ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

9 Months Ended

Dec. 31, 2021

ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

NOTE 4 – ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

Upon acquisition, the IKONICS 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 IKONICS 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. The structure of the business combination, through the CVR Agreement, contemplated the sale of the IKONICS legacy business whereby the Company would become solely a bitcoin mining focused entity. The Merger Agreement requires IKONICS, after the Closing, to use its reasonable best efforts to consummate a sale of its legacy business as soon as reasonably practicable. The CVR Agreement provides that 95% of the net proceeds of the disposition, as defined, of the IKONICS business accrue to the historical stockholders of IKONCS if the disposition is consummated within eighteen months from the Closing.

In conjunction with the classification as held for sale, the Company has reported the IKONICS business as discontinued operations in these consolidated financial statements and has recognized a loss on discontinued operations, net of tax of $48.9 million to write down the related carrying amounts to their fair values less estimated cost to sell. The fair values of assets held for sale were determined using a combination of the cost approach, income approach and market approach. The assets and liabilities of IKONICS are presented separately in current assets held for sale and current liabilities held for sale, respectively, in the consolidated balance sheet at December 31, 2021, and consist of the following (in thousands):

Trade receivables	$	1,327
Inventories		3,737
Prepaid expenses and other current assets		944
Property, plant and equipment		10,036
Intangible assets		3,304
Current assets held for sale	$	19,348
Accounts payable	$	1,207
Accrued compensation		439
Other accrued liabilities		109
Current liabilities held for sale	$	1,755

The Company has classified IKONCS’ long-lived assets in current assets held for sale as it is deemed probable that the disposition will occur and proceeds will be collected within one year. Intangible assets includes the following definite-lived intangible assets at December 31, 2021 (in thousands, except years):

			Weighted
			Average
			Useful
	Carrying		Remaning
	Value		Life (Years)
Customer relationships	$	2,161	11.5
Developed technology		663	8.0
Trade names		480	13.7
	$	3,304	11.1

The loss from discontinued operations, net of tax presented in the consolidated statement of operations for the nine months ended December 31, 2021 consists of the following (in thousands):

Net sales	$	676
Cost of goods sold		487
Gross profit		189
Selling, general and administrative expenses		388
Research and development expenses		20
Impairment on classification as held for sale		48,887
Loss from discontinued operations before income tax		(49,106)
Income tax expense (benefit)		—
Loss from discontinued operations, net of tax	$	(49,106)

Total cash flows used in operating activities from discontinued operations was $3.0 million in the consolidated statement of cash flows for the nine months ended December 31, 2021.