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RELATED PARTY TRANSACTIONS | 12 Months Ended
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Dec. 31, 2022
RELATED PARTY TRANSACTIONS |
RELATED PARTY TRANSACTIONS | NOTE 17 – 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 year ended December 31, 2022, the Company paid Beowulf E&D $16.9 million under the Services Agreement. Selling, general and administrative expenses– related party and operating expenses – related party in the consolidated statement of operations includes $12.6 million and $459,000, respectively, for the year ended December 31, 2022 related to the base fee and reimbursement of costs and expenses. As of December 31, 2022, $833,000 is included in prepaid expenses, $3.0 million, including $2.2 million related to the Payment Netting Agreement, is included in amounts due to related parties and $5.9 million is included in property, plant and equipment, net in the consolidated balance sheet. 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 in December 2021, pursuant to the Services Agreement, 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. However, no awards have been issued as of the date these consolidated financial statements were available for issuance. 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. As of December 31, 2022, the Company considers it probable that the performance milestone of 100MW of mining load deployed by the mining facilities will be met. Accordingly, the Company has recognized $2.1 million in expense during the year ended December 31, 2022. As of December 31, 2022 and 2021, $14.6 million and $12.5 million, respectively, are included in share-based liabilities due to related party in the consolidated balance sheets. Performance milestone expense of $2.1 million and $12.5 million is included in selling, general and administrative expenses – related party in the consolidated statements of operation for the year ended December 31, 2022 and the period February 8, 2021 (date of inception) to December 31, 2021, respectively. ​ 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 period February 8, 2021 (date of inception) to December 31, 2021, $697,000 was included in selling, general and administrative expense – related party in the consolidated statements of operations and $853,000 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.

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