TeraWulf (WULF) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Financial Statements Unaudited Q1 2021 condensed financial statements reflect a reduced net loss, positive operating cash flow, and slightly increased total assets Condensed Balance Sheets Condensed Balance Sheet Highlights (Unaudited) | Account | March 31, 2021 ($) | December 31, 2020 ($) | | :--- | :--- | :--- | | Assets | | | | Cash | 4,428,269 | 3,693,845 | | Total current assets | 8,164,356 | 7,803,453 | | Total assets | 15,635,977 | 15,435,399 | | Liabilities & Equity | | | | Total current liabilities | 4,074,392 | 3,596,053 | | Total stockholders' equity | 11,561,585 | 11,839,346 | | Total liabilities and stockholders' equity | 15,635,977 | 15,435,399 | Condensed Statements of Operations Condensed Statements of Operations (Unaudited, for the three months ended March 31) | Metric | 2021 ($) | 2020 ($) | | :--- | :--- | :--- | | Net Sales | 3,073,408 | 3,497,192 | | Gross Profit | 996,332 | 1,153,232 | | Loss from Operations | (322,181) | (811,368) | | Net Loss | (321,639) | (587,006) | | Basic & Diluted Loss Per Share | (0.16) | (0.30) | Condensed Statements of Cash Flows Condensed Statements of Cash Flows (Unaudited, for the three months ended March 31) | Cash Flow Activity | 2021 ($) | 2020 ($) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | 771,355 | (427,276) | | Net cash (used in) provided by investing activities | (6,787) | 1,104,749 | | Net cash used in financing activities | (30,144) | (35,682) | | Net Increase in Cash | 734,424 | 641,791 | | Cash at End of Period | 4,428,269 | 1,605,440 | Notes to Condensed Financial Statements - The financial statements are unaudited and management believes they include all necessary recurring adjustments for a fair presentation, noting the COVID-19 pandemic could continue to have a material adverse impact on operations, financial condition, and cash flows[19][22] Segment Net Sales (for the three months ended March 31) | Segment | 2021 ($) | 2020 ($) | | :--- | :--- | :--- | | Chromaline | 1,698,681 | 1,964,340 | | IKONICS Imaging | 1,086,601 | 970,099 | | DTX | 76,311 | 112,529 | | AMS | 211,815 | 450,224 | - On April 1, 2021, the Company repaid its entire $2.7 million Duluth Economic Development Authority loan, plus interest, using existing cash on hand, with the loan classified as a current liability as of March 31, 2021[52] - The company maintains a $2.05 million bank line of credit, which was unused during the first three months of 2021 and 2020[53] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Q1 2021 sales decreased by 12.1% to $3.1 million due to pandemic impacts, yet net loss significantly narrowed Impact of the COVID-19 Pandemic - The COVID-19 pandemic has caused decreased demand for the company's products and is expected to have a significant adverse effect on business, operating results, and financial condition throughout 2021[59] - To mitigate negative impacts, the company implemented cost reduction efforts in 2020, including workforce reduction, decreased 401(k) contributions, and elimination of non-essential expenditures[59] Results of Operations Q1 Sales Comparison by Segment (2021 vs. 2020) | Segment | Q1 2021 Sales ($) | Q1 2020 Sales ($) | % Change | | :--- | :--- | :--- | :--- | | Chromaline | 1.7M | 2.0M | -13.5% | | AMS | 212k | 450k | -53.0% | | DTX | 76k | 113k | -32.2% | | IKONICS Imaging | 1.1M | 970k | +12.0% | - The sales increase in the IKONICS Imaging segment is attributed to improving sales of its IKONART® product[76] - Gross margin decreased slightly from 33.0% to 32.4% due to lower sales and production volume, particularly in the AMS segment which has a high fixed cost structure[77] - Selling, general and administrative (SG&A) expenses decreased significantly to $1.2 million from $1.8 million, primarily due to reductions in personnel and travel expenses, and the absence of $365,000 in one-time CEO transition costs incurred in Q1 2020[78] Liquidity and Capital Resources - Cash increased to $4.4 million at March 31, 2021, from $3.7 million at December 31, 2020[84] - Operating activities provided $771,000 in cash during Q1 2021, a significant improvement from a $427,000 use of cash in Q1 2020[84] - On April 1, 2021, the company repaid a $2.7 million loan with existing cash on hand after being notified by the bank that the loan would be recalled per the agreement[91] - The company has an available and unused bank line of credit of $2.05 million, which expires in August 2021[92] - Planned capital expenditures for 2021 are approximately $220,000, to be funded with existing cash and cash from operations[94] Future Outlook - AMS Business: The company has three long-term sales agreements with major aerospace companies but anticipates reduced order volume for 2021 due to the COVID-19 pandemic[101] - DTX Business: The company is pursuing initiatives for its inkjet technology and working on production improvements with its German partner, AKK[100] - IKONICS Imaging: The new IKONART® product, which provides a novel way to make custom reusable stencils, has been positively received and is generating sales growth[102] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section is not applicable for the reporting period - Not applicable[106] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Based on an evaluation as of the end of the period, the principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures are effective[106] - There were no changes to the Company's internal control over financial reporting during the first quarter of 2021 that materially affected, or are reasonably likely to materially affect, these controls[107] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reported no legal proceedings during the period - None[110] Item 1A. Risk Factors No material changes occurred to the risk factors previously disclosed in the company's 2020 Annual Report on Form 10-K - There have been no material changes or additions to the Company's risk factors as discussed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2020[110] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section is not applicable for the reporting period - Not applicable[112] Item 6. Exhibits The report lists filed exhibits, including CEO and CFO certifications and Interactive Data Files - Exhibits filed with the report include CEO and CFO certifications (31.1, 31.2, 32) and Interactive Data Files (101)[112]