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A leading BTC mining company doesn’t generate revenue


Filings from the week of March 30 - April 5.


WULF, an ESG-focused bitcoin mining company, reported substantial doubt over ability to continue as a going concern. It went public through a reverse merger with IKONICS, a company with no relationship to crypto. SST reported potential going concern issues and ineffective controls.

NT 10-Ks were filed by $CHPT, $GLS, $GATO, $VLTA, $BBIG, $FFIE and others. NT 10-Ks are easy to explore on the Hudson Labs portal.


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Top Red Flags

POSHMARK INC ($POSH) | 10-K | $1B - A member of the audit committee, John Marren, announced his resignation at the same time that the company reported ineffective controls. BLUEROCK RESIDENTIAL GROWTH REIT INC ($BRG) | 8-K | $780M - BRG amended and restated portions of its March 11, 2022 Proxy Statement after facing four lawsuits alleging dissemination of incomplete and misleading information concerning a proposed merger. Revisions included disclosures regarding financial projections and forward-looking financial information. FARADAY FUTURE INTELLIGENT INC ($FFIE) | NT 10-K & 8-K | $1.5B - FFIE filed a late filing notification for its FY 2021 annual report. It still has not filed its 10-Q for Q3 2021, either. FFIE reported that a special committee of independent directors have been investigating allegations of inaccurate company disclosures, which explains the delay in these filings. Management stated that they may report ineffective controls upon completion of the 10-K and 10-Q. GOLD FIELDS LTD ($GFI) | 20-F | $13B - The company reported the resignations of its CEO, Executive Vice President, and four directors all within the past year.



10-K | Market Cap: $814M

Although WULF describes themselves as “a leading BTC mining company that maximizes the energy-to-crypto value chain through power supply optimization.” WULF is still in the process of developing its bitcoin mining facilities and has yet to generate any revenues. [1] WULF claims they will produce bitcoin domestically, using zero-carbon energy. WULF reported substantial doubts in its ability to continue as a going concern. [2] This ESG-focused bitcoin mining firm had a unique path to becoming a public company. In December 2021, WULF merged with a publicly traded company called IKONICS, an imaging technology business. IKONICS business had nothing to do with bitcoin mining. [3] WULF’s plan is to fully divest IKONICS’s business line. [4] This strategic business combination was one of many actions that WULF took to receive additional funding in 2021. WULF reported that it may not have enough cash flows to keep the business running for the next twelve months. [5]

  1. “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.”

  2. “The Company has suffered recurring losses from operations, has negative cash flows from operations, and is reliant upon raising capital through debt and equity issuances to fund its operations. This raises substantial doubt about the Company's ability to continue as a going concern.”

  3. “TeraWulf completed its business combination with IKONICS on December 13, 2021 (the “Closing Date”) pursuant to the agreement and plan of merger, dated as of June 24, 2021 (as amended, the “Merger Agreement”). IKONICS served as an international leader in the development of imaging technologies for over 65 years and introduced products and process solutions for a diverse array of imaging markets.”

  4. “Our business combination with IKONICS contemplated the sale of the IKONICS legacy business as soon as reasonably practicable and within 18 months following the closing of the merger, whereby the Company would become solely a bitcoin-mining focused entity.”

  5. “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.”



10-K | Market Cap: $1.6B

System1, Inc ($SST), which operates a customer acquisition platform, reported a net income of $21 million for the year ended December 31, 2021. [1] However, none of this income came from revenue from operations. The sources of income came from fair value adjustments from stock warrant liabilities and forward purchase agreement liabilities owed to its investors. [2] In simpler terms, SST only had net income because of accounting adjustments. Despite having positive net income, SST disclosed potential going concern issues as the company has incurred and expects to incur significant costs. [3] Nevertheless SST believes it can stay afloat at least another year through acquisitions and additional financing. [4] Similar to many young companies recently, SST became public through a SPAC called Trebia Acquisition Corp. Like many SPACs, the company reported ineffective controls for the year ended December 31, 2021. [5] Clearly, internal control issues have become a common theme for SPACs. On April 4, 2022, SST issued a press release relating to its FY 2021 financial results. This earnings release included the operating results for S1 Holdco, LLC and Group Limited, two entities that were acquired by SST in January 2022. [6] The earnings release disclosed gross revenues of $833 million and a net income of $77 million, all of which related to the FY 2021 financial results of S1 Holdco and [6]

  1. Per SST’s Consolidated Statements of Operations for the year ended December 31, 2021.

  2. “For the year ended December 31, 2021, we had net income of $21,026,763, consisting of $23,699,501 of gain on change in fair value of warrant liability, $7,494,372 of gain on change in fair value of FPA liability and $3,160,168 of gain on termination of the FPA offset by formation and operating costs of $13,327,278.”

  3. “The Company has incurred and expects to continue to incur significant costs in pursuit of its Business Combination (see Note 6). These conditions raise substantial doubt about the Company’s ability to continue as a going concern.”

  4. “Management addressed this [going concern] issue with the consummation of the Business Combination Agreement on January 27, 2022, and with new sources of financing.”

  5. “Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective, due to the material weakness in our internal control over financial reporting related to the Company’s accounting for complex financial instruments.”



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