RISK FACTORS

In addition to the other information included in this proxy statement/prospectus, including the matters addressed in the section “Cautionary Statement Concerning Forward-Looking Information,” you should carefully consider the following risks before deciding how to vote on the proposals presented at the special meeting. The risk factors related to the Merger Proposal present the material risks directly related to the Merger and the integration of the two companies to the extent presently known. Also included are the material risks associated with each of the businesses of Sphere 3D and Gryphon presently known, because these risks will also affect Sphere 3D following the closing of the Merger. The risks below also include forward-looking statements, and actual results may differ substantially from those discussed in these forward-looking statements. See “Cautionary Statement Concerning Forward-Looking Information” beginning on page 56. The risks and uncertainties described in this proxy statement/prospectus are not the only ones that Sphere 3D and Gryphon face. Additional risks and uncertainties not presently known to Gryphon or Sphere 3D or that Gryphon or Sphere 3D currently consider immaterial may also impair Gryphon’s business operations or the business operations of Sphere 3D after the Merger. If any of the risks actually occur, business and financial results of both companies could be harmed or the trading price of Sphere 3D’s common shares could decline. You should also read and consider the other information in this proxy statement/prospectus, including the annexes. See “Where You Can Find More Information.”

Risks Related to the Merger Proposal

The Exchange Ratio will not be adjusted in the event of any change in Sphere 3D’s share price.

In the Merger, each Gryphon share of capital stock will be converted into the right to receive [            ] common shares of Sphere 3D (subject to adjustment as described herein). This Exchange Ratio will not be adjusted for changes in the market price of Sphere 3D’s common shares. Changes in the price of Sphere 3D’s common shares prior to completion of the Merger will affect the value of the consideration that Gryphon stockholders will receive on the date of the Merger. Share price changes may result from a variety of factors (many of which are beyond the control of Sphere 3D), including the following:

•        Changes in Sphere 3D’s business, operations, finances and prospects, or the market assessments thereof;

•        Market assessments of the likelihood that the Merger will be completed, including related considerations regarding regulatory approvals of the Merger; and

•        General market and economic conditions.

The price of Sphere 3D’s common shares at the closing of the Merger may vary from the price on the date the Merger Agreement was executed, on the date of this proxy statement/prospectus, and on the date of the special meeting. As a result, the market value represented by the Exchange Ratio will also vary. For example, based on the range of closing prices of Sphere 3D’s common shares on Nasdaq during the period from June 2, 2021, the last trading day before public announcement of execution of the Merger Agreement, through [            ], 2022, the last trading date before the date of this proxy statement/prospectus, the Exchange Ratio represented a market value ranging from a low of $[            ] to a high of $[            ] for each Gryphon share.

Because the Merger will be completed after the date of the special meeting, at the time of the special meeting, shareholders will not know the exact market value of the Sphere 3D common shares that Gryphon stockholders will receive upon completion of the Merger.

If the price of Sphere 3D’s common shares increases between the time of the special meeting and the closing of the Merger, Gryphon stockholders will receive Sphere 3D common shares that have a market value that is greater than the market value of such shares at the time of the special meeting. If the price of Sphere 3D’s common shares decreases between the time of the special meeting and the Effective Time, Gryphon stockholders will receive Sphere 3D common shares at closing that have a market value that is less than the market value of such shares at the time of the special meeting. Therefore, because the Exchange Ratio will not be adjusted based on the market value of shares of Sphere 3D common shares, shareholders cannot be sure at the time of the special meeting of the market value of the consideration that will be paid to Gryphon stockholders upon completion of the Merger.

The Merger is subject to a number of conditions.

The Merger Agreement contains a number of conditions that must be fulfilled (or waived by the parties) to complete the Merger. These include, among other customary conditions, conditions relating to the approval of the Merger Proposal by Sphere 3D’s shareholders and of the Merger by Gryphon’s stockholders. The required satisfaction (or waiver) of these conditions could delay the completion of the Merger for a significant period of time or prevent it from occurring. Any delay in completing the Merger could cause Sphere 3D not to realize some or all of the benefits that the parties expect Sphere 3D to achieve. Further, there can be no assurance that the conditions to the closing of the Merger will be satisfied or waived or that the Merger will be completed.

Failure to complete the Merger could negatively impact Sphere 3D’s business, financial condition, results of operations or stock price.

Completion of the Merger is conditioned upon the satisfaction of certain closing conditions, including the approval of the each of the shareholder proposals in this proxy statement/prospectus, other than the Name Change Proposal and the Adjournment Proposal, by Sphere 3D shareholders, as set forth in the Merger Agreement. The required conditions to closing may not be satisfied in a timely manner, if at all, or, if permissible, waived. If the Merger is not consummated for these or any other reason, Sphere 3D’s ongoing business may be adversely affected and will be subject to a number of risks and consequences, including the following:

•        Sphere 3D may be required, under certain circumstances, to forgive the promissory note pursuant to which Sphere 3D has loaned Gryphon a total of $12.5 million and to issue and deliver 850,000 Sphere 3D common shares (or $2,500,000 in cash, if such issuance of such shares would negatively impact the ability of the Registration Statement of which this proxy statement/prospectus forms a part to be declared effective under the Securities Act or would negatively impact the ability of Sphere 3D to comply with the Nasdaq listing covenants);

•        Sphere 3D will be required to pay a portion of the substantial fees and expenses that it incurred related to the Merger, such as legal, accounting, printing and fees and expenses of other professionals retained in connection with the Merger, even if the Merger is not completed and, except in certain circumstances, Sphere 3D may not be able to recover such fees and expenses from Gryphon;

•        under the Merger Agreement, Sphere 3D is subject to certain restrictions on the conduct of its business prior to completing the Merger, which restrictions could adversely affect its ability to realize certain of its business strategies, including its ability to enter into additional acquisitions or other strategic transactions while the Merger is pending;

•        matters relating to the Merger may require substantial commitments of time and resources by Sphere 3D’s management, which could otherwise have been devoted to other opportunities that may have been beneficial to Sphere 3D;

•        the market price of Sphere 3D common shares may decline to the extent that the current market price reflects a market assumption that the Merger will be completed;

•        Sphere 3D may experience negative reactions to the termination of the Merger from customers, clients, business partners, lenders and employees; and

•        Sphere 3D would not realize any of the anticipated benefits of having completed the Merger.

In addition, any delay in the consummation of the Merger, or any uncertainty about the consummation of the Merger, may adversely affect Sphere 3D’s future business, growth, revenue, liquidity and results of operations.

Gryphon is not a publicly-traded company, making it difficult to determine the fair market value of Gryphon.

The outstanding capital stock of Gryphon is privately held and is not currently traded on any public market, which makes it difficult to determine the fair market value of Gryphon. There can be no assurance that the Merger Consideration to be issued to Gryphon stockholders will not be more than the actual value of Gryphon.

Sphere 3D and Gryphon have incurred and expect to continue to incur substantial transaction-related costs in connection with the Merger.

Sphere 3D and Gryphon have incurred, and expect to continue to incur, a number of non-recurring transaction-related costs associated with completing the Merger. These fees and costs have been, and will continue to be, substantial. Non-recurring transaction costs include, but are not limited to, fees paid to legal, financial and accounting advisors, filing fees and printing costs. Additional unanticipated costs may be incurred, which may be higher than expected and could have a material adverse effect on the new business’s financial condition and operating results.

The fairness opinion obtained by Sphere 3D from its independent financial advisor will not reflect subsequent changes.

In connection with the proposed Merger, PGP Capital Advisors, LLC, the independent financial advisor to the board of directors of Sphere 3D, delivered to the board of directors an opinion dated June 3, 2021 to the effect that as of that date, and based upon and subject to the various considerations set forth in the opinion, the Merger Consideration to be paid by Sphere 3D pursuant to the Merger Agreement was fair, from a financial point of view, to Sphere 3D. The opinion does not reflect changes that may occur or that have occurred after the date of the opinion, including changes to the operations and prospects of Sphere 3D or Gryphon, changes in the market prices of the common shares of Sphere 3D, changes in general market or economic conditions, Gryphon’s ability to service the debt on its mining machine orders, Sphere 3D’s loan to Gryphon to pay for mining machines or regulatory or other factors. Any such changes, or changes of other factors on which the opinion is based, may materially alter or affect the relative values of Sphere 3D and Gryphon and the value of the Merger Consideration payable to Gryphon stockholders.

The Merger may be a taxable event for Gryphon stockholders if it does not qualify as a “reorganization” for U.S. federal income tax purposes or if the Merger does not satisfy the requirements of Section 367(a)(1) of the Code.

The U.S. federal income tax considerations of the Merger applicable to U.S. Holders (as defined in the section entitled “Material U.S. Federal Income Tax Consequences of the Merger”) will depend on whether the Merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code.

Although the Merger (i) is intended to qualify as a reorganization within the meaning of Section 368(a) of the Code and (ii) accordingly it is intended that the Merger does not result in gain being recognized by U.S. Holders of Gryphon common stock under Section 367(a) of the Code (other than with respect to any such holder that would own, actually or constructively, 5% or more (by vote or value) of the outstanding common shares of Sphere 3D immediately after the Merger) there can be no assurance that the Internal Revenue Service (the “IRS”) will not take a contrary position to views expressed herein or that a court will not agree with a contrary position of the IRS. If the Merger were to fail to qualify as a reorganization or if any requirement for the Merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code were not satisfied, a U.S. Holder would recognize gain or loss for U.S. federal income tax purposes on each share of Gryphon common stock surrendered in the Merger in an amount equal to the difference between (1) the fair market value of the Merger Consideration received in exchange for such surrendered share upon completion of the Merger and (2) the holder’s basis in the share of Gryphon common stock surrendered. If the transaction does qualify as a reorganization but does not satisfy the requirements of Section 367(a)(1) of the Code, U.S. Holders will be required to recognize the full amount of any gain, but not loss, on their exchange of their shares of Gryphon common stock for Merger Consideration. Any gain or loss recognized would be long-term capital gain or loss if the U.S. Holder’s holding period in a particular block of Gryphon common stock exceeds one year at the Effective Time of the Merger. Long-term capital gain of non-corporate U.S. Holders (including individuals) is taxed at reduced U.S. federal income tax rates. The deductibility of capital losses is subject to limitations.

The closing of the Merger is not conditioned upon the receipt of an opinion of counsel that the Merger will qualify for the intended tax treatment, and neither Gryphon nor Sphere 3D intends to request a ruling from the IRS regarding the U.S. federal income tax treatment of the Merger. Neither Gryphon nor Sphere 3D nor any other party to the Merger Agreement makes any representations or provides any assurances regarding the tax treatment of the Merger, including whether the Merger qualifies as a reorganization, or any related transactions. For a more complete discussion of the material U.S. federal income tax considerations of the Merger, please review the information set forth in the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” below.

The Merger could result in Sphere 3D being treated as a U.S. corporation for U.S. federal income tax purposes.

Under current U.S. federal income tax law, a corporation organized under Canadian law is not treated as a U.S. corporation and, therefore, is treated as a non-U.S. corporation. Section 7874 of the Code and the Treasury Regulations promulgated thereunder, however, contain rules that may cause a non-U.S. corporation that acquires the stock of a U.S. corporation to be treated as a U.S. corporation for U.S. federal income tax purposes under certain circumstances. If Sphere 3D were treated as a U.S. corporation for U.S. federal income tax purposes, among other consequences, it would generally be subject to U.S. federal income tax on its worldwide income, and its dividends would be treated as dividends from a U.S. corporation. Regardless of the application of Section 7874 of the Code, Sphere 3D is expected to be treated as a Canadian tax resident for Canadian tax purposes. Consequently, if Sphere 3D were to be treated as a U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code, it could be liable for both U.S. and Canadian taxes and dividends paid by Sphere 3D to its shareholders could be subject to both U.S. and Canadian withholding taxes.

Sphere 3D does not expect to be treated as a U.S. corporation for U.S. federal income tax purposes, and Sphere 3D intends to take this position on its tax returns. Sphere 3D has not sought and will not seek any rulings from the IRS as to such tax treatment, and the closing of the Merger is not conditioned upon achieving, or receiving a ruling from any tax authority or opinion from any tax advisor in regards to, any particular tax treatment. The rules for determining whether a non-U.S. corporation is treated as a U.S. corporation for U.S. federal income tax purposes are complex, unclear, and the subject of ongoing regulatory change. Sphere 3D’s intended position is not free from doubt. Further, the application of such rules must be finally determined after completion of the Merger, by which time there could be adverse changes to the relevant facts, law, and other circumstances. For more information about the application of Section 7874 of the Code to the Merger, see the section entitled “Material U.S. Federal Income Tax Consequences of the Merger.”

Code Section 7874 may limit the ability of Gryphon to use certain tax attributes following the Merger, increase Sphere 3D’s U.S. affiliates’ U.S. taxable income or have other adverse consequences to Sphere 3D and Sphere 3D’s shareholders.

Following the acquisition of a U.S. corporation by a foreign corporation, Section 7874 of the Code can limit the ability of the acquired U.S. corporation and its U.S. affiliates to use U.S. tax attributes (including net operating losses and certain tax credits) to offset U.S. taxable income resulting from certain transactions, as well as result in certain other adverse tax consequences, even if the acquiring foreign corporation is respected as a foreign corporation for purposes of Section 7874 of the Code. In general, if a foreign corporation acquires, directly or indirectly, substantially all of the properties held directly or indirectly by a U.S. corporation and after the acquisition, the former shareholders of the acquired U.S. corporation hold at least 60% (by either vote or value) but less than 80% (by vote and value) of the shares of the foreign acquiring corporation by reason of holding shares in the acquired U.S. corporation, subject to other requirements, certain adverse tax consequences under Section 7874 of the Code may apply.

If these rules apply to the Merger, Sphere 3D and certain of Sphere 3D’s shareholders may be subject to adverse tax consequences including, but not limited to, restrictions on the use of tax attributes with respect to “inversion gain” recognized over a 10-year period following the transaction, disqualification of dividends paid from preferential “qualified dividend income” rates and the requirement that any U.S. corporation owned by Sphere 3D include as “base erosion payments” that may be subject to a minimum U.S. federal income tax any amounts treated as reductions in gross income paid to certain related foreign persons. Furthermore, certain “disqualified individuals” (including officers and directors of a U.S. corporation) may be subject to an excise tax on certain stock-based compensation held thereby at a rate of 20%.

As more fully described in the section titled “Material U.S. Federal Income Tax Consequences of the Merger,” based on the terms of the Merger and certain factual assumptions, Sphere 3D is not currently intended to be subject to these rules under Section 7874 of the Code after the Merger. The above determination, however, is subject to detailed regulations (the application of which is uncertain in various respects and could be impacted by future changes in such U.S. Treasury regulations, with possible retroactive effect) and is subject to certain factual uncertainties. Accordingly, there can be no assurance that the IRS will not challenge whether Sphere 3D is subject to the above rules or that such a challenge would not be sustained by a court.

However, even if Sphere 3D is not subject to the above adverse consequences under Section 7874, Sphere 3D may be limited in using its equity to engage in future acquisitions of U.S. corporations over a 36-month period following the Merger. If Sphere 3D were to be treated as acquiring substantially all of the assets of a U.S. corporation within

a 36-month period after the Merger, the Treasury regulations under Section 7874 would exclude certain shares of Sphere 3D attributable to the Merger for purposes of determining whether Section 7874 applies to that subsequent acquisition, making it more likely that Section 7874 will apply to such subsequent acquisition. See “Material U.S. Federal Income Tax Consequences of the Merger” for a more detailed discussion of the application of Section 7874 of the Code to the Merger. Investors in Sphere 3D should consult their own advisors regarding the application of Section 7874 of the Code to the Merger.

Risks Relating to the Merger

The expected benefits of the Merger may not be realized.

To be successful after the Merger, Sphere 3D will need to combine and integrate the operations of Gryphon and Sphere 3D. Integration will require substantial management attention and resources and could detract attention and resources from the day-to-day business of Sphere 3D. Sphere 3D could encounter difficulties in the integration process, such as:

•        the inability to successfully combine Gryphon’s business in a manner that permits Sphere 3D to achieve, on a timely basis, or at all, the anticipated benefits of the Merger;

•        complexities associated with managing the combined businesses, including difficulty addressing possible differences in corporate cultures and management philosophies and the challenge of integrating different assets of each of the companies in a seamless manner that minimizes any adverse impact on customers, clients, employees, lenders, and other constituencies;

•        the loss of key employees, customers, suppliers, vendors and partners;

•        insufficient capital and liquidity to achieve the business plan;

•        the inability of the combined company to meet its cost expectations

•        performance shortfalls as a result of the diversion of management’s attention caused by completing the Merger; and

•        potential unknown liabilities and unforeseen increased expenses or delays associated with the Merger.

If Sphere 3D cannot integrate Gryphon’s business successfully with its own, Sphere 3D may fail to realize the expected benefits of the Merger. In addition, there is no assurance that all of the goals and anticipated benefits of the Merger will be achievable, particularly as the achievement of the benefits are in many important respects subject to factors that neither Sphere 3D nor Gryphon’s controls. These factors include such things as the reactions of third parties with whom contracts are entered into and with which business is undertaken and the reactions of investors and analysts.

In addition, Gryphon and Sphere 3D have operated and, until the completion of the Merger, will continue to operate independently. It is possible that the integration process could result in diversion of the attention of each company’s management which could adversely affect each company’s ability to maintain relationships with customers, clients, employees, and other constituencies or Sphere 3D ability to achieve the anticipated benefits of the Merger, or could reduce each company’s operating results or otherwise adversely affect Sphere 3D business and financial results following the Merger.

A market for Sphere 3D’s securities may not be sustained, which would adversely affect the liquidity and price of its securities.

Following the Merger, the price of Sphere 3D’s securities may fluctuate significantly due to the market’s reaction to the Merger and general market and economic conditions. An active trading market for Sphere 3D’s securities following the Merger may not be sustained.

Future results following the Merger may differ materially from the unaudited pro forma financial information included in this proxy statement/prospectus.

The unaudited pro forma financial information contained in this proxy statement/prospectus is presented for purposes of presenting the historical consolidated financial statements of Sphere 3D with the historical financial statements of Gryphon, as adjusted to give effect to the Merger, and is not necessarily indicative of the financial condition or

results of operations of the business following the Merger. The assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect the combined company’s financial condition and results of operations following the Merger. Any change in Sphere 3D’s financial condition or results of operations may cause significant variations in the price of its common shares. See “Unaudited Pro Forma Condensed Combined Financial Statements” for more information.

Sphere 3D may not realize anticipated growth opportunities.

Sphere 3D expects that it will realize growth opportunities and other financial and operating benefits as a result of the Merger; however, it cannot predict with certainty if or when these growth opportunities and benefits will occur, or the extent to which they actually will be achieved.

Following the consummation of the Merger, Gryphon’s existing stockholders will, assuming no conversion of the outstanding Series H Preferred Shares, or until such conversion, control Sphere 3D, and their interests may conflict with yours in the future.

Immediately following the Closing of the anticipated Merger, Gryphon’s existing stockholders will own a majority of the outstanding Sphere 3D common shares, assuming that the shares issuable upon the conversion of the Series H Preferred Shares in connection with the Hertford Transaction are not issued prior to such time. Each Sphere 3D common share initially entitles its holders to one vote on all matters presented to shareholders generally. Accordingly, those owners, if voting in the same manner, will be able to control the election and removal of the majority of directors of Sphere 3D and thereby determine corporate and management policies, including potential mergers or acquisitions, payment of dividends, asset sales, amendment of the articles and by-laws and other significant corporate transactions of Sphere 3D for so long as they retain significant ownership. This concentration of ownership may delay or deter possible changes in control of Sphere 3D, which may reduce the value of an investment in the Sphere 3D common shares. So long as Gryphon’s existing stockholders continue to own a significant amount of the combined voting power, even if such amount is less than 50%, they will continue to be able to strongly influence or effectively control decisions of Sphere 3D. After giving effect to the issuance of Sphere 3D common shares to Hertford in connection with the possible conversion of the Series H Preferred Shares owned by Hertford, Gryphon will have less influence and ability to control the decisions of Sphere 3D.

Nasdaq may not continue to list Sphere 3D’s securities on its exchange, and if they do continue to be listed, Sphere 3D may be unable to satisfy Nasdaq listing requirements in the future, which could limit investors’ ability to effect transactions in its securities and subject it to additional trading restrictions.

As a result of the proposed Merger, Sphere 3D intends to re-apply for listing of its shares and warrants on the Nasdaq Capital Market. While Sphere 3D will apply to have its shares and warrants listed on Nasdaq upon consummation of the Merger, it must meet Nasdaq’s initial listing requirements. Sphere 3D may be unable to meet those requirements. Even if its securities are listed on Nasdaq following the Merger, Sphere 3D may be unable to maintain the listing of its securities in the future.

If Sphere 3D fails to meet the initial listing requirements and Nasdaq does not list the securities of Sphere 3D on its exchange, or if Sphere 3D is delisted, there could be significant material adverse consequences to Sphere 3D, including:

•        a limited availability of market quotations for Sphere 3D securities;

•        a limited amount of news and analyst coverage for Sphere 3D; and

•        a decreased ability to obtain capital or pursue acquisitions by issuing additional equity or convertible securities.

The Merger will result in changes to Sphere 3D’s board of directors and management that may affect the strategy and operations of the combined company as compared to that of Gryphon and Sphere 3D as they currently exist.

If the Merger is completed, the composition of Sphere 3D’s board of directors and management team will change. Upon completion of the Merger, the Sphere 3D board of directors will be comprised of seven (7) members. Sphere 3D’s board of directors currently consists of four (4) members, and on closing of the Merger, certain members of the Sphere 3D board of directors are anticipated to resign and additional board members designated by Gryphon will be appointed to the Sphere 3D board of directors.

There is no assurance that the newly-constituted board of directors and new management of Sphere 3D will function effectively as a team or be able to execute Sphere 3D’s business plan and operations to maximize profitability, and that there will not be any adverse effect on Sphere 3D’s business as a result.

Uncertainties associated with the Merger may cause a loss of management personnel and other key employees which could adversely affect the future business and operations following the Merger.

The combined company will be dependent on the experience and industry knowledge of Gryphon and Sphere 3D officers and other key employees to execute its business plans. Sphere 3D’s success after the Merger will depend in part upon its ability to retain key management personnel and other key employees of both Sphere 3D and Gryphon as well as upon the ability of Sphere 3D’s new management to execute operationally after the Merger. Gryphon’s and Sphere 3D’s current and prospective employees may experience uncertainty about their roles within Sphere 3D following the Merger or other concerns regarding its operations following the Merger, any of which may have an adverse effect on Sphere 3D’s ability to attract or retain key management and other key personnel. Accordingly, no assurance can be given that Gryphon and Sphere 3D will be able to attract or retain key management personnel and other key employees until the Merger is consummated or following the Merger to the same extent that Gryphon and Sphere 3D have previously been able to attract or retain such employees.

Sphere 3D will continue to incur substantial costs and obligations as a result of being a public company.

As a publicly-traded company, Sphere 3D will continue to incur significant legal, accounting and other expenses that Gryphon was not required to incur in the recent past. In addition, new and changing laws, regulations and standards relating to corporate governance and public disclosure for public companies, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), regulations related thereto and the rules and regulations of the SEC and Nasdaq, have increased the costs and the time that must be devoted to compliance matters. Sphere 3D expects these rules and regulations will increase its legal and financial costs and lead to a diversion of management time and attention from revenue-generating activities.

Following the Merger, Sphere 3D may issue additional shares or other equity securities without your approval, which would dilute your ownership interest in Sphere 3D and may depress the market price of its common shares.

Sphere 3D may issue additional shares or other equity securities in the future in connection with, among other things, future acquisitions, repayment of outstanding indebtedness or grants without shareholder approval in a number of circumstances.

The issuance of additional shares or other equity securities could have one or more of the following effects:

•        Sphere 3D’s existing shareholders’ proportionate ownership interest will decrease;

•        the amount of cash available per share, including for payment of dividends in the future, may decrease;

•        the relative voting strength of each previously outstanding share may be diminished; and

•        the market price of Sphere 3D shares may decline.

If Sphere 3D’s performance following the Merger does not meet market expectations, the price of its securities may decline.

If Sphere 3D’s performance following the Merger does not meet market expectations, the price of Sphere 3D common shares may decline. The market value of Sphere 3D common shares at the time of the Merger may vary significantly from the price of its common shares on the date the Merger Agreement was executed, the date of this proxy statement/prospectus, or the date on which its shareholders vote on the Merger. Because the number of Sphere 3D common shares issued as consideration in the Merger will not be adjusted to reflect any changes in the market price of its common shares, the value of Sphere 3D common shares issued in the Merger may be higher or lower than the values of its shares on earlier dates.

In addition, following the Merger, fluctuations in the price of Sphere 3D common shares could contribute to the loss of all or part of your investment. Prior to the Merger, there has not been a public market for the equity interests of Gryphon, and trading in its common stock has not been active. Accordingly, the valuation ascribed to Gryphon and

Sphere 3D common shares in the Merger may not be indicative of the price that will prevail in the trading market following the Merger. If an active market for Sphere 3D common shares develops and continues, the trading price of its shares following the Merger could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond its control. Any of the factors listed below could have a material adverse effect on your investment in Sphere 3D common shares and its common shares may trade at prices significantly below the price you paid for them.

Factors affecting the trading price of Sphere 3D common shares following the Merger may include:

•        actual or anticipated fluctuations in Sphere 3D’s financial results or the financial results of companies perceived to be similar to it;

•        changes in the market’s expectations about its operating results;

•        success of competitors;

•        its operating results failing to meet market expectations in a particular period;

•        changes in financial estimates and recommendations by securities analysts concerning Sphere 3D or the lithium-ion battery recycling industry and market in general;

•        operating and share price performance of other companies that investors deem comparable to Sphere 3D;

•        its ability to market new and enhanced products on a timely basis;

•        changes in laws and regulations affecting its business;

•        commencement of, or involvement in, litigation involving Sphere 3D;

•        changes in its capital structure, such as future issuances of securities or the incurrence of additional debt;

•        the volume of its shares available for public sale;

•        any significant change in its board or management;

•        sales of substantial amounts of shares by its directors, executive officers or significant shareholders or the perception that such sales could occur; and

•        general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.

Broad market and industry factors may depress the market price of Sphere 3D common shares irrespective of its operating performance. The stock market in general and Nasdaq have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of Sphere 3D’s securities, may not be predictable. A loss of investor confidence in the market for technology, bitcoin mining or sustainability-related stocks or the stocks of other companies that investors perceive to be similar to Sphere 3D could depress its share price regardless of its business, prospects, financial conditions or results of operations. A decline in the market price of Sphere 3D common shares also could adversely affect its ability to issue additional securities and its ability to obtain additional financing in the future.

The market price of Sphere 3D’s common shares may be affected by factors different from those affecting the Sphere 3D’s common shares or Gryphon’s common stock prior to consummation of the Merger.

Sphere 3D’s historical business differs from that of Gryphon. Accordingly, the results of operations of the combined company and the market price of Sphere 3D’s common shares may be affected by factors different from those that previously affected the independent results of operations and the market price of the common stock of Gryphon and the common shares of Sphere 3D.

Gryphon stockholders and Sphere 3D shareholders will experience immediate dilution due to the issuance of Sphere 3D common shares upon the closing of the Merger.

If Sphere 3D shareholders approve the Merger Proposal and the other proposals described herein and the parties consummate the Merger, Sphere 3D is expected to issue an aggregate of [            ] Sphere 3D common shares upon the closing of the Merger. It is anticipated that, upon completion of the Merger and assuming no conversion of the

Series H Preferred Shares into Sphere 3D common shares in connection with the Hertford Transaction, (i) Sphere 3D’s existing public shareholders, including its independent directors, will own approximately [            ]% of the outstanding Sphere 3D common shares and (ii) Gryphon’s existing shareholders will own approximately [            ]% of the outstanding Sphere 3D common shares. The expected number of Sphere 3D common shares to be issued by Sphere 3D and the ownership percentages set forth above are subject to adjustment in accordance with the terms of the Merger Agreement.

It is anticipated that, upon completion of the Merger and assuming all conditions to the Hertford Transaction are satisfied and all Series H Preferred Shares issuable in the Hertford transaction are issued and converted in connection with the Hertford Proposal, (i) Sphere 3D’s existing public shareholders, including its independent directors, will own approximately [            ]% of the outstanding Sphere 3D common shares, (ii) Gryphon’s existing shareholders will own approximately [            ]% of the outstanding Sphere 3D common shares and (iii) Hertford will own approximately [            ]% of the outstanding Sphere 3D common shares. The expected number of Sphere 3D common shares to be issued by Sphere 3D and the ownership percentages set forth above are subject to adjustment in accordance with the terms of the Merger Agreement and in accordance the terms of the Series H Preferred Shares.

Directors and officers have discretion in agreeing to changes or waivers to the terms of the Merger Agreement and related transactions, which may result in a conflict of interest when determining whether such changes or waivers are appropriate and in Sphere 3D’s public shareholders’ best interest.

In the period leading up to the closing of the Merger, events may occur that, pursuant to the Merger Agreement, would require Sphere 3D to agree to amend the Merger Agreement, to consent to certain actions taken by Gryphon or to waive rights to which Sphere 3D is entitled to under the Merger Agreement. These events could arise because of changes in Gryphon’s business, a request by Gryphon to undertake actions that would otherwise be prohibited by the terms of the Merger Agreement or the occurrence of other events that would have a material adverse effect on Gryphon’s business and would entitle us to terminate the Merger Agreement. In any of such circumstances, it would be at Sphere 3D’s discretion, acting through its board of directors, to consent to such a request or action or waive such rights. The existence of the financial and personal interests of the directors described elsewhere in these risk factors may result in a conflict of interest on the part of one or more of the directors between what he or she may believe is best for the public shareholders and what he or she may believe is best for him or herself in determining whether or not to take the requested action or waive its rights. As of the date of this proxy statement/prospectus, Sphere 3D does not believe there will be any requests, actions or waivers that its directors and officers would be likely to make after shareholder approval of the Merger Proposal has been obtained. While certain changes could be made without further shareholder approval, Sphere 3D will circulate a new or amended proxy statement/prospectus and resolicit its shareholders if changes to the terms of the Merger and other related transactions that would have a material impact on its shareholders are required prior to the vote on the Merger Proposal.

Sphere 3D expects to incur significant, non-recurring costs in connection with consummating the Merger and related transactions.

Sphere 3D expects to incur significant, non-recurring costs in connection with consummating the Merger and other related transactions. Sphere 3D will pay all fees, expenses and costs it incurs or incurred on its behalf in connection with the Merger Agreement and the transactions contemplated thereby (including the Merger). Sphere 3D currently estimates that transaction expenses will be approximately $[            ] million.

Actions taken by Sphere 3D’s officers and directors to increase the likelihood of approval of the Merger Proposal and the other proposals presented in this proxy statement/prospectus could have a depressive effect on the price of Sphere 3D common shares.

At any time prior to the special meeting, during a period when they are not then aware of any material non-public information regarding Sphere 3D or its securities, Sphere 3D’s directors, officers and their respective affiliates may enter into agreements to purchase shares from institutional and other investors who vote, or indicate an intention to vote, against the Merger Proposal, or enter into transactions with such investors and others to provide them with incentives to acquire common shares or vote their shares in favor of the Merger Proposal. As of the date of this proxy statement/prospectus, no such arrangement has been made with an existing investor. While the exact nature of any

other incentive arrangements that may be entered into in the future has not been determined as of the date of this proxy statement/prospectus, they might include, without limitation, arrangements to protect such investors or holders against potential loss in value of their shares, including the granting of put options and the transfer to such investors or holders of shares owned by such persons for nominal value. The purpose of such purchases and other transactions would be to increase the likelihood that the Merger Proposal is approved. Entering into any such arrangements may have a depressive effect on the price of Sphere 3D’s common shares. For example, if as a result of these arrangements an investor or holder purchases shares for nominal value, the investor or holder may be more likely to sell such shares immediately following the closing of the Merger for a price below market value.

The unaudited pro forma condensed combined financial information included in this proxy statement/prospectus may not be indicative of what Sphere 3D’s and Gryphon’s actual financial position or results of operations would have been.

The unaudited pro forma condensed combined financial information in this proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what Sphere 3D’s and Gryphon’s actual financial position or results of operations would have been had the Merger been completed on the dates indicated. See the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” for more information.

Gryphon’s and Sphere 3D’s ability to successfully effect the Merger and successfully operate the business thereafter will depend largely upon the efforts of certain key personnel, including the key personnel of Gryphon, all of whom Sphere 3D expects to stay with Sphere 3D following the Merger. The loss of such key personnel following the Merger could adversely affect the operations and profitability of Sphere 3D’s business.

Sphere 3D’s and Gryphon’s ability to recognize certain benefits of the Merger and successfully operate Sphere 3D’s business following the Merger will depend upon the efforts of certain key personnel of Gryphon. Although Sphere 3D and Gryphon expect all of such key personnel to remain with Sphere 3D following the Merger, the unexpected loss of key personnel may adversely affect the operations and profitability of Sphere 3D and would require Sphere 3D to recruit a new leadership team. In addition, Sphere 3D’s future success depends in part on its ability to identify and retain key personnel to succeed senior management in an expedient matter. Furthermore, while Sphere 3D has closely scrutinized the skills, abilities and qualifications of the key Gryphon personnel that will be employed by Sphere 3D, Sphere 3D’s assessment may not prove to be correct. If such personnel do not possess the skills, qualifications or abilities Sphere 3D expects or those necessary to manage a public company, the operations and profitability of Sphere 3D’s business may be negatively impacted.

Following the Merger, Sphere 3D’s ability to meet expectations and projections in any research or reports published by securities or industry analysts, or a lack of coverage by securities or industry analysts, could result in a depressed market price and limited liquidity for its common shares.

The trading market for Sphere 3D common shares will be influenced by the research and reports that industry or securities analysts may publish about it, its business, its market, or its competitors. If no securities or industry analysts commence coverage of Sphere 3D, its share price would likely be less than that which would be obtained if it had such coverage and the liquidity, or trading volume of its shares may be limited, making it more difficult for a shareholder to sell shares at an acceptable price or amount. If any analysts do cover Sphere 3D, their projections may vary widely and may not accurately predict the results it actually achieves. Sphere 3D’s share price may decline if its actual results do not match the projections of research analysts covering it. Similarly, if one or more of the analysts who write reports on Sphere 3D downgrades its shares or publishes inaccurate or unfavorable research about its business, its share price could decline. If one or more of these analysts ceases coverage of Sphere 3D or fails to publish reports on it regularly, its share price or trading volume could decline.

Subsequent to the consummation of the Merger, Sphere 3D may be required to take write-downs or write-offs, restructuring and impairment or other charges, including goodwill, that could have a significant negative effect on its financial condition, results of operations and share price, which could cause you to lose some or all of your investment.

Although Sphere 3D has conducted a due diligence examination of Gryphon and its subsidiaries, Sphere 3D cannot assure you that this examination revealed all material issues that may be present in Gryphon’s business, or that factors outside of Sphere 3D’s and Gryphon’s control will not later arise. As a result, Sphere 3D may be forced to later write

down or write off assets, restructure its operations, or incur impairment or other charges that could result in losses. Even if Sphere 3D’s due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with its preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on Sphere 3D’s liquidity, the fact that it may report charges of this nature could contribute to negative market perceptions about Sphere 3D or its securities. In addition, charges of this nature may cause Sphere 3D to be unable to obtain future financing on favorable terms or at all.

If the Merger is not completed, and Gryphon is unable to repay the loan made to it by Sphere 3D, Sphere 3D may incur a loss.

On July 6, 2021, Sphere 3D entered into a promissory note (the “Gryphon Note”) and security agreement with Gryphon (the “Security Agreement”), pursuant to which Sphere 3D loaned Gryphon $2.7 million in exchange for the Gryphon Note bearing interest at 9.5% per annum. On August 30, 2021, Sphere 3D entered into Amendment No. 1 to the Gryphon Note and Security Agreement, pursuant to which Sphere 3D loaned Gryphon an additional $3,650,000. On September 29, 2021, Sphere 3D entered into Amendment No. 2 to the Gryphon Note and Security Agreement pursuant to which Sphere 3D loaned Gryphon an additional $3,650,000 and amended the repayment schedule whereby the principal and accrued interest shall be due and payable commencing on January 1, 2022 continuing until and including December 1, 2024. To provide additional financing for Gryphon for operations prior to the consummation of the Merger, Sphere 3D loaned an additional $2.5 million to Gryphon on January 3, 2022, which loan increased the principal amount of the Gryphon Note to $12.5 million, and extended the initial date for the repayment of the Gryphon Note to a date subsequent to the consummation of the Merger. As Sphere 3D agreed in the amendment to the Merger Agreement that the amounts payable by Gryphon under the Gryphon Note will be forgiven if the Merger is not consummated, Sphere 3D also released all of the collateral pledged by Gryphon to secure the Gryphon Note.

Sphere 3D may be subject to securities litigation, which is expensive and could divert management attention.

Following the Merger, Sphere 3D’s share price may be volatile and, in the past, companies that have experienced volatility in the market price of their shares have been subject to securities class action litigation. Sphere 3D may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could have a material adverse effect on its business, financial condition, results of operations and prospects. Any adverse determination in litigation could also subject Sphere 3D to significant liabilities.

Gryphon’s operations may be restricted during the pendency of the Merger pursuant to terms of the Merger Agreement.

Prior to the consummation of the Merger, Gryphon is subject to customary interim operating covenants relating to carrying on its business in the ordinary course of business and is also subject to customary restrictions on actions that may be taken during such period without the consent of Sphere 3D. As a result, Gryphon may be unable, during the pendency of the Merger, to make certain acquisitions and capital expenditures, borrow money and otherwise pursue other actions, even if such actions would prove beneficial.

Risks Related to Sphere 3D’s Business.

Sphere 3D may be unable to successfully integrate its recent and future acquisitions, which could adversely affect Sphere 3D’s business, financial condition, results of operations and prospects.

The operation and management of this acquisition and other recent acquisitions, or any of Sphere 3D’s future acquisitions, may adversely affect Sphere 3D’s existing income and operations or Sphere 3D may not be able to effectively manage any growth resulting from these transactions. Sphere 3D’s success will depend, in part, on the extent to which Sphere 3D is able to merge these functions, eliminate the unnecessary duplication of other functions and otherwise integrate these companies (and any additional businesses with which Sphere 3D may combine in the future) into a cohesive, efficient enterprise. This integration process may entail significant costs and delays. Sphere 3D’s failure to integrate the operations of these companies successfully could adversely affect Sphere 3D’s business, financial condition, results of operations and prospects. To the extent that any acquisition results in additional goodwill, it will reduce Sphere 3D’s tangible net worth, which might adversely affect Sphere 3D’s business, financial condition, results of operations and prospects, as well as Sphere 3D’s credit capacity.

The extent to which the coronavirus, or COVID-19, outbreak and measures taken in response thereto impact Sphere 3D’s business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted.

Global health concerns relating to the coronavirus outbreak have been weighing on the macroeconomic environment, and the outbreak has significantly increased economic uncertainty. Risks related to consumers and businesses lowering or changing spending, which impact domestic and international spend. The outbreak has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and business shutdowns. These measures have not only negatively impacted consumer spending and business spending habits, they have also adversely impacted and may further impact Sphere 3D’s workforce and operations and the operations of its customers, suppliers and business partners. These measures may remain in place for a significant period of time and they are likely to continue to adversely affect Sphere 3D’s business, results of operations and financial condition.

The spread of the coronavirus has caused Sphere 3D to modify its business practices (including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences), and it may take further actions as may be required by government authorities that it determines are in the best interests of its employees, customers and business partners. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus or otherwise be satisfactory to government authorities.

The extent to which the coronavirus outbreak impacts Sphere 3D’s business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Even after the coronavirus outbreak has subsided, Sphere 3D may continue to experience materially adverse impacts to its business as a result of its global economic impact, including any recession that has occurred or may occur in the future.

There are no comparable recent events which may provide guidance as to the effect of the spread of the coronavirus and a global pandemic, and, as a result, the ultimate impact of the coronavirus outbreak or a similar health epidemic is highly uncertain and subject to change. Sphere 3D does not yet know the full extent of the impacts on its business, its operations or the global economy as a whole. However, the effects could have a material impact on Sphere 3D’s results of operations, and Sphere 3D will continue to monitor the coronavirus situation closely.

Sphere 3D’s cash and other sources of liquidity may not be sufficient to fund its operations beyond June 30, 2022. Sphere 3D may not be successful in raising additional capital necessary to meet expected increases in working capital needs. If Sphere 3D raises additional funding through sales of equity or equity-based securities, your shares will be diluted. If Sphere 3D needs additional funding for operations and it is unable to raise it, Sphere 3D may be forced to liquidate assets and/or curtail or cease operations or seek bankruptcy protection or be subject to an involuntary bankruptcy petition.

Management has projected that cash on hand may not be sufficient to allow Sphere 3D to continue operations beyond June 30, 2022 if it is unable to raise additional funding for operations. Sphere 3D expects its working capital needs to increase in the future as it continues to expand and enhance its operations. Sphere 3D’s ability to raise additional funds through equity or debt financings or other sources may depend on the financial success of its current business and successful implementation of its key strategic initiatives, financial, economic and market conditions and other factors, some of which are beyond Sphere 3D’s control. No assurance can be given that Sphere 3D will be successful in raising the required capital at reasonable cost and at the required times, or at all. Further equity financings may have a dilutive effect on shareholders and any debt financing, if available, may require restrictions to be placed on Sphere 3D’s future financing and operating activities. If Sphere 3D requires additional capital and is unsuccessful in raising that capital, it may not be able to continue its business operations and advance its growth initiatives, which could adversely impact Sphere 3D’s business, financial condition and results of operations.

Significant changes from Sphere 3D’s current forecasts, including but not limited to: (i) failure to comply with the financial covenants in its credit facility; (ii) shortfalls from projected sales levels; (iii) unexpected increases in product costs; (iv) increases in operating costs; (v) changes in the historical timing of collecting accounts receivable; and (vi) inability to maintain compliance with the requirements of the Nasdaq and/or inability to maintain listing with the Nasdaq could have a material adverse impact on Sphere 3D’s ability to access the level of funding necessary to continue its operations at current levels. If any of these events occurs or Sphere 3D is unable to generate sufficient cash from

operations or financing sources, Sphere 3D may be forced to liquidate assets where possible and/or curtail, suspend or cease planned programs or operations generally or seek bankruptcy protection or be subject to an involuntary bankruptcy petition, any of, which would have a material adverse effect on Sphere 3D’s business, results of operations, financial position and liquidity.

If Sphere 3D raises additional funds by selling additional shares, or securities convertible into shares, the ownership interest of Sphere 3D’s existing shareholders will be diluted. The amount of dilution could be increased by the issuance of warrants or securities with other dilutive characteristics, such as anti-dilution clauses or price resets.

Sphere 3D urges you to review the additional information about its liquidity and capital resources in “Management’s Discussion and Analysis of Financial Condition and Results of Operations for Sphere 3D.” If Sphere 3D’s business ceases to continue as a going concern due to lack of available capital or otherwise, it could have a material adverse effect on Sphere 3D’s business, results of operations, financial position, and liquidity.

A cybersecurity breach into Sphere 3D’s products when used by its customers could adversely affect its ability to conduct its business, harm its reputation, expose it to significant liability or otherwise damage its financial results.

A cybersecurity breach into a system Sphere 3D has sold to a customer could negatively affect its reputation as a trusted provider of storage and data protection products by adversely impacting the market’s perception of the security of Sphere 3D’s products and services. Many of Sphere 3D’s customers and partners store sensitive data on Sphere 3D’s products, and a cybersecurity breach related to Sphere 3D’s products could harm Sphere 3D’s reputation and potentially expose Sphere 3D to significant liability.

Sphere 3D also maintains sensitive data related to its employees, partners and customers, including intellectual property, proprietary business information and personally identifiable information on its own systems. Sphere 3D employs sophisticated security measures; however, it may face threats across its infrastructure including unauthorized access, security breaches and other system disruptions.

It is critical to Sphere 3D’s business that its employees’, partners’ and customers’ sensitive information remains secure, and that its customers perceive that this information is secure. A cybersecurity breach could result in unauthorized access to, loss of, or unauthorized disclosure of such information. A cybersecurity breach could expose Sphere 3D to litigation, indemnity obligations, government investigations and other possible liabilities. Additionally, a cyber-attack, whether actual or perceived, could result in negative publicity that could harm Sphere 3D’s reputation and reduce its customers’ confidence in the effectiveness of its solutions, which could materially and adversely affect Sphere 3D’s business and results of operations. A breach of its security systems could also expose Sphere 3D to increased costs, including remediation costs, disruption of operations or increased cybersecurity protection costs that may have a material adverse effect on Sphere 3D’s business. Although Sphere 3D maintains technology errors and omissions liability insurance, its insurance may not cover potential claims of these types or may not be adequate to indemnify it for inability that may be imposed. Any imposition or liability or litigation costs that are not covered by insurance or in excess of Sphere 3D’s insurance coverage could harm Sphere 3D’s business.

Sphere 3D faces a selling cycle of variable length to secure new purchase agreements for its products and services, and design wins may not result in purchase orders or new customer relationships.

Sphere 3D faces a selling cycle of variable lengths to secure new purchase agreements. Even if Sphere 3D succeeds in developing a relationship with a potential new customer and/or obtaining design wins, it may not be successful in securing new sales for its products or services, or new customers. In addition, Sphere 3D cannot accurately predict the timing of entering into purchase agreements with new customers due to the complex purchase decision processes of some large institutional customers, such as healthcare providers or school districts, which often involve high-level management or board of directors approvals. Consequently, Sphere 3D has only a limited ability to predict the timing of specific new customer relationships.

Sphere 3D has a history of net losses. It may not achieve or maintain profitability.

Sphere 3D has limited non-recurring revenues derived from operations. Sphere 3D’s near-term focus has been in actively developing reference accounts and building its sales, marketing and support capabilities. HVE ConneXions, LLC (“HVE”) and UCX ConneXions Inc. (“UCX”), which Sphere 3D acquired in January 2017, also have a history

of net losses. Sphere 3D expects to continue to incur net losses and it may not achieve or maintain profitability. Sphere 3D expects continued losses during 2021 and as a result of these and other factors, it may not be able to achieve, sustain or increase profitability in the near future.

Sphere 3D is subject to many risks common to early-stage enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial and other resources, technology, and market acceptance issues. There is no assurance that Sphere 3D will be successful in achieving a return on shareholders’ investment and the likelihood of success must be considered in light of Sphere 3D’s stage of operations.

Sphere 3D’s plans for growth will place significant demands upon its resources. If Sphere 3D is unsuccessful in achieving its plan for growth, its business could be harmed.

Sphere 3D is actively pursuing a plan to market its products domestically and internationally. The plan will place significant demands upon managerial, financial and human resources. Sphere 3D’s ability to manage future growth will depend in large part upon several factors, including its ability to rapidly:

•        build or leverage, as applicable, a network of channel partners to create an expanding presence in the evolving marketplace for Sphere 3D’s products and services;

•        build or leverage, as applicable, a sales team to keep end-users and channel partners informed regarding the technical features, issues and key selling points of Sphere 3D’s products and services;

•        attract and retain qualified technical personnel in order to continue to develop reliable and flexible products and provide services that respond to evolving customer needs;

•        develop support capacity for end-users as sales increase, so that Sphere 3D can provide post-sales support without diverting resources from product development efforts; and

•        expand Sphere 3D’s internal management and financial controls significantly, so that Sphere 3D can maintain control over its operations and provide support to other functional areas as the number of personnel and size increases.

Sphere 3D’s inability to achieve any of these objectives could harm its business, financial condition and results of operations.

Sphere 3D’s market is competitive and dynamic. New competing products and services could be introduced at any time that could result in reduced profit margins and loss of market share.

The technology industry is very dynamic, with new technology and services being introduced by a range of players, from larger established companies to start-ups, on a frequent basis. Sphere 3D’s competitors may announce new products, services, or enhancements that better meet the needs of end-users or changing industry standards. Further, new competitors or alliances among competitors could emerge. Increased competition may cause price reductions, reduced gross margins and loss of market share, any of which could have a material adverse effect on Sphere 3D’s business, financial condition and results of operations. Furthermore, the worldwide storage market is intensely competitive. A number of manufacturers of disk-based storage solutions compete for a limited number of customers. Barriers to entry are relatively low in these markets, and some of Sphere 3D’s competitors in this market have substantially greater financial and other resources, larger research and development staffs, and more experience and capabilities in manufacturing, marketing and distributing products. Ongoing pricing pressure could result in significant price erosion, reduced profit margins and loss of market share, any of which could have a material adverse effect on Sphere 3D’s business, results of operations, financial position and liquidity.

Sphere 3D’s success depends on its ability to anticipate technological changes and develop new and enhanced products.

The markets for Sphere 3D’s products are characterized by rapidly-changing technology, evolving industry standards and increasingly-sophisticated customer requirements. The introduction of products embodying new technology and the emergence of new industry standards can negatively impact the marketability of Sphere 3D’s existing products and can exert price pressures on existing products. It is critical to Sphere 3D’s success that it is able to anticipate and

react quickly to changes in technology or in industry standards and to successfully develop, introduce, manufacture and achieve market acceptance of new, enhanced and competitive products on a timely basis and cost-effective basis. Sphere 3D invests resources towards continued innovation; however, there can be no assurance that it will successfully develop new products or enhance and improve its existing products, that new products and enhanced and improved existing products will achieve market acceptance or that the introduction of new products or enhanced existing products by others will not negatively impact Sphere 3D. Sphere 3D’s inability to develop products that are competitive in technology and price and that meet end-user needs could have a material adverse effect on its business, financial condition or results of operations.

Development schedules for technology products are inherently uncertain. Sphere 3D may not meet its product development schedules, and development costs could exceed budgeted amounts. Sphere 3D’s business, results of operations, financial position and liquidity may be materially and adversely affected if the products or product enhancements that Sphere 3D develops are delayed or not delivered due to developmental problems, quality issues or component shortage problems, or if Sphere 3D’s products or product enhancements do not achieve market acceptance or are unreliable. Sphere 3D or its competitors will continue to introduce products embodying new technologies, such as new sequential or random access mass storage devices. In addition, new industry standards may emerge. Such events could render Sphere 3D’s existing products obsolete or not marketable, which would have a material adverse effect on its business, results of operations, financial position and liquidity.

Sphere 3D’s products, including its Bitcoin mining machines, may contain defects in components or design, and its warranty reserves may not adequately cover its warranty obligations for these products.

Although Sphere 3D employs a testing and quality assurance program, its products, including its Bitcoin mining machines, may contain defects or errors. Defects and errors in Sphere 3D’s products could materially and adversely affect its reputation, result in significant costs, delay planned release dates and impair its ability to sell its products in the future. The costs incurred in correcting any product defects or errors may be substantial and could adversely affect Sphere 3D’s operating margins.

Sphere 3D also established reserves for the estimated liability associated with product warranties. However, Sphere 3D could experience unforeseen circumstances where these or future reserves may not adequately cover its warranty obligations. For example, the failure or inadequate performance of product components that Sphere 3D purchases could increase its warranty obligations beyond these reserves.

The failure to attract, hire, retain and motivate key personnel could have a significant adverse impact on Sphere 3D’s operations.

Sphere 3D’s success depends on the retention and maintenance of key personnel, including members of senior management and its technical, sales and marketing teams. Achieving this objective may be difficult due to many factors, including competition for such highly skilled personnel; fluctuations in global economic and industry conditions; changes in Sphere 3D’s management or leadership; competitors’ hiring practices; and the effectiveness of Sphere 3D’s compensation programs. The loss of any of these key persons could have a material adverse effect on Sphere 3D’s business, financial condition or results of operations.

Sphere 3D’s success is also dependent on continuing ability to identify, hire, train, motivate and retain highly qualified management, technical, sales, marketing and finance personnel. Any such new hire may require a significant transition period prior to making a meaningful contribution. Competition for qualified employees is particularly intense in the technology industry, and Sphere 3D has in the past experienced difficulty recruiting qualified employees. Sphere 3D’s failure to attract and to retain the necessary qualified personnel could seriously harm Sphere 3D’s operating results and financial condition. Competition for such personnel can be intense, and no assurance can be provided that Sphere 3D will be able to attract or retain highly qualified technical and managerial personnel in the future, which may have a material adverse effect on Sphere 3D’s future growth and profitability. Sphere 3D does not have key person insurance.

Sphere 3D’s financial results may fluctuate substantially for many reasons, and past results should not be relied on as indications of future performance.

Sphere 3D’s revenues and operating results may fluctuate from quarter to quarter and from year to year due to a combination of factors, including, but not limited to:

•        varying size, timing and contractual terms of orders for Sphere 3D’s products, which may delay the recognition of revenue;

•        competitive conditions in the industry, including strategic initiatives by Sphere 3D or its competitors, new products or services, product or service announcements and changes in pricing policy by Sphere 3D or its competitors;

•        market acceptance of Sphere 3D’s products and services;

•        Sphere 3D’s ability to maintain existing relationships and to create new relationships with channel partners;

•        the discretionary nature of purchase and budget cycles of Sphere 3D’s customers and end-users;

•        the length and variability of the sales cycles for Sphere 3D’s products;

•        general weakening of the economy resulting in a decrease in the overall demand for Sphere 3D’s products and services or otherwise affecting the capital investment levels of businesses with respect to Sphere 3D’s products or services;

•        timing of product development and new product initiatives;

•        changes in customer mix;

•        increases in the cost of, or limitations on, the availability of materials;

•        fluctuations in average selling prices;

•        changes in product mix; and

•        increases in costs and expenses associated with the introduction of new products.

Further, the markets that Sphere 3D serves are volatile and subject to market shifts that Sphere 3D may be unable to anticipate. A slowdown in the demand for workstations, mid-range computer systems, networks and servers could have a significant adverse effect on the demand for Sphere 3D’s products in any given period. In the past, Sphere 3D has experienced delays in the receipt of purchase orders and, on occasion, anticipated purchase orders have been rescheduled or have not materialized due to changes in customer requirements. Sphere 3D’s customers may cancel or delay purchase orders for a variety of reasons, including, but not limited to, the rescheduling of new product introductions, changes in Sphere 3D’s customers’ inventory practices or forecasted demand, general economic conditions affecting Sphere 3D’s customers’ markets, changes in Sphere 3D’s pricing or the pricing of Sphere 3D’s competitors, new product announcements by Sphere 3D or others, quality or reliability problems related to Sphere 3D’s products, or selection of competitive products as alternate sources of supply.

Thus, there can be no assurance that Sphere 3D will be able to reach profitability on a quarterly or annual basis. Sphere 3D believes that its revenue and operating results will continue to fluctuate, and that period-to-period comparisons are not necessarily indications of future performance. Sphere 3D’s revenue and operating results may fail to meet the expectations of public market analysts or investors, which could have a material adverse effect on the price of Sphere 3D’s common shares. In addition, portions of Sphere 3D’s expenses are fixed and difficult to reduce if Sphere 3D’s revenues do not meet its expectations. These fixed expenses magnify the adverse effect of any revenue shortfall.

Sphere 3D’s plans for implementing its business strategy and achieving profitability are based upon the experience, judgment and assumptions of its key management personnel, and available information concerning the communications and technology industries. If management’s assumptions prove to be incorrect, it could have a material adverse effect on Sphere 3D’s business, financial condition or results of operations.

Sphere 3D relies on indirect sales channels to market and sell its branded products. Therefore, the loss of, or deterioration in, Sphere 3D’s relationship with one or more of its distributors or resellers could negatively affect its operating results.

Sphere 3D has relationships with third party resellers, system integrators and enterprise application providers that facilitate its ability to sell and implement its products. These business relationships are important to extend the geographic reach and customer penetration of Sphere 3D’s sales force and ensure that Sphere 3D’s products are compatible with customer network infrastructures and with third party products.

Sphere 3D believes that its success depends, in part, on its ability to develop and maintain strategic relationships with resellers, independent software vendors, system integrators, and enterprise application providers. Should any of these third parties go out of business, or choose not to work with Sphere 3D, it may be forced to increase the development of those capabilities internally, incurring significant expense and adversely affecting operating margins. Any of these third parties may develop relationships with other companies, including those that develop and sell products that compete with Sphere 3D’s. Sphere 3D could lose sales opportunities if it fails to work effectively with these parties or they choose not to work with it. Most of Sphere 3D’s distributors and resellers also carry competing product lines that they may promote over its products. A distributor or reseller might not continue to purchase Sphere 3D’s products or market them effectively, and each determines the type and amount of products that it will purchase from Sphere 3D and the pricing of the products that it sells to end user customers. Further, the long-term success of any of Sphere 3D’s distributors or resellers is difficult to predict, and Sphere 3D has no purchase commitments or long-term orders from any of them to assure Sphere 3D of any baseline sales through these channels. Therefore, the loss of, or deterioration in, Sphere 3D’s relationship with one or more of its distributors or resellers could negatively affect its operating results. Sphere 3D’s operating results could also be adversely affected by a number of factors, including, but not limited to:

•        change in competitive strategy that adversely affects a distributor’s or reseller’s willingness or ability to stock and distribute Sphere 3D’s products;

•        the reduction, delay or cancellation of orders or the return of a significant amount of Sphere 3D’s products;

•        the loss of one or more of Sphere 3D’s distributors or resellers; and

•        any financial difficulties of Sphere 3D’s distributors or resellers that result in their inability to pay amounts owed to Sphere 3D.

If Sphere 3D’s suppliers fail to meet its manufacturing needs, it would delay its production and its product shipments to customers and this could negatively affect its operations.

Some of Sphere 3D’s products have a large number of components and subassemblies produced by outside suppliers. Sphere 3D depends greatly on these suppliers for items that are essential to the manufacturing of its products, including disk drives and chassis. Sphere 3D works closely with its regional, national and international suppliers, which are carefully selected based on their ability to provide quality parts and components that meet both its technical specifications and volume requirements. For certain items, Sphere 3D qualifies only a single source, which magnifies the risk of shortages and decreases its ability to negotiate with that supplier on the basis of price. From time to time, Sphere 3D has in the past been unable to obtain as many drives as have needed due to drive shortages or quality issues from certain of its suppliers. If these suppliers fail to meet Sphere 3D’s manufacturing needs, it would delay its production and its product shipments to customers could negatively affect its operations.

Sphere 3D is subject to laws, regulations and similar requirements, changes to which may adversely affect its business and operations.

Sphere 3D is subject to laws, regulations and similar requirements that affect its business and operations, including, but not limited to, the areas of commerce, intellectual property, income and other taxes, labor, environmental, health and safety, and its compliance in these areas may be costly. While Sphere 3D has implemented policies and procedures to comply with laws and regulations, there can be no assurance that its employees, contractors, suppliers or agents will not violate such laws and regulations or its policies. Any such violation or alleged violation could materially and adversely affect Sphere 3D’s business. Any changes or potential changes to laws, regulations or similar requirements,

or Sphere 3D’s ability to respond to these changes, may significantly increase Sphere 3D’s costs to maintain compliance or result in Sphere 3D’s decision to limit its business or products, which could materially harm Sphere 3D’s business, results of operations and future prospects.

Sphere 3D has made a number of acquisitions in the past and it may make acquisitions in the future. Sphere 3D’s ability to identify complementary assets, products or businesses for acquisition and successfully integrate them could affect its business, financial condition and operating results.

In the future, in addition to its acquisition of Gryphon, Sphere 3D may continue to pursue acquisitions of assets, products or businesses that it believes are complementary to its existing business, including the business of Gryphon and/or to enhance its market position or expand its product portfolio. There is a risk that Sphere 3D will not be able to identify suitable acquisition candidates available for sale at reasonable prices, complete any acquisition, or successfully integrate any acquired product or business into Sphere 3D’s operations. Sphere 3D is likely to face competition for acquisition candidates from other parties including those that have substantially greater available resources. Acquisitions may involve a number of other risks, including:

•        diversion of management’s attention;

•        disruption to Sphere 3D’s ongoing business;

•        failure to retain key acquired personnel;

•        difficulties in integrating acquired operations, technologies, products or personnel;

•        unanticipated expenses, events or circumstances;

•        assumption of disclosed and undisclosed liabilities; and

•        inappropriate valuation of the acquired in-process research and development, or the entire acquired business.

If Sphere 3D does not successfully address these risks or any other problems encountered in connection with an acquisition, the acquisition could have a material adverse effect on its business, results of operations and financial condition. Problems with an acquired business could have a material adverse effect on Sphere 3D’s performance or its business as a whole. In addition, if Sphere 3D proceeds with an acquisition, its available cash may be used to complete the transaction, diminishing its liquidity and capital resources, or shares may be issued which could cause significant dilution to existing shareholders.

Sphere 3D has implemented cost reduction efforts; however, these efforts may need to be modified, and if Sphere 3D needs to implement additional cost reduction efforts it could materially harm its business.

Sphere 3D has implemented certain cost reduction efforts. There can be no assurance that these cost reduction efforts will be successful. As a result, Sphere 3D may need to implement further cost reduction efforts across its operations, such as further reductions in the cost of its workforce and/or suspending or curtailing planned programs, either of which could materially harm its business, results of operations and future prospects.

Sphere 3D’s ability to compete depends in part on its ability to protect its intellectual property rights.

Sphere 3D’s success depends in part on its ability to protect its rights in its intellectual property. Sphere 3D relies on various intellectual property protections, including copyright, trade-mark and trade secret laws and contractual provisions, to preserve its intellectual property rights. Sphere 3D has filed a number of patent applications and has historically protected its intellectual property through trade secrets and copyrights. As Sphere 3D’s technology is evolving and rapidly changing, current intellectual property rights may not adequately protect Sphere 3D.

Intellectual property rights may not prevent competitors from developing products that are substantially equivalent or superior to Sphere 3D’s products. Competitors may independently develop similar products, duplicate Sphere 3D’s products or, if patents are issued to Sphere 3D, design around these patents. To the extent that Sphere 3D has or obtains patents, such patents may not afford meaningful protection for its technology and products. Others may challenge Sphere 3D’s patents and, as a result, Sphere 3D’s patents could be narrowed, invalidated or declared unenforceable. The patents that are material to Sphere 3D’s business began expiring in November 2015. In addition, Sphere 3D’s current or future patent applications may not result in the issuance of patents in the U.S. or foreign countries.

Although Sphere 3D believes it has a proprietary platform for its technologies and products, it may in the future become subject to claims for infringement of intellectual property rights owned by others. Further, to protect Sphere 3D’s own intellectual property rights, Sphere 3D may in the future bring claims for infringement against others.

Sphere 3D’s commercial success depends, in part, upon not infringing intellectual property rights owned by others. Although Sphere 3D believes that it has a proprietary platform for its technologies and products, it cannot determine with certainty whether any existing third party patents or the issuance of any third party patents would require Sphere 3D to alter its technology, obtain licenses or cease certain activities. Sphere 3D may become subject to claims by third parties that its technology infringes on their intellectual property rights. While Sphere 3D provides its customers with a qualified indemnity against the infringement of third party intellectual property rights, it may become subject to these claims either directly or through indemnities against these claims that it routinely provides to its end-users and channel partners.

Further, Sphere 3D’s customers may use its products in ways that may infringe the intellectual property rights of third parties and/or require a license from third parties. Although Sphere 3D’s customers are contractually obligated to use Sphere 3D’s products only in a manner that does not infringe third party intellectual property rights, Sphere 3D cannot guarantee that such third parties will not seek remedies against Sphere 3D for providing products that may enable Sphere 3D’s customers to infringe the intellectual property rights of others.

In addition, Sphere 3D may receive in the future, claims from third parties asserting infringement, claims based on indemnities provided by Sphere 3D, and other related claims. Litigation may be necessary to determine the scope, enforceability and validity of third party proprietary or other rights, or to establish Sphere 3D’s proprietary or other rights. Furthermore, despite precautions, it may be possible for third parties to obtain and use Sphere 3D’s intellectual property without Sphere 3D’s authorization. Policing unauthorized use of intellectual property is difficult, and some foreign laws do not protect proprietary rights to the same extent as the laws of Canada or the U.S. To protect its intellectual property, Sphere 3D may become involved in litigation. In addition, other companies may initiate similar proceedings against Sphere 3D. The patent position of information technology firms is highly uncertain, involves complex legal and factual questions, and continues to be the subject of much litigation. No consistent policy has emerged from the U.S. Patent and Trademark Office or the courts regarding the breadth of claims allowed or the degree of protection afforded under information technology patents.

Some of Sphere 3D’s competitors have, or are affiliated with companies having, substantially greater resources than Sphere 3D and these competitors may be able to sustain the costs of complex intellectual property litigation to a greater degree and for a longer period of time than Sphere 3D. Regardless of their merit, any such claims could:

•        divert the attention of Sphere 3D’s management, cause significant delays, materially disrupt the conduct of its business or materially adversely affect its revenue, financial condition and results of operations;

•        be time consuming to evaluate and defend;

•        result in costly litigation and substantial expenses;

•        cause product shipment delays or stoppages;

•        subject Sphere 3D to significant liabilities;

•        require Sphere 3D to enter into costly royalty or licensing agreements;

•        require Sphere 3D to modify or stop using the infringing technology; or

•        result in costs or other consequences that have a material adverse effect on Sphere 3D’s business, results of operations and financial condition.

Certain of Sphere 3D’s directors, officers and management could be in a position of conflict of interest.

Certain directors, officers and members of management of Sphere 3D may also serve as directors and/or officers of other companies. Sphere 3D may contract with such directors, officers, members of management and such other companies or with affiliated parties or other companies in which such directors, officers or members of management own or control. These persons may obtain compensation and other benefits in transactions relating to Sphere 3D. Consequently, there exists the possibility for such directors, officers and members of management to be in a position of conflict. Any decision made by any of such directors, officers and members of management involving Sphere 3D are being made in accordance with their duties and obligations to deal fairly and in good faith with a view to the best interests of Sphere 3D.

Risks Related to Gryphon’s Business

Gryphon is an early-stage company and has not yet generated any profits.

Gryphon was formed in October 2020 and has a limited history upon which an evaluation of Gryphon’s performance and future prospects can be made. Gryphon began mining operations in September 2021, and had no previous existing operations. Gryphon’s current and proposed operations are subject to all the business risks associated with new enterprises. These include likely fluctuations in operating results as Gryphon reacts to developments in its market, managing its growth, its ability to manage operations and the entry of competitors into the market. Gryphon has had limited revenues generated since the machines were operational in September 2021. Gryphon has had limited operations to date, and there is no assurance that it can successfully execute their business plan.

While Gryphon has raised limited capital through private placements to date, there is no guarantee that it will continue to be able to do so, or to service its debt obligations, in the future. In addition, Gryphon has engaged in financings following the execution of the Merger Agreement totaling approximately $12.1 million. Pursuant to the terms of the Merger Agreement, Gryphon may only raise an additional $5.9 million until the Merger is either consummated or terminated.

There is no assurance that Gryphon will be able to raise sufficient capital in the markets and there is no assurance that Gryphon will be able to raise the capital needed to continue operations. There is no assurance that Gryphon will be able to generate any profits.

Any valuation at this stage is difficult to assess.

Gryphon’s valuation is based upon a number of estimates and assumptions that may prove later to be inaccurate or incomplete. Unlike listed companies that are valued publicly through market-driven stock prices, the valuation of private companies, especially startups, is difficult to assess and you may risk overpaying for your investment. Gryphon began its operations in September 2021, and has limited operating experience and performance history, making valuation difficult.

Bitcoin mining activities are energy-intensive, which may restrict the geographic locations of mining machines and have a negative environmental impact. Government regulators may potentially restrict the ability of electricity suppliers to provide electricity to mining operations, such as Gryphon’s.

Mining bitcoin requires massive amounts of electrical power, and electricity costs are expected to account for a significant portion of Gryphon’s overall costs. The availability and cost of electricity will restrict the geographic locations of Gryphon’s mining activities. Any shortage of electricity supply or increase in electricity costs in any location where Gryphon plans to operate may negatively impact the viability and the expected economic return for bitcoin mining activities in that location.

Further, Gryphon’s business model can only be successful and Gryphon’s mining operations can only be profitable if the costs, including electrical power costs, associated with bitcoin mining are lower than the price of bitcoin itself. As a result, any equipment Gryphon deploys can only be successful if Gryphon can obtain access to sufficient electrical power on a cost-effective basis through hosting arrangements with mining data centers. Gryphon’s deployment of new mining equipment requires Gryphon to find sites where that is the case. Even if Gryphon’s electrical power costs do not increase, significant fluctuations in, and any prolonged periods of, low bitcoin prices may also cause Gryphon’s electrical supply to no longer be cost-effective.

Furthermore, if cryptocurrency mining becomes more widespread, government scrutiny related to restrictions on cryptocurrency mining facilities and their energy consumption may significantly increase. The considerable consumption of electricity by mining operators may also have a negative environmental impact, including contribution to climate change, which could set the public opinion against allowing the use of electricity for bitcoin mining activities. This, in turn, could lead to governmental measures restricting or prohibiting the use of electricity for bitcoin mining activities. Any such development in the jurisdictions where Gryphon plans to operate could increase our compliance burdens and have a material adverse effect on Gryphon’s business, prospects, financial condition, and operating results.

Additionally, the mining data centers at which Gryphon maintains its mining equipment could be materially adversely affected by power outages and similar disruptions. Given the power requirements for Gryphon’s mining equipment, it would not be feasible to run this equipment on back-up power generators in the event of a government restriction on electricity or a power outage. If Gryphon is unable to receive adequate power supply and is forced to reduce its operations due to the availability or cost of electrical power, it would have a material adverse effect on Gryphon’s business, prospects, financial condition, and operating results.

Gryphon relies on hosting arrangements such as that with Core Scientific, Inc. and Coinmint, LLC to conduct its business, and the availability of such hosting arrangements is uncertain and competitive and may be affected by changes in regulation in one or more countries.

If Gryphon is unable to successfully enter into definitive hosting agreements with mining data centers on favorable terms or those counterparties fail to perform their obligations under such agreements, Gryphon may be forced to look for alternative mining data centers to host its mining equipment.

In May 2021, China’s State Council issued a statement signaling its intent to restrict cryptocurrency mining and trading activities, resulting in provincial governments taking proactive measurements to prohibit cryptocurrency mining. On September 24, 2021, China’s central bank and its National Development and Reform Commission issued a nation-wide ban on cryptocurrency mining and declaring all financial transactions involving cryptocurrencies illegal. As a result, mining data centers previously operating in China have been forced to shut down and owners of crypto mining equipment located in China have been attempting to relocate the equipment to mining data centers in other jurisdictions, with a particular focus on locations within the United States. Combined with the increase in the price of bitcoin in 2021, the influx of crypto miners from China has created conditions of great demand for mining data centers and limited supply. Due to these conditions, there is no assurance that Gryphon will be able to procure alternative hosting agreements on acceptable terms in a timely manner or at all.

Significant competition for suitable mining data centers is expected to continue, and other government regulators, including local permitting officials, may potentially restrict the ability of potential mining data centers to begin or continue operations in certain locations. They can also restrict the ability of electricity suppliers to provide electricity to mining operations in times of electricity shortage, or may otherwise potentially restrict or prohibit the provision of electricity to mining operations. While Gryphon is not aware of the existence of any such restrictions in Georgia, New York and North Carolina, the jurisdictions in which the mining data centers that Gryphon is currently contemplating maintaining its machines at are located, new ordinances and other regulations at the federal, state and local levels can be introduced at any time and can be triggered by certain adverse weather conditions or natural disasters, among other reasons.

Gryphon may be affected by price fluctuations in the wholesale and retail power markets.

Market prices for power, generation capacity and ancillary services, are unpredictable. Depending upon the effectiveness of any price risk management activity undertaken by Gryphon, including but not limited to attempts to secure hosting services contracts at fixed fees, an increase in market prices for power, generation capacity, and ancillary services may adversely affect Gryphon’s business, prospects, financial condition, and operating results. Long- and short-term power prices may fluctuate substantially due to a variety of factors outside of Gryphon’s control, including, but not limited to:

•        increases and decreases in generation capacity;

•        changes in power transmission or fuel transportation capacity constraints or inefficiencies;

•        volatile weather conditions, particularly unusually hot or mild summers or unusually cold or warm winters;

•        technological shifts resulting in changes in the demand for power or in patterns of power usage, including the potential development of demand-side management tools, expansion and technological advancements in power storage capability and the development of new fuels or new technologies for the production or storage of power;

•        federal and state power, market and environmental regulation and legislation; and

•        changes in capacity prices and capacity markets.

If Gryphon is unable to secure power supply at prices or on terms acceptable to it, it would have a material adverse effect on Gryphon’s business, prospects, financial condition, and operating results.

Gryphon’s loss of any of its management or advisory team, its inability to execute an effective succession plan, or its inability to attract and retain qualified personnel, could adversely affect Gryphon’s business.

Gryphon’s success and future growth will depend to a significant degree on the skills and services of its management and advisors, including Robby Chang, Gryphon’s Chief Executive Officer, and Dan Tolhurst, Gryphon’s President. Gryphon will need to continue to grow its management in order to alleviate pressure on its existing team and in order to continue to develop its business. If Gryphon’s management, including any new hires that Gryphon may make, fails to work together effectively and to execute Gryphon’s plans and strategies on a timely basis, Gryphon’s business could be harmed. Furthermore, if Gryphon fails to execute an effective contingency or succession plan with the loss of any member of management, the loss of such management personnel may significantly disrupt its business.

The loss of key members of management or advisory team could inhibit Gryphon’s growth prospects. Gryphon’s future success also depends in large part on its ability to attract, retain and motivate key management and operating personnel. As Gryphon continues to develop and expand its operations, it may require personnel with different skills and experiences, and who have a sound understanding of Gryphon’s business and the Bitcoin network industry. The market for highly qualified personnel in this industry is very competitive and Gryphon may be unable to attract such personnel. If Gryphon is unable to attract such personnel, its business could be harmed.

As cryptocurrencies may be determined to be investment securities, Gryphon may inadvertently violate the Investment Company Act of 1940 and incur large losses as a result and potentially be required to register as an investment company or terminate operations and Gryphon may incur third-party liabilities.

Gryphon believes that it is not engaged in the business of investing, reinvesting, or trading in securities, and it does not hold itself out as being engaged in those activities. However, under the Investment Company Act of 1940 (the “Investment Company Act”), a company may be deemed an investment company under section 3(a)(1)(C) thereof if the value of its investment securities is more than 40% of its total assets (exclusive of government securities and cash items) on an unconsolidated basis.

As a result of Gryphon’s investments and its mining activities, including investments in which it does not have a controlling interest, the investment securities Gryphon holds could exceed 40% of Gryphon’s total assets, exclusive of cash items and, accordingly, Gryphon could determine that it has become an inadvertent investment company. The Bitcoin Gryphon that owns, acquires or mines may be deemed an investment security by the SEC, although Gryphon does not believe any of the Bitcoin is owns, acquires or mines are securities. An inadvertent investment company can avoid being classified as an investment company if it can rely on one of the exclusions under the Investment Company Act. One such exclusion, Rule 3a-2 under the Investment Company Act, allows an inadvertent investment company a grace period of one year from the earlier of (a) the date on which an issuer owns securities and/or cash having a value exceeding 50% of the issuer’s total assets on either a consolidated or unconsolidated basis and (b) the date on which an issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of government securities and cash items) on an unconsolidated basis. As of the date of this proxy statement/prospectus, Gryphon does not believe it is an inadvertent investment company. Gryphon may take actions to cause the investment securities held by it to be less than 40% of its total assets, which may include acquiring assets with Gryphon’s cash and Bitcoin on hand or liquidating Gryphon’s investment securities or Bitcoin or seeking a no-action letter from the SEC if Gryphon is unable to acquire sufficient assets or liquidate sufficient investment securities in a timely manner.

As the Rule 3a-2 exception is available to a company no more than once every three years, and assuming no other exclusion were available to Gryphon, Gryphon would have to keep within the 40% limit for at least three years after it ceases being an inadvertent investment company. This may limit Gryphon’s ability to make certain investments or enter into joint ventures that could otherwise have a positive impact on Gryphon’s earnings. In any event, Gryphon does not intend to become an investment company engaged in the business of investing and trading securities.

Classification as an investment company under the Investment Company Act requires registration with the SEC. If an investment company fails to register, it would have to stop doing almost all business, and its contracts would become voidable. Registration is time consuming and restrictive and would require a restructuring of Gryphon’s operations, and Gryphon would be very constrained in the kind of business it could do as a registered investment company. Further, Gryphon would become subject to substantial regulation concerning management, operations, transactions with affiliated persons and portfolio composition, and would need to file reports under the Investment Company Act regime. The cost of such compliance would result in Gryphon incurring substantial additional expenses, and the failure to register if required would have a materially adverse impact to conduct Gryphon’s operations.

If regulatory changes or interpretations of Gryphon’s activities require its registration as a money services business under the regulations promulgated by The Financial Crimes Enforcement Network under the authority of the U.S. Bank Secrecy Act, Gryphon may be required to register and comply with such regulations. If regulatory changes or interpretations of Gryphon’s activities require the licensing or other registration of Gryphon as a money transmitter (or equivalent designation) under state law in any state in which Gryphon operates, Gryphon may be required to seek licensure or otherwise register and comply with such state law. In the event of any such requirement, to the extent Gryphon decides to continue, the required registrations, licensure and regulatory compliance steps may result in extraordinary, non-recurring expenses to Gryphon. Gryphon may also decide to cease its operations. Any termination of certain operations in response to the changed regulatory circumstances may be at a time that is disadvantageous to investors.

To the extent that Gryphon’s activities cause it to be deemed a money service business under the regulations promulgated by the Financial Crimes Enforcement Network of the U.S. Treasury Department (“FinCEN”) under the authority of the U.S. Bank Secrecy Act, Gryphon may be required to comply with FinCEN regulations, including those that would mandate Gryphon to implement anti-money laundering programs, make certain reports to FinCEN and maintain certain records.

To the extent that Gryphon’s activities cause Gryphon to be deemed a money transmitter or equivalent designation under state law in any state in which Gryphon operates, Gryphon may be required to seek a license or otherwise register with a state regulator and comply with state regulations that may include the implementation of anti-money laundering programs, maintenance of certain records and other operational requirements. Currently, the New York Department of Financial Services has finalized its “BitLicense” framework for businesses that conduct “virtual currency business activity.” Gryphon will continue to monitor for developments in New York legislation, guidance and regulations.

Such additional federal or state regulatory obligations may cause Gryphon to incur extraordinary expenses, possibly affecting Gryphon’s business in a material and adverse manner. Furthermore, Gryphon and its service providers may not be capable of complying with certain federal or state regulatory obligations applicable to money service businesses and money transmitters. If Gryphon is deemed to be subject to and determine not to comply with such additional regulatory and registration requirements, Gryphon may act to dissolve and liquidate Gryphon. Any such action may adversely affect an investment in Gryphon.

There is no one unifying principle governing the regulatory status of cryptocurrency nor whether cryptocurrency is a security in each context in which it is viewed. Regulatory changes or actions in one or more countries may alter the nature of an investment in Gryphon or restrict the use of digital assets, such as cryptocurrencies, in a manner that adversely affects Gryphon’s business, prospects or operations.

As cryptocurrencies have grown in both popularity and market size, governments around the world have reacted differently, with certain governments deeming cryptocurrencies illegal, and others allowing their use and trade without restriction. In some jurisdictions, such as in the U.S., digital assets, like cryptocurrencies, are subject to extensive, and in some cases overlapping, unclear and evolving regulatory requirements.

Bitcoin is the oldest and most well-known form of cryptocurrency. Bitcoin and other forms of cryptocurrencies have been the source of much regulatory consternation, resulting in differing definitional outcomes without a single

unifying statement. Bitcoin and other digital assets are viewed differently by different regulatory and standards setting organizations globally as well as in the United States on the federal and state levels. For example, the Financial Action Task Force (“FATF”) and the Internal Revenue Service (“IRS”) consider a cryptocurrency as currency or an asset or property. Further, the IRS applies general tax principles that apply to property transactions to transactions involving virtual currency.

If regulatory changes or interpretations require the regulation of Bitcoin or other digital assets under the securities laws of the United States or elsewhere, including the Securities Act of 1933, the Exchange Act and the 1940 Act or similar laws of other jurisdictions and interpretations by the SEC, the CFTC, the IRS, Department of Treasury or other agencies or authorities, Gryphon may be required to register and comply with such regulations, including at a state or local level. To the extent that Gryphon decides to continue operations, the required registrations and regulatory compliance steps may result in extraordinary expense or burdens to Gryphon. Gryphon may also decide to cease certain operations and change Gryphon’s business model. Any disruption of Gryphon’s operations in response to the changed regulatory circumstances may be at a time that is disadvantageous to Gryphon.

Current and future legislation and SEC-rulemaking and other regulatory developments, including interpretations released by a regulatory authority, may impact the manner in which Bitcoin or other cryptocurrencies are viewed or treated for classification and clearing purposes. In particular, Bitcoin and other cryptocurrencies may not be excluded from the definition of “security” by SEC rulemaking or interpretation requiring registration of all transactions unless another exemption is available, including transacting in Bitcoin or cryptocurrency among owners and require registration of trading platforms as “exchanges”.

Gryphon cannot be certain as to how future regulatory developments will impact the treatment of Bitcoin and other cryptocurrencies under the law. If Gryphon fails to comply with such additional regulatory and registration requirements, Gryphon may seek to cease certain of its operations or be subjected to fines, penalties and other governmental action. Such circumstances could have a material adverse effect on Gryphon’s ability to continue as a going concern or to pursue its business model at all, which could have a material adverse effect on its business, prospects or operations and potentially the value of any cryptocurrencies Gryphon plans to hold or expect to acquire for its own account.

Gryphon’s business is dependent on a small number of digital asset mining equipment suppliers.

Gryphon’s business is dependent upon digital asset mining equipment suppliers providing an adequate supply of new generation digital asset mining machines at economical prices to customers intending to purchase its hosting and other solutions. The growth in Gryphon’s business is directly related to increased demand for hosting services and digital assets such as Bitcoin which is dependent in large part on the availability of new generation mining machines offered for sale at a price conducive to profitable digital asset mining, as well as the trading price of digital assets such as Bitcoin. The market price and availability of new mining machines fluctuates with the price of Bitcoin and can be volatile. Higher Bitcoin prices increase the demand for mining equipment and increases the cost. In addition, as more companies seek to enter the mining industry, the demand for machines may outpace supply and create mining machine equipment shortages. There are no assurances that digital asset mining equipment suppliers will be able to keep pace with any surge in demand for mining equipment. Further, manufacturing mining machine purchase contracts are not favorable to purchasers and Gryphon may have little or no recourse in the event a mining machine manufacturer defaults on its mining machine delivery commitments. If Gryphon and its customers are not able to obtain a sufficient number of digital asset mining machines at favorable prices, its growth expectations, liquidity, financial condition and results of operations will be negatively impacted.

Mining machines rely on components and raw materials that may be subject to price fluctuations or shortages, including ASIC chips that have been subject to an ongoing significant shortage.

In order to build and sustain Gryphon’s self-mining operations it will depend on third parties to provide it with ASIC chips and other critical components for its mining equipment, which may be subject to price fluctuations or shortages. For example, the ASIC chip is the key component of a mining machine as it determines the efficiency of the device. The production of ASIC chips typically requires highly sophisticated silicon wafers, which currently only a small number of fabrication facilities, or wafer foundries, in the world are capable of producing. Gryphon believes that the current microchip shortage that the entire industry is experiencing leads to price fluctuations and disruption in the supply of key miner components. Specifically, the ASIC chips have recently been subject to a significant price increases and shortages.

There is also a risk that a manufacturer or seller of ASIC chips or other necessary mining equipment may adjust the prices according to Bitcoin, other cryptocurrency prices or otherwise, so the cost of new machines could become unpredictable and extremely high. As a result, at times, Gryphon may be forced to obtain mining machines and other hardware at premium prices, to the extent they are even available. Such events could have a material adverse effect on Gryphon’s business, prospects, financial condition, and operating results.

The open-source structure of the Bitcoin network protocol means that the contributors to the protocol are generally not directly compensated for their contributions in maintaining and developing the protocol. A failure to properly monitor and upgrade the protocol could damage the Bitcoin network and an investment in Gryphon.

The Bitcoin network operates based on an open-source protocol maintained by contributors, largely on the Bitcoin Core project on GitHub. As an open-source project, Bitcoin is not represented by an official organization or authority. As the Bitcoin network protocol is not sold and its use does not generate revenues for contributors, contributors are generally not compensated for maintaining and updating the Bitcoin network protocol. The lack of guaranteed financial incentive for contributors to maintain or develop the Bitcoin network and the lack of guaranteed resources to adequately address emerging issues with the Bitcoin network may reduce incentives to address the issues adequately or in a timely manner. Changes to a digital asset network which Gryphon is mining on may adversely affect an investment in Gryphon.

The further development and acceptance of digital asset networks and other digital assets, which represent a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. The slowing or stopping of the development or acceptance of digital asset systems may adversely affect an investment in Gryphon.

The use of cryptocurrencies to, among other things, buy and sell goods and services and complete transactions, is part of a new and rapidly evolving industry that employs cryptocurrency assets, including Bitcoin, based upon a computer-generated mathematical and/or cryptographic protocol. Large-scale acceptance of Bitcoin as a means of payment has not, and may never, occur. The growth of this industry in general, and the use of Bitcoin in particular, is subject to a high degree of uncertainty, and the slowing or stopping of the development or acceptance of developing protocols may occur unpredictably. The factors include, but are not limited to:

•        continued worldwide growth in the adoption and use of Bitcoin as a medium to exchange;

•        governmental and quasi-governmental regulation of Bitcoin and its use, or restrictions on or regulation of access to and operation of the Bitcoin network or similar cryptocurrency systems;

•        changes in consumer demographics and public tastes and preferences;

•        the maintenance and development of the open-source software protocol of the network;

•        the increased consolidation of contributors to the Bitcoin blockchain through mining pools;

•        the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies;

•        the use of the networks supporting cryptocurrencies for developing smart contracts and distributed applications;

•        general economic conditions and the regulatory environment relating to cryptocurrencies; and

•        negative consumer sentiment and perception of Bitcoin specifically and cryptocurrencies generally.

The outcome of these factors could have negative effects on Gryphon’s ability to continue as a going concern or to pursue Gryphon’s business strategy at all, which could have a material adverse effect on Gryphon’s business, prospects or operations as well as potentially negative effect on the value of any Bitcoin that Gryphon mines or otherwise acquires or holds for Gryphon’s own account, which would harm investors.

Banks and financial institutions may not provide banking services, or may cut off services, to businesses that engage in Bitcoin-related activities or that accept Bitcoin as payment, including financial institutions of investors in Gryphon’s common stock.

A number of companies that engage in Bitcoin and/or other cryptocurrency-related activities have been unable to find banks or financial institutions that are willing to provide them with bank accounts and other services. Similarly, a number of companies and individuals or businesses associated with Bitcoin may have had and may continue to have their existing bank accounts closed or services discontinued with financial institutions in response to government action, particularly in China, where regulatory response to cryptocurrencies has been to exclude their use for ordinary consumer transactions within China. Gryphon also may be unable to obtain or maintain these services for Gryphon’s business. The difficulty that many businesses that provide Bitcoin and/or derivatives on other cryptocurrency-related activities have and may continue to have in finding banks and financial institutions willing to provide them services may be decreasing the usefulness of Bitcoin as a payment system and harming public perception of Bitcoin, and could decrease their usefulness and harm their public perception in the future.

The usefulness of Bitcoin as a payment system and the public perception of Bitcoin could be damaged if banks or financial institutions were to close the accounts of businesses engaging in Bitcoin and/or other cryptocurrency-related activities. This could occur as a result of compliance risk, cost, government regulation or public pressure. The risk applies to securities firms, clearance and settlement firms, national stock exchanges and commodities derivatives exchanges, the over-the-counter market, and the Depository Trust Company, which, if any of such entities adopts or implements similar policies, rules or regulations, could negatively affect Gryphon’s relationships with financial institutions and impede Gryphon’s ability to convert Bitcoin to fiat currencies. Such factors could have a material adverse effect on Gryphon’s ability to continue as a going concern or to pursue its strategy at all, which could have a material adverse effect on Gryphon’s business, prospects or operations and harm investors.

Gryphon faces risks of Internet disruptions, which could have an adverse effect on the price of Bitcoin.

A disruption of the Internet may affect the use of Bitcoin. Generally, Bitcoin and Gryphon’s business of mining Bitcoin is dependent upon the Internet. A significant disruption in Internet connectivity could disrupt a currency’s network operations until the disruption is resolved and have an adverse effect on the price of Bitcoin and Gryphon’s ability to mine Bitcoin.

The impact of geopolitical and economic events on the supply and demand for Bitcoin is uncertain.

Geopolitical crises may motivate large-scale purchases of Bitcoin and other cryptocurrencies, which could increase the price of Bitcoin and other cryptocurrencies rapidly. This may increase the likelihood of a subsequent price decrease as crisis-driven purchasing behavior dissipates, adversely affecting the value of Gryphon’s inventory following such downward adjustment. Such risks are similar to the risks of purchasing commodities in uncertain times, such as the risk of purchasing, holding or selling gold. Alternatively, as an emerging asset class with limited acceptance as a payment system or commodity, global crises and general economic downturns may discourage investment in Bitcoin as investors focus their investment on less volatile asset classes as a means of hedging their investment risk.

As an alternative to fiat currencies that are backed by central governments, Bitcoin, which is relatively new, is subject to supply and demand forces. How such supply and demand will be impacted by geopolitical events is largely uncertain but could be harmful to Gryphon. Political or economic crises may motivate large-scale acquisitions or sales of Bitcoin either globally or locally. Such events could have a material adverse effect on Gryphon’s ability to continue as a going concern or to pursue Gryphon’s new strategy at all, which could have a material adverse effect on Gryphon’s business, prospects or operations and potentially the value of any Bitcoin that Gryphon mines or otherwise acquires or holds for its own account.

The development of other cryptocurrencies and/or digital currencies may adversely affect the value of Bitcoin.

To the extent that other cryptocurrencies are introduced into the market, gain traction and are supported by the deployment of significant resources, the success of any such cryptocurrency could lead to a decrease in demand and the potential exclusion of existing cryptocurrencies, such as Bitcoin.

In addition, central banks in some countries have started to introduce digital forms of legal tender. Whether or not they incorporate blockchain or similar technology, central bank digital currencies as legal tender in the issuing jurisdiction could have an advantage in competing with, or replacing, Bitcoin and other cryptocurrencies as a medium of exchange or store of value. As a result, the value of Bitcoin could decrease, which could have a material adverse effect on Gryphon’s business, prospects, financial condition, and operating results.

Gryphon may not be able to compete with other companies, some of whom have greater resources and experience.

Gryphon may not be able to compete successfully against present or future competitors. Gryphon does not have the resources to compete with larger providers of similar services at this time. The Bitcoin industry has attracted various high-profile and well-established operators, some of which have substantially greater liquidity and financial resources than Gryphon does. With the limited resources Gryphon has available, Gryphon may experience great difficulties in expanding and improving its network of computers to remain competitive. Competition from existing and future competitors, particularly those that have access to competitively-priced energy, could result in Gryphon’s inability to secure acquisitions and partnerships that Gryphon may need to expand Gryphon’s business in the future. This competition from other entities with greater resources, experience and reputations may result in Gryphon’s failure to maintain or expand its business, as Gryphon may never be able to successfully execute its business plan. If Gryphon is unable to expand and remain competitive, its business could be negatively affected.

The mining data centers at which Gryphon maintains its mining equipment may experience damages, including damages that are not covered by insurance.

The mining data centers at which Gryphon maintains its mining equipment in Georgia, New York, and North Carolina are, and any future mining data centers at which Gryphon maintains its mining equipment will be, subject to a variety of risks relating to physical condition and operation, including:

•        the presence of construction or repair defects or other structural or building damage;

•        any non-compliance with or liabilities under applicable environmental, health or safety regulations or requirements or building permit requirements;

•        any damage resulting from natural disasters, such as hurricanes, earthquakes, fires, floods and windstorms; and

•        claims by employees and others for injuries sustained at Gryphon’s properties.

For example, the mining data centers at which Gryphon maintains its mining equipment could be rendered inoperable, temporarily or permanently, as a result of a fire or other natural disaster or by a terrorist or other attack on the facilities where Gryphon’s mining equipment are located. The security and other measures Gryphon takes to protect against these risks may not be sufficient. Any property insurance Gryphon obtained in the future may not be adequate to cover the losses Gryphon suffers as a result of any of these events. In the event of an uninsured loss, including a loss in excess of insured limits, at any of the mining data centers at which Gryphon maintains its mining equipment, such mining data centers may not be adequately repaired in a timely manner or at all and Gryphon may lose some or all of the future revenues anticipated to be derived from Gryphon’s equipment located at such mining data centers.

Acceptance and/or widespread use of Bitcoin is uncertain.

Currently, there is a relatively limited use of any Bitcoin in the retail and commercial marketplace. Banks and other established financial institutions may refuse to process funds for Bitcoin transactions, process wire transfers to or from Bitcoin exchanges, Bitcoin-related companies or service providers, or maintain accounts for persons or entities transacting in Bitcoin. Conversely, a significant portion of Bitcoin demand is generated by investors seeking a long-term store of value or speculators seeking to profit from the short- or long-term holding of the asset. Price volatility undermines Bitcoin’s role as a medium of exchange, as retailers are much less likely to accept it as a form of payment. Market capitalization for Bitcoin as a medium of exchange and payment method may always be low.

The relative lack of acceptance of Bitcoin in the retail and commercial marketplace, or a reduction of such use, limits the ability of end users to use them to pay for goods and services. Such lack of acceptance or decline in acceptances could have a material adverse effect on Gryphon’s ability to continue as a going concern or to pursue Gryphon’s strategy at all, which could have a material adverse effect on Gryphon’s business, prospects or operations and potentially the value of Bitcoin Gryphon mines or otherwise acquires or holds for its own account.

The decentralized nature of cryptocurrency systems may lead to slow or inadequate responses to crises, which may negatively affect Gryphon’s business.

The decentralized nature of the governance of cryptocurrency systems may lead to ineffective decision making that slows development or prevents a network from overcoming emergent obstacles. Governance of many cryptocurrency systems is by voluntary consensus and open competition with no clear leadership structure or authority. To the extent lack of clarity in corporate governance of the Bitcoin blockchain leads to ineffective decision making that slows development and growth of the Bitcoin network protocol, Gryphon’s business may be adversely affected.

It may be illegal now, or in the future, to acquire, own, hold, sell or use Bitcoin, ether, or other cryptocurrencies, participate in blockchains or utilize similar cryptocurrency assets in one or more countries, the ruling of which would adversely affect Gryphon.

As Bitcoin has grown in both popularity and market size, governments around the world have reacted differently to Bitcoin; certain governments have deemed them illegal, and others have allowed their use and trade without restriction, while in some jurisdictions, such as in the U.S., subject to extensive, and in some cases overlapping, unclear and evolving regulatory requirements. Until recently, little or no regulatory attention has been directed toward Bitcoin and the Bitcoin network by U.S. federal and state governments, foreign governments and self-regulatory agencies. As Bitcoin has grown in popularity and in market size, the Federal Reserve Board, U.S. Congress and certain U.S. agencies (e.g., the Commodity Futures Trading Commission, the SEC, FinCEN and the Federal Bureau of Investigation) have begun to examine the operations of the Bitcoin network, Bitcoin users and the Bitcoin exchange market.

One or more countries such as China and Russia, which have taken harsh regulatory action in the past, may take regulatory actions in the future that could severely restrict the right to acquire, own, hold, sell or use these cryptocurrency assets or to exchange for fiat currency. In many nations, particularly in China and Russia, it is illegal to accept payment in Bitcoin and other cryptocurrencies for consumer transactions and banking institutions are barred from accepting deposits of Bitcoin. Such restrictions may adversely affect Gryphon as the large-scale use of Bitcoin as a means of exchange is presently confined to certain regions globally. Such circumstances could have a material adverse effect on Gryphon’s ability to continue as a going concern or to pursue Gryphon’s strategy at all, which could have a material adverse effect on Gryphon’s business, prospects or operations and potentially the value of any Bitcoin that Gryphon mines or otherwise acquires or holds for its own account, and harm investors.

There is a lack of liquid markets, and possible manipulation of blockchain/cryptocurrency-based assets.

Cryptocurrencies that are represented and trade on a ledger-based platform may not necessarily benefit from viable trading markets. Stock exchanges have listing requirements and vet issuers, requiring them to be subjected to rigorous listing standards and rules, and monitor investors transacting on such platform for fraud and other improprieties. These conditions may not necessarily be replicated on a distributed ledger platform, depending on the platform’s controls and other policies. The laxer a distributed ledger platform is about vetting issuers of cryptocurrency assets or users that transact on the platform, the higher the potential risk for fraud or the manipulation of the ledger due to a control event. These factors may decrease liquidity or volume or may otherwise increase volatility of investment securities or other assets trading on a ledger-based system, which may adversely affect Gryphon. Such circumstances could have a material adverse effect on Gryphon’s ability to continue as a going concern or to pursue its strategy at all, which could have a material adverse effect on Gryphon business, prospects or operations and potentially the value of any Bitcoin that Gryphon mines or otherwise acquires or holds for its own account, and harm investors.

Gryphon’s operations, investment strategies and profitability may be adversely affected by competition from other methods of investing in Bitcoin.

Gryphon competes with other users and/or companies that are mining Bitcoin and other potential financial vehicles, including securities backed by or linked to Bitcoin through entities similar to Gryphon. Market and financial conditions, and other conditions beyond Gryphon’s control, may make it more attractive to invest in other financial vehicles, or to

invest in Bitcoin directly. The emergence of other financial vehicles and exchange-traded funds have been scrutinized by regulators and such scrutiny and the negative impressions or conclusions resulting from such scrutiny could be applicable to Gryphon and impact Gryphon’s ability to successfully pursue its strategy or operate at all, or to establish or maintain a public market for Gryphon’s securities. Such circumstances could have a material adverse effect on Gryphon’s ability to continue as a going concern or to pursue its strategy at all, which could have a material adverse effect on Gryphon’s business, prospects or operations and potentially the value of any Bitcoin that Gryphon mines or otherwise acquires or holds for its own account, and harm investors.

The development and acceptance of competing blockchain platforms or technologies may cause consumers to use alternative distributed ledgers or other alternatives.

The development and acceptance of competing blockchain platforms or technologies may cause consumers to use alternative distributed ledgers or an alternative to distributed ledgers altogether. Gryphon’s business utilizes presently existent digital ledgers and blockchains and Gryphon could face difficulty adapting to emergent digital ledgers, blockchains, or alternatives thereto. This may adversely affect Gryphon and Gryphon’s exposure to various blockchain technologies and prevent Gryphon from realizing the anticipated profits from its investments. Such circumstances could have a material adverse effect on Gryphon’s ability to continue as a going concern or to pursue Gryphon’s strategy at all, which could have a material adverse effect on its business, prospects or operations and potentially the value of any Bitcoin that Gryphon mines or otherwise acquires or holds for Gryphon’s own account, and harm investors.

Gryphon’s Bitcoin may be subject to loss, theft or restriction on access.

There is a risk that some or all of Gryphon’s Bitcoin could be lost or stolen. Cryptocurrencies are stored in cryptocurrency sites commonly referred to as “wallets” by holders of cryptocurrencies which may be accessed to exchange a holder’s cryptocurrency assets. Access to Gryphon’s Bitcoin assets could also be restricted by cybercrime (such as a denial of service attack) against a service at which Gryphon maintains a hosted hot wallet. A hot wallet refers to any cryptocurrency wallet that is connected to the Internet. Generally, hot wallets are easier to set up and access than wallets in cold storage, but they are also more susceptible to hackers and other technical vulnerabilities. Cold storage refers to any cryptocurrency wallet that is not connected to the Internet. Cold storage is generally more secure than hot storage, but is not ideal for quick or regular transactions and Gryphon may experience lag time in its ability to respond to market fluctuations in the price of Gryphon’s Bitcoin assets. Gryphon expects to hold all of its Bitcoin in a combination of insured institutional custody services and multisignature cold storage wallets, and maintain secure backups to reduce the risk of malfeasance, but the risk of loss of Gryphon’s Bitcoin assets cannot be wholly eliminated. Gryphon utilizes hot wallets on exchanges to liquidate daily mining rewards. Amounts held in hot wallets are limited to one day’s worth of revenue, to mitigate risk of loss. Any restrictions on access to Gryphon’s hot wallet accounts due to cybercrime or other reasons could limit Gryphon’s ability to convert Bitcoin to cash, potentially resulting in liquidity issues.

Hackers or malicious actors may launch attacks to steal, compromise or secure Bitcoin, such as by attacking the Bitcoin network source code, exchange miners, third-party platforms, cold and hot storage locations or software, or by other means. As Gryphon increases in size, it may become a more appealing target of hackers, malware, cyber-attacks or other security threats. Any of these events may adversely affect Gryphon’s operations and, consequently, Gryphon’s investments and profitability. The loss or destruction of a private key required to access Gryphon’s digital wallets may be irreversible and Gryphon may be denied access for all time to its Bitcoin holdings or the holdings of others held in those compromised wallets. Gryphon’s loss of access to its private keys or a data loss relating to Gryphon’s digital wallets could adversely affect Gryphon’s investments and assets.

Cryptocurrencies are controllable only by the possessor of both the unique public and private keys relating to the local or online digital wallet in which they are held, which wallet’s public key or address is reflected in the network’s public blockchain. Gryphon will publish the public key relating to digital wallets in use when Gryphon verifies the receipt of transfers and disseminate such information into the network, but Gryphon will need to safeguard the private keys relating to such digital wallets. To the extent such private keys are lost, destroyed or otherwise compromised, Gryphon will be unable to access its Bitcoin rewards and such private keys may not be capable of being restored by any network. Any loss of private keys relating to digital wallets used to store Gryphon’s Bitcoin could have a material adverse effect

on Gryphon’s ability to continue as a going concern or to pursue its new strategy at all, which could have a material adverse effect on Gryphon business, prospects or operations and potentially the value of any Bitcoin that Gryphon mines or otherwise acquires or holds for its own account.

Incorrect or fraudulent cryptocurrency transactions may be irreversible.

Cryptocurrency transactions are irrevocable and stolen or incorrectly transferred cryptocurrencies may be irretrievable. As a result, any incorrectly executed or fraudulent Bitcoin transactions could adversely affect Gryphon’s investments and assets. Cryptocurrency transactions are not, from an administrative perspective, reversible without the consent and active participation of the recipient of the cryptocurrencies from the transaction. In theory, Bitcoin transactions may be reversible with the control or consent of a majority of processing power on the Bitcoin network, however, Gryphon does not now, nor is it feasible that Gryphon could in the future, possess sufficient processing power to effect such a reversal. Once a transaction has been verified and recorded in a block that is added to a blockchain, an incorrect transfer of a cryptocurrency or a theft thereof generally will not be reversible and Gryphon may not have sufficient recourse to recover its losses from any such transfer or theft. It is possible that, through computer or human error, or through theft or criminal action, Gryphon’s cryptocurrency rewards could be transferred in incorrect amounts or to unauthorized third parties, or to uncontrolled accounts. Further, at this time, there is no specifically enumerated U.S. or foreign governmental, regulatory, investigative or prosecutorial authority or mechanism through which to bring an action or complaint regarding missing or stolen cryptocurrency. In the event of a loss, Gryphon would be reliant on existing private investigative entities to investigate any such loss of Gryphon’s Bitcoin assets. These third-party service providers rely on data analysis and compliance of Internet service providers with traditional court orders to reveal information such as the IP addresses of any attackers who may have targeted Gryphon. To the extent that Gryphon is unable to recover its losses from such action, error or theft, such events could have a material adverse effect on Gryphon’s ability to continue as a going concern or to pursue Gryphon’s new strategy at all, which could have a material adverse effect on Gryphon’s business, prospects or operations of and potentially the value of any Bitcoin that Gryphon mines or otherwise acquires or holds for its own account.

Gryphon’s interactions with a blockchain may expose Gryphon to specially designated nationals or blocked persons or cause Gryphon to violate provisions of law that did not contemplate distributed ledger technology.

The Office of Financial Assets Control of the U.S. Department of Treasury (“OFAC”) requires Gryphon to comply with its sanction program and not conduct business with persons named on its specially designated nationals list. However, because of the pseudonymous nature of blockchain transactions, Gryphon may inadvertently and without Gryphon’s knowledge engage in transactions with persons named on OFAC’s specially designated nationals list. Gryphon’s policy prohibits any transactions with such specially designated national individuals, but Gryphon may not be adequately capable of determining the ultimate identity of the individual with whom Gryphon transacts with respect to selling Bitcoin assets. Moreover, federal law prohibits any U.S. person from knowingly or unknowingly possessing any visual depiction commonly known as child pornography. Recent media reports have suggested that persons have imbedded such depictions on one or more blockchains. Because Gryphon’s business requires it to download and retain one or more blockchains to effectuate Gryphon’s ongoing business, it is possible that such digital ledgers contain prohibited depictions without Gryphon’s knowledge or consent. To the extent government enforcement authorities literally enforce these and other laws and regulations that are impacted by decentralized distributed ledger technology, Gryphon may be subject to investigation, administrative or court proceedings, and civil or criminal monetary fines and penalties, all of which could harm Gryphon’s reputation.

Cryptocurrencies including Bitcoin face significant scaling obstacles that can lead to high fees or slow transaction settlement times.

Cryptocurrencies face significant scaling obstacles that can lead to high fees or slow transaction settlement times, and attempts to increase the volume of transactions may not be effective. Scaling cryptocurrencies is essential to the widespread acceptance of cryptocurrencies as a means of payment, which widespread acceptance is necessary to the continued growth and development of Gryphon’s business. Many cryptocurrency networks, including the Bitcoin network, face significant scaling challenges. For example, cryptocurrencies are limited with respect to how many transactions can occur per second. Participants in the cryptocurrency ecosystem debate potential approaches to increasing the average number of transactions per second that the network can handle and have implemented mechanisms or are researching ways to increase scale, such as increasing the allowable sizes of blocks, and therefore the number of transactions per block, and sharding (a horizontal partition of data in a database or search engine),

which would not require every single transaction to be included in every single miner’s or validator’s block. However, there is no guarantee that any of the mechanisms in place or being explored for increasing the scale of settlement of cryptocurrency and, specifically, Bitcoin transactions will be effective, or how long they will take to become effective, which could adversely affect Gryphon’s business.

The price of Bitcoin may be affected by the sale of Bitcoin by other vehicles investing in Bitcoin or tracking Bitcoin markets.

The global market for Bitcoin is characterized by supply constraints that differ from those present in the markets for commodities or other assets such as gold and silver. The mathematical protocols under which Bitcoin is mined permit the creation of a limited, predetermined amount of currency, while others have no limit established on total supply. To the extent that other vehicles investing in Bitcoin or tracking Bitcoin markets form and come to represent a significant proportion of the demand for Bitcoin, large redemptions of the securities of those vehicles and the subsequent sale of Bitcoin by such vehicles could negatively affect Bitcoin prices and therefore affect the value of the Bitcoin inventory Gryphon holds. Such events could have a material adverse effect on Gryphon’s ability to continue as a going concern or to pursue Gryphon’s new strategy at all, which could have a material adverse effect on Gryphon’s business, prospects or operations and potentially the value of any Bitcoin that Gryphon mines or otherwise acquires or holds for its own account.

Since there has been limited precedent set for financial accounting or taxation of digital assets other than digital securities, it is unclear how Gryphon will be required to account for digital asset transactions and the taxation of Gryphon’s businesses.

There is currently no authoritative literature under accounting principles generally accepted in the United States which specifically addresses the accounting for digital assets, including digital currencies. Therefore, by analogy, Gryphon intends to record digital assets similar to financial instruments under ASC 825, Financial Instruments, because the economic nature of these digital assets is most closely related to a financial instrument such as an investment in a foreign currency.

Gryphon believes that it will recognize revenue when it is realized or realizable and earned. Gryphon’s material revenue stream is expected to be related to the mining of digital currencies. Gryphon will derive revenue by providing transaction verification services within the digital currency network of Bitcoin, commonly termed “cryptocurrency mining.” In consideration for these services, Gryphon expects to receive digital currency in the form of Bitcoins. Bitcoins are generally recorded as revenue, using the spot price of the prominent exchange at the time of daily reward. The Bitcoins are recorded on the balance sheet at their cost basis and are reviewed for impairment annually. Gains or losses on sale of Bitcoins are recorded in the statement of operations. Expenses associated with running the cryptocurrency mining business, such as equipment depreciation, rent and electricity cost are recorded as cost of revenues.

A change in regulatory or financial accounting standards or interpretation by the U.S. Internal Revenue Service (“IRS”) or accounting standards of the SEC could result in changes in Gryphon’s accounting treatment, taxation and the necessity to restate Gryphon’s financial statements. Such a restatement could negatively impact Gryphon’s business, prospects, financial condition and results of operation.

There are risks related to technological obsolescence, the vulnerability of the global supply chain to Bitcoin hardware disruption, and difficulty in obtaining new hardware which may have a negative effect on Gryphon’s business.

Gryphon’s mining operations can only be successful and ultimately profitable if the costs of mining Bitcoin, including hardware and electricity costs, associated with mining Bitcoin are lower than the price of a Bitcoin. As Gryphon’s mining facility operates, Gryphon’s miners experience ordinary wear and tear, and may also face more significant malfunctions caused by a number of extraneous factors beyond Gryphon’s control. The physical degradation of Gryphon’s miners will require Gryphon to, over time, replace those miners which are no longer functional. Additionally, as the technology evolves, Gryphon may be required to acquire newer models of miners to remain competitive in the market.

Also, because Gryphon expects to depreciate all new miners, Gryphon’s reported operating results will be negatively affected. Further, the global supply chain for Bitcoin miners is presently heavily dependent on China, which has been severely affected by the emergence of the COVID-19 coronavirus global pandemic. The global reliance on China as a main supplier of Bitcoin miners has been called into question in the wake of the COVID-19 pandemic and China’s ban on cryptocurrency mining and trading in 2021. Should similar outbreaks or other disruptions to the China-based global supply chain for Bitcoin hardware occur, Gryphon may not be able to obtain adequate replacement parts for Gryphon’s existing miners or to obtain additional miners from the manufacturer on a timely basis. Such events could have a material adverse effect on Gryphon’s ability to pursue Gryphon’s new strategy, which could have a material adverse effect on Gryphon’s business.

Gryphon may not adequately respond to price fluctuations and rapidly changing technology, which may negatively affect Gryphon’s business.

Competitive conditions within the Bitcoin industry require that Gryphon use sophisticated technology in the operation of Gryphon’s business. The industry for blockchain technology is characterized by rapid technological changes, new product introductions, enhancements and evolving industry standards. New technologies, techniques or products could emerge that might offer better performance than the software and other technologies Gryphon currently utilizes, and Gryphon may have to manage transitions to these new technologies to remain competitive. Gryphon may not be successful, generally or relative to Gryphon’s competitors in the Bitcoin industry, in timely implementing new technology into Gryphon’s systems, or doing so in a cost-effective manner. During the course of implementing any such new technology into Gryphon’s operations, Gryphon may experience system interruptions and failures during such implementation. Furthermore, there can be no assurances that Gryphon will recognize, in a timely manner or at all, the benefits that Gryphon may expect as a result of implementing new technology into its operations. As a result, Gryphon’s business and operations may suffer.

The Bitcoin reward for successfully uncovering a block will halve several times in the future and Bitcoin value may not adjust to compensate Gryphon for the reduction in the rewards Gryphon receives from its mining efforts.

Halving is a process designed to control the overall supply and reduce the risk of inflation in cryptocurrencies using a Proof-of-Work consensus algorithm. At a predetermined block, the mining reward is cut in half, hence the term “halving.” For Bitcoin, the reward was initially set at 50 Bitcoin currency rewards per block and this was cut in half to 25 on November 28, 2012 at block 210,000, then again to 12.5 on July 9, 2016 at block 420,000. The most recent halving for Bitcoin happened on May 11, 2020 at block 630,000 and the reward reduced to 6.25. The next halving will likely occur in 2024. This process will reoccur until the total amount of Bitcoin currency rewards issued reaches 21 million, which is expected around 2140. While Bitcoin price has had a history of price fluctuations around the halving of its rewards, there is no guarantee that the price change will be favorable or would compensate for the reduction in mining reward. If a corresponding and proportionate increase in the trading price of Bitcoin or a proportionate decrease in mining difficulty does not follow these anticipated halving events, the revenue Gryphon earns from its Bitcoin mining operations would see a corresponding decrease, which would have a material adverse effect on Gryphon’s business and operations.

Gryphon’s future success will depend upon the value of Bitcoin; the value of Bitcoin may be subject to pricing risk and has historically been subject to wide swings.

Gryphon’s operating results depend on the value of Bitcoin because it is the only cryptocurrency that Gryphon mines. Specifically, Gryphon’s revenues from its Bitcoin mining operations are based on two factors: (1) the number of Bitcoin rewards Gryphon successfully mines and (2) the value of Bitcoin. In addition, Gryphon’s operating results are directly impacted by changes in the value of Bitcoin, because under the value measurement model, both realized and unrealized changes will be reflected in Gryphon’s statement of operations (i.e., Gryphon will be marking Bitcoin to fair value each quarter). This means that Gryphon’s operating results will be subject to swings based upon increases or decreases in the value of Bitcoin. Further, Gryphon’s current application-specific integrated circuit, or ASIC, machines (which Gryphon refers to as “miners”) are principally utilized for mining Bitcoin and cannot mine other cryptocurrencies, such as ether, that are not mined utilizing the “SHA-256 algorithm.” If other cryptocurrencies were to achieve acceptance at the expense of Bitcoin causing the value of Bitcoin to decline, or if Bitcoin were to switch its proof of work algorithm from SHA-256 to another algorithm for which Gryphon’s miners are not specialized, or the value of Bitcoin were to decline for other reasons, particularly if such decline were significant or over an extended

period of time, Gryphon’s operating results would be adversely affected, and there could be a material adverse effect on Gryphon’s ability to continue as a going concern or to pursue Gryphon’s new strategy at all, which could have a material adverse effect on Gryphon’s business, prospects or operations, and harm investors.

Bitcoin market prices, which have historically been volatile and are impacted by a variety of factors (including those discussed below), are determined primarily using data from various exchanges, over-the-counter markets and derivative platforms. Furthermore, such prices may be subject to factors such as those that impact commodities, more so than business activities, which could be subjected to additional influence from fraudulent or illegitimate actors, real or perceived scarcity, and political, economic, regulatory or other conditions. Pricing may be the result of, and may continue to result in, speculation regarding future appreciation in the value of Bitcoin, inflating and making its market prices more volatile or creating “bubble” type risks for Bitcoin.

Gryphon may not be able to realize the benefits of forks. Forks in a digital asset network may occur in the future which may affect the value of Bitcoin held by Gryphon.

To the extent that a significant majority of users and miners on a cryptocurrency network install software that changes the cryptocurrency network or properties of a cryptocurrency, including the irreversibility of transactions and limitations on the mining of new cryptocurrency, the cryptocurrency network would be subject to new protocols and software. However, if less than a significant majority of users and miners on the cryptocurrency network consent to the proposed modification, and the modification is not compatible with the software prior to its modification, the consequence would be what is known as a “fork” of the network, with one prong running the pre-modified software and the other running the modified software. The effect of such a fork would be the existence of two versions of the cryptocurrency running in parallel, yet lacking interchangeability and necessitating exchange-type transactions to convert currencies between the two forks. Additionally, it may be unclear following a fork which fork represents the original asset and which is the new asset. Different metrics adopted by industry participants to determine which is the original asset include: referring to the wishes of the core developers of a cryptocurrency, blockchains with the greatest amount of hashing power contributed by miners or validators, or blockchains with the longest chain. A fork in the Bitcoin network could adversely affect Gryphon’s ability to operate.

Gryphon may not be able to realize the economic benefit of a fork, either immediately or ever, which could adversely affect Gryphon’s business. If Gryphon holds Bitcoin at the time of a hard fork into two cryptocurrencies, industry standards would dictate that Gryphon would be expected to hold an equivalent amount of the old and new assets following the fork. However, Gryphon may not be able, or it may not be practical, to secure or realize the economic benefit of the new asset for various reasons. For instance, Gryphon may determine that there is no safe or practical way to custody the new asset, that trying to do so may pose an unacceptable risk to Gryphon’s holdings in the old asset, or that the costs of taking possession and/or maintaining ownership of the new cryptocurrency exceed the benefits of owning the new cryptocurrency. Additionally, laws, regulations or other factors may prevent Gryphon from benefitting from the new asset even if there is a safe and practical way to custody and secure the new asset.

There is a possibility of Bitcoin mining algorithms transitioning to proof of stake validation and other mining related risks, which could make Gryphon less competitive and ultimately adversely affect Gryphon’s business.

Proof of stake is an alternative method in validating Bitcoin transactions. Should the algorithm shift from a proof of work validation method to a proof of stake method, mining would require less energy and may render any company that maintains advantages in the current climate (for example, from lower priced electricity, processing, real estate, or hosting) less competitive. Gryphon, as a result of its efforts to optimize and improve the efficiency of its Bitcoin mining operations, may be exposed to the risk in the future of losing the benefit of Gryphon’s capital investments and the competitive advantage Gryphon hopes to gain from this as a result, and may be negatively impacted if a switch to proof of stake validation were to occur. Such events could have a material adverse effect on Gryphon’s ability to continue as a going concern or to pursue its new strategy at all, which could have a material adverse effect on Gryphon’s business, prospects or operations and potentially the value of any Bitcoin that Gryphon mines or otherwise acquires or holds for its own account.

If a malicious actor or botnet obtains control in excess of 50% of the processing power active on any digital asset network, including the Bitcoin network, it is possible that such actor or botnet could manipulate the blockchain in a manner that adversely affects an investment in Gryphon.

If a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) obtains a majority of the processing power dedicated to mining on any digital asset network, including the Bitcoin network, it may be able to alter the blockchain by constructing alternate blocks if it is able to solve for such blocks faster than the remainder of the miners on the blockchain can add valid blocks. In such alternate blocks, the malicious actor or botnet could control, exclude or modify the ordering of transactions, though it could not generate new digital assets or transactions using such control. Using alternate blocks, the malicious actor could “double-spend” its own digital assets (i.e., spend the same digital assets in more than one transaction) and prevent the confirmation of other users’ transactions for so long as it maintains control. To the extent that such malicious actor or botnet does not yield its majority control of the processing power or the digital asset community does not reject the fraudulent blocks as malicious, reversing any changes made to the blockchain may not be possible. Such changes could adversely affect an investment in Gryphon.

For example, in late May and early June 2014, a mining pool known as GHash.io approached and, during a 24- to 48-hour period may have exceeded, the threshold of 50% of the processing power on the Bitcoin network. To the extent that GHash.io did exceed 50% of the processing power on the network, reports indicate that such threshold was surpassed for only a short period, and there are no reports of any malicious activity or control of the blockchain performed by GHash.io. Furthermore, the processing power in the mining pool appears to have been redirected to other pools on a voluntary basis by participants in the GHash.io pool, as had been done in prior instances when a mining pool exceeded 40% of the processing power on the Bitcoin network.

The approach towards and possible crossing of the 50% threshold indicate a greater risk that a single mining pool could exert authority over the validation of digital asset transactions. To the extent that the digital assets ecosystems do not act to ensure greater decentralization of digital asset mining processing power, the feasibility of a malicious actor obtaining in excess of 50% of the processing power on any digital asset network (e.g., through control of a large mining pool or through hacking such a mining pool) will increase, which may adversely impact an investment in Gryphon.

Cryptocurrencies, including those maintained by or for Gryphon, may be exposed to cybersecurity threats and hacks.

As with any computer code generally, flaws in cryptocurrency codes, including Bitcoin codes, may be exposed by malicious actors. Several errors and defects have been found previously, including those that disabled some functionality for users and exposed users’ information. Exploitations of flaws in the source code that allow malicious actors to take or create money have previously occurred. Despite Gryphon’s efforts and processes to prevent breaches, Gryphon’s devices, as well as Gryphon’s miners, computer systems and those of third parties that Gryphon uses in its operations, are vulnerable to cybersecurity risks, including cyberattacks such as viruses and worms, phishing attacks, denial-of-service attacks, physical or electronic break-ins, employee theft or misuse, and similar disruptions from unauthorized tampering with Gryphon’s miners and computer systems or those of third parties that Gryphon uses in its operations. Such events could have a material adverse effect Gryphon’s business, prospects or operations and potentially the value of any Bitcoin that Gryphon mines or otherwise acquires or holds for its own account.

If the Bitcoin reward for solving blocks and transaction fees, is not sufficiently high, Gryphon may not have an adequate incentive to continue mining and may cease mining operations, which will likely lead to Gryphon’s failure to achieve profitability.

As the number of Bitcoin rewards awarded for solving a block in a blockchain decreases, Gryphon’s ability to achieve profitability worsens. Decreased use and demand for Bitcoin rewards may adversely affect Gryphon’s incentive to expend processing power to solve blocks. If the award of Bitcoin rewards for solving blocks and transaction fees are not sufficiently high, Gryphon or other miners may not have an adequate incentive to continue mining and may cease mining operations. Miners ceasing operations would reduce the collective processing power on the network, which would adversely affect the confirmation process for transactions (i.e., temporarily decreasing the speed at which blocks are added to a blockchain until the next scheduled adjustment in difficulty for block solutions) and make the Bitcoin network more vulnerable to a malicious actor or botnet obtaining control in excess of 50 percent of the processing power active on a blockchain, potentially permitting such actor or botnet to manipulate a blockchain in a manner that

adversely affects Gryphon’s activities. A reduction in confidence in the confirmation process or processing power of the network could result and be irreversible. Such events could have a material adverse effect on Gryphon’s business, prospects or operations and potentially the value of any Bitcoin that Gryphon mines or otherwise acquires or holds for its own account.

Transaction fees may decrease demand for Bitcoin and prevent expansion that could adversely impact an investment in Gryphon.

As the number of Bitcoins awarded for solving a block in a blockchain decreases, the incentive for miners to continue to contribute to the Bitcoin network may transition from a set reward to transaction fees. In order to incentivize miners to continue to contribute to the Bitcoin network, the Bitcoin network may either formally or informally transition from a set reward to transaction fees earned upon solving a block. This transition could be accomplished by miners independently electing to record in the blocks they solve only those transactions that include payment of a transaction fee. If transaction fees paid for Bitcoin transactions become too high, the marketplace may be reluctant to accept Bitcoin as a means of payment and existing users may be motivated to switch from Bitcoin to another cryptocurrency or to fiat currency. Either the requirement from miners of higher transaction fees in exchange for recording transactions in a blockchain or a software upgrade that automatically charges fees for all transactions may decrease demand for Bitcoin and prevent the expansion of the Bitcoin network to retail merchants and commercial businesses, resulting in a reduction in the price of Bitcoin that could adversely impact Gryphon’s business. Decreased use and demand for Bitcoins that Gryphon has accumulated may adversely affect their value and may adversely impact an investment in Gryphon.

Gryphon’s business, results of operations, and financial condition may be impacted by the recent coronavirus (COVID-19) outbreak.

With respect to the ongoing and evolving coronavirus (COVID-19) outbreak, which was designated as a pandemic by the World Health Organization on March 11, 2020, the outbreak has caused substantial disruption in international and U.S. economies and markets. The outbreak has potential to have an adverse impact on the digital mining industry and, if repercussions of the outbreak are prolonged, could have a significant adverse impact on Gryphon’s business, which could be material. Gryphon’s management cannot at this point estimate the impact of the outbreak on Gryphon’s business and no provision for this outbreak is reflected in the accompanying financial statements.

Risks Related to the Ownership of Sphere 3D Common Shares

The market price of Sphere 3D common shares is volatile.

The market price for Sphere 3D common shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond Sphere 3D’s control, including the following:

•        price and volume fluctuations in the overall stock market from time to time;

•        volatility in the market prices and trading volumes of technology stocks;

•        changes in operating performance and stock market valuations of other technology companies generally, or those in Sphere 3D’s industry in particular;

•        future capital raising activities;

•        sales of common shares by holders thereof or by Sphere 3D;

•        failure of securities analysts to maintain coverage of Sphere 3D, changes in financial estimates by securities analysts who follow Sphere 3D, or Sphere 3D’s failure to meet these estimates or the expectations of investors;

•        the financial projections Sphere 3D may provide to the public, any changes in those projections or Sphere 3D’s failure to meet those projections;

•        market acceptance of Sphere 3D’s products and technologies;

•        announcements by Sphere 3D or its competitors of new products or services;

•        the public’s reaction to Sphere 3D’s press releases, other public announcements and filings with the SEC and the applicable Canadian securities regulatory authorities;

•        rumors and market speculation involving Sphere 3D or other companies in Sphere 3D’s industry;

•        actual or anticipated changes in Sphere 3D’s operating results or fluctuations in Sphere 3D’s operating results;

•        actual or anticipated developments in Sphere 3D’s business, Sphere 3D’s competitors’ businesses or the competitive landscape generally;

•        litigation involving Sphere 3D, Sphere 3D’s industry or both, or investigations by regulators into Sphere 3D’s operations or those of Sphere 3D’s competitors;

•        developments or disputes concerning Sphere 3D’s intellectual property or other proprietary rights;

•        announced or completed acquisitions of businesses or technologies by Sphere 3D or its competitors;

•        new laws or regulations or new interpretations of existing laws or regulations applicable to Sphere 3D and its business;

•        changes in accounting standards, policies, guidelines, interpretations or principles;

•        any significant change in Sphere 3D’s executive officers and other key personnel or board of directors;

•        general economic conditions and slow or negative growth of Sphere 3D’s markets;

•        release of transfer restrictions on certain outstanding common shares; and

•        news reports relating to trends, concerns or competitive developments, regulatory changes and other related issues in Sphere 3D’s industry or target markets.

Financial markets may experience price and volume fluctuations that affect the market prices of equity securities of companies and that are unrelated to the operating performance, underlying asset values or prospects of such companies. Accordingly, the market price of Sphere 3D common shares may decline even if Sphere 3D’s operating results, underlying asset values or prospects have not changed. As well, certain institutional investors may base their investment decisions on consideration of Sphere 3D’s governance and social practices and performance against such institutions’ respective investment guidelines and criteria, and failure to meet such criteria may result in a limited or no investment in Sphere 3D common shares by those institutions, which could adversely affect the trading price of Sphere 3D common shares. There can be no assurance that fluctuations in price and volume will not occur due to these and other factors.

In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. Sphere 3D may in the future be a target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention from day-to-day operations and consume resources, such as cash. In addition, the resolution of those matters may require Sphere 3D to issue additional common shares, which could potentially result in dilution to Sphere 3D’s existing shareholders. Expenses incurred in connection with these matters (which include fees of lawyers and other professional advisors and potential obligations to indemnify officers and directors who may be parties to such actions) could adversely affect Sphere 3D’s cash position.

Sphere 3D must comply with the financial reporting requirements of a public company, as well as other requirements associated with being listed on NASDAQ.

Sphere 3D is subject to reporting and other obligations under applicable Canadian securities laws, SEC rules and the rules of the NASDAQ Capital Market. These reporting and other obligations, including National Instrument 52-102 — Continuous Disclosure Obligations and National Instrument 52-109 — Certification of Disclosure in Issuers’ Annual and Interim Filings, place significant demands on Sphere 3D’s management, administrative, operational and accounting resources. Moreover, any failure to maintain effective internal controls could cause Sphere 3D to fail to meet Sphere 3D’s reporting obligations or result in material misstatements in Sphere 3D’s consolidated

financial statements. If Sphere 3D cannot provide reliable financial reports or prevent fraud, Sphere 3D’s reputation and operating results could be materially harmed, which could also cause investors to lose confidence in Sphere 3D’s reported financial information, which could result in a lower trading price of Sphere 3D common shares.

Management does not expect that Sphere 3D’s disclosure controls and procedures and internal controls over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that its objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within a company are detected. The inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Controls can also be circumvented by individual acts of some persons, by collusion of two or more people or by management override of the controls. Due to the inherent limitations in a cost-effective control system, misstatements due to error, or fraud may occur and not be detected.

Sphere 3D could lose its “foreign private issuer” status in the future, which could result in significant additional regulatory costs and expenses to Sphere 3D.

In order to maintain Sphere 3D’s current status as a “foreign private issuer” (as defined in Rule 405 under the United States Securities Act of 1933), where more than 50% of Sphere 3D’s outstanding voting securities are directly or indirectly owned by residents of the United States, Sphere 3D must not have any of the following: (i) a majority of Sphere 3D’s executive officers or directors being U.S. citizens or residents, (ii) more than 50% of Sphere 3D’s assets being located in the United States, or (iii) Sphere 3D’s business being principally administered in the United States. If Sphere 3D were to lose its foreign private issuer status:

•        Sphere 3D would no longer be exempt from certain of the provisions of U.S. securities laws, such as Regulation FD and the Section 16 short swing profit rules;

•        Sphere 3D would be required to commence reporting on forms required of U.S. companies, such as Forms l0-K, 10-Q and 8-K, rather than the forms currently available to Sphere 3D, such as Forms 20-F and 6-K;

•        Sphere 3D would be subject to additional restrictions on offers and sales of securities outside the United States, including in Canada;

•        Sphere 3D might lose the ability to rely upon exemptions from the NASDAQ corporate governance requirements that are available to foreign private issuers; and

•        if Sphere 3D engages in capital raising activities after losing Sphere 3D’s foreign private issuer status, there is a higher likelihood that investors may require Sphere 3D to file resale registration statements with the SEC as a condition to any such financing.

Sphere 3D may be treated as a Passive Foreign Investment Company.

There is also an ongoing risk that Sphere 3D may be treated as a Passive Foreign Investment Company (“PFIC”), for U.S. federal income tax purposes. A non-U.S. corporation generally will be considered to be a PFIC for any taxable year in which 75% or more of its gross income is passive income, or 50% or more of the value, determined on the basis of a quarterly average, of its gross assets are considered “passive assets” (generally, assets that generate passive income). Passive income generally includes dividends, interest, royalties, rents (other than certain rents and royalties derived in the active conduct of a trade or business), annuities and gains from assets that produce passive income. Cash is a passive asset for PFIC purposes, even if held as working capital. This determination is highly factual, and will depend upon, among other things, Sphere 3D’s market valuation and future financial performance. Based on the composition of Sphere 3D’s income and assets, Sphere 3D believes that it was not be a PFIC for its tax years ended December 31, 2020 and 2019, and based on current business plans and financial expectations, Sphere 3D expects that it will not be a PFIC for its tax year ending December 31, 2021 and for the foreseeable future. This conclusion is a factual determination, however, that is made annually and thus may be subject to change. Because PFIC status is determined based on the composition of Sphere 3D’s income and assets annually and generally cannot be determined until the end of the taxable year, there can be no assurance that Sphere 3D will not be a PFIC for the current taxable year or any future taxable year.

If Sphere 3D were to be classified as a PFIC for any future taxable year, a U.S. Holder (defined below in “Certain Material U.S. Federal Income Tax Considerations”) will generally be subject to additional taxes and interest charges on the gain from a sale of common shares of Sphere 3D, and upon receipt of an “excess distribution” with respect to the common shares of Sphere 3D. In general, a U.S. Holder would receive an “excess distribution” if the amount of any distribution for U.S. federal income tax purposes in respect of the common shares of Sphere 3D were more than 125 percent of the average distributions made with respect to such common shares within the three preceding taxable years (or shorter period if such U.S. Holder held the shares for a shorter period). A U.S. Holder of a PFIC generally may mitigate these adverse U.S. federal income tax consequences by making a “qualified electing fund” election or a “mark-to-market” election. However, there is no assurance that Sphere 3D would provide information that would enable a U.S. Holder to make a qualified electing fund election. U.S. owners of common shares of Sphere 3D should consult their own U.S. tax advisors regarding the potential application of the PFIC rules. See the section entitled “Material United States and Canadian Income Tax Considerations — Material U.S. Federal Income Taxation Considerations — Passive Foreign Investment Company Consequences” below.

Future sales of common shares by directors, officers and other shareholders could adversely affect the prevailing market price for Sphere 3D common shares.

Subject to compliance with applicable securities laws, officers, directors and other shareholders and their respective affiliates may sell some or all of their common shares in the future. No prediction can be made as to the effect, if any, such future sales will have on the market price of Sphere 3D common shares prevailing from time to time. However, the future sale of a substantial number of Sphere 3D common shares by Sphere 3D’s officers, directors and other shareholders and their respective affiliates, or the perception that such sales could occur, could adversely affect prevailing market prices for Sphere 3D common shares.

Sphere 3D may issue an unlimited number of common shares. Future sales of common shares will dilute your shares.

Sphere 3D’s Articles permit the issuance of an unlimited number of common shares, and shareholders will have no pre-emptive rights in connection with such further issuances. The directors of Sphere 3D have the discretion to determine the price and the terms of issue of further issuances of common shares in accordance with applicable laws.