Sphere 3D: Fiscal 2Q20 Financial Results

Sphere 3D Corp. reported financial results for its second quarter ended June 30, 2020.

2FQ20 Results:
• Revenue was $0.9 million, compared to $1.0 million for 2FQ19.
• Gross margin was 49.6%, compared to 25.4% for 2FQ19.
• Operating expenses were $2.4 million, compared to $1.8 million for 2FQ19.
• Depreciation and amortization was $0.2 million, compared to $0.3 million for 2FQ19.
• Net loss from operations was $1.9 million, or a net loss of $0.41 per share, compared to a net loss from operations of $1.7 million, or a net loss of $0.72 per share, for 2FQ19.

1FH20 Results:
• Revenue was $1.9 million, compared to $3.1 million for 1FH19.
• Gross margin was 47.6%, compared to 30.4% for 1FH19. 
• Operating expenses were $4.0 million, compared to $4.2 million for 1FH19.
• Depreciation and amortization was $0.5 million in both 1FH20 and 1FH19.
• Net loss from operations was $3.0 million, or a net loss of $0.70 per share, compared to a net loss from operations of $3.5 million, or a net loss of $1.55 per share, in 1FH19. 

Select Events subsequent to second quarter end:
•  On July 14, 2020, the company entered into a definitive merger agreement (the Rainmaker Merger Agreement) pursuant to which it will acquire all of the outstanding securities of Rainmaker Worldwide Inc., a global Water-as-a-Service (WaaS) provider. Upon closing, the company’s name will change to Rainmaker Worldwide Inc., and its business model will focus on Water-as-a-Service. Rainmaker management will assume leadership of the combined entity. Under the terms of the agreement, Rainmaker, a Nevada company, will merge with S3D Nevada Inc., a Nevada company wholly-owned by the company, and the merged entity will be a wholly-owned subsidiary of the company. Rainmaker shareholders will receive 0.33 of a share of the company for each whole share of Rainmaker exchanged and one-third of a warrant or option for each whole warrant or option then held by such Rainmaker shareholder. Upon completion of the transaction the company expects to remain listed on the Nasdaq market and will change its name to Rainmaker Worldwide Inc. and apply to change its trading symbol from ANY to RAIN. After completion of the transaction, it is expected that current holders of Rainmaker will own approximately 80% of the company, on a fully diluted basis, as a result of their exchange of securities in the transaction. The transaction is subject to completion of an equity financing, or series of financings, for a minimum of $15.0 million at a share price to be mutually agreed upon prior to closing and such other customary regulatory and shareholder approvals, including the approval of Nasdaq. Closing is expected to occur in the fall of 2020, but in any event prior to December 31, 2020 and subject to extension to February 28, 2021 in certain circumstances. The intent of the transaction is to transform the company to a Commercial WaaS provider.
•  On August 3, 2020, shareholders of 101250 Investments Ltd. (101 Invest), a company existing under the laws of the Turks & Caicos Islands and a water partner of Rainmaker, entered into a share purchase agreement with the company. As a result, 101 Invest will become a wholly-owned subsidiary of the company. Under the terms of the agreement, the company shall issue 480,000 common shares at $3.25 per share, subject to regulatory and Nasdaq  approvals, for a purchase price of $1,560,000. The common shares contain a legend, either statutory or contractual, which will restrict the resale of the common shares for a period of six-months and one day from the closing date. In addition, the company shall hold back and retain 96,000 of the common shares for a six-month period from the closing date in support of any breaches of representations and warranties by the shareholders of 101 Invest under the purchase agreement. 101 Invest has exclusive rights to deliver the Rainmaker water solution to three Turks and Caicos island communities – Plantation Hills, Blue Sky and Village Estates.  The company completed this transaction to assist in the deployment and expansion of its opportunities in the WaaS segment.
•  Certain transactions which were completed after the reporting period, will increase the company’s equity balance by adding approximately $2.0 million to the equity balance that was reported as of June 30, 2020.