UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from to
Commission file number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
(Address of principal executive offices) | (State) | (Zip Code) |
( |
(Registrant’s telephone number, including area code) |
Securities registered pursuant to 12(b) of the Exchange Act:
Title of each class: |
| Trading Symbol(s) |
| Name of each exchange on which registered: |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ | Smaller reporting company | Emerging growth company |
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
There were
TERAWULF INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
2
Forward-Looking Statements
This Quarterly Report contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management, and expected market growth are forward-looking statements. These forward- looking statements are contained principally in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis.” Without limiting the generality of the preceding sentence, any time we use the words “expects,” intends,” “will,” “anticipates,” “believes,” “confident,” “continue,” “propose,” “seeks,” “could,” “may,” “should,” “estimates,” “forecasts,” “might,” “goals,” “objectives,” “targets,” “planned,” “projects,” and, in each case, their negative or other various or comparable terminology and similar expressions, we intend to clearly express that the information deals with possible future events and is forward-looking in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. For TeraWulf, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include, without limitation:
● | conditions in the cryptocurrency mining industry, including any prolonged substantial reduction in cryptocurrency prices, and specifically, the value of bitcoin, which could cause a decline in the demand for TeraWulf’s services; |
● | competition among the various providers of data mining services; |
● | the need to raise additional capital to meet our business requirements in the future, which may be costly or difficult to obtain or may not be obtained (in whole or in part) and, if obtained, could significantly dilute the ownership interests of TeraWulf’s shareholders; |
● | the ability to implement certain business objectives and the ability to timely and cost-effectively execute integrated projects; |
● | adverse geopolitical or economic conditions, including a high inflationary environment; |
● | security threats or unauthorized or impermissible access to our datacenters, our operations or our digital wallet; |
● | counterparty risk with respect to our digital asset custodian and our mining pool provider; |
● | employment workforce factors, including the loss of key employees; |
● | changes in governmental safety, health, environmental and other regulations, which could require significant expenditures; |
● | liability related to the use of TeraWulf’s services; |
● | currency exchange rate fluctuations; and |
● | other risks, uncertainties and factors included or incorporated by reference in this Quarterly Report, including those set forth under “Risk Factors” and those included under the heading “Risk Factors” in our annual report on Form 10-K, filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 31, 2023 (the “Original 10-K”), as amended by our annual report on Form 10-K/A, filed with the SEC on May 5, 2023, for the fiscal year ended December 31, 2022 (the “10-K/A” and together with the Original 10-K, the “Annual Report on Form 10-K”). |
These forward-looking statements reflect our views with respect to future events as of the date of this Quarterly Report and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report and, except as required by law, we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Quarterly Report. We anticipate that subsequent events and developments will cause our views to change. You should read this Quarterly Report completely and with
3
the understanding that our actual future results may be materially different from what we expect. Our forward-looking statements do not reflect the potential impact of any future acquisitions, merger, dispositions, joint ventures or investments we may undertake. We qualify all of our forward-looking statements by these cautionary statements.
4
PART I: FINANCIAL INFORMATION
ITEM 1.Financial Statements
TERAWULF INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2023 AND DECEMBER 31, 2022
(In thousands, except number of shares and par value)
| June 30, 2023 |
| December 31, 2022 | |||
(unaudited) | ||||||
ASSETS |
|
|
|
| ||
CURRENT ASSETS: |
|
|
|
| ||
Cash and cash equivalents | $ | | $ | | ||
Restricted cash |
| — | | |||
Digital currency, net | | | ||||
Prepaid expenses |
| | | |||
Other current assets |
| | | |||
Total current assets |
| | | |||
Equity in net assets of investee |
| | | |||
Property, plant and equipment, net |
| | | |||
Right-of-use asset |
| | | |||
Other assets |
| | | |||
TOTAL ASSETS | $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
| ||
CURRENT LIABILITIES: |
|
|
|
| ||
Accounts payable | $ | | $ | | ||
Accrued construction liabilities |
| | | |||
Other accrued liabilities |
| | | |||
Share based liabilities due to related party |
| | | |||
Other amounts due to related parties |
| | | |||
Contingent value rights |
| | | |||
Current portion of operating lease liability |
| | | |||
Insurance premium financing payable | | | ||||
Convertible promissory notes | — | | ||||
Current portion of long-term debt | | | ||||
Total current liabilities |
| |
| | ||
Operating lease liability, net of current portion |
| | | |||
Long-term debt |
| | | |||
TOTAL LIABILITIES |
| |
| | ||
Commitments and Contingencies (See Note 12) |
|
|
|
| ||
STOCKHOLDERS' EQUITY: |
|
|
|
| ||
Preferred stock, $ |
| | | |||
Common stock, $ |
| | | |||
Additional paid-in capital |
| | | |||
Accumulated deficit |
| ( | ( | |||
Total stockholders' equity |
| |
| | ||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | | $ | |
See Notes to Consolidated Financial Statements.
5
TERAWULF INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
(In thousands, except number of shares and loss per common share; unaudited)
Three Months Ended | Six Months Ended | ||||||||||||
| June 30, |
| June 30, | ||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||
Revenue | $ | | $ | | $ | | $ | | |||||
Cost of revenue (exclusive of depreciation shown below) |
| | | | | ||||||||
Gross profit |
| |
| |
| |
| | |||||
Cost of operations: |
|
|
|
|
|
|
|
| |||||
Operating expenses |
| | | | | ||||||||
Operating expenses – related party | | | | | |||||||||
Selling, general and administrative expenses |
| | | | | ||||||||
Selling, general and administrative expenses – related party | | | | | |||||||||
Depreciation | | | | | |||||||||
Realized gain on sale of digital currency | ( | — | ( | — | |||||||||
Impairment of digital currency | | | | | |||||||||
Total cost of operations |
| |
| |
| |
| | |||||
Operating loss |
| ( | ( | ( | ( | ||||||||
Interest expense |
| ( | ( | ( | ( | ||||||||
Other income | | — | | — | |||||||||
Loss before income tax and equity in net loss of investee |
| ( |
| ( |
| ( |
| ( | |||||
Income tax (expense) benefit |
| ||||||||||||
Equity in net loss of investee, net of tax |
| ( | ( | ( | ( | ||||||||
Loss from continuing operations |
| ( |
| ( |
| ( |
| ( | |||||
Loss from discontinued operations, net of tax |
| ( | ( | ( | ( | ||||||||
Net loss | ( | ( | ( | ( | |||||||||
Preferred stock dividends | ( | ( | ( | ( | |||||||||
Net loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | |||||
Loss per common share: |
|
|
|
|
|
|
|
| |||||
Continuing operations | ( | ( | ( | ( | |||||||||
Discontinued operations |
| - |
| ( |
| - |
| ( | |||||
Basic and diluted | ( | ( | ( | ( | |||||||||
Weighted average common shares outstanding: |
| ||||||||||||
Basic and diluted |
| | | | |
See Notes to Consolidated Financial Statements.
6
TERAWULF INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
(In thousands, except number of shares; unaudited)
Additional | Common | ||||||||||||||||||||
Preferred Stock | Common Stock |
| Paid-in |
| Stock to | Accumulated |
|
| |||||||||||||
Number |
| Amount |
| Number |
| Amount |
| Capital |
| be Issued | Deficit |
| Total | ||||||||
Balances as of March 31, 2023 | | $ | | | $ | | $ | | $ | | $ | ( | $ | | |||||||
Warrant exercise | - | - | | | | - | - | | |||||||||||||
Common stock offering, net of issuance costs | - | - | | | | - | - | | |||||||||||||
Common stock to be issued, net of issuance costs | - | - | - | - | - | ( | - | ( | |||||||||||||
Stock-based compensation expense and issuance of stock | - | - | | | | - | - | | |||||||||||||
Tax withholdings related to net share settlements of stock-based compensation awards | - | - | ( | - | ( | - | - | ( | |||||||||||||
Net loss | - | - | - | - | - | - | ( | ( | |||||||||||||
Balances as of June 30, 2023 | | $ | | | $ | | $ | | $ | - | $ | ( | $ | |
Additional | Common | ||||||||||||||||||||
Preferred Stock | Common Stock |
| Paid-in |
| Stock to | Accumulated |
|
| |||||||||||||
Number |
| Amount |
| Number |
| Amount |
| Capital |
| be Issued | Deficit |
| Total | ||||||||
Balances as of December 31, 2022 | | $ | | | $ | | $ | | $ | — | $ | ( | $ | | |||||||
Common stock reacquired in exchange for warrants | — | — | ( | ( | ( | — | — |
| ( | ||||||||||||
Warrant issuance in conjunction with debt modification | — | — | — | — | | — | — | | |||||||||||||
Warrant offerings | — | — | — | — | | — | — | | |||||||||||||
Warrant exercise | — | — | | | | — | — | | |||||||||||||
Common stock offering, net of issuance costs | — | — | | | | — | — | | |||||||||||||
Convertible promissory notes converted to common stock | — | — | | | | — | — | | |||||||||||||
Stock-based compensation expense and issuance of stock | — | — | | | | — | — | | |||||||||||||
Tax withholdings related to net share settlements of stock-based compensation awards | — | — | ( | — | ( | — | — | ( | |||||||||||||
Net loss | — | — | — | — | — | — | ( |
| ( | ||||||||||||
Balances as of June 30, 2023 | | $ | | | $ | | $ | | $ | — | $ | ( | $ | |
Additional | Common | ||||||||||||||||||||
Preferred Stock | Common Stock |
| Paid-in |
| Stock to | Accumulated |
|
| |||||||||||||
Number |
| Amount |
| Number |
| Amount |
| Capital |
| be Issued | Deficit |
| Total | ||||||||
Balances as of March 31, 2022 | | $ | | | $ | | $ | | $ | — | $ | ( | $ | | |||||||
Common stock offering, net of issuance costs | — | — | | | | — | — | | |||||||||||||
Stock-based compensation expense | — | — | — | — | | — | — | | |||||||||||||
Preferred stock dividends | — | | — | — | — | — | ( | | |||||||||||||
Net loss | — | — | — | — | — | — | ( | ( | |||||||||||||
Balances as of June 30, 2022 | | $ | | | $ | | $ | | $ | — | $ | ( | $ | |
Additional | Common | ||||||||||||||||||||
Preferred Stock | Common Stock |
| Paid-in |
| Stock to | Accumulated |
|
| |||||||||||||
Number |
| Amount |
| Number |
| Amount |
| Capital |
| be Issued | Deficit |
| Total | ||||||||
Balances as of December 31, 2021 | — | $ | — | | $ | | $ | | $ | — | $ | ( | $ | | |||||||
Issuance of Series A Convertible Preferred Stock, net of issuance costs | | | — | — | — | — | | ||||||||||||||
Common stock offering, net of issuance costs | — | — | | | | — | — | | |||||||||||||
Stock-based compensation expense | — | — | — | — | | — | — | | |||||||||||||
Preferred stock dividends | — | | — | — | — | — | ( | — | |||||||||||||
Net loss | — | — | — | — | — | — | ( | ( | |||||||||||||
Balances as of June 30, 2022 | | $ | | | $ | | $ | | $ | — | $ | ( | $ | |
See Notes to Consolidated Financial Statements.
7
TERAWULF INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022
(In thousands; unaudited)
Six Months Ended | |||||||
| June 30, |
| |||||
2023 | 2022 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
| |||||
Net loss | $ | ( | $ | ( | |||
Adjustments to reconcile net loss to net cash used in operating activities: |
|
| |||||
Amortization of debt issuance costs, commitment fees and accretion of debt discount |
| | |
| |||
Related party expense to be settled with respect to common stock | | — | |||||
Common stock issued for interest expense | | — | |||||
Stock-based compensation expense | | | |||||
Depreciation | | | |||||
Amortization of right-of-use asset | | | |||||
Increase in digital currency from mining and hosting services | ( | ( | |||||
Impairment of digital currency | | | |||||
Realized gain on sale of digital currency | ( | — | |||||
Proceeds from sale of digital currency | | — | |||||
Equity in net loss of investee, net of tax |
| | |
| |||
Loss from discontinued operations, net of tax |
| | |
| |||
Changes in operating assets and liabilities: |
| — | — |
| |||
Decrease (increase) in prepaid expenses |
| | ( |
| |||
Decrease in amounts due from related parties | — | | |||||
Increase in other current assets |
| ( | ( |
| |||
Decrease (increase) in other assets |
| | ( |
| |||
Decrease in accounts payable |
| ( | ( |
| |||
(Decrease) increase in other accrued liabilities |
| ( | |
| |||
(Decrease) increase in other amounts due to related parties |
| ( | |
| |||
Decrease in operating lease liability |
| ( | ( |
| |||
Net cash used in operating activities from continuing operations |
| ( |
| ( |
| ||
Net cash provided by (used in) operating activities from discontinued operations |
| | ( |
| |||
Net cash used in operating activities |
| ( |
| ( |
| ||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
| ||
Investments in joint venture, including direct payments made on behalf of joint venture |
| ( | ( |
| |||
Reimbursable payments for deposits on plant and equipment made on behalf of a joint venture or joint venture partner |
| — | ( |
| |||
Reimbursement of payments for deposits on plant and equipment made on behalf of a joint venture or joint venture partner |
| — | |
| |||
Purchase of and deposits on plant and equipment |
| ( | ( |
| |||
Payment of contingent value rights liability | ( | — | |||||
Net cash used in investing activities |
| ( |
| ( |
| ||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
| ||
Proceeds from insurance premium and property, plant and equipment financing | | | |||||
Principal payments on insurance premium and property, plant and equipment financing | ( | ( | |||||
Proceeds from issuance of common stock, net of issuance costs paid of $ |
| | |
| |||
Proceeds from warrant issuances | | — | |||||
Payments of tax withholding related to net share settlements of stock-based compensation awards | ( | — | |||||
Proceeds from issuance of preferred stock |
| — | |
| |||
Proceeds from issuance of convertible promissory note | | | |||||
Net cash provided by financing activities |
| |
| |
| ||
Net change in cash and cash equivalents and restricted cash |
| ( |
| ( |
| ||
Cash and cash equivalents and restricted cash at beginning of period |
| | |
| |||
Cash and cash equivalents and restricted cash at end of period | $ | | $ | | |||
Cash paid during the period for: |
|
|
|
| |||
Interest | $ | | $ | | |||
Income taxes | $ | $ |
See Notes to Consolidated Financial Statements.
8
NOTE 1 – ORGANIZATION
Organization
TeraWulf, Inc. (“TeraWulf” or the “Company”) is a digital asset technology company with a core business of digital infrastructure and energy development to enable sustainable bitcoin mining. TeraWulf’s principal operations consist of operating, developing and constructing bitcoin mining facilities in the United States that are fueled by clean, low cost and reliable power sources. The Company operates a portfolio of bitcoin mining facilities, either wholly-owned or through joint ventures, that each deploy a series of powerful computers that solve complex cryptographic algorithms, which computing power is provided to a mining pool operator to mine bitcoin and validate transactions on the bitcoin network. TeraWulf’s revenue is substantially derived from pay-per-share base amounts and transaction fee rewards earned in bitcoin from the mining pool as compensation for providing the computing power. The Company also leverages its available digital infrastructure to provide miner hosting services to third parties whereby the Company holds an option to purchase the hosted miners in the future. While the Company may choose to mine other cryptocurrencies in the future, it has no plans to do so currently.
TeraWulf’s
On December 13, 2021, TeraWulf Inc. completed a strategic business combination (the “Merger”) with IKONICS Corporation, a Minnesota corporation (“IKONICS”) pursuant to which, among other things, the Company effectively acquired IKONICS and became a publicly traded company on the National Association of Securities Dealers Automated Quotations (“Nasdaq”), which was the primary purpose of the business combination. IKONICS’ traditional business was the development and manufacturing of high-quality photochemical imaging systems for sale primarily to a wide range of printers and decorators of surfaces. Customers’ applications were primarily screen printing and abrasive etching. TeraWulf initially classified the IKONICS business as held for sale and discontinued operations in its consolidated financial statements. During the year ended December 31, 2022, the Company completed sales of substantially all of IKONICS’ historical net assets (see Note 3). Subsequent to the asset sales, IKONICS’ name was changed to RM 101 Inc. (“RM 101”).