Document and Entity Information
Document and Entity Information - USD ($) | 9 Months Ended | ||
Dec. 31, 2021 | Mar. 28, 2022 | Sep. 30, 2021 | |
Document and Entity Information [Abstract] | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Document Period End Date | Dec. 31, 2021 | ||
Entity File Number | 001-41163 | ||
Entity Registrant Name | TERAWULF INC. | ||
Entity Incorporation, State or Country Code | DE | ||
Entity Tax Identification Number | 87-1909475 | ||
Entity Address State Or Province | MD | ||
Entity Address, Address Line One | 9 Federal Street | ||
Entity Address, City or Town | Easton | ||
Entity Address, Postal Zip Code | 21601 | ||
City Area Code | 410 | ||
Local Phone Number | 770-9500 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 0 | ||
Entity Common Stock, Shares Outstanding | 100,700,099 | ||
ICFR Auditor Attestation Flag | true | ||
Entity Central Index Key | 0001083301 | ||
Current Fiscal Year End Date | --12-31 | ||
Document Fiscal Year Focus | 2021 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Auditor Name | RSM US LLP | ||
Auditor Location | Boston, Massachusetts | ||
Auditor Firm ID | 49 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2021 | Mar. 31, 2021 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 43,448 | $ 6,300 |
Restricted cash | 3,007 | |
Prepaid expenses | 1,494 | 5 |
Amounts due from related parties | 647 | |
Other current assets | 108 | |
Current assets held for sale | 19,348 | |
Total current assets | 68,052 | 6,305 |
Equity in net assets of investee | 104,280 | |
Property, plant and equipment, net | 91,446 | |
Right-of-use asset | 1,024 | |
Deposits | 23,700 | |
Other assets | 109 | |
TOTAL ASSETS | 264,911 | 30,005 |
CURRENT LIABILITIES: | ||
Accounts payable | 11,791 | 38 |
Accrued construction liabilities | 3,892 | |
Other accrued liabilities | 3,771 | 261 |
Share based liabilities due to related party | 12,500 | |
Other amounts due to related parties | 60 | 1,440 |
Contingent value rights | 12,000 | |
Current portion of operating lease liability | 88 | |
Current liabilities held for sale | 1,755 | |
Total current liabilities | 45,857 | 1,739 |
Operating lease liability, net of current portion | 992 | |
Deferred tax liabilities, net | 256 | |
Long-term debt | 94,627 | |
TOTAL LIABILITIES | 141,732 | 1,739 |
Commitments and Contingencies (See Note 11) | ||
STOCKHOLDERS' EQUITY: | ||
Preferred stock, $0.001 par value, 25,000,000 and 20,000,000 authorized at December 31, 2021 and March 31, 2021, respectively; no shares issued and outstanding at December 31, 2021 and March 31, 2021 | ||
Common stock, $0.001 par value, 200,000,000 and 100,000,000 authorized at December 31, 2021 and March 31, 2021, respectively; 99,976,253 and 50,000,000 issued and outstanding at December 31, 2021 and March 31, 2021, respectively | 100 | 50 |
Additional paid-in capital | 218,762 | 29,892 |
Accumulated deficit | (95,683) | (1,676) |
Total stockholders' equity | 123,179 | 28,266 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 264,911 | $ 30,005 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2021 | Mar. 31, 2021 |
CONSOLIDATED BALANCE SHEETS | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock authorized | 25,000,000 | 20,000,000 |
Preferred stock shares issued | 0 | 0 |
Preferred stock shares outstanding | 0 | |
Common stock par value | $ 0.001 | $ 0.001 |
Common stock shares authorized | 200,000,000 | 100,000,000 |
Common stock shares issued | 99,976,253 | 50,000,000 |
Common stock shares outstanding | 99,976,253 | 50,000,000 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 2 Months Ended | 9 Months Ended |
Mar. 31, 2021 | Dec. 31, 2021 | |
Cost of operations: | ||
Operating expenses | $ 104 | |
Operating expenses - related party | $ 853 | 107 |
Selling, general and administrative expenses | 246 | 23,513 |
Selling, general and administrative expenses - related party | 577 | 17,999 |
Total cost of operations | 1,676 | 41,723 |
Operating loss | (1,676) | (41,723) |
Interest expense | (2,255) | |
Loss before income tax and equity in net loss of investee | (1,676) | (43,978) |
Loss before income tax and equity in net loss of investee | (1,676) | (45,516) |
Income tax benefit | (615) | |
Equity in net loss of investee, net of tax | (1,538) | |
Loss from continuing operations | (1,676) | (44,901) |
Loss from discontinued operations, net of tax | 49,106 | |
Net loss | $ (1,676) | $ (94,007) |
Loss per common share: | ||
Continuing operations, basic | $ (0.03) | $ (0.54) |
Continuing operations, diluted | (0.03) | (0.54) |
Discontinued operations, basic | (0.59) | |
Discontinued operations, diluted | (0.58) | |
Earnings per share, basic | (0.03) | (1.13) |
Earnings per share, diluted | $ (0.03) | $ (1.12) |
Weighted average common shares outstanding: | ||
Basic | 58,819,431 | 83,644,463 |
Diluted | 58,819,431 | 83,644,463 |
CONSOLIDATED STATEMENTS OF REDE
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Preferred StockSeries A Preferred Stock | Preferred Stock | Common StockSeries A Preferred Stock | Common Stock | Additional Paid-in CapitalSeries A Preferred Stock | Additional Paid-in Capital | Accumulated Deficit | Series A Preferred Stock | Total | ||
Beginning balance at Feb. 07, 2021 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | ||||||
Beginning balance (in shares) at Feb. 07, 2021 | 0 | [1] | 0 | ||||||||
Issuance of stock, net of issuance costs | $ 50 | 29,892 | 29,942 | ||||||||
Issuance of stock, net of issuance costs (in shares) | 50,000,000 | ||||||||||
Net loss | (1,676) | (1,676) | |||||||||
Ending balance at Mar. 31, 2021 | $ 50 | 29,892 | (1,676) | 28,266 | |||||||
Ending balance (in shares) at Mar. 31, 2021 | 50,000,000 | ||||||||||
Issuance of stock, net of issuance costs | $ 49,315 | $ 2 | 74,374 | 74,376 | |||||||
Issuance of stock, net of issuance costs (in shares) | 2,000,000 | [1] | 2,261,932 | ||||||||
Common stock issuance in conjunction with debt offering, net of issuance costs | $ 1 | 24,638 | 24,639 | ||||||||
Common stock issuance in conjunction with debt offering, net of issuance costs (in shares) | 839,398 | ||||||||||
Series A Preferred Stock converted to common stock | $ (49,315) | $ 2 | $ 49,313 | $ 49,315 | |||||||
Series A Preferred Stock converted to common stock (in shares) | (2,000,000) | [1] | 1,739,311 | ||||||||
Reverse merger exchange ratio share adjustment | $ 43 | (43) | |||||||||
Reverse merger exchange ratio share adjustment (in shares) | 43,136,087 | ||||||||||
Common stock issued for acquisition of IKONICS Corporation | $ 2 | 40,588 | 40,590 | ||||||||
Common stock issued for acquisition of IKONICS Corporation (in shares) | 1,999,525 | ||||||||||
Net loss | (94,007) | (94,007) | |||||||||
Ending balance at Dec. 31, 2021 | $ 100 | $ 218,762 | $ (95,683) | $ 123,179 | |||||||
Ending balance (in shares) at Dec. 31, 2021 | 99,976,253 | ||||||||||
[1] | The redeemable convertible preferred stock was presented in the mezzanine section of the consolidated balance sheets while outstanding. |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 2 Months Ended | 9 Months Ended |
Mar. 31, 2021 | Dec. 31, 2021 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (1,676) | $ (94,007) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Amortization of debt issuance costs and accretion of debt discount | 990 | |
Related party expense to be settled with respect to common stock | 12,500 | |
Deferred income tax benefit | (615) | |
Equity in net loss of investee, net of tax | 1,538 | |
Loss from operations of discontinued operations, net of tax | 49,106 | |
Changes in operating assets and liabilities: | ||
Increase in prepaid expenses | (1,489) | |
Increase in amounts due from related parties | (647) | |
Increase in other current assets | (5) | (108) |
Decrease in right-of-use asset | 52 | |
Increase in other assets | (109) | |
Increase in accounts payable | 38 | 5,679 |
Increase in accrued construction liabilities | 3,892 | |
Increase in other accrued liabilities | 203 | 3,453 |
(Decrease) increase in other amounts due to related parties | 1,440 | (1,380) |
Increase in operating lease liability | 4 | |
Net cash used in operating activities from continuing operations | (21,141) | |
Net cash used in operating activities from discontinued operations | (2,958) | |
Net cash used in operating activities | (24,099) | |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Acquisition of a business, net of cash acquired | (10,280) | |
Investments in joint venture related to direct payments made on behalf of joint venture | (93,911) | |
Reimbursable payments for deposits on plant and equipment made on behalf of a joint venture partner | (56,057) | |
Reimbursement of payments for deposits on plant and equipment made on behalf of a joint venture partner | 56,057 | |
Reimbursement from joint venture partner for deposits on plant and equipment contributed to the joint venture | 11,850 | |
Purchase of and deposits on plant and equipment | (23,700) | (85,372) |
Net cash used in investing activities | (23,700) | (177,713) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from issuance of long-term debt, net of issuance costs | 118,276 | |
Proceeds from issuance of promissory notes to stockholders | 25,000 | |
Repayments of promissory notes to stockholders | (25,000) | |
Proceeds from issuance of common stock, net of issuance costs | 30,000 | 74,376 |
Proceeds from issuance of Series A Preferred Stock, net of issuance costs | 49,315 | |
Net cash provided by financing activities | 30,000 | 241,967 |
Net change in cash and cash equivalents and restricted cash | 6,300 | 40,155 |
Cash and cash equivalents and restricted cash at beginning of period | 0 | 6,300 |
Cash and cash equivalents and restricted cash at end of period | $ 6,300 | 46,455 |
Cash paid during the period for: | ||
Interest | $ 252 |
ORGANIZATION
ORGANIZATION | 9 Months Ended |
Dec. 31, 2021 | |
ORGANIZATION | |
ORGANIZATION | NOTE 1 – ORGANIZATION Organization On December 13, 2021 (the “Closing Date”), TeraWulf Inc. (formerly known as Telluride Holdco, Inc.), a Delaware corporation, completed the previously announced strategic business combination pursuant to the agreement and plan of merger, dated as of June 24, 2021 (as amended, supplemented or otherwise modified prior to the Closing Date, the “Merger Agreement”), by and among TeraWulf Inc., IKONICS Corporation, a Minnesota corporation (“IKONICS”), Telluride Merger Sub I, Inc., a Minnesota corporation (“Merger Sub I”), Telluride Merger Sub II, Inc., a Delaware corporation (“Merger Sub II”), and TeraCub Inc. (formerly known as TeraWulf Inc.), a Delaware corporation that was formed on February 8, 2021 (“TeraCub”). Pursuant to the terms of the Merger Agreement, (i) Merger Sub I, a wholly-owned subsidiary of TeraWulf Inc., which was a wholly-owned subsidiary of IKONICS, merged with and into IKONICS (the “First Merger”), with IKONICS surviving the First Merger, and (ii) Merger Sub II, a wholly-owned subsidiary of TeraWulf Inc., merged with and into TeraCub (the “Second Merger” and, together with the First Merger, the “Mergers”), with TeraCub surviving the Second Merger. In connection with or as a result of the First Merger and the Second Merger, each of IKONICS and TeraCub became a wholly-owned subsidiary of TeraWulf Inc. In addition, in connection with the consummation of the Mergers, Telluride Holdco, Inc. was renamed TeraWulf Inc., and TeraWulf Inc. was renamed TeraCub Inc. TeraWulf Inc. and its subsidiaries are referred to in these consolidated financial statements as “TeraWulf” or the “Company.” TeraWulf’s planned principal operations consist of developing, constructing and operating bitcoin mining facilities in the United States that are fueled by clean, low cost and reliable power sources. TeraWulf expects to operate 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 to mine bitcoin and validate transactions on the bitcoin network TeraWulf’s and its joint venture’s two bitcoin mining facilities are in New York and Pennsylvania and are under construction as of December 31, 2021. The Pennsylvania bitcoin mining facility is being developed and constructed through a joint venture (see Note 10). The Company’s New York bitcoin mining facility is wholly-owned. During 2021, the Company entered into certain purchase agreements with two bitcoin miner manufacturers to acquire up to a total of 78,000 bitcoin miners, which are expected to be delivered between December 2021 and December 2022. One of the purchase agreements was subsequently assigned to the Company’s joint venture. See Note 10 for additional information. In May 2021, TeraWulf created three wholly-owned subsidiaries to facilitate ownership of bitcoin mining facilities or joint venture interests related thereto. Lake Mariner Data LLC and Kyalami Data LLC are subsidiaries involved in developing wholly-owned bitcoin mining facilities in New York. As of the date these consolidated financial statements were available to be issued, Kayalami Data LLC was inactive. TeraWulf (Thales) LLC (“Thales”) is a subsidiary holding interests in a joint venture involved in developing bitcoin mining facilities in Pennsylvania (see Note 10). IKONICS’ traditional business has been 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 are primarily screen printing and abrasive etching. More recently, IKONICS has augmented its customer offerings with inkjet receptive films, ancillary chemicals and related equipment to provide a full line of products and services to its customers. TeraWulf has classified the IKONICS business as held for sale and discontinued operations in these consolidated financial statements (see Note 4). Risks and Uncertainties Liquidity and Financial Condition The Company incurred a net loss of $94.0 million, including an impairment charge of $49.1 million on the acquired IKONICS business, and negative cash flows from operations of $24.1 million for the nine months ended December 31, 2021. As of December 31, 2021, the Company had balances of cash and cash equivalents of $43.4 million, working capital of $22.2 million, total stockholders’ equity of $123.2 million and an accumulated deficit of $95.7 million. The Company has commenced mining activities, however not yet to scale, and therefore has not generated material revenues from its mining business. The Company has relied on proceeds from its issuances of debt and equity to fund its principal operations. In accordance with its plan to develop its bitcoin mining facilities, during the nine months ended December 31, 2021, the Company paid approximately $70.6 million as deposits on miners, and has significant future obligations related to these miner purchase agreements as detailed in Note 11. Also during the nine months ended December 31, 2021, the Company invested million, net in its joint venture and has commitments under its joint venture agreement as detailed in Note 10. The Company will need additional capital in order to meet these obligations in accordance with the existing contractual terms and to fund the planned development of its bitcoin mining facilities. Until TeraWulf is able to generate positive cash flows from operations, TeraWulf expects to fund its business operations and infrastructure buildout through the issuance of debt or equity securities. Subsequent to December 31, 2021, the Company entered into an At Market Issuance Sales Agreement for sale of shares of Common Stock having an aggregate offering price of up to million (the “ATM Offering”). The issuance of Common Stock under this agreement will be made pursuant to the Company’s effective registration statement on Form S-3 (Registration statement No. 333-262226). See Note 17. However, there can be no assurance that the ATM Offering or any other financing will be successfully consummated on acceptable terms and volume, if at all, which may impact the timing or scale of TeraWulf’s planned development. In the event TeraWulf is unable to raise additional capital, TeraWulf may seek alternative arrangements or potential partnerships in order to fund its planned development. In the opinion of management, while it expects to be successful in its fundraising efforts, these factors, which include elements of capital acquisition outside the control of the Company, raise substantial doubt about TeraWulf’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 The Company’s results of operations could be adversely affected by general conditions in the economy and in the global financial markets, including conditions that are outside of the Company’s control, such as the outbreak and global spread of the novel coronavirus disease (“COVID-19”). The COVID-19 pandemic that was declared on March 11, 2020 has caused significant economic dislocation in the United States and globally as governments across the world, including the United States, introduced measures aimed at preventing the spread of COVID-19. The spread of COVID-19 and the imposition of related public health measures have resulted in, and are expected to continue to result in, increased volatility and uncertainty in the cryptocurrency space. Any severe or prolonged economic downturn, as result of the COVID-19 pandemic or otherwise, could result in a variety of risks to the business and management cannot anticipate all the ways in which the current economic climate and financial market conditions could adversely impact its business. The Company may experience disruptions to its business operations resulting from supply interruptions (including miner delivery interruptions), quarantines, self-isolations, or other movement and restrictions on the ability of its employees or its counterparties to perform their jobs and provide services. The Company may also experience delays in construction and obtaining necessary equipment in a timely fashion. If the Company is unable to effectively set up and service its miners, its ability to mine bitcoin will be adversely affected. The future impact of the COVID-19 pandemic is still highly uncertain and there is no assurance that the COVID-19 pandemic or any other pandemic, or other unfavorable global economic, business or political conditions, will not materially and adversely affect the Company’s business, prospects, financial condition, and operating results. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Dec. 31, 2021 | |
SIGNIFICANT ACCOUNTING POLICIES | |
SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany balances and transactions have been eliminated. Upon the Closing Date, the Company assumed the fiscal year end of December 31. Prior to the Mergers, the TeraCub fiscal year ended on March 31. The Mergers were accounted for as a reverse merger whereby the accounting acquirer was TeraCub due to TeraCub’s historic shareholders having the majority voting control in the Company, the board of directors members being associated with TeraCub and the senior management of TeraCub becoming the senior management of the Company. Therefore, the historical information included in these consolidated financial statements is that of TeraCub. The operations of IKONICS are included in these consolidated financial statements commencing with the consummation of the Mergers. Upon acquisition, the IKONICS business met the assets held for sale and discontinued operations criteria and is reflected as discontinued operations held for sale in the consolidated financial statements. See Notes 3 and 4 for additional information. Certain amounts as of March 31, 2021 and for the period February 8, 2021 (date of inception) to March 31, 2021 have been reclassified for consistency with the current period presentation. These reclassifications have no effect on the previously reported financial position or results of operations. Variable Interest Entities Variable interest entities (“VIE”) are legal entities in which equity investors do not have (i) sufficient equity at risk for the legal entity to finance its activities without additional subordinated financial support, or (ii) as a group, the power, through voting or similar rights, to direct the activities of the legal entity that most significantly impact the entity’s economic performance, or (iii) the obligation to absorb the expected losses of the legal entity or the right to receive expected residual returns of the legal entity. The Company would consolidate any VIE in which it has a controlling financial interest through being deemed to be the primary beneficiary of the VIE. The primary beneficiary of a VIE has both of the following characteristics: (1) the power to direct the activities of the VIE that most significantly impact its economic performance; and (2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could be significant to the VIE. If both characteristics are met, the Company considers itself to be the primary beneficiary and therefore will consolidate that VIE into its consolidated financial statements. The Company determines whether it is the primary beneficiary of a VIE upon initial involvement with a VIE and reassesses whether it is the primary beneficiary of a VIE on an ongoing basis. The determination of whether an entity is a VIE and whether the Company is the primary beneficiary of a VIE is based upon facts and circumstances for the VIE and requires significant judgments such as whether the entity is a VIE, whether the Company’s interest in a VIE is a variable interest, the determination of the activities that most significantly impact the economic performance of the entity, whether the Company controls those activities, and whether the Company has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. In 2021, the Company entered into a joint venture, Nautilus Cryptomine LLC (“Nautilus”), with an unrelated co-venturer to develop, construct and operate a bitcoin mining facility in Pennsylvania. Due to the initial nature of the joint venture and the continued commitment for additional financing, the Company determined Nautilus is a VIE. While the Company has the ability to exercise significant influence over Nautilus, the Company has determined that it does not have the power to direct the activities that most significantly impact the economic performance of Nautilus. The power to direct the activities of Nautilus that most significantly impact Nautilus’ economic performance are shared equally by both parties within the joint venture due to the requirement for both equity holders to approve many of the key operating decisions and when not equally shared, are predominantly under the control of the co-venturer, including through the co-venturer’s majority representation on the board of managers. As such, the Company has determined that it is not the primary beneficiary of Nautilus and, therefore, has accounted for this entity under the equity method of accounting. Risks associated with the Company’s involvement with Nautilus include a commitment to fund additional equity investments. See Note 10 for additional information. Equity Method of Accounting Investee companies that are not consolidated, but over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or not the Company exercises significant influence with respect to an investee depends on an evaluation of several factors including, among others, representation on the investee company’s board of directors and ownership level, which is generally a 20% to 50% interest in the voting securities of the investee company. Under the equity method of accounting, an investee company’s accounts are not reflected within the Company’s consolidated balance sheets and statements of operations; however, the Company’s share of the earnings or losses of the investee company is reflected in the caption “Equity in net loss of investee, net of tax” in the consolidated statements of operations. The Company’s carrying value in an equity method investee company is reflected in the caption “Equity in net assets of investee ” in the Company’s consolidated balance sheets. Interest related to construction of assets at equity method investee companies is capitalized when the financial statement effect of capitalization is material, construction of the asset at the equity method investee has begun, the equity method investee has not commenced its principal operations and interest is being incurred. Interest capitalization ends at the earlier of the asset being substantially complete and ready for its intended use, the equity method investee commencing principal operations or when interest costs are no longer being incurred. When the Company’s carrying value in an equity method investee company is reduced to zero, no further losses are recorded in the Company’s consolidated financial statements unless the Company guaranteed obligations of the investee company or has committed additional funding. When the investee company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized. The Company’s investment in companies that are accounted for under the equity method of accounting consists of a 50% interest in Nautilus. See Note 10 for additional information. Business Combinations The Company includes the results of operations of the businesses that it acquires as of the acquisition date. The Company allocates the purchase price of the acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the fair values of identifiable assets and liabilities is recorded as goodwill. Contingent consideration is included within the purchase price and is recognized at its fair value on the acquisition date. A liability resulting from contingent consideration is remeasured to fair value as of each reporting date until the contingency is resolved, and subsequent changes in fair value are recognized in earnings. Contingent consideration is recorded in current liabilities in the Company’s consolidated balance sheets. While the Company uses its best estimates and assumptions to accurately apply preliminary values to assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of the assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the consolidated statements of operations. Accounting for business combinations requires management to make significant estimates and assumptions, especially at the acquisition date, including estimates for intangible assets, contractual obligations assumed, pre-acquisition contingencies, and contingent consideration, where applicable. Although the Company believes the assumptions and estimates it has made have been reasonable and appropriate, they are based in part on historical experience and information obtained from management of the acquired companies and are inherently uncertain. Critical estimates in valuing certain of the intangible assets acquired include; future expected cash flows, estimated market royalty rates, customer attrition rates, cost of developed technology and discount rates. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates, or actual results. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred. Use of Estimates in the Financial Statements The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used for (but are not limited to) such items as the fair values of assets acquired and liabilities assumed in business combinations, the establishment of useful lives for property, plant and equipment and intangible assets, the impairment of goodwill, the fair value of equity securities issued as a component of a debt offering, the establishment of right-of-use assets and lease liabilities that arise from leasing arrangements, the timing of commencement of capitalization for plant and equipment, recoverability of deferred tax assets and the recording of various accruals. These estimates are made after considering past and current events and assumptions about future events. Actual results could differ from those estimates. Supplemental Cash Flow Information The following table shows supplemental cash flow information (in thousands): Period February 8, 2021 (date of Nine Months Ended inception) to December 31, 2021 March 31, 2021 Supplemental disclosure of non-cash activities: Right-of-use asset obtained in exchange for lease obligation $ 1,076 $ — Contribution of deposits on plant and equipment to joint venture $ 11,850 $ — Common stock issuance costs in other accrued liabilities $ — $ 58 Common stock issued for business acquisition $ 40,590 $ — Contingent value rights issued for business acquisition $ 12,000 $ — Common stock issued in conjunction with debt offering representing debt issuance costs $ 25,727 $ — Purchases of and deposits on plant and equipment in accounts payable and accrued construction liabilities $ 6,074 $ — Investment in joint venture in other accrued liabilities $ 57 $ — Series A Preferred Stock converted to common stock $ 49,315 $ — Reverse merger exchange ratio share adjustment $ 43 $ — Cash and Cash Equivalents Highly liquid instruments with an original maturity of three months or less are classified as cash equivalents. The Company maintains cash and cash equivalent balances primarily at one financial institution that is insured by the Federal Deposit Insurance Corporation (“FDIC”). The Company’s accounts at this institution are insured, up to $250,000, by the FDIC. As of December 31, 2021, the Company’s bank balances exceeded the FDIC insurance limit in an amount of $42.7 million. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits. As of December 31, 2021 and March 31,2021, the Company had cash and cash equivalents of $43.4 million and $6.3 million, respectively. Restricted Cash The Company considers cash and marketable securities to be restricted when withdrawal or general use is legally restricted. The Company reports restricted cash in the consolidated balance sheets, and determines current or non-current classification based on the expected duration of the restriction. The restricted cash included in the consolidated balance sheet as of December 31, 2021 is restricted as to use due to being held as a construction escrow by a third party escrow agent. The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets that total to the amounts shown in the consolidated statements of cash flows (in thousands): Cash and cash equivalents $ 43,448 $ 6,300 Restricted cash 3,007 — Cash and cash equivalents and restricted cash $ 46,455 $ 6,300 Segment Reporting Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision–making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision–making group (“CODM”) is composed of the chief executive officer, chief operating officer and chief strategy officer. The Company currently operates in the Digital Currency Mining segment and through its ownership of IKONICS operates in the Imaging Technology segment. The Company’s mining operations are located in the United States, and the Company has employees only in the United States and views its mining operations as one operating segment as the CODM reviews financial information on a consolidated basis in making decisions regarding resource allocations and assessing performance. TeraWulf has classified the IKONICS segment as held for sale and discontinued operations in these consolidated financial statements (see Note 4). Property, Plant and Equipment Property, plant and equipment are recorded at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the lease term. Property, plant and equipment includes deposits, amounting to approximately $70.6 million as of December 31, 2021, on purchases of such assets, including miners, which would be included in property, plant and equipment upon receipt. As of March 31, 2021, deposits on miners were recorded as deposits and not recorded in property, plant and equipment as the Company had not determined which bitcoin mining facility would utilize those miners. See Note 10 for additional information. Interest related to construction of assets is capitalized when the financial statement effect of capitalization is material, construction of the asset has begun, and interest is being incurred. Interest capitalization ends at the earlier of the asset being substantially complete and ready for its intended use or when interest costs are no longer being incurred. Impairment of Long-lived Assets The Company reviews its long-lived assets, including property, plant and equipment, for impairment when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. Any impairment loss recorded is measured as the amount by which the carrying value of the assets exceeds the fair value of the assets. During the nine months ended December 31, 2021 and for the period February 8, 2021 (date of inception) to March 31, 2021, the Company has Goodwill and Indefinite-lived Intangible Assets The Company evaluates goodwill and indefinite-lived intangible assets for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable. The Company may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying value and if so, it performs a quantitative test. The Company estimates the fair value of the reporting units using discounted cash flows. The Company’s analyses require significant assumptions and judgments, including assumptions about future economic conditions, revenue growth, and operating margins, among other factors. Events or changes in circumstances considered in the qualitative analysis, many of which are subjective in nature, include: a significant negative trend in the Company’s industry or overall economic trends, a significant change in how the Company uses the acquired assets, a significant change in business strategy, a significant decrease in the market value of the asset, and a significant change in regulations or in the industry that could affect the value of the asset. The Company compares the carrying value of each reporting unit and indefinite-lived intangible asset to its estimated fair value and if the fair value is determined to be less than the carrying value, the Company would recognize an impairment loss for the difference. The Company recorded goodwill of Leases The Company determines if an arrangement is a lease at inception and, if so, classifies the lease as an operating or finance lease. Operating leases are included in right-of-use (“ROU”) asset, current portion of operating lease liabilities, and long-term lease operating liabilities in the consolidated balance sheets. Finance leases are included in property, plant and equipment, current portion of finance lease liabilities, and long-term finance lease liabilities in the consolidated balance sheets. The Company does not recognize a ROU asset or lease liability for short-term leases having initial terms of 12 months or less and instead recognizes rent expense on a straight-line basis over the lease term. In an arrangement that is determined to be a lease, the Company includes both the lease and nonlease components as a single component and accounts for it as a lease when the Company would otherwise recognize the cost associated with both the lease and nonlease components in a similar fashion. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease ROU assets and liabilities are recognized at commencement date, and subsequently remeasured upon changes to the underlying lease arrangement, based on the present value of lease payments over the lease term. If the lease does not provide an implicit rate or if the implicit rate is not determinable, the Company generally uses an estimate of its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at the commencement date. The ROU asset also includes any lease prepayments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Costs associated with operating lease ROU assets are recognized on a straight-line basis within operating expenses or selling, general and administrative, as appropriate, over the term of the lease. Finance ROU lease assets are amortized within operating expenses or selling, general and administrative, as appropriate, on a straight-line basis over the shorter of the estimated useful lives of the assets or, in the instance where title does not transfer at the end of the lease term, the lease term. The interest component of a finance lease is included in interest expense and recognized using the effective interest method over the lease term. As of December 31, 2021 and March 31, 2021, the Company is not a counterparty to any finance leases. Stock Issuance Costs Stock issuance costs are recorded as a reduction to issuance proceeds. Stock issuance costs incurred prior to the closing of the related issuance are recorded in other assets in the consolidated balance sheets if the closing of the related issuance is deemed probable. Debt Issuance Costs and Debt Discount Debt issuance costs and debt discount are recorded as a direct reduction of the carrying amount of the debt and are amortized to interest expense using the effective interest method over the contractual term of the debt. Debt issuance costs include incremental third-party costs directly related to debt issuance such as attorney and financial advisor fees. Debt discount includes upfront fees and proceeds allocated to other components included in the debt issuance. The allocation of proceeds between the debt instrument and any other components included in the debt issuance, including common stock, is generally based on the relative fair value allocation method. Held for Sale and Discontinued Operations Classification The Company classifies a business as held for sale in the period in which management commits to a plan to sell the business, the business is available for immediate sale in its present condition, an active program to complete the plan to sell the business is initiated, the sale of the business within one year is probable and the business is being marketed at a reasonable price in relation to its fair value. Newly acquired businesses that meet the held-for-sale classification criteria upon acquisition are reported as discontinued operations. Upon a business’ classification as held for sale, net assets are measured for impairment. Goodwill impairment is measured in accordance with the method described in the accounting policy entitled “Goodwill and Indefinite-lived Intangible Assets.” An impairment loss is recorded for long-lived assets held for sale when the carrying amount of the asset exceeds its fair value less cost to sell. Other assets and liabilities are generally measured for impairment by comparing their carrying values to their respective fair values. A long-lived asset shall not be depreciated or amortized while it is classified as held for sale. Income Taxes The Company accounts for income taxes pursuant to the provision of Accounting Standards Codification (“ASC”) 740-10, “ Accounting for Income Taxes The Company’s policy is to recognize interest and penalties that would be assessed in relation to the settlement value of unrecognized tax benefits as a component of income tax expense. The Company did not accrue Revenue Recognition The Company recognizes revenue under the Financial Accounting Standards Board (“FASB”) ASC 606 “ Revenue from Contracts with Customers ● Step 1: Identify the contract with the customer ● Step 2: Identify the performance obligations in the contract ● Step 3: Determine the transaction price ● Step 4: Allocate the transaction price to the performance obligations in the contract ● Step 5: Recognize revenue when the Company satisfies a performance obligation In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met: the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract). If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following: ● Variable consideration ● Constraining estimates of variable consideration ● The existence of a significant financing component in the contract ● Noncash consideration ● Consideration payable to a customer Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate. Mining pools The Company has entered into an arrangement with a cryptocurrency mining pool to provide computing power to the mining pool. The arrangement is terminable at any time by either party and our enforceable right to compensation only begins when the Company provides computing power to the mining pool operator. The mining pool applies the Full Pay Per Share (“FPPS”) model. Under the FPPS model, in exchange for providing computing power to the pool, the Company is entitled to compensation at an amount that approximates the total bitcoin that could have been mined using the Company’s computing power, based upon the then current blockchain difficulty. Under this model, the Company is entitled to compensation regardless of whether the pool operator successfully records a block to the bitcoin blockchain. Fair value of the cryptocurrency award received is determined using the quoted price of the related cryptocurrency at the time of receipt. There is no significant financing component in these transactions. There is, however, consideration payable to the customer in the form of a pool operator fee; this fee will be deducted from the proceeds the Company receives and will be recorded as contra-revenue, as it does not represent a payment for a distinct good or service. Providing computing power in cryptocurrency transaction verification services will be an output of the Company’s ordinary activities. The provision of providing such computing power is a performance obligation. The transaction consideration the Company receives, if any, is non-cash consideration and is all variable. Fair value of the cryptocurrency award received for cryptocurrency transaction verification services is determined using the quoted price of the related cryptocurrency at the time of receipt. There is no significant financing component in these transactions. Cryptocurrencies Cryptocurrencies, including bitcoin, will be included in current assets in the consolidated balance sheets. Cryptocurrencies purchased will be recorded at cost and cryptocurrencies awarded to the Company through the Company’s mining activities will be accounted for in connection with the Company’s revenue recognition policy disclosed above. Cryptocurrencies will be accounted for as intangible assets with indefinite useful lives. An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value, which is measured using the quoted price of the cryptocurrency at the time its fair value is being measured. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, the Company is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. Purchases of cryptocurrencies, if any, made by the Company will be included within investing activities in the consolidated statements of cash flows, while cryptocurrencies awarded to the Company through its mining activities will be included as a non-cash adjustment within operating activities in the consolidated statements of cash flows. The sales of cryptocurrencies will be included within investing activities in the consolidated statements of cash flows and any realized gains or losses from such sales will be included in other income (expense) in the consolidated statements of operations. The Company will account for its gains or losses in accordance with the first in first out (“FIFO”) method of accounting. Loss per Share The Company computes earnings (loss) per share using the two-class method required for participating securities. The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. Basic loss per share of common stock is computed by dividing the Company’s net loss by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share reflects the effect on weighted average shares outstanding of the number of additional shares outstanding if potentially dilutive instruments, if any, were converted into common stock using the treasury stock method. The computation of diluted loss per share does not include dilutive instruments in the weighted average shares outstanding, as they would be anti-dilutive. The Company had no dilutive instruments or participating securities as of December 31, 2021 and March 31, 2021. Concentrations The Company or its joint venture have contracted with two suppliers for the provision of bitcoin miners. One supplier for the joint venture is well behind on its miner delivery schedule due to COVID-19 lockdowns, power shortages and other operational issues at its factory. The supplier has committed to fulfilling its performance obligations with increased future production levels at multiple production facilities. The Company does not believe that these counterparties represent a significant performance risk. The Company expects to operate bitcoin mining facilities. While the Company may choose to mine other cryptocurrencies in the future, it has no plans to do so currently. If the market value of bitcoin declines significantly, the consolidated financial condition and results of operations of the Company may be adversely affected. Recent Accounting Standards In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) . In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity In December 2019, the FASB issued ASU 2019-12, Income |
BUSINESS COMBINATION
BUSINESS COMBINATION | 9 Months Ended |
Dec. 31, 2021 | |
BUSINESS COMBINATION | |
BUSINESS COMBINATION | NOTE 3 – BUSINESS COMBINATION On June 25, 2021, TeraCub entered into the Merger Agreement with IKONICS, a public company registered on the National Association of Securities Dealers Automated Quotations (“Nasdaq”), pursuant to which, among other things, TeraCub would effectively acquire IKONICS and become a publicly traded company on the Nasdaq, which was the primary purpose of the business combination. The closing date of the acquisition was December 13, 2021. For financial accounting purposes, the business combination was treated as a reverse merger whereby the accounting acquirer was TeraCub due to TeraCub’s historic shareholders having the majority voting control in the Company, the board of directors members being associated with TeraCub and the senior management of TeraCub becoming the senior management of TeraWulf. Pursuant to business combination accounting, the Company applied the acquisition method, which requires the assets acquired and liabilities assumed be recorded at fair value with limited exceptions. The excess of the purchase price over the assets acquired and liabilities assumed represents goodwill. The transactions contemplated by the Mergers were intended to be a “tax-free” transaction pursuant to the Internal Revenue Code. None of the goodwill recognized is expected to be deductible for income tax purposes. Under the terms of the Merger Agreement, each share of IKONICS common stock issued and outstanding immediately prior to the transaction close, as defined (the “Closing”), was automatically converted into and exchanged for (i) one validly issued, fully paid and nonassessable share of common stock of the surviving public company, TeraWulf, (ii) one contractual contingent value right (“CVR”) to a Contingent Value Rights Agreement (“CVR Agreement” as discussed below) and (iii) the right to receive $5.00 in cash, without interest. TeraCub common stock (including new shares of TeraWulf common stock resulting from the conversion of the Series A Preferred Stock described in Note 13) issued and outstanding immediately prior to the Closing was automatically converted into the right to receive a number of validly issued, fully paid and nonassessable shares of TeraWulf such that the TeraCub common stockholders prior to conversion would effectively control Pursuant to the CVR Agreement, each shareholder of IKONICS as of immediately prior to the Closing, received one non-transferable CVR for each outstanding share of common stock of IKONICS then held. The holders of the CVRs are entitled to receive 95% of the Net Proceeds (as defined in the CVR Agreement), if any, from the sale, transfer, disposition, spin-off, or license of all or any part of the pre-merger business of IKONICS, subject to a reserve of up to 10% of the Gross Proceeds (as defined in the CVR Agreement) from such transaction. The CVRs do not confer to the holders thereof any voting or equity or ownership interest in TeraWulf. The CVRs are not transferable, except in limited circumstances, and will not be listed on any quotation system or traded on any securities exchange. The CVR Agreement will terminate after all payment obligations to the holders thereof have been satisfied. Holders of CVRs will not be eligible to receive payment for dispositions, if any, of any part of the pre-merger business of IKONICS after the eighteen-month anniversary of the Closing. On December 2, 2021, the Merger Agreement was amended to provide for TeraCub reimbursement to IKONICS prior to the Closing of all payments made or then agreed to be made by IKONICS in exchange for the cancellation of restricted stock unit awards. TeraCub reimbursed IKONICS approximately $3.0 million under this provision. Consideration Transferred The following table summarizes the fair value of the aggregate consideration paid for IKONICS (in thousands): Cash consideration (1) $ 13,712 Equity instruments: 1,999,525 shares of TeraWulf Inc. (2) 40,590 Contingent consideration: Contingent Value Rights (3) 12,000 $ 66,302 (1) The cash paid at close represents the gross contractual amount paid. Net cash paid, which accounts for the cash acquired of $ 3.4 million, was $ 10.3 million and is reflected as an investing activity in the consolidated statement of cash flows for the nine months ended December 31, 2021. (2) The fair value of the common shares issued as part of the consideration paid for IKONICS was determined on the basis of the closing market price of the Company’s Common Stock on December 14, 2021, the first day of trading subsequent to the acquisition date. (3) The fair value of the CVRs was estimated by applying the income and market approaches. The measurement is based on significant inputs that are not observable in the market, which ASC 820 “ Fair Value Measurements and Disclosures” refers to as Level 3 inputs. Key assumptions include (1) a business enterprise value of $ 15.9 million, (2) an implied probability of sale of 90% and (3) estimated transaction and other deductible costs of $ 1.6 million. The significant unobservable inputs used in applying the income approach include a discount rate of 11.5% and a long-term growth rate of 2.5% . As of December 31, 2021, the amount recognized for the contingent consideration arrangement and the assumptions used to develop the estimates had not changed. Allocation of Purchase Price The following table summarizes the allocation of the purchase price to the fair value of the assets acquired and liabilities assumed for the acquisition of IKONICS (in thousands): Cash $ 3,433 Inventory 3,760 Other current assets 2,596 Property, plant and equipment 10,449 Identifiable intangible assets 3,440 Goodwill 48,338 Current liabilities (4,842) Deferred tax liabilities (872) $ 66,302 The Company’s consolidated financial statements include the operating results of IKONICS beginning on December 13, 2021, the date of the acquisition. The operating loss of $49.1 million related to the IKONICS’ business has been reflected in loss from discontinued operations, net of tax in the Company’s consolidated statement of operations for the nine months ended December 31, 2021. On an unaudited pro forma basis, the net loss of the combined entity as though the business combination had occurred on February 8, 2021 (date of inception) is $94.5 million and $1.9 million for the nine months ended December 31, 2021 and the period February 8, 2021 (date of inception) to March 31, 2021, respectively. Pro forma basic and diluted loss per share is for the nine months ended December 31, 2021 and the period February 8, 2021 (date of inception) to March 31, 2021, respectively. Because IKONICS has been classified as held for sale upon the acquisition date, its results of operations are included in loss from discontinued operations, net of tax in the consolidated statements of operations and there would be no change to reported revenues from continuing operations on a pro forma basis for those periods. |
ASSETS HELD FOR SALE AND DISCON
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS | 9 Months Ended |
Dec. 31, 2021 | |
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS | |
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS | NOTE 4 – ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS Upon acquisition, the IKONICS business met the assets held-for-sale and discontinued operations criteria and is reflected as discontinued operations held for sale in these consolidated financial statements. The Company determined that the IKONICS business qualified as assets held for sale as management committed to a plan to sell the business, the business was in readily sellable form and it was deemed probable that the business would be sold in a twelve-month period. The structure of the business combination, through the CVR Agreement, contemplated the sale of the IKONICS legacy business whereby the Company would become solely a bitcoin mining focused entity. The Merger Agreement requires IKONICS, after the Closing, to use its reasonable best efforts to consummate a sale of its legacy business as soon as reasonably practicable. The CVR Agreement provides that 95% of the net proceeds of the disposition, as defined, of the IKONICS business accrue to the historical stockholders of IKONCS if the disposition is consummated within eighteen months from the Closing. In conjunction with the classification as held for sale, the Company has reported the IKONICS business as discontinued operations in these consolidated financial statements and has recognized a loss on discontinued operations, net of tax of $48.9 million to write down the related carrying amounts to their fair values less estimated cost to sell. The fair values of assets held for sale were determined using a combination of the cost approach, income approach and market approach. The assets and liabilities of IKONICS are presented separately in current assets held for sale and current liabilities held for sale, respectively, in the consolidated balance sheet at December 31, 2021, and consist of the following (in thousands): Trade receivables $ 1,327 Inventories 3,737 Prepaid expenses and other current assets 944 Property, plant and equipment 10,036 Intangible assets 3,304 Current assets held for sale $ 19,348 Accounts payable $ 1,207 Accrued compensation 439 Other accrued liabilities 109 Current liabilities held for sale $ 1,755 The Company has classified IKONCS’ long-lived assets in current assets held for sale as it is deemed probable that the disposition will occur and proceeds will be collected within one year. Intangible assets includes the following definite-lived intangible assets at December 31, 2021 (in thousands, except years): Weighted Average Useful Carrying Remaning Value Life (Years) Customer relationships $ 2,161 11.5 Developed technology 663 8.0 Trade names 480 13.7 $ 3,304 11.1 The loss from discontinued operations, net of tax presented in the consolidated statement of operations for the nine months ended December 31, 2021 consists of the following (in thousands): Net sales $ 676 Cost of goods sold 487 Gross profit 189 Selling, general and administrative expenses 388 Research and development expenses 20 Impairment on classification as held for sale 48,887 Loss from discontinued operations before income tax (49,106) Income tax expense (benefit) — Loss from discontinued operations, net of tax $ (49,106) Total cash flows used in operating activities from discontinued operations was $3.0 million in the consolidated statement of cash flows for the nine months ended December 31, 2021. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Dec. 31, 2021 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | NOTE 5 – FAIR VALUE MEASUREMENTS Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-level fair value hierarchy prioritizing the inputs to valuation techniques is used to measure fair value. The levels are as follows: (Level 1) observable inputs such as quoted prices in active markets for identical assets or liabilities; (Level 2) observable inputs for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs other than quoted prices that are observable either directly or indirectly from market data; and (Level 3) unobservable inputs in which there is little or no market data, which require the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The following table illustrates the financial instruments measured at fair value on a non-recurring basis segregated by hierarchy fair value levels as of December 31, 2021 (in thousands): Significant Significant Quoted Prices Other Other in Active Observable Unobservable Markets Inputs Inputs Carrying Value (Level 1) (Level 2) (Level 3) Impairment Goodwill $ — $ — $ — $ — $ 48,338 Long-lived assets held for sale - intangible assets 3,304 — — 3,304 136 $ 3,304 $ — $ — $ 3,304 $ 48,474 At December 31, 2021, the significant unobservable inputs used to estimate fair value include an attrition rate of 4% to 10% (with a weighted average of 8%) and a discount rate of 27% for customer relationships, twelve months’ time to recreate for developed technology and a royalty rate of 0.5% and a discount rate of 27% for trade names. The Company has determined the long-term debt fair value at December 31, 2021 approximates its book value due to the short duration between the issuance of the long-term debt and December 31, 2021. See Note 9. The carrying values of cash and cash equivalents, restricted cash, prepaid expenses, amounts due from related parties, other current assets, accounts payable, accrued construction liabilities, other accrued liabilities and other amounts due to related parties are considered to be representative of their respective fair values principally due to their short-term maturities. There were no material non-recurring fair value measurements as of December 31, 2021 and March 31, 2021 except for the calculation of the allocation of the IKONICS purchase price to the fair values of the assets acquired and liabilities assumed and the impairment loss upon IKONICS’ classification as held for sale. |
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT | 9 Months Ended |
Dec. 31, 2021 | |
PROPERTY, PLANT AND EQUIPMENT | |
PROPERTY, PLANT AND EQUIPMENT | NOTE 6 — PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, net consisted of the following as of December 31, 2021 (in thousands): December 31, 2021 March 31, 2021 Construction in process $ 20,867 $ — Equipment 19 — Deposits on miners 70,560 — 91,446 — Less: accumulated depreciation — — $ 91,446 $ — The Company capitalizes a portion of the interest on funds borrowed to finance its capital expenditures. Capitalized interest is recorded as part of an asset’s cost and will be depreciated over the asset’s useful life. Capitalized interest costs was $94,000 for the nine months ended December 31, 2021. No depreciation expense was recorded for the nine months ended December 31, 2021 or the period February 8, 2021 (date of inception) to March 31, 2021. |
LEASES
LEASES | 9 Months Ended |
Dec. 31, 2021 | |
LEASES | |
LEASES | NOTE 7 — LEASES Effective in May 2021, the Company entered into a ground lease related to its planned bitcoin mining facility in New York with a counterparty which is a related party due to control by a member of Company management. The lease includes fixed payments and contingent payments, including an annual escalation based on the change in the Consumer Price Index as well as the Company’s proportionate share of the landlord’s cost to own, operate and maintain the premises. The lease has an initial term of The following is a maturity analysis of the annual undiscounted cash flows of the estimated operating lease liabilities as of December 31, 2021 (in thousands): Year ending December 31: 2022 $ 150 2023 150 2024 150 2025 150 2026 150 Thereafter 662 $ 1,412 A reconciliation of the undiscounted cash flows to the operating lease liabilities recognized in the consolidated balance sheet as of December 31, 2021 follows (in thousands): Undiscounted cash flows of the operating lease $ 1,412 Unamortized discount 332 Total operating lease liability 1,080 Current portion of operating lease liability 88 Operating lease liability, net of current portion $ 992 |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Dec. 31, 2021 | |
INCOME TAXES | |
INCOME TAXES | NOTE 8 – INCOME TAXES The components of net loss before income tax for continuing operations (comprised of the total of loss before income tax and equity in net loss of investee and equity in net loss of investee, net of tax) for the nine months ended December 31, 2021 and the period February 8, 2021 (date of inception) to March 31, 2021 are as follows (in thousands): Period February 8, 2021 (date of Nine Months Ended inception) to December 31, March 31, 2021 2021 Domestic $ (45,516) $ (1,676) Foreign — — Total $ (45,516) $ (1,676) The Company’s income tax benefit for continuing operations for the nine months ended December 31, 2021 and the period February 8, 2021 (date of inception) to March 31, 2021 are as follows (in thousands): Period February 8, 2021 (date of Nine Months Ended inception) to December 31, March 31, 2021 2021 Current: Federal $ — $ — State — — Total current income tax (benefit) expense — — Deferred: Federal (615) — State — — Total deferred income tax benefit (615) — Income tax benefit $ (615) $ — A reconciliation between income tax benefit and the expected tax benefit at the statutory rate for the nine months ended December 31, 2021 and the period February 8, 2021 (date of inception) to March 31, 2021 are as follows: Period February 8, 2021 (date of Nine Months Ended inception) to December 31, March 31, 2021 2021 Federal statutory rate 21.0 % 21.0 % State rate, net of federal benefit 0.0 % 0.0 % Non-deductible equity financing costs (2.8) % 0.0 % Change in valuation allowance (16.8) % (21.0) % Effective tax rate 1.4 % 0.0 % The significant components of the Company’s deferred tax liabilities, net consist of the following at December 31, 2021 and March 31, 2021 (in thousands): December 31, 2021 March 31, 2021 Deferred tax assets: Net operating loss $ 6,678 $ 352 Share based liabilities 2,630 — Accruals and reserves 470 — Tax credit carryforwards 278 — Operating lease liability 227 — Gross deferred tax assets 10,283 352 Valuation allowance (8,295) (352) Deferred tax assets, net 1,988 — Deferred tax liabilities: Property, plant and equipment (899) — Intangible assets (723) — Inventory (407) — Right-of-use asset (215) — Deferred tax liabilites, net $ (256) $ — ASC 740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of available evidence, it is more likely than not that some or a portion or all the deferred tax assets will not be realized. The Company has estimated that approximately $0.6 million of deferred tax assets will be utilized to offset the Company’s deferred tax liabilities established in purchase accounting during the nine months ended December 31, 2021. Based upon the level of historical U.S. losses and future projections over the period in which the net deferred tax assets are deductible, at this time, management believes it is more likely than not that the Company will not realize the benefits of the remaining deductible temporary differences, and as a result the Company has recorded a valuation allowance for the amount of deferred tax assets that will not be realized. The increase in the December 31,2021 valuation allowance of $7.9 million is primarily attributable to the current year net loss. As of December 31, 2021 and March 31, 2021, for federal income tax purposes the Company had total net operating loss carryforwards of approximately $31.5 million and $1.6 million, respectively. As of December 31, 2021, approximately $0.1 million will begin to expire in 2037 and approximately $31.4 million of the net operating losses will have an indefinite carryforward as a result of the Tax Cuts and Jobs Act. For state income tax purposes, as of December 31, 2021 and March 31, 2021 the Company had state net operating loss carryforwards of approximately $0.7 million and $0.0 million, respectively, which begin to expire in 2029. As of December 31, 2021 and March 31, 2021, the Company has available federal research development tax credit carryforwards of approximately $0.1 million and $0.0 million, respectively. The federal research credits will begin to expire in 2036. As of December 31, 2021 and March 31, 2021, the Company has available state research development tax credit carryforwards of approximately $0.1 million and $0.0 million, respectively. The state tax credit carryforwards will begin to expire in 2034. Under the provisions of the Internal Revenue Code, the net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Net operating loss and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company follows the provisions of ASC 740-10, Accounting for Uncertainty in Income Taxes , which specifies how tax benefits for uncertain tax positions are to be recognized, measured, and recorded in financial statements; requires certain disclosures of uncertain tax matters; specifies how reserves for uncertain tax positions should be classified on the balance sheet; and provides transition and interim period guidance, among other provisions. At December 31, 2021 and March 31, 2021, the Company has not recorded any long-term liabilities for uncertain tax positions. The Company’s policy is to recognize interest and penalties accrued on any uncertain tax positions as a component of income tax expense, if any, in its consolidated statements of operations. For the nine months ended December 31, 2021 and the period February 8, 2021 (date of inception) to March 31, 2021, no estimated interest or penalties were recognized on uncertain tax positions. The Company files income tax returns in the U.S. federal tax jurisdiction and various state jurisdictions. Since the Company is in a loss carryforward position, the Company is generally subject to examination by the U.S. federal, state and local income tax authorities for all years in which a loss carryforward is available. The statute of limitations for assessment by federal and state tax jurisdictions in which the Company has business operations is open for the tax year ended December 31, 2021. The tax years subject to examination vary by jurisdiction. |
DEBT
DEBT | 9 Months Ended |
Dec. 31, 2021 | |
DEBT | |
DEBT | NOTE 9 – DEBT Promissory Notes Between October 4, 2021 and November 19, 2021, the Company obtained loans (each, a “Loan”) from its three largest stockholders in an aggregate principal amount of $25.0 million, each evidenced by a promissory note, certain of which were amended and restated subsequent to issuance. Interest on the unpaid principal balance of each Loan accrued at a rate of 8% per annum and was paid in kind and added to the principal balance of such Loan on a monthly basis. The outstanding principal amount of each Loan, together with all accrued and unpaid interest thereon, was due and payable in full on the earliest to occur of: (i) the issuance of equity securities by the Company or any of its subsidiaries under any offering in an amount greater than $50.0 million; and (ii) the first anniversary of the issuance date of such Loan. The Company could have prepaid the outstanding principal balance of the Loans, in whole or in part, without penalty or premium at any time prior to the applicable maturity date. In December 2021, the Loans were repaid in full. Long-Term Debt Long-term debt consists of the following as of December 31, 2021 (in thousands): Term loan $ 123,500 Debt issuance costs and debt discount (28,873) 94,627 Less long-term debt due within one year — Total long-term debt, net of portion due within one year $ 94,627 On December 1, 2021, TeraCub entered into a Loan, Guaranty and Security Agreement with Wilmington Trust, National Association as administrative agent (the “LGSA”). The LGSA consists of a $123.5 million term loan facility (the “Term Loan”). On December 14, 2021, TeraWulf. executed a joinder agreement whereby it effectively became the successor borrower to TeraCub and assumed all obligations under the LGSA. The Company shall pay the outstanding principal balance of the Term Loan in quarterly installments, commencing in April 2023, equal to 12.5% of the original principal amount of the Term Loan. The maturity date of the Term Loan is December 1, 2024. The Term Loan bears an interest rate of 11.5% and an upfront fee of 1%, an amount of approximately $1.2 million. Upon the occurrence and during the continuance of an event of default, as defined, the applicable interest rate will be 13.5%. Interest payments are due quarterly in arrears. The Company has the option to prepay all or any portion of the Term Loan in increments of at least $5.0 million subject to certain prepayment fees, including: (1) if paid prior to the first anniversary of the LGSA, a make whole amount based on the present value of the unpaid interest that would have been paid on the prepaid principal amount over the first year of the Term Loan, (2) if paid subsequent to the first anniversary of the LGSA but prior to the second anniversary of the LGSA, an amount of The LGSA requires the Company to maintain or meet certain affirmative, negative, financial and reporting covenants. The affirmative covenants include, among other things, a requirement for the Company to maintain insurance coverage, maintain mining equipment and comply in all material respects with the Company’s Nautilus joint venture agreement (see Note 10), each as defined. The negative covenants restrict or limit the Company’s ability to, among other things, incur debt, create liens, divest or acquire assets, make restricted payments and permit the Company’s interest in the Nautilus joint venture to be reduced below 50%, each as defined. The LGSA also contains usual and customary events of default. If an event of default occurs and is continuing, the then outstanding obligations under the LGSA may become immediately due and payable. In connection with the LGSA, the Company issued to the holders of the Term Loans 839,398 shares of Common Stock (the “Term Loan Equity”), which is a quantity of Common Stock which represented 1.5% of the outstanding shares of the publicly registered shares of TeraWulf subsequent to the Closing. In connection with the issuance of the Term Loans, the Company incurred aggregate issuance costs of approximately $4.0 million, in addition to the $1.2 million upfront fee. The aggregate issuance costs and the upfront fee were allocated to the Term Loan Equity and the Term Loan based on the relative fair value method in the amounts of $1.1 million and $4.1 million, respectively. For the Term Loan, this $4.1 million was included in debt discount along with the fair value of the Term Loan Equity, an amount of $25.7 million. The total of these items, an amount of $29.8 million, represents debt issuance costs and debt discount and is deducted from the Term Loan proceeds and is being accreted into the long-term debt balance over the three-year term of the debt at an effective interest rate of 12.9%, which is in addition to the stated interest rate. For the nine months ended December 31, 2021, the Company amortized $990,000 of the capitalized debt issuance costs and debt discount to interest expense in the consolidated statement of operations. Capitalized debt issuance costs and debt discount of $28.9 million are recorded as a reduction of long-term debt at December 31, 2021 in the consolidated balance sheet. Principal maturities of outstanding long-term debt as of December 31, 2021 are as follows (in thousands): Year ending December 31: 2022 $ — 2023 46,313 2024 77,187 Total principal maturities $ 123,500 |
JOINT VENTURE
JOINT VENTURE | 9 Months Ended |
Dec. 31, 2021 | |
JOINT VENTURE | |
JOINT VENTURE | NOTE 10 – JOINT VENTURE On May 13, 2021, the Company and Talen Energy Corporation (“Talen”) (each a “Member” and collectively the “Members”) entered into a joint venture, Nautilus, to develop, construct and operate up to 300 MW of zero-carbon bitcoin mining in Pennsylvania (the “Joint Venture”). In connection with the Joint Venture, Nautilus simultaneously entered into (i) a ground lease (the “Ground Lease”), which includes an electricity supply component, with a related party of Talen, (ii) a Facility Operations Agreement with a related party of the Company and (3) a Corporate Services Agreement with a related party of Talen. Each Member holds a 50% interest in the Joint Venture. Pursuant to the terms of the Joint Venture agreement, TeraWulf would contribute $156.0 million both in cash and in-kind and Talen would contribute $156.0 million both in cash and in-kind to Nautilus by March 2022, unless otherwise determined in accordance with the Joint Venture agreement. The aforementioned contributions are now expected to be contributed by the third quarter of 2022, as agreed to by the Members. The Company capitalizes a portion of the interest on funds borrowed to finance its investments in Nautilus prior to Nautilus commencing its principal operations. Capitalized interest costs was $57,000 for the nine months ended December 31, 2021. On March 19, 2021, TeraCub executed an agreement for the purchase of bitcoin miners from Minerva Semiconductor Corp. (“Minerva”) for a total of 30,000 MV7 miners, with originally scheduled monthly deliveries of miners each between November 2021 and January 2022, for an aggregate price of $118.5 million (the “Minerva Purchase Agreement”). Pursuant to the Minerva Purchase Agreement, the Company paid an initial deposit of $23.7 million and the amount is included in deposits in the consolidated balance sheet as of March 31, 2021. During the nine months ended December 31, 2021, the Company paid to Minerva $16.8 million and was reimbursed by Talen for 50% of that amount and also reimbursed by Talen an additional amount of $11.9 million related to 50% of the initial deposit paid prior to March 31, 2021. The balance of payments under the Minerva Purchase Agreement were originally scheduled to be paid as follows: (i) On June 15, 2021, Nautilus entered into two Non-fixed Price Sales and Purchase Agreements for the purchase of bitcoin miners from Bitmain Technologies Limited (“Bitmain”) for a total of 30,000 S19j Pro miners, with originally scheduled monthly deliveries of 5,000 miners each between January 2022 and June 2022 (the “Bitmain Purchase Agreements”). During the nine months ended December 21, 2021, the Company paid to Bitmain approximately $124.6 million under the Bitmain Purchase Agreements. On a net basis, the Company funded approximately $76.9 million as Talen reimbursed the Company during the nine months ended December 31, 2021 approximately $47.7 million in accordance with the Joint Venture agreement. The Company’s direct payments to Minerva and Bitmain, among others, on behalf of Nautilus for the nine months ended December 31, 2021, are included in investments in joint venture related to direct payments made on behalf of joint venture in the consolidated statement of cash flows. A reconciliation of amounts included within this footnote to captions in the consolidated statement of cash flows follows (in thousands): Payment of TeraWulf 50% share of Minerva deposits $ (8,400) Payment of TeraWulf 50% share of Bitmain deposits (76,926) Other direct payments (8,585) Investments in joint venture related to direct payments made on behalf of joint venture $ (93,911) Payment of Talen 50% share of Minerva deposits $ (8,400) Payment of Talen 50% share of Bitmain deposits (47,657) Reimbursable payments for deposits on plant and equipment made on behalf of a joint venture partner $ (56,057) Talen reimbursement of 50% share of Minerva deposits $ 8,400 Talen reimbursement of 50% share of Bitmain deposits 47,657 Reimbursement of payments for deposits on plant and equipment made on behalf of a joint venture partner $ 56,057 Talen reimbursement of 50% share of Minerva initial deposit paid by TeraWulf in the period ended March 31, 2021 $ 11,850 Reimbursement from joint venture partner for deposits on plant and equipment contributed to the joint venture $ 11,850 Minerva Purchase Agreement assignment: TeraWulf 50% share of Minerva initial deposit paid by TeraWulf in the period ended March 31, 2021 $ (11,850) Contribution of deposits on plant and equipment to joint venture (non-cash activity) $ (11,850) Nautilus is a VIE accounted for using the equity method of accounting. The table below summarizes the Company’s interest in Nautilus and the Company’s maximum exposure to loss as a result of its involvement with the VIE as of December 31, 2021 (in thousands, except for percentages): Commitment to Company’s Future Company’s Net loss Variable Additional Maximum % Initial Additional Inception Interest in Contributions Exposure to Loss Entity Ownership Investment Investment to Date Entity (1) in Entity (2) Nautilus 50 % $ 18,000 $ 87,818 $ 1,538 $ 104,280 $ 50,239 $ 154,519 (1) The Members may seek alternate financing for the Pennsylvania bitcoin mining facility, which could reduce the amount of investments each Member would be required to provide. The Members may mutually agree on changes to the Pennsylvania bitcoin mining facility, which could increase or decrease the amount of contributions each Member is required to provide. (2) The maximum exposure at December 31, 2021 is determined by adding the Company’s variable interest in the entity and any explicit or implicit arrangements that could require the Company to provide additional financial support. The amount represents the contractually required capital contributions of the Company which are required for the initial phase of the Pennsylvania bitcoin mining facility buildout. The condensed results of operations for the nine months ended December 31,2021 and the condensed financial position as of December 31, 2021, of Nautilus are summarized below (in thousands): Nine months ended December 31, 2021 Condensed statements of operations information: Revenue $ — Operating expense 3,076 Net loss $ (3,076) December 31, 2021 Condensed balance sheet information: Current assets $ 4,960 Noncurrent assets 214,803 Total assets $ 219,763 Current liabilities $ 11,317 Equity 208,446 Total liabilities and equity $ 219,763 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Dec. 31, 2021 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 11 – COMMITMENTS AND CONTINGENCIES Litigation The Company is not a party to any material legal proceedings and is not aware of any pending or threatened claims. From time to time, the Company may be subject to various legal proceedings, regulatory inquiries and claims that arise in the ordinary course of its business activities. Bitmain Miner Purchase Agreements On December 7, 2021, the Company entered into a Non-fixed Price Sales and Purchase Agreement with Bitmain for the purchase of 3,000 S19XP miners, with originally scheduled monthly deliveries of 500 miners each between July 2022 and December 2022 (the “Second Bitmain Purchase Agreement”) for a total purchase price of $32.6 million. The Second Bitmain Purchase Agreement includes liquidated damage provisions that may be applied if payments are not made within sixty days of a payment due date, if not otherwise mutually extended. For a batch of miners comprising a monthly shipment, if timely payments were made on installments then due, the Company holds an option to partially or wholly cancel that batch of miners and the remaining balance on that batch shall be refunded no later than two years after such cancellation. The Company is responsible for all logistics costs related to transportation for the delivery of miners. Pursuant to the Second Bitmain Purchase Agreement, the Company paid an initial deposit of approximately $11.4 million during the nine months ended December 31, 2021. The balance of payments due under the Second Bitmain Purchase Agreement are scheduled to be paid in unequal monthly installments through November 2022. On December 15, 2021, the Company entered into a Non-fixed Price Sales and Purchase Agreement with Bitmain for the purchase of 15,000 S19XP miners, with originally scheduled monthly deliveries of 2,500 miners each between July 2022 and December 2022 (the “Third Bitmain Purchase Agreement”) for a total purchase price of $169.1 million. The Third Bitmain Purchase Agreement includes liquidated damage provisions that may be applied if payments are not made within sixty days of a payment due date, if not otherwise mutually extended. For a batch of miners comprising a monthly shipment, if timely payments were made on installments then due, the Company holds an option to partially or wholly cancel that batch of miners and the remaining balance on that batch shall be refunded no later than two years after such cancellation. The Company is responsible for all logistics costs related to transportation for the delivery of miners. Pursuant to the Third Bitmain Purchase Agreement, the Company paid an initial deposit of approximately $59.2 million during the nine months ended December 31, 2021. The balance of payments due under the Third Bitmain Purchase Agreement are scheduled to be paid in unequal monthly installments through November 2022. |
DEFINED CONTRIBUTION PLAN
DEFINED CONTRIBUTION PLAN | 9 Months Ended |
Dec. 31, 2021 | |
DEFINED CONTRIBUTION PLAN | |
DEFINED CONTRIBUTION PLAN | NOTE 12 – DEFINED CONTRIBUTION PLAN The TeraWulf Inc. 401(k) Plan is a safe harbor defined contribution plan which qualified under section 401(k) of the Internal Revenue Code. A participant’s right to claim a distribution of his or her account balance is dependent on the plan, Employee Retirement and Income Security Act guidelines and Internal Revenue Service regulations. All active participants are fully vested in all contributions to the 401(k) plan. During the nine months ended December 31, 2021 and the period February 8, 2021 (date of inception) to March 31, 2021, the Company expensed approximately $55,000 and $0, respectively, for Company matching contributions. |
TERACUB REDEEMABLE CONVERTIBLE
TERACUB REDEEMABLE CONVERTIBLE PREFERRED STOCK | 9 Months Ended |
Dec. 31, 2021 | |
TERACUB REDEEMABLE CONVERTIBLE PREFERRED STOCK | |
TERACUB REDEEMABLE CONVERTIBLE PREFERRED STOCK | NOTE 13 – TERACUB REDEEMABLE CONVERTIBLE PREFERRED STOCK In April 2021, TeraCub commenced a private placement offering of 2,000,000 shares of Series A Preferred Stock, at an original issuance price per share of $25.00, to certain individuals and accredited investors, for an aggregate amount of $50.0 million (the “Series A Private Placement”). On June 15, 2021, the Series A Private Placement concluded and was fully funded. On December 2, 2021, TeraCub’s Certificate of Incorporation was amended to provide that if the Closing under the Merger Agreement were to occur, the conversion ratio that shall apply to the conversion of shares of preferred stock immediately prior to the effective time of the Closing shall be equal to 0.8696560 shares of TeraCub common stock for each share of preferred stock. On December 13, 2021, the Closing was effected and TeraCub converted the 2,000,000 shares of preferred stock into 1,739,311 shares of common stock. No dividends were declared for the nine months ended December 31, 2021. |
COMMON STOCK
COMMON STOCK | 9 Months Ended |
Dec. 31, 2021 | |
COMMON STOCK | |
COMMON STOCK | NOTE 14 – COMMON STOCK TeraWulf Commensurate with the Closing, the TeraWulf Certificate of Incorporation was amended to provide for authorized shares of 225,000,000, divided into (a) 200,000,000 shares of Common Stock, with par value of $0.001 per share and (b) 25,000,000 shares of Preferred Stock, with par value of $0.001 per share. Each holder of a share of Common Stock shall be entitled to one vote of each common share held. Each holder of a share of Preferred Stock shall not be entitled to any voting powers. The board of directors may authorize one or more series of Preferred Stock and may fix the number of shares in such series and the designation, powers, preferences, rights, qualifications, limitations and restrictions in respect of the shares of such series. No series of preferred stock were authorized as of December 31, 2021. No dividends were declared for the nine months ended December 31, 2021. TeraCub Per the TeraCub Amended and Restated Certificate of Incorporation dated December 13, 2021, the total number of shares of all classes of stock authorized to be issued is 1,000 shares, all of which will be common stock with the par value of $0.001 per share. Prior to that date, TeraCub’s authorized capital stock consisted of 100,000,000 shares of common stock, par value $0.001 per share, and 20,000,000 shares of preferred stock, par value $0.001 per share, with 2,000,000 shares of such authorized Preferred Stock designated as Series A Preferred Stock. Upon establishment of the Company, 44,000,000 shares of common stock were issued to the Company’s founders. In March 2021, TeraCub completed a private offering of 6,000,000 shares of common stock at a price per share of $5.00 to certain individuals, for an aggregate gross amount of $30.0 million (the “Common Stock Private Placement”), representing approximately 12% of the outstanding shares of the TeraCub’s common stock subsequent to such issuance of shares. The applicable stockholders agreement provided for certain limitations on share transfer rights, for registration of shares in connection with an initial public offering, for execution of a lock-up agreement upon an initial public offering, for certain tag-along and drag-along rights and for certain preemptive rights upon future issuance of shares by TeraCub. The voting rights of common stockholders and certain board of director features including the number of directors, board composition and replacement of directors under certain conditions were circumscribed by certain stockholders which are controlled by certain members of the Company’s board of directors. Proceeds of the Common Stock Private Placement were used primarily to fund the purchase of bitcoin mining equipment. In December 2021, TeraCub completed a private offering of 2,261,932 shares of common stock at a price per share of $33.82 to certain institutional and individual investors, for gross proceeds of approximately $76.5 million (the “December Private Placement”). Additionally, in connection with the Term Loan offering, TeraCub issued 839,398 shares of common stock. On December 13, 2021, the Closing was effected and the then outstanding 54,840,641 shares of TeraCub common stock converted into 97,976,728 of shares of Common Stock of TeraWulf, resulting in a total of No dividends were declared for the nine months ended December 31, 2021 and for the period from February 8, 2021 (date of inception) to March 31, 2021. |
STOCK BASED COMPENSATION
STOCK BASED COMPENSATION | 9 Months Ended |
Dec. 31, 2021 | |
STOCK BASED COMPENSATION | |
STOCK BASED COMPENSATION | NOTE 15 – STOCK BASED COMPENSATION On May 13, 2021, the Company made effective the 2021 Omnibus Incentive Plan (the “Plan”) for purpose of attracting and retaining employees, consultants and directors of the Company and its affiliates by providing each the opportunity to acquire an equity interest in the Company or other incentive compensation in order to align the interests of such individuals with those of the Company’s stockholders. The Plan provides for a maximum number of shares to be issued, limitations of shares to be delivered for incentive stock options and a maximum compensation amount for any non-employee member of the board of directors, among other provisions. The form of grants under the Plan includes stock options, stock appreciation rights, restricted stock and restricted stock units. No grants have been made under the Plan as of the date the consolidated financial statements were available to be issued. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Dec. 31, 2021 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 16 – RELATED PARTY TRANSACTIONS On April 27, 2021, the Company entered into an Administrative and Infrastructure Services Agreement (the “Services Agreement”) with Beowulf Electricity & Data Inc. (“Beowulf E&D”), a related party due to control by a member of Company management. Under the Services Agreement, Beowulf E&D will provide, or cause its affiliates to provide, to TeraWulf certain services necessary to build out and operate certain bitcoin mining facilities anticipated to be developed by the Company and support the Company’s ongoing business, including, among others, services related to construction, technical and engineering, operations and maintenance, procurement, information technology, finance and accounting, human resources, legal, risk management and external affairs consultation. The Services Agreement has an initial term of five years and provides for certain fixed, passthrough and incentive payments to Beowulf E&D, including issuing to certain designated employees of Beowulf E&D awards with respect to shares of TeraWulf Common Stock upon the consummation of an initial public offering of TeraWulf or the consummation of a merger following which TeraWulf is listed on a nationally recognized securities exchange and, thereafter, upon achievement of certain milestones regarding bitcoin mining capacity deployed at the bitcoin mining facilities. For the base fee, the Company has agreed to pay Beowulf E&D in monthly installments an annual fee for the first year in the amount of $7.0 million and, thereafter, an annual fee equal to the greater of $10.0 million or $0.0037 per kilowatt hour of electric load utilized by the bitcoin mining facilities. The Services Agreement also provides for reimbursement of cost and expenses incurred in connection with providing the services. For the nine months ended December 31, 2021, the Company paid Beowulf E&D $8.5 million under the Services Agreement. Selling, general and administrative – related party in the consolidated statement of operations includes $5.4 million for the nine months ended December 31, 2021 related to the base fee and reimbursement of costs and expenses. As of December 31, 2021, $583,000 is included in prepaid expenses, $647,000 is included in amounts due from related parties and $1.9 million is included in property, plant and equipment, net in the consolidated balance sheet. The Services Agreement provides for performance related milestones and related incentive compensation. In connection with the listing of its Common Stock on a nationally recognized stock exchange, the Company agreed to issue awards valued at $12.5 million with respect to shares of its Common Stock to certain designated employees of Beowulf E&D in accordance with TeraWulf’s then effective Plan. This performance milestone was met on the Closing Date. However, no awards have been issued as of the date these consolidated financial statements were available for issuance. The $12.5 million performance expense is included in selling, general and administrative – related party in the consolidated statement of operations for the nine months ended December 31, 2021. As of December 31, 2021, $12.5 million is included in share based liabilities due to related party in the consolidated balance sheet. Once the mining facilities have utilized 100MW of cryptocurrency mining load in the aggregate, and for every incremental 100 MW of cryptocurrency mining load deployed by the mining facilities in the aggregate thereafter, TeraWulf agreed to issue additional awards of shares of TeraWulf Common Stock each in the amount of $2.5 million to certain designated employees of Beowulf E&D in accordance with TeraWulf’s then effective Plan. In April 2021, the Company reimbursed Heorot Power Holdings LLC, a related party due to control by a member of Company management, $1.6 million related to (i) the development of bitcoin mining facilities including services and third-party costs for transmission consulting, engineering consulting, transmission system impact study costs, electricity procurement and site development costs, (ii) joint venture investigation and negotiation and (iii) certain Company organizational and legal costs. During the nine months ended December 31, 2021 and for the period from February 8, 2021 (date of inception) to March 31, 2021, $120,000 and $577,000, respectively, was included in selling, general and administrative expense – related party in the consolidated statements of operations and $0 and $853,000, respectively, was included in operating expenses – related party in the consolidated statements of operations. In June 2021, the Company paid a related party due to control by a member of Company management $632,000 for the purchase of certain electrical infrastructure and equipment for its planned bitcoin mining facility in New York. The certain electrical infrastructure and equipment is included in property, plant and equipment, net in the consolidated balance sheet as of December 31, 2021. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Dec. 31, 2021 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 17 – SUBSEQUENT EVENTS The Company has evaluated subsequent events through March 31, 2022, which is also the date these consolidated financial statements were available to be issued, and has determined that the following subsequent events require disclosure. Subsequent to December 31, 2021, the Company made payments totaling approximately $12.1 million to Bitmain for miner deposits related to purchase commitments under the Second Bitmain Purchase Agreement and Third Bitmain Purchase Agreement. In February 2022, the Company entered into the an At Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. and D.A. Davidson & Co. (each, individually, an “Agent” and, collectively, the “Agents”), pursuant to which the Company may offer and sell, from time to time, through or to the agents, acting as agent or principal, shares of the Company’s Common Stock, par value $0.001 per share, having an aggregate offering price of up to $200.0 million (the “Shares”). The Company is not obligated to sell any Shares under the Sales Agreement. of March 28, 2022, the Company sold 521,390 shares of Common Stock for net proceeds of $4.3 million. The issuance and sale of the Shares by the Company under the ATM Offering will be made pursuant to the Company’s effective registration statement on Form As S-3 (Registration Statement No. 333-262226) (as amended, the “Registration Statement”), filed with the U.S. Securities and Exchange Commission (the “SEC”) on January 31, 2022, and declared effective on February 4, 2022. In March 2022, the Company issued shares of Series A Convertible Preferred Stock (the “Preferred Stock”) of approximately $10 million and Common Stock of approximately $5 million (including approximately $3 million issued pursuant to the ATM Offering) primarily to existing shareholders and newly appointed directors. The Preferred Stock has no maturity date and will be entitled to cumulative non-cash dividends at the rate of per annum. The initial conversion rate for the Preferred Stock is liquidation preference. The Preferred Stock contains certain customary anti-dilution rights, adjustments to the conversion price and mandatory conversion rights, each as defined. In February 2022, the Company entered into an agreement with the Power Authority of the State of New York for the purchase of 90 MW of electric power over a term of ten years. This agreement includes certain Company site investment commitments. In March 2022, the Company entered into an exchange agreement with Nautilus and the Nautilus co-venturer whereby the Company purchases 2,500 of Nautilus’ Bitmain miners to be received under the Bitmain Purchase Agreements in exchange for an option to either (1) deliver exchange miners, as defined, at a later date in fulfillment of the Company’s obligations or (2) incur a pro forma adjustment to Nautilus’ distributions such that the Nautilus co-venturer is made whole as though the miners had not been transferred to the Company. |
SIGNIFICANT ACCOUNTING POLICI_2
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Dec. 31, 2021 | |
SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany balances and transactions have been eliminated. Upon the Closing Date, the Company assumed the fiscal year end of December 31. Prior to the Mergers, the TeraCub fiscal year ended on March 31. The Mergers were accounted for as a reverse merger whereby the accounting acquirer was TeraCub due to TeraCub’s historic shareholders having the majority voting control in the Company, the board of directors members being associated with TeraCub and the senior management of TeraCub becoming the senior management of the Company. Therefore, the historical information included in these consolidated financial statements is that of TeraCub. The operations of IKONICS are included in these consolidated financial statements commencing with the consummation of the Mergers. Upon acquisition, the IKONICS business met the assets held for sale and discontinued operations criteria and is reflected as discontinued operations held for sale in the consolidated financial statements. See Notes 3 and 4 for additional information. Certain amounts as of March 31, 2021 and for the period February 8, 2021 (date of inception) to March 31, 2021 have been reclassified for consistency with the current period presentation. These reclassifications have no effect on the previously reported financial position or results of operations. |
Variable Interest Entities | Variable Interest Entities Variable interest entities (“VIE”) are legal entities in which equity investors do not have (i) sufficient equity at risk for the legal entity to finance its activities without additional subordinated financial support, or (ii) as a group, the power, through voting or similar rights, to direct the activities of the legal entity that most significantly impact the entity’s economic performance, or (iii) the obligation to absorb the expected losses of the legal entity or the right to receive expected residual returns of the legal entity. The Company would consolidate any VIE in which it has a controlling financial interest through being deemed to be the primary beneficiary of the VIE. The primary beneficiary of a VIE has both of the following characteristics: (1) the power to direct the activities of the VIE that most significantly impact its economic performance; and (2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could be significant to the VIE. If both characteristics are met, the Company considers itself to be the primary beneficiary and therefore will consolidate that VIE into its consolidated financial statements. The Company determines whether it is the primary beneficiary of a VIE upon initial involvement with a VIE and reassesses whether it is the primary beneficiary of a VIE on an ongoing basis. The determination of whether an entity is a VIE and whether the Company is the primary beneficiary of a VIE is based upon facts and circumstances for the VIE and requires significant judgments such as whether the entity is a VIE, whether the Company’s interest in a VIE is a variable interest, the determination of the activities that most significantly impact the economic performance of the entity, whether the Company controls those activities, and whether the Company has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. In 2021, the Company entered into a joint venture, Nautilus Cryptomine LLC (“Nautilus”), with an unrelated co-venturer to develop, construct and operate a bitcoin mining facility in Pennsylvania. Due to the initial nature of the joint venture and the continued commitment for additional financing, the Company determined Nautilus is a VIE. While the Company has the ability to exercise significant influence over Nautilus, the Company has determined that it does not have the power to direct the activities that most significantly impact the economic performance of Nautilus. The power to direct the activities of Nautilus that most significantly impact Nautilus’ economic performance are shared equally by both parties within the joint venture due to the requirement for both equity holders to approve many of the key operating decisions and when not equally shared, are predominantly under the control of the co-venturer, including through the co-venturer’s majority representation on the board of managers. As such, the Company has determined that it is not the primary beneficiary of Nautilus and, therefore, has accounted for this entity under the equity method of accounting. Risks associated with the Company’s involvement with Nautilus include a commitment to fund additional equity investments. See Note 10 for additional information. |
Equity Method of Accounting | Equity Method of Accounting Investee companies that are not consolidated, but over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or not the Company exercises significant influence with respect to an investee depends on an evaluation of several factors including, among others, representation on the investee company’s board of directors and ownership level, which is generally a 20% to 50% interest in the voting securities of the investee company. Under the equity method of accounting, an investee company’s accounts are not reflected within the Company’s consolidated balance sheets and statements of operations; however, the Company’s share of the earnings or losses of the investee company is reflected in the caption “Equity in net loss of investee, net of tax” in the consolidated statements of operations. The Company’s carrying value in an equity method investee company is reflected in the caption “Equity in net assets of investee ” in the Company’s consolidated balance sheets. Interest related to construction of assets at equity method investee companies is capitalized when the financial statement effect of capitalization is material, construction of the asset at the equity method investee has begun, the equity method investee has not commenced its principal operations and interest is being incurred. Interest capitalization ends at the earlier of the asset being substantially complete and ready for its intended use, the equity method investee commencing principal operations or when interest costs are no longer being incurred. When the Company’s carrying value in an equity method investee company is reduced to zero, no further losses are recorded in the Company’s consolidated financial statements unless the Company guaranteed obligations of the investee company or has committed additional funding. When the investee company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized. The Company’s investment in companies that are accounted for under the equity method of accounting consists of a 50% interest in Nautilus. See Note 10 for additional information. |
Business Combinations | Business Combinations The Company includes the results of operations of the businesses that it acquires as of the acquisition date. The Company allocates the purchase price of the acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the fair values of identifiable assets and liabilities is recorded as goodwill. Contingent consideration is included within the purchase price and is recognized at its fair value on the acquisition date. A liability resulting from contingent consideration is remeasured to fair value as of each reporting date until the contingency is resolved, and subsequent changes in fair value are recognized in earnings. Contingent consideration is recorded in current liabilities in the Company’s consolidated balance sheets. While the Company uses its best estimates and assumptions to accurately apply preliminary values to assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of the assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the consolidated statements of operations. Accounting for business combinations requires management to make significant estimates and assumptions, especially at the acquisition date, including estimates for intangible assets, contractual obligations assumed, pre-acquisition contingencies, and contingent consideration, where applicable. Although the Company believes the assumptions and estimates it has made have been reasonable and appropriate, they are based in part on historical experience and information obtained from management of the acquired companies and are inherently uncertain. Critical estimates in valuing certain of the intangible assets acquired include; future expected cash flows, estimated market royalty rates, customer attrition rates, cost of developed technology and discount rates. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates, or actual results. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred. |
Use of Estimates in the Financial Statements | Use of Estimates in the Financial Statements The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used for (but are not limited to) such items as the fair values of assets acquired and liabilities assumed in business combinations, the establishment of useful lives for property, plant and equipment and intangible assets, the impairment of goodwill, the fair value of equity securities issued as a component of a debt offering, the establishment of right-of-use assets and lease liabilities that arise from leasing arrangements, the timing of commencement of capitalization for plant and equipment, recoverability of deferred tax assets and the recording of various accruals. These estimates are made after considering past and current events and assumptions about future events. Actual results could differ from those estimates. |
Supplemental Cash Flow Information | Supplemental Cash Flow Information The following table shows supplemental cash flow information (in thousands): Period February 8, 2021 (date of Nine Months Ended inception) to December 31, 2021 March 31, 2021 Supplemental disclosure of non-cash activities: Right-of-use asset obtained in exchange for lease obligation $ 1,076 $ — Contribution of deposits on plant and equipment to joint venture $ 11,850 $ — Common stock issuance costs in other accrued liabilities $ — $ 58 Common stock issued for business acquisition $ 40,590 $ — Contingent value rights issued for business acquisition $ 12,000 $ — Common stock issued in conjunction with debt offering representing debt issuance costs $ 25,727 $ — Purchases of and deposits on plant and equipment in accounts payable and accrued construction liabilities $ 6,074 $ — Investment in joint venture in other accrued liabilities $ 57 $ — Series A Preferred Stock converted to common stock $ 49,315 $ — Reverse merger exchange ratio share adjustment $ 43 $ — |
Cash and Cash Equivalents | Cash and Cash Equivalents Highly liquid instruments with an original maturity of three months or less are classified as cash equivalents. The Company maintains cash and cash equivalent balances primarily at one financial institution that is insured by the Federal Deposit Insurance Corporation (“FDIC”). The Company’s accounts at this institution are insured, up to $250,000, by the FDIC. As of December 31, 2021, the Company’s bank balances exceeded the FDIC insurance limit in an amount of $42.7 million. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits. As of December 31, 2021 and March 31,2021, the Company had cash and cash equivalents of $43.4 million and $6.3 million, respectively. |
Restricted Cash | Restricted Cash The Company considers cash and marketable securities to be restricted when withdrawal or general use is legally restricted. The Company reports restricted cash in the consolidated balance sheets, and determines current or non-current classification based on the expected duration of the restriction. The restricted cash included in the consolidated balance sheet as of December 31, 2021 is restricted as to use due to being held as a construction escrow by a third party escrow agent. The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets that total to the amounts shown in the consolidated statements of cash flows (in thousands): Cash and cash equivalents $ 43,448 $ 6,300 Restricted cash 3,007 — Cash and cash equivalents and restricted cash $ 46,455 $ 6,300 |
Segment Reporting | Segment Reporting Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision–making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision–making group (“CODM”) is composed of the chief executive officer, chief operating officer and chief strategy officer. The Company currently operates in the Digital Currency Mining segment and through its ownership of IKONICS operates in the Imaging Technology segment. The Company’s mining operations are located in the United States, and the Company has employees only in the United States and views its mining operations as one operating segment as the CODM reviews financial information on a consolidated basis in making decisions regarding resource allocations and assessing performance. TeraWulf has classified the IKONICS segment as held for sale and discontinued operations in these consolidated financial statements (see Note 4). |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment are recorded at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the lease term. Property, plant and equipment includes deposits, amounting to approximately $70.6 million as of December 31, 2021, on purchases of such assets, including miners, which would be included in property, plant and equipment upon receipt. As of March 31, 2021, deposits on miners were recorded as deposits and not recorded in property, plant and equipment as the Company had not determined which bitcoin mining facility would utilize those miners. See Note 10 for additional information. Interest related to construction of assets is capitalized when the financial statement effect of capitalization is material, construction of the asset has begun, and interest is being incurred. Interest capitalization ends at the earlier of the asset being substantially complete and ready for its intended use or when interest costs are no longer being incurred. |
Impairment of Long-lived Assets | Impairment of Long-lived Assets The Company reviews its long-lived assets, including property, plant and equipment, for impairment when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. Any impairment loss recorded is measured as the amount by which the carrying value of the assets exceeds the fair value of the assets. During the nine months ended December 31, 2021 and for the period February 8, 2021 (date of inception) to March 31, 2021, the Company has |
Goodwill and Indefinite-lived Intangible Assets | Goodwill and Indefinite-lived Intangible Assets The Company evaluates goodwill and indefinite-lived intangible assets for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable. The Company may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying value and if so, it performs a quantitative test. The Company estimates the fair value of the reporting units using discounted cash flows. The Company’s analyses require significant assumptions and judgments, including assumptions about future economic conditions, revenue growth, and operating margins, among other factors. Events or changes in circumstances considered in the qualitative analysis, many of which are subjective in nature, include: a significant negative trend in the Company’s industry or overall economic trends, a significant change in how the Company uses the acquired assets, a significant change in business strategy, a significant decrease in the market value of the asset, and a significant change in regulations or in the industry that could affect the value of the asset. The Company compares the carrying value of each reporting unit and indefinite-lived intangible asset to its estimated fair value and if the fair value is determined to be less than the carrying value, the Company would recognize an impairment loss for the difference. The Company recorded goodwill of |
Leases | Leases The Company determines if an arrangement is a lease at inception and, if so, classifies the lease as an operating or finance lease. Operating leases are included in right-of-use (“ROU”) asset, current portion of operating lease liabilities, and long-term lease operating liabilities in the consolidated balance sheets. Finance leases are included in property, plant and equipment, current portion of finance lease liabilities, and long-term finance lease liabilities in the consolidated balance sheets. The Company does not recognize a ROU asset or lease liability for short-term leases having initial terms of 12 months or less and instead recognizes rent expense on a straight-line basis over the lease term. In an arrangement that is determined to be a lease, the Company includes both the lease and nonlease components as a single component and accounts for it as a lease when the Company would otherwise recognize the cost associated with both the lease and nonlease components in a similar fashion. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease ROU assets and liabilities are recognized at commencement date, and subsequently remeasured upon changes to the underlying lease arrangement, based on the present value of lease payments over the lease term. If the lease does not provide an implicit rate or if the implicit rate is not determinable, the Company generally uses an estimate of its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at the commencement date. The ROU asset also includes any lease prepayments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Costs associated with operating lease ROU assets are recognized on a straight-line basis within operating expenses or selling, general and administrative, as appropriate, over the term of the lease. Finance ROU lease assets are amortized within operating expenses or selling, general and administrative, as appropriate, on a straight-line basis over the shorter of the estimated useful lives of the assets or, in the instance where title does not transfer at the end of the lease term, the lease term. The interest component of a finance lease is included in interest expense and recognized using the effective interest method over the lease term. As of December 31, 2021 and March 31, 2021, the Company is not a counterparty to any finance leases. |
Stock Issuance Costs | Stock Issuance Costs Stock issuance costs are recorded as a reduction to issuance proceeds. Stock issuance costs incurred prior to the closing of the related issuance are recorded in other assets in the consolidated balance sheets if the closing of the related issuance is deemed probable. |
Debt Issuance Costs and Debt Discount | Debt Issuance Costs and Debt Discount Debt issuance costs and debt discount are recorded as a direct reduction of the carrying amount of the debt and are amortized to interest expense using the effective interest method over the contractual term of the debt. Debt issuance costs include incremental third-party costs directly related to debt issuance such as attorney and financial advisor fees. Debt discount includes upfront fees and proceeds allocated to other components included in the debt issuance. The allocation of proceeds between the debt instrument and any other components included in the debt issuance, including common stock, is generally based on the relative fair value allocation method. |
Held for Sale and Discontinued Operations Classification | Held for Sale and Discontinued Operations Classification The Company classifies a business as held for sale in the period in which management commits to a plan to sell the business, the business is available for immediate sale in its present condition, an active program to complete the plan to sell the business is initiated, the sale of the business within one year is probable and the business is being marketed at a reasonable price in relation to its fair value. Newly acquired businesses that meet the held-for-sale classification criteria upon acquisition are reported as discontinued operations. Upon a business’ classification as held for sale, net assets are measured for impairment. Goodwill impairment is measured in accordance with the method described in the accounting policy entitled “Goodwill and Indefinite-lived Intangible Assets.” An impairment loss is recorded for long-lived assets held for sale when the carrying amount of the asset exceeds its fair value less cost to sell. Other assets and liabilities are generally measured for impairment by comparing their carrying values to their respective fair values. A long-lived asset shall not be depreciated or amortized while it is classified as held for sale. |
Income Taxes | Income Taxes The Company accounts for income taxes pursuant to the provision of Accounting Standards Codification (“ASC”) 740-10, “ Accounting for Income Taxes The Company’s policy is to recognize interest and penalties that would be assessed in relation to the settlement value of unrecognized tax benefits as a component of income tax expense. The Company did not accrue |
Revenue Recognition | Revenue Recognition The Company recognizes revenue under the Financial Accounting Standards Board (“FASB”) ASC 606 “ Revenue from Contracts with Customers ● Step 1: Identify the contract with the customer ● Step 2: Identify the performance obligations in the contract ● Step 3: Determine the transaction price ● Step 4: Allocate the transaction price to the performance obligations in the contract ● Step 5: Recognize revenue when the Company satisfies a performance obligation In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met: the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract). If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following: ● Variable consideration ● Constraining estimates of variable consideration ● The existence of a significant financing component in the contract ● Noncash consideration ● Consideration payable to a customer Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate. Mining pools The Company has entered into an arrangement with a cryptocurrency mining pool to provide computing power to the mining pool. The arrangement is terminable at any time by either party and our enforceable right to compensation only begins when the Company provides computing power to the mining pool operator. The mining pool applies the Full Pay Per Share (“FPPS”) model. Under the FPPS model, in exchange for providing computing power to the pool, the Company is entitled to compensation at an amount that approximates the total bitcoin that could have been mined using the Company’s computing power, based upon the then current blockchain difficulty. Under this model, the Company is entitled to compensation regardless of whether the pool operator successfully records a block to the bitcoin blockchain. Fair value of the cryptocurrency award received is determined using the quoted price of the related cryptocurrency at the time of receipt. There is no significant financing component in these transactions. There is, however, consideration payable to the customer in the form of a pool operator fee; this fee will be deducted from the proceeds the Company receives and will be recorded as contra-revenue, as it does not represent a payment for a distinct good or service. Providing computing power in cryptocurrency transaction verification services will be an output of the Company’s ordinary activities. The provision of providing such computing power is a performance obligation. The transaction consideration the Company receives, if any, is non-cash consideration and is all variable. Fair value of the cryptocurrency award received for cryptocurrency transaction verification services is determined using the quoted price of the related cryptocurrency at the time of receipt. There is no significant financing component in these transactions. |
Cryptocurrencies | Cryptocurrencies Cryptocurrencies, including bitcoin, will be included in current assets in the consolidated balance sheets. Cryptocurrencies purchased will be recorded at cost and cryptocurrencies awarded to the Company through the Company’s mining activities will be accounted for in connection with the Company’s revenue recognition policy disclosed above. Cryptocurrencies will be accounted for as intangible assets with indefinite useful lives. An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value, which is measured using the quoted price of the cryptocurrency at the time its fair value is being measured. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, the Company is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. Purchases of cryptocurrencies, if any, made by the Company will be included within investing activities in the consolidated statements of cash flows, while cryptocurrencies awarded to the Company through its mining activities will be included as a non-cash adjustment within operating activities in the consolidated statements of cash flows. The sales of cryptocurrencies will be included within investing activities in the consolidated statements of cash flows and any realized gains or losses from such sales will be included in other income (expense) in the consolidated statements of operations. The Company will account for its gains or losses in accordance with the first in first out (“FIFO”) method of accounting. |
Loss per Share | Loss per Share The Company computes earnings (loss) per share using the two-class method required for participating securities. The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. Basic loss per share of common stock is computed by dividing the Company’s net loss by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share reflects the effect on weighted average shares outstanding of the number of additional shares outstanding if potentially dilutive instruments, if any, were converted into common stock using the treasury stock method. The computation of diluted loss per share does not include dilutive instruments in the weighted average shares outstanding, as they would be anti-dilutive. The Company had no dilutive instruments or participating securities as of December 31, 2021 and March 31, 2021. |
Concentrations | Concentrations The Company or its joint venture have contracted with two suppliers for the provision of bitcoin miners. One supplier for the joint venture is well behind on its miner delivery schedule due to COVID-19 lockdowns, power shortages and other operational issues at its factory. The supplier has committed to fulfilling its performance obligations with increased future production levels at multiple production facilities. The Company does not believe that these counterparties represent a significant performance risk. The Company expects to operate bitcoin mining facilities. While the Company may choose to mine other cryptocurrencies in the future, it has no plans to do so currently. If the market value of bitcoin declines significantly, the consolidated financial condition and results of operations of the Company may be adversely affected. |
Recent Accounting Standards | Recent Accounting Standards In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) . In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes |
SIGNIFICANT ACCOUNTING POLICI_3
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Dec. 31, 2021 | |
SIGNIFICANT ACCOUNTING POLICIES | |
Supplemental disclosure of cash flow information | The following table shows supplemental cash flow information (in thousands): Period February 8, 2021 (date of Nine Months Ended inception) to December 31, 2021 March 31, 2021 Supplemental disclosure of non-cash activities: Right-of-use asset obtained in exchange for lease obligation $ 1,076 $ — Contribution of deposits on plant and equipment to joint venture $ 11,850 $ — Common stock issuance costs in other accrued liabilities $ — $ 58 Common stock issued for business acquisition $ 40,590 $ — Contingent value rights issued for business acquisition $ 12,000 $ — Common stock issued in conjunction with debt offering representing debt issuance costs $ 25,727 $ — Purchases of and deposits on plant and equipment in accounts payable and accrued construction liabilities $ 6,074 $ — Investment in joint venture in other accrued liabilities $ 57 $ — Series A Preferred Stock converted to common stock $ 49,315 $ — Reverse merger exchange ratio share adjustment $ 43 $ — |
Schedule of cash, cash equivalents and restricted cash | The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets that total to the amounts shown in the consolidated statements of cash flows (in thousands): Cash and cash equivalents $ 43,448 $ 6,300 Restricted cash 3,007 — Cash and cash equivalents and restricted cash $ 46,455 $ 6,300 |
BUSINESS COMBINATION (Tables)
BUSINESS COMBINATION (Tables) | 9 Months Ended |
Dec. 31, 2021 | |
BUSINESS COMBINATION | |
Summary of the fair value of the aggregate consideration paid | The following table summarizes the fair value of the aggregate consideration paid for IKONICS (in thousands): Cash consideration (1) $ 13,712 Equity instruments: 1,999,525 shares of TeraWulf Inc. (2) 40,590 Contingent consideration: Contingent Value Rights (3) 12,000 $ 66,302 (1) The cash paid at close represents the gross contractual amount paid. Net cash paid, which accounts for the cash acquired of $ 3.4 million, was $ 10.3 million and is reflected as an investing activity in the consolidated statement of cash flows for the nine months ended December 31, 2021. (2) The fair value of the common shares issued as part of the consideration paid for IKONICS was determined on the basis of the closing market price of the Company’s Common Stock on December 14, 2021, the first day of trading subsequent to the acquisition date. (3) The fair value of the CVRs was estimated by applying the income and market approaches. The measurement is based on significant inputs that are not observable in the market, which ASC 820 “ Fair Value Measurements and Disclosures” refers to as Level 3 inputs. Key assumptions include (1) a business enterprise value of $ 15.9 million, (2) an implied probability of sale of 90% and (3) estimated transaction and other deductible costs of $ 1.6 million. The significant unobservable inputs used in applying the income approach include a discount rate of 11.5% and a long-term growth rate of 2.5% . As of December 31, 2021, the amount recognized for the contingent consideration arrangement and the assumptions used to develop the estimates had not changed. |
Summary of the allocation of the purchase price to the fair value of the assets acquired and liabilities | The following table summarizes the allocation of the purchase price to the fair value of the assets acquired and liabilities assumed for the acquisition of IKONICS (in thousands): Cash $ 3,433 Inventory 3,760 Other current assets 2,596 Property, plant and equipment 10,449 Identifiable intangible assets 3,440 Goodwill 48,338 Current liabilities (4,842) Deferred tax liabilities (872) $ 66,302 |
ASSETS HELD FOR SALE AND DISC_2
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (Tables) | 9 Months Ended |
Dec. 31, 2021 | |
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS | |
Schedule of assets, liabilities, intangible assets and loss from discontinued operations | Trade receivables $ 1,327 Inventories 3,737 Prepaid expenses and other current assets 944 Property, plant and equipment 10,036 Intangible assets 3,304 Current assets held for sale $ 19,348 Accounts payable $ 1,207 Accrued compensation 439 Other accrued liabilities 109 Current liabilities held for sale $ 1,755 The Company has classified IKONCS’ long-lived assets in current assets held for sale as it is deemed probable that the disposition will occur and proceeds will be collected within one year. Intangible assets includes the following definite-lived intangible assets at December 31, 2021 (in thousands, except years): Weighted Average Useful Carrying Remaning Value Life (Years) Customer relationships $ 2,161 11.5 Developed technology 663 8.0 Trade names 480 13.7 $ 3,304 11.1 The loss from discontinued operations, net of tax presented in the consolidated statement of operations for the nine months ended December 31, 2021 consists of the following (in thousands): Net sales $ 676 Cost of goods sold 487 Gross profit 189 Selling, general and administrative expenses 388 Research and development expenses 20 Impairment on classification as held for sale 48,887 Loss from discontinued operations before income tax (49,106) Income tax expense (benefit) — Loss from discontinued operations, net of tax $ (49,106) |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Dec. 31, 2021 | |
FAIR VALUE MEASUREMENTS | |
Fair Value Measurements, Nonrecurring [Table Text Block] | Significant Significant Quoted Prices Other Other in Active Observable Unobservable Markets Inputs Inputs Carrying Value (Level 1) (Level 2) (Level 3) Impairment Goodwill $ — $ — $ — $ — $ 48,338 Long-lived assets held for sale - intangible assets 3,304 — — 3,304 136 $ 3,304 $ — $ — $ 3,304 $ 48,474 |
PROPERTY, PLANT AND EQUIPMENT (
PROPERTY, PLANT AND EQUIPMENT (Tables) | 9 Months Ended |
Dec. 31, 2021 | |
PROPERTY, PLANT AND EQUIPMENT | |
Property, Plant and Equipment | Property, plant and equipment, net consisted of the following as of December 31, 2021 (in thousands): December 31, 2021 March 31, 2021 Construction in process $ 20,867 $ — Equipment 19 — Deposits on miners 70,560 — 91,446 — Less: accumulated depreciation — — $ 91,446 $ — |
LEASES (Tables)
LEASES (Tables) | 9 Months Ended |
Dec. 31, 2021 | |
LEASES | |
Maturity analysis of annual undiscounted cash flows, operating lease liabilities | The following is a maturity analysis of the annual undiscounted cash flows of the estimated operating lease liabilities as of December 31, 2021 (in thousands): Year ending December 31: 2022 $ 150 2023 150 2024 150 2025 150 2026 150 Thereafter 662 $ 1,412 |
Reconciliation of undiscounted cash flows, operating lease liabilities | A reconciliation of the undiscounted cash flows to the operating lease liabilities recognized in the consolidated balance sheet as of December 31, 2021 follows (in thousands): Undiscounted cash flows of the operating lease $ 1,412 Unamortized discount 332 Total operating lease liability 1,080 Current portion of operating lease liability 88 Operating lease liability, net of current portion $ 992 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 9 Months Ended |
Dec. 31, 2021 | |
INCOME TAXES | |
Schedule of components of the net loss (income) before tax on income | The components of net loss before income tax for continuing operations (comprised of the total of loss before income tax and equity in net loss of investee and equity in net loss of investee, net of tax) for the nine months ended December 31, 2021 and the period February 8, 2021 (date of inception) to March 31, 2021 are as follows (in thousands): Period February 8, 2021 (date of Nine Months Ended inception) to December 31, March 31, 2021 2021 Domestic $ (45,516) $ (1,676) Foreign — — Total $ (45,516) $ (1,676) |
Schedule of income tax provision | The Company’s income tax benefit for continuing operations for the nine months ended December 31, 2021 and the period February 8, 2021 (date of inception) to March 31, 2021 are as follows (in thousands): Period February 8, 2021 (date of Nine Months Ended inception) to December 31, March 31, 2021 2021 Current: Federal $ — $ — State — — Total current income tax (benefit) expense — — Deferred: Federal (615) — State — — Total deferred income tax benefit (615) — Income tax benefit $ (615) $ — |
Schedule of reconciliation between income tax benefit and the expected tax benefit at the statutory rate | A reconciliation between income tax benefit and the expected tax benefit at the statutory rate for the nine months ended December 31, 2021 and the period February 8, 2021 (date of inception) to March 31, 2021 are as follows: Period February 8, 2021 (date of Nine Months Ended inception) to December 31, March 31, 2021 2021 Federal statutory rate 21.0 % 21.0 % State rate, net of federal benefit 0.0 % 0.0 % Non-deductible equity financing costs (2.8) % 0.0 % Change in valuation allowance (16.8) % (21.0) % Effective tax rate 1.4 % 0.0 % |
Schedule of significant components of the deferred tax assets | The significant components of the Company’s deferred tax liabilities, net consist of the following at December 31, 2021 and March 31, 2021 (in thousands): December 31, 2021 March 31, 2021 Deferred tax assets: Net operating loss $ 6,678 $ 352 Share based liabilities 2,630 — Accruals and reserves 470 — Tax credit carryforwards 278 — Operating lease liability 227 — Gross deferred tax assets 10,283 352 Valuation allowance (8,295) (352) Deferred tax assets, net 1,988 — Deferred tax liabilities: Property, plant and equipment (899) — Intangible assets (723) — Inventory (407) — Right-of-use asset (215) — Deferred tax liabilites, net $ (256) $ — |
DEBT (Tables)
DEBT (Tables) | 12 Months Ended |
Dec. 31, 2021 | |
DEBT | |
Schedule of long-term debt | Long-term debt consists of the following as of December 31, 2021 (in thousands): Term loan $ 123,500 Debt issuance costs and debt discount (28,873) 94,627 Less long-term debt due within one year — Total long-term debt, net of portion due within one year $ 94,627 |
Schedule principal maturities of outstanding long-term debt | Principal maturities of outstanding long-term debt as of December 31, 2021 are as follows (in thousands): Year ending December 31: 2022 $ — 2023 46,313 2024 77,187 Total principal maturities $ 123,500 |
JOINT VENTURE (Tables)
JOINT VENTURE (Tables) | 9 Months Ended |
Dec. 31, 2021 | |
JOINT VENTURE | |
Schedule of reconciliation of direct payments made on behalf of joint venture in the consolidated statement of cash flows | The Company’s direct payments to Minerva and Bitmain, among others, on behalf of Nautilus for the nine months ended December 31, 2021, are included in investments in joint venture related to direct payments made on behalf of joint venture in the consolidated statement of cash flows. A reconciliation of amounts included within this footnote to captions in the consolidated statement of cash flows follows (in thousands): Payment of TeraWulf 50% share of Minerva deposits $ (8,400) Payment of TeraWulf 50% share of Bitmain deposits (76,926) Other direct payments (8,585) Investments in joint venture related to direct payments made on behalf of joint venture $ (93,911) Payment of Talen 50% share of Minerva deposits $ (8,400) Payment of Talen 50% share of Bitmain deposits (47,657) Reimbursable payments for deposits on plant and equipment made on behalf of a joint venture partner $ (56,057) Talen reimbursement of 50% share of Minerva deposits $ 8,400 Talen reimbursement of 50% share of Bitmain deposits 47,657 Reimbursement of payments for deposits on plant and equipment made on behalf of a joint venture partner $ 56,057 Talen reimbursement of 50% share of Minerva initial deposit paid by TeraWulf in the period ended March 31, 2021 $ 11,850 Reimbursement from joint venture partner for deposits on plant and equipment contributed to the joint venture $ 11,850 Minerva Purchase Agreement assignment: TeraWulf 50% share of Minerva initial deposit paid by TeraWulf in the period ended March 31, 2021 $ (11,850) Contribution of deposits on plant and equipment to joint venture (non-cash activity) $ (11,850) |
Summary of interest in Nautilus and maximum exposure to loss as a result of its involvement with the VIE | Nautilus is a VIE accounted for using the equity method of accounting. The table below summarizes the Company’s interest in Nautilus and the Company’s maximum exposure to loss as a result of its involvement with the VIE as of December 31, 2021 (in thousands, except for percentages): Commitment to Company’s Future Company’s Net loss Variable Additional Maximum % Initial Additional Inception Interest in Contributions Exposure to Loss Entity Ownership Investment Investment to Date Entity (1) in Entity (2) Nautilus 50 % $ 18,000 $ 87,818 $ 1,538 $ 104,280 $ 50,239 $ 154,519 (1) The Members may seek alternate financing for the Pennsylvania bitcoin mining facility, which could reduce the amount of investments each Member would be required to provide. The Members may mutually agree on changes to the Pennsylvania bitcoin mining facility, which could increase or decrease the amount of contributions each Member is required to provide. (2) The maximum exposure at December 31, 2021 is determined by adding the Company’s variable interest in the entity and any explicit or implicit arrangements that could require the Company to provide additional financial support. The amount represents the contractually required capital contributions of the Company which are required for the initial phase of the Pennsylvania bitcoin mining facility buildout. |
Condensed results of operations for the nine months ended December 31,2021 and the condensed financial position as of December 31, 2021, of Nautilus | The condensed results of operations for the nine months ended December 31,2021 and the condensed financial position as of December 31, 2021, of Nautilus are summarized below (in thousands): Nine months ended December 31, 2021 Condensed statements of operations information: Revenue $ — Operating expense 3,076 Net loss $ (3,076) December 31, 2021 Condensed balance sheet information: Current assets $ 4,960 Noncurrent assets 214,803 Total assets $ 219,763 Current liabilities $ 11,317 Equity 208,446 Total liabilities and equity $ 219,763 |
ORGANIZATION - (Details)
ORGANIZATION - (Details) $ in Thousands | 1 Months Ended | 2 Months Ended | 9 Months Ended |
May 31, 2021subsidiary | Mar. 31, 2021USD ($) | Dec. 31, 2021USD ($)itemfacilityagreement | |
ORGANIZATION | |||
Number of revenue sources | item | 2 | ||
Number of mining facilities | facility | 2 | ||
Purchase agreement assigned to joint venture | agreement | 1 | ||
Number of subsidiaries to facilitate ownership of bitcoin mining facilities | subsidiary | 3 | ||
Net loss | $ (1,676) | $ (94,007) | |
Impairment charge | 49,100 | ||
Negative cash flows from operations | (24,099) | ||
Cash and cash equivalents | 6,300 | 43,448 | |
Working Capital | 22,200 | ||
Total stockholders' equity | 123,200 | ||
Accumulated deficit | $ (1,676) | (95,683) | |
Net invested | 82,100 | ||
Offering price | $ 200,000 | ||
Bitcoin miner manufacturers to acquire | |||
ORGANIZATION | |||
Number suppliers for bitcoin miners | item | 2 | ||
Number miners purchases covered by the agreement | item | 78,000 | ||
Deposits made on miners | $ 70,600 |
SIGNIFICANT ACCOUNTING POLICI_4
SIGNIFICANT ACCOUNTING POLICIES - Equity Method of Accounting (Details) | 9 Months Ended |
Dec. 31, 2021 | |
Minimum [Member] | |
Schedule of Equity Method Investments [Line Items] | |
Ownership percentage for significant influence | 20.00% |
Maximum [Member] | |
Schedule of Equity Method Investments [Line Items] | |
Ownership percentage for significant influence | 50.00% |
SIGNIFICANT ACCOUNTING POLICI_5
SIGNIFICANT ACCOUNTING POLICIES - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands | 2 Months Ended | 9 Months Ended |
Mar. 31, 2021 | Dec. 31, 2021 | |
Noncash Investing and Financing Items [Abstract] | ||
Right-of-use asset obtained in exchange for lease obligation | $ 1,076 | |
Contribution of deposits on plant and equipment to joint venture | 11,850 | |
Common stock issuance costs in other accrued liabilities | $ 58 | |
Common stock issued for business acquisition | 40,590 | |
Contingent value rights issued for business acquisition | 12,000 | |
Common stock issued in conjunction with debt offering representing debt issuance costs | 25,727 | |
Purchases of and deposits on plant and equipment in accounts payable and accrued construction liabilities | 6,074 | |
Investment in joint venture in other accrued liabilities | 57 | |
Series A Preferred Stock conversion to common stock | 49,315 | |
Reverse merger exchange ratio share adjustment | $ 43 |
SIGNIFICANT ACCOUNTING POLICI_6
SIGNIFICANT ACCOUNTING POLICIES - Cash and Cash Equivalents (Details) - USD ($) $ in Thousands | Dec. 31, 2021 | Mar. 31, 2021 |
SIGNIFICANT ACCOUNTING POLICIES | ||
FDIC cash insured amount | $ 250,000 | |
Cash exceeding FDIC limit | 42,700 | |
Cash and cash equivalents | $ 43,448 | $ 6,300 |
SIGNIFICANT ACCOUNTING POLICI_7
SIGNIFICANT ACCOUNTING POLICIES - Restricted Cash (Details) - USD ($) $ in Thousands | Dec. 31, 2021 | Mar. 31, 2021 | Feb. 07, 2021 |
SIGNIFICANT ACCOUNTING POLICIES | |||
Cash and cash equivalents | $ 43,448 | $ 6,300 | |
Restricted cash | 3,007 | ||
Cash and cash equivalents and restricted cash | $ 46,455 | $ 6,300 | $ 0 |
SIGNIFICANT ACCOUNTING POLICI_8
SIGNIFICANT ACCOUNTING POLICIES -Segment (Details) | 9 Months Ended |
Dec. 31, 2021segment | |
ORGANIZATION | |
Number of operating segment | 1 |
SIGNIFICANT ACCOUNTING POLICI_9
SIGNIFICANT ACCOUNTING POLICIES - Property, Plant and Equipment (Details) $ in Millions | 9 Months Ended |
Dec. 31, 2021USD ($) | |
SIGNIFICANT ACCOUNTING POLICIES | |
Deposits on miners | $ 70.6 |
SIGNIFICANT ACCOUNTING POLIC_10
SIGNIFICANT ACCOUNTING POLICIES - Impairment of Long-lived assets (Details) - USD ($) | 1 Months Ended | 9 Months Ended | |
Mar. 31, 2021 | Feb. 28, 2021 | Dec. 31, 2021 | |
SIGNIFICANT ACCOUNTING POLICIES | |||
Impairment of long-lived assets | $ 0 | $ 0 | $ 0 |
SIGNIFICANT ACCOUNTING POLIC_11
SIGNIFICANT ACCOUNTING POLICIES - Goodwill and Indefinite-Lived Intangible Assets (Details) $ in Thousands | 9 Months Ended |
Dec. 31, 2021USD ($) | |
Business Acquisition [Line Items] | |
Loss on impairment of goodwill | $ 48,474 |
IKONICS | |
Business Acquisition [Line Items] | |
Goodwill recognized | 48,300 |
Loss on impairment of goodwill | $ 48,300 |
SIGNIFICANT ACCOUNTING POLIC_12
SIGNIFICANT ACCOUNTING POLICIES - Income Taxes (Details) - USD ($) | 9 Months Ended | |
Dec. 31, 2021 | Mar. 31, 2021 | |
SIGNIFICANT ACCOUNTING POLICIES | ||
Interest and penalties in relation to settlement value of unrecognized tax benefits | $ 0 | $ 0 |
Recognized Tax Benefits, Percentage | 50.00% |
SIGNIFICANT ACCOUNTING POLIC_13
SIGNIFICANT ACCOUNTING POLICIES - Loss per Share (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2021 | Dec. 31, 2021 | |
SIGNIFICANT ACCOUNTING POLICIES | ||
Dilutive instruments or participating securities | $ 0 | $ 0 |
BUSINESS COMBINATION (Details)
BUSINESS COMBINATION (Details) - IKONICS Corporation | Jun. 25, 2021USD ($)shares |
BUSINESS COMBINATION | |
Goodwill expected to be tax deductible | $ 0 |
TeraWulf common stock for each IKONICs common stock | shares | 1 |
Contingent Value Rights Agreement for each IKONICs common stock | shares | 1 |
Amount for each IKONICs common stock | $ 5 |
TeraClub stockholders' ownership in Terawulf after closing (as a percent) | 98.00% |
Percentage of net proceeds holders of CVR are entitled to | 95.00% |
Percentage of reserve of the gross proceeds of per-merger business of IKONICS | 10.00% |
Period to receive dispositions, if any, of any part of the pre-merger business of IKCONICS | 18 months |
TeraCub reimbursement to IKONICS for cancellation of restricted unit awards | $ 3,000,000 |
BUSINESS COMBINATION - Consider
BUSINESS COMBINATION - Consideration Transferred (Details) - USD ($) $ in Thousands | Jun. 25, 2021 | Dec. 31, 2021 |
BUSINESS COMBINATION | ||
Payment for acquisition of business, net of cash acquired | $ 10,280 | |
Percentage of discount rate | 11.50% | |
Percentage Of long-term growth rate | 2.50% | |
IKONICS Corporation | ||
BUSINESS COMBINATION | ||
Cash consideration | $ 13,712 | |
Equity instruments: 1,999,525 shares of TeraWulf Inc. | 40,590 | |
Contingent consideration: Contingent Value Rights | 12,000 | |
Fair value of the aggregate consideration | $ 66,302 | |
Common stock issued for business acquisition | 1,999,525 | |
Cash acquired | $ 3,400 | |
Payment for acquisition of business, net of cash acquired | $ 10,300 | |
IKONICS Corporation | Level 3 | ||
BUSINESS COMBINATION | ||
Business enterprise value | $ 15,900 | |
Percentage of probability of sale | 90.00% | |
Estimated transaction and other deductible costs | $ 1,600 |
BUSINESS COMBINATION - Allocati
BUSINESS COMBINATION - Allocation of Purchase Price (Details) - IKONICS Corporation $ in Thousands | Jun. 25, 2021USD ($) |
BUSINESS COMBINATION | |
Cash | $ 3,433 |
Inventory | 3,760 |
Other current assets | 2,596 |
Property, plant and equipment | 10,449 |
Identifiable intangible assets | 3,440 |
Goodwill recognized | 48,338 |
Current liabilities | (4,842) |
Deferred tax liabilities | (872) |
Purchase Price | $ 66,302 |
BUSINESS COMBINATION - IKONICs
BUSINESS COMBINATION - IKONICs business (Details) - USD ($) $ / shares in Units, $ in Thousands | 2 Months Ended | 9 Months Ended |
Mar. 31, 2021 | Dec. 31, 2021 | |
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS | ||
Loss from discontinued operations, net of tax | $ (49,106) | |
Earnings per share, basic | $ (0.03) | $ (1.13) |
Earnings per share, diluted | $ (0.03) | $ (1.12) |
IKONICS | Discontinued Operations, Held-for-sale [Member] | ||
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS | ||
Loss from discontinued operations, net of tax | $ 49,100 | |
Business Acquisition, Pro Forma Net Income (Loss) | $ 94,500 | $ 1,900 |
Earnings per share, basic | $ 1.13 | |
Earnings per share, diluted | $ 0.03 |
ASSETS HELD FOR SALE AND DISC_3
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (Details) $ in Thousands | 9 Months Ended |
Dec. 31, 2021USD ($) | |
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS | |
Intangible assets, net | $ 3,304 |
Current assets held for sale | 19,348 |
Current liabilities held for sale | $ 1,755 |
IKONICS | |
Other information | |
Percent of net proceeds of disposal that is accrued to historic stockholders if disposition is consummated within eighteen months (as a percent) | 95.00% |
IKONICS | Discontinued Operations, Held-for-sale [Member] | |
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS | |
Trade receivables | $ 1,327 |
inventories | 3,737 |
Prepaid expenses and other current assets | 944 |
Property, plant and equipment, net | 10,036 |
Intangible assets, net | 3,304 |
Current assets held for sale | 19,348 |
Accounts payable | 1,207 |
Accrued compensation | 439 |
Other accrued liabilities | 109 |
Current liabilities held for sale | 1,755 |
Other information | |
Loss on discontinued operations | $ 48,900 |
ASSETS HELD FOR SALE AND DISC_4
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS - Intangible assets, net (Details) $ in Thousands | 9 Months Ended |
Dec. 31, 2021USD ($) | |
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS | |
Intangible assets, net | $ 3,304 |
Ikonics Inc [Member] | Discontinued Operations, Held-for-sale [Member] | |
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS | |
Intangible assets, net | $ 3,304 |
Disposal Group Including Discontinued Operation Finite Lived Intangible Assets, Weighted Average, Useful Life | 11 years 1 month 6 days |
Ikonics Inc [Member] | Discontinued Operations, Held-for-sale [Member] | Customer Relationships | |
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS | |
Intangible assets, net | $ 2,161 |
Disposal Group Including Discontinued Operation Finite Lived Intangible Assets, Weighted Average, Useful Life | 11 years 6 months |
Ikonics Inc [Member] | Discontinued Operations, Held-for-sale [Member] | In Process Research and Development | |
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS | |
Intangible assets, net | $ 663 |
Disposal Group Including Discontinued Operation Finite Lived Intangible Assets, Weighted Average, Useful Life | 8 years |
Ikonics Inc [Member] | Discontinued Operations, Held-for-sale [Member] | Trade Names | |
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS | |
Intangible assets, net | $ 480 |
Disposal Group Including Discontinued Operation Finite Lived Intangible Assets, Weighted Average, Useful Life | 13 years 8 months 12 days |
ASSETS HELD FOR SALE AND DISC_5
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS - loss from discontinued operations (Details) $ in Thousands | 9 Months Ended |
Dec. 31, 2021USD ($) | |
Cash flow impact of discontinued operations: | |
Cash flows used in operating activities from discontinued operations | $ 2,958 |
Ikonics Inc [Member] | Discontinued Operations, Held-for-sale [Member] | |
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS | |
Net sales | 676 |
Cost of goods sold | 487 |
Gross profit | 189 |
Selling, general and administrative expenses | 388 |
Research and development expenses | 20 |
Goodwill impairment on held for sale classification | 48,887 |
Loss from operations before income tax | (49,106) |
Net loss from discontinued operations | (49,106) |
Cash flow impact of discontinued operations: | |
Cash flows used in operating activities from discontinued operations | $ 3,000 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) $ in Thousands | 9 Months Ended |
Dec. 31, 2021USD ($) | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Goodwill, Impairment Loss | $ 48,474 |
Disposal Group, Including Discontinued Operation, Finite Lived Intangible Assets, Current | $ 3,304 |
Weighted Average Attrition Rate Percent | 8.00% |
Goodwill [Member] | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Goodwill, Impairment Loss | $ 48,338 |
Long Lived Assets Held For Sale [Member] | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Goodwill, Impairment Loss | 136 |
Disposal Group, Including Discontinued Operation, Finite Lived Intangible Assets, Current | $ 3,304 |
Minimum [Member] | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Weighted Average Attrition Rate Percent | 4.00% |
Maximum [Member] | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Weighted Average Attrition Rate Percent | 10.00% |
Customer Relationships | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Percentage Of Fair Value Discount Rate | 27.00% |
In Process Research and Development | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Percentage Of Fair Value Discount Rate | 0.50% |
Trade Names | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Percentage Of Fair Value Discount Rate | 27.00% |
Level 3 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Disposal Group, Including Discontinued Operation, Finite Lived Intangible Assets, Current | $ 3,304 |
Level 3 | Long Lived Assets Held For Sale [Member] | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Disposal Group, Including Discontinued Operation, Finite Lived Intangible Assets, Current | $ 3,304 |
PROPERTY, PLANT AND EQUIPMENT -
PROPERTY, PLANT AND EQUIPMENT - PPE Schedule (Details) $ in Thousands | Dec. 31, 2021USD ($) |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, Gross | $ 91,446 |
Property, Plant and Equipment, Net | 91,446 |
Construction in process | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, Gross | 20,867 |
Deposits on miners | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, Gross | 70,560 |
Equipment | |
Property, Plant and Equipment [Line Items] | |
Property, Plant and Equipment, Gross | $ 19 |
PROPERTY, PLANT AND EQUIPMENT_2
PROPERTY, PLANT AND EQUIPMENT - Narrative (Details) - USD ($) | 1 Months Ended | 9 Months Ended | |
Mar. 31, 2021 | Feb. 28, 2021 | Dec. 31, 2021 | |
PROPERTY, PLANT AND EQUIPMENT | |||
Capitalized interest costs | $ 94,000 | ||
Depreciation expense | $ 0 | $ 0 | $ 0 |
LEASES - Narrative (Details)
LEASES - Narrative (Details) - USD ($) | 1 Months Ended | 9 Months Ended |
May 31, 2021 | Dec. 31, 2021 | |
LEASES | ||
Initial term of lease | 5 years | |
Renewal term of lease | 5 years | |
Number of days payments commence after effective date | 180 days | |
Discount rate | 6.00% | |
Operating lease expense | $ 107,000 | |
Lease payments | $ 0 | |
Remaining lease term | 9 years 3 months 18 days |
LEASES - Maturity analysis of t
LEASES - Maturity analysis of the annual undiscounted cash flows (Details) $ in Thousands | Dec. 31, 2021USD ($) |
LEASES | |
2022 | $ 150 |
2023 | 150 |
2024 | 150 |
2025 | 150 |
2026 | 150 |
Thereafter | 662 |
Operating lease liabilities, to be paid | $ 1,412 |
LEASES - Reconciliation of the
LEASES - Reconciliation of the undiscounted cash flows (Details) $ in Thousands | Dec. 31, 2021USD ($) |
LEASES | |
Undiscounted cash flows of the operating lease | $ 1,412 |
Unamortized discount | 332 |
Total Operating lease liability | 1,080 |
Current portion of operating lease liability | 88 |
Operating lease liability, net of current portion | $ 992 |
INCOME TAXES - Components of ne
INCOME TAXES - Components of net income (loss) before income taxes (Details) - USD ($) $ in Thousands | 2 Months Ended | 9 Months Ended |
Mar. 31, 2021 | Dec. 31, 2021 | |
INCOME TAXES | ||
Domestic | $ (1,676) | $ (45,516) |
Loss before income tax and equity in net loss of investee | (1,676) | (45,516) |
Loss from continuing operations | $ (1,676) | $ (44,901) |
INCOME TAXES - Income tax provi
INCOME TAXES - Income tax provision (Details) $ in Thousands | 9 Months Ended |
Dec. 31, 2021USD ($) | |
Deferred | |
Federal | $ (615) |
Total deferred income tax benefit | 615 |
Income tax benefit | $ 615 |
INCOME TAXES - Reconciliation b
INCOME TAXES - Reconciliation between income tax benefit and the expected tax benefit (Details) | 2 Months Ended | 9 Months Ended |
Mar. 31, 2021 | Dec. 31, 2021 | |
Reconciliation between income tax benefit and the expected tax benefit at the statutory rate | ||
Federal statutory rate | 21.00% | 21.00% |
State rate, net of federal benefit | 0.00% | 0.00% |
Non-deductible equity financing costs | 0.00% | (2.80%) |
Change in valuation allowance | (21.00%) | (16.80%) |
Effective tax rate | 0.00% | 1.40% |
INCOME TAXES -Net deferred tax
INCOME TAXES -Net deferred tax liability (Details) - USD ($) $ in Thousands | Dec. 31, 2021 | Mar. 31, 2021 |
Deferred tax assets | ||
Net operating loss | $ 6,678 | $ 352 |
Share based liabilities | 2,630 | |
Accruals and reserves | 470 | |
Tax credit carryforwards | 278 | |
Operating lease liability | 227 | |
Gross deferred tax assets | 10,283 | 352 |
Valuation allowance | (8,295) | $ (352) |
Deferred tax assets, net | 1,988 | |
Deferred tax liabilities | ||
Property, plant and equipment | (899) | |
Intangible assets | (723) | |
Inventory | (407) | |
Right-of-use asset | (215) | |
Deferred tax liabilites, net | $ (256) |
INCOME TAXES - Paragraphs (Deta
INCOME TAXES - Paragraphs (Details) - USD ($) $ in Millions | Dec. 31, 2021 | Mar. 31, 2021 |
INCOME TAXES | ||
Deferred tax asset to offset purchase accounting deferred tax liability | $ 0.6 | |
Increase valuation allowance | 7.9 | |
Federal net operating loss carryforward | 31.5 | $ 1.6 |
Operating losses subject to expiration | 0.1 | |
Operating losses not subject to expiration | 31.4 | |
State net operating loss carryforwards | 0.7 | 0 |
federal research development tax credit carryforwards | 0.1 | 0 |
State research development tax credit carryforwards | $ 0.1 | $ 0 |
DEBT - Promissory Notes (Detail
DEBT - Promissory Notes (Details) - Majority Shareholder [Member] $ in Millions | 2 Months Ended |
Nov. 19, 2021USD ($)item | |
RELATED PARTY TRANSACTIONS | |
Number stockholders that granted loans | item | 3 |
Transaction amount | $ 25 |
Interest rate | 8.00% |
Minimum equity offering to trigger full payment | $ 50 |
DEBT - Long-Term Debt Table (De
DEBT - Long-Term Debt Table (Details) $ in Thousands | Dec. 31, 2021USD ($) |
DEBT | |
Term loan | $ 123,500 |
Debt issuance costs and debt discount, unamortized | (28,873) |
Term loan, net | 94,627 |
Long-term debt | $ 94,627 |
DEBT - LGSA (Details)
DEBT - LGSA (Details) - USD ($) | Dec. 01, 2021 | Dec. 31, 2021 |
DEBT | ||
Debt issuance costs and debt discount, unamortized | $ 28,873,000 | |
Amortization of debt issuance costs and accretion of debt discount | 990,000 | |
Nautilus Joint Venture | ||
DEBT | ||
Minimum interest in Nautilus joint venture | 50.00% | |
Issuance of stock, net of issuance costs (in shares) | 839,398 | |
Percentage to outstanding shares | 1.50% | |
One Term Loan investor, NovaWulf Digital Master Fund, L.P. | ||
DEBT | ||
Upfront fee | $ 15,000,000 | |
One Term Loan investor, NovaWulf Digital Master Fund, L.P. | Nautilus Joint Venture | ||
DEBT | ||
Issuance costs | 4,000,000 | |
Upfront fee considered as debt discount | 29,800,000 | |
Allocated fair value of equity included in the issuance of loan | 25,700,000 | |
Debt issuance costs and debt discount, unamortized | $ 990,000 | |
Amortization period of debt costs and discount over term of debt | 3 years | |
Amortization of debt issuance costs and accretion of debt discount | $ 28,900,000 | |
Term Loan | ||
DEBT | ||
Loan amount | 123,500,000 | |
Allocated fair value of equity included in the issuance of loan | 4,100,000 | |
Fair value of term loan | 1,100,000 | |
Amount of fair value included in debt discount | $ 4,100,000 | |
Effective interest rate of debt | 12.90% | |
Term Loan | Nautilus Joint Venture | ||
DEBT | ||
Upfront fee | 1,200,000 | |
Term Loan | One Term Loan investor, NovaWulf Digital Master Fund, L.P. | Nautilus Joint Venture | ||
DEBT | ||
Quarterly periodic payment as a % of the original amount | $ 12.5 | |
Interest rate | 11.50% | |
Upfront fee percentage | 1.00% | |
Upfront fee | $ 1,200,000 | |
Interest rate in case default | 13.50% | |
Prepayment incremental amount | $ 5,000,000 | |
Prepayment fees after 1st anniversary | 3.00% | |
Prepayment fees after 2nd anniversary | 2.00% |
DEBT - Maturity (Details)
DEBT - Maturity (Details) $ in Thousands | Dec. 31, 2021USD ($) |
DEBT | |
2023 | $ 46,313 |
2024 | 77,187 |
Total principal maturities | $ 123,500 |
JOINT VENTURE (Details)
JOINT VENTURE (Details) | May 13, 2021USD ($)item | Dec. 31, 2021USD ($) |
JOINT VENTURE | ||
Interest in joint venture (as a percent) | 50.00% | |
Talen | ||
JOINT VENTURE | ||
Maximum operating capacity (MW) | item | 300 | |
Interest in joint venture (as a percent) | 50.00% | |
Capitalized interest costs | $ 57,000 | |
Nautilus | ||
JOINT VENTURE | ||
Join Venture contribution | $ 156,000,000 | |
Nautilus | Talen | ||
JOINT VENTURE | ||
Join Venture contribution | $ 156,000,000 |
JOINT VENTURE - Purchase Agreem
JOINT VENTURE - Purchase Agreements (Details) $ in Millions | Jun. 15, 2021item | Mar. 31, 2021USD ($) | Dec. 31, 2021USD ($)item | Mar. 19, 2021USD ($)item |
JOINT VENTURE | ||||
Number of agreements | item | 30,000 | |||
Amount funded on net basis | $ 47.7 | |||
Minerva Purchase Agreement | ||||
JOINT VENTURE | ||||
Number miners purchases covered by the agreement | item | 30,000 | |||
Total purchase price per agreement | $ 118.5 | |||
Deposits made | $ 23.7 | |||
Amount paid | $ 16.8 | |||
Percentage reimbursed by Talen | 50.00% | |||
Reimbursement of initial deposit by Talen | $ 11.9 | |||
Reimbursement of initial deposit by Talen (as percent) | 50.00% | |||
Payment to be made six months before shipping date (as percent) | 30.00% | |||
30% payment to be made prior to shipping date | 6 months | |||
Payment to be made three months before shipping date (as percent) | 30.00% | |||
30% payment to be made prior to shipping date | 3 months | |||
Payment to be made one month before shipping date (as percent) | 20.00% | |||
20% payment to be made prior to shipping date | 1 month | |||
Number of miners covered by payment to date | item | 10,000 | |||
Percentage of payment to the total amount due at the date of purchase agreement amendment | 90.00% | |||
Number of agreements | item | 5,000 | |||
Bitmain Non-fixed Price Sales and Purchase Agreements | ||||
JOINT VENTURE | ||||
Amount funded on net basis | $ 124.6 | |||
Talen | ||||
JOINT VENTURE | ||||
Amount funded on net basis | $ 76.9 | |||
Nautilus | Bitmain Non-fixed Price Sales and Purchase Agreements | ||||
JOINT VENTURE | ||||
Number of agreements | item | 2 |
JOINT VENTURE - Payments (Detai
JOINT VENTURE - Payments (Details) $ in Thousands | 9 Months Ended |
Dec. 31, 2021USD ($) | |
JOINT VENTURE | |
Investments in joint venture related to direct payments made on behalf of joint venture - 50% share of purchase agreement deposits | $ (93,911) |
Reimbursable payments for deposits on plant and equipment made on behalf of a joint venture partner - 50% share of Talen | (56,057) |
Reimbursement of payments for deposits on plant and equipment made on behalf of a joint venture partner | 56,057 |
Talen reimbursement of 50% share of Minerva initial deposit paid by TeraWulf in the period ended March 31, 2021 | 11,850 |
Minerva Purchase Agreement assignment: TeraWulf 50% share of Minerva initial deposit paid by TeraWulf in the period ended March 31, 2021 | (11,850) |
Minerva Purchase Agreement | |
JOINT VENTURE | |
Investments in joint venture related to direct payments made on behalf of joint venture - 50% share of purchase agreement deposits | (8,400) |
Reimbursable payments for deposits on plant and equipment made on behalf of a joint venture partner - 50% share of Talen | (8,400) |
Reimbursement of payments for deposits on plant and equipment made on behalf of a joint venture partner | 8,400 |
Talen reimbursement of 50% share of Minerva initial deposit paid by TeraWulf in the period ended March 31, 2021 | 11,850 |
Minerva Purchase Agreement assignment: TeraWulf 50% share of Minerva initial deposit paid by TeraWulf in the period ended March 31, 2021 | (11,850) |
Bitmain Non-fixed Price Sales and Purchase Agreements | |
JOINT VENTURE | |
Investments in joint venture related to direct payments made on behalf of joint venture - 50% share of purchase agreement deposits | (76,926) |
Reimbursable payments for deposits on plant and equipment made on behalf of a joint venture partner - 50% share of Talen | (47,657) |
Reimbursement of payments for deposits on plant and equipment made on behalf of a joint venture partner | 47,657 |
Other direct payments | |
JOINT VENTURE | |
Investments in joint venture related to direct payments made on behalf of joint venture - 50% share of purchase agreement deposits | $ (8,585) |
Nautilus | Minerva Purchase Agreement | |
JOINT VENTURE | |
Percentage of share in deposits | 50.00% |
Percentage of Talen's share in deposits paid | 50.00% |
Percentage of share in initial deposit | 50.00% |
Nautilus | Bitmain Non-fixed Price Sales and Purchase Agreements | |
JOINT VENTURE | |
Percentage of share in deposits | 50.00% |
Percentage of Talen's share in deposits paid | 50.00% |
Talen | Minerva Purchase Agreement | |
JOINT VENTURE | |
Percentage of share in initial deposit | 50.00% |
Talen | Nautilus | Minerva Purchase Agreement | |
JOINT VENTURE | |
Percentage of share in deposits | 50.00% |
Talen | Nautilus | Bitmain Non-fixed Price Sales and Purchase Agreements | |
JOINT VENTURE | |
Percentage of share in deposits | 50.00% |
JOINT VENTURE - Interest and Ex
JOINT VENTURE - Interest and Exposure (Details) $ in Thousands | 9 Months Ended |
Dec. 31, 2021USD ($) | |
JOINT VENTURE | |
Ownership interest (as percent) | 50.00% |
Initial Investment | $ 18,000 |
Additional Investment | 87,818 |
Net loss Inception to Date | (1,538) |
Company's Variable Interest in Entity | 104,280 |
Commitment to Future Additional Contributions | 50,239 |
Company's Maximum Exposure to Loss in Entity | $ 154,519 |
JOINT VENTURE - Results of Oper
JOINT VENTURE - Results of Operations and Financial Position (Details) - USD ($) $ in Thousands | 2 Months Ended | 9 Months Ended |
Mar. 31, 2021 | Dec. 31, 2021 | |
Condensed statements of operations information: | ||
Operating expenses | $ 104 | |
Net loss | $ (1,676) | (94,007) |
Condensed balance sheet information: | ||
Total current assets | 6,305 | 68,052 |
TOTAL ASSETS | 30,005 | 264,911 |
Total current liabilities | 1,739 | 45,857 |
Equity | 123,200 | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 30,005 | 264,911 |
Nautilus Joint Venture [Member] | ||
Condensed statements of operations information: | ||
Operating expenses | 3,076 | |
Net loss | (3,076) | |
Condensed balance sheet information: | ||
Total current assets | 4,960 | |
Noncurrent assets | 214,803 | |
TOTAL ASSETS | 219,763 | |
Total current liabilities | 11,317 | |
Equity | 208,446 | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 219,763 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) $ in Millions | Dec. 15, 2021USD ($)item | Dec. 07, 2021USD ($)item | Dec. 31, 2021USD ($) |
Second Bitmain Purchase Agreement | |||
COMMITMENTS AND CONTINGENCIES | |||
Number miners purchases covered by the agreement | item | 3,000 | ||
Number S19XP miners monthly deliveries | item | 500 | ||
Total purchase price per agreement | $ | $ 32.6 | ||
Payment due period | 60 days | ||
Deposits made | $ | $ 11.4 | $ 12.1 | |
Third Bitmain Purchase Agreement | |||
COMMITMENTS AND CONTINGENCIES | |||
Number miners purchases covered by the agreement | item | 15,000 | ||
Number S19XP miners monthly deliveries | item | 2,500 | ||
Total purchase price per agreement | $ | $ 169.1 | ||
Payment due period | 60 days | ||
Deposits made | $ | $ 59.2 |
DEFINED CONTRIBUTION PLAN (Deta
DEFINED CONTRIBUTION PLAN (Details) - USD ($) | 2 Months Ended | 9 Months Ended |
Mar. 31, 2021 | Dec. 31, 2021 | |
DEFINED CONTRIBUTION PLAN | ||
Expense for matching contributions | $ 0 | $ 55,000 |
TERACUB REDEEMABLE CONVERTIBL_2
TERACUB REDEEMABLE CONVERTIBLE PREFERRED STOCK (Details) $ / shares in Units, $ in Millions | Dec. 13, 2021shares | Dec. 31, 2021$ / shares | Dec. 02, 2021 | Apr. 30, 2021USD ($)$ / sharesshares |
TERACUB REDEEMABLE CONVERTIBLE PREFERRED STOCK | ||||
Dividends declared (in dollar per share) | $ / shares | $ 0 | |||
TeraCub | ||||
TERACUB REDEEMABLE CONVERTIBLE PREFERRED STOCK | ||||
Number of preferred shares converted | 97,976,728 | |||
Number of common stock issued upon conversion of preferred stock | 1,739,311 | |||
Dividends declared (in dollar per share) | $ / shares | $ 0 | |||
Preferred Stock | TeraCub | ||||
TERACUB REDEEMABLE CONVERTIBLE PREFERRED STOCK | ||||
Number of preferred shares converted | 2,000,000 | |||
Series A Preferred Stock | TeraCub | ||||
TERACUB REDEEMABLE CONVERTIBLE PREFERRED STOCK | ||||
Number of shares in private placement offering | 2,000,000 | |||
Issuance price per share | $ / shares | $ 25 | |||
Series A Preferred Stock | Private Placement | TeraCub | ||||
TERACUB REDEEMABLE CONVERTIBLE PREFERRED STOCK | ||||
Aggregate amount of private placement offering | $ | $ 50 | |||
Common Stock | TeraCub | ||||
TERACUB REDEEMABLE CONVERTIBLE PREFERRED STOCK | ||||
Conversion ratio | 0.8696560 |
COMMON STOCK (Details)
COMMON STOCK (Details) $ / shares in Units, $ in Thousands | Dec. 13, 2021$ / sharesshares | Dec. 31, 2021USD ($)item$ / sharesshares | Mar. 31, 2021USD ($)$ / sharesshares | Mar. 31, 2021USD ($)$ / sharesshares | Dec. 31, 2021USD ($)item$ / sharesshares |
COMMON STOCK | |||||
Authorized shares | 225,000,000 | 225,000,000 | |||
Common stock shares authorized | 200,000,000 | 100,000,000 | 100,000,000 | 200,000,000 | |
Common stock par value | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | |
Common stock number of votes | item | 1 | 1 | |||
Preferred stock authorized | 25,000,000 | 20,000,000 | 20,000,000 | 25,000,000 | |
Preferred stock par value | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | |
Issuance of stock, net of issuance costs | $ | $ 29,942 | $ 74,376 | |||
Proceeds from issuance of common stock, net of issuance costs | $ | $ 30,000 | $ 74,376 | |||
Common stock shares outstanding | 99,976,253 | 50,000,000 | 50,000,000 | 99,976,253 | |
Dividends declared (in dollar per share) | $ / shares | $ 0 | ||||
TeraCub | |||||
COMMON STOCK | |||||
Authorized shares | 1,000 | ||||
Common stock shares authorized | 100,000,000 | ||||
Common stock par value | $ / shares | $ 0.001 | ||||
Preferred stock authorized | 20,000,000 | ||||
Preferred stock par value | $ / shares | $ 0.001 | ||||
Price per share (in dollar per share) | $ / shares | $ 0.001 | ||||
TeraClub shares converted to TeraWulf shares. | 97,976,728 | ||||
TeraWulf shares issued converting TereClub shares | 99,976,253 | ||||
Common stock shares outstanding | 54,840,641 | ||||
Dividends declared (in dollar per share) | $ / shares | $ 0 | ||||
TeraCub | Company's founders | |||||
COMMON STOCK | |||||
Issuance of stock, net of issuance costs (in shares) | 44,000,000 | ||||
Term Loan | TeraCub | |||||
COMMON STOCK | |||||
Issuance of stock, net of issuance costs (in shares) | 839,398 | ||||
Private Placement | TeraCub | |||||
COMMON STOCK | |||||
Issuance of stock, net of issuance costs (in shares) | 2,261,932 | 6,000,000 | |||
Price per share (in dollar per share) | $ / shares | $ 33.82 | $ 5 | $ 5 | $ 33.82 | |
Issuance of stock, net of issuance costs | $ | $ 30,000 | ||||
Percentage of shares sold to outstanding shares | 12.00% | ||||
Proceeds from issuance of common stock, net of issuance costs | $ | $ 76,500 | ||||
Series A Preferred Stock | |||||
COMMON STOCK | |||||
Preferred stock authorized | 0 | 0 | |||
Series A Preferred Stock | TeraCub | |||||
COMMON STOCK | |||||
Preferred stock authorized | 2,000,000 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) | Apr. 27, 2021USD ($) | Jun. 30, 2021USD ($) | Apr. 30, 2021USD ($) | Feb. 28, 2021 | Mar. 31, 2021USD ($) | Dec. 31, 2021USD ($)item |
RELATED PARTY TRANSACTIONS | ||||||
Term of agreement | 10 years | |||||
Amount paid charged to selling, general and administrative | $ 577,000 | $ 17,999,000 | ||||
Related Party Payment In Balance Sheet | $ 12,500,000 | |||||
Cryptocurrency load deployment that requires additional share-base award compensation | item | 100 | |||||
Operating expenses | $ 104,000 | |||||
Selling, general and administrative | ||||||
RELATED PARTY TRANSACTIONS | ||||||
Purchases of electrical infrastructure and equipment | 577,000,000,000 | 120,000 | ||||
Performance shares | Selling, general and administrative | ||||||
RELATED PARTY TRANSACTIONS | ||||||
Expense in statement of operations | 12,500,000 | |||||
Prepaid expenses | ||||||
RELATED PARTY TRANSACTIONS | ||||||
Amount paid charged to selling, general and administrative | 583,000,000 | |||||
Due from related parties | ||||||
RELATED PARTY TRANSACTIONS | ||||||
Amount paid charged to selling, general and administrative | 647,000,000 | |||||
Plant, plant and equipment, net | ||||||
RELATED PARTY TRANSACTIONS | ||||||
Amount paid charged to selling, general and administrative | 1,900,000 | |||||
Beowulf E&D | Performance shares | ||||||
RELATED PARTY TRANSACTIONS | ||||||
Additional awards for every 100MW cryptocurrency mining load | 2,500,000 | |||||
Beowulf E&D | Services Agreement | ||||||
RELATED PARTY TRANSACTIONS | ||||||
Term of agreement | 5 years | |||||
Commons stock awards agreed to issue | 12,500,000 | |||||
Beowulf E&D | Services Agreement | Selling, general and administrative | ||||||
RELATED PARTY TRANSACTIONS | ||||||
Transaction amount | 8,500,000 | |||||
Amount paid charged to selling, general and administrative | 5,400,000 | |||||
Beowulf E&D | Development of bitcoin and organization and legal costs | ||||||
RELATED PARTY TRANSACTIONS | ||||||
Services agreement, monthly fee in the first year | $ 7,000,000 | |||||
Services agreement, annual fee after the first year if higher | 10,000,000 | |||||
Services agreement, annual fee per kilowatt hour of electric load utilized after the first year if higher | $ 0.0037 | |||||
Heorot Power Holdings LLC | Development of bitcoin and organization and legal costs | ||||||
RELATED PARTY TRANSACTIONS | ||||||
Purchases of electrical infrastructure and equipment | $ 1,600,000 | |||||
Heorot Power Holdings LLC | Development of bitcoin and organization and legal costs | Operating expenses | ||||||
RELATED PARTY TRANSACTIONS | ||||||
Transaction amount | $ 853,000 | $ 0 | ||||
Company, Controlled by A Management Member | ||||||
RELATED PARTY TRANSACTIONS | ||||||
Purchases of electrical infrastructure and equipment | $ 632,000 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) | Mar. 28, 2022USD ($)shares | Dec. 07, 2021USD ($)item | Mar. 31, 2022USD ($)item | Feb. 28, 2021 | Mar. 31, 2021USD ($)$ / shares | Dec. 31, 2021USD ($)$ / shares | Feb. 28, 2022USD ($)$ / shares |
Subsequent Event [Line Items] | |||||||
Common stock par value | $ / shares | $ 0.001 | $ 0.001 | |||||
Net proceeds from sale of shares | $ 29,942,000 | $ 74,376,000 | |||||
Agreement Term Period | 10 years | ||||||
Second Bitmain Purchase Agreement | |||||||
Subsequent Event [Line Items] | |||||||
Payment of deposit | $ 11,400,000 | $ 12,100,000 | |||||
Number miners purchases covered by the agreement | item | 3,000 | ||||||
Subsequent Events | |||||||
Subsequent Event [Line Items] | |||||||
Common stock par value | $ / shares | $ 0.001 | ||||||
Aggregate offering price | $ 200,000,000 | ||||||
Preferred Stock Cumulative Dividend Rate | 10.00% | ||||||
Preferred Stock conversion ration to Common Stock per $1,000 preference | 100 | ||||||
Conversion denomination | $ 1,000 | ||||||
Subsequent Events | Common Stock | |||||||
Subsequent Event [Line Items] | |||||||
Net proceeds from sale of shares | 5,000,000 | ||||||
Subsequent Events | Series A Convertible Preferred Stock | |||||||
Subsequent Event [Line Items] | |||||||
Net proceeds from sale of shares | 10,000,000 | ||||||
Subsequent Events | ATM Offering [Member] | |||||||
Subsequent Event [Line Items] | |||||||
Shares sold (in shares) | shares | 521,390 | ||||||
Net proceeds from sale of shares | $ 4,300,000 | $ 3,000,000 | |||||
Subsequent Events | Second Bitmain Purchase Agreement | |||||||
Subsequent Event [Line Items] | |||||||
Number miners purchases covered by the agreement | item | 2,500 |