Sphere 3D Corp.

Previous wording

The following quarterly management’s discussion and analysis (“MD&A”) should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes of Sphere 3D Corp. (the “Company”) for the three and six months ended June 30, 2025. The condensed consolidated financial statements have been presented in United States (“U.S.”) dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Unless the context otherwise requires, any reference to the “Company,” “Sphere 3D,” “we,” “our,” “us” or similar terms refers to Sphere 3D Corp. and its subsidiaries. Unless otherwise indicated, all references to “$” and “dollars” in this discussion and analysis mean U.S. dollars.

Current wording

The following quarterly management’s discussion and analysis (“MD&A”) should be read in conjunction with our unaudited condensed consolidated financial statements and the accompanying notes of Sphere 3D Corp. (the “Company”) for the three and nine months ended September 30, 2025. The condensed consolidated financial statements have been presented in United States (“U.S.”) dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Unless the context otherwise requires, any reference to the “Company,” “Sphere 3D,” “we,” “our,” “us” or similar terms refers to Sphere 3D Corp. and its subsidiaries. Unless otherwise indicated, all references to “$” and “dollars” in this discussion and analysis mean U.S. dollars.

Previous wording

On March 6, 2025, we received a notice from the Nasdaq Listing Qualifications Department of the Nasdaq Stock Market LLC stating that the bid price of our common shares for the last 30 consecutive trading days had closed below the minimum $1.00 per share required for continued listing under Listing Rule 5550(a)(2). We have a period of 180 calendar days, or until September 2, 2025, to regain compliance with the Listing Rule.

Current wording

On March 6, 2025, we received a notice from the Nasdaq Listing Qualifications Department of the Nasdaq Stock Market LLC stating that the bid price of our common shares for the last 30 consecutive trading days had closed below the minimum $1.00 per share required for continued listing under Listing Rule 5550(a)(2). In September 2025, we received an extension for a period of 180 calendar days, or until March 2, 2026, to regain compliance with the Listing Rule.

Previous wording

We obtain Bitcoin as a result of our mining operations, and when necessary we sell Bitcoin to support our operations and strategic growth. We mine Bitcoin in Missouri, Texas and Iowa, which these states do not have any material state-specific regulatory restrictions on the mining of Bitcoin. However, it is possible that these states or other states in which we may seek to operate may create laws that would impede Bitcoin mining. We do not currently plan to engage in regular trading of Bitcoin other than sales to convert our Bitcoin into U.S. dollars. Decisions to hold or sell our Bitcoin is currently determined by management by analyzing forecasts and monitoring the market in real time. We have a hybrid treasury strategy to hold Bitcoin when possible, and sell to fund working capital requirements.

Current wording

We obtain Bitcoin as a result of our mining operations, and when necessary we sell Bitcoin to support our operations and strategic growth. We mine Bitcoin in states which do not have any material state-specific regulatory restrictions on the mining of Bitcoin. However, it is possible that these states or other states in which we may seek to operate may create laws that would impede Bitcoin mining. We do not currently plan to engage in regular trading of Bitcoin other than sales to convert our Bitcoin into U.S. dollars. Decisions to hold or sell our Bitcoin is currently determined by management by analyzing forecasts and monitoring the market in real time. We have a hybrid treasury strategy to hold Bitcoin when possible, and sell to fund working capital requirements.

Previous wording

As of June 30, 2025, we owned approximately 13,000 miners, of which approximately 5,600 were in service, and a total hashrate capacity of 0.73 exahash per second (“EH/s”). We are strategizing for our future growth by refreshing a significant portion of our fleet with newer-generation machines to bolster efficiency, and starting from March 2025, we have a self-owned 8 megawatt (“MW”) facility in Iowa. Vertically integrating with self-owned facilities, such as the Iowa site, allows us to reduce our reliance on third-parties and decrease our overall cost to mine a Bitcoin. As a result of our strategic changes, during the latter part of 2024 and ongoing, mining production has decreased as we focused on our long-term strategic goals of transitioning to lower-cost hosting sites, vertically integrating to own our own sites, and refreshing our fleet with newer-generation machines

Current wording

As of September 30, 2025, we owned approximately 12,000 miners, of which approximately 4,900 were in service, and a total hashrate capacity of 0.75 exahash per second (“EH/s”). We are strategizing for our future growth by refreshing a significant portion of our fleet with newer-generation machines to bolster efficiency, and starting from March 2025, we have a self-owned 8 megawatt (“MW”) facility in Iowa. Vertically integrating with self-owned facilities, such as the Iowa site, allows us to reduce our reliance on third-parties and decrease our overall cost to mine a Bitcoin. As a result of our strategic changes, during the latter part of 2024 and ongoing, mining production has decreased as we focused on our long-term strategic goals of transitioning to lower-cost hosting sites, vertically integrating to own our own sites, and refreshing our fleet with newer-generation machines.

Previous wording

During the six months ended June 30, 2025, we mined 61.3 Bitcoin, which represented a decrease of 13.4% over the 70.8 Bitcoin we mined in the last six months of 2024. The decrease was primarily due to the April 2024 halving event, and our transition to lower-cost hosting sites and refreshing our fleet with newer-generation machines. Based on our existing operations and expected deployment of miners we have purchased, we anticipate continuing to increase exahash throughout 2025. We do not have scheduled downtime for our miners. We periodically perform both scheduled and unscheduled maintenance on our miners. Depending on the type of repair, the miner may run at a reduced speed or be taken offline. We use multiple software programs to monitor the performance of our machines. The miners owned as of June 30, 2025 have an average efficiency (joules per terahash – “J/th”) of 26.4 J/th. The miner efficiency is an indication of how efficiently we can earn Bitcoin and minimize cost to run the miner. Currently, we intend only to mine Bitcoin and we hold no other cryptocurrency other than Bitcoin.

Current wording

During the nine months ended September 30, 2025, we mined 84.3 Bitcoin, which represented a decrease of 40.4% over the 141.5 Bitcoin we mined in the last nine months of 2024. The decrease was primarily due to the April 2024 halving event, and our transition to lower-cost hosting sites and refreshing our fleet with newer-generation machines. Based on our existing operations and expected deployment of miners we have purchased, we anticipate continuing to increase exahash throughout 2025. We do not have scheduled downtime for our miners. We periodically perform both scheduled and unscheduled maintenance on our miners. Depending on the type of repair, the miner may run at a reduced speed or be taken offline. We use multiple software programs to monitor the performance of our machines. The miners owned as of September 30, 2025 have an average efficiency (joules per terahash – “J/th”) of 23.6 J/th. The miner efficiency is an indication of how efficiently we can earn Bitcoin and minimize cost to run the miner. Currently, we intend only to mine Bitcoin and we hold no other cryptocurrency other than Bitcoin.

Previous wording

As of June 30, 2025, we held approximately 20.5 Bitcoin. The fair value of our Bitcoin as of June 30, 2025 was approximately $2.2 million on our consolidated balance sheet.

Current wording

As of September 30, 2025, we held approximately 22.7 Bitcoin. The fair value of our Bitcoin as of September 30, 2025 was approximately $2.6 million on our consolidated balance sheet.

Previous wording

The Second Quarter of 2025 Compared with the Second Quarter of 2024

Current wording

The Third Quarter of 2025 Compared with the Third Quarter of 2024

Previous wording

For the second quarter of 2025 and 2024, we had revenues of $3.0 million and $4.7 million, respectively. The $1.7 million decrease in revenue is primarily due to the April 2024 halving event, and the process of removing our older mining equipment and replacing them with newer generation machines. The refreshing of our mining equipment is expected to be an ongoing process through 2025 which may result in further fluctuations in exahash. During the second quarter of 2025 and 2024, all of our revenue was derived from Bitcoin mining.

Current wording

For the third quarter of 2025 and 2024, we had revenues of $2.6 million and $2.4 million, respectively. The $0.2 million increase in revenue is primarily due to the increase in the fair value of Bitcoin offset by the process of removing our older mining equipment and replacing them with newer generation machines. The refreshing of our mining equipment is expected to be an ongoing process through 2025 which may result in further fluctuations in exahash. During the third quarter of 2025 and 2024, all of our revenue was derived from Bitcoin mining.

Previous wording

For the second quarter of 2025 and 2024, direct cost of revenues were $2.3 million and $4.0 million, respectively. The $1.7 million decrease in cost of revenue was primarily due to lower hosting fees related to machines taken offline to be relocated and the transition of removing older mining machines and replacing them with newer generation machines.

Current wording

For the third quarter of 2025 and 2024, direct cost of revenues were $2.0 million and $2.7 million, respectively. The $0.7 million decrease in cost of revenue was primarily due to lower hosting fees related to machines taken offline to be relocated and the transition of removing older mining machines and replacing them with newer generation machines.

Previous wording

General and administrative expenses were $2.1 million and $3.0 million for the second quarter of 2025 and 2024. The decrease of $0.9 million was due to a decrease of $0.5 million in share-based compensation primarily related to forfeited awards, a decrease of $0.4 million in legal fees related to resolved litigation, a $0.2 million decrease in director fees, and a $0.1 million decrease in insurance and property tax expenses. These decreases were offset by an increase of $0.3 million in costs related to strategic business growth efforts.

Current wording

General and administrative expenses were $1.8 million and $3.0 million for the third quarter of 2025 and 2024, respectively. The $1.2 million decrease was primarily due to a $1.2 million decrease in legal fees related to a resolved litigation, a decrease of $0.3 million in share-based compensation primarily related to forfeited awards, a $0.2 million decrease in insurance expense. These decreases were offset by a $0.3 million provision for the remaining portion of the Rebel Mining Company settlement that is in default and a $0.2 million increase in costs related to strategic business growth efforts.

Previous wording

Loss on disposal of property and equipment was $0.1 million and $0.7 million for the second quarter of 2025 and 2024, respectively, and related to the disposal of or sale of mining equipment.

Current wording

Loss on disposal of property and equipment was $0.8 million and nil for the third quarter of 2025 and 2024, respectively, and related to the disposal of or sale of mining equipment.

Previous wording

Change in fair value of Bitcoin was a gain of $0.5 million and a loss of $0.1 million for the second quarter of 2025 and 2024, respectively. The gain or loss was the change in fair value of Bitcoin held, as well as the gains and losses from when Bitcoin was sold.

Current wording

Change in fair value of Bitcoin was a gain of $0.1 million for the third quarter of 2025 and an immaterial loss for the third quarter of 2024. The gain or loss was the change in fair value of Bitcoin held, as well as the gains and losses from when Bitcoin was sold.

Previous wording

Investment gain was $4.3 million and $7.8 million for the second quarter of 2025 and 2024, respectively, and related to realized and unrealized gains on our equity investment in Core Scientific Inc.

Current wording

Investment gain (loss) was a loss of $0.2 million and gain of $2.4 million for the third quarter of 2025 and 2024, respectively, and related to realized and unrealized gains and losses on our equity investment in Core Scientific Inc.

Previous wording

The First Six Months of 2025 Compared with the First Six Months of 2024

Current wording

The First Nine Months of 2025 Compared with the First Nine Months of 2024

Previous wording

We generated revenues of $5.8 million and $11.6 million during the first six months of 2025 and 2024, respectively. The $5.8 million decrease in revenue is primarily due to the April 2024 halving event, and the process of removing our older mining equipment and replacing them with newer generation machines. The refreshing of our mining equipment is expected to be an ongoing process through 2025 which may result in further fluctuations in exahash. During the first six months of 2025 and 2024, all of our revenue was derived from Bitcoin mining.

Current wording

We generated revenues of $8.5 million and $14.0 million during the first nine months of 2025 and 2024, respectively. The $5.5 million decrease in revenue is primarily due to the April 2024 halving event, and the process of removing our older mining equipment and replacing them with newer generation machines, offset by an increase in the fair value of Bitcoin. The refreshing of our mining equipment is expected to be an ongoing process through 2025 which may result in further fluctuations in exahash. During the first nine months of 2025 and 2024, all of our revenue was derived from Bitcoin mining.

Previous wording

Direct cost of revenues during the first six months of 2025 and 2024 were $4.5 million and $8.3 million, respectively, representing a decrease of $3.8 million was primarily due to lower hosting fees related to machines taken offline to be relocated and the transition of removing older mining machines and replacing them with newer generation machines.

Current wording

During the first nine months of 2025 and 2024, direct cost of revenues were $6.5 million and $11.0 million, respectively. The $4.5 million decrease was primarily due to lower hosting fees related to machines taken offline to be relocated and the transition of removing older mining machines and replacing them with newer generation machines.

Previous wording

General and administrative expenses were $5.3 million and $6.4 million for the first six months of 2025 and 2024, respectively. The decrease of $1.1 million was primarily due to a decrease of $1.5 million in share-based compensation primarily related to forfeited awards, a decrease of $0.4 million in employee and related expenses primarily related to a decrease in headcount, a $0.3 million decrease in insurance and property tax expenses, and a $0.2 million decrease in director fees. These decreases were offset by an increase of $0.8 million in costs related to strategic business growth efforts and an increase in legal fees of $0.4 million related to the Gryphon Digital Mining, Inc. litigation.

Current wording

General and administrative expenses were $7.1 million and $9.5 million for the first nine months of 2025 and 2024, respectively. The decrease of $2.4 million was primarily due to a decrease of $1.8 million in share-based compensation primarily related to forfeited awards, a decrease in legal fees of $0.8 million related to the resolution of the Gryphon Digital Mining, Inc. litigation, a decrease of $0.5 million in employee and related expenses primarily related to a decrease in headcount, a $0.3 million decrease in insurance expense, and a $0.2 million decrease in directors’ fees. These decreases were offset by an increase of $0.9 million in costs related to strategic business growth efforts and a $0.3 million provision for the remaining portion of the Rebel Mining Company settlement that is in default.

Previous wording

Depreciation and amortization expense was $3.3 million and $3.6 million for the first six months of 2025 and 2024, respectively. The decrease of $0.3 million was primarily due to less depreciation related to our Bitcoin mining machines due to the disposal of machines.

Current wording

Depreciation and amortization expense was $5.0 million and $5.4 million for the first nine months of 2025 and 2024, respectively. The decrease of $0.4 million was primarily due to less depreciation related to our Bitcoin mining machines due to the disposal of machines.

Previous wording

Loss on disposal of property and equipment was $0.9 million and $0.7 million for the first six months of 2025 and 2024, respectively, and primarily related to the sale of mining equipment.

Current wording

Loss on disposal of property and equipment was $1.7 million and $0.7 million for the first nine months of 2025 and 2024, respectively, and primarily related to the sale of mining equipment.

Previous wording

Impairment of property and equipment was nil and $0.9 million for the first six months of 2025 and 2024, respectively, and the prior year related to idle mining equipment not expected to return to use.

Current wording

Impairment of property and equipment was $0.5 million and $0.9 million for the first nine months of 2025 and 2024, respectively, and related to unrepairable mining equipment and idle mining equipment not expected to return to use.

Previous wording

Change in fair value of Bitcoin was $0.3 million and $0.7 million for the first six months of 2025 and 2024, respectively. The gain in the first six months of 2025 and 2024 was the change in fair value of Bitcoin held, as well as the gains and losses from when Bitcoin was sold.

Current wording

Change in fair value of Bitcoin was $0.4 million and $0.7 million for the first nine months of 2025 and 2024, respectively. The gain in the first nine months of 2025 and 2024 was the change in fair value of Bitcoin held, as well as the gains and losses from when Bitcoin was sold.

Previous wording

Investment gain was $0.7 million and $5.1 million for the first six months of 2025 and 2024, respectively, and related to realized and unrealized gains on our equity investment in Core Scientific Inc.

Current wording

Investment gain was $0.4 million and $7.5 million for the first nine months of 2025 and 2024, respectively, and related to realized and unrealized gains on our equity investment in Core Scientific Inc.

Previous wording

Our principal sources of liquidity are our existing cash, cash equivalents and available-for-sale equity securities. We expect to fund our operations going forward with existing cash resources, anticipated revenue from our Bitcoin mining operation, and cash that we may raise through future financing transactions. At June 30, 2025, we had cash and cash equivalents of $4.7 million compared to cash and cash equivalents of $5.4 million at December 31, 2024. As of June 30, 2025, we had working capital of $9.6 million, reflecting a decrease of $4.3 million since December 31, 2024 primarily related to sales of our available-for-sale equity securities. Cash management continues to be a priority and we are phasing out high-cost hosting contracts, leveraging our access to capital, and reducing our overall mining costs.

Current wording

Our principal sources of liquidity are our existing cash, cash equivalents, and our At-the-Market (“ATM”) facility. We expect to fund our operations going forward with existing cash resources, anticipated revenue from our Bitcoin mining operation, and cash that we may raise through future financing transactions. At September 30, 2025, we had cash and cash equivalents of $5.3 million compared to cash and cash equivalents of $5.4 million at December 31, 2024. As of September 30, 2025, we had working capital of $8.3 million, reflecting a decrease of $5.5 million since December 31, 2024. Cash management continues to be a priority and we are phasing out high-cost hosting contracts, leveraging our access to capital, and reducing our overall mining costs.

Previous wording

Neither us nor the Sales Agent are obligated to sell any Placement Shares pursuant to the AGP Agreement. Subject to the terms and conditions of the AGP Agreement, the Sales Agent will use commercially reasonable efforts, consistent with its normal trading and sales practices and applicable state and federal law, rules and regulations and the rules of The Nasdaq Capital Market (“Nasdaq”), to sell the Placement Shares from time to time based upon our instructions, including any price, time or size limits or other customary parameters or conditions we may impose. Sales of the Placement Shares, if any, will be made on Nasdaq at market prices by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 of the Securities Act of 1933, as amended. For the three and six months ended June 30, 2025, the Company issued nil and 210,448 common shares, respectively, for nil and $0.1 million, respectively, of net proceeds under the AGP Agreement.

Current wording

Neither us nor the Sales Agent are obligated to sell any Placement Shares pursuant to the AGP Agreement. Subject to the terms and conditions of the AGP Agreement, the Sales Agent will use commercially reasonable efforts, consistent with its normal trading and sales practices and applicable state and federal law, rules and regulations and the rules of The Nasdaq Capital Market (“Nasdaq”), to sell the Placement Shares from time to time based upon our instructions, including any price, time or size limits or other customary parameters or conditions we may impose. Sales of the Placement Shares, if any, will be made on Nasdaq at market prices by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 of the Securities Act of 1933, as amended. For the three and nine months ended September 30, 2025, under the AGP Agreement the Company issued 917,431 and 1,127,879 common shares, respectively, for $0.6 million and $0.7 million of net proceeds, respectively.

Previous wording

Management has projected that based on our recurring losses, negative cash flows from operating activities, and our hashing rate at June 30, 2025, cash on hand may not be sufficient to allow us to continue operations and there is substantial doubt about our ability to continue as a going concern within 12 months from the date of issuance of our financial statements if we are unable to raise additional funding for operations. We expect our working capital needs to increase in the future as we continue to expand and enhance our operations. Included in our working capital is an investment in equity securities that we can liquidate as needed to assist in funding our operations. Our ability to raise additional funds for working capital through equity or debt financings or other sources may depend on the financial success of our business and successful implementation of our key strategic initiatives, financial, economic and market conditions and other factors, some of which are beyond our control. We require additional capital and if we are unsuccessful in raising that capital at a reasonable cost and at the required times, or at all, we may not be able to continue our business operations in the cryptocurrency mining industry or we may be unable to advance our growth initiatives, either of which could adversely impact our business, financial condition and results of operations. In an effort to mitigate these risks we expect to take steps to lower our cost of mining and also refresh our mining fleet to increase our mining efficiency.

Current wording

Management has projected that based on our recurring losses, negative cash flows from operating activities, and our hashing rate at September 30, 2025, cash on hand may not be sufficient to allow us to continue operations and there is substantial doubt about our ability to continue as a going concern within 12 months from the date of issuance of our financial statements if we are unable to raise additional funding for operations. We expect our working capital needs to increase in the future as we continue to expand and enhance our operations. Our ability to raise additional funds for working capital through equity or debt financings or other sources may depend on the financial success of our business and successful implementation of our key strategic initiatives, financial, economic and market conditions and other factors, some of which are beyond our control. We require additional capital and if we are unsuccessful in raising that capital at a reasonable cost and at the required times, or at all, we may not be able to continue our business operations in the cryptocurrency mining industry or we may be unable to advance our growth initiatives, either of which could adversely impact our business, financial condition and results of operations. In an effort to mitigate these risks we expect to take steps to lower our cost of mining and also refresh our mining fleet to increase our mining efficiency.

Previous wording

Net cash used in operating activities. The use of cash during the first six months of 2025 was primarily a result of our net loss of $7.1 million, offset by $3.6 million in non-cash items, which primarily included a realized gain on sale of investment in equity securities, unrealized loss on investment in equity securities, depreciation and amortization, share-based compensation expense, loss on disposal of property and equipment, and change in fair value of Bitcoin.

Current wording

Net cash used in operating activities. The use of cash during the first nine months of 2025 was primarily a result of our net loss of $11.4 million, offset by $7.4 million in non-cash items, which primarily included a realized gain on sale of investment in equity securities, depreciation and amortization, share-based compensation expense, loss on disposal of property and equipment, impairment of property and equipment, provision for loss on other assets, change in fair value of Bitcoin, and nonemployee share-based compensation performance award expense.

Previous wording

Net cash provided by investing activities. During the first six months of 2025, we received $5.3 million from proceeds from the sale of Bitcoin, $4.8 million from proceeds from the sale of investment in equity securities, and $0.2 million for the sale of 950 miners originally included in mining equipment, offset by $1.2 million of payments for the purchase of property and equipment consisting of infrastructure for our Iowa mining site completed in 2025. During the first six months of 2024, we received $5.5 million from proceeds from the sale of investment in equity securities and $1.5 million from proceeds from the sale of Bitcoin.

Current wording

Net cash provided by investing activities. During the first nine months of 2025, we received $7.6 million from proceeds from the sale of Bitcoin, $8.0 million from proceeds from the sale of investment in equity securities, and $0.5 million for the sale of miners originally included in mining equipment, offset by $3.5 million of payments for the purchase of property and equipment consisting of infrastructure for our Iowa mining site completed in 2025 and newer generation mining machines. During the first nine months of 2024, we received $10.5 million from proceeds from the sale of investment in equity securities and $1.5 million from proceeds from the sale of Bitcoin, offset by $4.6 million of payments for the purchase of property and equipment consisting of newer generation mining machines.

Previous wording

Net cash provided by financing activities. For the first six months of 2025, we received $0.1 million of net proceeds from the issuance of common shares through our AGP Agreement.

Current wording

Net cash provided by financing activities. For the first nine months of 2025, we received $0.7 million of net proceeds from the issuance of common shares through our AGP Agreement.