TERAWULF INC

Current report

As of the date of this Quarterly Report, the Lake Mariner Facility has 245 MW of energized capacity supporting bitcoin mining and next-gen HPC infrastructure. TeraWulf remains on track to deliver 72.5 MW of HPC colocation capacity under its data center lease agreement with Core42, with revenue recognition expected as data halls become operational in 2025.

Current report

Bitcoin, introduced in 2008, revolutionized digital finance by enabling a decentralized system for exchanging and storing value without reliance on traditional financial institutions. It operates on a public ledger known as the “blockchain,” which records every transaction transparently and securely. This decentralized structure eliminates the need for intermediaries, enhancing transaction efficiency while making the network resilient to censorship and fraud. Unlike fiat currencies, bitcoin is not controlled by any government or central bank, reinforcing its role as a scarce, independent store of value.

Current report

Bitcoin mining is the process of validating transactions and securing the network through proof-of-work consensus, where miners solve complex cryptographic puzzles to add new blocks to the blockchain. The network is maintained by a global pool of distributed nodes, ensuring transaction integrity and preventing double-spending. Key factors influencing mining economics include computing power, energy costs, and network difficulty, with miners competing to maximize their share of the total computational power (hashrate) deployed on the bitcoin network. As more miners participate, the network difficulty adjusts dynamically every 2,016 blocks (approximately every two weeks) to maintain a consistent block creation rate.

Current report

Bitcoin’s supply issuance follows a predefined halving schedule, reducing the block reward by 50% approximately every four years. This mechanism enforces a controlled supply of bitcoin, contributing to its scarcity and long-term value proposition. The total bitcoin supply is capped at 21 million coins, and halvings will continue until this limit is reached.

Current report

The most recent halving occurred on April 19, 2024, reducing the block reward from 6.25 to 3.125 bitcoin per block. While the halving decreases the direct mining subsidy, transaction fees remain an additional source of miner revenue. This built-in supply constraint influences mining economics and often plays a role in bitcoin’s long-term price dynamics.

Current report

The April 2024, halving intensified competition among miners and underscores the importance of our access to low-cost power and vertically integrated business model. These advantages are increasingly critical to sustaining profitability in the post-halving environment.

Current report

Our strategy is centered on leveraging our owned and scalable digital infrastructure to drive revenue and profitability through both bitcoin mining and HPC hosting. As a vertically integrated operator, we own and control our infrastructure, allowing us to optimize efficiency, reduce costs, and maintain a highly competitive cost structure.

Current report

While bitcoin mining remains a core focus, we are strategically transitioning an increasing portion of the Lake Mariner Facility’s capacity to support HPC hosting and colocation. This shift allows us to capitalize on the growing demand for AI, machine learning, and cloud computing workloads while further optimizing our power utilization and digital infrastructure.

Current report

A key milestone in this transition occurred on December 22, 2024, when we signed a multi-year data center lease agreement with Core42, securing 72.5 MW of HPC hosting capacity at the Lake Mariner Facility for GPU compute workloads. The Company remains in discussions with Core42 regarding future capacity. This development accelerates our HPC hosting expansion, positioning us at the intersection of energy and digital compute infrastructure. To support this expansion, we have expanded our digital infrastructure at the site, featuring advanced liquid cooling systems and Tier 3 redundancy. This infrastructure will be optimized for high-density compute workloads, reinforcing our ability to attract hyperscale and enterprise customers.

Current report

By prioritizing cost-efficient power utilization, sustainability, and scalable infrastructure, our strategy positions TeraWulf to maximize value creation while adapting to the evolving landscape of digital asset mining and AI-driven computing. Looking ahead, we remain focused on expanding our infrastructure, optimizing operations, and strengthening our competitive advantage in both bitcoin mining and HPC hosting.

Current report

During the three months ended March 31, 2025 and 2024, we operated bitcoin mining activities at the Lake Mariner Facility. During the three months ended March 31, 2024, we also operated bitcoin mining activities at the jointly owned Nautilus Cryptomine Facility located in central Pennsylvania. In October 2024, we sold our entire equity interest in Nautilus, allowing us to consolidate operations and reinvest in future infrastructure growth.

Current report

Strategically located in Barker, New York, on the site of a former coal-fired power plant, the Lake Mariner Facility began operations in March 2022, designed to support sustainable bitcoin mining. As of the date of this Quarterly Report, the facility is operating 245 MW of bitcoin mining capacity. Additionally, the Company is developing HPC data centers at the Lake Mariner Facility to provide HPC hosting services for Core42, supporting up to 72.5 MW of data center infrastructure dedicated to GPU compute workloads. This capacity is expected to come online throughout 2025.

Current report

The Lake Mariner Facility sources 100% of its power from the Zone A grid, which is characterized by low-cost, predominantly zero-carbon energy. Of the Facility’s total power needs, 90 MW is secured under a Power Purchase Agreement (PPA) with NYPA executed in February 2022, which provides high-load factor power under a ten-year term commencing with NYPA’s initial power delivery. The Lake Mariner Facility is built for scalable expansion, with the ability to grow up to 500 MW in the near term and potentially 750 MW with targeted transmission upgrades. Its strategic location and direct access to sustainable Zone A power make it a highly attractive site for both bitcoin mining and HPC workloads.

Current report

TeraWulf began mining bitcoin at the Nautilus Cryptomine Facility in the first quarter of 2023 with an allotted 50 MW of operational bitcoin mining capacity. While holding a 25% equity stake, TeraWulf’s share of mined bitcoin was determined by relative hashrate contributions. The Company had contributed approximately 1.9 EH/s of the facility’s total 5.2 EH/s capacity, representing approximately 35.7% of the total hashrate attributed to the Company. At the time of TeraWulf’s ownership, the Nautilus Cryptomine Facility deployed approximately 48,000 miners, of which 15,800 miners were attributed to TeraWulf’s contribution to utilize is 50 MW allotment.

Current report

In October 2024, TeraWulf sold its entire equity interest in Nautilus, allowing the Company to reallocate capital toward expanding its digital infrastructure at the Lake Mariner Facility and advancing its HPC hosting strategy. As part of the transaction, Nautilus distributed to TeraWulf all of its right, title, and interest in its miners, as well as certain other related equipment.

Current report

Bitcoin Mining - Combined Facilities

Current report

As of March 31, 2025, our operating hashrate represented approximately 0.9% of the total global hashrate, aligning with our share of global blockchain rewards. As of that date, this is equivalent to approximately 4 bitcoin mined per day. To maintain profitably, we focus on optimizing operational efficiency and cost management, ensuring that our mining rewards consistently cover direct operating expenses.

Current report

Our management and operations teams continuously monitor market conditions to determine when and for how long to curtail operations. If curtailment is not mandated under demand response programs, we make real-time decisions to curtail mining whenever power prices exceed the value of the fixed bitcoin reward. As a result, curtailment increases when bitcoin’s value declines or energy prices rise, and decreases when bitcoin’s value appreciates or energy costs fall. These decisions are actively managed on an hour-by-hour basis to optimize profitability.

Current report

During the three months ended March 31, 2024, the Company recorded accelerated depreciation expense of $3.8 million related to certain miners whose estimated useful lives were shortened due to planned replacement by April 2024. While our standard depreciation period for miners is four years, historically low power costs may allow for a longer actual useful life in certain circumstances. However, if depreciation were included in the cost of mining analysis, it would add $37,316 and $15,092 per bitcoin mined for the three months ended March 31, 2025 and 2024, respectively.

Current report

Estimating asset useful lives requires management judgement, particularly given the rapid evolution of next-generation mining rigs in industrial-scale bitcoin mining. Depreciation schedules may be adjusted if events, regulatory changes, or shifts in operating conditions indicate a need for revision. Management continuously evaluates factors such as future energy market conditions, operating costs, maintenance practices and capital investment needs to ensure depreciation assumptions remain reasonable. When an asset’s estimated useful life is adjusted — either shortened or extended — depreciation provisions are updated accordingly, which could have a material impact on future financial results.

Current report

On May 5, 2025, the Company held its 2025 Annual Meeting of Stockholders (the “2025 Annual Meeting”). As a result of the matters submitted to a stockholder vote at the 2025 Annual Meeting, the Company's stockholders adopted a Plan amendment increasing the maximum number of shares available for issuance under the Plan to 54,096,290 shares of Common Stock and increasing the number of shares of Common Stock authorized for issuance for grants of incentive stock options to 13,524,073 shares of Common Stock.

Current report

Revenue for the three months ended March 31, 2025 and 2024 was $34.4 million and $42.4 million, respectively, a decrease of $8.0 million. The decline was primarily due to a reduction in the total bitcoin mined driven by the April 2024 halving event and increased network hashrate. As a result, the Company mined a total of 372 bitcoin during the three months ended March 31, 2025 as compared to 767 bitcoin during the same period in the prior year. This decrease was partially offset by a higher average price of bitcoin of $93,522 during the three months ended March 31, 2025, compared to $53,260 in the prior year period, as well as increased mining capacity at the Lake Mariner Facility between March 31, 2024 and 2025.

Current report

During the three months ended March 31, 2024, the Company also reported revenue from bitcoin miner hosting of $0.8 million prior to the expiration of the Company’s one bitcoin miner hosting contract with a customer in February 2024.

Current report

Cost of revenue (excluding depreciation) for the three months ended March 31, 2025 and 2024, was $24.6 million and $14.4 million, respectively, representing an increase of approximately $10.2 million. The increase was primarily driven by higher power expenses, resulting from both increased mining and hosting capacity due to infrastructure placed in service between March 31, 2024 and 2025, and higher realized power prices during the 2025 period. Proceeds from participation in demand response programs are recorded as a reduction in cost of revenue during the period in which the underlying program occurs. These proceeds totaled $2.8 million and $1.2 million for the three months ended March 31, 2025 and 2024, respectively. The Company is actively expanding its participation in such programs across New York State.

Current report

Loss (gain) on fair value of digital currency, net during the three months ended March 31, 2025 and 2024 was $0.9 million and $(1.3) million, respectively, due to the steady increases in the price of bitcoin during the three months ended March 31, 2024 as compared to decreases in the price of bitcoin during the three months ended March 31, 2025.

Current report

Interest expense was $4.0 million and $11.0 million for the three months ended March 31, 2025 and 2024, respectively, a decrease of $7.0 million. The decrease is primarily attributed to amortization of debt issuance costs during the three months ended March 31, 2025 related to the 2030 Convertible Notes of $0.6 million as compared to $7.6 million during the three months ended March 31, 2024 related to the LGSA which was fully repaid in July 2024 ahead of maturity.

Current report

Equity in net income of investee, net of tax was $5.3 million for the three months ended March 31, 2024, which represents TeraWulf’s proportional share of income of Nautilus. On October 2, 2024, the Company sold its entire 25% equity interest in Nautilus to the Talen Member.

Current report

Cash provided by operating activities was $56.5 million and $22.8 million for the three months ended March 31, 2025 and 2024, respectively. The increase in 2025 was primarily driven by the receipt of $90.0 million in Prepaid Rent from the Company’s HPC customer. These amounts are reflected in the condensed consolidated balance sheet as of March 31, 2025 within the current and non-current portions of deferred rent liability, totaling $32.0 million and $58.0 million, respectively. This increase was partially offset by a $10.1 million rise in cost of revenue during the 2025 period compared to the prior year. Cost of revenue, which primarily consists of power expenses, increased due to expanded mining and hosting capacity, the effects of the April 2024 halving and increased network hashrate, and higher realized power prices. Additionally, prior to the repayment of its Term Loans in July 2024, the Company converted bitcoin to cash almost immediately. As a result, $54.4 million in proceeds from digital currency sales were included in operating cash flows for the three months ended March 31, 2024. In contrast, during the same period in 2025, bitcoin sales proceeds of $32.6 million are classified as cash flows from investing activities, as the Company no longer converts bitcoin to cash on a near-immediate basis.

Current report

Cash used in investing activities was $61.1 million and $47.0 million for the three months ended March 31, 2025 and 2024, respectively. The increase in cash used in investing activities is primarily attributed to increases in purchase of and deposits on plant and equipment of $46.7 million related to the buildout of its facilities at the Lake Mariner Facility. The increase in cash used in investing activities was partially offset by the classification of cash received as proceeds from sales of digital currency not converted nearly immediately into cash of $32.6 million during the three months ended March 31, 2025.

Current report

Cash (used in) provided by financing activities from continuing operations was $(51.3) million and $15.5 million for the three months ended March 31, 2025 and 2024, respectively. During the three months ended March 31, 2025, the Company repurchased $33.3 million of treasury stock under the Share Repurchase Program and paid $18.0 million in taxes related to net share settlements of stock-based compensation awards. During the three months ended March 31, 2024, financing activities included $50.7 million in proceeds from issuances of Common Stock, partially offset by $33.4 million in principal repayments on long-term debt.

Current report

Bitcoin earned through mining is reflected as a noncash adjustment reconciling net loss to cash flows from operating activities in the consolidated statements of cash flows. Bitcoin received as distributions-in-kind from equity investees is reported as as supplemental noncash investing activity. Prior to the repayment of the Term Loans in July 2024 (see Note 8), bitcoin was converted into cash immediately upon mining, and related sales proceeds were included in cash flows from operating activities. Following the loan repayment, the Company no longer converts bitcoin into cash immediately, and proceeds from bitcoin sales are now reported within cash flows from investing activities.

Previous report

Revenue Structure

Previous report

We are primarily engaged in, and all of our revenues are derived from, bitcoin mining for our own account. Our digital asset mining involves solving complex cryptographic algorithms that validate transactions on the bitcoin blockchain— a process known as “mining.” Competing on a global scale, we aim to complete new blocks on the blockchain to secure bitcoin rewards. With a large fleet of high-performance miners, primarily sourced from Bitmain Technologies Limited, we strive to increase bitcoin production while continuously enhancing operational efficiencies to reduce costs. We generate revenue by providing hash computation services to a mining pool operator to mine bitcoin and validate transactions using application-specific integrated circuit computers (“ASIC” or “miners”) owned by us. Beyond block rewards, we also earn transaction fees for confirming blockchain transactions. These earnings are routinely converted into U.S. dollars. Presently, we liquidate the bitcoin mined as part of our routine treasury management processes to acquire U.S. dollars for operational, capital, or other corporate expenses. Our bitcoin holdings are securely stored in a cold storage wallet managed by our custodian, NYDIG Trust Company LLC, a duly chartered New York limited liability trust company (“NYDIG”).

Previous report

For our bitcoin mining operations, we utilize a third-party mining pool operated by Foundry Digital LLC (“Foundry”). At the close of each day, the bitcoin we have earned is transferred by Foundry to our custodial wallet address at NYDIG. We abstain from engaging in the direct sale of our bitcoin on any exchange. Instead, we rely on NYDIG to handle the sale of our mined bitcoin in accordance with our execution agreement with NYDIG, as detailed further in the “Risk Factors” section herein. Our bitcoin sales occur on a daily and weekly basis.

Previous report

Bitcoin, introduced in 2008, fundamentally transformed the landscape of digital currency by providing a decentralized mechanism for exchanging and preserving value. It operates on a consensus-based network, utilizing a public ledger termed as the “blockchain” to meticulously record every bitcoin transaction, allowing users to send and receive payments without the need for banks and other intermediaries. Bitcoin is not linked to any fiat currency or country’s monetary policy, therefore serves as a store of value outside of government control.

Previous report

Bitcoin mining involves validating transactions through a proof-of-work consensus method, where miners solve complex mathematical problems to add transactions to the blockchain. The blockchain is maintained by a robust and public open-source architecture consisting of a network of computers, known as nodes, that work together to verify and validate new transactions. Because the blockchain is decentralized and transparent, all users can verify the legitimacy of a transaction without having to rely on a third party. This eliminates the need for intermediaries, which can be slow and expensive, and makes the network resistant to censorship and fraud. Bitcoin mining plays a key role in the maintenance and growth of the Bitcoin network by providing the computational power needed to verify transactions and add new blocks to the blockchain. Factors such as computing capacity, electricity costs, and location play pivotal roles in mining operations. Generally, the greater the share a single mining rig can capture of the blockchain’s total network hashrate, or the aggregate hashrate deployed to solving a block on the Bitcoin blockchain, the greater the rig’s chances of solving a block and therefore earning the reward.

Previous report

Network difficulty, which is a measure of how hard it is for miners to solve a block on the Bitcoin blockchain (and, thus, earn a mining reward), is determined by the network’s total hashrate (i.e., the total computational power devoted to solving a block), which is adjusted every 2,016 blocks (with a new block being added approximately every ten minutes). Therefore, as more miners join the network and the network’s global hashrate increases, its difficulty will increase. Conversely, if miners leave the network and its hashrate decreases, its difficulty will decrease.

Previous report

The bitcoin subsidy issued by the Bitcoin network for solving a block is subject to periodic incremental halving. The network halving is a preprogrammed, fixed process of the Bitcoin network where the bitcoin subsidy for solving a block received by miners is reduced by half approximately every four years. The network halving is a process designed to implement a periodic decreasing schedule of the issuance of new bitcoin into the market, which results in a predictable and controlled inflationary rate. The network halving will continue to occur on this schedule until the amount of bitcoin in existence reaches the cap of 21.0 million. After each halving, the decrease in the subsidy provided to miners from the Bitcoin network leads to fewer rewards for miners and therefore a decrease in revenues should the price of bitcoin remain the same. Transaction fees, which together with the block subsidy comprise the block reward for successfully solving a block, is not directly impacted by the halving. On April 19, 2024, the bitcoin rewards issued for each block solved dropped from 6.25 to 3.125, effectively reducing the bitcoin earned from bitcoin mining by 50% (excluding transactions fee rewards).

Previous report

In December 2023, we launched our digital infrastructure and third-party colocation initiative, which aims to provide colocation, facility operations, security, and essential services for workloads in machine learning, artificial intelligence, and other compute-intensive fields. While capital investments have been made to develop our HPC data center infrastructure, this investment is still in its early stages and is not yet generating revenue. Nonetheless, this initiative reinforces our long-term growth and diversification strategy, positioning us to meet the increasing demand for high-density compute capacity powered by low-cost, predominantly zero-carbon energy.

Previous report

Since our public debut in December 2021, we have primarily focused on sustainable bitcoin mining as our principal revenue-generating activity. As of September 30, 2024, we deployed a fleet of 74,200 miners, including miners deployed at our jointly owned Nautilus facility located in central Pennsylvania (the “Nautilus Cryptomine Facility”), achieving a hashrate capacity of approximately 10.0 exahashes per second (“EH/s”) with a fleet-wide efficiency of 23.2 joules per terahash (“J/TH”). In October 2024, we sold our 25% equity interest in the Nautilus Cryptomine LLC (“Nautilus”) joint venture, representing 50 MW of mining load capacity at the Nautilus Cryptomine Facility, as part of a strategic transaction to reinvest in future growth.

Previous report

We determine the sources of electricity used in our operations and the proportion of energy attributable to zero-carbon energy sources based on energy production data published by New York Independent System Operator (“NYISO”) for upstate New York, specifically covering NYISO Zones A-E, where the Lake Mariner Facility is located, consistent with recommended geographic resolution for projected emissions factors for upstate New York published by the New York State Energy Research and Development Authority.

Previous report

For example, we recently completed a 2.5 MW HPC proof-of-concept project designed to support both current and next-generation GPU technology. Additionally, we are constructing a 20 MW colocation building (“CB-1”), a facility designed with advanced liquid cooling systems and Tier 3 redundancy. Key planned features include N+1 redundant cooling systems, variable speed fans, chilled water infrastructure, dual power supplies, and redundant fiber network paths.

Previous report

CB-1 is scheduled to be operational by the first quarter of 2025. Following this, a second colocation building (“CB-2”) with a planned gross capacity of 50 MW, is expected to be completed by the end of the second quarter of 2025. Planned capital expenditures associated with CB-1 will be funded in part from proceeds from the sale of our equity stake in the Nautilus Cryptomine Facility, which was completed on October 2, 2024, and we expect that proceeds from the private offering of 2.75% Convertible Senior Notes due 2030 (the “2030 Convertible Notes”) will substantially fund the capital expenditures associated with CB-2. Once CB-1 and CB-2 are operational, we anticipate adding approximately 178 MW of additional HPC data center capacity throughout 2025, bringing the total deployed capacity at the site to around 500 MW, with the capacity approximately divided between bitcoin mining and HPC workloads.

Previous report

These initiatives mark significant progress in our HPC build-out, tapping into the rapidly growing hyperscale data center market. We believe that HPC hosting aligns with our current business model, leading to stable, long-term, and high-margin revenue.

Previous report

As of September 30, 2024, TeraWulf conducted its bitcoin mining operations at two established data centers: the Lake Mariner Facility in upstate New York and the jointly owned Nautilus Cryptomine Facility located in central Pennsylvania, which had a combined operating capacity of 10.0 EH/s with approximately 74,200 miners deployed, comprised of 58,400 deployed miners at the Lake Mariner Facility and 15,800 deployed at the Nautilus Cryptomine Facility. As of the date of this Quarterly Report, the Company has a total operational bitcoin mining capacity of approximately 195 MW at the Lake Mariner Facility and is currently constructing an additional 50 MW facility, which we expect to be operational in the first quarter of 2025.

Previous report

Located at a site adjacent to the now decommissioned coal-fired power plant in Barker, New York, the Lake Mariner Facility began sustainably mining bitcoin in March 2022. As of the date of this Quarterly Report, the Lake Mariner Facility is operating approximately 195 MW of bitcoin mining capacity and the Company is currently constructing an additional 50 MW, which we expect to be operational in the first quarter of 2025. The Company has an agreement in place with the Power Authority of the State of New York (“NYPA”) for 90 MW of high load factor power to support its bitcoin mining operations (the “PPA”). The PPA was executed in February 2022 and has a term of ten years from the date of commencement of NYPA’s power delivery. The Lake Mariner Facility is situated on an expansive site on the shores of Lake Ontario and has the capacity to scale up to 500 MW, and potentially up to 750 MW with certain transmission upgrades.

Previous report

As of September 30, 2024, approximately 48,000 miners were deployed at the Nautilus Cryptomine Facility of which 46,000 were operational. Approximately 15,800 of the deployed miners were attributed to TeraWulf’s contributions to Nautilus in order to utilize TeraWulf's allotted 50 MW of bitcoin mining capacity. These miners were comprised as follows:

Previous report

As of September 30, 2024, these miners ranged in age from 1.5 to 1.6 years with an average age of approximately 1.5 years. Nautilus did not have scheduled downtime for our miners; however, while Nautilus periodically performed unscheduled maintenance on miners, such downtime had not been significant historically. When performing unscheduled maintenance, depending on the length of estimated repair time, Nautilus may have replaced a miner with a substitute miner to limit overall downtime. As of September 30, 2024, these miners had a range of energy efficiency from 22 to 30 j/th and an average energy efficiency of 25.5 j/th. While the Company held a 25% equity interest in Nautilus, the distributions of mined bitcoin were determined by each of TeraWulf’s and Talen’s respective hashrate contributions. Accordingly, the Company had contributed approximately 1.9 EH/s of a total 5.2 EH/s of miners which resulted in an approximate 35.7% of the hashrate share attributed to the Company. In connection with the sale of TeraWulf’s interest in Nautilus in October 2024, Nautilus distributed to TeraWulf all of Nautilus’ right, title and interest in and to all of its miners, as well as certain other related equipment owned by Nautilus.

Previous report

Combined Facilities

Previous report

As of September 30, 2024 our operating hashrate was approximately 1.3% of the total global hashrate, and we received approximately the same percentage of the global blockchain rewards, which as of that date, equaled approximately 6 to 7 bitcoin per day. Ultimately, in order to mine profitably, we work to ensure that these mining rewards cover our direct operating costs.

Previous report

The management team makes real-time determinations on the need and timing during which we should curtail. If not otherwise curtailed under demand response programs, we curtail when power prices exceed the value we would receive for the corresponding fixed bitcoin reward. This means if bitcoin’s value decrease or energy prices increase, our curtailment will increase; likewise, when bitcoin’s value increases and energy prices decrease, our curtailment will decrease. The management team manages this decision on an hour-by-hour basis.

Previous report

The estimation of asset useful lives requires management judgement, including consideration of historical operating data, which is limited in the industrial-scale bitcoin mining space given the advent of next-generation mining rigs primarily used by the Company’s bitcoin mining operations. Depreciation periods can be adjusted periodically if an event, regulatory action, or change in retirement patterns indicates an update is necessary. Additionally, management considers expected future energy market prices and conditions, operating costs, maintenance practices and capital investment requirements in determining the estimated useful lives of our equipment and reassesses the reasonableness of estimated useful lives whenever events or changes in circumstances warrant. When a determination has been made that an asset will be retired or extended before or after the end of its current estimated useful life, depreciation provisions will be accelerated or extended to reflect the shortened or lengthened estimated useful life, which could have a material unfavorable or favorable impact on future results of operations.

Previous report

On October 2, 2024, the Company sold its entire 25% equity interest to Talen Member for $85.0 million in cash, subject to a customary working capital adjustment (the “Nautilus Sale”). In connection with the Nautilus Sale, Nautilus transferred to the Company all of Nautilus’ right, title and interest in and to all of its miners, including miners contributed by the Talen Member, as well as certain other related equipment owned by Nautilus. The Nautilus Sale included customary representations and warranties and customary covenants, including, among others, that the Talen Member will pay the Company 25% of the net proceeds received in excess of $300.0 million in the aggregate in any future sale of all or substantially all of the assets, or a majority of the equity interests of Nautilus.

Previous report

On October 9, 2024, the Company terminated the Ground Lease and entered into a new lease with the same related party counterparty (the “New Ground Lease”) related to the Lake Mariner Facility which expanded the acreage of real property as compared to the Ground Lease for the purposes of cryptocurrency mining and HPC data center operations. The New Ground Lease includes fixed payments, including an annual escalation factor as well as the Company’s proportionate share of the landlord’s cost to own, operate and maintain the premises and has an initial term of 35 years, commencing on October 9, 2024, and will automatically renew for up to nine additional periods of five years each unless the Company provides written notice to terminate the lease at least six months prior to the expiration of the initial term or the then-current renewal term. Upon expiration of the New Ground Lease, the buildings and improvements on the premises will revert to the landlord in good order. As consideration for the termination of the Ground Lease and entering into the New Ground Lease, the Company issued 20 million shares of the Company’s Common Stock and paid $12.0 million in cash in October 2024.

Previous report

On October 23, 2024, the Company’s board of directors approved a share repurchase program authorizing the Company to repurchase up to $200.0 million of the Company’s outstanding shares of Common Stock through December 31, 2025. As of the date of this Quarterly Report, the Company has repurchased 17,968,750 shares of its Common Stock for approximately $115.0 million.

Previous report

On October 25, 2024, the Company completed a private offering of 2.75% Convertible Senior Notes due 2030 (the “2030 Convertible Notes”). The 2030 Convertible Notes were sold under a purchase agreement, dated as of October 23, 2024, entered into by and between the Company and Cantor Fitzgerald & Co. as representative of the several initial purchasers named therein (the “Initial Purchasers”), for resale to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The aggregate principal amount of notes sold in the offering was $500.0 million, which includes $75.0 million aggregate principal amount of notes issued pursuant to an option to purchase additional notes granted to the Initial Purchasers under the purchase agreement, which the Initial Purchasers exercised in full on October 24, 2024 and which additional purchase was completed on October 25, 2024.

Previous report

The notes were issued at a price equal to 100% of their principal amount. The net proceeds from the sale of the notes were approximately $487.1 million after deducting the Initial Purchasers’ discounts and commissions and estimated offering expenses payable by the Company. The Company used approximately $60.0 million of the net proceeds from the sale of the notes to pay the cost of certain capped call transactions and plans to use the remainder for general corporate purposes, which may include working capital, strategic acquisitions, expansion of data center infrastructure to support high-performance computing activities and expansion of existing assets.

Previous report

The Business Combination

Previous report

TeraWulf completed its business combination with IKONICS Corporation (“IKONICS”) on December 13, 2021 pursuant to which, among other things, the Company effectively acquired IKONICS and became a publicly traded company on the Nasdaq, which was the primary purpose of the business combination. The consideration in the Merger included, among other things, contractual contingent value rights (“CVR”) per a Contingent Value Rights Agreement (the “CVR Agreement”) pursuant to which each shareholder of IKONICS as of immediately prior to the Merger, received one non-transferable CVR for each outstanding share of common stock of IKONICS then held. The holders of the CVRs were 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. During the nine months ended September 30, 2023, the Company made payments of the CVR liability related to proceeds from sales of net assets held for sale of $9.6 million. Additionally, the Company made payments of the CVR liability of $1.4 million in November 2023 such that as of December 31, 2023, the Company had made all of the aggregate required distributions of $11.0 million of proceeds to the CVR Holders and the CVR Agreement was deemed terminated.

Previous report

Revenue for the three months ended September 30, 2024 and 2023 was $27.1 million and $19.0 million, respectively, an increase of $8.1 million. The increase in revenue was primarily attributed to an increase in the average price of bitcoin during the three months ended September 30, 2024 of $61,023 as compared to $28,129 during the same period in the prior year and an increase in mining capacity at the Lake Mariner Facility to approximately 195 MW as of September 30, 2024 as compared to 110 MW as of September 30, 2023. These increases were partially offset by decreases in the total bitcoin mined due to impacts of the halving in April 2024 and the increase in network hashrate, resulting in total bitcoin mined of 442 bitcoin during the three months ended September 30, 2024 as compared to 624 bitcoin during the same period in the prior year.

Previous report

Revenue for the nine months ended September 30, 2024 and 2023 was $105.1 million and $45.9 million, respectively, an increase of $59.2 million. The increase was primarily attributed to an increase in the average price of bitcoin during the nine months ended September 30, 2024 of $60,022 as compared to $26,313 during the same period in the prior year and an increase in mining capacity at the Lake Mariner Facility to approximately 195 MW as of September 30, 2024 as compared to 110 MW as of September 30, 2023, partially offset by decreases in the total bitcoin mined due to impacts of the halving in April 2024 and the increase in network hashrate, resulting in total bitcoin mined of 1,754 bitcoin during the nine months ended September 30, 2024 as compared to 1,560 bitcoin during the same period in the prior year.

Previous report

During the three and nine months ended September 30, 2024, revenue from hosting was $0 and $0.8 million, respectively, as compared to $1.8 million and $5.8 million during the three and nine months ended September 30, 2023, respectively, a decrease due to the expiration of the Company’s one data center hosting contract with a customer in February 2024.

Previous report

Cost of revenue (exclusive of depreciation) for the three months ended September 30, 2024 and 2023 was $14.7 million and $8.3 million, respectively, an increase of $6.4 million. Cost of revenue (exclusive of depreciation) for the nine months ended September 30, 2024 and 2023, was $43.0 million and $18.4 million, respectively, an increase of approximately $24.6 million. Cost of revenues is primarily comprised of power expense and the increases were primarily due to the increase in mining and hosting capacity due to infrastructure constructed and placed in service between September 30, 2023 and September 30, 2024 and, to a lesser extent, slight increase in realized power prices during the three and nine months ended September 30, 2024 as compared to the same periods in 2023. The Company records proceeds related to participation in demand response programs as a reduction in cost of revenue in the period corresponding to the underlying demand response program period; the amount of aggregate proceeds received or expected to be received were $4.1 million and $7.3 million for the three and nine months ended September 30, 2024, respectively, and $1.7 million and $2.5 million for the three and nine months ended September 30, 2023, respectively. The Company is actively expanding its enrollment in such available programs in New York State.

Previous report

Selling, general and administrative expenses (including related party expenses) for the three months ended September 30, 2024 and 2023 were $11.5 million and $10.3 million, respectively, a net increase of $1.2 million. Selling, general and administrative expenses are comprised primarily of professional fees, legal fees, employee compensation and benefits, stock-based compensation to employees and consultants, insurance and general corporate expenses. The increase was primarily due to increased expense during the three months ended September 30, 2024 as compared to the same period in the prior year of stock-based compensation of $1.0 million, employee compensation and benefits of $0.4 million, and legal and other professional fees of $1.5 million. These increases were partially offset by decreased expenses during the three months ended September 30, 2024 as compared to the same period in the prior year of insurance expense of $0.3 million. Selling, general and administrative expenses – related party decreased $1.7 million primarily due to performance milestone expense under the Administrative and Infrastructure Services Agreement (the “Services Agreement”) with Beowulf Electricity & Data Inc. (“Beowulf E&D”).

Previous report

Gain on fair value of digital currency, net during the three and nine months ended September 30, 2024 was $1.0 million and $1.6 million, respectively, as a result of the Company adopting Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2023-08, Intangible – Goodwill and Other – Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”) on January 1, 2024 which requires entities with certain crypto assets to subsequently measure such assets at fair value, with changes in fair value recorded in net income in each reporting period. Prior to the adoption of ASU 2023-08, the Company recorded impairment of digital currency of $0.9 million and $2.2 million during the three and nine months ended September 30, 2023, respectively, representing the decline in bitcoin prices during the Company’s holding period of its bitcoin, which was not reversed during its holding period, and realized gain on sale of digital currency for the three and nine months ended September 30, 2023 of $0.7 million and $1.9 million, respectively, upon subsequent liquidation of bitcoin held. The Company elected to early adopt ASU 2023-08 effective January 1, 2024, resulting in a cumulative-effect change of $37,000 to increase the balance of digital currency with a corresponding decrease in the opening balance of accumulated deficit in the condensed consolidated balance sheet as of January 1, 2024.

Previous report

During the three and nine months ended September 30, 2024, the Company recorded an impairment loss of $0.4 million related to the expected sale of 1,200 miners for proceeds of $0.2 million which were classified as held for sale as of September 30, 2024 and included in other current assets in the condensed consolidated balance sheet.

Previous report

During the three and nine months ended September 30, 2023, the Company recorded a loss on disposal of property, plant and equipment of $0.4 million related to disposals of miners.

Previous report

Interest expense was $0.4 million and $10.3 million for the three months ended September 30, 2024 and 2023, respectively, a decrease of $9.9 million. Interest expense relates primarily to the borrowings under the Loan, Guaranty and Security Agreement (the “LGSA”) with Wilmington Trust (the “Term Loans”), which had an original maturity date of December 1, 2024 and was fully repaid in July 2024 ahead of maturity. Interest expense was $16.8 million and $25.5 million for the nine months ended September 30, 2024 and 2023, respectively, an decrease of $8.7 million. The decrease in interest expense for the nine months ended September 30, 2024 as compared to the same period in the prior year is primarily due to repayments of the Term Loans principal balance subsequent to September 30, 2023 resulting in (i) a decrease of amortization of debt issuance costs and debt discount of $3.4 million during the nine months ended September 30, 2024 as compared to the same period in 2023 and (ii) a decrease of $5.5 million in interest expense related to the stated interest rate, which remained unchanged.

Previous report

Equity in net income (loss) of investee, net of tax

Previous report

Equity in net income (loss) of investee, net of tax for the three and nine months ended September 30, 2024 was $(2.7) million and $3.4 million, respectively as compared to $0.9 million and $(12.6) million for the three and nine months ended September 30, 2023, respectively, which represents TeraWulf’s proportional share of income or losses of Nautilus, which commenced principal operations in February 2023. For the three and nine months ended September 30, 2023, the amount also includes an impairment loss of $0 and $13.6 million, respectively, on the distribution of miners from Nautilus to the Company whereby the miners were marked to fair value from book value on the date distributed. The impairment loss was the result of decreasing prices for miners between initial purchase and distribution.

Previous report

Cash provided by (used in) operating activities was $18.3 million and $(6.6) million for the nine months ended September 30, 2024 and 2023, respectively. The $24.9 million increase in cash provided by operating activities from continuing operations was primarily driven by the increase in mining capacity at the Lake Mariner Facility and increases in the average price of bitcoin, partially offset by increased network hashrate and the effects of the halving in April 2024.

Current report — wording carried from elsewhere

(1) Results as of March 31, 2024 reflect hashrate of mining operations at the Lake Mariner Facility and TeraWulf’s net share of hashrate produced at the Nautilus Cryptomine Facility.

Current report — wording carried from elsewhere

Miner acquisition costs, or capital expenditures, are not factored into the cost of mining analysis, as they do not impact the marginal cost of producing one bitcoin. Instead, these costs are recorded as property, plant and equipment in the condensed consolidated balance sheets. Depreciation of property, plant and equipment is calculated using the straight-line method, with estimated useful lives of four years for miners and five years for computer equipment.

Previous report — wording carried elsewhere

Our business strategy centers on growing revenue and profitability by enhancing the capacity and efficiency of our self-mining fleet while expanding our data center infrastructure to support HPC activities. We plan to strategically develop the infrastructure necessary for growth and profitability while pursuing adjacent high-value computing opportunities that leverage our power and mining expertise.

Previous report — wording carried elsewhere

We are confident that our expertise in power infrastructure and digital asset mining can be favorably applied to the design, development, and operation of large-scale data centers. These data centers are optimized for high-value applications such as cloud computing, machine learning, and artificial intelligence. We will actively seek opportunities to expand into these areas using our knowledge, expertise, and existing infrastructure wherever favorable market opportunities arise.