DarkHorse Technologies Inc 10-Q for FY2023 Q3

DarkHorse Technologies Inc. (DRK)

10-Q 2023-11-13 For: 2023-09-30

Added on April 11, 2026

About this 10-Q

DarkHorse Technologies Inc filed this 10-Q on November 13, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).

Headline figures

Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $5.72M; up 322.1% from $1.36M a year earlier
Net loss: $6.31M; compared with a net loss of $20.52M a year earlier
Diluted EPS: -$0.50; compared with -$2.14 a year earlier

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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)						(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares	ANY	NASDAQ Capital Market


	September 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	613	$	1,337
Digital assets	425		1,695
Restricted cash	202		206
Accounts receivable, net	164		174
Note receivable, net of allowance for credit losses of $3,821 and $0, respectively	—		3,821
Other current assets	3,829		3,051
Total current assets	5,233		10,284
Property and equipment, net	26,682		34,259
Intangible assets, net	6,678		9,477
Funds held in trust account	—		10,297
Other assets	20,503		18,699
Total assets	$	59,096	$	83,016
Liabilities, Temporary Equity and Shareholders’ Equity
Current liabilities:
Accounts payable	$	2,442	$	2,993
Accrued liabilities	1,723		1,537
Accrued payroll and employee compensation	744		696
Warrant liabilities	221		—

Other current liabilities	1,557		974
Total current liabilities	6,687		6,200
Deferred underwriting fee	4,554		4,554
Warrant liabilities	—		864

Other non-current liabilities	269		366
Total liabilities	11,510		11,984
Commitments and contingencies (Note 13)
Series H preferred shares, no par value, unlimited shares authorized, 47,604 and 60,000 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	15,597		26,469
Redeemable non-controlling interest	—		9,998
Total temporary equity	15,597		36,467

Shareholders’ equity:

Common shares, no par value; unlimited shares authorized, 14,222,194 and 9,804,609 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	472,628		456,402
Accumulated other comprehensive loss	(1,805)		(1,799)
Accumulated deficit	(438,604)		(419,732)
Total Sphere 3D Corp. shareholders’ equity	32,219		34,871
Non-controlling interest	(230)		(306)
Total shareholders’ equity	31,989		34,565
Total liabilities, temporary equity, and shareholders’ equity	$	59,096	$	83,016


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

Revenues:
Digital mining revenue	$	5,102	$	787	$	12,592	$	2,745
Service and product revenue	622		569		1,624		1,904
Total revenues	5,724		1,356		14,216		4,649
Operating costs and expenses:
Cost of digital mining revenue	4,292		553		10,331		1,527
Cost of service and product revenue	221		296		728		996
Sales and marketing	217		236		768		731
Research and development	362		139		859		392
General and administrative	3,399		2,930		10,504		19,687
Depreciation and amortization	2,028		7,408		4,428		21,257
Impairment of acquired intangible assets	1,231		—		1,231		—
Loss on disposal of property and equipment	315		—		566		—
Realized gain on sale of digital assets	(136)		(10)		(908)		(10)
Impairment of digital assets	199		138		549		908
Total operating expenses	12,128		11,690		29,056		45,488
Loss from operations	(6,404)		(10,334)		(14,840)		(40,839)
Other income (expense):

Interest expense	(10)		—		(1,183)		—
Interest income and other expense, net	100		(68)		1,464		677
Provision for losses on deposit for mining equipment	—		(10,000)		—		(10,000)
Forgiveness of note receivable	—		—		—		(13,145)
Impairment of investments	—		—		—		(12,429)
Net loss before taxes	(6,314)		(20,402)		(14,559)		(75,736)
Provision for income taxes	—		121		4		121
Net loss	(6,314)		(20,523)		(14,563)		(75,857)
Less: Non-controlling interest - (loss) income	(7)		—		76		—
Net loss available to common shareholders	$	(6,307)	$	(20,523)	$	(14,639)	$	(75,857)

Net loss per share:
Net loss per share basic and diluted	$	(0.50)	$	(2.14)	$	(1.29)	$	(8.08)
Shares used in computing net loss per share:
Basic and diluted	12,653,413		9,574,867		11,340,973		9,383,266


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

Net loss	$	(6,314)	$	(20,523)	$	(14,563)	$	(75,857)
Other comprehensive (loss) income:
Foreign currency translation adjustment	(1)		(3)		(6)		(2)
Total other comprehensive (loss) income	(1)		(3)		(6)		(2)
Comprehensive loss	$	(6,315)	$	(20,526)	$	(14,569)	$	(75,859)


	Common Shares		Accumulated Other Comprehensive Loss		Accumulated Deficit			Non-controlling Interest		Total Shareholders' Equity
		Shares					Amount
Balance at January 1, 2023		9,804,609	$	456,402	$	(1,799)		$	(419,732)	$	(306)	$	34,565
Cumulative adjustment from adoption of ASU 2016-13		—	—		—			(3,821)		—		(3,821)
Issuance of common shares for conversion of preferred shares		748,427	2,311		—			—		—		2,311

Issuance of common shares pursuant to the vesting of restricted stock units		10,656	—		—			—		—		—
Share-based compensation		—	485		—			—		—		485
Remeasurement of redeemable non-controlling interest		—	—		—			(376)		—		(376)
Other comprehensive loss		—	—		(2)			—		—		(2)
Net loss		—	—		—			(3,505)		16		(3,489)
Balance at March 31, 2023		10,563,692	459,198		(1,801)			(427,434)		(290)		29,673
Issuance of common shares for conversion of preferred shares		682,856	2,109		—			—		—		2,109


Exercise of stock options		94,701	200		—			—		—		200
Issuance of common shares for vested restricted stock units, net of shares withheld for income taxes		82,061	—		—			—		—		—
Share-based compensation		—	719		—			—		—		719
Remeasurement of redeemable non-controlling interest		—	—		—			(36)		—		(36)
Other comprehensive loss		—	—		(3)			—		—		(3)
Net loss		—	—		—			(4,827)		67		(4,760)
Balance at June 30, 2023		11,423,310	462,226		(1,804)			(432,297)		(223)		27,902
Issuance of common share warrants, net		—	1,130		—			—		—		1,130
Issuance of common shares for conversion of preferred shares		2,699,136	8,335		—			—		—		8,335
Issuance of common shares for the settlement of liabilities		44,450	64		—			—		—		64
Issuance of common shares pursuant to the vesting of restricted stock units		10,000	—		—			—		—		—
Exercise of stock options		45,298	117		—			—		—		117
Share-based compensation		—	756		—			—		—		756

Other comprehensive loss		—	—		(1)			—		—		(1)
Net loss		—	—		—			(6,307)		(7)		(6,314)

Balance at September 30, 2023		14,222,194	$	472,628	$	(1,805)		$	(438,604)	$	(230)	$	31,989


Sphere 3D Corp.
Condensed Consolidated Statements of Cash Flows (continued)
(in thousands of U.S. dollars)
(unaudited)

	Nine Months Ended September 30,
	2023		2022

Reconciliation of cash, cash equivalents and restricted cash to consolidated balance sheets:
Cash and cash equivalents	$	613	$	4,355
Restricted cash	202		—
Total cash, cash equivalents and restricted cash	$	815	$	4,355

Supplemental disclosures of non-cash investing and financing activities:
Remeasurement of redeemable non-controlling interest	$	412	$	—

Preferred shares and warrants accrued issuance cost	$	34	$	—
Reclassification from deposit for mining equipment to mining equipment	$	—	$	37,304
Issuance of common shares for purchase of intangible assets	$	—	$	1,721


Balance at January 1, 2023	$	1,695
Addition of digital assets	12,592
Digital assets sold for cash	(12,050)
Digital assets issued for services	(1,263)
Impairment loss	(549)
Balance at September 30, 2023	$	425


	September 30, 2023
	Fair Value		Level 1		Level 2		Level 3

Warrant liabilities	$	221	$	—	$	—	$	221


	December 31, 2022
	Fair Value		Level 1		Level 2		Level 3
Warrant liabilities	$	864	$	864	$	—	$	—


Warrant liability as of January 1, 2023	$	864
Change in fair value MEOA warrant	(202)
Warrant liability as of March 31, 2023	662
Issuance of LDA warrant	976
Change in fair value MEOA warrant	(662)
Change in fair value LDA warrant	(397)
Warrant liability as of June 30, 2023	579
Retired LDA warrant	(248)
Change in fair value LDA warrant	(110)
Warrant liability as of September 30, 2023	$	221


	September 30, 2023		December 31, 2022
Prepaid digital hosting services	$	2,062	$	880
Prepaid services	549		927
Prepaid insurance	690		783
Other	528		461
	$	3,829	$	3,051


	September 30, 2023		December 31, 2022
Mining equipment	$	30,873	$	35,550
Accumulated depreciation	(4,569)		(1,709)
Subtotal	26,304		33,841
Right of use asset	378		418
Property and equipment, net	$	26,682	$	34,259


	September 30, 2023		December 31, 2022
Advance from target for SPAC	$	898	$	449
Taxes payable for SPAC	270		254
Deferred revenue	154		160
Other	235		111
	$	1,557	$	974


	September 30, 2023		December 31, 2022
Supplier agreements	$	37,854	$	39,084
Channel partner relationships	730		730
Customer relationships	380		380
Developed technology	150		150
Capitalized development costs	103		103
	39,217		40,447
Accumulated amortization:
Supplier agreements	(32,901)		(31,708)
Channel partner relationships	(730)		(720)
Customer relationships	(376)		(366)
Developed technology	(150)		(150)
Capitalized development costs	(103)		(103)
	(34,260)		(33,047)
Total finite-lived intangible assets, net	4,957		7,400
Carbon credits held for future use, net	1,721		2,077
Total intangible assets, net	$	6,678	$	9,477


	April 17, 2023			September 30, 2023
Common share price	$	2.98		$	1.33
Expected volatility	120.0		%	120.0		%
Risk-free interest rate	3.8		%	4.9%


Date issued	Contractual life (years)	Exercise price	Number outstanding	Expiration
July 2021	3	$28.00	285,716	December 22, 2024
August 2021	3	$45.50	370,787	August 25, 2024
August 2021	3	$52.50	370,787	August 25, 2024
September 2021	5	$66.50	1,614,299	September 8, 2026
October 2021	3	$42.00	121,429	October 1, 2024
February 2022	5	$28.00	14,286	February 7, 2027
February 2022	5	$35.00	14,286	February 7, 2027
February 2022	5	$42.00	14,286	February 7, 2027
April 2023	3	$3.29	273,556	April 17, 2026
August 2023	3	$2.75	800,000	August 11, 2026
August 2023	3	$2.75	2,162,922	August 23, 2026
			6,042,354


	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Options outstanding — January 1, 2023	389,604	$	7.07
Granted	250,000	$	2.43
Exercised	(139,999)	$	2.27
Forfeited	(14,364)	$	20.36
Options outstanding — September 30, 2023	485,241	$	5.66	4.0	$	—
Vested and expected to vest — September 30, 2023	485,241	$	5.66	4.0	$	—
Exercisable — September 30, 2023	234,184	$	6.83	2.8	$	—


	Number of Shares	Weighted Average Grant Date Fair Value
Outstanding — January 1, 2023	125,182	$	8.89
Granted	454,697	$	2.89
Vested and released	(111,873)	$	5.12
Forfeited	(20,953)	$	6.78
Outstanding — September 30, 2023	447,053	$	3.83


	September 30, 2023
	Unrecognized Expense		Remaining Weighted-Average Recognition Period (years)
RSUs	$	752	1.1
Stock options	$	309	1.3


	Deferred Revenue
Liability at January 1, 2023	$	139
Revenue recognized during the period	(72)
Change in liability for warranties issued during the period	84
Liability at September 30, 2023	$	151
Current liability, included in other current liabilities	116
Non-current liability, included in other non-current liabilities	35
Liability at September 30, 2023	$	151


Three Months Ended September 30, 2023	Digital Mining		Service and Product		Unallocated		Total Consolidated
Revenue	$	5,102	$	622	$	—	$	5,724
Segment gross profit	$	810	$	401	$	—	$	1,211
Segment loss from operations	$	(1,569)	$	(124)	$	(4,711)	$	(6,404)

Interest expense	$	—	$	—	$	10	$	10
Depreciation and amortization	$	1,999	$	3	$	26	$	2,028


Nine months ended September 30, 2023	Digital Mining		Service and Product		Unallocated		Total Consolidated
Revenue	$	12,592	$	1,624	$	—	$	14,216
Segment gross profit	$	2,261	$	896	$	—	$	3,157
Segment loss from operations	$	(2,281)	$	(866)	$	(11,693)	$	(14,840)
Capital expenditures	$	1,561	$	—	$	—	$	1,561
Interest expense	$	—	$	—	$	1,183	$	1,183
Depreciation and amortization	$	4,330	$	20	$	78	$	4,428


Three months ended September 30, 2022	Digital Mining		Service and Product		Unallocated		Total Consolidated
Revenue	$	787	$	569	$	—	$	1,356
Segment gross profit	$	234	$	273	$	—	$	507
Segment loss from operations	$	(7,311)	$	(273)	$	(2,750)	$	(10,334)
Capital expenditures	$	1,365	$	—	$	—	$	1,365
Depreciation and amortization	$	7,348	$	34	$	26	$	7,408


Nine months ended September 30, 2022	Digital Mining		Service and Product		Unallocated		Total Consolidated
Revenue	$	2,745	$	1,904	$	—	$	4,649
Segment gross profit	$	1,218	$	908	$	—	$	2,126
Segment loss from operations	$	(22,724)	$	(670)	$	(17,445)	$	(40,839)
Capital expenditures	$	17,629	$	—	$	—	$	17,629
Depreciation and amortization	$	21,078	$	101	$	78	$	21,257


As of September 30, 2023	Digital Mining		Service and Product		Unallocated		Total Consolidated
Total assets	$	56,050	$	609	$	2,437	$	59,096


As of December 31, 2022	Digital Mining		Service and Product		Unallocated		Total Consolidated
Total assets	$	63,077	$	689	$	19,250	$	83,016


	September 30, 2023		December 31, 2022
Customer A	24.4	%	10.5	%
Customer B	24.0	%	22.7	%
Customer C	19.7	%	—	%
Customer D	16.0	%	15.2	%
Customer E	—	%	14.5	%
Customer F	—	%	10.2	%


			SPHERE 3D CORP.

			By:			/s/ Kurt Kalbfleisch
			Name:			Kurt Kalbfleisch
			Title:			Chief Financial Officer







			RAINMAKER WORLDWIDE INC.

			By:			/s/ Michael O’Connor
			Name:			Michael O’Connor
			Title:			CEO


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 registrant as of, and for, the periods presented in this report;


4.			The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


			(a)			Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


			(b)			Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


			(c)			Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


			(d)			Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


			(a)			All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


			(b)			Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.