Document Entity Information Doc
Document Entity Information Document - shares | 3 Months Ended | |
Mar. 31, 2018 | May 01, 2018 | |
Document Information [Abstract] | ||
Entity Registrant Name | Sphere 3D Corp. | |
Entity Central Index Key | 1,591,956 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 13,748,744 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Product Revenue | $ 17,419 | $ 19,445 |
Service Revenue | 2,029 | 2,293 |
Revenue, Net | 19,448 | 21,738 |
Cost of Product Revenue | 12,535 | 14,085 |
Cost of Service Revenue | 903 | 822 |
Gross Profit | 6,010 | 6,831 |
Sales and Marketing | 4,390 | 4,797 |
Research and Development | 1,288 | 1,771 |
General and Administrative | 5,421 | 4,989 |
Operating Expenses | 11,099 | 11,557 |
Loss from Operations | (5,089) | (4,726) |
Other Expense | ||
Interest Expense | (453) | (1,190) |
Interest Expense, Related Party | (655) | (660) |
Other expense, net | (286) | (927) |
Loss before Income Taxes | (6,483) | (7,503) |
Provision for income taxes | 340 | 306 |
Net Loss | $ (6,823) | $ (7,809) |
Loss Per Share, Basic and Diluted [Abstract] | ||
Basic and Diluted | $ (0.89) | $ (2.50) |
Weighted Average Number of Shares Outstanding, Diluted [Abstract] | ||
Basic and Diluted | 7,679 | 3,118 |
Condensed Consolidated Stateme3
Condensed Consolidated Statements of Comprehensive Loss Statement - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Net Loss | $ (6,823) | $ (7,809) |
Other Comprehensive Loss | ||
Foreign currency translation adjustment | 641 | (9) |
Other Comprehensive Income (Loss) | 641 | (9) |
Comprehensive Loss | $ (6,182) | $ (7,818) |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Cash and Cash Equivalents | $ 2,327 | $ 4,598 |
Accounts receivable, net of allowance for doubtful accounts of $1,699 and $1,675, respectively | 10,606 | 11,482 |
Inventories | 7,697 | 8,366 |
Other Current Assets | 2,325 | 1,829 |
Assets, Current | 22,955 | 26,275 |
Property and Equipment, Net | 2,676 | 2,742 |
Intangible Assets, Net | 40,130 | 41,473 |
Goodwill | 11,590 | 11,590 |
Other Assets | 1,236 | 1,200 |
Total Assets | 78,587 | 83,280 |
Accounts Payable | 10,788 | 9,362 |
Accrued Liabilities | 4,538 | 4,157 |
Accrued Payroll and Employee Compensation | 2,419 | 3,240 |
Deferred Revenue | 4,318 | 5,060 |
Debt, Related Party | 25,854 | 26,613 |
Debt | 18,109 | 18,195 |
Other Current Liabilities | 1,023 | 1,283 |
Liabilities, Current | 67,049 | 67,910 |
Deferred Revenue, long-term | 1,321 | 1,276 |
Deferred income taxes | 1,368 | 1,342 |
Other Non-current Liabilities | 794 | 2,289 |
Total Liabilities | 70,532 | 72,817 |
Commitments and Contingencies (Note 12) | ||
Common shares, no par value; 9,428 and 7,116 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively | 177,371 | 173,871 |
Accumulated Other Comprehensive Loss | (1,340) | (1,981) |
Accumulated Deficit | (167,976) | (161,427) |
Total Shareholders' Equity | 8,055 | 10,463 |
Total Liabilities and Shareholders' Equity | $ 78,587 | $ 83,280 |
Condensed Consolidated Balance5
Condensed Consolidated Balance Sheets Consolidated Balance Sheets Parenthetical Data - USD ($) shares in Thousands, $ / shares in Thousands, $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Allowance for Doubtful Accounts Receivable, Current | $ 1,699 | $ 1,675 |
Common Stock, No Par Value | $ 0 | $ 0 |
Common Stock, Shares, Issued | 9,428 | 7,116 |
Common Stock, Shares, Outstanding | 9,428 | 7,116 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Operating Activities [Abstract] | ||
Net Loss | $ (6,823) | $ (7,809) |
Adjustments to reconcile net loss to cash used in operating activities: | ||
Depreciation and Amortization | 1,484 | 1,526 |
Share-based Compensation | 821 | 2,169 |
Amortization of Debt Issuance Costs | 183 | 951 |
Fair Value Adjustment of Warrants | (259) | (187) |
Paid-in-Kind Interest Expense, related party | 63 | 0 |
Loss on revaluation of investment | 0 | 1,145 |
Changes in operating assets and liabilities (net of effects of acquisition): | ||
Accounts Receivable | 1,036 | (756) |
Inventories | 709 | (496) |
Accounts Payable and Accrued Liabilities | 2,228 | 1,298 |
Accrued Payroll and Employee Compensation | (823) | (414) |
Deferred Revenue | (465) | 124 |
Other Assets and Liabilities, Net | (265) | (1,523) |
Net Cash Used in Operating Activities | (2,111) | (3,972) |
Investing activities: | ||
Acquisition, Net of Cash Acquired | 0 | (1,051) |
Purchase of Fixed Assets | (8) | (4) |
Net Cash Used in Investing Activities | (8) | (1,055) |
Financing activities: | ||
Proceeds from issuance of common shares and warrants | 0 | 7,862 |
Payment for Issuance Costs | 0 | (433) |
Payments on Debt, Related Party | (192) | (577) |
Net Cash (Used in) Provided by Financing Activities | (192) | 6,852 |
Effect of Exchange Rate Changes on Cash | 40 | 23 |
Net (decrease) increase in cash and cash equivalents | (2,271) | 1,848 |
Cash and Cash Equivalents, beginning of period | 4,598 | 5,056 |
Cash and Cash Equivalents, end of period | $ 2,327 | $ 6,904 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows Supplemental Disclosures of Cash Flow Information - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Supplemental Cash Flow Information [Abstract] | ||
Cash paid for interest | $ 379 | $ 404 |
Cash Flow, Noncash Investing and Financing Activities Disclosure [Abstract] | ||
Issuance of common shares for settlement of liabilities | 787 | 52 |
Issuance of common shares for related party liabilities | 483 | 0 |
Issuance of common shares for acquisition | 0 | 346 |
Costs accrued for issuance of common shares | $ 0 | $ 250 |
Organization and Business
Organization and Business | 3 Months Ended |
Mar. 31, 2018 | |
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 RDX ® , Glassware 2.0™, SnapCLOUD ® , SnapServer ® , SnapSync™, NEO ® , and V3 ® . Related Party Share Purchase Agreement On February 20, 2018, the Company, Overland Storage, Inc., a California corporation and a wholly owned subsidiary of the Company (“Overland”), and Silicon Valley Technology Partners LLC, a Delaware limited liability company established and controlled by Eric Kelly, the Company’s Chief Executive Officer and Chairman of the Board of Directors (the “Purchaser”) entered into a share purchase agreement (the “Purchase Agreement”), pursuant to which, among other things, and subject to certain closing conditions, the Company will sell to Purchaser all of the issued and outstanding shares of capital stock of Overland for $45.0 million (the “Purchase Price”), subject to a working capital adjustment (the “Share Purchase”). The net proceeds from the Share Purchase will be used to repay: (i) the Company’s outstanding obligations under its Credit Agreement with Opus Bank; (ii) its outstanding obligations under the related party convertible note with FBC Holdings S.a.r.l. (“FBC Holdings”); and (iii) its related party subordinated promissory note with MF Ventures, LLC. The Special Committee of the Board of Directors of the Company and the Board of Directors of the Company (with Eric Kelly recusing himself) unanimously approved the entry into the Purchase Agreement by the Company. The Company will hold a special shareholder meeting on May 31, 2018 to seek shareholder approval for the Share Purchase and, subject to the receipt of requisite shareholder approval and meeting the other closing conditions contained therein (including Purchaser’s receipt of adequate funding to close the Share Purchase), anticipates the transaction will close shortly thereafter. Under the terms of the Purchase Agreement, the Share Purchase is contingent upon, and Purchaser must use its best efforts to arrange for, debt and/or equity financing in an amount at least equal to the Purchase Price in order to consummate the Share Purchase (the “Financing”). In addition, the Company must use commercially reasonable efforts to provide all cooperation reasonably requested by Purchaser regarding the Financing. Until the Financing is committed in accordance with a Contingency Termination Event (as defined below), the Company is free to solicit and negotiate other offers to purchase the Company, Overland or any or all of their assets and has the right to terminate the Purchase Agreement for any or no reason without penalty (subject to the expense reimbursement provisions described below). The closing of the Share Purchase and of the other transactions contemplated by the Purchase Agreement are subject to (i) the adoption of the Purchase Agreement by the affirmative vote of the holders of (a) at least 66 2/3% of the outstanding common shares of the Company cast in person or by proxy at the special meeting of shareholders and (b) a majority of the votes cast by certain “minority shareholders” in person or by proxy at the special meeting of shareholders (the “Shareholder Approval”) and (ii) the transfer by the Company of (a) the businesses of (x) Unified ConneXions, Inc. and (y) HVE ConneXions, LLC (including the provision of information technology consulting services and hardware solutions around cloud computing, data storage and server virtualization to corporate, government, and educational institutions), and (b) the SNAP network attached storage business to a subsidiary of the Company other than Overland or a subsidiary of Overland. The closing of the Share Purchase and of the other transactions contemplated by the Purchase Agreement are also subject to various other conditions, including the consummation of the Financing, the absence of any order, statute, rule, regulation, executive order, decree or injunction issued by any governmental entity prohibiting the Share Purchase, the absence of a pending claim, suit, action or proceeding material claims seeking to prohibit the Share Purchase, the accuracy of the representations and warranties contained in the Purchase Agreement, compliance with the covenants and agreements contained in the Purchase Agreement in all material respects, and the absence of a material adverse effect on either the Company or Overland. The Company has made customary representations, warranties and covenants in the Purchase Agreement, including, among others, covenants (i) to conduct its business in the ordinary course during the period between the execution of the Purchaser Agreement and the closing of the Share Purchase, (ii) not to engage in specified types of transactions during this period unless agreed to in writing by Purchaser, (iii) to convene and hold a meeting of its shareholders for the purpose of obtaining the Shareholder Approval and (iv) subject to certain exceptions and only following the occurrence of the Contingency Termination Event (as defined below), not to solicit and negotiate other offers to purchase the Company, Overland or any or all of their assets or to withdraw, modify or qualify in a manner adverse to Purchaser the recommendation of the Board that the Company’s shareholders vote in favor of approving the Share Purchase. The Company has also agreed to indemnification provisions in favor of Purchaser that are customary for transactions of this type. Prior to the (i) execution and delivery of financing commitments in forms reasonably acceptable to the Company, which provide, among other things, for commitments from financing sources sufficient to pay the Purchase Price in the Share Purchase, (ii) execution and delivery by Purchaser of an irrevocable waiver in a form reasonably acceptable to the Company waiving Purchaser’s condition to the obligation to close the Share Purchase that the Financing has been received and (iii) an executed certificate delivered by Purchaser to the Company regarding the accuracy of certain representations regarding the Financing (the “Contingency Termination Event”), the Company has the right to terminate the Purchase Agreement for any reason or for no reason. The Purchase Agreement also provides that, upon such termination of the Purchase Agreement by the Company, the Company has agreed to reimburse Purchaser up to approximately $350,000 for the reasonable and documented out-of-pocket expenses incurred by the Purchaser and the sources for the Financing in connection with the negotiation, execution and performance of the Purchase Agreement and the transactions contemplated thereby, as well as the fees and expenses of the Purchaser's outside counsel. In addition, the Purchase Agreement contains certain other termination rights, including, following the occurrence of the Contingency Termination Event, the right of the Company to terminate the Purchase Agreement under specified circumstances to accept an unsolicited superior proposal from a third party. The Purchase Agreement provides that, following the occurrence of the Contingency Termination Event and upon termination of the Purchase Agreement by the Company under specified circumstances (including termination by the Company to accept a superior proposal) or by Purchaser under specified circumstances, a termination fee equal to the lesser of (i) $1.0 million and (ii) the amount of Purchaser’s reasonable fees and expenses in connection with the negotiation, execution and performance of the Purchase Agreement (including the amount that the Purchaser must pay or reimburse to the sources for the Financing) will be payable by the Company to the Purchaser. Such termination fee is also payable following the occurrence of the Contingency Termination Event under certain other specified circumstances set forth in the Purchase Agreement. The Purchase Agreement also provides that each party to the Purchase Agreement may compel the other party or parties thereto to specifically perform its or their obligations under the Purchase Agreement. However, if the Purchase Agreement is terminated such that the Company termination fee becomes payable, the Purchaser will be precluded from any other remedy against the Company or Overland, including expense reimbursement and specific performance. Further, if the Purchase Agreement is terminated such that the expense reimbursement becomes payable, the Purchaser will be precluded from any other remedy against the Company or Overland, including the Company termination fee and specific performance. Subject to certain exceptions and limitations, either party may terminate the Purchase Agreement if the Share Purchase is not consummated by August 19, 2018 . Management has projected that cash on hand will not be sufficient to allow the Company to continue operations beyond May 31, 2018 if the Company is unable to amend, refinance, or pay off its debt and credit facilities. If the transactions contemplated by the Purchase Agreement are consummated, the Company expects that the proceeds to be received by the Company would be sufficient to pay off its outstanding debt and credit facilities. The Company will hold a special shareholder meeting on May 31, 2018 to seek shareholder approval for the Share Purchase and, subject to the receipt of requisite shareholder approval and meeting the other closing conditions contained therein (including Purchaser’s receipt of adequate funding to close the Share Purchase), anticipates the transaction will close shortly thereafter. There can be no guarantee that we will be able to raise additional funds or amend or refinance our debt and credit facilities on favorable terms or at all, nor can there be any guarantee that the Company’s shareholders will approve the Share Purchase or that the Share Purchase will ultimately be consummated. Significant changes from the Company’s current forecasts, including but not limited to: (i) any delay in the closing of the Share Purchase after May 31, 2018 (including as a result of a failure to receive the appropriate shareholder vote, the failure of the Purchaser to obtain funding adequate to fund the Purchase Price, or the failure to satisfy any closing conditions), (ii) failure to comply with the financial covenants in its credit facilities; (iii) shortfalls from projected sales levels; (iv) unexpected increases in product costs; (v) increases in operating costs; (vi) changes in the historical timing of collecting accounts receivable; and (vii) 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 possibly seek bankruptcy protection, 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, 2018 , and such losses might continue for the foreseeable future. Based upon the Company's current expectations and projections for the next year, the Company believes that it may not have sufficient liquidity necessary to sustain operations beyond May 31, 2018 due to the maturity dates of the existing debt facilities. 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. Reverse Stock Split On July 5, 2017, 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 1-for-25 , which became effective on July 11, 2017. All share and per share amounts in the accompanying consolidated financial statements and the notes thereto have been restated for all periods to reflect the share consolidation. |
Significant Accounting Policies
Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2018 | |
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. 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 and long-lived assets; deferred revenue; allowance for doubtful receivables; inventory valuation; warranty provisions; deferred income taxes; 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’ equity. Gains or losses from foreign currency transactions are recognized in the consolidated statements of operations. Such transactions resulted in a loss of $0.6 million in three months ended March 31, 2018 and a minimal gain in three months ended March 31, 2017 . 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 its inventory for obsolete or unmarketable inventory by an amount equal to the difference between the cost of the inventory and the net realizable value. 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, Intangible Assets and Long-Lived 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. Long-lived assets are reviewed for recoverability whenever events or changes in circumstances indicate the carrying value may not be recoverable. Our consideration includes, but is not limited to: (i) significant under-performance relative to historical or projected future operating results; (ii) significant changes in the manner of use of the assets or the strategy for the Company’s overall business; (iii) significant decrease in the market value of the assets; and (iv) significant negative industry or economic trends. When the carrying value is not considered recoverable, an impairment loss for the amount by which the carrying value of a long-lived asset exceeds its fair value is recognized, with an offsetting reduction in the carrying value of the related asset. Revenue Recognition The Company primarily generates revenue from solutions for standalone storage and long-term data archive products, as well as enterprise storage management solutions which are primarily grouped into three categories: (i) disk systems, (ii) tape automation systems, tape drive and media, and (iii) warranty and customer services. Approximately 90% 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 generally have 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 are subject to certain rights of return, stock rotation privileges and price protections, that create “variable considerations”. 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 over time on a ratable basis. The performance obligations are satisfied as services are rendered typically on a straight-line 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 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 revenue to the performance obligations in multiple element arrangements based on relative selling prices. The Company determines the transaction price based on its normal pricing and discounting practices for the specific product or service when sold separately. When the Company is not able to establish the individual transaction price for all performance obligations in an arrangement with multiple elements, the Company determines the selling price of each element based on third party evidence of selling price or based on the Company’s actual historical selling prices of similar items, whichever management believes provides the most reliable estimate of expected selling prices. 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. Shipping and Handling Amounts billed to customers for shipping and handling are included in product revenue, and costs incurred related to shipping and handling are included in cost of product revenue. 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 purchased software code and services content. Such costs related to software development are included in research and development expense until the point that technological feasibility is reached, which for our software products, is generally shortly before the products are released to manufacturing. Once technological feasibility is reached, such costs are capitalized and amortized to cost of revenue over the estimated lives of the products. Segment Information We report segment data based on the management approach. The management approach designates the internal reporting that is used by management for making operating and investment decisions and evaluating performance as the source of our reportable segments. We use one measurement of profitability and do not disaggregate our business for internal reporting. We operate in one segment providing data management, and desktop and application virtualization solutions for small and medium businesses and distributed enterprises. We disclose information about products and services, geographic areas, and major customers. Comprehensive Loss Comprehensive loss and its components encompasses 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 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 and the unvested options remeasured at each reporting date, with changes in fair value recognized in expense in the consolidated statement of operations. 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 January 2017, the FASB issued Accounting Standards Update (“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. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). 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, with early adoption permitted. An entity will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. We are currently evaluating the effect that ASU 2016-02 will have on our consolidated financial statements and related disclosures. Recently Adopted Accounting Pronouncements On January 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers and all the related amendments, or Accounting Standards Codification (“ASC”) Topic 606. Under Topic 606, an entity is required to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Topic 606 defines a five-step process in order to achieve this core principle, which may require the use of judgment and estimates, and also requires expanded qualitative and quantitative disclosures relating to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including significant judgments and estimates used. The adoption of the new standard requires the recognition of revenues generally upon shipment to our customers for both distributors and direct consumers also known as “sell-in basis” for sales of products to certain customers which had previously been recognized on a “sell-through basis” or when the product was ultimately shipped to the end consumer. We elected to adopt this guidance using the modified retrospective method and it resulted in a cumulative adjustment reducing our accumulated deficit by approximately $0.3 million . Comparative prior periods were not adjusted and continue to be reported under FASB ASC Topic 605, Revenue Recognition . In connection with the adoption of Topic 606, we are required to capitalize certain contract acquisition costs consisting primarily of commissions paid when contracts are signed. The Company elected follow a Topic 606 practical expedient and expense the incremental costs of obtaining a contract (sales commissions) when incurred because the amortization period is generally one year or less and capitalized long-term contract costs are not significant. For certain performance obligations related to services, extended warranty and other service agreements that are settled over time, the Company has elected not to adjust the transaction price for the consideration of the effects of time value of money for prepaid services from customers as these services and warranty services are usually fully amortized in one year or less. The impact of the adoption of ASC 606 on our unaudited consolidated balance sheet at March 31, 2018 and our unaudited consolidated statements of comprehensive income, equity and cash flows for the three months ended March 31, 2018 was not material. We do not expect the adoption of this guidance to have a material effect on our results of operations in future periods. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). The update addresses eight cash flow classification issues and how they should be reported in the statement of cash flows. The update is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The adoption of the new standard on January 1, 2018 did not have a material effect on our financial position, results of operations or cash flows. In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718) - Scope of Modification Accounting (“ASU 2017-09”). The update provides clarity and is expected to reduce both diversity in practice and the cost and complexity when accounting for a change to the terms of a stock-based award. the update is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2017, on a prospective basis. The adoption of the new standard on January 1, 2018 did not have a material effect on our financial position, results of operations or cash flows. In July 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815) (“ASU 2017-11”) . The update changes the classification of certain equity-linked financial instruments (or embedded features) with down round features. The update also clarifies existing disclosure requirements for equity-classified instruments. The update is effective retrospectively for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. We early adopted the new standard effective January 1, 2018 and it did not have a material effect on our financial position, results of operations or cash flows. |
Business Combination
Business Combination | 3 Months Ended |
Mar. 31, 2018 | |
Business Combinations [Abstract] | |
Business Combination Disclosure [Text Block] | Business Combination UCX and HVE Acquisition In December 2016, the Company acquired 19.9% of the outstanding equity interests of Unified ConneXions, Inc. (“UCX”) and HVE ConneXions, LLC (“HVE”) for the purchase price of $1.5 million . The Company issued 157,894 shares of its common shares in satisfaction of payment. In January 2017, the Company completed its acquisition of all of the remaining outstanding equity interests of UCX and HVE, for $1.1 million in cash and issued 88,235 common shares with an approximate value of $0.3 million . In 2017, the Company recognized a $1.1 million loss, included in other expense, as a result of the remeasurement to fair value the equity interest held immediately before the business combination. The valuation was based on the Company’s private placement completed as of January 26, 2017. UCX and HVE provide information technology consulting services and hardware solutions around cloud computing, data storage and server virtualization to corporate, government, and educational institutions primarily in the southern central United States. By adding UCX’s technologies, professional services and engineering talent, and HVE’s products, engineering and virtualization expertise, the Company intends to expand its virtualization offerings as well as enhance its ability to accelerate the delivery of hybrid cloud solutions to customers. We incurred acquisition related expenses of $34,000 which consisted primarily of due diligence, legal and other one-time charges and are included in general and administrative expense in the consolidated statements of operations. A summary of the estimated fair values of the assets acquired and liabilities assumed as of the closing date were as follows (in thousands): Cash $ 49 Accounts receivable 582 Inventory 206 Identifiable intangible assets 1,260 Other assets 45 Total identifiable assets acquired 2,142 Accounts payable and accrued liabilities (359 ) Deferred revenue (518 ) Net identifiable assets acquired 1,265 Goodwill 522 Net assets acquired $ 1,787 Goodwill is primarily comprised of a trained and assembled workforce. The fair value estimates for the assets acquired and liabilities assumed for the acquisition were based on estimates and analysis, including work performed by third party valuation specialists. The goodwill recognized upon acquisition is not deductible for tax purposes. The results of operations related to this acquisition have been included in our consolidated statements of operations from the acquisition date. Pro forma results of operations have not been presented because at this time it is impracticable to provide as the information is not available at the level of detail required. The identified intangible assets as of the date of acquisition consisted of the following (in thousands): Estimated Weighted- Channel partner relationships $ 730 6.0 Customer relationships 380 3.2 Developed technology 150 3.0 Total identified intangible assets $ 1,260 |
Inventories
Inventories | 3 Months Ended |
Mar. 31, 2018 | |
Balance Sheet Related Disclosures [Abstract] | |
Inventories Disclosures [Text Block] | Inventories The following table summarizes inventories (in thousands): March 31, 2018 December 31, 2017 Raw materials $ 1,601 $ 1,222 Work in process 2,160 2,217 Finished goods 3,936 4,927 $ 7,697 $ 8,366 |
Intangible Assets and Goodwill
Intangible Assets and Goodwill | 3 Months Ended |
Mar. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets Disclosure [Text Block] | Intangible Assets and Goodwill The following table summarizes intangible assets, net (in thousands): March 31, 2018 December 31, 2017 Developed technology $ 23,414 $ 23,414 Channel partner relationships (1) 12,976 12,929 Capitalized development costs (1) 3,069 3,164 Customer relationships (1) 1,668 1,647 41,127 41,154 Accumulated amortization: Developed technology (16,299 ) (15,276 ) Channel partner relationships (1) (1,365 ) (1,201 ) Capitalized development costs (1) (1,461 ) (1,409 ) Customer relationships (1) (572 ) (495 ) (19,697 ) (18,381 ) Total finite-lived assets, net 21,430 22,773 Indefinite-lived intangible assets - trade names 18,700 18,700 Total intangible assets, net $ 40,130 $ 41,473 ________________ (1) Includes the impact of foreign currency exchange rate fluctuations. Amortization expense of intangible assets was $1.3 million during each of the three months ended March 31, 2018 and 2017 . Estimated amortization expense for intangible assets is expected to be approximately $2.4 million for the remainder of 2018 and $2.6 million , $2.5 million , $2.1 million , $1.9 million and $1.5 million in fiscal 2019, 2020, 2021, 2022 and 2023, respectively. |
Debt
Debt | 3 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Debt Disclosure [Text Block] | Debt Related Party Convertible Note In December 2014, in connection with the acquisition of Overland, the existing debt of Overland and the remaining debt of the Company were amended and restated into a $19.5 million convertible note held by FBC Holdings. In April 2016, the Company modified its convertible note with FBC Holdings, pursuant to which the holder made an additional advance and principal amount under the convertible note amount was increased to $24.5 million . The convertible note bears interest at an 8.0% simple annual interest rate, payable semi-annually. The obligations under the convertible note are secured by substantially all assets of the Company. At March 31, 2018 , the Company had $23.8 million , net of unamortized debt costs of $0.7 million , outstanding on the convertible note. The Company has the option to pay accrued and outstanding interest either entirely in cash or common shares. If the Company choses to pay the interest in common shares, the calculation is based upon the number of common shares that may be issued as payment of interest on the convertible note and will be determined by dividing the amount of interest due by the current market price as defined in the convertible note agreement. For the three months ended March 31, 2018 and 2017 , the Company issued 344,959 and zero common shares, respectively, for the settlement of accrued interest expense. In March 2018, the Company and FBC Holdings entered into an amendment to the convertible note, under which the maturity date was extended from March 31, 2018 to May 31, 2018 . The amendment also altered the schedule for interest payments under the FBC Debenture by providing for future accrued interest to be paid twice monthly rather than semi-annually. In partial consideration for the extension, the Company agreed to pay to FBC Holdings a fee, payable in cash or common shares of the Company at the Company’s option, of $735,000 , payable in full by May 16, 2018. In April 2018, the Company issued in the aggregate 950,579 common shares to FBC Holdings for payment of accrued interest and partial payment of fees related to the March 2018 amendment to the convertible note. In November 2015, the convertible note’s conversion price was adjusted to $75.00 per share. At the option of the Company, the convertible note is convertible into common shares at the conversion price at any time that the weighted average trading price for the common shares exceeds 150% of the conversion price (i.e. exceeds $112.50 per share), for ten consecutive trading days on its principal stock exchange that the common shares trade. The convertible note contains customary covenants, including covenants that limit or restrict the Company’s ability to incur liens, incur indebtedness, or make certain restricted payments. Upon the occurrence of an event of default under the convertible note, the Holder may declare all amounts outstanding to be immediately due and payable. The convertible note specifies a number of events of default (some of which are subject to applicable grace or cure periods), including, among other things, non-payment defaults, covenant defaults, cross-defaults to other materials indebtedness, bankruptcy and insolvency defaults, and material judgment defaults. As of March 31, 2018 , the Company was in compliance with all covenants of the convertible note. For the three months ended March 31, 2018 and 2017 , interest expense, including amortization of debt costs, on the convertible note was $0.6 million and $0.5 million , respectively. Related Party Debt In December 2017, the Company entered into a $2.0 million subordinated promissory note with MF Ventures, LLC, a related party. The promissory note is subordinate to the Company’s Opus Bank Credit Agreement and FBC Holdings indebtedness and has a maturity date of the earliest of: (i) December 11, 2020 ; (ii) immediately after repayment in full of the Opus Bank Credit Agreement and the FBC Holdings indebtedness; or (iii) immediately after the Company’s refinancing of both the Opus Bank Credit Agreement and the FBC Holdings indebtedness. The promissory note may be prepaid at any time by the Company; including any accrued and unpaid interest and a $0.3 million prepayment penalty. The promissory note bears interest at a 12.5% simple annual interest rate, payable quarterly in arrears. Interest shall be paid in kind by increasing the principal amount of the note on each quarterly interest payment date. At March 31, 2018 , the Company had $2.1 million outstanding on the convertible note. For the three months ended March 31, 2018 , interest expense, including amortization of debt costs, on the promissory note was $0.1 million . In September 2016, the Company entered into a $2.5 million agreement with FBC Holdings. The term loan has a maturity date of January 31, 2018 and bears interest at a 20.0% simple annual interest rate, payable monthly in arrears. For the three months ended March 31, 2018 and 2017, interest expense, including amortization of debt costs, on the term loan was $5,000 and $119,000 , respectively. In January 2018, the FBC Holdings term loan was repaid in full per the term loan agreement. Credit Agreement In April 2016, the Company entered into a Credit Agreement with Opus Bank for a term loan in the amount of $10.0 million and a credit facility in the amount of up to $10.0 million . A portion of the proceeds were used to pay off the Company’s then outstanding credit facilities with FBC Holdings and Silicon Valley Bank. The remainder of the proceeds were used for working capital and general business requirements. On December 30, 2016, the credit facility was reduced to $8.2 million . The obligations under the term loan and credit facility are secured by substantially all assets of the Company other than the stock of its subsidiaries organized outside of the U.S. and Canada that are pledged to secure the Company’s obligations under the Company’s convertible note. At March 31, 2018 , the interest rate on the term loan and credit facility was 8.25% . In March 2018, the Company and Opus Bank entered into Amendment Number Eight to Credit Agreement (“Amendment Number Eight”). Under the terms of Amendment Number Eight the maturity date for the revolving and term loan credit facilities were extended from March 31, 2018 to May 31, 2018 . In consideration for the extension, the Company agreed to pay to Opus Bank a fee of $0.1 million , payable in cash on the date the Credit Agreement is paid in full. In March 2017, the Company and Opus Bank entered into Amendment Number Two to Credit Agreement, Amendment Number One to Amendment Number 1, Waiver and Reaffirmation (the “Second Amendment”). As a condition of the Second Amendment, the Company issued to Opus Bank (i) a warrant, exercisable for 15,957 shares at an exercise price of $0.25 per common share as the debt was not repaid by April 17, 2017 and (ii) a warrant, exercisable for 35,242 shares at an exercise price of $0.25 per common share as the debt was not repaid by May 31, 2017. The term loan and credit facility contain customary covenants, including covenants that limit or restrict the Company’s ability to incur liens, incur indebtedness, or make certain restricted payments. Upon the occurrence of an event of default under the term loan, the holder may declare all amounts outstanding to be immediately due and payable. The term loan and credit facility specify a number of events of default (some of which are subject to applicable grace or cure periods), including, among other things, non-payment defaults, covenant defaults, cross-defaults to other materials indebtedness, bankruptcy and insolvency defaults, and material judgment defaults. As of March 31, 2018 , the Company was in compliance with all covenants of the term loan and credit facility. At March 31, 2018 , the outstanding balances of the term loan and credit facility were $9.9 million , net of unamortized debt costs of $0.1 million , and $8.2 million , respectively. For the three months ended March 31, 2018 and 2017, interest expense, including amortization of debt costs, on the Opus facilities was $0.5 million and $1.2 million , respectively. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2018 | |
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, credit facility, debt and related party debt. 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 amount of the credit facility borrowings approximate their fair value as the interest rate of the credit facility is substantially comparable to rates offered for similar debt 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 following table provides information by level for liabilities that are measured at fair value using significant unobservable inputs (Level 3) (in thousands): Warrant liability as of December 31, 2017 $ 1,669 Adoption of accounting guidance (46 ) Change in fair value of warrants (259 ) Reclassification to equity resulting from warrant exchange agreement (1,364 ) Warrant liability as of March 31, 2018 $ — Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis The Company's non-financial assets such as 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
Share Capital | 3 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
Stockholders' Equity Note Disclosure [Text Block] | Share Capital Reverse Stock Split On July 5, 2017, 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 1-for-25 , which became effective on July 11, 2017. All share and per share amounts have been restated for all periods to reflect the share consolidation. At March 31, 2018 , the Company had the following outstanding warrants to purchase common shares: Date issued Contractual life (years) Exercise price Number outstanding Expiration May 2015 5 $100.00 33,600 May 31, 2020 October 2015 5 $58.25 16,077 October 14, 2020 December 2015 3 $38.50 20,000 December 21, 2018 December 2015 5 $62.50 41,100 December 15, 2020 December 2015 5 $27.00 60,000 (1) December 4, 2020 January 2016 3 $51.50 3,539 November 30, 2018 February 2016 3 $40.50 20,000 February 26, 2019 March 2016 5 $62.50 1,200 March 4, 2021 November 2016 3 $50.00 1,000 November 8, 2019 December 2016 6 $0.25 34,483 December 30, 2022 March 2017 6 $0.25 15,957 April 18, 2023 March 2017 6 $0.25 35,242 June 1, 2023 August 2017 5 $5.25 300,000 August 11, 2022 August 2017 5 $5.25 95,000 August 16, 2022 August 2017 5 $5.25 205,000 August 22, 2022 882,198 (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 340,000 common shares, in the aggregate, outstanding to related parties at March 31, 2018 . Related Party Share Capital Transactions In August 2017, the Company entered into a securities purchase agreement with certain investors pursuant to which the Company issued (i) 600,000 common shares, of which 395,000 common shares were issued to related parties, and (ii) warrants for the purchase of up to 600,000 common shares, of which warrants to purchase up to 395,000 common shares were issued to related parties, in a private placement in exchange for a cash payment of $3.0 million . The purchase price was $5.00 per common share and warrant to purchase one common share, and the exercise price of the warrants is $5.25 per warrant share. The warrants were subject to certain anti-dilution adjustments through December 2017. In July 2017, the Company entered into amended and restated warrant agreements with certain holders of warrants previously issued in March 2016 (the “Amended March 2016 Warrant”) and between December 2016 and March 2017 (the “Amended March 2017 Warrants” and together with the Amended March 2016 Warrant, the “Amended and Restated Warrants”). Pursuant to the amended and restated warrant agreements, the Company issued an aggregate of 1,617,917 common shares, of which 1,315,385 common shares were issued to related parties, in exchange for the cancellation of such warrants. Immediately after the exchange, the amended and restated warrant agreements became null and void. In March 2017, the Company entered into a securities purchase agreement with certain investors party thereto, pursuant to which the Company issued to the investors, in the aggregate, 818,182 of the Company’s common shares for gross proceeds of $4.5 million . The securities purchase agreement also provided for the concurrent private placement of warrants exercisable to purchase up to 867,272 common shares. Each warrant had an exercise price of $7.50 per warrant share. MF Ventures, LLC, a related party, participated in the offering by acquiring 181,818 common shares and warrants to purchase 181,818 shares. In August 2017, the Company issued additional common shares, which triggered a price adjustment for the March 2017 warrants from $7.50 to $5.00 and the Company issued, in the aggregate, additional warrants exercisable to purchase up to 433,638 common shares, of which MF Ventures, LLC received warrants exercisable to purchase 90,909 common shares. 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 1,430,998 common shares in exchange for the surrender and cancellation of the Company’s outstanding March 24, 2017 warrants (the “Exchange”). Immediately after the Exchange, the previously issued warrants became null and void. MF Ventures, LLC, participated in the Exchange by acquiring 299,999 common shares in exchange for the cancellation of a warrant to purchase 272,727 common shares. Between December 30, 2016 and March 16, 2017, the Company completed a private placement and issued a total of 725,599 “Units” at a purchase price of $7.50 per Unit. Each Unit consisted of one common share and one warrant from each of two series of warrants. The Company received gross proceeds of $5.4 million in connection with the sale of the Units. The warrants were exercisable to purchase 1,451,198 common shares in the aggregate. MF Ventures, LLC participated in the private placements by acquiring 333,333 common shares and warrants to purchase 666,666 common shares. Lynn Factor and Sheldon Inwentash, a married couple and related party to the Company, participated in the private placements by acquiring 213,000 common shares and warrants to purchase 426,000 common shares. An additional 28,000 common shares and warrants to purchase 56,000 common shares were acquired by ThreeD Capital Inc. Mr. Inwentash is the Chief Executive Officer of ThreeD Capital Inc. In July 2017, the warrants issued between December 30, 2016 and March 16, 2017 became null and void as a result of the amended and restated warrant agreements. As of December 31, 2017, Lynn Factor and Sheldon Inwentash no longer have a significant direct or indirect ownership of the Company and are no longer classified as a related party. |
Equity Incentive Plan
Equity Incentive Plan | 3 Months Ended |
Mar. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Disclosure of Compensation Related Costs, Share-based Payments [Text Block] | Equity Incentive Plans During the three months ended March 31, 2018 and 2017, the Company granted awards of restricted stock units of 400 and 210,441 , respectively, which 206,238 were granted outside of the 2015 Performance Incentive Plan. The restricted stock units were fair valued based on the date of grant. During the three months ended March 31, 2018 and 2017, the Company granted awards of stock options of none and 800 , respectively. The stock options were fair valued using the Black-Scholes option pricing model. The restricted stock units and stock options typically vest over a period of approximately three years. During the three months ended March 31, 2018 and 2017, 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, 2018 and 2017, the Company granted RSAs of 380,371 and 6,520 , respectively, with a value of $787,000 and $52,000 , respectively. Stock Options The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model, which uses the weighted-average assumptions noted in the following table: Three Months 2018 2017 Expected volatility n/a 93.0 % Risk-free interest rate n/a 1.5 % Dividend yield n/a — Expected term (in years) n/a 4.7 The expected volatility was based on the Company’s historical share price. The risk-free interest rate is determined based upon a constant maturity U.S. Treasury security with a contractual life approximating the expected term of the option. The expected term of options granted is estimated based on a number of factors, including but not limited to the vesting term of the award, historical employee exercise behavior, the expected volatility of the Company’s common shares and an employee’s average length of service. Share-Based Compensation Expense The Company recorded the following compensation expense related to its share-based compensation awards (in thousands): Three Months 2018 2017 Cost of sales $ 32 $ 84 Sales and marketing 184 651 Research and development 96 370 General and administrative 509 1,064 Total share-based compensation expense $ 821 $ 2,169 As of March 31, 2018 , there was a total of $2.1 million 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, 2018 is expected to be recognized over a weighted-average period of 1.6 years. |
Net Loss Per Share
Net Loss Per Share | 3 Months Ended |
Mar. 31, 2018 | |
Earnings Per Share [Abstract] | |
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 (in thousands): Three Months 2018 2017 Common share purchase warrants 882 2,744 Convertible notes 327 327 Convertible notes interest 328 452 Restricted stock not yet vested or released 848 267 Options outstanding 176 130 |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions Disclosure [Text Block] | Related Party Transactions Professional services provided by affiliates of the Company were $206,000 and $42,000 during the three months ended March 31, 2018 and 2017, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2018 | |
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, 2018 , the Company’s had no outstanding standby letters of credit. Warranty and Extended Warranty The Company had $0.8 million in deferred costs included in other current and non-current assets related to deferred service revenue at both March 31, 2018 and December 31, 2017 . Changes in the liability for product warranty and deferred revenue associated with extended warranties and service contracts were as follows (in thousands): Product Deferred Liability at December 31, 2017 $ 996 $ 5,672 Settlements made during the period (156 ) (1,493 ) Change in liability for warranties issued during the period 180 1,339 Change in liability for pre-existing warranties 9 — Liability at March 31, 2018 $ 1,029 $ 5,518 Current liability $ 642 $ 4,260 Non-current liability 387 1,258 Liability at March 31, 2018 $ 1,029 $ 5,518 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. Patent Litigation Funding Agreement In December 2010, Overland entered into a litigation funding agreement (the “Funding Agreement”) with Special Situations Fund III QP, L.P., Special Situations Private Equity Fund, L.P., Special Situations Technology Fund, L.P., and Special Situations Technology Fund II, L.P. (collectively, the “Special Situations Funds”) pursuant to which the Special Situations Funds agreed to fund certain patent litigation brought by Overland. In May 2014, the Special Situations Funds filed a complaint against Overland in the Supreme Court for New York County, alleging breach of the Funding Agreement. The Special Situations Funds alleged that Overland’s January 2014 acquisition of Tandberg Data entitled the Special Situation Funds to a $6.0 million payment under the Funding Agreement, and therefore Overland’s refusal to make the payment constituted a breach of the Funding Agreement by Overland. In November 2014, the Special Situations Funds amended their complaint to allege that Overland breached the Funding Agreement’s implied covenant of good faith and fair dealing by settling the patent litigation with BDT in bad faith to avoid a payment obligation under the Funding Agreement. The Special Situations Funds sought $6.0 million in contractual damages as well as costs and fees. On October 10, 2017, the Court entered an order granting Overland’s motion for summary judgment and dismissing the Special Situations Funds’ complaint in its entirety with prejudice, and in April 2018, the parties entered into a settlement agreement ending the litigation that did not require payment from either party. 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. The Company believes the allegations are without merit and plans to vigorously defend itself against the allegations. 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 Court on October 11, 2016. There is currently no hearing set 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 and the Company in the principal amount of $19.5 million in December 2014 constitutes a fraudulent transfer. Second, UD Trust alleges that the Share Purchase Agreement constitutes a fraudulent transfer, and seeks to enjoin the Share Purchase or 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 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. |
Segmented Information (Notes)
Segmented Information (Notes) | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Segment Reporting Disclosure [Text Block] | Segmented Information The Company reports segment information as a single reportable business segment based upon the manner in which related information is organized, reviewed, and managed. The Company operates in one segment providing data storage and desktop virtualization solutions for small and medium businesses and distributed enterprises. The following table summarizes net revenue (in thousands): Three Months 2018 2017 Disk systems $ 13,164 $ 14,965 Tape automation systems 2,064 2,398 Tape drives and media 2,191 2,082 Service 2,029 2,293 $ 19,448 $ 21,738 |
Subsequent Events (Notes)
Subsequent Events (Notes) | 3 Months Ended |
Mar. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events [Text Block] | Subsequent Events In April 2018, the Company closed an underwritten public offering of 3,300,000 common shares and warrants to purchase up to an aggregate of 990,000 common shares at an aggregate purchase price of $0.70 per common share and accompanying warrant, as well as a concurrent closing of warrants to purchase an additional 112,500 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 . On May 10, 2018, the Company issued 640,800 common shares to satisfy payment obligations incurred by the Company in the aggregate amount of $0.3 million . The obligations were related to the Purchase Agreement entered into in February 2018. |
Significant Accounting Polici22
Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
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. |
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 and long-lived assets; deferred revenue; allowance for doubtful receivables; inventory valuation; warranty provisions; deferred income taxes; 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’ equity. Gains or losses from foreign currency transactions are recognized in the 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 its inventory for obsolete or unmarketable inventory by an amount equal to the difference between the cost of the inventory and the net realizable value. |
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, Intangible Assets and Long-Lived 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. Long-lived assets are reviewed for recoverability whenever events or changes in circumstances indicate the carrying value may not be recoverable. Our consideration includes, but is not limited to: (i) significant under-performance relative to historical or projected future operating results; (ii) significant changes in the manner of use of the assets or the strategy for the Company’s overall business; (iii) significant decrease in the market value of the assets; and (iv) significant negative industry or economic trends. When the carrying value is not considered recoverable, an impairment loss for the amount by which the carrying value of a long-lived asset exceeds its fair value is recognized, with an offsetting reduction in the carrying value of the related asset. |
Revenue Recognition, Policy [Policy Text Block] | Revenue Recognition The Company primarily generates revenue from solutions for standalone storage and long-term data archive products, as well as enterprise storage management solutions which are primarily grouped into three categories: (i) disk systems, (ii) tape automation systems, tape drive and media, and (iii) warranty and customer services. Approximately 90% 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 generally have 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 are subject to certain rights of return, stock rotation privileges and price protections, that create “variable considerations”. 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 over time on a ratable basis. The performance obligations are satisfied as services are rendered typically on a straight-line 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 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 revenue to the performance obligations in multiple element arrangements based on relative selling prices. The Company determines the transaction price based on its normal pricing and discounting practices for the specific product or service when sold separately. When the Company is not able to establish the individual transaction price for all performance obligations in an arrangement with multiple elements, the Company determines the selling price of each element based on third party evidence of selling price or based on the Company’s actual historical selling prices of similar items, whichever management believes provides the most reliable estimate of expected selling prices |
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. |
Shipping and Handling Cost, Policy [Policy Text Block] | Shipping and Handling Amounts billed to customers for shipping and handling are included in product revenue, and costs incurred related to shipping and handling are included in cost of product revenue. |
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 purchased software code and services content. Such costs related to software development are included in research and development expense until the point that technological feasibility is reached, which for our software products, is generally shortly before the products are released to manufacturing. Once technological feasibility is reached, such costs are capitalized and amortized to cost of revenue over the estimated lives of the products. |
Segment Reporting, Policy [Policy Text Block] | Segment Information We report segment data based on the management approach. The management approach designates the internal reporting that is used by management for making operating and investment decisions and evaluating performance as the source of our reportable segments. We use one measurement of profitability and do not disaggregate our business for internal reporting. We operate in one segment providing data management, and desktop and application virtualization solutions for small and medium businesses and distributed enterprises. We disclose information about products and services, geographic areas, and major customers. |
Comprehensive Income, Policy [Policy Text Block] | Comprehensive Loss Comprehensive loss and its components encompasses 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 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 and the unvested options remeasured at each reporting date, with changes in fair value recognized in expense in the consolidated statement of operations. 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 January 2017, the FASB issued Accounting Standards Update (“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. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). 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, with early adoption permitted. An entity will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. We are currently evaluating the effect that ASU 2016-02 will have on our consolidated financial statements and related disclosures. Recently Adopted Accounting Pronouncements On January 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers and all the related amendments, or Accounting Standards Codification (“ASC”) Topic 606. Under Topic 606, an entity is required to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Topic 606 defines a five-step process in order to achieve this core principle, which may require the use of judgment and estimates, and also requires expanded qualitative and quantitative disclosures relating to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including significant judgments and estimates used. The adoption of the new standard requires the recognition of revenues generally upon shipment to our customers for both distributors and direct consumers also known as “sell-in basis” for sales of products to certain customers which had previously been recognized on a “sell-through basis” or when the product was ultimately shipped to the end consumer. We elected to adopt this guidance using the modified retrospective method and it resulted in a cumulative adjustment reducing our accumulated deficit by approximately $0.3 million . Comparative prior periods were not adjusted and continue to be reported under FASB ASC Topic 605, Revenue Recognition . In connection with the adoption of Topic 606, we are required to capitalize certain contract acquisition costs consisting primarily of commissions paid when contracts are signed. The Company elected follow a Topic 606 practical expedient and expense the incremental costs of obtaining a contract (sales commissions) when incurred because the amortization period is generally one year or less and capitalized long-term contract costs are not significant. For certain performance obligations related to services, extended warranty and other service agreements that are settled over time, the Company has elected not to adjust the transaction price for the consideration of the effects of time value of money for prepaid services from customers as these services and warranty services are usually fully amortized in one year or less. The impact of the adoption of ASC 606 on our unaudited consolidated balance sheet at March 31, 2018 and our unaudited consolidated statements of comprehensive income, equity and cash flows for the three months ended March 31, 2018 was not material. We do not expect the adoption of this guidance to have a material effect on our results of operations in future periods. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). The update addresses eight cash flow classification issues and how they should be reported in the statement of cash flows. The update is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The adoption of the new standard on January 1, 2018 did not have a material effect on our financial position, results of operations or cash flows. In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718) - Scope of Modification Accounting (“ASU 2017-09”). The update provides clarity and is expected to reduce both diversity in practice and the cost and complexity when accounting for a change to the terms of a stock-based award. the update is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2017, on a prospective basis. The adoption of the new standard on January 1, 2018 did not have a material effect on our financial position, results of operations or cash flows. In July 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815) (“ASU 2017-11”) . The update changes the classification of certain equity-linked financial instruments (or embedded features) with down round features. The update also clarifies existing disclosure requirements for equity-classified instruments. The update is effective retrospectively for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. We early adopted the new standard effective January 1, 2018 and it did not have a material effect on our financial position, results of operations or cash flows. |
Business Combination (Tables)
Business Combination (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Business Combinations [Abstract] | |
Schedule of Business Acquisitions, by Acquisition [Table Text Block] | A summary of the estimated fair values of the assets acquired and liabilities assumed as of the closing date were as follows (in thousands): Cash $ 49 Accounts receivable 582 Inventory 206 Identifiable intangible assets 1,260 Other assets 45 Total identifiable assets acquired 2,142 Accounts payable and accrued liabilities (359 ) Deferred revenue (518 ) Net identifiable assets acquired 1,265 Goodwill 522 Net assets acquired $ 1,787 |
Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination [Table Text Block] | The identified intangible assets as of the date of acquisition consisted of the following (in thousands): Estimated Weighted- Channel partner relationships $ 730 6.0 Customer relationships 380 3.2 Developed technology 150 3.0 Total identified intangible assets $ 1,260 |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Balance Sheet Related Disclosures [Abstract] | |
Schedule of Inventory, Current [Table Text Block] | The following table summarizes inventories (in thousands): March 31, 2018 December 31, 2017 Raw materials $ 1,601 $ 1,222 Work in process 2,160 2,217 Finished goods 3,936 4,927 $ 7,697 $ 8,366 |
Intangible Assets and Goodwill
Intangible Assets and Goodwill (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Finite-Lived Intangible Assets [Table Text Block] | The following table summarizes intangible assets, net (in thousands): March 31, 2018 December 31, 2017 Developed technology $ 23,414 $ 23,414 Channel partner relationships (1) 12,976 12,929 Capitalized development costs (1) 3,069 3,164 Customer relationships (1) 1,668 1,647 41,127 41,154 Accumulated amortization: Developed technology (16,299 ) (15,276 ) Channel partner relationships (1) (1,365 ) (1,201 ) Capitalized development costs (1) (1,461 ) (1,409 ) Customer relationships (1) (572 ) (495 ) (19,697 ) (18,381 ) Total finite-lived assets, net 21,430 22,773 Indefinite-lived intangible assets - trade names 18,700 18,700 Total intangible assets, net $ 40,130 $ 41,473 ________________ (1) Includes the impact of foreign currency exchange rate fluctuations. |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value, Assets Measured on Recurring Basis [Table Text Block] | The following table provides information by level for liabilities that are measured at fair value using significant unobservable inputs (Level 3) (in thousands): Warrant liability as of December 31, 2017 $ 1,669 Adoption of accounting guidance (46 ) Change in fair value of warrants (259 ) Reclassification to equity resulting from warrant exchange agreement (1,364 ) Warrant liability as of March 31, 2018 $ — |
Share Capital (Tables)
Share Capital (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Equity [Abstract] | |
Schedule of Warrants [Table Text Block] | At March 31, 2018 , the Company had the following outstanding warrants to purchase common shares: Date issued Contractual life (years) Exercise price Number outstanding Expiration May 2015 5 $100.00 33,600 May 31, 2020 October 2015 5 $58.25 16,077 October 14, 2020 December 2015 3 $38.50 20,000 December 21, 2018 December 2015 5 $62.50 41,100 December 15, 2020 December 2015 5 $27.00 60,000 (1) December 4, 2020 January 2016 3 $51.50 3,539 November 30, 2018 February 2016 3 $40.50 20,000 February 26, 2019 March 2016 5 $62.50 1,200 March 4, 2021 November 2016 3 $50.00 1,000 November 8, 2019 December 2016 6 $0.25 34,483 December 30, 2022 March 2017 6 $0.25 15,957 April 18, 2023 March 2017 6 $0.25 35,242 June 1, 2023 August 2017 5 $5.25 300,000 August 11, 2022 August 2017 5 $5.25 95,000 August 16, 2022 August 2017 5 $5.25 205,000 August 22, 2022 882,198 (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 340,000 common shares, in the aggregate, outstanding to related parties at March 31, 2018 . |
Equity Incentive Plan (Tables)
Equity Incentive Plan (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of Share-based Payment Award, Employee Stock Purchase Plan, Valuation Assumptions [Table Text Block] | The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model, which uses the weighted-average assumptions noted in the following table: Three Months 2018 2017 Expected volatility n/a 93.0 % Risk-free interest rate n/a 1.5 % Dividend yield n/a — Expected term (in years) n/a 4.7 |
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 (in thousands): Three Months 2018 2017 Cost of sales $ 32 $ 84 Sales and marketing 184 651 Research and development 96 370 General and administrative 509 1,064 Total share-based compensation expense $ 821 $ 2,169 |
Net Loss Per Share (Tables)
Net Loss Per Share (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Earnings Per Share [Abstract] | |
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 (in thousands): Three Months 2018 2017 Common share purchase warrants 882 2,744 Convertible notes 327 327 Convertible notes interest 328 452 Restricted stock not yet vested or released 848 267 Options outstanding 176 130 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
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): Product Deferred Liability at December 31, 2017 $ 996 $ 5,672 Settlements made during the period (156 ) (1,493 ) Change in liability for warranties issued during the period 180 1,339 Change in liability for pre-existing warranties 9 — Liability at March 31, 2018 $ 1,029 $ 5,518 Current liability $ 642 $ 4,260 Non-current liability 387 1,258 Liability at March 31, 2018 $ 1,029 $ 5,518 |
Segmented Information (Tables)
Segmented Information (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Segment Reporting [Abstract] | |
Revenue from External Customers by Products and Services [Table Text Block] | The following table summarizes net revenue (in thousands): Three Months 2018 2017 Disk systems $ 13,164 $ 14,965 Tape automation systems 2,064 2,398 Tape drives and media 2,191 2,082 Service 2,029 2,293 $ 19,448 $ 21,738 |
Organization and Business (Deta
Organization and Business (Details) - USD ($) | Feb. 20, 2018 | Mar. 31, 2018 | Dec. 31, 2017 |
Related Party Transaction [Line Items] | |||
Share Purchase Agreement Maximum Termination Fee | |||
Chief Executive Officer [Member] | |||
Related Party Transaction [Line Items] | |||
Share Purchase Agreement Proceeds | $ 45,000,000 | ||
Shareholder Votes Needed to Approve Share Purchase Agreement | affirmative vote of the holders of (a) at least 66 2/3% of the outstanding common shares of the Company | ||
Termination of Share Purchase, reimbursement of expense to Purchaser | $ 350,000 | ||
Share Purchase Agreement Maximum Termination Fee | $ 1,000,000 | ||
Sale Purchase Agreement End of Life | Aug. 19, 2018 |
Organization and Business Rever
Organization and Business Reverse Stock Split (Details) | Jul. 11, 2017 |
Organization, Consolidation and Presentation of Financial Statements [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 1-for-25 |
Significant Accounting Polici34
Significant Accounting Policies (Details) $ in Millions | 3 Months Ended | |
Mar. 31, 2018USD ($) | Mar. 31, 2017USD ($) | |
Accounting Policies [Abstract] | ||
Foreign Currency Transaction Loss | $ 0.6 | $ 0 |
Number of Operating Segments | 1 |
Significant Accounting Polici35
Significant Accounting Policies Intangible Assets (Details) | 3 Months Ended |
Mar. 31, 2018 | |
Channel partner relationships [Member] | Minimum [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Finite-Lived Intangible Asset, Useful Life | 6 years |
Channel partner relationships [Member] | Maximum [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Finite-Lived Intangible Asset, Useful Life | 25 years |
Developed Technology Rights [Member] | Minimum [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Finite-Lived Intangible Asset, Useful Life | 3 years |
Developed Technology Rights [Member] | Maximum [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Finite-Lived Intangible Asset, Useful Life | 9 years |
Capitalized Development [Member] | Minimum [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Finite-Lived Intangible Asset, Useful Life | 3 years |
Capitalized Development [Member] | Maximum [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Finite-Lived Intangible Asset, Useful Life | 8 years |
Customer Relationships [Member] | Minimum [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Finite-Lived Intangible Asset, Useful Life | 2 years |
Customer Relationships [Member] | Maximum [Member] | |
Finite-Lived Intangible Assets [Line Items] | |
Finite-Lived Intangible Asset, Useful Life | 25 years |
Significant Accounting Polici36
Significant Accounting Policies New Accounting Pronouncements (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Accounting Standards Update 2014-09 [Member] | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Effect of Adoption ASU 2014-09 | $ 0.3 |
Business Combination UCX and HV
Business Combination UCX and HVE (Details) - USD ($) | Jan. 27, 2017 | Mar. 31, 2017 | Dec. 31, 2016 |
Business Acquisition [Line Items] | |||
Business Combination, Step Acquisition, Equity Interest in Acquiree, Percentage | 19.90% | ||
Cost Method Investments, Original Cost | $ 1,500,000 | ||
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares | 88,235 | 157,894 | |
Payments to Acquire Businesses, Gross | $ 1,100,000 | ||
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable | $ 300,000 | ||
Business Combination, Step Acquisition, Equity Interest in Acquiree, Remeasurement Loss | $ 1,100,000 | ||
Business Combination, Acquisition Related Costs | $ 34,000 |
Business Combination UCX and 38
Business Combination UCX and HVE acquisition (Details) $ in Thousands | Jan. 27, 2017USD ($) |
Business Combinations [Abstract] | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Cash and Equivalents | $ 49 |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Assets, Receivables | 582 |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Inventory | 206 |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill | 1,260 |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets, Other | 45 |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets | 2,142 |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Accounts Payable and Accrued Liabilities | (359) |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities, Deferred Revenue | (518) |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net | 1,265 |
Goodwill, Gross | 522 |
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net | $ 1,787 |
Business Combination UCX and 39
Business Combination UCX and HVE Identifiable Intangible Assets (Details) $ in Thousands | Jan. 27, 2017USD ($) |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill | $ 1,260 |
Channel partner relationships [Member] | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Finite-lived Intangible Assets Acquired | $ 730 |
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 6 years |
Customer-Related Intangible Assets [Member] | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Finite-lived Intangible Assets Acquired | $ 380 |
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 3 years 2 months |
Developed Technology Rights [Member] | |
Acquired Finite-Lived Intangible Assets [Line Items] | |
Finite-lived Intangible Assets Acquired | $ 150 |
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 3 years |
Inventories Inventories (Detail
Inventories Inventories (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 |
Inventory [Line Items] | ||
Inventory, Raw Materials, Net of Reserves | $ 1,601 | $ 1,222 |
Inventory, Work in Process, Net of Reserves | 2,160 | 2,217 |
Inventory, Finished Goods, Net of Reserves | 3,936 | 4,927 |
Inventories | $ 7,697 | $ 8,366 |
Intangible Assets and Goodwil41
Intangible Assets and Goodwill Intangible Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2018 | Dec. 31, 2017 | |
Finite-Lived Intangible Assets [Line Items] | |||
Finite-Lived Intangible Assets, Gross | $ 41,127 | $ 41,154 | |
Finite-Lived Intangible Assets, Accumulated Amortization | (19,697) | (18,381) | |
Finite-Lived Intangible Assets, Net | 21,430 | 22,773 | |
Indefinite-Lived Intangible Assets (Excluding Goodwill) | 18,700 | 18,700 | |
Intangible Assets, Net | 40,130 | 41,473 | |
Developed Technology Rights [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Finite-Lived Intangible Assets, Gross | 23,414 | 23,414 | |
Finite-Lived Intangible Assets, Accumulated Amortization | (16,299) | (15,276) | |
Channel partner relationships [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Finite-Lived Intangible Assets, Gross | [1] | 12,976 | 12,929 |
Finite-Lived Intangible Assets, Accumulated Amortization | [1] | (1,365) | (1,201) |
Capitalized Development [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Finite-Lived Intangible Assets, Gross | [1] | 3,069 | 3,164 |
Finite-Lived Intangible Assets, Accumulated Amortization | [1] | (1,461) | (1,409) |
Customer Relationships [Member] | |||
Finite-Lived Intangible Assets [Line Items] | |||
Finite-Lived Intangible Assets, Gross | [1] | 1,668 | 1,647 |
Finite-Lived Intangible Assets, Accumulated Amortization | [1] | $ (572) | $ (495) |
[1] | Includes the impact of foreign currency exchange rate fluctuations. |
Intangible Assets and Goodwil42
Intangible Assets and Goodwill Amortization (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization of Intangible Assets | $ 1.3 | $ 1.3 |
Amortization Expense, Remainder of Fiscal Year | 2.4 | |
Amortization Expense 2019 | 2.6 | |
Amortization Expense 2020 | 2.5 | |
Amortization Expense 2021 | 2.1 | |
Amortization Expense 2022 | 1.9 | |
Amortization Expense 2023 | $ 1.5 |
Debt Convertible Notes - Relate
Debt Convertible Notes - Related Party (Details) - USD ($) | 1 Months Ended | 3 Months Ended | ||
Apr. 30, 2018 | Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2014 | |
Debt Instrument [Line Items] | ||||
Interest Expense, including amortization of debt costs, Related Party | $ 655,000 | $ 660,000 | ||
FBC Holdings [Member] | ||||
Debt Instrument [Line Items] | ||||
Interest Expense, including amortization of debt costs, Related Party | 5,000 | $ 119,000 | ||
FBC Holdings [Member] | Convertible Debt Securities [Member] | ||||
Debt Instrument [Line Items] | ||||
Convertible Debt | $ 24,500,000 | $ 19,500,000 | ||
Debt Instrument, Interest Rate, Stated Percentage | 8.00% | |||
Convertible Debt, Current | $ 23,800,000 | |||
Unamortized Debt Issuance Costs | $ 700,000 | |||
Shares issued for payment of related party debt interest | 344,959 | 0 | ||
Debt Instrument, Maturity Date | May 31, 2018 | |||
Debt Instrument, Fee Amount | $ 735,000 | |||
Debt Instrument, Convertible, Conversion Price | $ 75 | |||
Debt Instrument, Convertible, Threshold Percentage of Stock Price Trigger | 150.00% | |||
Debt Instrument, Convertible, Stock Price Trigger | $ 112.50 | |||
Debt Instrument, Number of Trading Days Before Conversion | 10 days | |||
Debt Instrument, Covenant Compliance | in compliance | |||
Interest Expense, including amortization of debt costs, Related Party | $ 600,000 | $ 500,000 | ||
Subsequent Event [Member] | FBC Holdings [Member] | Convertible Debt Securities [Member] | ||||
Debt Instrument [Line Items] | ||||
Shares issued for payment of accrued interest and other fees | 950,579 |
Debt Related Party Promissory N
Debt Related Party Promissory Note (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Related Party Transaction [Line Items] | |||
Debt, Related Party | $ 25,854 | $ 26,613 | |
Interest Expense, including amortization of debt costs, Related Party | 655 | $ 660 | |
MF Ventures, related party | |||
Related Party Transaction [Line Items] | |||
Debt, Related Party | $ 2,100 | $ 2,000 | |
Related Party Debt Maturity Date | Dec. 11, 2020 | ||
Related Party Transaction, Terms and Manner of Settlement | (ii) immediately after repayment in full of the Opus Bank Credit Agreement and the FBC Holdings indebtedness; or (iii) immediately after the Company’s refinancing of both the Opus Bank Credit Agreement and the FBC Holdings indebtedness. | ||
Debt instrument, prepayment penalty | $ 300 | ||
Related Party, Interest Rate | 12.50% | ||
Interest Expense, including amortization of debt costs, Related Party | $ 100 |
Debt Related Party Term Loan (D
Debt Related Party Term Loan (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Debt Instrument [Line Items] | |||
Debt, Related Party | $ 25,854,000 | $ 26,613,000 | |
Interest Expense, including amortization of debt costs, Related Party | $ 655,000 | $ 660,000 | |
FBC Holdings [Member] | |||
Debt Instrument [Line Items] | |||
Debt, Related Party | $ 2,500,000 | ||
Paid in Full Date | Jan. 31, 2018 | ||
Related Party, Interest Rate | 20.00% | ||
Interest Expense, including amortization of debt costs, Related Party | $ 5,000 | $ 119,000 |
Debt Opus Bank Credit Agreement
Debt Opus Bank Credit Agreement (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | |||
Mar. 31, 2018 | Mar. 31, 2017 | Apr. 17, 2018 | Apr. 06, 2016 | |
Debt [Member] | ||||
Debt Instrument [Line Items] | ||||
Debt Instrument, Face Amount | $ 10 | |||
Line of Credit Facility, Maximum Borrowing Capacity | $ 8.2 | $ 10 | ||
Line of Credit Facility, Interest Rate at Period End | 8.25% | |||
Line of Credit Facility, Expiration Date | May 31, 2018 | |||
Debt Instrument, Maturity Date | May 31, 2018 | |||
Debt Instrument, Fee Amount | $ 0.1 | |||
Debt Instrument, Covenant Compliance | in compliance | |||
Debt Instrument, Current, Net | $ 9.9 | |||
Unamortized Debt Issuance Costs | 0.1 | |||
Line of Credit, Current | 8.2 | |||
Interest Expense, Debt, including amortization of debt costs | $ 0.5 | $ 1.2 | ||
April 18, 2023 [Member] | ||||
Debt Instrument [Line Items] | ||||
Number of Securities Called by Warrants | 15,957 | |||
Exercise Price of Warrants | $ 0.25 | |||
June 1, 2023 [Member] | ||||
Debt Instrument [Line Items] | ||||
Number of Securities Called by Warrants | 35,242 | |||
Exercise Price of Warrants | $ 0.25 | |||
Subsequent Event [Member] | ||||
Debt Instrument [Line Items] | ||||
Number of Securities Called by Warrants | 990,000 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Warrant liability, period start | $ 1,669 |
Fair Value, Assets Measured on Recurring Basis, Change in Unrealized Gain | (259) |
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Instruments Classified in Shareholders' Equity, Transfers out of Level 3 | (1,364) |
Warrant liability, period end | 0 |
Adjustments for New Accounting Pronouncement [Member] | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Effect of Adoption ASU 2017-11 | $ (46) |
Share Capital (Details)
Share Capital (Details) | Jul. 11, 2017 |
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 1-for-25 |
Share Capital Warrants Outstand
Share Capital Warrants Outstanding (Details) | 3 Months Ended | |
Mar. 31, 2018$ / sharesshares | ||
Related Party [Member] | ||
Class of Warrant or Right [Line Items] | ||
Warrant, Outstanding | 340,000 | |
May 31, 2020 [Member] | ||
Class of Warrant or Right [Line Items] | ||
Warrant Term | 5 years | |
Exercise Price of Warrants | $ / shares | $ 100 | |
Warrant, Outstanding | 33,600 | |
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 | $ 58.25 | |
Warrant, Outstanding | 16,077 | |
Warrant expiration date | Oct. 14, 2020 | |
December 21, 2018 [Member] | ||
Class of Warrant or Right [Line Items] | ||
Warrant Term | 3 years | |
Exercise Price of Warrants | $ / shares | $ 38.50 | |
Warrant, Outstanding | 20,000 | |
Warrant expiration date | Dec. 21, 2018 | |
December 15, 2020 [Member] | ||
Class of Warrant or Right [Line Items] | ||
Warrant Term | 5 years | |
Exercise Price of Warrants | $ / shares | $ 62.50 | |
Warrant, Outstanding | 41,100 | |
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 | $ 27 | |
Warrant, Outstanding | 60,000 | [1] |
Warrant expiration date | Dec. 4, 2020 | |
November 30, 2018 [Member] | ||
Class of Warrant or Right [Line Items] | ||
Warrant Term | 3 years | |
Exercise Price of Warrants | $ / shares | $ 51.50 | |
Warrant, Outstanding | 3,539 | |
Warrant expiration date | Nov. 30, 2018 | |
February 26, 2019 [Member] | ||
Class of Warrant or Right [Line Items] | ||
Warrant Term | 3 years | |
Exercise Price of Warrants | $ / shares | $ 40.50 | |
Warrant, Outstanding | 20,000 | |
Warrant expiration date | Feb. 26, 2019 | |
March 4, 2021 [Member] | ||
Class of Warrant or Right [Line Items] | ||
Warrant Term | 5 years | |
Exercise Price of Warrants | $ / shares | $ 62.50 | |
Warrant, Outstanding | 1,200 | |
Warrant expiration date | Mar. 4, 2021 | |
November 8, 2019 [Member] | ||
Class of Warrant or Right [Line Items] | ||
Warrant Term | 3 years | |
Exercise Price of Warrants | $ / shares | $ 50 | |
Warrant, Outstanding | 1,000 | |
Warrant expiration date | Nov. 8, 2019 | |
December 30, 2022 [Member] | ||
Class of Warrant or Right [Line Items] | ||
Warrant Term | 6 years | |
Exercise Price of Warrants | $ / shares | $ 0.25 | |
Warrant, Outstanding | 34,483 | |
Warrant expiration date | Dec. 30, 2022 | |
April 18, 2023 [Member] | ||
Class of Warrant or Right [Line Items] | ||
Warrant Term | 6 years | |
Exercise Price of Warrants | $ / shares | $ 0.25 | |
Warrant, Outstanding | 15,957 | |
Warrant expiration date | Apr. 18, 2023 | |
June 1, 2023 [Member] | ||
Class of Warrant or Right [Line Items] | ||
Warrant Term | 6 years | |
Exercise Price of Warrants | $ / shares | $ 0.25 | |
Warrant, Outstanding | 35,242 | |
Warrant expiration date | Jun. 1, 2023 | |
August 11, 2022 [Member] | ||
Class of Warrant or Right [Line Items] | ||
Warrant Term | 5 years | |
Exercise Price of Warrants | $ / shares | $ 5.25 | |
Warrant, Outstanding | 300,000 | |
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 | $ 5.25 | |
Warrant, Outstanding | 95,000 | |
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 | $ 5.25 | |
Warrant, Outstanding | 205,000 | |
Warrant expiration date | Aug. 22, 2022 | |
Warrant [Member] | ||
Class of Warrant or Right [Line Items] | ||
Warrant, Outstanding | 882,198 | [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 340,000 common shares, in the aggregate, outstanding to related parties at March 31, 2018. |
Share Capital Related Party Sha
Share Capital Related Party Share Capital Transactions (Details) - USD ($) $ / shares in Units, $ in Millions | Aug. 11, 2017 | Mar. 24, 2017 | Mar. 31, 2018 |
March 24, 2022 [Member] | |||
Sale of Stock [Line Items] | |||
Exercise Price of Warrants | $ 7.50 | $ 5 | |
Warrants Issued During Period | 433,638 | ||
March 24, 2022 [Member] | MF Ventures, related party | |||
Sale of Stock [Line Items] | |||
Warrants Issued During Period | 90,909 | ||
Private Placement [Member] | |||
Sale of Stock [Line Items] | |||
Stock Issued During Period, Shares | 600,000 | 818,182 | |
Number of Securities Called by Warrants | 600,000 | 867,272 | |
Proceeds from Issuance of Common Stock | $ 3 | $ 4.5 | |
Shares Issued, Price Per Share | $ 5 | ||
Exercise Price of Warrants | $ 5.25 | ||
Private Placement [Member] | MF Ventures, related party | |||
Sale of Stock [Line Items] | |||
Stock Issued During Period, Shares, New Issues | 395,000 | 181,818 | |
Number of Securities Called by Warrants | 395,000 | 181,818 |
Share Capital Related Party War
Share Capital Related Party Warrant Exchange (Details) - shares | Mar. 16, 2018 | Dec. 31, 2017 |
Class of Warrant or Right [Line Items] | ||
Shares Issued for Warrant Exchange | 1,617,917 | |
MF Ventures, related party | ||
Class of Warrant or Right [Line Items] | ||
Shares Issued for Warrant Exchange | 1,315,385 | |
March 24, 2022 [Member] | ||
Class of Warrant or Right [Line Items] | ||
Shares Issued for Warrant Exchange | 1,430,998 | |
March 24, 2022 [Member] | MF Ventures, related party | ||
Class of Warrant or Right [Line Items] | ||
Shares Issued for Warrant Exchange | 299,999 | |
Assumption of Warrants | 272,727 |
Share Capital Dec 2016 to March
Share Capital Dec 2016 to March 2017 Placement (Details) - USD ($) $ / shares in Units, $ in Millions | Aug. 11, 2017 | Mar. 24, 2017 | Mar. 16, 2017 | Mar. 29, 2017 |
Private Placement [Member] | ||||
Sale of Stock [Line Items] | ||||
Stock Issued During Period, Shares | 600,000 | 818,182 | ||
Shares Issued, Price Per Share | $ 5 | |||
Proceeds from Issuance of Common Stock | $ 3 | $ 4.5 | ||
Number of Securities Called by Warrants | 600,000 | 867,272 | ||
Private Placement [Member] | MF Ventures, related party | ||||
Sale of Stock [Line Items] | ||||
Number of Securities Called by Warrants | 395,000 | 181,818 | ||
Stock Issued During Period, Shares, New Issues | 395,000 | 181,818 | ||
December 2016 to March 2017 [Member] | ||||
Sale of Stock [Line Items] | ||||
Stock Issued During Period, Shares | 725,599 | |||
Shares Issued, Price Per Share | $ 7.50 | |||
Proceeds from Issuance of Common Stock | $ 5.4 | |||
Number of Securities Called by Warrants | 1,451,198 | |||
December 2016 to March 2017 [Member] | MF Ventures, related party | ||||
Sale of Stock [Line Items] | ||||
Number of Securities Called by Warrants | 666,666 | |||
Stock Issued During Period, Shares, New Issues | 333,333 | |||
December 2016 to March 2017 [Member] | Factor and Inwentash | ||||
Sale of Stock [Line Items] | ||||
Number of Securities Called by Warrants | 426,000 | |||
Stock Issued During Period, Shares, New Issues | 213,000 | |||
December 2016 to March 2017 [Member] | ThreeD Capital | ||||
Sale of Stock [Line Items] | ||||
Number of Securities Called by Warrants | 56,000 | |||
Stock Issued During Period, Shares, New Issues | 28,000 |
Equity Incentive Plan Textuals
Equity Incentive Plan Textuals (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Restricted Stock Units (RSUs) [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Equity Instruments Other than Options, Grants in Period | 400 | 210,441 |
Employee Stock Option [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Options, Grants in Period | 0 | 800 |
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 | 380,371 | 6,520 |
RSAs, Share-based Liabilities Paid | $ 787,000 | $ 52,000 |
Outside of 2015 Plan [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Equity Instruments Other than Options, Grants in Period | 206,238 |
Equity Incentive Plan Weighted
Equity Incentive Plan Weighted Average Assumptions (Details) | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate | 93.00% |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate | 1.50% |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate | 0.00% |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term | 4 years 8 months |
Equity Incentive Plan Share-bas
Equity Incentive Plan Share-based Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||
Allocated Share-based Compensation Expense | $ 821 | $ 2,169 |
Cost of Sales [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||
Allocated Share-based Compensation Expense | 32 | 84 |
Sales and Marketing Expense [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||
Allocated Share-based Compensation Expense | 184 | 651 |
Research and Development Expense [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||
Allocated Share-based Compensation Expense | 96 | 370 |
General and Administrative Expense [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||
Allocated Share-based Compensation Expense | $ 509 | $ 1,064 |
Equity Incentive Plan (Details)
Equity Incentive Plan (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized | $ 2.1 |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition | 1 year 7 months |
Net Loss Per Share Net Loss Per
Net Loss Per Share Net Loss Per Share (Details) - shares shares in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Warrant [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 882 | 2,744 |
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 | 327 | 327 |
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 | 328 | 452 |
Restricted Stock [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 848 | 267 |
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 | 176 | 130 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Related Party Transactions [Abstract] | ||
Related Party Transaction, Expenses from Transactions with Related Party | $ 206,000 | $ 42,000 |
Commitments and Contingencies59
Commitments and Contingencies (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2018 | Dec. 31, 2014 | |
Loss Contingencies [Line Items] | |||
Letters of Credit Outstanding, Amount | $ 0 | ||
Loss Contingency, Damages Sought, Value | $ 6 | ||
UD Dissolution Liquidating Trust [Member] | |||
Loss Contingencies [Line Items] | |||
Convertible Debt | $ 19.5 |
Commitments and Contingencies W
Commitments and Contingencies Warranty and Extended Warranty (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018 | Dec. 31, 2017 | |
Product Warranty Liability [Line Items] | ||
Deferred Costs, Service Revenue | $ 800 | $ 800 |
Product Warranty Accrual, Current | 642 | |
Deferred revenue extended warranties, current | 4,260 | |
Product Warranty Accrual, Noncurrent | 387 | |
Deferred revenue extended warranties, noncurrent | 1,258 | |
Warranty Reserves [Member] | ||
Product Warranty Liability [Line Items] | ||
Liability, period start | 996 | |
Standard and Extended Product Warranty Accrual, Decrease for Payments | (156) | |
Standard and Extended Product Warranty Accrual, Increase for Warranties Issued | 180 | |
Standard and Extended Product Warranty Accrual, Increase (Decrease) for Preexisting Warranties | 9 | |
Liability, period end | 1,029 | |
Deferred revenue [Member] | ||
Product Warranty Liability [Line Items] | ||
Deferred Revenue, period start | 5,672 | |
Standard and Extended Product Warranty Accrual, Decrease for Payments | (1,493) | |
Standard and Extended Product Warranty Accrual, Increase for Warranties Issued | 1,339 | |
Standard and Extended Product Warranty Accrual, Increase (Decrease) for Preexisting Warranties | 0 | |
Deferred Revenue, period end | $ 5,518 |
Segmented Information (Details)
Segmented Information (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2018USD ($) | Mar. 31, 2017USD ($) | |
Segment Reporting Information [Line Items] | ||
Number of Operating Segments | 1 | |
Revenue, Net | $ 19,448 | $ 21,738 |
Disk Systems [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenues | 13,164 | 14,965 |
Tape Automation Systems [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenues | 2,064 | 2,398 |
Tape drives and media [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenues | 2,191 | 2,082 |
Service [Member] | ||
Segment Reporting Information [Line Items] | ||
Revenues | $ 2,029 | $ 2,293 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event [Member] - USD ($) $ in Millions | May 10, 2018 | Apr. 17, 2018 |
Subsequent Event [Line Items] | ||
Stock Issued During Period, Shares, New Issues | 640,800 | 3,300,000 |
Purchase Agreement related fees | $ 0.3 |
Subsequent Events Public Offeri
Subsequent Events Public Offering (Details) - Subsequent Event [Member] - USD ($) $ / shares in Units, $ in Millions | May 10, 2018 | Apr. 17, 2018 |
Subsequent Event [Line Items] | ||
Stock Issued During Period, Shares, New Issues | 640,800 | 3,300,000 |
Number of Securities Called by Warrants | 990,000 | |
Shares Issued, Price Per Share | $ 0.70 | |
Proceeds from Issuance of Common Stock | $ 2.3 | |
Over-Allotment Option [Member] | ||
Subsequent Event [Line Items] | ||
Number of Securities Called by Warrants | 112,500 |