UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-41163

TERAWULF INC.

(Exact name of registrant as specified in its charter)


DE		87-1909475
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

9 Federal Street		21601
Easton	MD
(Address of principal executive offices)	(State)	(Zip Code)

(410) 770-9500

(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:
Common Stock, $0.001 par value per share	WULF	The Nasdaq Stock Market LLC

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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 ☐	Non-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 ☐ No ☒

There were 221,132,914 shares of Common Stock outstanding as of August 11, 2023.

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TERAWULF INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

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		Page

Forward-Looking Statements		3

PART I — FINANCIAL INFORMATION

ITEM 1. Financial Statements

Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022		5

Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022		6

Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022		7

Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022		8

Notes to Consolidated Financial Statements		9

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		38

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		50

ITEM 4. Controls and Procedures		50

PART II — OTHER INFORMATION

ITEM 1. Legal Proceedings		51

ITEM 1A. Risk Factors		51

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.		52

ITEM 3. Defaults Upon Senior Securities.		52

ITEM 4. Mine Safety Disclosures.		52

ITEM 5. Other Information.		52

ITEM 6. Exhibits		53

SIGNATURES		54

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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

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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.

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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	$	8,241	$	1,279
Restricted cash		—		7,044
Digital currency, net		708		183
Prepaid expenses		3,472		5,095
Other current assets		1,938		543
Total current assets		14,359		14,144
Equity in net assets of investee		111,446		98,741
Property, plant and equipment, net		161,776		191,521
Right-of-use asset		11,443		11,944
Other assets		798		1,337
TOTAL ASSETS	$	299,822	$	317,687

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	17,303	$	21,862
Accrued construction liabilities		95		2,903
Other accrued liabilities		7,883		14,963
Share based liabilities due to related party		15,000		14,583
Other amounts due to related parties		3,172		3,295
Contingent value rights		1,302		10,900
Current portion of operating lease liability		45		42
Insurance premium financing payable		352		2,117
Convertible promissory notes		—		3,416
Current portion of long-term debt		36,532		51,938
Total current liabilities		81,684		126,019
Operating lease liability, net of current portion		924		947
Long-term debt		82,396		72,967
TOTAL LIABILITIES		165,004		199,933

Commitments and Contingencies (See Note 12)

STOCKHOLDERS' EQUITY:
Preferred stock, $0.001 par value, 100,000,000 and 25,000,000 authorized at June 30, 2023 and December 31, 2022, respectively; 9,566 issued and outstanding at June 30, 2023 and December 31, 2022; aggregate liquidation preference of $10,873 and $10,349 at June 30, 2023 and December 31, 2022, respectively		9,273		9,273
Common stock, $0.001 par value, 400,000,000 and 200,000,000 authorized at June 30, 2023 and December 31, 2022, respectively; 216,055,887 and 145,492,971 issued and outstanding at June 30, 2023 and December 31, 2022, respectively		216		145
Additional paid-in capital		355,600		294,810
Accumulated deficit		(230,271)		(186,474)
Total stockholders' equity		134,818		117,754
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	299,822	$	317,687

See Notes to Consolidated Financial Statements.

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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	$	15,456	$	1,385	$	26,989	$	1,602
Cost of revenue (exclusive of depreciation shown below)		5,113		591		10,115		623
Gross profit		10,343		794		16,874		979

Cost of operations:
Operating expenses		468		948		776		1,428
Operating expenses – related party		639		147		1,236		209
Selling, general and administrative expenses		5,878		4,334		12,370		10,319
Selling, general and administrative expenses – related party		2,676		2,423		5,574		5,239
Depreciation		6,428		200		11,861		204
Realized gain on sale of digital currency		(583)		—		(1,186)		—
Impairment of digital currency		682		558		1,309		563
Total cost of operations		16,188		8,610		31,940		17,962

Operating loss		(5,845)		(7,816)		(15,066)		(16,983)
Interest expense		(8,450)		(4,139)		(15,284)		(9,461)
Other income		54		—		54		—
Loss before income tax and equity in net loss of investee		(14,241)		(11,955)		(30,296)		(26,444)
Income tax (expense) benefit		—		—		—		—
Equity in net loss of investee, net of tax		(3,296)		(1,084)		(13,463)		(1,872)
Loss from continuing operations		(17,537)		(13,039)		(43,759)		(28,316)
Loss from discontinued operations, net of tax		(3)		(630)		(38)		(3,536)
Net loss		(17,540)		(13,669)		(43,797)		(31,852)
Preferred stock dividends		(265)		(239)		(524)		(284)
Net loss attributable to common stockholders	$	(17,805)	$	(13,908)	$	(44,321)	$	(32,136)

Loss per common share:
Continuing operations	$	(0.08)	$	(0.13)	$	(0.24)	$	(0.28)
Discontinued operations		-		(0.01)		-		(0.03)
Basic and diluted	$	(0.08)	$	(0.14)	$	(0.24)	$	(0.31)

Weighted average common shares outstanding:
Basic and diluted		210,421,237		104,119,328		187,843,663		102,131,393

See Notes to Consolidated Financial Statements.

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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	9,566	$	9,273	186,268,682	$	186	$	345,195	$	4,390	$	(212,731)	$	146,313
Warrant exercise	-		-	25,647,821		26		3,487		-		-		3,513
Common stock offering, net of issuance costs	-		-	3,048,196		3		6,036		-		-		6,039
Common stock to be issued, net of issuance costs	-		-	-		-		-		(4,390)		-		(4,390)
Stock-based compensation expense and issuance of stock	-		-	1,591,682		1		1,734		-		-		1,735
Tax withholdings related to net share settlements of stock-based compensation awards	-		-	(500,494)		-		(852)		-		-		(852)
Net loss	-		-	-		-		-		-		(17,540)		(17,540)
Balances as of June 30, 2023	9,566	$	9,273	216,055,887	$	216	$	355,600	$	-	$	(230,271)	$	134,818


							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	9,566	$	9,273	145,492,971	$	145	$	294,810	$	—	$	(186,474)	$	117,754
Common stock reacquired in exchange for warrants	—		—	(12,000,000)		(12)		(12,479)		—		—		(12,491)
Warrant issuance in conjunction with debt modification	—		—	—		—		16,036		—		—		16,036
Warrant offerings	—		—	—		—		14,991		—		—		14,991
Warrant exercise	—		—	25,647,821		26		3,487		—		—		3,513
Common stock offering, net of issuance costs	—		—	43,812,902		44		32,304		—		—		32,348
Convertible promissory notes converted to common stock	—		—	11,762,956		12		4,693		—		—		4,705
Stock-based compensation expense and issuance of stock	—		—	1,839,731		1		2,610		—		—		2,611
Tax withholdings related to net share settlements of stock-based compensation awards	—		—	(500,494)		—		(852)		—		—		(852)
Net loss	—		—	—		—		—		—		(43,797)		(43,797)
Balances as of June 30, 2023	9,566	$	9,273	216,055,887	$	216	$	355,600	$	—	$	(230,271)	$	134,818


							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	9,566	$	9,273	100,790,239	$	101	$	225,545	$	—	$	(113,911)	$	121,008
Common stock offering, net of issuance costs	—		—	4,178,960		4		27,147		—		—		27,151
Stock-based compensation expense	—		—	—		—		482		—		—		482
Preferred stock dividends	—		284	—		—		—		—		(239)		45
Net loss	—		—	—		—		—		—		(13,669)		(13,669)
Balances as of June 30, 2022	9,566	$	9,557	104,969,199	$	105	$	253,174	$	—	$	(127,819)	$	135,017


							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	—	$	—	99,976,253	$	100	$	218,762	$	—	$	(95,683)	$	123,179
Issuance of Series A Convertible Preferred Stock, net of issuance costs	9,566		9,273	—		—		—		—				9,273
Common stock offering, net of issuance costs	—		—	4,992,946		5		33,930		—		—		33,935
Stock-based compensation expense	—		—	—		—		482		—		—		482
Preferred stock dividends	—		284	—		—		—		—		(284)		—
Net loss	—		—	—		—		—		—		(31,852)		(31,852)
Balances as of June 30, 2022	9,566	$	9,557	104,969,199	$	105	$	253,174	$	—	$	(127,819)	$	135,017

See Notes to Consolidated Financial Statements.

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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	$	(43,797)	$	(31,852)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt issuance costs, commitment fees and accretion of debt discount		8,307		4,435
Related party expense to be settled with respect to common stock		417		—
Common stock issued for interest expense		26		—
Stock-based compensation expense		2,610		482
Depreciation		11,861		204
Amortization of right-of-use asset		501		41
Increase in digital currency from mining and hosting services		(24,206)		(1,214)
Impairment of digital currency		1,309		563
Realized gain on sale of digital currency		(1,186)		—
Proceeds from sale of digital currency		28,501		—
Equity in net loss of investee, net of tax		13,463		1,872
Loss from discontinued operations, net of tax		38		3,536
Changes in operating assets and liabilities:		—		—
Decrease (increase) in prepaid expenses		1,623		(2,864)
Decrease in amounts due from related parties		—		815
Increase in other current assets		(1,347)		(344)
Decrease (increase) in other assets		28		(951)
Decrease in accounts payable		(3,812)		(398)
(Decrease) increase in other accrued liabilities		(2,330)		1,876
(Decrease) increase in other amounts due to related parties		(1,290)		351
Decrease in operating lease liability		(20)		(42)
Net cash used in operating activities from continuing operations		(9,304)		(23,490)
Net cash provided by (used in) operating activities from discontinued operations		294		(45)
Net cash used in operating activities		(9,010)		(23,535)

CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in joint venture, including direct payments made on behalf of joint venture		(2,845)		(36,367)
Reimbursable payments for deposits on plant and equipment made on behalf of a joint venture or joint venture partner		—		(11,622)
Reimbursement of payments for deposits on plant and equipment made on behalf of a joint venture or joint venture partner		—		11,540
Purchase of and deposits on plant and equipment		(15,990)		(45,469)
Payment of contingent value rights liability		(9,598)		—
Net cash used in investing activities		(28,433)		(81,918)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from insurance premium and property, plant and equipment financing		790		4,706
Principal payments on insurance premium and property, plant and equipment financing		(2,450)		(3,127)
Proceeds from issuance of common stock, net of issuance costs paid of $1,051 and $142		36,123		34,075
Proceeds from warrant issuances		2,500		—
Payments of tax withholding related to net share settlements of stock-based compensation awards		(852)		—
Proceeds from issuance of preferred stock		—		9,566
Proceeds from issuance of convertible promissory note		1,250		14,700
Net cash provided by financing activities		37,361		59,920

Net change in cash and cash equivalents and restricted cash		(82)		(45,533)
Cash and cash equivalents and restricted cash at beginning of period		8,323		46,455
Cash and cash equivalents and restricted cash at end of period	$	8,241	$	922

Cash paid during the period for:
Interest	$	11,252	$	4,946
Income taxes	$	—	$	—

See Notes to Consolidated Financial Statements.

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TERAWULF INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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 two bitcoin mining facilities are in New York (the “Lake Mariner Facility”) and Pennsylvania (the “Nautilus Cryptomine Facility”). Mining operations commenced at the Lake Mariner Facility in March 2022 and the Company has energized buildings one and two as of June 30, 2023. The Nautilus Cryptomine Facility, which has been developed and constructed through a joint venture (see Note 11), commenced mining operations in February 2023 and achieved full energization of the Company’s allotted infrastructure capacity in April 2023. The Lake Mariner Facility is wholly-owned.

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”).