ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

3 Months Ended

Mar. 31, 2022

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.

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 sheets and includes the following (in thousands):

	March 31, 2022		December 31, 2021
Trade receivables	$	1,691	$	1,327
Inventories		3,718		3,737
Prepaid expenses and other current assets		948		944
Property, plant and equipment		7,867		10,036
Intangible assets		1,551		3,304
Current assets held for sale	$	15,775	$	19,348
Accounts payable	$	1,697	$	1,207
Accrued compensation		612		439
Other accrued liabilities		135		109
Current liabilities held for sale	$	2,444	$	1,755

During the three months ended March 31, 2022, the Company determined that change in circumstance indicated that the then carrying amount of the IKONICS’ long-lived assets may not be recoverable and has recognized an impairment loss in loss on discontinued operations, net of tax of $3.9 million to write down the related carrying amounts to their fair values less estimated cost to sell. The loss from discontinued operations, net of tax presented in the consolidated statements of operations consists of the following (in thousands):

		Three Months Ended
		March 31,
	2022
Net sales	$	4,230
Cost of goods sold		3,223
Gross profit		1,007
Selling, general and administrative expenses		1,264
Research and development expenses		137
Impairment on remeasurement or classification as held for sale		3,922
Loss from discontinued operations before other income		(4,316)
Other income		3
Loss from discontinued operations before income tax		(4,313)
Income tax (expense) benefit		1
Loss from discontinued operations, net of tax	$	(4,312)

Total cash flows used in operating activities from discontinued operations was $50,000 and $0 in the consolidated statements of cash flows for the three months ended March 31, 2022 and the period February 8, 2021 (date of inception) to March 31, 2021, respectively.

Subsequent to March 31, 2022, the Company became aware of certain potential environmental remediation that may be required on a property of IKONICS.  As of the date these consolidated financial statements were available to be issued, because the extent of any potential remediation procedures is not known, the Company cannot reasonably estimate a range of potential remediation costs, if any.