Company: ANY
Filing Date: 2025-03-28
Form Type: 10-K
Source: 0001628280-25-015457
Chunk: 90

Company: Sphere 3D Corp.
Filing Date: 2025-03-28
Form: 10-K
Item: Item 8
Chunk 90
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 Mining Revenue

As disclosed in Note 2 to the consolidated financial statements, the Company accounts for revenue in accordance with Topic 606, Revenue from Contracts with Customers. The Company provides a service to perform hash calculations to third-party operated mining pools and in exchange for providing the service, the Company earns non-cash consideration in the form of bitcoin based on the Full-Pay-Per-Share (“FPPS”) payout method set forth by the mining pool operators. Bitcoin mining revenue is comprised of the block reward and transaction fees earned by the Company net of the mining pool fees charged by the mining pool operators. During the years ended December 31, 2024 and 2023, the Company recognized bitcoin mining revenue of approximately $16.6 million and $19.7 million, respectively.

We identified the auditing of mining revenue as a critical audit matter due to the nature and extent of audit effort required to perform audit procedures over the Company’s hash calculation service provided to the mining pool operators, the associated contractual payouts including the blockchain contractual inputs, the Company’s valuation of bitcoin received from the mining pool operators and evaluating the results of those procedures.

The primary procedures we performed to address this critical audit matter included the following:

•We independently confirmed with mining pool operators the significant contractual terms utilized in the determination of mining revenue, total mining rewards earned by the Company, and the Company’s digital asset wallet addresses in which the rewards are deposited.

•Using the Company’s digital asset wallet addresses confirmed by the mining pool operators, we reconciled the mining revenue earned from and paid by the mining pool operators against on-chain transactions independently obtained from the blockchain.

•We evaluated the reasonableness of the prices utilized by the Company to value bitcoin by obtaining independent bitcoin prices and comparing those to the prices used by the Company.

•We recalculated the Company’s recorded mining revenue per the calculation prescribed in the FPPS payout method, based on the hash calculation service provided to the mining pool operators, using independently obtained blockchain contractual inputs and independent bitcoin prices.

•We undertook an analytical review of total bitcoin mining revenue expected to be recognized by the Company by assessing the total hash rate contributed onto the network by the Company against total block rewards and transaction fees issued over the year.

•For the mining revenue generated through colocation facilities, we developed an expectation for the hash rate provided to the mining pool operators and the mining revenue earned, and compared our expectation to the amount recorded by the Company.

/s/ MaloneBailey, LLP

www.malonebailey.com

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