Ontario, Canada | 98-1220792 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | |
895 Don Mills Road, Bldg. 2, Suite 900 | ||
Toronto, Ontario, Canada, M3C 1W3 | ||
(Address of principal executive offices) |
Item 1. | Page | |||
Item 2. | ||||
Item 3. | ||||
Item 4. | ||||
Item 1. | ||||
Item 1A. | ||||
Item 2. | ||||
Item 3. | ||||
Item 4. | ||||
Item 5. | ||||
Item 6. | ||||
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(Unaudited) | ||||||||
Revenue | $ | 2,130 | $ | 2,373 | ||||
Cost of revenue | 1,435 | 1,930 | ||||||
Gross profit | 695 | 443 | ||||||
Operating expenses: | ||||||||
Sales and marketing | 453 | 781 | ||||||
Research and development | 697 | 1,111 | ||||||
General and administrative | 1,252 | 3,000 | ||||||
2,402 | 4,892 | |||||||
Loss from operations | (1,707 | ) | (4,449 | ) | ||||
Other income (expense): | ||||||||
Interest expense, related party | (142 | ) | (558 | ) | ||||
Interest expense | (3 | ) | — | |||||
Other income (expense), net | 8 | (126 | ) | |||||
Net loss from continuing operations | (1,844 | ) | (5,133 | ) | ||||
Net loss from discontinued operations | — | (1,690 | ) | |||||
Net loss | $ | (1,844 | ) | $ | (6,823 | ) | ||
Net loss per share: | ||||||||
Continuing operations | $ | (0.82 | ) | $ | (5.35 | ) | ||
Discontinued operations | — | (1.76 | ) | |||||
Net loss per share basic and diluted | $ | (0.82 | ) | $ | (7.11 | ) | ||
Shares used in computing net loss per share: | ||||||||
Basic and diluted | 2,236,590 | 959,828 |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(Unaudited) | ||||||||
Net loss | $ | (1,844 | ) | $ | (6,823 | ) | ||
Other comprehensive income: | ||||||||
Foreign currency translation adjustment | 40 | 641 | ||||||
Total other comprehensive income | 40 | 641 | ||||||
Comprehensive loss | $ | (1,804 | ) | $ | (6,182 | ) |
March 31, 2019 | December 31, 2018 | ||||||
Assets | (Unaudited) | ||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 139 | $ | 341 | |||
Accounts receivable, net | 859 | 1,142 | |||||
Inventories | 1,247 | 1,230 | |||||
Other current assets | 596 | 784 | |||||
Total current assets | 2,841 | 3,497 | |||||
Investment in affiliate | 2,100 | 2,100 | |||||
Property and equipment, net | 5 | 6 | |||||
Intangible assets, net | 3,101 | 3,348 | |||||
Goodwill | 1,385 | 1,385 | |||||
Other assets | 1,114 | 950 | |||||
Total assets | $ | 10,546 | $ | 11,286 | |||
Liabilities and Shareholders’ Deficit | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 5,298 | $ | 4,600 | |||
Accrued liabilities | 1,165 | 1,711 | |||||
Accrued payroll and employee compensation | 1,470 | 1,717 | |||||
Deferred revenue | 692 | 988 | |||||
Debt, related party | 500 | 500 | |||||
Line of credit | 365 | 100 | |||||
Other current liabilities | 104 | 23 | |||||
Total current liabilities | 9,594 | 9,639 | |||||
Series A redeemable preferred shares | 6,701 | 6,571 | |||||
Deferred revenue, long-term | 772 | 667 | |||||
Long-term debt, related party | 523 | — | |||||
Other non-current liabilities | 138 | 16 | |||||
Total liabilities | 17,728 | 16,893 | |||||
Commitments and contingencies (Note 14) | |||||||
Shareholders’ deficit: | |||||||
Common shares, no par value; 2,300,071 and 2,219,141 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively | 183,753 | 183,524 | |||||
Accumulated other comprehensive loss | (1,776 | ) | (1,816 | ) | |||
Accumulated deficit | (189,159 | ) | (187,315 | ) | |||
Total shareholders’ deficit | (7,182 | ) | (5,607 | ) | |||
Total liabilities and shareholders’ deficit | $ | 10,546 | $ | 11,286 |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Operating activities: | (Unaudited) | ||||||
Net loss | $ | (1,844 | ) | $ | (6,823 | ) | |
Adjustments to reconcile net loss to cash used in operating activities: | |||||||
Depreciation and amortization | 267 | 1,484 | |||||
Share-based compensation | 124 | 821 | |||||
Preferred shares interest expense, related party | 130 | — | |||||
Amortization of debt issuance costs | — | 183 | |||||
Fair value adjustment of warrants | — | (259 | ) | ||||
Payment in-kind interest expense, related party | — | 63 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 282 | 1,036 | |||||
Inventories | (16 | ) | 709 | ||||
Accounts payable and accrued liabilities | 70 | 2,228 | |||||
Accrued payroll and employee compensation | (62 | ) | (823 | ) | |||
Deferred revenue | (191 | ) | (465 | ) | |||
Other assets and liabilities, net | 250 | (265 | ) | ||||
Net cash used in operating activities | (990 | ) | (2,111 | ) | |||
Investing activities: | |||||||
Purchase of property and equipment | — | (8 | ) | ||||
Net cash used in investing activities | — | (8 | ) | ||||
Financing activities: | |||||||
Proceeds from debt - related party | 523 | — | |||||
Proceeds from line of credit, net | 265 | — | |||||
Payments on debt, related party | — | (192 | ) | ||||
Net cash provided by (used in) financing activities | 788 | (192 | ) | ||||
Effect of exchange rate changes on cash | — | 40 | |||||
Net decrease in cash and cash equivalents | (202 | ) | (2,271 | ) | |||
Cash and cash equivalents, beginning of period | 341 | 4,598 | |||||
Cash and cash equivalents, end of period | 139 | 2,327 | |||||
Less: Cash and cash equivalents, discontinued operations | — | 2,163 | |||||
Cash and cash equivalents of continuing operations, end of period | $ | 139 | $ | 164 |
Supplemental disclosures of cash flow information: | |||||||
Cash paid for interest | $ | 10 | $ | 379 | |||
Supplemental disclosures of non-cash investing and financing activities: | |||||||
Issuance of common shares for settlement of related party liabilities | $ | 105 | $ | 483 | |||
Issuance of common shares for settlement of liabilities | $ | — | $ | 787 |
Common Shares | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Shareholders' Deficit | |||||||||||||||
Shares | Amount | |||||||||||||||||
Balance at January 1, 2019 | 2,219,141 | $ | 183,524 | $ | (1,816 | ) | $ | (187,315 | ) | $ | (5,607 | ) | ||||||
Issuance of common shares pursuant to the vesting of restricted stock units | 38,930 | — | — | — | — | |||||||||||||
Issuance of restricted stock awards | 42,000 | 105 | — | — | 105 | |||||||||||||
Share-based compensation | — | 124 | — | — | 124 | |||||||||||||
Other comprehensive income | — | — | 40 | — | 40 | |||||||||||||
Net loss | — | — | — | (1,844 | ) | (1,844 | ) | |||||||||||
Balance at March 31, 2019 | 2,300,071 | $ | 183,753 | $ | (1,776 | ) | $ | (189,159 | ) | $ | (7,182 | ) | ||||||
Common Shares | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Shareholders' Equity | |||||||||||||||
Shares | Amount | |||||||||||||||||
Balance at January 1, 2018 | 889,461 | $ | 173,871 | $ | (1,981 | ) | $ | (161,427 | ) | $ | 10,463 | |||||||
Adoption of accounting standards | — | — | — | 320 | 320 | |||||||||||||
Issuance of common shares for warrant exchange | 178,875 | 1,364 | — | — | 1,364 | |||||||||||||
Issuance of common shares for settlement of related party interest expense | 43,120 | 483 | — | — | 483 | |||||||||||||
Issuance of common shares pursuant to the vesting of restricted stock units | 26,353 | — | — | — | — | |||||||||||||
Issuance of restricted stock awards | 40,654 | 787 | — | — | 787 | |||||||||||||
Share-based compensation | — | 821 | — | — | 821 | |||||||||||||
Other comprehensive income | — | — | 641 | — | 641 | |||||||||||||
Net loss | — | — | — | (6,823 | ) | (6,823 | ) | |||||||||||
Balance at March 31, 2018 | 1,178,463 | $ | 177,326 | $ | (1,340 | ) | $ | (167,930 | ) | $ | 8,056 |
1. | Organization and Business |
2. | Significant Accounting Policies |
3. | Discontinued Operations |
Three Months Ended March 31, 2018 | ||||
Revenue | $ | 17,075 | ||
Cost of revenue | 11,507 | |||
Gross profit | 5,568 | |||
Sales and marketing | 3,609 | |||
Research and development | 177 | |||
General and administrative | 2,422 | |||
6,208 | ||||
Loss from operations of discontinued operations | (640 | ) | ||
Other expense of discontinued operations: | ||||
Interest expense, related party | (97 | ) | ||
Interest expense | (453 | ) | ||
Other expense, net | (160 | ) | ||
Loss before income taxes of discontinued operations | (1,350 | ) | ||
Provision for income taxes of discontinued operations | 340 | |||
Net loss of discontinued operations | $ | (1,690 | ) |
Three Months Ended March 31, 2018 | ||||
Depreciation and amortization | $ | 638 | ||
Capital expenditures | $ | 8 |
4. | Certain Balance Sheet Items |
March 31, 2019 | December 31, 2018 | ||||||
Raw materials | $ | 240 | $ | 255 | |||
Work in process | 302 | 282 | |||||
Finished goods | 705 | 693 | |||||
$ | 1,247 | $ | 1,230 |
March 31, 2019 | December 31, 2018 | ||||||
Deferred cost - service contracts | $ | 329 | $ | 385 | |||
Prepaid insurance and services | 252 | 344 | |||||
Other | 15 | 55 | |||||
$ | 596 | $ | 784 |
March 31, 2019 | December 31, 2018 | ||||||
Prepaid insurance and services | $ | 619 | $ | 653 | |||
Deferred cost – service contracts | 241 | 270 | |||||
Right-of-use asset | 225 | — | |||||
Other | 29 | 27 | |||||
$ | 1,114 | $ | 950 |
5. | Intangible Assets |
March 31, 2019 | December 31, 2018 | ||||||
Developed technology | $ | 13,383 | $ | 13,383 | |||
Channel partner relationships | 730 | 730 | |||||
Capitalized development costs(1) | 2,959 | 2,918 | |||||
Customer relationships | 380 | 380 | |||||
17,452 | 17,411 | ||||||
Accumulated amortization: | |||||||
Developed technology | (12,348 | ) | (12,222 | ) | |||
Channel partner relationships | (267 | ) | (233 | ) | |||
Capitalized development costs(1) | (1,768 | ) | (1,655 | ) | |||
Customer relationships | (318 | ) | (303 | ) | |||
(14,701 | ) | (14,413 | ) | ||||
Total finite-lived assets, net | 2,751 | 2,998 | |||||
Indefinite-lived intangible assets - trade names | 350 | 350 | |||||
Total intangible assets, net | $ | 3,101 | $ | 3,348 |
(1) | Includes the impact of foreign currency exchange rate fluctuations. |
6. | Investment in Affiliate |
7. | Debt |
8. | Preferred Shares |
9. | Fair Value Measurements |
10. | Share Capital |
Date issued | Contractual life (years) | Exercise price | Number outstanding | Expiration | |||||
May 2015 | 5 | $800.00 | 4,200 | May 31, 2020 | |||||
October 2015 | 5 | $466.00 | 2,010 | October 14, 2020 | |||||
December 2015 | 5 | $500.00 | 5,138 | December 15, 2020 | |||||
December 2015 | 5 | $216.00 | 7,500 | (1) | December 4, 2020 | ||||
March 2016 | 5 | $500.00 | 150 | March 4, 2021 | |||||
November 2016 | 3 | $400.00 | 125 | November 8, 2019 | |||||
August 2017 | 5 | $42.00 | 37,500 | August 11, 2022 | |||||
August 2017 | 5 | $42.00 | 11,876 | August 16, 2022 | |||||
August 2017 | 5 | $42.00 | 25,625 | August 22, 2022 | |||||
April 2018 | 5 | $5.60 | 111,563 | April 17, 2023 | |||||
205,687 | (2) |
(1) | If the Company or any subsidiary thereof, at any time while this warrant is outstanding, enters into a Variable Rate Transaction (“VRT”) (as defined in the purchase agreement) and the issue price, conversion price or exercise price per share applicable thereto is less than the warrant exercise price then in effect, the exercise price shall be reduced to equal the VRT price. |
(2) | Includes warrants to purchase up to 40,000 common shares, in the aggregate, outstanding to related parties at March 31, 2019. |
11. | Equity Incentive Plans |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Cost of sales | $ | 693 | $ | 32,083 | ||||
Sales and marketing | 10,313 | 183,775 | ||||||
Research and development | 18,471 | 96,300 | ||||||
General and administrative | 94,565 | 508,626 | ||||||
Total share-based compensation expense | $ | 124,042 | $ | 820,784 |
12. | Net Loss per Share |
Three Months Ended March 31, | |||||
2019 | 2018 | ||||
Common share purchase warrants | 205,687 | 110,275 | |||
Restricted stock not yet vested or released | 114,066 | 106,026 | |||
Options outstanding | 10,298 | 22,019 | |||
Convertible notes | — | 40,833 | |||
Convertible notes interest | — | 40,945 |
13. | Related Party Transactions |
14. | Commitments and Contingencies |
Product Warranty | Deferred Revenue | ||||||
Liability at January 1, 2019 | $ | 22 | $ | 1,655 | |||
Settlements made during the period | — | (355 | ) | ||||
Change in liability for warranties issued during the period | — | 164 | |||||
Change in liability for pre-existing warranties | (22 | ) | — | ||||
Liability at March 31, 2019 | $ | — | $ | 1,464 | |||
Current liability | $ | — | $ | 692 | |||
Non-current liability | — | 772 | |||||
Liability at March 31, 2019 | $ | — | $ | 1,464 |
15. | Subsequent Event |
• | In May 2019, the Company signed purchase agreements for a private placement of 340,000 common shares of the Company for a purchase price of $680,000, or $2.00 per common share. The transaction is anticipated to close on or about May 15, 2019 subject to customary closing conditions. The Company intends to use the proceeds from the offering for general corporate and working capital purposes. |
Three Months Ended March 31, | ||||||
2019 | 2018 | |||||
Revenue | 100.0 | % | 100.0 | % | ||
Cost of revenue | 67.4 | 81.3 | ||||
Gross profit | 32.6 | 18.7 | ||||
Operating expenses: | ||||||
Sales and marketing | 21.3 | 32.9 | ||||
Research and development | 32.7 | 46.8 | ||||
General and administrative | 58.8 | 126.4 | ||||
112.8 | 206.1 | |||||
Loss from operations | (80.2 | ) | (187.4 | ) | ||
Interest expense | (6.8 | ) | (23.5 | ) | ||
Other income (expense), net | 0.4 | (5.3 | ) | |||
Net loss from continuing operations | (86.6 | ) | (216.2 | ) | ||
Net loss from discontinued operations | — | (71.2 | ) | |||
Net loss | (86.6 | )% | (287.4 | )% |
Three Months Ended March 31, | |||||||||
2019 | 2018 | Change | |||||||
Gross profit | 695 | 443 | 56.9 | % | |||||
Gross margin | 32.6 | % | 18.7 | % | 13.9 | pt |
Maturity Date | Interest Rate | Amount Outstanding | ||||||
Series A redeemable preferred shares | 11/13/2020 | 8.0% | $ | 6,701 | ||||
Unsecured debt - related party | 1/10/2021 | 8.0% | $ | 523 | ||||
Secured debt - related party | 6/13/2019 | 2.0% | $ | 500 | ||||
Line of credit | 12/19/2019 | 6.0% | $ | 365 |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Net cash used in operating activities | $ | (990 | ) | $ | (2,111 | ) | ||
Net cash used in investing activities | $ | — | $ | (8 | ) | |||
Net cash provided by (used in) financing activities | $ | 788 | $ | (192 | ) |
Item 1. | Legal Proceedings. |
Exhibit | Filed | Incorporated by Reference | |||
Number | Description | Herewith | Form | File No. | Date Filed |
3.1 | 6-K | 001-36532 | 3/25/2015 | ||
3.2 | 6-K | 001-36532 | 7/17/2017 | ||
3.3 | 8-K | 001-36532 | 10/2/2018 | ||
3.4 | 8-K | 001-36532 | 10/5/2018 | ||
3.5 | 8-K | 001-36532 | 11/5/2018 | ||
3.6 | 8-K | 001-36532 | 11/14/2018 | ||
3.7 | 6-K | 001-36532 | 7/17/2017 | ||
3.8 | 6-K | 001-36532 | 5/12/2017 | ||
10.1 | X | ||||
10.2 | X | ||||
10.3 | X | ||||
10.4 | X | ||||
31.1 | X | ||||
31.2 | X | ||||
32 | X | ||||
101.INS | XBRL Instance 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 |
Sphere 3D Corp. | ||||
Date: | May 15, 2019 | By: | /s/ Peter Tassiopoulos | |
Peter Tassiopoulos Chief Executive Officer (Principal Executive Officer) |
1. | PURPOSE OF PLAN |
2. | ELIGIBILITY |
3. | PLAN ADMINISTRATION |
3.1 | The Administrator. This Plan shall be administered by and all awards under this Plan shall be authorized by the Administrator. The “Administrator” means the Board or one or more committees appointed by the Board or another committee (within its delegated authority and in the manner and on the terms authorized by the Board) to administer all or certain aspects of this Plan. Any such committee shall be comprised solely of one or more directors or such number of directors as may be required under applicable law. A committee may delegate some or all of its authority to another committee so constituted, to the extent permitted by applicable laws. The Board or a committee comprised solely of directors may also delegate, to the extent permitted by applicable law, to one or more officers of the Corporation, its powers under this Plan (a) to designate the officers and employees of the Corporation and its Subsidiaries who will receive grants of awards under this Plan, and (b) to determine the number of shares subject to, and the other terms and conditions of, such awards. The Board may delegate different levels of authority to different committees with administrative and grant authority under this Plan. Unless otherwise provided in the Bylaws of the Corporation or the applicable |
3.2 | Powers of the Administrator. Subject to the express provisions of this Plan and applicable laws, the Administrator is authorized and empowered to do all things necessary or desirable in connection with the authorization of awards and the administration of this Plan (in the case of a committee or delegation to one or more officers, within the authority delegated to that committee or person(s) and in the manner and on the terms authorized by the Board), including, without limitation, the authority to: |
(a) | determine eligibility and, from among those persons determined to be eligible, the particular Eligible Persons who will receive an award under this Plan; |
(b) | grant awards to Eligible Persons, determine the price at which securities will be offered or awarded and the number of securities to be offered or awarded to any of such persons, determine the other specific terms and conditions of such awards consistent with the express limits of this Plan, establish the installments (if any) in which such awards shall become exercisable or shall vest (which may include, without limitation, performance and/or time-based schedules), or determine that no delayed exercisability or vesting is required, establish any applicable performance targets, determine the extent (if any) to which any applicable exercise and vesting requirements have been satisfied, and establish the events of termination or reversion of such awards; |
(c) | approve the forms of award agreements (which need not be identical either as to type of award or among participants); |
(d) | construe and interpret this Plan and any agreements defining the rights and obligations of the Corporation, its Subsidiaries, and participants under this Plan, make any and all determinations necessary under this Plan and any such agreements, further define the terms used in this Plan, and prescribe, amend and rescind rules and regulations relating to the administration of this Plan or the awards granted under this Plan; |
(e) | cancel, modify, or waive the Corporation’s rights with respect to, or modify, discontinue, suspend, or terminate any or all outstanding awards, subject to any required consent under Section 8.6.5; |
(f) | accelerate or extend the vesting or exercisability or extend the term of any or all such outstanding awards (in the case of options or stock appreciation rights, within the maximum ten-year term of such awards) in such circumstances as the Administrator may deem appropriate (including, without limitation, in connection with a termination of employment or services or other events of a personal nature) subject to any required consent under Section 8.6.5; |
(g) | adjust the number of Common Shares subject to any award, adjust the price of any or all outstanding awards or otherwise change previously imposed terms and conditions, in such circumstances as the Administrator may deem appropriate, in each case subject to Sections 4 and 8.6 (and subject to the no repricing provision below); |
(h) | determine the date of grant of an award, which may be a designated date after but not before the date of the Administrator’s action (unless otherwise designated by the Administrator, the date of grant of an award shall be the date upon which the Administrator took the action granting an award); |
(i) | determine whether, and the extent to which, adjustments are required pursuant to Section 7 hereof and authorize the termination, conversion, substitution or succession of awards upon the occurrence of an event of the type described in Section 7; |
(j) | acquire or settle (subject to Sections 7 and 8.6) rights under awards in cash, stock of equivalent value, or other consideration (subject to the no repricing provision below); and |
(k) | determine the fair market value of the Common Shares or awards under this Plan from time to time and/or the manner in which such value will be determined. |
3.3 | Binding Determinations. Any determination or other action taken by, or inaction of, the Corporation, any Subsidiary, or the Administrator relating or pursuant to this Plan (or any award made under this Plan) and within its authority hereunder or under applicable law shall be within the absolute discretion of that entity or body and shall be conclusive and binding upon all persons. Neither the Board nor any Board committee, nor any member thereof or person acting at the direction thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with this Plan (or any award made under this Plan), and all such persons shall be entitled to indemnification and reimbursement by the Corporation in respect of any claim, loss, damage or expense (including, without limitation, attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under any directors and officers liability insurance coverage that may be in effect from time to time. Neither the Board nor any Board committee, nor any member thereof or person acting at the direction thereof, nor the Corporation or any of its Subsidiaries, shall be liable for any damages of a participant should an option intended as an ISO (as defined below) fail to actually meet the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to ISOs, should any other award(s) fail to qualify for any intended tax treatment, should any award grant or other action with respect thereto not satisfy Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, or otherwise for any tax or other liability imposed on a participant with respect to an award. |
3.4 | Reliance on Experts. In making any determination or in taking or not taking any action under this Plan, the Administrator may obtain and may rely upon the advice of experts, including employees and professional advisors to the Corporation. To the fullest extent permitted by law, no director, officer or agent of the Corporation or any of its Subsidiaries shall be liable for any such action or determination taken or made or omitted in good faith. |
3.5 | Delegation. The Administrator may delegate ministerial, non-discretionary functions to individuals who are officers or employees of the Corporation or any of its Subsidiaries or to third parties. |
4. | COMMON SHARES SUBJECT TO THE PLAN; SHARE LIMITS |
4.1 | Shares Available. Subject to the provisions of Section 7.1, the shares that may be delivered under this Plan shall be the Corporation’s authorized but unissued Common Shares. For purposes of this Plan, “Common Shares” shall mean the common shares of the Corporation and such other securities or property as may become the subject of awards under this Plan, or may become subject to such awards, pursuant to an adjustment made under Section 7.1. |
4.2 | Share Limits. The maximum number of Common Shares that may be delivered pursuant to awards granted to Eligible Persons under this Plan (the “Share Limit”) is equal to the sum of the following: |
(1) | 640,843 Common Shares, plus |
(2) | the number of any Common Shares subject to stock options granted under the Corporation’s Second Amended and Restated Stock Option Plan (the “Prior Plan”) and outstanding on June 18, 2015 which expire, or for any reason are cancelled or terminated, after that date without being exercised. |
4.3 | Awards Settled in Cash, Reissue of Awards and Shares. Except as provided in the next sentence, shares that are subject to or underlie awards granted under this Plan which expire or for any reason are cancelled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under this Plan shall again be available for subsequent awards under this Plan. Shares that are exchanged by a participant or withheld by the Corporation as full or partial payment in connection with any award granted under this Plan, as well as any shares exchanged by a participant or withheld by the Corporation or one of its Subsidiaries to satisfy the tax withholding obligations related to any award granted under this Plan, shall be available for subsequent awards under this Plan. To the extent that an award granted under this Plan is settled in cash or a form other than Common Shares, the shares that would have been delivered had there been no such cash or other settlement shall not be counted against the shares available for issuance under this Plan. In the event that Common Shares are delivered in respect of a dividend equivalent right granted under this Plan, the number of shares actually delivered with respect to the award shall be counted against the share limits of this Plan. To the extent that Common Shares are delivered pursuant to the exercise of a stock appreciation right or stock option granted under this Plan, the number of shares actually delivered with respect to the award shall be counted against the share limits of this Plan. Refer to Section 8.10 for application of the foregoing share limits with respect to assumed awards. |
4.4 | Reservation of Shares; No Fractional Shares; Minimum Issue. The Corporation shall at all times reserve a number of Common Shares sufficient to cover the Corporation’s obligations and contingent obligations to deliver shares with respect to awards then outstanding under this Plan (exclusive of any dividend equivalent obligations to the extent the Corporation has the right to settle such rights in cash). No fractional shares shall be delivered under this Plan. The Administrator may pay cash in lieu of any fractional shares in settlements of awards under this Plan. The Administrator may from time to time impose a limit (of not greater than 100 shares) on the minimum number of shares that may be purchased or exercised as to awards granted under this Plan unless (as to any particular award) the total number purchased or exercised is the total number at the time available for purchase or exercise under the award. |
5. | AWARDS |
5.1 | Type and Form of Awards. The Administrator shall determine the type or types of award(s) to be made to each selected Eligible Person. Awards may be granted singly, in combination or in tandem. Awards also may be made in combination or in tandem with, in replacement of, as alternatives to, or as the payment form for grants or rights under any other employee or compensation plan of the Corporation or one of its Subsidiaries. The types of awards that may be granted under this Plan are (subject, in each case, to the no repricing provisions of Section 3.2): |
5.2 | [Reserved]. |
5.3 | Award Agreements. Each award shall be evidenced by either (1) a written award agreement in a form approved by the Administrator and executed by the Corporation by an officer duly authorized to act on its behalf, or (2) an electronic notice of award grant in a form approved by the Administrator and recorded by the Corporation (or its designee) in an electronic recordkeeping system used for the purpose of tracking award grants under this Plan generally (in each case, an “award agreement”), as the Administrator may provide and, in each case and if required by the Administrator, executed or otherwise electronically accepted by the recipient of the award in such form and manner as the Administrator may require. The Administrator may authorize any officer of the Corporation (other than the particular award recipient) to execute any or all award agreements on behalf of the Corporation. The award agreement shall set forth the material terms and conditions of the award as established by the Administrator consistent with the express limitations of this Plan. |
5.4 | Deferrals and Settlements. Payment of awards may be in the form of cash, Common Shares, other awards or combinations thereof as the Administrator shall determine, and with such restrictions as it may impose. The Administrator may also require or permit participants to elect to defer the issuance of shares or the settlement of awards in cash under such rules and procedures as it may establish under this Plan. The Administrator may also provide that deferred settlements include the payment or crediting of interest or other earnings on the deferral amounts, or the payment or crediting of dividend equivalents where the deferred amounts are denominated in shares. |
5.5 | Consideration for Common Shares or Awards. The purchase price for any award granted under this Plan or the Common Shares to be delivered pursuant to an award, as applicable, may be paid by means of any lawful consideration as determined by the Administrator, including, without limitation, one or a combination of the following methods: |
• | services rendered by the recipient of such award; |
• | cash, check payable to the order of the Corporation, or electronic funds transfer; |
• | notice and third party payment in such manner as may be authorized by the Administrator; |
• | the delivery of previously owned Common Shares; |
• | by a reduction in the number of shares otherwise deliverable pursuant to the award; or |
• | subject to such procedures as the Administrator may adopt, pursuant to a “cashless exercise” with a third party who provides financing for the purposes of (or who otherwise facilitates) the purchase or exercise of awards. |
5.6 | Definition of Fair Market Value. For purposes of this Plan, “fair market value” shall mean, unless otherwise determined or provided by the Administrator in the circumstances, the closing price (in regular trading) for a Common Share on the NASDAQ Stock Market (the “Market”) for the date in question or, if no sales of Common Shares were reported on the Market on that date, the closing price (in regular trading) for a Common Share on the Market for the next preceding day on which sales of Common Shares were reported on the Market. The Administrator may, however, provide with respect to one or more awards that the fair market value shall equal the closing price (in regular trading) for a Common Share on the Market on the last trading day preceding the date in question or the average of the high and low trading prices of a Common Share on the Market for the date in question or the most recent trading day. If the Common Shares are no longer listed or are no longer actively traded on the Market as of the applicable date, the fair market value of the Common Shares shall be the value as reasonably determined by the Administrator for purposes of the award in the circumstances. The Administrator also may adopt a different methodology for determining fair market value with respect to one or more awards if a different methodology is necessary or advisable to secure any intended favorable tax, legal or other treatment for the particular award(s) (for example, and without limitation, the Administrator may provide that fair market value for purposes of one or more awards will be based on an average of closing prices (or the average of high and low daily trading prices) for a specified period preceding the relevant date). |
(a) | transfers to the Corporation (for example, in connection with the expiration or termination of the award), |
(b) | the designation of a beneficiary to receive benefits in the event of the participant’s death or, if the participant has died, transfers to or exercise by the participant’s beneficiary, or, in the absence of a validly designated beneficiary or if such designation cannot be validly made, transfers by will or the laws of descent and distribution, |
(c) | subject to any applicable limitations on ISOs, transfers to a family member (or former family member) pursuant to a domestic relations order if approved or ratified by the Administrator, |
(d) | if the participant has suffered a disability, permitted transfers or exercises on behalf of the participant by his or her legal representative, or |
(e) | the authorization by the Administrator of “cashless exercise” procedures with third parties who provide financing for the purpose of (or who otherwise facilitate) the exercise of awards consistent with applicable laws and the express authorization of the Administrator. |
5.8 | International Awards. One or more awards may be granted to Eligible Persons who provide services to the Corporation or one of its Subsidiaries outside of the United States. Any awards granted to such persons may be granted pursuant to the terms and conditions of any applicable sub-plans, if any, appended to this Plan and approved by the Administrator. The awards so granted need not comply with other specific terms of this Plan, provided that shareholder approval of any deviation from the specific terms of this Plan is not required by applicable law or any applicable listing agency. |
6. | EFFECT OF TERMINATION OF EMPLOYMENT OR SERVICE ON AWARDS |
6.1 | General. The Administrator shall establish the effect of a termination of employment or service on the rights and benefits under each award under this Plan and in so doing may make distinctions based upon, inter alia, the cause of termination and type of award. If the participant is not an employee of the Corporation or one of its Subsidiaries and provides other services to the Corporation or one of its Subsidiaries, the Administrator shall be the sole judge for purposes of this Plan (unless a contract or the award otherwise provides) of whether the participant continues to render services to the Corporation or one of its Subsidiaries and the date, if any, upon which such services shall be deemed to have terminated. |
6.2 | Events Not Deemed Terminations of Service. Unless the express policy of the Corporation or one of its Subsidiaries, or the Administrator, otherwise provides, or except as otherwise required by applicable law, the employment relationship shall not be considered terminated in the case of (a) sick leave, (b) military leave, or (c) any other leave of absence authorized by the Corporation or one of its Subsidiaries, or the Administrator; provided that, unless reemployment upon the expiration of such leave is guaranteed by contract or law or the Administrator otherwise provides, such leave is for a period of not more than three months. In the case of any employee of the Corporation or one of its Subsidiaries on an approved leave of absence, continued vesting of the award while on leave from the employ of the Corporation or one of its Subsidiaries may be suspended until the employee returns to service, unless the Administrator otherwise provides or applicable law otherwise requires. In no event shall an award be exercised after the expiration of the term set forth in the applicable award agreement. |
6.3 | Effect of Change of Subsidiary Status. For purposes of this Plan and any award, if an entity ceases to be a Subsidiary of the Corporation a termination of employment or service shall be deemed to have occurred with respect to each Eligible Person in respect of such Subsidiary who does not continue as an Eligible Person in respect of the Corporation or another Subsidiary that continues as such after giving effect to the transaction or other event giving rise to the change in status unless the Subsidiary that is sold, spun-off or otherwise divested (or its successor or a direct or indirect parent of such Subsidiary or successor) assumes the Eligible Person’s award(s) in connection with such transaction. |
7. | ADJUSTMENTS; ACCELERATION |
7.1 | Adjustments. Subject to Section 7.2, upon (or, as may be necessary to effect the adjustment, immediately prior to): any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend) or reverse stock split; any merger, amalgamation, combination, consolidation, conversion or other reorganization; any spin-off, split-up, or similar extraordinary dividend distribution in respect of the Common Shares; or any exchange of Common Shares or other securities of the Corporation, or any similar, unusual or extraordinary corporate transaction in respect of the Common Shares; then the Administrator shall equitably and proportionately adjust (1) the number and type of Common Shares (or other securities) that thereafter may be made the subject of awards (including the specific share limits, maximums and numbers of shares set forth elsewhere in this Plan), (2) the number, amount and type of Common Shares (or other securities or property) subject to any outstanding awards, (3) the grant, purchase, or exercise price (which term includes the base price of any SAR or similar right) of any outstanding awards, and/or (4) the securities, cash or other property deliverable upon exercise or payment of any outstanding awards, in each case to the extent necessary to preserve (but not increase) the level of incentives intended by this Plan and the then-outstanding awards. |
7.2 | Corporate Transactions - Assumption and Termination of Awards. Upon the occurrence of any of the following: any recapitalization, merger, amalgamation, combination, consolidation, conversion or other reorganization in connection with which the Corporation does not survive (or does not survive as a public company in respect of its Common Shares); any exchange of Common Shares or other securities of the Corporation in connection with which the Corporation does not survive (or does not survive as a public company in respect of its Common Shares); a sale of all or substantially all the business, stock or assets of the Corporation in connection with which the Corporation does not survive (or does not survive as a public company in respect of its Common Shares); a dissolution of the Corporation; or any other event in which the Corporation does not survive (or does not survive as a public company in respect of its Common Shares); then the Administrator may make provision for a cash payment in settlement of, or for the termination, assumption, substitution or exchange of any or all outstanding share-based awards or the cash, securities or property deliverable to the holder of any or all outstanding share-based awards, based upon, to the extent relevant under the circumstances, the distribution or consideration payable to holders of the Common Shares upon or in respect of such event. Upon the occurrence of any event described in the preceding sentence, then, unless the Administrator has made a provision for the substitution, assumption, exchange or other continuation or settlement of the award or the award would otherwise continue in accordance with its terms in the circumstances: (1) unless otherwise provided in the applicable award agreement, each then-outstanding option and SAR shall become fully vested, all shares of restricted stock then outstanding shall fully vest free of restrictions, and each other award granted under this Plan that is then outstanding shall become payable to the holder of such award; and (2) each award shall terminate upon the related event; provided that the holder of an option or SAR shall be given reasonable advance notice of the impending termination and a |
7.3 | Other Acceleration Rules. The Administrator may override the provisions of Section 7.2 by express provision in the award agreement and may accord any Eligible Person a right to refuse any acceleration, whether pursuant to the award agreement or otherwise, in such circumstances as the Administrator may approve. The portion of any ISO accelerated in connection with an event referred to in Section 7.2 (or such other circumstances as may trigger accelerated vesting of the award) shall remain exercisable as an ISO only to the extent the applicable $100,000 limitation on ISOs is not exceeded. To the extent exceeded, the accelerated portion of the option shall be exercisable as a nonqualified stock option under the Code. |
8. | OTHER PROVISIONS |
Section 1 | Application |
Section 2 | Stock Options |
Section 3 | Restricted Stock and Incentive Stock Options |
Section 4 | Stock Appreciation Rights |
Section 5 | Restricted Stock Units |
Section 6 | Tendering of Shares |
Section 7 | Designation of beneficiary |
Section 8 | Miscellaneous |
1. | Definitions. In this note, in addition to the terms defined above, the following definitions apply: |
3. | The Borrower shall pay the Lender Interest on the Principal on a yearly basis. The yearly rate of interest will be calculated on the basis of a 365 day year. |
4. | The Borrower may prepay the Principal either in whole at one time or in part from time to time without notice to the Lender, penalty, or bonus. |
5. | The entire unpaid Principal and all accrued but unpaid Interest shall be due and payable on January 10, 2021. |
7. | The laws of Ontario and the laws of Canada applicable in that province, excluding any rule or principle of conflicts of law that may provide otherwise, govern this note. |
1. | Definitions. In this note, in addition to the terms defined above, the following definitions apply: |
3. | The Borrower shall pay the Lender Interest on the Principal on a yearly basis. The yearly rate of interest will be calculated on the basis of a 365 day year. |
4. | The Borrower may prepay the Principal either in whole at one time or in part from time to time without notice to the Lender, penalty, or bonus. |
5. | The entire unpaid Principal and all accrued but unpaid Interest shall be due and payable on January 10, 2021. |
7. | The laws of Ontario and the laws of Canada applicable in that province, excluding any rule or principle of conflicts of law that may provide otherwise, govern this note. |
1. | I have reviewed this quarterly report on Form 10-Q 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 issuer as of, and for, the periods presented in this report; |
4. | The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (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 company 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 issuer, 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 issuer’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 issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and |
5. | The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’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 issuer’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 issuer’s internal control over financial reporting. |
/s/ Peter Tassiopoulos |
Peter Tassiopoulos |
Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q 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 issuer as of, and for, the periods presented in this report; |
4. | The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (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 company 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 issuer, 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 issuer’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 issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and |
5. | The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’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 issuer’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 issuer’s internal control over financial reporting. |
/s/ Kurt L. Kalbfleisch |
Kurt L. Kalbfleisch |
Senior Vice-President and |
Chief Financial Officer |
• | 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. |
/s/ Peter Tassiopoulos |
Peter Tassiopoulos |
Chief Executive Officer |
• | 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 Company. |
/s/ Kurt L. Kalbfleisch |
Kurt L. Kalbfleisch |
Senior Vice-President and |
Chief Financial Officer |
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Document Entity Information Document - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
May 08, 2019 |
|
Document Information [Abstract] | ||
Entity Registrant Name | Sphere 3D Corp. | |
Entity Central Index Key | 0001591956 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 2,300,071 | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Current Reporting Status | Yes |
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Revenue | $ 2,130 | $ 2,373 |
Cost of revenue | 1,435 | 1,930 |
Gross Profit | 695 | 443 |
Sales and Marketing | 453 | 781 |
Research and Development | 697 | 1,111 |
General and Administrative | 1,252 | 3,000 |
Operating Expenses | 2,402 | 4,892 |
Loss from Operations | (1,707) | (4,449) |
Other income (expense) | ||
Interest Expense, Related Party | (142) | (558) |
Interest Expense | (3) | 0 |
Other income (expense), net | 8 | (126) |
Net loss from continuing operations | (1,844) | (5,133) |
Net loss from discontinued operations | 0 | (1,690) |
Net Loss | $ (1,844) | $ (6,823) |
Loss Per Share, Basic and Diluted [Abstract] | ||
Net loss from continuing operations, per share | $ (0.82) | $ (5.35) |
Net loss from discontinued operations, per share | 0.00 | (1.76) |
Net loss per share basic and diluted | $ (0.82) | $ (7.11) |
Weighted Average Number of Shares Outstanding, Diluted [Abstract] | ||
Basic and Diluted | 2,236,590 | 959,828 |
Condensed Consolidated Statements of Comprehensive Loss Statement - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Net Loss | $ (1,844) | $ (6,823) |
Other Comprehensive Income | ||
Foreign currency translation adjustment | 40 | 641 |
Total other comprehensive income | 40 | 641 |
Comprehensive Loss | $ (1,804) | $ (6,182) |
Condensed Consolidated Balance Sheets Consolidated Balance Sheets Parenthetical Data - $ / shares |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common Stock, No Par Value | $ 0 | $ 0 |
Common Stock, Shares, Issued | 2,300,071 | 2,219,141 |
Common Stock, Shares, Outstanding | 2,300,071 | 2,219,141 |
Condensed Consolidated Statements of Cash Flows Supplemental Disclosures of Cash Flow Information - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Supplemental Cash Flow Information [Abstract] | ||
Cash paid for interest | $ 10 | $ 379 |
Cash Flow, Noncash Investing and Financing Activities Disclosure [Abstract] | ||
Issuance of common shares for settlement of related party liabilities | 105 | 483 |
Issuance of common shares for settlement of liabilities | $ 0 | $ 787 |
Organization and Business |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] | Organization and Business Sphere 3D Corp. (the “Company”) 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.” The Company delivers data management, and desktop and application virtualization solutions through hybrid cloud, cloud and on premise implementations by its global reseller network. The Company achieves this through a combination of containerized applications, virtual desktops, virtual storage and physical hyper-converged platforms. The Company’s products allow organizations to deploy a combination of public, private or hybrid cloud strategies while backing them up with the latest storage solutions. The Company has a portfolio of brands including SnapCLOUD®, SnapServer®, SnapSync®, HVE, Glassware 2.0™, and V3®. In November 2018, the Company completed the sale of its outstanding shares of capital stock of Overland Storage, Inc. (“Overland”). In connection with the closing of the Purchase Agreement, the Company filed an articles of amendment to its articles of amalgamation setting forth the rights, privileges, restrictions and conditions of a new series of non-voting preferred shares of the Company (the “Series A Preferred Shares”). The Company entered into a Conversion Agreement between the Company and FBC Holdings S.a r.l. (“FBC Holdings”), pursuant to which $6.5 million of the Company’s then outstanding debt was converted into 6,500,000 Series A Preferred Shares (the “Preferred Shares”). Management has projected that cash on hand will not be sufficient to allow the Company to continue operations beyond May 31, 2019 if we 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. Our ability to raise additional funds through equity or debt financings or other sources may depend on the financial success of our current business and successful implementation of our key strategic initiatives, financial, economic and market conditions and other factors, some of which are beyond our control. No assurance can be given that we will be successful in raising the required capital at reasonable cost and at the required times, or at all. Further equity financings may have a dilutive effect on shareholders and any debt financing, if available, may require restrictions to be placed on our future financing and operating activities. If we require additional capital and are unsuccessful in raising that capital, we may not be able to continue our business operations and advance our growth initiatives, which could adversely impact our business, financial condition and results of operations. Significant changes from the Company’s current forecasts, including but not limited to: (i) failure to comply with the financial covenants in its debt facilities; (ii) shortfalls from projected sales levels; (iii) unexpected increases in product costs; (iv) increases in operating costs; (v) changes in the historical timing of collecting accounts receivable; and (vi) inability to maintain compliance with the requirements of the NASDAQ Capital Market and/or inability to maintain listing with the NASDAQ Capital Market 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. If any of these events occurs or the Company is unable to generate sufficient cash from operations or financing sources, the Company may be forced to liquidate assets where possible and/or curtail, suspend or cease planned programs or operations generally or seek bankruptcy protection or be subject to an involuntary bankruptcy petition, any of, which would have a material adverse effect on the Company’s business, results of operations, financial position and liquidity. The Company incurred losses from operations and negative cash flows from operating activities for the three months ended March 31, 2019, and such losses may continue for the foreseeable future. Based upon the Company's current expectations and projections for the next year, the Company believes that it will not have sufficient liquidity necessary to sustain operations beyond May 31, 2019. These factors, among others, raise substantial doubt that the Company will be able to continue as a going concern. The accompanying condensed 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. |
Significant Accounting Policies |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies [Text Block] | Significant Accounting Policies Principles of Consolidation The condensed 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. These condensed consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All intercompany balances and transactions have been appropriately eliminated in consolidation. In November 2018, the Company closed the Purchase Agreement related to its divestiture of Overland. The 2018 financial results of Overland have been reflected in the Company’s condensed consolidated statements of operations as discontinued operations. The Company’s 2018 statement of cash flows is presented on a combined basis, including continuing and discontinued operations. Unless it is otherwise disclosed, all other disclosures in the consolidated financial statements are related to continuing operations. Use of Estimates The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management estimates relate to the determination of provisions for impairment assessments of goodwill, other indefinite-lived intangible assets; revenue; allowance for doubtful receivables; inventory valuation; warranty provisions; and litigation claims. Actual results could differ from these estimates. Foreign Currency Translation The financial statements of foreign subsidiaries, for which the functional currency is the local currency, are 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 other comprehensive income (loss) within shareholders’ deficit. Gains or losses from foreign currency transactions are recognized in the condensed consolidated statements of operations. Such transactions resulted in a loss of $22,000 and $385,000 in three months ended March 31, 2019 and 2018, respectively. 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 carrying amounts approximate fair value due to the short maturities of these instruments. Accounts Receivable Accounts receivable is recorded at the invoiced amount and is non-interest bearing. We estimate our allowance for doubtful accounts based on an assessment of the collectability of specific accounts and the overall condition of the accounts receivable portfolio. When evaluating the adequacy of the allowance for doubtful accounts, we analyze specific trade and other receivables, historical bad debts, customer credits, customer concentrations, customer credit-worthiness, current economic trends and changes in customers’ payment terms and/or patterns. We review the allowance for doubtful accounts on a quarterly basis and record adjustments as considered necessary. Customer accounts are written-off against the allowance for doubtful accounts when an account is considered uncollectable. Inventories Inventories are stated at the lower of cost and net realizable value using the first-in-first-out method. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. We assess the value of inventories periodically based upon numerous factors including, among others, expected product or material demand, current market conditions, technological obsolescence, current cost, and net realizable value. If necessary, we write down our inventory for obsolete or unmarketable inventory by an amount equal to the difference between the cost of the inventory and the net realizable value. Investment in Affiliate The Company holds an investment in equity securities of a nonpublic company for business and strategic purposes. The equity securities do not have a readily determinable fair value and are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company reviews its investment on a regular basis to determine if the investment is impaired. For purposes of this assessment, the Company considers the investee’s cash position, earnings and revenue outlook, liquidity and management ownership, among other factors, in its review. If management’s assessment indicates that an impairment exists, the Company estimates the fair value of the equity investment and recognizes in current earnings an impairment loss that is equal to the difference between the fair value of the equity investment and its carrying amount. Goodwill and Intangible Assets Goodwill represents the excess of consideration paid over the value assigned to the net tangible and identifiable intangible assets acquired. 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. Purchased intangible assets are amortized on a straight-line basis over their economic lives of six to 25 years for channel partner relationships, three to nine years for developed technology, three to eight years for capitalized development costs, and two to 25 years for customer relationships as this method most closely reflects the pattern in which the economic benefits of the assets will be consumed. Impairment of Goodwill and Intangible Assets Goodwill and intangible assets are tested for impairment on an annual basis at December 31, or more frequently if there are indicators of impairment. Triggering events for impairment reviews may be indicators such as adverse industry or economic trends, restructuring actions, lower projections of profitability, or a sustained decline in our 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. Revenue Recognition The Company generates revenue primarily from: (i) solutions for standalone storage and integrated hyper-converged storage; (ii) professional services; and (iii) warranty and customer services. As of January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, which affects how the Company recognizes revenue in these arrangements. The Company applied the provisions of Topic 606 using the modified retrospective approach, with the cumulative effect of the adoption recognized as of January 1, 2018, to all contracts that had not been completed as of that date. Approximately 70% of the Company’s revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied at a point in time. These contracts are generally comprised of a single performance obligation to transfer products. Accordingly, the Company recognizes revenue when change of control has been transferred to the customer, generally at the time of shipment of products. The Company sells its products both directly to customers and through distributors generally under agreements with payment terms typically less than 45 days. Revenue on direct product sales, excluding sales to distributors, are not entitled to any specific right of return or price protection, except for any defective product that may be returned under our standard product warranty. Product sales to distribution customers that are subject to certain rights of return, stock rotation privileges and price protections, contain a component of “variable consideration.” Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products and is generally based upon a negotiated fixed price and is net of estimates for variable considerations. For performance obligations related to warranty and customer services, such as extended product warranties, the Company transfers control and recognizes revenue on a time-elapsed basis. The performance obligations are satisfied as services are rendered typically on a stand-ready basis over the contract term, which is generally 12 months. In limited circumstances where a customer is unable to accept shipment and requests products be delivered to, and stored on, the Company’s premises, also known as a “bill-and-hold” arrangements, revenue is recognized when: (i) the customer has requested delayed delivery and storage of the products, (ii) the goods are segregated from the inventory, (iii) the product is complete, ready for shipment and physical transfer to the customer, and (iv) the Company does not have the ability to use the product or direct it to another customer. The Company also enters into revenue arrangements that may consist of multiple performance obligations of its product and service offerings such as for sales of hardware devices and extended warranty services. The Company allocates contract fees to the performance obligations on a relative stand-alone selling price basis. The Company determines the stand-alone selling price based on its normal pricing and discounting practices for the specific product and/or service when sold separately. When the Company is unable to establish the individual stand-alone price for all elements in an arrangement by reference to sold separately instances, the Company may estimate the stand-alone selling price of each performance obligation using a cost plus a margin approach, by reference to third party evidence of selling price, based on the Company’s actual historical selling prices of similar items, or based on a combination of the aforementioned methodologies; whichever management believes provides the most reliable estimate of stand-alone selling price. Warranty and Extended Warranty The Company records a provision for standard warranties provided with all products. If future actual costs to repair were to differ significantly from estimates, the impact of these unforeseen costs or cost reductions would be recorded in subsequent periods. Separately priced extended on-site warranties and service contracts are offered for sale to customers on all product lines. The Company contracts with third party service providers to provide service relating to on-site warranties and service contracts. Extended warranty and service contract revenue and amounts paid in advance to outside service organizations are deferred and recognized as service revenue and cost of service, respectively, over the period of the service agreement. The Company will typically apply the practical expedient to agreements wherein the period between transfer of any good or service in the contract and when the customer pays for that good or service is one year or less. Advanced payments for long-term maintenance and warranty contracts do not give rise to a significant financing component. Rather, such payments are required by the Company primarily for reasons other than the provision of finance to the entity. Research and Development Costs Research and development expenses include payroll, employee benefits, share-based compensation expense, and other headcount-related expenses associated with product development. Research and development expenses also include third party development and programming costs, localization costs incurred to translate software for international markets, and the amortization of capitalized internally developed software costs. Comprehensive Loss Comprehensive 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 condensed consolidated statement of comprehensive loss. Share-based Compensation We account for share-based awards, and similar equity instruments, granted to employees, non-employee directors, and consultants under the fair value method. Share-based compensation award types include stock options and restricted stock. We use the Black-Scholes option pricing model to estimate the fair value of option awards on the measurement date, which generally is the date of grant. The expense is recognized over the requisite service period (usually the vesting period) for the estimated number of instruments for which service is expected to be rendered. The fair value of restricted stock units (“RSUs”) is estimated based on the market value of the Company’s common shares on the date of grant. The fair value of options granted to non-employees is estimated at the measurement date using the Black-Scholes option pricing model. Share-based compensation expense for options with graded vesting is recognized pursuant to an accelerated method. Share-based compensation expense for RSUs is recognized over the vesting period using the straight-line method. Share-based compensation expense for an award with performance conditions is recognized when the achievement of such performance conditions are determined to be probable. If the outcome of such performance condition is not determined to be probable or is not met, no compensation expense is recognized and any previously recognized compensation expense is reversed. Forfeitures are recognized in share-based compensation expense as they occur. We have not recognized, and do not expect to recognize in the near future, any tax benefit related to share-based compensation cost as a result of the full valuation allowance of our net deferred tax assets and its net operating loss carryforward. Recently Issued 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 August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820). The new guidance removes, modifies and adds to certain disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. The update is effective for annual reporting periods, including interim periods, beginning after December 15, 2019, with early adoption permitted. We do not expect the adoption of ASU 2018-13 to have a material effect on our consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). The update simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. An entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, if applicable. The loss recognized should not exceed the total amount of goodwill allocated to the reporting unit. The same impairment test also applies to any reporting unit with a zero or negative carrying amount. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The update is effective for annual reporting periods, including interim periods, beginning after December 15, 2019, on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed after January 1, 2017. We do not expect the adoption of ASU 2017-04 to have a material effect on our consolidated financial statements and related disclosures. Recently Adopted Accounting Pronouncements On January 1, 2019, we adopted ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), as amended. The update increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and requires disclosing key information about leasing arrangements. The update is effective for reporting periods beginning after December 15, 2018. The Company elected to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company adopted the new standard on January 1, 2019 and elected the package of practical expedients permitted under the transition guidance. The practical expedients allowed us to carry forward our historical assessment of whether existing agreements are or contain a lease and the classification of our existing lease arrangements. As a result of the adoption, the Company recorded right-of-use assets and liabilities on its condensed consolidated balance sheet, which resulted in an increase in the assets and liabilities of the condensed consolidated balance sheet of $253,000, using a discount rate of 8.0%. At March 31, 2019, the weighted-average remaining lease term of the Company’s operating leases was approximately 2.3 years. On January 1, 2019, ASU No. 2018-07, ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07). The update aligns measurement and classification guidance for share-based payments to nonemployees with the guidance applicable to employees. Under the new guidance, the measurement of equity-classified nonemployee awards will be fixed at the grant date. The update is effective for annual reporting periods, including interim periods, beginning after December 15, 2018, with early adoption permitted. The adoption of the new standard on January 1, 2019 did not have an effect on our financial position, results of operations or cash flows. |
Discontinued Operations (Notes) |
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Discontinued Operations and Disposal Groups [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block] | In November 2018, the Company transferred all the issued and outstanding shares of capital stock of Overland to SVTP in consideration for (i) the issuance to the Company of shares of Series A Preferred Stock of SVTP representing 19.9% of the outstanding shares of capital stock of SVTP as of the closing with a value of $2.1 million, (ii) the release of the Company from outstanding debt obligations totaling $41.7 million assumed by SVTP, and (iii) $1.0 million in cash proceeds from SVTP. In addition, the Company entered into a Conversion Agreement with FBC Holdings, pursuant to which $6.5 million of the Company’s outstanding related party secured note was converted into 6,500,000 Preferred Shares of the Company. In 2018, the Company recorded a loss on the divestiture of Overland of $4.3 million which was included in net loss of discontinued operations. At both March 31, 2019 and December 31, 2018, accrued payroll and employee compensation included $1.0 million for accrued one-time employee related costs associated with the divestiture, which was included in the 2018 loss on the disposal of discontinued operations. The Company and the buyer entered into a transition service agreement (“TSA”) to facilitate an orderly transition process. The TSA has terms ranging up to 24 months depending on the service. Expense incurred by the Company related to the TSA was approximately $81,000 for the three months ended March 31, 2019, and was included in continuing operations. The results of discontinued operations for Overland for the three months ended March 31, 2018 have been reflected as discontinued operations in the condensed consolidated statements of operations and comprehensive loss and consist of the following (in thousands):
Certain cash flows from discontinued operations consisted of the following amounts (in thousands):
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Certain Balance Sheet Items |
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Inventories Disclosures [Text Block] | The following table summarizes inventories (in thousands):
The following table summarizes other current assets (in thousands):
The following table summarizes other assets (in thousands):
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Intangible Assets |
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Intangible Assets Disclosure [Text Block] | Intangible Assets The following table summarizes intangible assets, net (in thousands):
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Amortization expense of intangible assets was $266,000 and $846,000 during the three months ended March 31, 2019 and 2018, respectively. Estimated amortization expense for intangible assets is expected to be approximately $764,000 for the remainder of 2019 and $936,000, $512,000, $329,000, $34,000, and $12,000 in fiscal 2020, 2021, 2022, 2023 and 2024, respectively. |
Investment in Affiliate (Notes) |
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Mar. 31, 2019 | |
Investments, Debt and Equity Securities [Abstract] | |
Investments in and Advances to Affiliates, Schedule of Investments [Text Block] | Investment in Affiliate In November 2018, in connection with the divestiture of Overland, the Company received 1,879,699 SVTP Preferred Shares representing 19.9% of the outstanding shares of capital stock of SVTP with a fair value of $2.1 million. The fair value of this investment was estimated using discounted cash flows and consideration of the Exchange Agreement described below. The Company concluded it does not have a significant influence over the investee. There were no known identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment at March 31, 2019. In November 2018, the Company also entered into an Exchange and Buy-Out Agreement (the “Exchange Agreement”), between the Company, FBC Holdings, SVTP, and MF Ventures LLC (“MFV”). Under the terms of the Exchange Agreement, (i) the Company granted FBC Holdings the right to exchange up to 2,500,000 of the Company’s Preferred Shares held by FBC Holdings for up to all of the SVTP Preferred Shares held by the Company (the “Exchange Right”), with such Exchange Right expiring within two years of the November 2018 closing, and (ii) MFV and SVTP have the right to purchase up to 2,500,000 Preferred Shares held by FBC Holdings (or, following exercise of the Exchange Right by FBC Holdings, the SVTP shares held by FBC Holdings) (the “Buy-out Right”), with such Buy-out Right expiring within one year of the November 2018 closing. If MFV or SVTP exercise their Buy-out Right prior to FBC Holdings exercise of its Exchange Right, then any Preferred Shares subject to the exercise of the Buy-out Right will automatically be exchanged for the same number of SVTP Preferred Shares that would have been issued to FBC Holdings had the Exchange Right been exercised prior to the buy-out. In connection with the Exchange Agreement, the Company entered into a security and pledge agreement between the Company and FBC Holdings, pursuant to which, among other things, the Company granted a security interest to FBC Holdings in all the SVTP Preferred Shares held by the Company to secure the Company’s obligations under the Exchange Agreement. |
Debt |
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Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
Debt Disclosure [Text Block] | Debt Related party secured note payable In November 2018, in connection with the divestiture of Overland, the Company entered into a $500,000 note payable held by SVTP. The note payable bears interest at a rate of 8.0% per annum. The principal amount of the note payable along with any unpaid interest is due on June 13, 2019. The obligations under the note payable are secured by the SVTP Preferred Shares held by the Company. Related party unsecured notes payable In January 2019, the Company entered into two unsecured notes payable, for an aggregate of $523,000 with two employees of the Company. Each of the notes payable bear interest at a rate of 2.0% per annum payable annually. The principal amount of the note payable along with any unpaid interest is due on January 10, 2021. Related party interest expense For the three months ended March 31, 2019, aggregate related party interest expense was $12,000. At March 31, 2019, there was $3,400 of accrued interest included in accrued liabilities for related party notes payable. Line of credit The Company has a line of credit agreement with a bank with a maximum borrowing limit of $400,000. Borrowings under this agreement bear interest at a rate of 6.0% per annum. The line of credit expires on December 19, 2019. The outstanding balance was $365,000 as of March 31, 2019. Borrowings under the line of credit are secured by the inventory and accounts receivable balances of the Company. The line of credit agreement also contains customary insurance requirements, limits on cross collateralization and events of default, including, among other things, failure to make payments, insolvency or bankruptcy, business termination, merger or consolidation or acquisition without written consent, a material impairment in the perfection or priority of the Lender’s lien in the collateral or in the value of such collateral, or material adverse change to the business that would impair the loan. |
Preferred Shares (Notes) |
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Mar. 31, 2019 | |
Other Liabilities Disclosure [Abstract] | |
Preferred Stock [Text Block] | Preferred Shares Series A Redeemable Preferred Shares In 2018, the Company filed an articles of amendment to its articles of amalgamation setting forth the rights, privileges, restrictions and conditions of a new series of non-voting preferred shares of the Company. On November 13, 2018, in connection with the disposition of Overland, the Company entered into a Conversion Agreement with FBC Holdings and $6.5 million of the outstanding principal amount of its secured note held by FBC Holdings was converted into 6,500,000 Preferred Shares. The Preferred Shares (i) are convertible into the Company’s common shares, subject to prior shareholder approval, at a conversion rate equal to $1.00 per share, plus accrued and unpaid dividends, divided by an amount equal to 0.85 multiplied by a 15-day volume weighted average price per common share prior to the date the conversion notice is provided (the “Conversion Rate”), (ii) carry a cumulative preferred dividend at a rate of 8.0% of the subscription price per preferred share, (iii) are subject to mandatory redemption for cash at the option of the holders thereof after a two-year period, and (iv) carry a liquidation preference equal to the subscription price per preferred share plus any accrued and unpaid dividends. At March 31, 2019, there was $201,000 of accrued preferred dividends included in Series A redeemable preferred shares and $130,000 included in related party interest expense. The common shares issuable upon the conversion of the Preferred Shares may constitute more than 20% of the common shares of the Company currently outstanding and may result in a change of control of the Company, and therefore the Company will seek shareholder approval for the issuance of all common shares issuable upon conversion of the Preferred Shares; provided, however, that the Company shall not seek shareholder approval unless such approval would occur after the six-month anniversary of the initial issue date of the Preferred Shares. In the event shareholder approval is not obtained, FBC Holdings and its affiliates will not be entitled to convert such Preferred Shares into common shares, but any unaffiliated transferee may convert all or any part of the Preferred Shares held by such transferee into the number of fully paid and non-assessable common shares that is equal to the number of Preferred Shares to be converted multiplied by the Conversion Rate in effect on the date of conversion; provided that, (x) after such conversion, the common shares issuable upon such conversion, together with all Common Shares held by such third party transferee that are or would be deemed to be aggregated under the rules of the Nasdaq Stock Market, in the aggregate would not exceed 19.9% of the total number of common shares of the Company then outstanding and (y) such conversion and issuance would not otherwise violate or cause the Company to violate the Company’s obligations under the rules or regulations of the Nasdaq Stock Market. |
Fair Value Measurements |
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Mar. 31, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair Value Disclosures [Text Block] | 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 Our financial instruments include cash equivalents, accounts receivable, prepaid expenses, accounts payable, accrued expenses, debt, related party debt and preferred shares. 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 receivable, prepaid expenses, accounts payable and accrued expenses are generally considered to be representative of their respective fair values because of the short-term nature of those instruments. The carrying value of debt and related party debt approximates its fair value as the borrowing rates are substantially comparable to rates available for loans with similar terms. The Company estimates the fair value of the preferred shares utilizing Level 2 inputs, including market yields for similar instruments. Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis The Company's non-financial assets such as investment in affiliate, goodwill, intangible assets and property and equipment are recorded at fair value when an impairment is recognized or at the time acquired in a business combination. |
Share Capital |
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Stockholders' Equity Note Disclosure [Text Block] | Share Capital In April 2018, the Company closed an underwritten public offering and issued 412,500 common shares and warrants to purchase up to an aggregate of 123,750 common shares at an aggregate purchase price of $5.60 per common share and accompanying warrant, as well as a concurrent closing of warrants to purchase an additional 14,063 common shares pursuant to the partial exercise of the over-allotment option granted to the underwriter. Gross proceeds, before underwriting discounts and commissions and other offering expenses, were approximately $2.3 million. In May 2018, the Company issued 80,100 common shares to satisfy payment obligations incurred by the Company in the aggregate amount of $0.3 million. The obligations were related to the Share Purchase Agreement entered into in February 2018. Reverse Stock Split On October 24, 2018, subject to the approval by the Company’s shareholders (which approval was obtained at the special shareholder meeting held on October 31, 2018), the Board of Directors of the Company authorized a share consolidation (also known as a reverse stock split) of the Company’s issued and outstanding common shares at a ratio of one-for-eight, which became effective on November 5, 2018. All share and per share amounts have been restated for all periods presented to reflect the share consolidation. Warrants At March 31, 2019, the Company had the following outstanding warrants to purchase common shares:
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Related Party Share Capital Transactions In March 2018, the Company entered into warrant exchange agreements, in a privately negotiated exchange under Section 4(a)(2) of the Securities Act of 1933, as amended, pursuant to which the Company issued 178,875 common shares in exchange for the surrender and cancellation of the Company’s then outstanding March 24, 2017 warrants (the “Exchange”). Immediately after the Exchange, the previously issued warrants became null and void. A related party participated in the Exchange by acquiring 37,500 common shares in exchange for the cancellation of a warrant to purchase 34,091 common shares. |
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Disclosure of Compensation Related Costs, Share-based Payments [Text Block] | Equity Incentive Plans During the three months ended March 31, 2019 and 2018, the Company granted awards of restricted stock units of 100,000 and 50, respectively, of which 100,000 were granted in 2019 outside of the 2015 Performance Incentive Plan. The restricted stock units were recorded at fair value on the date of grant. The restricted stock units typically vest over a period of approximately three years. The restricted stock units granted outside of the 2015 Performance Incentive Plan vest over a period of 18-months. Restricted Stock Awards During the three months ended March 31, 2019 and 2018, the Company granted restricted stock awards (“RSA”) 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. During the three months ended March 31, 2019 and 2018, the Company granted RSAs of 42,000 and 47,535, respectively, with a fair value of $105,000 and $787,000, respectively. Share-Based Compensation Expense The Company recorded the following compensation expense related to its share-based compensation awards, which 2018 includes amounts related to discontinued operations:
As of March 31, 2019, there was a total of $525,000 of unrecognized compensation expense related to unvested equity-based compensation awards. The expense associated with non-vested restricted stock units and options awards granted as of March 31, 2019 is expected to be recognized over a weighted-average period of 1.2 years. |
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Earnings Per Share [Text Block] | 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. 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. Anti-dilutive common share equivalents excluded from the computation of diluted net loss per share were as follows:
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Related Party Transactions |
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Mar. 31, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions Disclosure [Text Block] | Related Party Transactions In November 2018, the Company entered into a transition service agreement to facilitate an orderly transition process for the divestiture of Overland. The transition service agreement has terms ranging from up to 24 months depending on the service. Net expense incurred by the Company related to such agreement was approximately $81,000 during the three months ended March 31, 2019, and was included in continuing operations. |
Commitments and Contingencies |
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Text Block] | Commitments and Contingencies 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 March 31, 2019, the Company had no outstanding standby letters of credit. Warranty and Extended Warranty The Company had $0.6 million and $0.7 million in deferred costs included in other current and non-current assets related to deferred service revenue at March 31, 2019 and December 31, 2018, respectively. Changes in the liability for product warranty and deferred revenue associated with extended warranties and service contracts were as follows (in thousands):
Litigation The Company is, from time to time, subject to claims and suits arising in the ordinary course of business. In the opinion of management, the ultimate resolution of such pending proceedings will not have a material effect on the Company’s results of operations, financial position or cash flows. Other In January 2018, Mr. Vito Lupis filed a statement of claim in the Ontario Court of Justice alleging, among other things, breach of contracts, deceit and negligence against Mr. Giovanni J. Morelli, a former officer of the Company, and vicarious liability against the Company, in connection with stock purchase agreements and other related agreements that would have been entered into between Mr. Lupis and the Company in 2012. In March 2019, the Company and Mr. Lupis entered into a settlement agreement pursuant to which the Company has agreed to pay Mr. Lupis certain consideration, which is included in general and administrative expense, in exchange for a dismissal of the action. In April 2015, we filed a proof of claim in connection with bankruptcy proceedings of V3 Systems, Inc. (“V3”) based on breaches by V3 of the Asset Purchase Agreement entered into between V3 and the Company dated February 11, 2014 (the “APA”). On October 6, 2015, UD Dissolution Liquidating Trust (“UD Trust”), the apparent successor to V3, filed a complaint against us and certain of our current and former directors in the U.S. Bankruptcy Court for the District of Utah Central Division objecting to our proof of claim and asserting claims for affirmative relief against us and our directors. This complaint alleges, among other things, that Sphere 3D breached the APA and engaged in certain other actions and/or omissions that caused V3 to be unable to timely sell the Sphere 3D common shares received by V3 pursuant to the APA. The plaintiff seeks, among other things, monetary damages for the loss of the potential earn-out consideration, the value of the common shares held back by us pursuant to the APA and costs and fees. We believe the lawsuit to be without merit and intend to vigorously defend against the action. On December 23, 2015, we filed a motion seeking to dismiss the majority of the claims asserted by the UD Trust. On January 13, 2016, we filed a counterclaim against the UD Trust in which we allege that V3 breached numerous provisions of the APA. On July 22, 2016, we filed a motion seeking to transfer venue of this action to the United States District Court for the District of Delaware. The Bankruptcy Court granted our motion to transfer venue on August 30, 2016, and the case was formally transferred to the Delaware District Court on October 11, 2016. On November 13, 2018, the Delaware District Court referred the case to the Delaware Bankruptcy Court. The Delaware Bankruptcy Court has not yet set a hearing on our motion to dismiss. In March 2018, UD Trust filed a complaint in U.S. District Court, Northern California District (“California Complaint”) asserting that two transactions involving the Company constitute fraudulent transfers under federal and state law. First, UD Trust alleges that the consolidation of the Company’s and its subsidiaries’ indebtedness to the Cyrus Group into a debenture between FBC Holdings and the Company in December 2014 constitutes a fraudulent transfer. Second, UD Trust alleges that the Share Purchase Agreement constitutes a fraudulent transfer, and seeks to require that the proceeds of the transaction be placed in escrow until the V3 litigation is resolved. The California Complaint also asserts a claim against the Company’s former CEO for breach of fiduciary duty, and a claim against the Cyrus Group for aiding and abetting breach of fiduciary duty. We believe the lawsuit to be without merit and intend to vigorously defend against the action. On July 25, 2018, we filed a motion seeking to dismiss all of the claims asserted against the Company and its former CEO. On the same day, the Cyrus Group filed a motion seeking to dismiss all claims asserted against the Cyrus Group. |
Subsequent Event (Notes) |
3 Months Ended |
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Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events [Text Block] | Subsequent Event In May 2019, the Company signed purchase agreements for a private placement of 340,000 common shares of the Company for a purchase price of $680,000. The purchase price for one common share was $2.00. The transaction is anticipated to close on or about May 15, 2019 subject to customary closing conditions. The Company intends to use the proceeds from the offering for general corporate and working capital purposes. |
Significant Accounting Policies (Policies) |
3 Months Ended |
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Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Consolidation, Policy [Policy Text Block] | Principles of Consolidation The condensed 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. These condensed consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All intercompany balances and transactions have been appropriately eliminated in consolidation. In November 2018, the Company closed the Purchase Agreement related to its divestiture of Overland. The 2018 financial results of Overland have been reflected in the Company’s condensed consolidated statements of operations as discontinued operations. The Company’s 2018 statement of cash flows is presented on a combined basis, including continuing and discontinued operations. Unless it is otherwise disclosed, all other disclosures in the consolidated financial statements are related to continuing operations. |
Use of Estimates, Policy [Policy Text Block] | Use of Estimates The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management estimates relate to the determination of provisions for impairment assessments of goodwill, other indefinite-lived intangible assets; revenue; allowance for doubtful receivables; inventory valuation; warranty provisions; and litigation claims. Actual results could differ from these estimates. |
Foreign Currency Transactions and Translations Policy [Policy Text Block] | Foreign Currency Translation The financial statements of foreign subsidiaries, for which the functional currency is the local currency, are 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 other comprehensive income (loss) within shareholders’ deficit. Gains or losses from foreign currency transactions are recognized in the condensed consolidated statements of operations. |
Cash and Cash Equivalents, Policy [Policy Text Block] | 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 carrying amounts approximate fair value due to the short maturities of these instruments. |
Trade and Other Accounts Receivable, Policy [Policy Text Block] | Accounts Receivable Accounts receivable is recorded at the invoiced amount and is non-interest bearing. We estimate our allowance for doubtful accounts based on an assessment of the collectability of specific accounts and the overall condition of the accounts receivable portfolio. When evaluating the adequacy of the allowance for doubtful accounts, we analyze specific trade and other receivables, historical bad debts, customer credits, customer concentrations, customer credit-worthiness, current economic trends and changes in customers’ payment terms and/or patterns. We review the allowance for doubtful accounts on a quarterly basis and record adjustments as considered necessary. Customer accounts are written-off against the allowance for doubtful accounts when an account is considered uncollectable. |
Inventories, Policy [Policy Text Block] | Inventories Inventories are stated at the lower of cost and net realizable value using the first-in-first-out method. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. We assess the value of inventories periodically based upon numerous factors including, among others, expected product or material demand, current market conditions, technological obsolescence, current cost, and net realizable value. If necessary, we write down our inventory for obsolete or unmarketable inventory by an amount equal to the difference between the cost of the inventory and the net realizable value. |
Investment in Affiliate [Policy Text Block] | Investment in Affiliate The Company holds an investment in equity securities of a nonpublic company for business and strategic purposes. The equity securities do not have a readily determinable fair value and are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company reviews its investment on a regular basis to determine if the investment is impaired. For purposes of this assessment, the Company considers the investee’s cash position, earnings and revenue outlook, liquidity and management ownership, among other factors, in its review. If management’s assessment indicates that an impairment exists, the Company estimates the fair value of the equity investment and recognizes in current earnings an impairment loss that is equal to the difference between the fair value of the equity investment and its carrying amount. |
Goodwill and Intangible Assets, Policy [Policy Text Block] | Goodwill and Intangible Assets Goodwill represents the excess of consideration paid over the value assigned to the net tangible and identifiable intangible assets acquired. 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. Purchased intangible assets are amortized on a straight-line basis over their economic lives of six to 25 years for channel partner relationships, three to nine years for developed technology, three to eight years for capitalized development costs, and two to 25 years for customer relationships as this method most closely reflects the pattern in which the economic benefits of the assets will be consumed. |
Impairment or Disposal of Long-Lived Assets, Including Intangible Assets, Policy [Policy Text Block] | Impairment of Goodwill and Intangible Assets Goodwill and intangible assets are tested for impairment on an annual basis at December 31, or more frequently if there are indicators of impairment. Triggering events for impairment reviews may be indicators such as adverse industry or economic trends, restructuring actions, lower projections of profitability, or a sustained decline in our 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. |
Revenue Recognition, Policy [Policy Text Block] | Revenue Recognition The Company generates revenue primarily from: (i) solutions for standalone storage and integrated hyper-converged storage; (ii) professional services; and (iii) warranty and customer services. As of January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, which affects how the Company recognizes revenue in these arrangements. The Company applied the provisions of Topic 606 using the modified retrospective approach, with the cumulative effect of the adoption recognized as of January 1, 2018, to all contracts that had not been completed as of that date. Approximately 70% of the Company’s revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied at a point in time. These contracts are generally comprised of a single performance obligation to transfer products. Accordingly, the Company recognizes revenue when change of control has been transferred to the customer, generally at the time of shipment of products. The Company sells its products both directly to customers and through distributors generally under agreements with payment terms typically less than 45 days. Revenue on direct product sales, excluding sales to distributors, are not entitled to any specific right of return or price protection, except for any defective product that may be returned under our standard product warranty. Product sales to distribution customers that are subject to certain rights of return, stock rotation privileges and price protections, contain a component of “variable consideration.” Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products and is generally based upon a negotiated fixed price and is net of estimates for variable considerations. For performance obligations related to warranty and customer services, such as extended product warranties, the Company transfers control and recognizes revenue on a time-elapsed basis. The performance obligations are satisfied as services are rendered typically on a stand-ready basis over the contract term, which is generally 12 months. In limited circumstances where a customer is unable to accept shipment and requests products be delivered to, and stored on, the Company’s premises, also known as a “bill-and-hold” arrangements, revenue is recognized when: (i) the customer has requested delayed delivery and storage of the products, (ii) the goods are segregated from the inventory, (iii) the product is complete, ready for shipment and physical transfer to the customer, and (iv) the Company does not have the ability to use the product or direct it to another customer. The Company also enters into revenue arrangements that may consist of multiple performance obligations of its product and service offerings such as for sales of hardware devices and extended warranty services. The Company allocates contract fees to the performance obligations on a relative stand-alone selling price basis. The Company determines the stand-alone selling price based on its normal pricing and discounting practices for the specific product and/or service when sold separately. When the Company is unable to establish the individual stand-alone price for all elements in an arrangement by reference to sold separately instances, the Company may estimate the stand-alone selling price of each performance obligation using a cost plus a margin approach, by reference to third party evidence of selling price, based on the Company’s actual historical selling prices of similar items, or based on a combination of the aforementioned methodologies; whichever management believes provides the most reliable estimate of stand-alone selling price. |
Standard Product Warranty, Policy [Policy Text Block] | Warranty and Extended Warranty The Company records a provision for standard warranties provided with all products. If future actual costs to repair were to differ significantly from estimates, the impact of these unforeseen costs or cost reductions would be recorded in subsequent periods. |
Extended Product Warranty, Policy [Policy Text Block] | Separately priced extended on-site warranties and service contracts are offered for sale to customers on all product lines. The Company contracts with third party service providers to provide service relating to on-site warranties and service contracts. Extended warranty and service contract revenue and amounts paid in advance to outside service organizations are deferred and recognized as service revenue and cost of service, respectively, over the period of the service agreement. The Company will typically apply the practical expedient to agreements wherein the period between transfer of any good or service in the contract and when the customer pays for that good or service is one year or less. Advanced payments for long-term maintenance and warranty contracts do not give rise to a significant financing component. Rather, such payments are required by the Company primarily for reasons other than the provision of finance to the entity. |
Research and Development Expense, Policy [Policy Text Block] | Research and Development Costs Research and development expenses include payroll, employee benefits, share-based compensation expense, and other headcount-related expenses associated with product development. Research and development expenses also include third party development and programming costs, localization costs incurred to translate software for international markets, and the amortization of capitalized internally developed software costs. |
Comprehensive Income, Policy [Policy Text Block] | Comprehensive Loss Comprehensive 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 condensed consolidated statement of comprehensive loss. |
Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block] | Share-based Compensation We account for share-based awards, and similar equity instruments, granted to employees, non-employee directors, and consultants under the fair value method. Share-based compensation award types include stock options and restricted stock. We use the Black-Scholes option pricing model to estimate the fair value of option awards on the measurement date, which generally is the date of grant. The expense is recognized over the requisite service period (usually the vesting period) for the estimated number of instruments for which service is expected to be rendered. The fair value of restricted stock units (“RSUs”) is estimated based on the market value of the Company’s common shares on the date of grant. The fair value of options granted to non-employees is estimated at the measurement date using the Black-Scholes option pricing model. Share-based compensation expense for options with graded vesting is recognized pursuant to an accelerated method. Share-based compensation expense for RSUs is recognized over the vesting period using the straight-line method. Share-based compensation expense for an award with performance conditions is recognized when the achievement of such performance conditions are determined to be probable. If the outcome of such performance condition is not determined to be probable or is not met, no compensation expense is recognized and any previously recognized compensation expense is reversed. Forfeitures are recognized in share-based compensation expense as they occur. We have not recognized, and do not expect to recognize in the near future, any tax benefit related to share-based compensation cost as a result of the full valuation allowance of our net deferred tax assets and its net operating loss carryforward. |
New Accounting Pronouncements, Policy [Policy Text Block] | Recently Issued 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 August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820). The new guidance removes, modifies and adds to certain disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. The update is effective for annual reporting periods, including interim periods, beginning after December 15, 2019, with early adoption permitted. We do not expect the adoption of ASU 2018-13 to have a material effect on our consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). The update simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. An entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, if applicable. The loss recognized should not exceed the total amount of goodwill allocated to the reporting unit. The same impairment test also applies to any reporting unit with a zero or negative carrying amount. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The update is effective for annual reporting periods, including interim periods, beginning after December 15, 2019, on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed after January 1, 2017. We do not expect the adoption of ASU 2017-04 to have a material effect on our consolidated financial statements and related disclosures. Recently Adopted Accounting Pronouncements On January 1, 2019, we adopted ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), as amended. The update increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and requires disclosing key information about leasing arrangements. The update is effective for reporting periods beginning after December 15, 2018. The Company elected to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company adopted the new standard on January 1, 2019 and elected the package of practical expedients permitted under the transition guidance. The practical expedients allowed us to carry forward our historical assessment of whether existing agreements are or contain a lease and the classification of our existing lease arrangements. As a result of the adoption, the Company recorded right-of-use assets and liabilities on its condensed consolidated balance sheet, which resulted in an increase in the assets and liabilities of the condensed consolidated balance sheet of $253,000, using a discount rate of 8.0%. At March 31, 2019, the weighted-average remaining lease term of the Company’s operating leases was approximately 2.3 years. On January 1, 2019, ASU No. 2018-07, ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07). The update aligns measurement and classification guidance for share-based payments to nonemployees with the guidance applicable to employees. Under the new guidance, the measurement of equity-classified nonemployee awards will be fixed at the grant date. The update is effective for annual reporting periods, including interim periods, beginning after December 15, 2018, with early adoption permitted. The adoption of the new standard on January 1, 2019 did not have an effect on our financial position, results of operations or cash flows. |
Discontinued Operations (Tables) |
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Disposal Groups, Including Discontinued Operations [Table Text Block] | The results of discontinued operations for Overland for the three months ended March 31, 2018 have been reflected as discontinued operations in the condensed consolidated statements of operations and comprehensive loss and consist of the following (in thousands):
Certain cash flows from discontinued operations consisted of the following amounts (in thousands):
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Certain Balance Sheet Items (Tables) |
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Schedule of Inventory, Current [Table Text Block] | The following table summarizes inventories (in thousands):
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Schedule of Other Current Assets [Table Text Block] | The following table summarizes other current assets (in thousands):
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Schedule of Other Assets, Noncurrent [Table Text Block] | The following table summarizes other assets (in thousands):
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Intangible Assets (Tables) |
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Schedule of Finite-Lived Intangible Assets [Table Text Block] | The following table summarizes intangible assets, net (in thousands):
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Share Capital (Tables) |
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Schedule of Warrants [Table Text Block] | At March 31, 2019, the Company had the following outstanding warrants to purchase common shares:
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Equity Incentive Plan (Tables) |
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Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block] | The Company recorded the following compensation expense related to its share-based compensation awards, which 2018 includes amounts related to discontinued operations:
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Net Loss Per Share (Tables) |
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Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block] | Anti-dilutive common share equivalents excluded from the computation of diluted net loss per share were as follows:
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Commitments and Contingencies (Tables) |
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Schedule of Product Warranty Liability [Table Text Block] | Changes in the liability for product warranty and deferred revenue associated with extended warranties and service contracts were as follows (in thousands):
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Organization and Business (Details) $ in Millions |
Nov. 13, 2018
USD ($)
shares
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Related Party Transaction [Line Items] | |
Debt Conversion, Converted Instrument, Amount | $ | $ 6.5 |
Debt Conversion, Converted Instrument, Shares Issued | shares | 6,500,000 |
Organization and Business Going Concern (Details) |
3 Months Ended |
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Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Substantial Doubt about Going Concern, Conditions or Events | Based upon the Company's current expectations and projections for the next year, the Company believes that it will not have sufficient liquidity necessary to sustain operations beyond May 31, 2019. These factors, among others, raise substantial doubt that the Company will be able to continue as a going concern |
Significant Accounting Policies (Details) - USD ($) |
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Mar. 31, 2019 |
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Accounting Policies [Abstract] | ||
Foreign Currency Transaction Loss | $ (22,000) | $ (385,000) |
Significant Accounting Policies New Accounting Pronouncements (Details) - USD ($) |
Mar. 31, 2019 |
Jan. 01, 2019 |
Dec. 31, 2018 |
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New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Operating Lease, Liability | $ 253,000 | ||
Operating Lease, Right-of-Use Asset | $ 225,000 | $ 253,000 | $ 0 |
Operating Lease, Weighted Average Discount Rate, Percent | 8.00% | ||
Operating Lease, Weighted Average Remaining Lease Term | 2 years 4 months |
Discontinued Operations Discontinued operations selected cash flow information (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Disposal Group, Including Discontinued Operation, Depreciation and Amortization | $ 638 |
Capital Expenditure, Discontinued Operations | $ 8 |
Certain Balance Sheet Items Inventories (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Inventory [Line Items] | ||
Raw Materials | $ 240 | $ 255 |
Work in Process | 302 | 282 |
Finished Goods | 705 | 693 |
Inventories | $ 1,247 | $ 1,230 |
Certain Balance Sheet Items Other current assets (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Deferred Costs and Other Assets | $ 329 | $ 385 |
Prepaid Insurance | 252 | 344 |
Other Assets, Miscellaneous, Current | 15 | 55 |
Other Assets, Current | $ 596 | $ 784 |
Certain Balance Sheet Items Other long term assets (Details) - USD ($) |
Mar. 31, 2019 |
Jan. 01, 2019 |
Dec. 31, 2018 |
---|---|---|---|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||
Prepaid Expense, Noncurrent | $ 619,000 | $ 653,000 | |
Deferred Costs, Noncurrent | 241,000 | 270,000 | |
Operating Lease, Right-of-Use Asset | 225,000 | $ 253,000 | 0 |
Other Assets, Miscellaneous, Noncurrent | 29,000 | 27,000 | |
Other Assets, Noncurrent | $ 1,114,000 | $ 950,000 |
Intangible Assets Amortization (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization of Intangible Assets | $ 266,000 | $ 846,000 |
Amortization Expense, Remainder of Fiscal Year | 764,000 | |
Amortization Expense 2020 | 936,000 | |
Amortization Expense 2021 | 512,000 | |
Amortization Expense 2022 | 329,000 | |
Amortization Expense 2023 | 34,000 | |
Amortization Expense 2024 | $ 12,000 |
Investment in Affiliate (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Nov. 13, 2018 |
Mar. 31, 2019 |
|
Investments in and Advances to Affiliates [Line Items] | ||
Investment Repurchase Agreement, Description of Investments Subject to Agreement | FBC Holdings the right to exchange up to 2,500,000 of the Company’s Preferred Shares held by FBC Holdings for up to all of the SVTP Preferred Shares | |
Related Party Transaction, Description of Transaction | MFV and SVTP have the right to purchase up to 2,500,000 Preferred Shares held by FBC Holdings | |
Equity Securities [Member] | ||
Investments in and Advances to Affiliates [Line Items] | ||
Investments in and Advances to Affiliates, Balance, Shares | 1,879,699 | |
Discontinued Operation, Equity Method Investment Retained after Disposal, Ownership Interest after Disposal | 19.90% | |
Disposal Group, Including Discontinued Operation, Consideration | $ 2.1 |
Debt Related Party Secured Note (Details) |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Debt Instrument [Line Items] | |
Notes Payable, Related Parties, Current | $ 500,000 |
Related Party Transaction, Rate | 8.00% |
Related party note maturity date | Jun. 13, 2019 |
Debt Related Party Unsecured Note (Details) |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Debt Instrument [Line Items] | |
Related party note maturity date | Jun. 13, 2019 |
Employee [Member] | |
Debt Instrument [Line Items] | |
Unsecured Debt | $ 523,000 |
Debt Instrument, Interest Rate, Stated Percentage | 2.00% |
Related party note maturity date | Jan. 10, 2021 |
Debt Related party notes payable interest (Details) |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Debt Disclosure [Abstract] | |
Related party interest expense | $ 12,000 |
Accounts Payable, Related Parties | $ 3,400 |
Debt Line of credit (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Debt Disclosure [Abstract] | ||
Line of Credit Facility, Maximum Borrowing Capacity | $ 400,000 | |
Line of Credit Facility, Interest Rate at Period End | 6.00% | |
Line of Credit Facility, Expiration Date | Dec. 19, 2019 | |
Line of credit | $ 365,000 | $ 100,000 |
Preferred Shares (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Nov. 13, 2018 |
Mar. 31, 2019 |
|
Other Liabilities Disclosure [Abstract] | ||
Debt Conversion, Converted Instrument, Amount | $ 6,500,000 | |
Debt Conversion, Converted Instrument, Shares Issued | 6,500,000 | |
Convertible Preferred Stock, Terms of Conversion | Preferred Shares (i) are convertible into the Company’s common shares, subject to prior shareholder approval, at a conversion rate equal to $1.00 per share, plus accrued and unpaid dividends, divided by an amount equal to 0.85 multiplied by a 15-day volume weighted average price per common share prior to the date the conversion notice is provided (the “Conversion Rate”) | |
Preferred Stock, Dividend Rate, Percentage | 8.00% | |
Accrued Preferred Dividends | $ 201,000 | |
Related party preferred shares interest expense | $ 130,000 | |
Preferred Shares Converted to Common Shares ownership maximum | 19.90% |
Share Capital Public Offering (Details) $ / shares in Units, $ in Millions |
Apr. 17, 2018
USD ($)
$ / shares
shares
|
---|---|
Common Stock [Member] | |
Sale of Stock [Line Items] | |
Stock Issued During Period, Shares, New Issues | 412,500 |
Number of Securities Called by Warrants | 123,750 |
Shares Issued, Price Per Share | $ / shares | $ 5.60 |
Proceeds from Issuance of Common Stock | $ | $ 2.3 |
Over-Allotment Option [Member] | |
Sale of Stock [Line Items] | |
Number of Securities Called by Warrants | 14,063 |
Share Capital (Details) $ in Millions |
May 10, 2018
USD ($)
shares
|
---|---|
Equity [Abstract] | |
Payment of Obligations, Stock Issued During Period, Shares | shares | 80,100 |
Legal Fees | $ | $ 0.3 |
Share Capital Reverse Stock Split (Details) |
Nov. 05, 2018 |
---|---|
Equity [Abstract] | |
Stockholders' Equity, Reverse Stock Split | share consolidation (also known as a reverse stock split) of the Company’s issued and outstanding common shares at a ratio of one-for-eight |
Share Capital Warrants Outstanding (Details) |
3 Months Ended |
---|---|
Mar. 31, 2019
$ / shares
shares
| |
Related Party [Member] | |
Class of Warrant or Right [Line Items] | |
Warrant, Outstanding | 40,000 |
May 31, 2020 [Member] | |
Class of Warrant or Right [Line Items] | |
Warrant Term | 5 years |
Exercise Price of Warrants | $ / shares | $ 800.00 |
Warrant, Outstanding | 4,200 |
Warrant expiration date | May 31, 2020 |
October 14, 2020 [Member] | |
Class of Warrant or Right [Line Items] | |
Warrant Term | 5 years |
Exercise Price of Warrants | $ / shares | $ 466.00 |
Warrant, Outstanding | 2,010 |
Warrant expiration date | Oct. 14, 2020 |
December 15, 2020 [Member] | |
Class of Warrant or Right [Line Items] | |
Warrant Term | 5 years |
Exercise Price of Warrants | $ / shares | $ 500.00 |
Warrant, Outstanding | 5,138 |
Warrant expiration date | Dec. 15, 2020 |
December 4, 2020 [Member] | |
Class of Warrant or Right [Line Items] | |
Warrant Term | 5 years |
Exercise Price of Warrants | $ / shares | $ 216.00 |
Warrant, Outstanding | 7,500 |
Warrant expiration date | Dec. 04, 2020 |
March 4, 2021 [Member] | |
Class of Warrant or Right [Line Items] | |
Warrant Term | 5 years |
Exercise Price of Warrants | $ / shares | $ 500.00 |
Warrant, Outstanding | 150 |
Warrant expiration date | Mar. 04, 2021 |
November 8, 2019 [Member] | |
Class of Warrant or Right [Line Items] | |
Warrant Term | 3 years |
Exercise Price of Warrants | $ / shares | $ 400.00 |
Warrant, Outstanding | 125 |
Warrant expiration date | Nov. 08, 2019 |
August 11, 2022 [Member] | |
Class of Warrant or Right [Line Items] | |
Warrant Term | 5 years |
Exercise Price of Warrants | $ / shares | $ 42.00 |
Warrant, Outstanding | 37,500 |
Warrant expiration date | Aug. 11, 2022 |
August 16, 2022 [Member] | |
Class of Warrant or Right [Line Items] | |
Warrant Term | 5 years |
Exercise Price of Warrants | $ / shares | $ 42.00 |
Warrant, Outstanding | 11,876 |
Warrant expiration date | Aug. 16, 2022 |
August 22, 2022 [Member] | |
Class of Warrant or Right [Line Items] | |
Warrant Term | 5 years |
Exercise Price of Warrants | $ / shares | $ 42.00 |
Warrant, Outstanding | 25,625 |
Warrant expiration date | Aug. 22, 2022 |
April 17, 2023 [Member] | |
Class of Warrant or Right [Line Items] | |
Warrant Term | 5 years |
Exercise Price of Warrants | $ / shares | $ 5.60 |
Warrant, Outstanding | 111,563 |
Warrant expiration date | Apr. 17, 2023 |
Warrant [Member] | |
Class of Warrant or Right [Line Items] | |
Warrant, Outstanding | 205,687 |
Share Capital Related Party Warrant Exchange (Details) - March 24, 2022 [Member] |
Mar. 16, 2018
shares
|
---|---|
Class of Warrant or Right [Line Items] | |
Shares Issued for Warrant Exchange | 178,875 |
Related party | |
Class of Warrant or Right [Line Items] | |
Shares Issued for Warrant Exchange | 37,500 |
Assumption of Warrants | 34,091 |
Equity Incentive Plan Textuals (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Restricted Stock Units (RSUs) [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Equity Instruments Other than Options, Grants in Period | 100,000 | 50 |
RSUs Outside of 2015 Plan [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Equity Instruments Other than Options, Grants in Period | 100,000 | |
Employee Stock Option [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Restricted Stock Units and Stock Options Vesting Period | 3 years | |
Restricted Stock [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Equity Instruments Other than Options, Grants in Period | 42,000 | 47,535 |
RSAs, Share-based Third Party Liabilities Paid | $ 105,000 | $ 787,000 |
Equity Incentive Plan Share-based Compensation Expense (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||
Allocated Share-based Compensation Expense | $ 124,042 | $ 820,784 |
Cost of Sales [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||
Allocated Share-based Compensation Expense | 693 | 32,083 |
Sales and Marketing Expense [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||
Allocated Share-based Compensation Expense | 10,313 | 183,775 |
Research and Development Expense [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||
Allocated Share-based Compensation Expense | 18,471 | 96,300 |
General and Administrative Expense [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||
Allocated Share-based Compensation Expense | $ 94,565 | $ 508,626 |
Equity Incentive Plan (Details) |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized | $ 525,000 |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition | 1 year 2 months |
Net Loss Per Share Net Loss Per Share (Details) - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Warrant [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 205,687 | 110,275 |
Restricted Stock [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 114,066 | 106,026 |
Employee Stock Option [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 10,298 | 22,019 |
Convertible Notes Payable [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 0 | 40,833 |
Convertible notes interest [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 0 | 40,945 |
Related Party Transactions (Details) |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Related Party Transactions [Abstract] | |
Related Party Transaction, Amounts of Transaction | $ 81,000 |
Commitments and Contingencies (Details) |
Mar. 31, 2019
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
Letters of Credit Outstanding, Amount | $ 0 |
Commitments and Contingencies Warranty and Extended Warranty (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Commitments and Contingencies Disclosure [Abstract] | ||
Deferred Costs, Service Revenue | $ 600 | $ 700 |
Product Warranty Liability [Line Items] | ||
Product Warranty Accrual, Current | 0 | |
Deferred revenue extended warranties, current | 692 | |
Product Warranty Accrual, Noncurrent | 0 | |
Deferred revenue extended warranties, noncurrent | 772 | |
Warranty [Member] | ||
Product Warranty Liability [Line Items] | ||
Liability, period start | 22 | |
Standard and Extended Product Warranty Accrual, Decrease for Payments | 0 | |
Standard and Extended Product Warranty Accrual, Increase for Warranties Issued | 0 | |
Standard and Extended Product Warranty Accrual, Increase (Decrease) for Preexisting Warranties | (22) | |
Liability, period end | 0 | |
Deferred revenue [Member] | ||
Product Warranty Liability [Line Items] | ||
Deferred Revenue, period start | 1,655 | |
Standard and Extended Product Warranty Accrual, Decrease for Payments | (355) | |
Standard and Extended Product Warranty Accrual, Increase for Warranties Issued | 164 | |
Standard and Extended Product Warranty Accrual, Increase (Decrease) for Preexisting Warranties | 0 | |
Deferred Revenue, period end | $ 1,464 |
Subsequent Event (Details) - Private Placement [Member] - Subsequent Event [Member] |
May 15, 2019
USD ($)
$ / shares
shares
|
---|---|
Subsequent Event [Line Items] | |
Stock Issued During Period, Shares, Period Increase (Decrease) | shares | 340,000 |
Proceeds from Issuance of Common Stock | $ | $ 680,000 |
Shares Issued, Price Per Share | $ / shares | $ 2.00 |
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