousands, unless otherwise noted):
December 31, 2024
Unrecognized Expense
Remaining Weighted-
Average Recognition
Period (years)
RSUs
$
985 
0.9
Stock options
$
75 
0.3
14. Net Loss per Share
Basic net loss per share is computed by dividing net loss applicable to common shareholders by the weighted-average number of common shares
outstanding during the period. Preferred shares, common share outstanding purchase warrants, and outstanding options and RSUs are considered common stock
equivalents and are only included in the calculation of diluted earnings per common share when net income is reported and their effect is dilutive. For all periods
presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.
The Company included the outstanding 1,594,000 Pre-Funded Warrants issued in November 2024 in the computation of basic and diluted shares
outstanding as the stated exercise price is not substantive.
Anti-dilutive common share equivalents excluded from the computation of diluted net loss per share were as follows:
December 31,
 
2024
2023
Common share purchase warrants
8,918,988
5,842,354
Options and RSUs outstanding
1,204,004
454,170
Preferred shares
23,000
6,216,422
15. Income Taxes
The Company is subject to taxation in Canada and in the United States (“U.S.”). Sphere 3D Corp. is a Canadian entity that files tax returns in Canada and
the U.S. as it carries on a trade or business in various states in the United States. The Company's tax returns for calendar year 2017 and forward are subject to
examination by the Canadian tax authorities. The Company's tax returns for fiscal year 2022 and forward are subject to examination by the 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 being sustained.
F-26

At December 31, 2024, there were no unrecognized tax benefits. The Company believes it is reasonably possible that, within the next 12 months, the
amount of unrecognized tax benefits may remain unchanged. The Company recognizes interest and penalties related to unrecognized tax benefits in its provision
for income taxes. The Company had no material accrual for interest and penalties on its consolidated balance sheets at December 31, 2024 and 2023, and
recognized no interest and/or penalties in the consolidated statements of operations for the years ended December 31, 2024 and 2023.
The components of loss before income taxes were as follows (in thousands):
 
Year Ended December 31,
 
2024
2023
Domestic
$
(9,320)
$
(22,962)
Foreign
— 
(355)
Total
$
(9,320)
$
(23,317)
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 income tax
provision (benefit) reported in the accompanying consolidated statements of operations is as follows (in thousands): 
 
Year Ended December 31,
 
2024
2023
Income tax at statutory rate
$
(2,470)
$
(6,179)
State income taxes, net of federal benefit
82 
— 
Foreign rate differential
(1,801)
(78)
Change in valuation allowance
48,752 
12,150 
Tax impact of U.S. permanent establishment
(44,819)
— 
Share-based compensation expense
651 
1,938 
Change to provision and other true-ups
(446)
(4,250)
Tax impact of divestiture
— 
(246)
Tax impact of deconsolidation of SPAC
— 
(1,627)
Impairment of investment
— 
(1,639)
Other differences
201 
(56)
Provision for income taxes
$
150 
$
13 
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are shown below. A
valuation allowance has been recorded, as realization of such assets is uncertain.
F-27

Deferred income taxes are comprised as follows (in thousands):
 
December 31,
 
2024
2023
Deferred tax assets:
 
 
Net operating loss and capital loss carryforwards
$
109,300 
$
62,575 
Intangible assets
25,912 
16,118 
Provision for losses on deposits due to vendor bankruptcy filings
332 
6,513 
Share-based compensation
511 
83 
Provision for losses on notes receivable
2,096 
1,017 
Impairment of investments
6,976 
3,850 
Other
1,014 
2,491 
Deferred tax assets, gross
146,141 
92,647 
Valuation allowance for deferred tax assets
(137,208)
(88,456)
Deferred tax assets, net of valuation allowance
8,933 
4,191 
Deferred tax liabilities:
Property and equipment
(7,630)
(4,191)
Investment in equity securities
(1,303)
— 
Deferred tax liabilities
(8,933)
(4,191)
Net deferred tax assets (liabilities)
$
— 
$
— 
Net deferred tax liabilities is included in other non-current liabilities. At December 31, 2024, the Company had U.S. net operating loss carryforwards of
$168.8 million, which do not expire and will be carried forward indefinitely until utilized. At December 31, 2024, the Company had Canadian net operating loss
carryforwards of $260.9 million. These carryforwards will begin expiring December 31, 2031, unless previously utilized. The Company also has net capital loss
carryforwards in Canada of $33.7 million, which are available indefinitely to offset taxable capital gains.
16. Commitments and Contingencies
Hosting Agreements
On April 19, 2024, the Company entered into a Master Hosting Agreement with Simple Mining LLC (“Simple Mining”) for rack space, network services,
electrical connections, routine facility maintenance, and technical support of certain of the Company’s mining equipment. On September 25, 2024, the Company
entered into Amendment No. 2 to the Master Hosting Agreement (“Simple Mining Hosting”) for certain of the Company’s mining machines to be hosted at
Simple Mining’s facility in Iowa. The Simple Mining Hosting agreement has a term of two years and can be terminated by the Company with 30 days advance
notice. On September 25, 2024, the Company entered into Amendment No. 3 to the Master Hosting Agreement (“Simple Mining XP Hosting”) for certain of the
Company’s mining machines to be racked at Simple Mining’s facility in Iowa until the new facility Simple Mining and the Company are partnering on is
completed, see Note 8 Construction in Progress section for additional details. The Simple Mining XP Hosting agreement can be terminated by the Company
with 30 days advance notice. The Company paid Simple Mining a deposit of $0.1 million in 2024 and an additional deposit of $0.5 million in 2025, collectively
representing 30 days of estimated service fees. During the years ended December 31, 2024 and 2023, the Company incurred aggregate costs under the Simple
Mining Hosting and Simple Mining XP Hosting agreements of 1.7 million and nil, respectively.
F-28

On October 18, 2023, the Company entered into a Hosting Agreement with Joshi Petroleum, LLC (the “Joshi Hosting Agreement”) for rack space,
network services, electrical connections, routine facility maintenance, and technical support of certain of the Company’s mining equipment. The Joshi Hosting
Agreement has an initial term of three years with subsequent one year renewal periods until either party provides written notice to the other party of its desire to
avoid and given renewal term at least 30 days in advance of the conclusion of the prior initial term or renewal period. As required by the Joshi Hosting
Agreement, the Company paid a deposit of $0.3 million representing the last two months of estimated service fees. During the years ended December 31, 2024
and 2023, the Company incurred costs under the Joshi Hosting Agreement of $1.6 million and $0.1 million, respectively.
On April 4, 2023, the Company entered into a Master Hosting Services Agreement with Rebel Mining Company, LLC (the “Rebel Hosting Agreement”)
for rack space, network services, electrical connections, routine facility maintenance, and technical support of certain of the Company’s mining equipment. The
Rebel Hosting Agreement has a term of three years with subsequent one year renewal periods. As required by the Rebel Hosting Agreement, the Company paid
a deposit of $2.6 million representing the last two months of estimated service fees. During the years ended December 31, 2024 and 2023, the Company incurred
costs under the Rebel Hosting Agreement of $3.7 million and $5.3 million, respectively. During the year ended December 31, 2023, costs incurred under the
Rebel Hosting Agreement of $3.0 million were paid through the Gryphon MSA and are included in the Gryphon MSA costs below. On October 6, 2023, the
Company terminated the Gryphon MSA, and the Company paid costs under the Rebel Hosting Agreement directly. During the year ended December 31, 2024,
the Company recorded a $0.9 million impairment to prepaid service fees held by Rebel Mining Company and is included in impairment of other assets on the
consolidated statement of operations. On January 16, 2025, the Company terminated the Rebel Hosting Agreement and agreed to a settlement amount of
$2.4  million, which is included in other current assets, payable to the Company in satisfaction of all obligations of the Rebel Hosting Agreement and it
constitutes a final settlement of all amounts owed by either party of the Rebel Hosting Agreement.
On February 8, 2023, the Company entered into a Hosting Agreement with Lancium FS 25, LLC (the “Lancium Hosting Agreement”) for rack space,
network services, electrical connections, routine facility maintenance, and technical support of certain of the Company’s mining equipment. The Lancium
Hosting Agreement had a term of two years with subsequent one year renewal periods. As required by the Lancium Hosting Agreement, the Company paid a
deposit of $0.2 million representing a partial payment towards the last two months of estimated service fees. During the years ended December 31, 2024 and
2023, the Company incurred costs under the Lancium Hosting Agreement of $3.0 million and $1.9 million, respectively. During the year ended December 31,
2023, costs incurred under the Lancium Hosting Agreement of $1.2 million were paid through the Gryphon MSA and are included in the Gryphon MSA costs
below. On October 6, 2023, the Company terminated the Gryphon MSA, and the Company paid costs under the Lancium Hosting Agreement directly. On
November 15, 2024, both parties terminated the Lancium Hosting Agreement, which resulted in the return of the deposit, and waiving of outstanding service
fees in exchange for the mining equipment in immersion. The Company recorded a $2.3 million loss on equipment retained by Lancium, as agreed upon in the
Termination Agreement, which is included in loss on disposal of property and equipment on the consolidated statement of operations.
On June 3, 2022, the Company entered into a Master Agreement with Compute North LLC (the “Compute North MA”) for, the colocation, management,
and other services of certain of the Company’s mining equipment. In December 2022, the Compute North MA was assigned to GC Data Center Granbury, LLC
(the “GC Data Center MA”). In the first quarter of 2024, Marathon Digital Holdings acquired GC Data Center Granbury Equity Holdings, LLC and assumed the
GC Data Center MA. The GC Data Center MA had a term of five years beginning December 2022. The monthly service fee was payable based on the actual
hashrate performance of the equipment per miner type per location as a percentage of the anticipated monthly hashrate per miner type. As required by the
service agreement, the Company paid a deposit of $0.5 million representing the last two months of monthly service fees. The Company incurred costs under the
GC Data Center MA of $2.7 million and $5.1 million during the years ended December 31, 2024 and 2023, respectively. During the year ended December 31,
2023, costs incurred under the GC Data Center MA of $2.2 million were paid through the Gryphon MSA and are included in the Gryphon MSA costs below. On
October 6, 2023, the Company terminated the Gryphon MSA, and the Company paid costs under the GC Data Center MA directly. On August 28, 2024, the
Company and GC Data Center Granbury, LLC (the “Host”) mutually entered into a termination agreement effective August 31, 2024, and the Host paid a
termination fee to the Company of $3.0 million to settle all matters pertaining to the GC Data Center MA including all services and deposit prepayment for
estimated services fees, which is included within other income (expense) in its consolidated statements of operations.
F-29

On August 19, 2021, the Company entered into a Master Services Agreement (the “Gryphon MSA”) with Gryphon Digital Mining, Inc. (“Gryphon”),
under which Gryphon agreed to be the exclusive provider of any and all management services for all of the Company’s blockchain and cryptocurrency-related
operations including but not limited to services relating to all mining equipment owned, purchased, leased, operated, or otherwise controlled by the Company at
any location (collectively, the “Services”) unless the Gryphon MSA is terminated by the Company. As consideration for the Gryphon MSA, Gryphon received
the equivalent of 22.5% of the net operating profit, as defined in the Gryphon MSA, of all of the Company’s blockchain and cryptocurrency related operations as
a management fee. In addition, any costs Gryphon incurred on the Company's behalf were reimbursed to Gryphon as defined in the Gryphon MSA. On October
6, 2023, in accordance with the cure period, the Company terminated the Gryphon MSA. During the year ended December 31, 2023, the Company paid costs
under the Gryphon MSA of $8.4 million.
Hosting Sub-License
On October 5, 2021, the Company entered into a Sub-License and Delegation Agreement (“Hosting Sub-Lease”) by and between Gryphon and the
Company, which assigned to the Company certain Master Services Agreement, dated as of September 12, 2021 (the “Core Scientific MSA”), by and between
Core Scientific, Inc. (“Core Scientific”), and Gryphon and Master Services Agreement Order #2 (“Order 2”). On December 29, 2021, the Company and
Gryphon entered into Amendment No. 1 to the Sub-Lease Agreement (the “Sub-Lease Amendment”) to provide Gryphon the right to recapture the usage of up
to 50% of the hosting capacity to be managed by Core Scientific. The agreement allowed for approximately 230 MW of carbon neutral Bitcoin mining hosting
capacity to be managed by Core Scientific as hosting partner. On October 31, 2022, the Company filed an arbitration request against Core Scientific regarding
the Hosting Sub-Lease. The Company requested that certain advanced deposits paid be refunded back to it as a result of the modification to the Company’s
machine purchase agreement with FuFu Technology Limited (now Ethereal Tech Pte. Ltd.). In December 2022, Core Scientific filed Chapter 11 bankruptcy.
During the year ended December 31, 2023, the Company incurred costs under the Sub-Lease Amendment of $0.6 million. The costs incurred under the
Sub-Lease Amendment were paid through the Gryphon MSA and included in the Gryphon MSA costs above. During the year ended December 31, 2023, the
Company had $8.2 million of expense included in provision for losses on deposits due to vendor bankruptcy filings on the consolidated statements of operations.
On January 16, 2024, the Company reached a settlement agreement (the “Settlement Agreement”) with Core Scientific for $10.0  million of Core
Scientific’s equity, which was approved by a United States Bankruptcy Judge as part of Core Scientific’s emergence from bankruptcy. The Settlement
Agreement includes access to potential additional funds for interest as well as an additional equity pool if the value of Core Scientific’s equity decreases below
plan value in the 18 months after the date of the Settlement Agreement commensurate with the other unsecured creditors. On January 23, 2024, the Company
received 2,050,982 shares of Core Scientific Inc. common stock trading under the Nasdaq symbol CORZ, which was included in investment in equity securities.
Letters of credit
During the ordinary course of business, the Company provides standby letters of credit to third parties as required for certain transactions initiated by the
Company. As of December 31, 2024, the Company had no outstanding standby letters of credit.
Waxahachie Lease
In January 2022, the Company entered into a lease agreement for administrative offices and research facilities located in Waxahachie, Texas (the
“Waxahachie Lease”) for approximately 3,600 square feet and has a term of five years. Occupancy was established in November 2022. The Company also paid a
pro rata share of operating costs, insurance costs, utilities and real property taxes. On December 28, 2023, the Company sold its Service and Product segment
and the Company is no longer subject to the Waxahachie Lease. Rent expense (cash paid) for the operating lease was $86,000 for the year ended December 31,
2023.
F-30

Greenwich Lease
On July 11, 2022, the Company entered into a lease agreement for administrative offices located in Greenwich, Connecticut (the “Greenwich Lease”) for
approximately 4,200 square feet. The Greenwich Lease began July 11, 2022 and expired on July 31, 2023. The Company elected the short-term lease exception
for the accounting of this lease. Rent expense was approximately $0.1 million for the year ended December 31, 2023.
Extended Warranty
Changes in the liability for deferred revenue associated with extended warranties and service contracts were as follows (in thousands):
 
Deferred

Revenue
Liability at January 1, 2023
139 
Revenue recognized during the period
(121)
Change in liability for warranties issued during the period
163 
Liabilities sold
(181)
Liability at December 31, 2023
$
— 
On December 28, 2023, the Company sold its Service and Product segment and no longer has any deferred revenue for extended on-site warranties and
service contracts as of December 31, 2023.
Litigation
The Company is, from time to time, subject to claims and suits arising in the ordinary course of business. The Company cannot predict the final outcome
of such proceedings. Where appropriate, the Company vigorously defends such claims, lawsuits and proceedings. Paid expenses related to the defense of such
claims are recorded by the Company as incurred and paid. On the basis of current information, the Company does not believe there is a reasonable possibility
that a material loss, if any, will result from any claims, lawsuits and proceedings to which the Company is subject to either individually, or in the aggregate.
On April 7, 2023, the Company filed a suit against Gryphon in the U.S. District Court for the Southern District of New York. The Company alleges,
among other things, that Gryphon materially breached its obligations to the Company, both its contractual duties under the Gryphon Master Services Agreement
(the “Gryphon MSA”) dated August 19, 2021, and its fiduciary duties, including as a custodian of the Company’s assets. On August 22, 2023, Gryphon asserted
counterclaims alleging breach of contract, breach of the implied covenant of good faith and fair dealing, negligence in managing its computer systems, and
defamation. On November 7, 2023, Gryphon voluntarily dismissed its defamation claim. Gryphon has amended its complaint several times, and on December
14, 2023, added a second breach of contract claim predicated on another alleged breach of the Gryphon MSA. On February 2, 2024, the Company filed a partial
motion to dismiss the second breach of contract claim, the negligence claim, and the breach of the implied covenant claim for failure to state a claim. On
February 16, 2024, the court so-ordered a stipulation agreed to by the parties dismissing the second breach of contract claim, the negligence claim, and the
breach of the implied covenant claim with prejudice. The so-ordered stipulation expressly preserved the Company’s ability to seek the recovery of its costs and
attorney’s fees incurred in connection with the dismissed claims. The Company disputes the allegations against it.
On March 7, 2025, the Company entered into a settlement agreement with Gryphon pursuant to which all claims were resolved on mutually acceptable
terms. The Company was required to make no payments under the settlement agreement. The parties filed a stipulation of dismissal with prejudice, resulting in
the dismissal of the case. 
17. Segment Information
The Company’s CODM is the Chief Executive Officer. The Company operates as one operating segment and uses net income as measures of profit or loss
on a consolidated basis in making decisions regarding resource allocation and performance assessment. Additionally, the Company’s CODM regularly reviews
the Company’s expenses on a consolidated basis. The financial metrics used by the CODM help make key operating decisions, such as determination of capital
expenditure purchases and significant acquisitions and allocation of budget between cost of revenues and
F-31

general and administrative expenses. The measure of segment assets is reported on the consolidated balance sheet as total consolidated assets. The significant
expense categories regularly provided to the CODM include cost of revenue, general and administrative expenses, depreciation and amortization, impairment of
property and equipment, and change in fair value of Bitcoin. These expense categories are reported as separate line items in the consolidated statements of
operations.
The Bitcoin Mining segment generates revenue through its Bitcoin mining activities. The Company generates its Bitcoin mining revenue from two mining
pool operators. The Company’s revenue from Bitcoin mining is generated in the United States.
Previously, the Company operated in two reportable business segments: Bitcoin Mining and Service and Product. On December 28, 2023, the Company
sold its Service and Product segment. Commencing with the three months ended March 31, 2024, Service and Product no longer met the quantitative
requirements for a reportable segment, and the CODM ceased analyzing the performance of the Company’s legacy service and product operations. As such, the
Service and Product Segment has been eliminated as a separate reportable segment.
18. Subsequent Events
Iowa Mining Site
Subsequent to December 31, 2024, the Company incurred additional costs of $1.4 million towards the infrastructure of the new 8 MW mining site in
Iowa. The cost of infrastructure to the Company for the Iowa mining site was $2.8 million. In March 2025, the Company entered into a Managed Services
Agreement with Simple Mining to operate the site on its behalf.
At-the-Market Offering Program
On January 3, 2025, the Company entered into a sales agreement (the “AGP Agreement”) with A.G.P./Alliance Global Partners (the “Sales Agent”). In
accordance with the terms of the AGP Agreement, the Company may offer and sell from time to time through or to the Sales Agent, as agent or principal, the
Company's common shares having an aggregate offering price of up to $8.0 million (the “Placement Shares”). The AGP Agreement can be terminated by either
party by giving two days written notice.
Neither the Company nor the Sales Agent are obligated to sell any Placement Shares pursuant to the AGP Agreement. Subject to the terms and conditions
of the AGP Agreement, the Sales Agent will use commercially reasonable efforts, consistent with its normal trading and sales practices and applicable state and
federal law, rules and regulations and the rules of Nasdaq, to sell the Placement Shares from time to time based upon the Company’s instructions, including any
price, time or size limits or other customary parameters or conditions the Company may impose. Sales of the Placement Shares, if any, will be made on Nasdaq
at market prices by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 of the Securities Act of 1933, as amended.
Subsequent to December 31, 2024, the Company has sold 210,448 common shares for approximately $0.1 million of net proceeds under the AGP Agreement.
Issuance of Common Shares
On January 21, 2025, the Company issued 507,000 common shares for the exercise of Pre-Funded Warrants.
Equity Incentive Plan Grants
On January 29, 2025, the Company granted 1,684,783 RSUs with a fair value of $1.5 million and vesting periods of two years. On March 4, 2025, the
Company canceled 927,310 RSUs that were granted on January 29, 2025.
Sale of Property and Equipment
On January 31, 2025, the Company sold 950 miners included in property and equipment for proceeds of $0.3 million. The Company had a loss on the sale
of miners of $0.8 million.
F-32

Exhibit 4.2
DESCRIPTION OF SECURITIES
 
Sphere 3D Corp. (the “Company”) authorized capital shares consist of unlimited number of common shares, no par value; unlimited number of Series A
Preferred Shares, no par value; unlimited number of Series B Preferred Shares, no par value; unlimited number of Series C Preferred Shares, no par value;
unlimited number of Series D Preferred Shares, no par value; unlimited number of Series E Preferred Shares, no par value; unlimited number of Series F
Preferred Shares, no par value; unlimited number of Series G Preferred Shares, no par value; and unlimited number of Series H Preferred Shares, no par value.
As of March 24, 2025, issued and outstanding were 26,178,282 common shares, and 161 Series H Preferred Shares. There are no Series A, Series B, Series C,
Series D, Series E, Series F, or Series G Preferred Shares outstanding. Pursuant to our articles of amalgamation, the Board of Directors has the authority to fix
and determine the voting rights, rights of redemption and other rights and preferences of preferred shares. The Series H Preferred Shares have no voting rights.
The following summary does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the applicable provisions of the
Business Corporation Act (Ontario) and our Articles and By-laws. The Company encourages you to review its:
•
Articles of Amendment dated June 28, 2023;
•
Articles of Amendment dated October 1, 2021;
•
Articles of Amendment dated July 13, 2021;
•
Articles of Amendment dated January 4, 2021;
•
Articles of Amendment dated September 29,2020;
•
Articles of Amendment dated May 6, 2020;
•
Articles of Amendment dated November 6, 2019;
•
Articles of Amendment dated July 12, 2019;
•
Articles of Amendment dated November 13, 2018;
•
Articles of Amendment dated November 5, 2018;
•
Articles of Amendment dated September 28, 2018;
•
Articles of Amendment dated July 11, 2017;
•
Articles of Amalgamation dated March 24, 2015;
•
By-law No. 1, as amended; and
•
By-law No. 2.
Common Shares
Voting, Dividend and Other Rights. Each outstanding common share entitles the holder to one vote on all matters presented to the shareholders for a vote.
Holders of common shares have no cumulative voting, pre-emptive, subscription or conversion rights. All common shares to be issued pursuant to this
registration statement will be duly authorized, fully paid and non-assessable. Our Board of Directors determines if and when distributions may be paid out of
legally available funds to the holders. To date, the Company has not declared any dividends with respect to its common shares. Our declaration of any cash
dividends in the future will depend on our Board of Directors’ determination as to whether, in light of our earnings, financial position, cash requirements and
other relevant factors existing at the time, it appears advisable to do so. The Company does not anticipate paying cash dividends on the common shares in the
foreseeable future.
Rights Upon Liquidation. Upon liquidation, subject to the right of any holders of preferred shares to receive preferential distributions, each outstanding
common share may participate pro rata in the assets remaining after payment of, or adequate provision for, all our known debts and liabilities.

Majority Voting. Two holders representing not less than 33⅓% of the outstanding common shares constitute a quorum at any meeting of the shareholders.
A plurality of the votes cast at a meeting of shareholders elects our directors. The common shares do not have cumulative voting rights. Therefore, the holders of
a majority of the outstanding common shares can elect all of our directors. In general, a majority of the votes cast at a meeting of shareholders must authorize
shareholder actions other than the election of directors.
Preferred Shares
Authority of Board of Directors to Create Series and Fix Rights
Under our certificate of amalgamation, as amended, our Board of Directors can issue an unlimited number of preferred shares from time to time in one or
more series. The Board of Directors is authorized to fix by resolution as to any series the designation and number of shares of the series, the voting rights, the
dividend rights, the redemption price, the amount payable upon liquidation or dissolution, the conversion rights, and any other designations, preferences or
special rights or restrictions as may be permitted by law. Unless the nature of a particular transaction and the rules of law applicable thereto require such
approval, our Board of Directors has the authority to issue these preferred shares without shareholder approval.
Series H Preferred Shares
The holders of Series H Preferred Shares have the following rights, restrictions and privileges in respect of their preferred shares:
•
The Series H Preferred Shares are convertible into 142.857 Sphere 3D common shares for every one Series H Preferred Share. Each holder may
convert such holders Series H Preferred Shares provided that after such conversion the common shares issuable, together with all the Sphere 3D
common shares beneficially owned by the shareholder, in the aggregate, would not exceed 9.99% of the total number of outstanding Sphere 3D
common shares.
•
The holders of Series H Preferred Shares are not entitled to receive dividends and are not entitled to voting rights, except as required by law.
Advance Notice Requirements for Shareholder Proposals and Director Nominations
The Company’s by-laws provide that shareholders seeking to nominate candidates for election as directors at a meeting of shareholders must provide the
Company with timely written notice of their proposal. The Company’s by-laws also specify requirements as to the form and content of a shareholder’s notice.
These provisions may preclude shareholder’s from making nominations for directors at an annual meeting of shareholders.
Indemnification of Our Executive Officers and Directors
In accordance with the by-laws of the Company, directors and officers are each indemnified by the Company against all liability and costs arising out of
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 to the
best interests of the Company and have otherwise complied with the provisions of applicable corporate law.

Exhibit 19.1
SPHERE 3D CORP.
INSIDER TRADING POLICY
1.     Purpose of this Policy
The purpose of this Insider Trading Policy of the Company (the “Policy”) is to set forth certain policies to ensure:
•
that all persons to whom this Policy applies understand their obligations to preserve the confidentiality of Undisclosed Material Information
(as defined herein); and
•
that all appropriate parties who have Undisclosed Material Information understand that they are prohibited from Insider Trading (as defined
herein) or Tipping (as defined herein) under applicable law, stock exchange rules and this Policy.
2.     To Whom this Policy Applies
       The main groups of persons to whom this Policy applies are set out in Schedule “A” attached hereto. Each section of the Policy that imposes
restrictions and obligations will identify which groups of persons are subject to that section. References in this Policy to “any person to whom this Policy
applies” or similar references are intended to include persons in all of the groups described in Schedule “A”.
3.     Responsibility for this Policy
    The Company’s Chief Financial Officer is responsible for overseeing compliance for this Policy. Changes to this Policy shall be approved by the Board
of Directors. Any questions or issues which arise under this Policy shall be brought to the attention of the Board of Directors or, if time does not permit review
by the Board, then to any member of the Board.
4.     Confidentiality of Undisclosed Material Information
    4.1     “Undisclosed Material Information” of the Company is Material Information about the Company that has not been “Generally Disclosed”; that is,
disseminated to the public by way of a news release together with the passage of a reasonable amount of time (24 hours, unless otherwise
advised that the period is longer or shorter, depending on the circumstances) for the public to analyze the information.
4.2    Any person to whom this Policy applies who becomes aware of information that has the possibility of being Material Information must immediately
disclose that information to the CEO or CFO. Schedule “B” attached hereto is a non-exhaustive list of examples of Material Information.
        4.3        Any person to whom this Policy applies and who has knowledge of Undisclosed Material Information must treat the Material Information as
confidential until the Material Information has been Generally Disclosed.
1

    4.4     Undisclosed Material Information shall not be disclosed to anyone except in the necessary course of business. If Undisclosed Material Information has
been disclosed in the necessary course of business, anyone so informed must clearly understand that it is to be kept confidential, and, in
appropriate circumstances, execute a confidentiality agreement in a form acceptable to the CEO or CFO of the Company. Schedule “C”
attached hereto lists circumstances where securities regulators believe disclosure may be in the “necessary course of business”. When in doubt,
all persons to whom this Policy applies must consult with the CEO of the Company to determine whether disclosure in a particular
circumstance is in the necessary course of business.
 
    For greater certainty, disclosure to analysts, institutional investors, other market professionals and members of the press and other media will not be
considered to be in the necessary course of business. “Tipping”, which refers to the disclosure of Undisclosed Material Information to third
parties outside the necessary course of business, is prohibited.
    4.5     In order to prevent the misuse of and inadvertent disclosure of Undisclosed Material Information, the procedures set forth below should be observed at
all times:
        •    documents and files containing confidential information should be kept in a safe place to which access is restricted to individuals who “need to know”
that information in the necessary course of business and code names should be used if necessary;
    
        •    confidential matters should not be discussed in places where the discussion may be overheard;
    
        •    transmission of documents containing Undisclosed Material Information by electronic means will be made only where it is reasonable to believe that the
transmission can be made and received under secure conditions such as a dedicated server; and
    
        •    unnecessary copying of documents containing Undisclosed Material Information must be avoided and extra copies of documents must be promptly
removed from meeting rooms and work areas at the conclusion of the meeting and must be destroyed if no longer required.
5.     Trading of Securities of the Company
    5.1     “Insider Trading”, which refers to persons in a Special Relationship with the Company purchasing or selling or otherwise monetizing securities of the
Company while in possession of Undisclosed Material Information, is prohibited.
    5.2     Board Members and certain Senior Officers and employees must notify and consult with the CFO before the purchase or sale of any securities of the
Company.
    The CFO may designate the CEO to act as an alternate or delegate when the CFO, is not available. The CFO must obtain the approval of the CEO
before the CFO sells any securities of the Company.
    5.3     In addition to Section 5.2, (a) Board Members, (b) Officers and (c) director-level Employees, together with (d) the administrative assistants of the
persons described in clauses (b) and (c) above and (e) other Employees and Contractors of the Company who are designated from time to time
by the CEO or CFO of the Company, shall not purchase or sell or otherwise monetize securities of the Company except during a ‘Trading
Window’ when there is no ‘Blackout Period’ in effect.
2

    5.4     “Trading Window” means: (a) the period of time beginning at 6:00 a.m. (EST) on the third day on which the NASDAQ is open for trading and on
which the trading in the Company’s securities is not halted or suspended (a “Trading Day”) after the financial results for a fiscal quarter or
fiscal year have been disclosed by way of a news release (a “Financial News Release”) and ending at 11:59 p.m. (EST) on the 14th day of the
last month of that quarter and (b) any other period designated by the Chief Financial Officer and communicated to those persons to whom this
Policy applies.
        
        “Blackout Period” means: (a) any time when trading securities of the Company is prohibited pursuant to this Policy; and (b) any other period designated by
the Chief Financial Officer and communicated to those persons to whom this Policy applies.
    5.5     The trading prohibitions in Sections 5.1, 5.2, 5.3 and 5.4 do not apply to the acquisition of securities through the exercise of share options, but do apply
to the sale of the securities acquired through the exercise of the option.
    5.6     Illegal Insider trading in securities of public companies and issuers other than the Company and Tipping by persons in a Special Relationship with the
Company can bring the Company into disrepute. Accordingly, neither the Company nor persons in a Special Relationship with the Company
who are also persons in a Special Relationship with another company or issuer and who possess Undisclosed Material Information relating to
that other company or issuer will (a) purchase or sell or otherwise monetize securities of the other company or issuer while they possess that
Undisclosed Material Information, or (b) engage in Tipping.
6.     Consequences of Non-Compliance with this Policy
    6.1     Any Board Member, Officer, Employee or Contractor who violates this Policy may face disciplinary action as is appropriate under the circumstances,
including termination of his or her position for cause without notice.
    6.2     Any person in a Special Relationship with the Company who violates this Policy may have also breached securities laws and the Company may refer
the matter to the appropriate regulatory authority, which could lead to the imposition of fines, penalties or imprisonment. Violation of this
Policy may also lead to civil liability for damages.
 
3

SCHEDULE “A”
Individuals and Entities to Whom This Policy Applies
“Board Members, Officers, Employees and Contractors” means a Board Member, Officer, Employee or Contractor of the Company or its subsidiaries. As
described below, all Board Members, Officers, Employees and Contractors are also persons in a Special Relationship with the Company.
“Contractor” means an independent contractor who is engaged in an employee-like capacity by the Company.
“Employee” means a full-time, part-time, or contract employee of the Company or any of its subsidiaries.
“Insider” means:
    (1)     a Board Member or a Senior Officer of the Company;
    
    (2)     a person who beneficially owns, directly or indirectly, more than 10% of the voting securities of the Company or who exercises control or direction over
more than 10% of the votes attached to the voting securities of the Company (a “10% Shareholder”);
    
    (3)     a Board Member or a Senior Officer of a subsidiary of the Company; or
    
    (4)    a Board Member or a Senior Officer of a 10% Shareholder of the Company.
“Officer” means those persons who are identified as an officer under applicable securities laws.
“Persons in a Special Relationship with the Company” means:
    (1)     each Board Member, Officer, Employee and Contractor;
    
    (2)     each 10% Shareholder;
    
    (3)     each Board Member, officer, employee or contractor of a 10% Shareholder;
    
    (4)     each member of an operating or advisory committee of the Company or its     subsidiaries;
    
    (5)     each Board Member, officer, partner and employee of a company that is engaging in any business or professional activity with the Company or its
subsidiaries and who routinely comes into contact with Material Information;
    
    (6)     each person or company that learned of Undisclosed Material Information with respect to the Company from a person or company described in (1)
though (5) of this definition and knew or ought reasonably to have known that the other person or company was in such a special relationship;
and
    
    (7)     any spouse, live-in partner or relative of any of the individuals referred to in (1) through (6) who resides in the same household as that individual.
    
    (8)     A company is considered to be a “Subsidiary” of another company if it is controlled by (a) that other, (b) that other and one or more companies, each of
which is controlled by that other, or (c)
4

two or more companies, each of which is controlled by that other; or it is a subsidiary of a company that is that other's subsidiary. In general, a
company will control another company when the first company owns more than 50% of the outstanding voting securities of that other
company.
“Senior Officer” means:
    (1)     the chair or a vice-chair of the Board of Directors of the Company or any of its subsidiaries, the CEO, CFO, CTO, COO, a Vice-President, the Corporate
Secretary, the Treasurer or the General Manager of the Company or any of its subsidiaries or any of their operating divisions; or
    
    (2)     any other individual who performs functions for the Company or any of its subsidiaries similar to those normally performed by an individual occupying
any of the offices listed in (1) above.
 
5

SCHEDULE “B”
Examples of Information That May Be Material
(Based on National Policy 51-201)
Changes in corporate structure
    •     changes in share ownership that may affect control of the company
    
    •     changes in corporate structure such as major reorganizations, amalgamations, or mergers
    
    •     take-over bids, issuer bids, or insider bids
Changes in capital structure
    •     the public or private sale of additional securities
    
    •     planned repurchases or redemptions of securities
    
    •     planned splits of common shares or offerings of warrants or rights to buy shares
    
    •     any share consolidation, share exchange, or stock dividend
    
    •     changes in a Company’s dividend payments or policies
    
    •    the possible initiation of a proxy fight
    
    •     material modifications to the rights of security holders
Changes in financial results
    •     a significant increase or decrease in near-term earnings prospects
    
    •     unexpected changes in the financial results for any period
    
    •     shifts in financial circumstances, such as cash flow reductions, major asset write-offs or write-downs
    
    •     changes in the value or composition of the Company’s assets
    
    •     any material change in the Company’s accounting policies
6

Changes in business and operations
    •     any significant development that affects the Company’s resources, technology, products or markets
    •     a significant change in capital investment plans or corporate objectives
    
    •     major labour disputes or disputes with major contractors or suppliers
    
    •     significant new contracts, products, patents, or services or significant losses of contracts or business
    
    •     significant discoveries by resource companies
    
    •     changes to the Board of Directors or executive management, including the departure of the Company’s CEO, CFO, CTO or COO (or persons in equivalent
positions)
    
    •     the commencement of, or developments in, material legal proceedings or regulatory matters
    
    •     waivers of corporate ethics and conduct rules for officers, directors, and other key employees
    
    •     any notice that reliance on a prior audit is no longer permissible
    
    •     de-listing of the Company’s securities or their movement from one quotation system or exchange to another
 
Acquisitions and dispositions
•     significant acquisitions or dispositions of assets, property or joint venture interests
•     acquisitions of other companies, including a take-over bid for, or merger with, another company
Changes in credit arrangements
•     the borrowing or lending of a significant amount of money
•     any mortgaging or encumbering of the Company’s assets
•     defaults under debt obligations, agreements to restructure debt, or planned enforcement procedures by a bank or any other creditors
•     changes in rating agency decisions
•     significant new credit arrangements
7

 
SCHEDULE “C”
Examples of Disclosures That May Be “Necessary in the Course Of Business”
(Reproduced from National Policy 51-201)
(1)     Disclosure to:
•     vendors, suppliers, or strategic partners on issues such as research and development, sales and marketing, and supply contracts;
•     employees, officers and board members;
•     lenders, legal counsel, auditors, underwriters, and financial and other professional advisors to the Company;
•     parties to negotiations;
•     labour unions and industry associations;
•     government agencies and non-governmental regulators;
•     credit rating agencies (provided that the information is disclosed for the purpose of assisting the agency to formulate a credit rating and the agency's
ratings generally are or will be publicly available);
(2)     Disclosures in connection with a private placement; and
(3)     Communications with controlling shareholders, in certain circumstances.
8

Exhibit 21.1
Subsidiaries of the Company
 Name of subsidiary
Jurisdiction of Incorporation

or Organization
Sphere 3D Inc.
Ontario, Canada
Sphere 3D Mining Corp.
Delaware, United States
101250 Investments Ltd.
Turks and Caicos Islands
Minority Equality Opportunities Acquisition Sponsor, LLC
Delaware, United States

Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements on Form S-3 (File No. 333-269663, 333-271989, and 333-283932); Form F-1
(File No. 333-254742); Forms F-3 (File Nos. 333-206357, 333-259277, and 333-259092) and Forms S-8 (File Nos. 333-203149, 333-203151, 333-205236, 333-
209251, 333-214605, 333-216209, 333-220152, 333-222771, 333-228380, 333-231472, 333-238145, 333-252632, 333-262154, 333-269298, 333-276395, 333-
279866, and 333-284524) of our report dated March 28, 2025 with respect to the audited financial statements of Sphere 3D Corp. (the “Company”) appearing in
this Annual Report on Form 10-K of the Company for the year ended December 31, 2024. Our report contains an explanatory paragraph regarding the
Company’s ability to continue as a going concern.
/s/ MaloneBailey, LLP
www.malonebailey.com
Houston, Texas
March 28, 2025

Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Kurt L. Kalbfleisch, Acting Chief Executive Officer of Sphere 3D Corp. 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 to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered
by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)
and 15d-15(f)) for the registrant and have:
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us 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 designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
 
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date:   March 28, 2025
/s/ Kurt L. Kalbfleisch
Kurt L. Kalbfleisch
Acting Chief Executive Officer

Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Kurt L. Kalbfleisch, Chief Financial Officer of Sphere 3D Corp.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 to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered
by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)
and 15d-15(f)) for the registrant and have:
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us 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 designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
 
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date:   March 28, 2025
/s/ Kurt L. Kalbfleisch
Kurt L. Kalbfleisch
Senior Vice-President and
Chief Financial Officer

Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION. 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In 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, 2024, as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kurt L. Kalbfleisch, Acting Chief Executive Officer 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 the
Registrant.
Date: March 28, 2025
/s/ Kurt L. Kalbfleisch
Kurt L. Kalbfleisch
Acting Chief Executive Officer

Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION. 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In 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, 2024, as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kurt L. Kalbfleisch, Senior Vice-President and Chief Financial Officer 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 the
Registrant.
Date: March 28, 2025
/s/ Kurt L. Kalbfleisch
Kurt L. Kalbfleisch
Senior Vice-President and
Chief Financial Officer

Exhibit 97.1
________________________________________________
SPHERE 3D CORP.
EXECUTIVE COMPENSATION CLAWBACK POLICY
________________________________________________
A.
OVERVIEW
The Board of Directors (the “Board”) of Sphere 3D Corp. (the “Company”) believes that it is in the best interests of the Company and its shareholders
to create and maintain a culture that emphasizes integrity and accountability. Accordingly, in accordance with the applicable rules of The Nasdaq Stock Market
LLC (the “Nasdaq Rules”), Section 10D and Rule 10D-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (“Rule 10D-1”), the Board
has adopted this Policy (the “Policy”) to provide for the recovery of erroneously awarded Incentive-based Compensation from Executive Officers. All
capitalized terms used and not otherwise defined herein shall have the meanings set forth in Section H, below.
B.
RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION
(1)    In the event of an Accounting Restatement, the Company will reasonably promptly recover the Erroneously Awarded Compensation Received in
accordance with the Nasdaq American Rules and Rule 10D-1 as follows:
(i)    After an Accounting Restatement, the Compensation Committee (if composed entirely of independent directors, or in the absence of such a
committee, a majority of independent directors serving on the Board) (the “Committee”) shall determine the amount of any Erroneously
Awarded Compensation Received by each Executive Officer and shall promptly notify each Executive Officer with a written notice containing
the amount of any Erroneously Awarded Compensation and a demand for repayment or return of such compensation, as applicable.
(a)    For Incentive-based Compensation based on (or derived from) the Company’s stock price or total shareholder return, where the amount
of Erroneously Awarded Compensation is not subject to mathematical recalculation directly from the information in the applicable
Accounting Restatement:
i.
The amount to be repaid or returned shall be determined by the Committee based on a reasonable estimate of the effect of the
Accounting Restatement on the Company’s stock price or total shareholder return upon which the Incentive-based Compensation
was Received; and
ii.
The Company shall maintain documentation of the determination of such reasonable estimate and provide the relevant
documentation as required to Nasdaq.
(ii)
The Committee shall have discretion to determine the appropriate means of recovering Erroneously Awarded Compensation based on the
particular facts and circumstances. Notwithstanding the foregoing, except as set forth in Section B(2) below, in no event may the Company
accept an amount that is less than the amount of Erroneously Awarded Compensation in satisfaction of an Executive Officer’s obligations
hereunder.
    

(iii)
To the extent that the Executive Officer has already reimbursed the Company for any Erroneously Awarded Compensation Received under any
duplicative recovery obligations established by the Company or applicable law, it shall be appropriate for any such reimbursed amount to be
credited to the amount of Erroneously Awarded Compensation that is subject to recovery under this Policy.
(iv)
To the extent that an Executive Officer fails to repay all Erroneously Awarded Compensation to the Company when due, the Company shall
take all actions reasonable and appropriate to recover such Erroneously Awarded Compensation from the applicable Executive Officer. The
applicable Executive Officer shall be required to reimburse the Company for any and all expenses reasonably incurred (including legal fees)
by the Company in recovering such Erroneously Awarded Compensation in accordance with the immediately preceding sentence.
(2)    Notwithstanding anything herein to the contrary, the Company shall not be required to take the actions contemplated by Section B(1) above if the
Committee (which, as specified above, is composed entirely of independent directors or in the absence of such a committee, a majority of the independent
directors serving on the Board) determines that recovery would be impracticable and any of the following three (3) conditions are met:
(i)
The Committee has determined that the direct expenses paid to a third party to assist in enforcing the Policy would exceed the amount to be
recovered. Before making this determination, the Company must make a reasonable attempt to recover the Erroneously Awarded
Compensation, document such attempt(s) and provide such documentation to Nasdaq;
(ii)
Recovery would violate home country law where that law was adopted prior to November 28, 2022, provided that, before determining that it
would be impracticable to recover any amount of Erroneously Awarded Compensation based on violation of home country law, the Company
has obtained an opinion of home country counsel, acceptable to Nasdaq, that recovery would result in such a violation and a copy of the
opinion is provided to Nasdaq; or
(iii)
Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the
Company, to fail to meet the requirements of Section 401(a)(13) or Section 411(a) of the Internal Revenue Code of 1986, as amended, and
regulations thereunder.
(3)    The Board may also cancel or recoup Incentive-based Compensation if the Executive Officer, without the consent of the Company, (A) has
engaged in or engages in activity that is in conflict with or adverse to the interests of the Company or any affiliate thereof while employed by or providing
services to the Company or any affiliate thereof, including fraud or conduct intentionally contributing to any material financial restatements or irregularities, or
(B) violates in any material respect a non-competition, non-solicitation, non-disparagement or non-disclosure covenant or agreement with the Company or any
affiliate thereof, as determined by the Board, and fails to cure such violation in all material respects within thirty (30) days of demand by the Company, or if the
Executive Officer’s employment or service is terminated for cause.
C.
DISCLOSURE REQUIREMENTS
The Company shall file all disclosures with respect to this Policy required by applicable U.S. Securities and Exchange Commission (“SEC”) filings and
rules, including without limitation, filing a copy of this Policy and any amendments thereto as an exhibit to the Company’s annual report on Form 10-K.
    

D.
PROHIBITION OF INDEMNIFICATION
The Company shall not be permitted to insure or indemnify any Executive Officer against (i) the loss of any Erroneously Awarded Compensation that is
repaid, returned or recovered pursuant to the terms of this Policy, or (ii) any claims relating to the Company’s enforcement of its rights under this Policy.
Further, the Company shall not enter into any agreement that exempts any Incentive-based Compensation that is granted, paid or awarded to an Executive
Officer from the application of this Policy or that waives the Company’s right to recovery of any Erroneously Awarded Compensation, and this Policy shall
supersede any such agreement (whether entered into before, on or after the Effective Date of this Policy).
E.
ADMINISTRATION AND INTERPRETATION
This Policy shall be administered by the Committee, and any determinations made by the Committee shall be final and binding on all affected
individuals.
The Committee is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate, or advisable for the
administration of this Policy and for the Company’s compliance with Nasdaq Rules, Section 10D, Rule 10D-1 and any other applicable law, regulation, rule or
interpretation of the SEC or Nasdaq promulgated or issued in connection therewith.
F.
AMENDMENT; TERMINATION
The Committee may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary. Notwithstanding anything in
this Section F to the contrary, no amendment or termination of this Policy shall be effective if such amendment or termination would (after taking into account
any actions taken by the Company contemporaneously with such amendment or termination) cause the Company to violate any federal securities laws, SEC
rule or Nasdaq rule.
G.
OTHER RECOVERY RIGHTS
This Policy shall be binding and enforceable against all Executive Officers and, to the extent required by applicable law or guidance from the SEC or
Nasdaq, their beneficiaries, heirs, executors, administrators or other legal representatives. The Committee intends that this Policy will be applied to the fullest
extent required by applicable law. Any employment agreement, equity award agreement, compensatory plan or any other agreement or arrangement with an
Executive Officer shall be deemed to include, as a condition to the grant of any benefit thereunder, an agreement by the Executive Officer to abide by the terms
of this Policy. Any right of recovery under this Policy is in addition to, and not in lieu of, any other remedies or rights of recovery that may be available to the
Company under applicable law, regulation or rule or pursuant to the terms of any policy of the Company or any provision in any employment agreement, equity
award agreement, compensatory plan, agreement or other arrangement.
H.
DEFINITIONS
For purposes of this Policy, the following capitalized terms shall have the meanings set forth below.
(1)
“Accounting Restatement” means an accounting restatement due to the material noncompliance of the Company with any financial reporting
requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material
to the previously issued financial statements (a “Big R” restatement), or that would result in a material misstatement if the error were corrected in the current
period or left uncorrected in the current period (a “little r” restatement).
    

(2)
“Clawback Eligible Incentive Compensation” means all Incentive-based Compensation Received by an Executive Officer (i) on or after the
effective date of the applicable Nasdaq Rules, (ii) after beginning service as an Executive Officer, (iii) who served as an Executive Officer at any time during the
applicable performance period relating to any Incentive-based Compensation (whether or not such Executive Officer is serving at the time the Erroneously
Awarded Compensation is required to be repaid to the Company), (iv) while the Company has a class of securities listed on a national securities exchange or a
national securities association, and (v) during the applicable Clawback Period (as defined below).
(3)
“Clawback Period” means, with respect to any Accounting Restatement, the three (3) completed fiscal years of the Company immediately
preceding the Restatement Date (as defined below), and if the Company changes its fiscal year, any transition period of less than nine (9) months within or
immediately following those three (3) completed fiscal years.
(4)
“Effective Date” means the date this Policy is adopted by the Board.
(5)
“Erroneously Awarded Compensation” means, with respect to each Executive Officer in connection with an Accounting Restatement, the
amount of Clawback Eligible Incentive Compensation that exceeds the amount of Incentive-based Compensation that otherwise would have been Received had
it been determined based on the restated amounts, computed without regard to any taxes paid.
(6)
“Executive Officer” means each individual who is currently or was previously designated as an “officer” of the Company as defined in Rule
16a-1(f) under the Exchange Act. For the avoidance of doubt, the identification of an executive officer for purposes of this Policy shall include each executive
officer who is or was identified pursuant to Item 401(b) of Regulation S-K or Item 6.A of Form 20-F, as applicable, as well as the principal financial officer and
principal accounting officer (or, if there is no principal accounting officer, the controller).
(7)
“Financial Reporting Measures” means measures that are determined and presented in accordance with the accounting principles used in
preparing the Company’s financial statements, and all other measures that are derived wholly or in part from such measures. Stock price and total shareholder
return (and any measures that are derived wholly or in part from stock price or total shareholder return) shall, for purposes of this Policy, be considered Financial
Reporting Measures. For the avoidance of doubt, a Financial Reporting Measure need not be presented in the Company’s financial statements or included in a
filing with the SEC.
(8)
“Incentive-based Compensation” means any compensation that is granted, earned or vested based wholly or in part upon the attainment of a
Financial Reporting Measure.
(9)
“Nasdaq” means the The Nasdaq Stock Market LLC.
(10)
“Received” means, with respect to any Incentive-based Compensation, actual or deemed receipt, and Incentive-based Compensation shall be
deemed received in the Company’s fiscal period during which the Financial Reporting Measure specified in the Incentive-based Compensation award is attained
(even if the payment or grant of the Incentive-based Compensation to the Executive Officer occurs after the end of that period).
(11)
“Restatement Date” means the earlier to occur of (i) the date the Board, a committee of the Board or the officers of the Company authorized to
take such action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare an Accounting
Restatement, or (ii) the date a court, regulator or other legally authorized body directs the Company to prepare an Accounting Restatement.