Sphere 3D Corp. (ANY) Earnings Call Transcript & Summary

Okay. Here we go. Sorry, guys about this. So good afternoon, everyone, and thank you for joining the meeting. My name is Caroline Wang, and I'm the host of today's Zoom meeting. Before we start the Annual Special Meeting of Sphere 3D Corp., we thought it would be helpful to go through a couple of Zoom functions that will help run the meeting more smoothly. Throughout the meeting, I will be sharing the agenda with everyone, and you should see that now on your screen. In addition to seeing the agenda, you should see a Zoom menu bar at the top or bottom of your screen. If you don't see the menu bar, try moving your cursor to the top or the bottom of the screen, which should unhide your menu bar. At the far left corner of the menu bar, you'll see a microphone icon, you should be muted now. If you are not, please put yourself on mute. Your microphone should have a red line going through it if you're not muted. Please tap the microphone with your cursor and that will mute you. When you're participating in the meeting simply tap the microphone again and that will unmute you. After you're done participating, please mute yourself again. If you're joining the meeting on your telephone, please also be sure to mute yourself so that we don't hear your background noise. Another function on the Menu bar is Participants. Please tap the Participant icon now. When you do, you will see all the participants in the meeting. You can use your cursor to move the Participant window on your screen so that you can still see the agenda. In the Participant window, you can send a private message to any of the attendees to send a private message, hover your cursor over the participant to which you want to send a message and you will see a blue More button to the right. When you tap the blue More button, you will see a menu, which includes the Chat button. Tap the Chat button, then you will be presented with the chat function. Also next to each participants saying you should see a green Chat bubble. This will allow you to send a private message to that participant. Please locate Oliver Keung's name in the participant list. If you are a registered shareholder or proxy holder and you have not submitted your proxy or would like to change your vote, please send a chat message to Oliver, and he will send you a ballot. You may also send Oliver an e-mail at [email protected], and I'll just -- you can see that at the top of the screen here, his e-mail address, which I've highlighted. Does anyone have a question? You may also send me a message during the meeting if you have a question. Okay. There are no questions, then I will turn this over to Duncan McEwan. Will you please take the chair for the meeting.

Thank you, Caroline. My name is Duncan McEwan. Good afternoon, everyone, and welcome to this Annual and Special Meeting of the Shareholders of Sphere 3D Corporation. As you -- as was mentioned, my name is Duncan McEwan. I'm one of the directors of Sphere 3D. Normally, this task would fall to Peter Tassiopoulos, who is our CEO. Unfortunately, he is down with COVID. He is on the call but doesn't feel well enough to participate at the moment. Also due to the COVID pandemic and to ensure the safety of shareholders, this annual and special meeting is being held via video conference rather than in person. As disclosed in the Notice of Meeting and Management Information Circular where shareholders are strongly encouraged to vote in advance of the meeting using one of the methods described in the voting instruction or the form of proxy. If you are a registered shareholder or a proxyholder having voting authority and you would like to vote today, please let me know now. We will send electronically a ballot to you, which you will need to sign and return via e-mail to the scrutineer, and Caroline has already indicated one way to do that, which is to get a hold of Oliver Keung. The e-mail address is at the top of the screen, at top of the agenda. If you've called in, the e-mail address is [email protected] (sic) [email protected]. Besides any shareholders who may be submitting a ballot to the scrutineer during the meeting, all of the votes for the meeting were submitted through proxies or otherwise in advance of the meeting. So in accordance with the bylaws, I will act as Chairman of this meeting, which I will now call to order and Caroline Wang, who is Corporate Counsel to the company will act as Secretary of the meeting as well as host. And Oliver Keung from the TSX Trust Company will act as scrutineer. The notice calling this meeting, a management information circular and form of proxy were mailed on December 1, 2021, to the registered shareholders and non-objecting beneficial owners of record as of November 19, 2021. A declaration of testing to such mailing has been provided by the TSX Trust Company. I hereby direct the secretary to append the declaration of mailing as Schedule A to the minutes of this meeting. I advise that the scrutineer has provided a report indicating that a quorum of shareholders is present. The scrutineers' report on quorum is available for inspection by any shareholder following the meeting. Due notice having been given and a quorum being present, I declare this Annual and Special Meeting of Shareholders to be regularly called and properly constituted for the transaction of business. In advance, I would like to just mention that, as you all know, on June 3, 2021, we signed an agreement of planned merger to merge with Gryphon Digital Mining Inc. Please be advised that U.S. and Canadian securities laws prohibit us from commenting on that transaction in a forum such as this one. So we will not be commenting on or taking any questions with respect to that proposed transaction at this meeting. The business of this meeting is: one, the presentation of financial statements for the year ended December 31, 2020; two, the election of directors; three, the appointment of auditors; four, approval of the private placement proposal; and five, approval of the bylaw amendment proposal; and six, approval of the Board size amendment. For the purposes of moving the business of the meeting along, shareholders and proxy holders will be asked to move and second the motions to be brought before the meeting. This is not intended to limit the discussion on any matter. Based upon the proxies duly received prior to the meeting, the votes in relation to the resolutions to be considered at this meeting concerning the election of directors, appointment of auditors, approval of the private placement, approval of the bylaw amendment and approval of the Board size amendment have been received in favor by the requisite majority of shareholders. The scrutineer will confirm that sufficient votes were received for each item after the respective proposal is introduced during the meeting. In order to conduct the meeting, only shareholders or valid proxyholders have a right to address the meeting, and only after they have been recognized by the Chair. Discussion will be limited to the matter under consideration at the applicable time and questions or comments related to the business of the meeting but not related to the matter under consideration will be deferred until the appropriate time. And the Chair reserves the right to limit a speaker to 5 minutes on any matter. As the first item of business, I place before the meeting financial statements for the year ended December 31, 2020, and the report of the auditors thereon. These documents are available on SEDAR and EDGAR. In addition, the financial statements and auditor's report will be attached as a schedule to the minutes of this meeting. The next item of business is the election of directors. I declare the meeting open for nominations for the election of 4 directors to hold office for a term expiring at the close of the next Annual Meeting of Shareholders. May I have the nominations?

Mr. Chairman, I nominate, Vic Mahadevan, Duncan McEwan, Peter Tassiopoulos, and Patricia Trompeter as directors.

Thank you. Since there were no additional nominations made prior to the meeting as required by the bylaws of the company, I declare the nominations closed. I will now entertain a motion respecting the election of directors.

Mr. Chairman, I move that the persons nominated be elected as directors of Sphere 3D Corp to hold office until the close of the next Annual Meeting of Shareholders.

I second the motion.

Thank you. All those in favor of the election of the nominees please signify by saying, aye. [Voting]

Aye.

Aye.

Aye.

If any against, please identify yourself as a duly registered shareholder or valid proxy holder and signify by saying nay or enter the chat room and say that. [Voting]

In the absence of any further information, I declare that the persons nominated have been duly elected as the directors of Sphere 3D Corp and ask that the scrutineer Oliver Keung confirm that each of the nominees received sufficient votes to be elected.

Mr. Chairman, I confirm.

Thank you very much, Oliver. Next item of business is the appointment of auditors. Auditors are currently Smythe LLC, chartered accountants, and it is proposed that they be reappointed as the auditors of Sphere 3D Corp. May I have a motion to appoint to Smythe LLC, chartered accountants as the auditors and authorizing directors to fix [indiscernible].

Mr. Chairman, I move that Smythe LLC, chartered professional accountants be appointed the auditors to hold office until the close of the next Annual Meeting of Shareholders or as their successors are appointed at [indiscernible] as may be fixed by the directors [indiscernible] I hereby authorized to fix such remuneration.

Sorry, please mute yourself.

I second the motion.

Sorry, just to interrupt with everybody who's on the phone. Somebody is not on mute and is interfering with the meeting. Could I ask everybody who is not on mute to go on mute please, so we may continue with the meeting. Thank you very much. All those in favor of the appointment of Smythe LLC, charter professional accountants as the auditors of Sphere 3D Corp, please signify by saying aye. [Voting]

Aye.

Aye.

If any against, please identify yourself as a duly registered shareholder or valid proxy holder, and signify by saying nay or alternatively use the chat function to contact the host and the administrator of this site. I will pause for a minute to see if there's any other -- any of those. [Voting]

In the absence of any contrary information, I declare that Smythe LLC have been duly appointed as the auditors of Sphere 3D Corp, and that the directors are to authorized to fix their remuneration. Will the scrutineer please confirm that the resolution received sufficient votes to be carried.

I confirm.

Thank you again, Oliver. The next item of business is to consider and if thought fit, to pass the resolution for the nonbinding approval, ratification and authorization of the issuance of common shares by the company in a private placement financing transaction that closed on July 12, 2021, otherwise known as the Private Placement Proposal, as outlined in the Management Information Circular on Page 12. This resolution must be passed by a majority of the votes, and I will now entertain a motion to pass the resolution as described in the Management Information Circular.

Mr. Chairman, I move that the resolution of the Private Placement Proposal be passed.

I second the motion.

Thank you very much. All those in favor, please signify by saying, aye. [Voting]

Aye.

Aye.

And again, if anybody is opposed, who has not already registered their opposition please contact through the chat function on the Zoom call to contact the host and administrator of this site. I will pause for a moment to see if there's any of those. [Voting]

I declare the motion carried. Will the scrutineer please confirm that the resolution received sufficient votes to be carried.

Mr. Chairman, I confirm.

Thank you, Oliver. Next, we have the bylaw amendment proposal. The next item is to consider and if thought fit, to pass a resolution authorizing an amendment of the bylaws of the company, otherwise known as Bylaw amendment proposal, as outlined in the Management Information Circular on Page 13. This resolution must be passed by a majority of the votes, and I will now entertain a motion to pass the resolution as described in the Management Information Circular.

Mr. Chairman, I move that the resolution for the Bylaw amendment proposal be passed.

I second the motion.

Thank you very much. All those in favor, please signify by saying, aye. [Voting]

Aye.

If any against, please identify yourselves as we've done before by contacting the administrator of the site through the chat function, and I will pause to see if there's any dissent that's not already registered. I declare the motion carried. Will the scrutineer please confirm that the resolution received sufficient votes to be carried.

I confirm.

Thank you, Oliver. The next item of business is to consider and if thought fit, to pass a resolution to authorize the Board of Directors to increase or decrease the size of the Board of Directors up to 1/3 within the minimum and maximum number of directors prescribed under the articles of the company. This is otherwise known as the Board size proposal, as outlined in the management information circular on Page 14. This resolution must be passed by not less than 2/3 of the votes, and I will now entertain a motion to pass the resolution as described in the Management Information Circular.

Mr. Chairman, I move that the resolution for the Board size proposal be passed.

Mr. Chairman, I second the motion.

Thank you very much. All those in favor, once again, please signify by saying, aye. [Voting]

Aye.

Aye.

And if any against, please identify yourselves as before through the chat function in contacting the host. I will pause for a second to see if there's any dissent that's not already registered. [Voting]

I declare the motion carried. Will the scrutineer please confirm that the resolution received sufficient votes to be carried.

Mr. Chairman, I confirm.

Thank you very much, Oliver. If there is no further business to be brought before the meeting, I will entertain a motion to conclude the meeting.

Mr. Chairman, I move that the meeting be concluded.

I second the motion.

Thank you. Just before we proceed, there have been a number of comments that people would like us to discuss the merger. As I mentioned at the beginning, because it's before the regulatory authorities, we do not -- we are not in a position to make any comments on the proposed merger with Gryphon at this time. So we have a [indiscernible] motion and a seconder to approve the end of the meeting. All those in favor, please signify by saying aye. [Voting]

Aye.

Any oppose, please contact the chat room with chat function? So I declare the motion carried and this Annual and Special Meeting of Shareholders concluded. Thank you for attending.

There are questions you need to answer here in the chart.

Okay. So Peter, do you feel up to answer some of these questions. Or would you prefer not to...

Yes. So I'll take myself off mute. Hopefully, you can hear me. I'm just looking at the chat, if you guys could just give me a second. They're coming in pretty quick. So I'll do my best to answer what I can.

Just by way of introduction, I've been chairing the meeting as a director because Peter is down with COVID.

Yes. So thanks, guys for putting up with me and I can probably type them. Okay. So let's slow down while I'm scrolling up trying to look at the questions. First of all, I appreciate a lot of people have come here to get an update. We can't comment on the merger is all we can say, and that's not to be interpreted in any manner other than the fact that we can't comment on the actual merger. I see a question here about what happened to the warrants of $4? I don't understand that specific question. Is there -- from [indiscernible], there's a specific question about what happened to the warrants of $4? Okay. I'll move to the next one. Contracts. So as you guys know, we've press released the order of 60,000 units. The first batch was shipped in November. They are being installed as we speak. Some are going into core. Others are going into one of Gryphon's other hosting partners, which I don't think we've disclosed, so we can't. But another shipment should be on a boat here before the end of the year coming across. So we've got miners on the way. I think we've disclosed our S-19 Pros, 100 Terahash each. I'm not sure we've disclosed yet what the numbers are. So look for our filing 6-K, you'll get an update as to how many of those miners have been shipped and roughly when they'll actually be set up. The folks at Gryphon are managing all that process. They're obviously, one of the reasons we entered into the agreement, is that they're good at exactly that purpose. So they're handling most of the logistics for us and everything else that goes with that. As far as, what else I can, the conversion price. Let me just read this guys. And I apologize, I am a little foggy. I think I'm lucky to have Omicron, so it's not so bad, but it does knock your socks off. Just give you 1 sec guys, I'll try to get to as many of them as I can. So I'm looking at a question about some conversion price. This $1 -- $2 preferred stock. I'd have to defer to Kurt on this question. As far as it's preferred shares that you're referencing, I don't want to be misquoted in terms of where we are, but -- and whether that's been converted or not, I have to refer back to Q3. And I don't have those handies, and I do apologize in advance. I wasn't anticipating that question. There's a question here from David. Obviously, I'm not going to comment on that. I can't disclose what's there. I can just tell you the first shipment is done. It's here in the United States, I'm actually quarantining in Florida. But we will update you as soon as practical about what's up, what's running as well as soon as practical as well. I know Gryphon also does their own update, so I encourage you to keep a close track on some of their updates as well. We are continuing to build our business, as you guys know. Just sort of as a recap, we're quite happy with the ability to become, I believe, [ Core's ] largest customer. And again, thanks to the Gryphon team, who did the heavy lifting in getting that agreement done as well as the miners that we've ordered. We continue to look for opportunities to expand our business and continue to work towards getting additional equipment as well as getting additional equipment up and running. We're like everyone else in terms of looking for critical mass. And so that is our focus at this time. I encourage you to follow us. We will give you guys more fulsome update as soon as humanly possible. There was a question that had come in prior to the meeting, I can address in one sec, series H. So there was a question that came up, I just want a clarity. What was voted today was the ratification of the common shares that were issued, which at the time I'm going from memory, but I believe it's 4-point-something million common shares. This vote that was held today was not a vote to approve the conversion of any other series H shares into common shares. That would be held at a separate meeting. So I wanted to clarify that. That was an e-mail I received from a couple of people as well as I see it posted here. So for clarity, this is a ratification of a share issuance that already took place. I don't know if the right thing is housekeeping item or how to phrase it, not the approval to convert additional shares of series H. And so there's a big difference in the two. So I wanted to make sure that there is no misunderstanding about that. So the advice we have from counsel is specifically, this is not the forum. This is not a forum where you provide an update on something along that matter. The forum would be a press release of 6-K. I don't, again, not the corporate lawyer. This is the advice we got that this is not a forum that is considered proper disclosure. That's fair and fulsome to everyone to provide an update on something as material as well. That's the reason. Everything I've talked about today is already public. We've already disclosed that we were getting shipments in November for machines in December. We've already disclosed Core. We've already disclosed that Gryphon is managing them under a managed services agreement. So I am just recapping. So again, I can't comment. I can't give opinions on anything else. I do appreciate it. I do recognize, and I'm not oblivious to the frustration. But again, as advised by Council, we will try to find the right forum to give you the appropriate update in a forum that makes sense.

I think, you're kind of near the end of your best buy, best...

That sure took a lot. I'd like to take a nap now. But I appreciate all of you for joining. We've had a very transformational year, and we'll continue to do everything we can guys to keep you up to date on what we're working on.

Thank you, Peter. I really appreciate it. I know you're on sick bed, but really appreciate your attendance.

Thanks, guys. And everybody, please stay safe.

Okay. We're going to terminate the meeting now, and thank you all very much for attending. Appreciate your time.

Thank you.