Sphere 3D Announces Agreement with Core Scientific

Rhea-AI Summary

Sphere 3D Corp. (ANY) has reached a settlement agreement with Core Scientific, Inc., approved by United States Bankruptcy Judge Christopher M. Lopez, providing Sphere 3D with $10,000,000 in equity of Core, access to additional equity, and mutual release of claims. The settlement allows for potential additional funds and equity pool access if Core's equity value decreases. Sphere 3D believes the settlement is in the best interests of its shareholders, with Judge Lopez acknowledging the complexity of the case and the efforts put into the settlement negotiations. The terms of the agreement do not waive any claim Sphere 3D has against Gryphon Digital Mining, Inc., seeking recovery for damages in connection with Gryphon's failure to file a timely proof of claim before the deadline in the Core bankruptcy proceeding.

Insights

Financial Analyst

The settlement agreement between Sphere 3D Corp. and Core Scientific, Inc., involving a $10,000,000 equity stake and additional financial provisions, is a strategic financial maneuver with significant implications for Sphere 3D's capital structure and liquidity. The non-dilutive nature of the capital infusion suggests a positive outcome for current shareholders, as it avoids the dilution that would occur from issuing new shares. This equity stake may also provide Sphere 3D with a potential upside if Core's value appreciates post-bankruptcy.

However, the contingency of accessing an additional equity pool based on the performance of Core's equity introduces an element of risk and uncertainty. Investors should closely monitor Core's post-bankruptcy performance, as it will directly impact the realized value of this settlement for Sphere 3D. Additionally, the mutual release of claims could signal an end to costly litigation, potentially freeing up resources for Sphere 3D's strategic growth initiatives.

Legal Expert

The approval of the settlement by a United States Bankruptcy Judge indicates that the agreement has passed legal scrutiny, likely considering the best interests of the involved parties and their creditors. The complexity of the case, as noted by Judge Lopez, underscores the potential for protracted litigation had a settlement not been reached. This resolution allows Sphere 3D to avoid the uncertainties and expenses associated with ongoing legal proceedings.

It is also noteworthy that Sphere 3D has preserved its claims against Gryphon Digital Mining, Inc. This decision to retain legal recourse against Gryphon suggests that Sphere 3D is actively seeking to mitigate its losses and recover damages, which could further influence its financial position. Stakeholders should be aware of the potential for additional recovery, or conversely, the risks if Sphere 3D's claims against Gryphon prove unsuccessful.

Market Research Analyst

The settlement's impact extends beyond the immediate financial boost to Sphere 3D. In the broader context of the Bitcoin mining industry, Sphere 3D's commitment to carbon neutrality is an increasingly relevant factor for investors sensitive to environmental, social and governance (ESG) criteria. The capital secured through this settlement could enable Sphere 3D to invest in cleaner, more efficient mining technologies, potentially improving its competitive position in a market where sustainability is becoming a key differentiator.

Moreover, Sphere 3D's strategic growth initiatives, as highlighted by CEO Patricia Trompeter, are likely to be underpinned by this new capital. The company's ability to focus on these initiatives without the overhang of litigation or the need for dilutive financing could enhance its agility and responsiveness in a rapidly evolving industry. The settlement may thus have long-term implications for Sphere 3D's market share and industry standing.

Toronto, Ontario--(Newsfile Corp. - January 23, 2024) - Sphere 3D Corp. (NASDAQ: ANY) ("Sphere 3D" or the "Company"), dedicated to becoming the leading carbon-neutral Bitcoin mining company has reached a settlement agreement (the "Settlement Agreement") with Core Scientific, Inc. (together with its affiliates, "Core") which was approved by United States Bankruptcy Judge Christopher M. Lopez on January 16, 2024 as part of Core's emergence from bankruptcy. Pursuant to the Settlement Agreement:

• Sphere 3D will receive $10,000,000 in equity of Core;
• Sphere 3D will receive access to a pool of additional equity, if the value of the equity decreases from plan value; and
• Sphere 3Dand Core have mutually released claims against each other, but have expressly preserved Sphere 3D's claims against Gryphon Digital Mining, Inc. ("Gryphon").

Sphere 3D reached an agreement with Core for $10,000,000 of equity which will be available for trading upon Core's Effective date. The Settlement Agreement includes access to potential additional funds for interest as well as an additional equity pool if the value of Core's equity decreases in the 18 months after the date of the Settlement Agreement commensurate with the other unsecured creditors.

Sphere 3D believes the settlement was in the best interests of its shareholders given the uncertainty of litigation. Consistent with Sphere 3D's view, Judge Lopez acknowledged in approving the settlement that the case was complex and would have required extensive deliberations to resolve. Judge Lopez acknowledged the efforts that Sphere 3D and Core had put into the settlement negotiations.

The terms of the Settlement Agreement expressly do not waive any claim Sphere has against Gryphon. Sphere 3D is seeking recovery from Gryphon for damages in connection with Gryphon's failure to file a timely proof of claim before the deadline in the Core bankruptcy proceeding before the filing deadline. Core previously contested Sphere 3D's proof of claim arguing that Gryphon's failure to file the proof of claim before the passage of the bar date deadline invalidated the claim.

CEO Comments

"The settlement of this case provides us with non-dilutive capital to grow and focus all efforts on our strategic growth initiatives," said Patricia Trompeter, CEO of Sphere 3D. "We are glad that the Settlement Agreement will enable us to recover capital."

About Sphere 3D

Sphere 3D Corp. (NASDAQ: ANY) is a net carbon-neutral cryptocurrency miner with more than a decade of proven enterprise data-services expertise. Sphere 3D is growing its industrial-scale Bitcoin mining operation through the capital-efficient procurement of next-generation mining equipment and partnering with best-in-class data center operators. Sphere 3D is dedicated to growing shareholder value while honoring its commitment to strict environmental, social, and governance standards. For more information about Sphere 3D, please visit Sphere3D.com.

Forward-Looking Statements

This communication contains forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify forward-looking statements because they contain words such as "may," "will," "should," "experts," "plans," "anticipates," "could," "intends," "target," "project," "contemplates," "believes," "believes," "estimates," "predicts," "potential," or "continue" or the negative of these words or other similar terms or expressions. Expectations and beliefs regarding matters discussed herein may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from the projected. The forward-looking statements contained in this communication are also subject to other risks and uncertainties, including those more fully described in filings with the SEC, including Sphere 3D's reports filed on Form 10-K, Form 10-Q and Form 8-K and in other filings made by Sphere 3D with the SEC from time to time and available at www.sec.gov. These forward-looking statements are based on current expectations, which are subject to change.

Sphere 3D Contacts

Kurt Kalbfleisch CFO, Sphere 3D
Investor.relations@sphere3d.com

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/195191

FAQ

What is the settlement agreement between Sphere 3D Corp. and Core Scientific, Inc.?

The settlement agreement provides Sphere 3D with $10,000,000 in equity of Core, access to additional equity, and mutual release of claims between the two parties.

What does the settlement agreement allow for if Core's equity value decreases?

If Core's equity value decreases, the settlement agreement allows Sphere 3D access to potential additional funds and an additional equity pool.

What does Judge Lopez acknowledge in approving the settlement?

Judge Lopez acknowledged the complexity of the case and the efforts put into the settlement negotiations by Sphere 3D and Core.

What claim is Sphere 3D seeking against Gryphon Digital Mining, Inc.?

Sphere 3D is seeking recovery from Gryphon for damages in connection with Gryphon's failure to file a timely proof of claim before the deadline in the Core bankruptcy proceeding.

Who is the CEO of Sphere 3D Corp. and what are her comments on the settlement?

Patricia Trompeter is the CEO of Sphere 3D, and she stated that the settlement provides non-dilutive capital to grow and focus on strategic growth initiatives, enabling the company to recover capital.