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BUSINESS COMBINATION, ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
 9 Months Ended
Sep. 30, 2023
Business Combination and Asset Acquisition [Abstract]  
BUSINESS COMBINATION, ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS BUSINESS COMBINATION, ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONSOn December 13, 2021, the Company completed the Merger with RM 101 (formerly known as IKONICS Corporation) pursuant to which, among other things, the Company effectively acquired RM 101 and became a publicly traded company on the Nasdaq. 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 the CVR Agreement, each shareholder of RM 101 as of immediately prior to the Merger, received one non-transferable CVR for each outstanding share of common stock of RM 101 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 RM 101. Payments under the CVR Agreement are calculated quarterly, are paid on the sixtieth day after the respective quarterly calculation period and are subject to a reserve of up to 10% of the Gross Proceeds (as defined in the CVR Agreement) from such transaction or more under certain conditions. The Company made a CVR payment in the amount of $3.9 million in February 2023 related to the quarterly calculation for the fourth quarter of 2022. The Company made a CVR payment in the amount of $5.7 million in May 2023 related to the quarterly calculation for the first quarter of 2023. 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 are not 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 (the “CVR Holders”) will not be eligible to receive payment for dispositions, if any, of any part of the pre-merger business of RM 101 after the eighteen-month anniversary of the closing of the Merger.
In August 2022, RM 101 sold a certain property, including a warehouse, to a third party for $6.7 million gross with net sale proceeds of $6.2 million. The Definitive Agreement governing the sale included certain indemnifications which were subject to an $850,000 limitation and which expired in August 2023.
In August 2022, RM 101 sold (i) certain property, including a warehouse and a building which houses manufacturing, operations and administration, (ii) substantially all of its working capital and (iii) its historical business to a third party for $7.7 million gross, including net working capital, with net sale proceeds of $7.0 million. The Asset Purchase Agreement (the “APA”) governing the sale was structured as an asset sale. The APA included certain indemnifications which were subject to a $650,000 limitation and a related escrow of that amount upon consummation of the transaction. Substantially all the remaining purchase price was placed into escrow upon consummation of the transaction pending the completion of certain remaining environmental testing and remediation resulting therefrom, if any. At December 31, 2022, proceeds from this sale were included in restricted cash in the consolidated balance sheet. In February 2023, all escrowed funds were released to the Company.
In accordance with the CVR Agreement, as of September 30, 2023, the Company has made aggregate distributions of $9.6 million of proceeds to the CVR Holders. As of September 30, 2023, all RM 101 assets previously held for sale had been sold and the estimated remaining CVR liability of $1.4 million is included in contingent value rights in the consolidated balance sheet. The final CVR payment will be made on or about November 28, 2023.
Upon acquisition, the RM 101 business met the assets held-for-sale and discontinued operations criteria and is reflected as discontinued operations held for sale in these consolidated financial statements. The Company determined that the RM 101 business qualified as assets held for sale as management committed to a plan to sell the business, the business was in readily sellable form and it was deemed probable that the business would be sold in a twelve-month period. All net assets held for sale had been sold as of December 31, 2022. The loss from discontinued operations, net of tax presented in the consolidated statements of operations includes the following results of RM 101 (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Net sales$— $2,203 $— $11,028 
Cost of goods sold— 1,945 — 8,265 
Gross profit— 258 — 2,763 
Selling, general and administrative expenses4 760 65 3,375 
Research and development expenses— 148 — 437 
Impairment on remeasurement or classification as held for sale— — — 4,541 
Loss on sale of net assets held for sale— 239 — 239 
Loss from discontinued operations before other income(4)(889)(65)(5,829)
Interest expense— (12)— (12)
Other income— — 23 6 
Loss from discontinued operations before income tax(4)(901)(42)(5,835)
Income tax expense — — (8)
Loss from discontinued operations, net of tax$(4)$(901)$(42)$(5,843)
Loss from discontinued operations, net of tax in the consolidated statement of operations also includes a loss on CVR remeasurement of $64,000 for each of the three and nine months ended September 30, 2023 and includes a gain on CVR remeasurement of $0 and $1.4 million for the three and nine months ended September 30, 2022, respectively. Total cash flows provided by (used in) operating activities from discontinued operations was $0.3 million and $(1.3) million in the consolidated statements of cash flows for the nine months ended September 30, 2023 and 2022, respectively.