ORGANIZATION	3 Months Ended
Mar. 31, 2023
ORGANIZATION
ORGANIZATION	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 building one and substantially completed the construction of building two as of March 31, 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”). Risks and Uncertainties Liquidity and Financial Condition The Company incurred a net loss attributable to common stockholders of $26.5 million and negative cash flows from continuing operations of $8.6 million for the three months ended March 31, 2023. As of March 31, 2023, the Company had balances of cash and cash equivalents and restricted cash of $17.0 million, a working capital deficiency of $33.9 million, total stockholders’ equity of $146.3 million and an accumulated deficit of $212.7 million. The Company has commenced mining activities at the Lake Mariner Facility and at the Nautilus Cryptomine Facility, however not yet to the scale required to support its principal operations. The Company has relied primarily on proceeds from its issuances of debt and equity and sale of bitcoin mined to fund its principal operations. In accordance with development of its bitcoin mining facilities, during the three months ended March 31, 2023, the Company invested approximately $10.0 million for purchases of and deposits on plant and equipment,. Also, during the three months ended March 31, 2023, the Company invested $2.3 million, net in its joint venture (see Note 11). As of March 31, 2023, the Company expects that is has sufficient capital to complete construction of the Lake Mariner Facility. However, until TeraWulf is able to generate positive cash flows from operations, TeraWulf expects to fund its business operations and infrastructure buildout primarily through cash on the balance sheet, sales of mined bitcoin or through the provision of miner hosting services and, if needed, the issuance of equity securities. During the three months ended March 31, 2023, the Company accomplished several notable steps toward achieving near term positive cash flows from operations, namely: (1) the Company amended its long-term debt agreement (see Note 9) to, among other changes, remove the fixed principal amortization through April 7, 2024 and, potentially, beyond, (2) through the issuance of shares of our common stock, par value $0.001 per share (the “Common Stock”), Common Stock warrants and convertible promissory notes (see Notes 13 and 14), the Company received net proceeds of $34.7 million, which along with cash flow from operations, is expected to be sufficient to satisfy the Company’s final capital expenditure requirements, other obligations and operating expenses in the months prior to achieving a free cash flow positive enterprise (3) mining activities commenced at the Nautilus Cryptomine Facility and the Company deems that it has funded all known and expected capital commitments at that facility, (4) the Company received substantially all contracted miners from the miner suppliers and has no remaining outstanding financial commitments under the miner purchase agreements (see Notes 11 and 12), (5) the received miners are sufficient to fully utilize mining capacity both in service and under construction at the Lake Mariner Facility and the Nautilus Cryptomine Facility and (6) the remaining construction activities at the Lake Mariner Facility and the Nautilus Cryptomine Facility are currently ongoing and expected to be complete in the second quarter of 2023. Additionally, if a business need requires its use, the Company has an active At Market Issuance Sales Agreement for sale of shares of Common Stock having an aggregate offering price of up to $200.0 million (the “ATM Offering”). The issuance of Common Stock under this agreement would be made pursuant to the Company’s effective registration statement on Form S-3 (Registration statement No. 333-262226). The Company has determined that it is probable that these actions and conditions will allow the Company to generate positive cash flows from operations and be able to realize its assets and discharge its liabilities and commitments in the normal course of business and, therefore, there is not substantial doubt about the Company’s ability to continue as a going concern through at least the next twelve months. The consolidated financial statements do not include any adjustments that might result from TeraWulf’s possible inability to continue as a going concern. COVID-19 Although the World Health Organization declared on May 5, 2023 that it no longer considers COVID-19 a global health emergency, the Company may from time to time experience disruptions to its business operations resulting from continued COVID-19-related supply interruptions, including miner delivery interruptions. The Company may also experience COVID-19-related delays in construction and obtaining necessary equipment in a timely fashion. To date, the Company has experienced certain, but minimal, delays due to COVID-19 among its suppliers and contractors.

ORGANIZATION

3 Months Ended

Mar. 31, 2023

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 building one and substantially completed the construction of building two as of March 31, 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”).

Risks and Uncertainties

Liquidity and Financial Condition

The Company incurred a net loss attributable to common stockholders of $26.5 million and negative cash flows from continuing operations of $8.6 million for the three months ended March 31, 2023. As of March 31, 2023, the Company had balances of cash and cash equivalents and restricted cash of $17.0 million, a working capital deficiency of $33.9 million, total stockholders’ equity of $146.3 million and an accumulated deficit of $212.7 million. The Company has commenced mining activities at the Lake Mariner Facility and at the Nautilus Cryptomine Facility, however not yet to the scale required to support its principal operations. The Company has relied primarily on proceeds from its issuances of debt and equity and sale of bitcoin mined to fund its principal operations.

In accordance with development of its bitcoin mining facilities, during the three months ended March 31, 2023, the Company invested approximately $10.0 million for purchases of and deposits on plant and equipment,. Also, during the three months ended March 31, 2023, the Company invested $2.3 million, net in its joint venture (see Note 11). As of March 31, 2023, the Company expects that is has sufficient capital to complete construction of the Lake Mariner Facility. However, until TeraWulf is able to generate positive cash flows from operations, TeraWulf expects to fund its business operations and infrastructure buildout primarily through cash on the balance sheet, sales of mined bitcoin or through the provision of miner hosting services and, if needed, the issuance of equity securities.

During the three months ended March 31, 2023, the Company accomplished several notable steps toward achieving near term positive cash flows from operations, namely: (1) the Company amended its long-term debt agreement (see Note 9) to, among other changes,

remove the fixed principal amortization through April 7, 2024 and, potentially, beyond, (2) through the issuance of shares of our common stock, par value $0.001 per share (the “Common Stock”), Common Stock warrants and convertible promissory notes (see Notes 13 and 14), the Company received net proceeds of $34.7 million, which along with cash flow from operations, is expected to be sufficient to satisfy the Company’s final capital expenditure requirements, other obligations and operating expenses in the months prior to achieving a free cash flow positive enterprise (3) mining activities commenced at the Nautilus Cryptomine Facility and the Company deems that it has funded all known and expected capital commitments at that facility, (4) the Company received substantially all contracted miners from the miner suppliers and has no remaining outstanding financial commitments under the miner purchase agreements (see Notes 11 and 12), (5) the received miners are sufficient to fully utilize mining capacity both in service and under construction at the Lake Mariner Facility and the Nautilus Cryptomine Facility and (6) the remaining construction activities at the Lake Mariner Facility and the Nautilus Cryptomine Facility are currently ongoing and expected to be complete in the second quarter of 2023. Additionally, if a business need requires its use, the Company has an active At Market Issuance Sales Agreement for sale of shares of Common Stock having an aggregate offering price of up to $200.0 million (the “ATM Offering”). The issuance of Common Stock under this agreement would be made pursuant to the Company’s effective registration statement on Form S-3 (Registration statement No. 333-262226). The Company has determined that it is probable that these actions and conditions will allow the Company to generate positive cash flows from operations and be able to realize its assets and discharge its liabilities and commitments in the normal course of business and, therefore, there is not substantial doubt about the Company’s ability to continue as a going concern through at least the next twelve months. The consolidated financial statements do not include any adjustments that might result from TeraWulf’s possible inability to continue as a going concern.

COVID-19

Although the World Health Organization declared on May 5, 2023 that it no longer considers COVID-19 a global health emergency, the Company may from time to time experience disruptions to its business operations resulting from continued COVID-19-related supply interruptions, including miner delivery interruptions. The Company may also experience COVID-19-related delays in construction and obtaining necessary equipment in a timely fashion. To date, the Company has experienced certain, but minimal, delays due to COVID-19 among its suppliers and contractors.