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Summary

  • Hype at its best. Sphere 3D's bought-and-paid-for promotions artificially kick the stock price over the moon.
  • Currently no real commercial product, though Sphere 3D has been at it about five years now.
  • No organic sales. The company pays dearly to claim an acquisition’s puny sales as its own.
  • Looming options and warrants poised to hit the market.
  • Large salaries for inexperienced execs, little money, big cash burn with a need to burn multi-millions more. We believe it’s all too clear - dilution is imminent.

By Sonya Colberg, Senior Investigative Reporter

From its rocky beginnings as a fake mining company to its absurd overpayment for a little two-man shop, Sphere 3D Corp. (SPIHF) (ANY.V) has signaled the true meaning of the "D" in its name: "Deep six" this stock before it's too late.

The Canadian technology company has gone screaming into the stratosphere. The stock smashed new 52-week highs five times in three months and is trading on the TSXV Canadian exchange as "ANY.V." Now at around $9, the stock is also listed on the alternative trading system OTCQB as "SPIHF."

But research by TheStreetSweeper indicates all the screaming will soon be done by ANY.V investors pushing and shoving and galloping for the exits.

What's behind all the recent excitement surrounding the stock of a company that reported zero revenue last year? Blatant, baseless promotions by a company desperate to get listed on the NASDAQ's subsidiary OMX. Additionally, retail investors anticipate that ANY.V's earnings report later this month might finally show some commercial revenue for its emulation and virtualization product. The patent-pending technology is designed to make applications run on a cell phone, iPad or other device as easily as they run on a person's computer at home or work.

But disaster lurks. And here's how TheStreetSweeper sees it breaking out:

· Hype at its best. Bought-and-paid-for promotions artificially kick the stock price over the moon.

· Currently no real commercial product.

· No organic sales. ANY.V pays dearly to claim an acquisition's puny sales as its own.

· Looming options and warrants poised to hit the market.

· Large salaries for inexperienced execs, little money, big cash burn with a need to burn multi-millions more. We believe it's all too clear - dilution is imminent.

TheStreetSweeper has requested an interview but ANY.V has not responded.

SUPREME HYPE

ANY.V proudly links to not one - not two - not six - but nine articles in How to Find Big Stocks. These promos of ANY.V seem just a little like the kind of material sent out by Jonathon Lebed, a stock promoter and newsletter writer noted for his youthful brush with the US Securities and Exchange Commission and his disclosure urging people never to trade on his advice unless they're prepared to lose the entire investment.

In fact, ANY.V is so desperate for attention, the company has taken on its own promoter. That hired gun is USA Investor Link, pulling in $10,000 monthly plus about $2.8 million in stock options.

CEO Peter Tassiopoulos issued a statement in March 2013 about hiring USA Investor Link to address the "increased interest we are receiving from the investment and business community."

Let's just take a look at USA Investor's previous clients… Whoa - maybe ANY.V should have done some due diligence before peeling off investors' hard-earned dollars to pay the two-man USA Investor Link.

Almost exactly a year before ANY.V's announcement about its USA Investor deal, Canada-based NWM Mining Corp. (OTCPK:NWMMF) issued its own statement about hiring USA Investor "due to a significant increase in the level of interest from the U.S. Investment community …"

If anyone's interested now, a share of NWM Mining stock costs just a fraction of a penny.

NO REAL PRODUCT

The promoters' jobs are all the more difficult since ANY.V has not created a real commercial product. That's why the company's financial statement - which isn't readily accessible to US investors - lists a big, fat "0" under revenue.

Yes, ANY.V would whine that investors gotta believe. They've got to believe that the company's patents - which are simply applications that have been filed - will amount to something someday.

The product Glassware 2.0 is not ready for prime time yet. And, like the CEO says, it's been years in the making.

"We've been at this since early 2009 and we're kind of tired of research and development. We've been doing this for a while," said CEO Tassiopoulos.

ANY.V is pushing to get a listing on the NASDAQ even though this 5-year-old product still apparently hasn't moved past the demonstration stage.

And even though ANY.V may want to believe its product is special, many, many companies are already doing what ANY.V wants to do. There's Citrix, ePlus, Vology, VMware, ITS and the list goes on and on. At least since 2007, there's even been free, open-source software to virtualize Android and more.

Most of all, the biggest gorilla in the forest is Microsoft (NASDAQ:MSFT). The $333 billion company's highly acclaimed Windows Azure helps people work anywhere on any device. Like ANY.V would like to do.

Indeed, ANY.V has been stumbling in an environment that is gradually becoming even rockier for tech companies. Billionaire David Einhorn called out a warning in his quarterly letter to investors in his Greenlight Capital fund.

"Now there is clear consensus that we are witnessing our second tech bubble in 15 years," Mr. Einhorn wrote. "What is uncertain is how much further the bubble can expand, and what might pop it."

ROLL 'EM UP

What ANY.V is really up to, as we see it, is that the company realizes that it's getting nowhere with its own product. So it is entering that magical land called roll-up-ville.

That's right. It's a rollup company. Much like these ridiculous rollups that TheStreetSweeper has warned investors about: Tangoe (NASDAQ:TNGO) ($19.55 day of article, now $14) Swisher Hygiene (NASDAQ:SWSH) ($8 day of article, now 40 cents) and Revolution Lighting (NASDAQ:RVLT) ($4 day of article, now $2).

Those companies are way out of ANY.V's league as far as assets, revenue and management. But, in our opinion, the coming ANY.V disaster is likely to be just as spectacular - or even more so.

BIG MONEY FOR TINY ACQUISITION

ANY.V announced expected first quarter revenue to exceed $1 million. But what the company didn't announce was that it paid dearly for that smidgen of revenue.

The bulk of that money for rollup ANY.V is likely to be thanks to the acquisition in March of V3 Systems. According to Dun & Bradstreet's WorldBase, the little Utah-based V3 Systems was a one-to-two-man operation that last year managed to make only $535,256 in sales.

Yet ANY.V trotted in like a gang of happy pups and agreed to pay $9.7 million for V3.

That's 1.1 million shares of ANY.V stock plus $4 million cash - an acquisition ANY.V could manage only by signing a $5 million debt deal with Cyrus Capital Partners - a company that describes itself as a debt fund manager that invests in "financially distressed" companies.

Incredibly, ANY.V paid more than 18 times V3's sales. Yes - 18 times more!

NAME OF THE GAME: ODD ACQUISITIONS

Acquisitions have played a big role for ANY.V since the beginning.

The boys behind T.B. Mining Venture, the shell company that reverse-merged into ANY.V, were only slightly coy about what they'd be mining. Canadian regulatory records show T.B. Mining did not operate in the usual business fashion. Instead, it popped out its 2010 IPO of 1.5 million shares at 20 cents each to raise money for one purpose and one purpose only - to search for "assets," "businesses," or "non-arms-length transactions."

ANY.V's current president Mario Biasini, with leadership experience limited to his small graphics arts company Promotion Depot, oversaw the 2012 reverse merger and name change to Sphere 3D. He invited a couple of buddies, Giovanni "John" Morelli, the inventor of the "emulation and virtualization technology" and financial expert Mr. Worthington along for the ride.

Though you won't see ANY.V trumpeting this fact, Promotion Depot had the original development stage product that ANY.V has been trying to build into a real company. Canadian filings show that in 2010, ANY.V acquired "all rights and assets related to the emulation and virtualization technology from Promotion Depot Inc." and paid $695,000.

BIG BOYS, BIG MONEY, BAD BUSINESSES

If ANY.V's been good for anybody, it's been good for top executives. It showered the top four guys last year with over $1 million in total compensation.

Canadian regulatory filings say Mr. Tassiopoulos received a big hunk of that executive payday last year - $459,611.

Part of that compensation is cheap stock. Mr. Tassiopoulos has the option to buy 100,000 shares of ANY.V for just 85 cents each -about one-tenth of what the shares would bring in today's market.

Mr. Tassiopoulos became a director in 2012 and CEO in 2013, riding up to ANY.V on his business development connections -- and despite his leadership of several dismal companies. Though his ANY.V profile certainly doesn't tout his role in Argentium Resources (OTC:AGTMF), he served as a director of the silver and gold mining company. Listed on the OTC exchange with ANY.V's alter-ego SPIHF, Argentium stock last traded Dec. 24, 2013 for just a fraction of 1 penny.

Until he was fired, Mr. Tassiopoulos also held COO and then CEO titles in 2009-2011 with Biosign Technologies (OTC:BITKF) (BIO.V). Also not mentioned in his company profile, Biosign is a healthcare software company listed on the same exchange with ANY.V. Biosign trades for about 3 cents.

Most recently, a material change filing - and a press release that buried the real news beneath a chirpy announcement about a recently hired sales manager - noted that Mr. Tassiopoulos' ascension in ANY.V included pushing Mr. Morelli out of the company two months ago and grabbing the man's director title.

More information on ailing companies associated with Mr. Tassiopoulos is available here. Both negative and positive viewpoints about ANY.V may be found here.

OVER 1 MILLION EXTRA OPTIONS PLANNED, MORE STOCK LOOMING

As if executives aren't already draining enough from this struggling company, they are ready to get their hands on even more.

ANY.V shareholders will meet May 27 to vote on items such as amending the stock plan. Here's how:

The three best-paid executives - Mr. Tassiopoulos, Mr. Biasini and CFO T. Scott Worthington - would get access to more than 1 million additional options to purchase ANY.V shares. According to filings, the number of options granted to those best-paid execs would jump from 3.38 million to 4.65 million.

So $30 million to $40 million is not a bad potential payday for these guys. Especially from a company that handed investors a loss of 14 cents per share.

And those new options aren't the only such worry for investors. Filings indicate (click on the April 29, 2014 MD&A):

· Options could spring about another 1.2 million shares on the market. Some were as cheap as 51 cents to 85 cents.

· Warrants set for June 27 release: 1.1 million shares.

· Warrants set for Dec. 27 release: 1.3 million shares.

· Total warrants set for 2014-2015 release: 6.3 million shares.

Not including the 1 million extra options that directors want, we estimate the force of the current options and warrants bearing down on the market could reach about 7.5 million shares.

At ANY.V's recent stock price of about $9, with 23 million shares outstanding, the current market cap is about $207 million.

The market cap under the looming options and warrants scenario at the $9 price, would reach a stunning $274.5 million.

That huge chunk of change is outlandish for a company with little more than hype to call its own.

CONCLUSION

Management is sucking the company dry as they throw away millions on salaries, promotions and acquisitions to support an aging idea. They're hoping to turn that idea into a product that they can turn into a real company. They will continue to seek more money, more money, and more money as they pursue this desperate, losing effort.

We've just begun digging into ANY.V yet the ultimate outcome is clear. This company is just begging to be deep-sixed.

Disclosure: The owners of TheStreetSweeper hold a short position in ANY.V and stand to profit on any future declines in the stock price.•Editor's Note: As a matter of policy, TheStreetSweeper prohibits members of its editorial team from taking financial positions in the companies that they cover. To contact Sonya Colberg, the author of this story, please send an email to scolberg@thestreetsweeper.org.

Source: Sphere 3D: Cloud Company Can't Rise Above Hype, Mistakes And Poor Management