|
Delaware
(State or other jurisdiction of
Incorporation or Organization) |
| |
7374
(Primary Standard Industrial
Classification Code Number) |
| |
87-1909475
(I.R.S. Employer
Identification Number) |
|
|
W. Morgan Burns
Joshua L. Colburn W. Jason Deppen Faegre Drinker Biddle & Reath LLP 90 South Seventh Street 2200 Wells Fargo Center Minneapolis, Minnesota 55402 (612) 766-7000 |
| |
Paul Prager
Chief Executive Officer TeraWulf Inc. 9 Federal Street Easton, Maryland 21601 (410) 770-9500 |
| |
Ariel J. Deckelbaum
David S. Huntington Sarah Stasny Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas New York, New York 10019 (212) 373-3000 |
|
|
Large accelerated filer
☐
|
| |
Accelerated filer
☐
|
|
|
Non-accelerated filer
☒
|
| |
Smaller reporting company
☒
|
|
| | | |
Emerging growth company
☐
|
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| | ||||||||||||||||||||||||||||
Title of each class of securities to be registered
|
| | |
Amount to be
registered |
| | |
Proposed maximum
offering price per share |
| | |
Proposed maximum
aggregate offering price |
| | |
Amount of
registration fee |
| ||||||||||||
Common Stock, par value $0.001 per share
|
| | | | | 104,550,200(a) | | | | | | | N/A | | | | | | $ | 109,553,842(b) | | | | | | $ | 11,952.33(c) | | |
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| | |
(1)TeraWulf
|
| |
(2)Ikonics
|
| |
Pro Forma
Adjustments |
| |
Note 3
|
| |
Pro Forma
Combined |
| |||||||||||||||
ASSETS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CURRENT ASSETS: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash
|
| | | $ | 31,721,000 | | | | | $ | 2,260,855 | | | | | $ | (10,418,750) | | | | | | (c) | | | | | $ | 23,563,105 | | |
Trade receivables, net
|
| | | | — | | | | | | 1,651,035 | | | | | | — | | | | | | | | | | | | 1,651,035 | | |
Inventories
|
| | | | — | | | | | | 1,607,828 | | | | | | (1,607,828) | | | | | | (f) | | | | | | 3,277,270 | | |
| | | | | | | | | | | | | | | | | 3,277,270 | | | | | | (g) | | | | | | | | |
Prepaid expenses and other assets
|
| | | | 2,216,000 | | | | | | 193,198 | | | | | | — | | | | | | | | | | | | 2,409,198 | | |
Total current assets
|
| | | | 33,937,000 | | | | | | 5,712,916 | | | | | | (8,749,308) | | | | | | | | | | | | 30,900,608 | | |
Equity in nest assets of investee
|
| | | | 42,100,000 | | | | | | — | | | | | | — | | | | | | | | | | | | 42,100,000 | | |
PROPERTY, PLANT, AND EQUIPMENT: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Property, plant and equipment
|
| | | | 916,000 | | | | | | 16,494,121 | | | | | | (16,494,121) | | | | | | (f) | | | | | | 10,894,166 | | |
| | | | | | | | | | | | | | | | | 9,978,166 | | | | | | (g) | | | | | | | | |
Less accumulated depreciation
|
| | | | — | | | | | | (9,410,087) | | | | | | 9,410,087 | | | | | | (f) | | | | | | — | | |
Total property, plant and equipment at cost, net
|
| | | | 916,000 | | | | | | 7,084,034 | | | | | | 2,894,132 | | | | | | | | | | | | 10,894,166 | | |
Deposits
|
| | | | 407,000 | | | | | | — | | | | | | — | | | | | | | | | | | | 407,000 | | |
Intangible Assets, net
|
| | | | — | | | | | | 245,832 | | | | | | (245,832) | | | | | | (f) | | | | | | 3,699,484 | | |
| | | | | | | | | | | | | | | | | 3,699,484 | | | | | | (g) | | | | | | | | |
Goodwill
|
| | | | — | | | | | | — | | | | | | 55,339,760 | | | | | | (b) | | | | | | 55,339,760 | | |
Other assets
|
| | | | 1,464,000 | | | | | | — | | | | | | — | | | | | | | | | | | | 1,464,000 | | |
Total assets
|
| | | $ | 78,824,000 | | | | | $ | 13,042,782 | | | | | $ | 52,938,236 | | | | | | | | | | | $ | 144,805,018 | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CURRENT LIABILITIES: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accounts payable and other accrued liabilities
|
| | | $ | 4,065,000 | | | | | $ | 2,088,057 | | | | | $ | 15,184,494 | | | | | | (e) | | | | | $ | 21,337,551 | | |
Current portion of operating lease liability
|
| | | | 48,000 | | | | | | — | | | | | | — | | | | | | | | | | | | 48,000 | | |
Contingent Value Rights
|
| | | | — | | | | | | — | | | | | | 10,142,967 | | | | | | (c) | | | | | | 10,142,967 | | |
Total current liabilities
|
| | | | 4,113,000 | | | | | | 2,088,057 | | | | | | 25,327,461 | | | | | | | | | | | | 31,528,518 | | |
Operating lease liability, net of current portion
|
| | | | 1,037,000 | | | | | | — | | | | | | — | | | | | | | | | | | | 1,037,000 | | |
Total liabilities
|
| | | | 5,150,000 | | | | | | 2,088,057 | | | | | | 25,327,461 | | | | | | | | | | | | 32,565,518 | | |
COMMITMENTS AND CONTINGENCIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Series A preferred stock, par value $0.001 per share
|
| | | | 49,815,000 | | | | | | — | | | | | | (49,815,000) | | | | | | (j) | | | | | | — | | |
STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock, par value $0.001 per share
|
| | | | 50,000 | | | | | | — | | | | | | 2,084 | | | | | | (c) | | | | | | 104,673 | | |
| | | | | | | | | | | | | | | | | 52,104 | | | | | | (d) | | | | | | | | |
| | | | | | | | | | | | | | | | | 485 | | | | | | (h) | | | | | | | | |
Common stock, par value $0.10 per share
|
| | | | | | | | | | 198,069 | | | | | | (198,069) | | | | | | (a) | | | | | | — | | |
Additional paid-in-capital
|
| | | | 29,892,000 | | | | | | 2,902,790 | | | | | | (2,902,790) | | | | | | (a) | | | | | | 145,902,321 | | |
| | | | | | | | | | | | | | | | | 53,747,910 | | | | | | (c) | | | | | | | | |
| | | | | | | | | | | | | | | | | (52,104) | | | | | | (d) | | | | | | | | |
| | | | | | | | | | | | | | | | | 12,499,515 | | | | | | (h) | | | | | | | | |
| | | | | | | | | | | | | | | | | 49,815,000 | | | | | | (j) | | | | | | | | |
Retained earnings / (accumulated deficit)
|
| | | | (6,083,000) | | | | | | 7,853,866 | | | | | | (7,853,866) | | | | | | (a) | | | | | | (33,767,494) | | |
| | | | | | | | | | | | | | | | | (15,184,494) | | | | | | (e) | | | | | | | | |
| | | | | | | | | | | | | | | | | (12,500,000) | | | | | | (h) | | | | | | | | |
Total stockholders’ equity
|
| | | | 23,859,000 | | | | | | 10,954,725 | | | | | | 77,425,775 | | | | | | | | | | | | 112,239,500 | | |
Total liabilities and stockholders’ equity
|
| | | $ | 78,824,000 | | | | | $ | 13,042,782 | | | | | $ | 52,938,236 | | | | | | | | | | | $ | 144,805,018 | | |
| | |
(1)TeraWulf
|
| |
(2)Ikonics
|
| |
Pro Forma
Adjustments |
| |
Note 3
|
| |
Pro Forma
Combined |
| |||||||||||||||
Net sales
|
| | | $ | — | | | | | $ | 7,324,756 | | | | | $ | — | | | | | | | | | | | $ | 7,324,756 | | |
Cost of goods sold
|
| | | | — | | | | | | 4,899,120 | | | | | | — | | | | | | | | | | | | 4,899,120 | | |
Gross profit
|
| | | | — | | | | | | 2,425,636 | | | | | | — | | | | | | | | | | | | 2,425,636 | | |
Cost of opertions: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operating expenses
|
| | | | 968,000 | | | | | | — | | | | | | — | | | | | | | | | | | | 968,000 | | |
Selling, general and administrative expenses
|
| | | | 4,975,000 | | | | | | 3,128,093 | | | | | | (1,815,506) | | | | | | (e) | | | | | | 6,412,797 | | |
| | | | | | | | | | | | | | | | | (413,933) | | | | | | (f) | | | | | | | | |
| | | | | | | | | | | | | | | | | 539,143 | | | | | | (g) | | | | | | | | |
Research and development expenses
|
| | | | — | | | | | | 263,817 | | | | | | — | | | | | | | | | | | | 263,817 | | |
Total cost of operations
|
| | | | 5,943,000 | | | | | | 3,391,910 | | | | | | (1,690,296) | | | | | | | | | | | | 7,644,614 | | |
Loss from operations
|
| | | | (5,943,000) | | | | | | (966,274) | | | | | | 1,690,296 | | | | | | | | | | | | (5,218,978) | | |
Interest expense
|
| | | | — | | | | | | (102,340) | | | | | | — | | | | | | | | | | | | (102,340) | | |
Other income
|
| | | | — | | | | | | 5,175 | | | | | | — | | | | | | | | | | | | 5,175 | | |
Loss before income taxes
|
| | | | (5,943,000) | | | | | | (1,063,439) | | | | | | 1,690,296 | | | | | | | | | | | | (5,316,143) | | |
Income tax benefit
|
| | | | — | | | | | | (19,524) | | | | | | — | | | | | | | | | | | | (19,524) | | |
Equity in net loss of investee, net of tax
|
| | | | 140,000 | | | | | | — | | | | | | — | | | | | | | | | | | | 140,000 | | |
Net loss
|
| | | $ | (6,083,000) | | | | | $ | (1,043,915) | | | | | $ | 1,690,296 | | | | | | | | | | | $ | (5,436,619) | | |
Loss per common share: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic and diluted
|
| | | | | | | | | $ | (0.53) | | | | | | | | | | | | | | | | | $ | (0.05) | | |
Weighted average common shares outstanding:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic and diluted
|
| | | | | | | | | | 1,977,368 | | | | | | 102,694,737 | | | | | | (i) | | | | | | 104,672,105 | | |
| | |
(1)TeraWulf
|
| |
(2)IKONICS
|
| |
Pro Forma
Adjustments |
| |
Note 3
|
| |
Pro Forma
Combined |
| |||||||||||||||
Net sales
|
| | | $ | — | | | | | $ | 13,432,220 | | | | | $ | — | | | | | | | | | | | $ | 13,432,220 | | |
Cost of goods sold
|
| | | | — | | | | | | 9,527,143 | | | | | | — | | | | | | | | | | | | 9,527,143 | | |
Gross profit
|
| | | | — | | | | | | 3,905,077 | | | | | | — | | | | | | | | | | | | 3,905,077 | | |
Cost of operations: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Selling, general and administrative expenses
|
| | | | — | | | | | | 5,019,604 | | | | | | (698,054) | | | | | | (f) | | | | | | 5,399,836 | | |
| | | | | | | | | | | | | | | | | 1,078,286 | | | | | | (g) | | | | | | | | |
Selling, general and administrative expenses attributable to related party share issuance
|
| | | | — | | | | | | — | | | | | | 12,500,000 | | | | | | (h) | | | | | | 12,500,000 | | |
Research and development expenses
|
| | | | — | | | | | | 671,493 | | | | | | — | | | | | | | | | | | | 671,493 | | |
Total cost of operations
|
| | | | — | | | | | | 5,691,097 | | | | | | 12,880,232 | | | | | | | | | | | | 18,571,329 | | |
Loss from operations
|
| | | | — | | | | | | (1,786,020) | | | | | | (12,880,232) | | | | | | | | | | | | (14,666,252) | | |
Interest expense
|
| | | | — | | | | | | (86,561) | | | | | | — | | | | | | | | | | | | (86,561) | | |
Other income
|
| | | | — | | | | | | 1,223,261 | | | | | | — | | | | | | | | | | | | 1,223,261 | | |
Loss before income taxes
|
| | | | — | | | | | | (649,320) | | | | | | (12,880,232) | | | | | | | | | | | | (13,529,552) | | |
Income tax benefit
|
| | | | — | | | | | | (210,000) | | | | | | — | | | | | | | | | | | | (210,000) | | |
Net loss
|
| | | $ | — | | | | | $ | (439,320) | | | | | $ | (12,880,232) | | | | | | | | | | | $ | (13,319,552) | | |
Loss per common share: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic and diluted
|
| | | | | | | | | $ | (0.22) | | | | | | | | | | | | | | | | | $ | (0.13) | | |
Weighted average common shares outstanding:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic and diluted
|
| | | | | | | | | | 1,976,354 | | | | | | 102,694,737 | | | | | | (i) | | | | | | 104,671,091 | | |
|
Estimated IKONICS shares outstanding(1)
|
| | | | 1,981,527 | | |
|
Estimated RSUs and stock options subject to accelerated vesting(2)
|
| | | | 102,223 | | |
|
Subtotal
|
| | | | 2,083,750 | | |
|
Cash consideration (per IKONICS share)
|
| | | $ | 5.00 | | |
|
Estimated share-based cash portion of purchase price
|
| | | $ | 10,418,750 | | |
|
Contingent Value Rights
|
| | | $ | 10,142,967 | | |
|
Estimated TeraWulf enterprise value
|
| | | $ | 2,700,000,000 | | |
|
Estimated shares at consummation of the mergers(3)
|
| | | | 104,672,105 | | |
|
Implied Holdco share price
|
| | | $ | 25.79 | | |
|
Estimated IKONICS shares outstanding(1)
|
| | | | 1,981,527 | | |
|
Estimated RSUs and stock options subject to accelerated vesting(2)
|
| | | | 102,223 | | |
|
Subtotal
|
| | | | 2,083,750 | | |
|
Equity portion of purchase price
|
| | | $ | 53,749,994 | | |
|
Total estimated consideration to be paid
|
| | | $ | 74,311,711 | | |
|
Shares issued to TeraWulf stockholders
|
| | | | 102,103,750 | | |
|
Shares issued to IKONICS stockholders
|
| | | | 2,083,750 | | |
|
Shares issued under awards to employees of Beowulf E&D
|
| | | | 484,605 | | |
| | | | | | 104,672,105 | | |
| | |
Implied Holdco
share price |
| |
Purchase Price
(equity portion) |
| ||||||
As presented
|
| | | $ | 25.79 | | | | | $ | 53,749,994 | | |
10% increase
|
| | | $ | 28.37 | | | | | $ | 59,115,988 | | |
10% decrease
|
| | | $ | 23.22 | | | | | $ | 48,384,675 | | |
20% increase
|
| | | $ | 30.95 | | | | | $ | 64,492,063 | | |
20% decrease
|
| | | $ | 20.64 | | | | | $ | 43,008,600 | | |
| | |
Implied Holdco
share price |
| |
Purchase Price
(equity portion) |
| ||||||
50% increase
|
| | | $ | 38.69 | | | | | $ | 80,620,288 | | |
50% decrease
|
| | | $ | 12.90 | | | | | $ | 26,880,375 | | |
|
Cash
|
| | | $ | 2,260,855 | | |
|
Trade receivables, net
|
| | | | 1,651,035 | | |
|
Inventories
|
| | | | 3,277,270 | | |
|
Prepaid expenses and other assets
|
| | | | 193,198 | | |
|
Property, plant and equipment
|
| | | | 9,978,166 | | |
|
Intangible assets
|
| | | | 3,699,484 | | |
| Goodwill | | | | | 55,339,760 | | |
|
Accounts payable and accrued liabilities
|
| | | | (2,088,057) | | |
|
Total estimated consideration
|
| | | $ | 74,311,711 | | |
|
Shares attributed to IKONICS common stock conversion
|
| | | | 2,083,750 | | |
|
Aggregate TeraWulf share amount – multiple of IKONICS attributed shares
|
| | | | 49 | | |
|
Aggregate TeraWulf share amount
|
| | | | 102,103,750 | | |
|
Less: number of outstanding TeraWulf shares
|
| | | | 50,000,000 | | |
|
Incremental TeraWulf shares
|
| | | | 52,103,750 | | |
|
Par value
|
| | | $ | 0.001 | | |
|
Par value of incremental TeraWulf shares
|
| | | $ | 52,104 | | |
|
|
Merger costs reflected in the historical financial statements(1)
|
| | | $ | 1,815,506 | | |
|
Merger costs not yet reflected in the historical financial statements(2)
|
| | | | 15,184,494 | | |
|
Total estimated direct, incremental Merger transaction costs
|
| | | $ | 17,000,000 | | |
| | |
Preliminary
Purchase Price Allocation |
| |
Weighted
Average Useful Life |
| |
Depreciation
or Amortization for the Year Ended December 31, 2020 |
| |
Depreciation
or Amortization for the Six Months Ended June 30, 2021 |
| | ||||||||||||||
Inventory
|
| | | $ | 3,277,270 | | | | | | | | | | | | | | | | | | | | | | | |
Property, plant and
equipment |
| | | $ | 9,978,166 | | | | | | 23.3 | | | | | $ | 515,772 | | | | | $ | 257,886 | | | | ||
Intangible Assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Intellectual property
|
| | | $ | 1,535,045 | | | | | | 7.1 | | | | | $ | 216,535 | | | | | $ | 108,268 | | | | ||
Trademarks and trade
names |
| | | | 869,084 | | | | | | 10.0 | | | | | | 86,908 | | | | | | 43,454 | | | | ||
Customer relationships
|
| | | | 1,295,355 | | | | | | 5.0 | | | | | | 259,071 | | | | | | 129,535 | | | | ||
Total intangible assets
|
| | | $ | 3,699,484 | | | | | | | | | | | $ | 562,514 | | | | | $ | 281,257 | | | |
|
Value of share awards due to Beowulf E&D employees
|
| | | $ | 12,500,000 | | |
|
Implied Holdco share price
|
| | | $ | 25.79 | | |
|
Shares issued under awards to Beowulf E&D employees
|
| | | | 484,605 | | |
|
Par value
|
| | | $ | 0.001 | | |
|
Par value of shares issued under awards to Beowulf E&D employees
|
| | | $ | 485 | | |
|
Shares issued to TeraWulf stockholders
|
| | | | 102,103,750 | | |
|
Shares issued to IKONICS holders of RSUs or stock options
|
| | | | 106,382 | | |
|
Shares issued under awards to employees of Beowulf E&D
|
| | | | 484,605 | | |
| | | | | | 102,694,737 | | |
| | |
IKONICS
Common Stock |
| |||
June 24, 2021
|
| | | $ | 11.30 | | |
October 29, 2021
|
| | | $ | 26.61 | | |
| | |
Year Ending December 31,
|
| |||||||||
(amounts reflect rounding)
|
| |
2021E
|
| |
2022E
|
| ||||||
GROSS SALES
|
| | | $ | 15,820,288 | | | | | $ | 18,405,985 | | |
Customer credits
|
| | | | (169,536) | | | | | | (196,964) | | |
Prepaid freight
|
| | | | 374,647 | | | | | | 429,291 | | |
Discounts allowed
|
| | | | (112,259) | | | | | | (127,665) | | |
NET SALES
|
| | | | 15,913,140 | | | | | | 18,510,647 | | |
Cost of goods sold
|
| | | | 10,678,849 | | | | | | 12,343,092 | | |
GROSS PROFIT
|
| | | | 5,234,291 | | | | | | 6,167,556 | | |
Percent of net sales
|
| | | | 32.9% | | | | | | 33.3% | | |
DIRECT DIVISION SALES EXPENSES
|
| | | | 2,600,147 | | | | | | 2,774,889 | | |
NET INCOME
|
| | | | 2,634,144 | | | | | | 3,392,667 | | |
Percent of net sales
|
| | | | 16.6% | | | | | | 18.3% | | |
CORPORATE EXPENSES: | | | | | | | | | | | | | |
Administrative
|
| | | | 2,302,510 | | | | | | 2,348,560 | | |
Research & development
|
| | | | 583,073 | | | | | | 594,735 | | |
Marketing services
|
| | | | 13,242 | | | | | | 13,507 | | |
Interest expense
|
| | | | 102,304 | | | | | | — | | |
Interest income
|
| | | | (5,169) | | | | | | (5,272) | | |
Miscellaneous expense (income) & discounts
|
| | | | 13,355 | | | | | | (13,622) | | |
(Gain) loss on sale of assets
|
| | | | — | | | | | | — | | |
(Gain) loss – other
|
| | | | — | | | | | | — | | |
TOTAL CORPORATE EXPENSES
|
| | | | 2,982,605 | | | | | | 2,937,907 | | |
PRETAX (LOSS) INCOME
|
| | | | (348,461) | | | | | | 454,760 | | |
Income Taxes
|
| | | | (20,347) | | | | | | — | | |
NET (LOSS) INCOME
|
| | | $ | (328,114) | | | | | $ | 454,760 | | |
| | |
Forecasts for Year Ending December 31,
|
| |||||||||||||||||||||||||||||||||||||||
(dollars in millions, amounts reflect rounding)
|
| |
2021E
|
| |
2022E
|
| |
2023E
|
| |
2024E
|
| |
2025E
|
| |
2026E
|
| |
2027E
|
| |||||||||||||||||||||
Revenue(1) | | | | $ | 10.0 | | | | | $ | 323.0 | | | | | $ | 561.1 | | | | | $ | 766.1 | | | | | $ | 779.3 | | | | | $ | 821.9 | | | | | $ | 853.7 | | |
Gross profit
|
| | | $ | 9.0 | | | | | $ | 281.4 | | | | | $ | 489.2 | | | | | $ | 639.5 | | | | | $ | 625.7 | | | | | $ | 662.1 | | | | | $ | 690.7 | | |
Net income
|
| | | $ | 3.2 | | | | | $ | 157.4 | | | | | $ | 275.9 | | | | | $ | 315.4 | | | | | $ | 264.5 | | | | | $ | 294.7 | | | | | $ | 359.4 | | |
Equity in net income of investee, net of tax(2)
|
| | | $ | 0.0 | | | | | $ | 51.9 | | | | | $ | 120.9 | | | | | $ | 77.3 | | | | | $ | 47.1 | | | | | $ | 51.6 | | | | | $ | 77.1 | | |
Total net income attributable to TeraWulf
Inc. |
| | | $ | 3.2 | | | | | $ | 209.3 | | | | | $ | 396.8 | | | | | $ | 392.7 | | | | | $ | 311.6 | | | | | $ | 346.4 | | | | | $ | 436.6 | | |
EBITDA(3) | | | | $ | 7.9 | | | | | $ | 260.7 | | | | | $ | 453.7 | | | | | $ | 583.1 | | | | | $ | 558.4 | | | | | $ | 593.2 | | | | | $ | 620.3 | | |
Capital expenditures
|
| | | $ | 324.4 | | | | | $ | 144.9 | | | | | $ | 581.8 | | | | | $ | 219.1 | | | | | $ | 0.0 | | | | | $ | 0.0 | | | | | $ | 0.0 | | |
Average price of one bitcoin
|
| | | $ | 37,209 | | | | | $ | 39,915 | | | | | $ | 44,978 | | | | | $ | 50,683 | | | | | $ | 57,110 | | | | | $ | 64,352 | | | | | $ | 72,514 | | |
Overall network hashrate (Eh/s)(4)
|
| | | | 244 | | | | | | 275 | | | | | | 310 | | | | | | 349 | | | | | | 397 | | | | | | 442 | | | | | | 498 | | |
Mining equipment cost ($/TH)(4)
|
| | | | 50 | | | | | | 56 | | | | | | 61 | | | | | | 68 | | | | | | 74 | | | | | | 82 | | | | | | 90 | | |
ASIC miners deployed (thousands)
|
| | | | 11 | | | | | | 108 | | | | | | 158 | | | | | | 201 | | | | | | 230 | | | | | | 230 | | | | | | 230 | | |
Total hashrate deployed by
TeraWulf(4)(5) |
| | | | 1.1 | | | | | | 10.8 | | | | | | 15.8 | | | | | | 20.1 | | | | | | 23.0 | | | | | | 23.0 | | | | | | 23.0 | | |
| | |
Forecasts for Year Ending December 31,
|
| |||||||||||||||||||||||||||||||||||||||
(in millions, amounts reflect rounding)
|
| |
2021E
|
| |
2022E
|
| |
2023E
|
| |
2024E
|
| |
2025E
|
| |
2026E
|
| |
2027E
|
| |||||||||||||||||||||
Bitcoin rewards revenue(a)
|
| | | $ | 6.1 | | | | | $ | 260.3 | | | | | $ | 441.0 | | | | | $ | 536.5 | | | | | $ | 460.9 | | | | | $ | 470.4 | | | | | $ | 470.9 | | |
Transaction fee revenue(b)
|
| | | $ | 0.6 | | | | | $ | 28.6 | | | | | $ | 61.7 | | | | | $ | 129.6 | | | | | $ | 182.8 | | | | | $ | 214.5 | | | | | $ | 243.0 | | |
Data center revenue
|
| | | $ | 3.3 | | | | | $ | 34.1 | | | | | $ | 58.3 | | | | | $ | 100.0 | | | | | $ | 135.6 | | | | | $ | 137.1 | | | | | $ | 139.8 | | |
Total revenue
|
| | | $ | 10.0 | | | | | $ | 323.0 | | | | | $ | 561.1 | | | | | $ | 766.1 | | | | | $ | 779.3 | | | | | $ | 821.9 | | | | | $ | 853.7 | | |
TeraWulf’s pro rata projected share
of the revenue contributions from the Nautilus Cryptomine Facility |
| | | $ | 0.0 | | | | | $ | 114.6 | | | | | $ | 246.2 | | | | | $ | 190.2 | | | | | $ | 151.4 | | | | | $ | 158.0 | | | | | $ | 164.7 | | |
Total revenue (non-GAAP)(c)
|
| | | $ | 10.0 | | | | | $ | 437.6(d) | | | | | $ | 807.3 | | | | | $ | 956.2 | | | | | $ | 930.6 | | | | | $ | 980.0 | | | | | $ | 1,018.5 | | |
(d)
|
(i)
|
Total bitcoin mined of 9,979 in 2022E is comprised of 8,982 bitcoin mined plus 997 bitcoin earned as transaction fees, driven by the following expected factors: |
Closed
|
| |
Acquiror
|
| |
Target
|
|
December 2020 | | | Avery Dennison Corporation | | | ACPO, Ltd. | |
December 2020 | | | good natured Products Inc. | | | IPF Holdings Inc. | |
November 2020 | | | Fitesa S.A. | | | Tredegar Corporation (Personal Care Films Business) | |
September 2020 | | | Essentra plc | | | 3C! Packaging, Inc. | |
April 2020 | | | TriMas Corporation | | | Rapak, LLC | |
March 2020 | | | Schweitzer-Mauduit International, Inc. | | | Trient LLC and Tekra LLC | |
December 2019 | | | Sonoco Products Company | | | Thermoform Engineered Quality, LLC, and Plastique Holdings, LTD | |
July 2019 | | | Tiarco, LLC | | | H.B. Fuller Company (Surfactants, Thickeners and Dispersants Business) | |
June 2019 | | | Sinomine (Hong Kong) Rare Metals Resources Co. Limited | | | Cabot Corporation (Specialty Fluids Business) | |
August 2018 | | | Sealed Air Corporation | | | Austin Foam Plastics, Inc. | |
July 2018 | | | CCL Industries Inc. | | | Treofan America, Inc. and Trespaphan Mexico Holdings GmbH | |
|
Average Approximate Implied Aggregate Equity Value
Reference Range for IKONICS Standalone (“Has”) |
| |
Average Approximate Implied Aggregate Reference
Range for Merger Consideration (“Gets”) |
|
|
$7.0 million – $29.1 million
|
| |
$50.4 million – $117.1 million
|
|
Name and Principal Position
|
| |
Cash(a)
($) |
| |
Equity(b)
($) |
| |
Perquisites/
Benefits(c) ($) |
| |
Other(d)
($) |
| |
Total
($) |
| |||||||||||||||
Glenn Sandgren
|
| | | | 275,000 | | | | | | 663,823 | | | | | | 18,000 | | | | | | — | | | | | | 956,823 | | |
Chief Executive Officer
|
| | | | | | |||||||||||||||||||||||||
Claude P. Piguet
|
| | | | — | | | | | | 349,469 | | | | | | — | | | | | | 50,000 | | | | | | 399,469 | | |
Executive Vice President
|
| | | | | | |||||||||||||||||||||||||
Kenneth Hegman
|
| | | | — | | | | | | 349,469 | | | | | | — | | | | | | 50,000 | | | | | | 399,469 | | |
Chief Operating Officer
|
| | | | | | |||||||||||||||||||||||||
William C. Ulland
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Former President and Chief Executive Officer
|
| | | | | |
| | |
1 Year or
Less |
| |
1-3 Years
|
| |
3-5 Years
|
| |
Total
|
| ||||||||||||
Nautilus Cryptomine LLC joint venture
|
| | | | 156,000 | | | | | | — | | | | | | — | | | | | | 156,000 | | |
Operating lease
|
| | | | 113 | | | | | | 300 | | | | | | 300 | | | | | | 713 | | |
Administrative and Infrastructure Services Agreement
|
| | | | 7,500 | | | | | | 20,000 | | | | | | 20,000 | | | | | | 47,500 | | |
Purchase commitments
|
| | | | 3,867 | | | | | | — | | | | | | — | | | | | | 3,867 | | |
Total | | | | | 167,480 | | | | | | 20,300 | | | | | | 20,300 | | | | | | 208,080 | | |
Name
|
| |
Age
|
| |
Position
|
|
Paul Prager | | |
62
|
| | Chief Executive Officer and Chair of the Board of Directors | |
Kenneth Deane | | |
52
|
| | Chief Financial Officer | |
Nazar Khan | | |
45
|
| | Chief Operating Officer, Chief Technology Officer and Executive Director | |
Kerri Langlais | | |
44
|
| | Chief Strategy Officer | |
Walter Carter | | |
62
|
| | Director | |
Catherine “Cassie” Motz | | |
50
|
| | Director | |
Jason New | | |
52
|
| | Director | |
Steven Pincus | | |
63
|
| | Director | |
Lisa Prager | | |
64
|
| | Director | |
Name and Principal Position
|
| |
Base Salary
($) |
| |
Target Bonus
(% of Base Salary) |
| |
Target Bonus
($) |
| |||||||||
Paul Prager
|
| | | | 950,000 | | | | | | 150% | | | | | | 1,425,000 | | |
Chief Executive Officer
|
| | | | | | | | | | | | | | | | | | |
Kenneth Deane
|
| | | | 325,000 | | | | | | 25% | | | | | | 81,250 | | |
Chief Financial Officer
|
| | | | | | | | | | | | | | | | | | |
Nazar Khan
|
| | | | 450,000 | | | | | | 100% | | | | | | 450,000 | | |
Chief Operating Officer and Chief Technology Officer
|
| | | | | | | | | | | | | | | | | | |
Kerri Langlais
|
| | | | 400,000 | | | | | | 50% | | | | | | 200,000 | | |
Chief Strategy Officer
|
| | | | | | | | | | | | | | | | | | |
|
•
Cash retainer
|
| | $60,000 | |
|
•
Lead independent director
(additional cash retainer)
|
| | $25,000 | |
|
•
Committee chairmanship
(additional cash retainers)
|
| |
Audit Committee Chair: $25,000
Compensation Committee Chair: $25,000 |
|
| Restricted stock units vest on the first anniversary of the date of grant | | |
Each non-employee director will receive an annual grant of restricted stock units with a grant date value of $90,000
The lead independent director will receive an additional annual grant of restricted stock units with a grant date value of $25,000
|
|
| | |
IKONICS Common Stock
|
| |||
June 24, 2021
|
| | | $ | 11.30 | | |
October 8, 2021
|
| | | $ | 28.71 | | |
|
Authorized Capital Stock
|
| |||
|
IKONICS
|
| |
Holdco
|
|
| 5,000,000 million, of which (1) 4,750,000 million are shares of common stock, par value $0.10 per share, and (2) 250,000 million are shares of preferred stock, par value $0.01 per share. | | | 225 million, of which (1) 200 million are shares of common stock, par value of $0.001 per share, and (2) 25 million are shares of preferred stock, par value $0.001 per share. | |
|
Size of the Board of Directors
|
| |||
|
IKONICS
|
| |
Holdco
|
|
| Subject to the rights of the holders of preferred stock to elect additional directors under certain circumstances, the number of directors on the IKONICS board of directors is at least five (5) and no more nine (9) directors. | | | The number of directors of Holdco shall not be less than three (3) nor more than ten (10) members as determined from time to time by the Holdco board of directors. Pursuant to agreements set forth in voting proxy agreements executed by certain company stockholders and Stammtisch Investments LLC (which agreements are cumulatively referred to as the “stockholders agreement,” Stammtisch Investments LLC will effectively have the ability to determine the number of directors. | |
| IKONICS currently has eight (8) directors. | | | Holdco will have directors upon the closing of the mergers. | |
|
Removal of Directors
|
| |||
|
IKONICS
|
| |
Holdco
|
|
| Any director may be removed for cause by an affirmative vote by shareholders of a majority of the shares then entitled to vote on the election of directors; provided however that notice of any such meeting convened for the purpose of removing a director will contain a statement of the intention to remove the director and a summary of the basis for the proposed removal and be served on such | | |
Holdco’s amended and restated certificate of incorporation does not contain any special provisions regarding the removal of directors.
Under the DGCL, a director may be removed from office, with or without cause, by the holders of a majority of the shares entitled to vote at an election of directors.
|
|
|
Removal of Directors
|
| |||
|
IKONICS
|
| |
Holdco
|
|
| director not less than 30 days before such meeting and at such meeting the director will be entitled to be heard on the motion for such director’s removal. | | | | |
|
Cumulative Voting
|
| |||
|
IKONICS
|
| |
Holdco
|
|
| None. | | | None. | |
|
Classes of Directors
|
| |||
|
IKONICS
|
| |
Holdco
|
|
| There are three (3) classes of directors, each class to be as nearly equal in number as possible. One class of directors is elected each year, and the term of each class of directors expires at the third (3rd) annual meeting of shareholders after their election by the shareholders. | | | All directors are elected annually and serve until each such director’s successor is elected and qualified. | |
|
Vacancies on the Board
|
| |||
|
IKONICS
|
| |
Holdco
|
|
| Vacancies, including as a result of an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors in office, though less than a quorum. | | | Holdco’s amended and restated bylaws provides that any newly created directorships resulting from an increase in the authorized number of directors and any vacancies occurring in the Holdco board of directors may be filled solely by a majority of the Holdco directors then in office, although less than a quorum, or a sole remaining director. | |
| Whenever the holders of any class of shares are entitled to elect one or more directors, any newly created directorships of such class to be filled as a result of an increase in the number of directors may be filled by the affirmative vote of a majority of the directors elected by such class or series then in office or by a sole remaining director so elected, or by vote of the holders of the outstanding shares of such class or series. | | | Holdco’s amended and restated bylaws provide that, subject to the rights of certain stockholders set forth in a stockholders agreement and the rights of a majority of the directors appointed by Stammtisch to the Holdco board to appoint the Chairperson of the board of directors for so long as Stammtisch beneficially owns in the aggregate (directly or indirectly) at least fifteen percent (15%) or more of the voting power of the then outstanding shares of capital stock of Holdco, when one or more directors resign from the Holdco board, effective at a future time, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancies. | |
|
Board Quorum and Vote Requirements
|
| |||
|
IKONICS
|
| |
Holdco
|
|
| A majority of the entire number of directors constitutes a quorum. The act of the majority of directors present at a meeting at which there is a quorum constitutes action by the board of directors. | | | Holdco’s amended and restated bylaws provide that the presence of a majority of the total number of directors of Holdco then in office shall constitute a quorum for the transaction of business at any meeting of the board, provided, however, than in no case shall a quorum consist of less than one-third of the total number of directors of Holdco that would have had if there were no vacancies on the Holdco | |
|
Board Quorum and Vote Requirements
|
| |||
|
IKONICS
|
| |
Holdco
|
|
| | | | board of directors. If a quorum shall not be present at any meeting of the Holdco board of directors, the directors present thereat may, to the fullest extent permitted by law, adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. | |
|
Annual Meetings of Shareholders
|
| |||
|
IKONICS
|
| |
Holdco
|
|
| Date, time and place of the annual meeting is determined by the board of directors. | | | Date, time and place of the annual meeting is determined by the board of directors. | |
| Written notice of the annual meeting must be given to shareholders personally, via mail, or via electronic transmission not less than ten (10) nor more than 60 days prior to the meeting, except in the event of a merger, conversion, consolidation in which the corporation is a constituent corporation, or the sale of all or substantially all of the assets of IKONICS requiring shareholder approval, in which case notice must be given to shareholders at least twenty (20) days prior to the meeting. | | | Written notice of any meeting of the shareholders shall be either mailed or electronically transmitted to shareholders entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days prior to the meeting. | |
|
Special Meetings of Shareholders
|
| |||
|
IKONICS
|
| |
Holdco
|
|
| Special meetings may be called by the Chief Executive Officer, the chair of the board of directors, or the board of directors. Additionally, so long as Ascribe and Solace (together with certain funds or accounts advised by them) own at least 25% of the issued and outstanding IKONICS common stock entitled to vote at such meeting, a special meeting of the shareholders shall be called by the Secretary upon the written request a shareholder or shareholders holding at least 30% of the voting power of the issued and outstanding common stock entitled to vote at such meeting. | | |
Special meetings may be called by the Holdco board of directors, at the request of the Chairperson of the Holdco board of directors upon written request by Stammtisch at any time prior to the first date on which Stammtisch and Stammtisch Affiliates cease to beneficially own in the aggregate (directly or indirectly) shares of capital stock entitled to vote generally for the election of directors of the Corporation representing at least fifteen percent (15%) of such shares of capital stock owned by Stammtisch and Stammtisch Affiliates as of the date of the closing of the mergers or by the Secretary upon proper written request or requests given by or on behalf of one or more shareholders of Holdco who hold at least fifty percent (50%) of the voting power of all outstanding shares of Holdco common stock (the date of any such shareholder meeting shall be no more than ninety (90) days after the Secretary receives the foregoing request or requests from shareholders of Holdco)
Notwithstanding the foregoing, a special meeting shall not be held if the board of directors calls for an annual meeting to be held within ninety (90) days after the Secretary receives the request for the special meeting and the board determines in good faith that the business of such annual meeting includes the business specified in the special meeting request.
|
|
|
Voting Standards
|
| |||
|
IKONICS
|
| |
Holdco
|
|
| Except as otherwise required by law, the affirmative vote of a majority of the votes cast at a meeting of shareholders constitutes the act of the shareholders in all matters other than the election of directors. Where the number of persons validly proposed for election or re-election as a director is greater than the number of directors to be elected, the persons receiving the most votes, up to the number of directors to be elected, are elected as directors. | | |
Each holder of Holdco common stock shall have the right to one (1) vote per share of Class A common stock and shall be entitled to vote upon such matters and in such manner as provided by applicable law.
In all matters other than the election of directors and except as otherwise required by law, the affirmative vote of a majority of votes cast at a meeting of shareholders constitutes the act of the shareholders. The amended and restated Holdco bylaws provide that directors shall be elected by will be elected by a plurality of the votes cast.
|
|
|
Shareholder Action by Written Consent
|
| |||
|
IKONICS
|
| |
Holdco
|
|
| Shareholder action by written consent is not permitted. | | | Under the DGCL, any action that may be taken at any annual or special meeting of the shareholders may be taken by written consent of holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize such action at a meeting at which all shares entitled to vote thereon were present and voted, which right to act by written consent may be limited by express provision set forth in a corporation’s certificate of incorporation. The amended and restated certificate of incorporation of Holdco expressly provides that the shareholders of Holdco may not take action by written consent in lieu of a meeting of Holdco shareholders. | |
|
Takeover Restrictions
|
| |||
|
IKONICS
|
| |
Holdco
|
|
|
The Restated Articles of Incorporation generally prohibit IKONICS from engaging in significant business transactions (including a merger or consolidation) with a holder of 15% or more of IKONICS’ stock (referred to as an interested shareholder) for a period of three (3) years after the interested shareholder becomes an interested shareholder, unless:
•
prior to the time the shareholder became an interested shareholder, the board approved either the business combination or the transaction which resulted in the shareholder becoming an interested shareholder;
•
upon consummation of the transaction which resulted in the shareholder becoming an interested shareholder, the interested shareholder owned at least 85% of the voting stock of the corporation, excluding specified shares; or
•
at or subsequent to the time the shareholder became an interested shareholder, the business combination is approved by the board and authorized at an annual or special meeting of shareholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested shareholder.
|
| |
Holdco’s amended and restated certificate of incorporation does not contain any super-majority voting requirements governing mergers, consolidations, sales of substantially all of Holdco’s assets, liquidations, reclassifications or recapitalizations.
Subject to certain exceptions, Section 203 of the DGCL generally prohibits public corporations from engaging in significant business transactions, including mergers, with a holder of 15% or more of the corporation’s stock, referred to as an interested shareholder, for a period of three (3) years after the interested shareholder becomes an interested shareholder. Holdco has not opted out of Section 203 in its amended and restated certificate of incorporation.
|
|
| IKONICS has elected not to be governed by Section 203 of the DGCL. | | | | |
|
Rights Plan
|
| |||
|
IKONICS
|
| |
Holdco
|
|
| IKONICS has not adopted a rights plan. | | | Holdco has not adopted a rights plan. | |
|
Amendments to the Bylaws
|
| |||
|
IKONICS
|
| |
Holdco
|
|
| The board of directors is expressly empowered to adopt, amend or repeal the IKONICS bylaws. In addition any amendment, repeal, or adoption of any provision inconsistent with IKONICS’ bylaws by the IKONICS shareholders requires the affirmative vote of at least 66 2/3% of the voting power of the issued and outstanding common stock entitled to vote generally in the election of directors, voting together as a single class. | | | Subject to the Stockholders Agreement of Holdco, by and among the certain stockholders the board of directors is expressly empowered to adopt, amend, or repeal Holdco’s bylaws. Holdco’s amended and restated bylaws provide that certain provisions of Holdco’s amended and restated bylaws may not be amended other than with the prior written consent of Stammtisch for so long as Stammtisch owns at least fifteen percent (15%) or more of the issued and outstanding voting securities of Holdco. | |
|
Limitation of Personal Liability of Directors, Officers and Employees
|
| |||
|
IKONICS
|
| |
Holdco
|
|
|
A director will not be personally liable to the company for monetary damages for breach of fiduciary duty as a director, except for liability:
•
for any breach of the director’s duty of loyalty to IKONICS or its shareholders,
•
for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law,
•
for unlawful payment of dividends or unlawful redemptions or repurchases under Section 174 of the DGCL, or
•
for any transaction from which the director derived an improper personal benefit. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of IKONICS will be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.
|
| | Same as IKONICS. | |
Name and Address of Beneficial Owner(1)
|
| |
Pre-Mergers
TeraWulf Common Stock |
| |||||||||
|
Number of
Shares |
| |
Percentage of
Outstanding Shares |
| ||||||||
Directors and Executive Officers of TeraWulf: | | | | | | | | | | | | | |
Paul Prager(2)
|
| | | | 32,528,288 | | | | | | 65.1% | | |
Kenneth Deane
|
| | | | — | | | | | | — | | |
Nazar Khan(3)
|
| | | | 4,259,200 | | | | | | 8.5% | | |
Kerri Langlais(4)
|
| | | | 484,000 | | | | | | 1.0% | | |
Bryan Pascual(5)
|
| | | | 9,919,800 | | | | | | 19.8% | | |
All directors and current executive officers (5 persons)
|
| | | | 32,528,288 | | | | | | 65.1% | | |
Significant Stockholders: | | | | | | | | | | | | | |
Stammtisch Investments LLC(6)
|
| | | | 27,204,288 | | | | | | 54.4% | | |
Bayshore Capital, LLC(5)
|
| | | | 9,919,800 | | | | | | 19.8% | | |
Revolve Capital LLC(7)
|
| | | | 7,345,800 | | | | | | 14.7% | | |
Name and Address of Beneficial Owner(1)
|
| |
Post-Mergers
Holdco Common Stock |
| |||||||||
|
Number of
Shares |
| |
Percentage of
Outstanding Shares |
| ||||||||
Directors and Executive Officers of Holdco: | | | | | | | | | | | | | |
Paul Prager(2)
|
| | | | 65,271,739 | | | | | | 62.4% | | |
Kenneth Deane
|
| | | | — | | | | | | — | | |
Nazar Khan(3)
|
| | | | 8,546,573 | | | | | | 8.2% | | |
Kerri Langlais(4)
|
| | | | 971,201 | | | | | | * | | |
Walter Carter
|
| | | | 14,899 | | | | | | * | | |
Catherine “Cassie” Motz
|
| | | | — | | | | | | — | | |
Jason New(5)
|
| | | | 1,605,292 | | | | | | 1.5% | | |
Steven Pincus
|
| | | | — | | | | | | — | | |
Lisa Prager
|
| | | | — | | | | | | — | | |
All directors and current executive officers (9 persons)
|
| | | | 66,891,930 | | | | | | 64.0% | | |
Significant Stockholders: | | | | | | | | | | | | | |
Stammtisch Investments LLC(6)
|
| | | | 54,588,523 | | | | | | 52.2% | | |
Bayshore Capital, LLC(7)
|
| | | | 19,905,216 | | | | | | 19.0% | | |
Revolve Capital LLC(8)
|
| | | | 14,740,190 | | | | | | 14.1% | | |
Name and Address of Beneficial Owner(1)
|
| |
Pre-Mergers
IKONICS Common Stock |
| |||||||||
|
Number of
Shares(2) |
| |
Percentage of
Outstanding Shares |
| ||||||||
Directors and Executive Officers: | | | | | | | | | | | | | |
William C. Ulland
|
| | | | 243,047(3) | | | | | | 12.3% | | |
Darrell B. Lee
|
| | | | 10,211 | | | | | | * | | |
Ernest M. Harper, Jr.
|
| | | | — | | | | | | — | | |
Lockwood Carlson
|
| | | | 250 | | | | | | * | | |
Marianne Bohren
|
| | | | 100 | | | | | | * | | |
Jeffrey D. Engbrecht
|
| | | | — | | | | | | — | | |
Gregory W. Jackson
|
| | | | — | | | | | | — | | |
Glenn Sandgren
|
| | | | 5,833(4) | | | | | | * | | |
Claude P. Piguet
|
| | | | 21,675 | | | | | | 1.1% | | |
Ken Hegman
|
| | | | 375 | | | | | | * | | |
All directors and current executive officers (11 persons)
|
| | | | 291,908 | | | | | | 14.7% | | |
Significant Shareholders: | | | | | | | | | | | | | |
Joseph R. Nerges 1726 Bundy Street Scranton, PA 18508
|
| | | | 318,779(5) | | | | | | 16.1% | | |
H. Leigh Severance 100 Fillmore Street, Suite 300 Denver, CO 80206
|
| | | | 180,079(6) | | | | | | 9.1% | | |
Gerald W. Simonson 7260 Commerce Circle East Minneapolis, Minnesota 55432
|
| | | | 125,495(7) | | | | | | 6.4% | | |
| | |
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Term
|
| |
Section
|
|
Adjusted RSU Award | | | 2.3(c) | |
Agreement | | | Preamble | |
Aggregate Company Share Amount | | | 8.1(b) | |
Alternative Acquisition Agreement | | | 5.4(c)(vi) | |
Assumed Shares | | | 2.3(d) | |
Balance Sheet Date | | | 3.9(a) | |
Closing | | | 1.2 | |
Closing Date | | | 1.2 | |
Code | | | 2.2(f) | |
Company | | | Preamble | |
Company Benefit Plan | | | 3.13(a) | |
Company Board | | | Recitals | |
Company Board Recommendation | | | Recitals | |
Company Book-Entry Shares | | | 2.1(e) | |
Company Disclosure Letter | | | Article III | |
Company Financing | | | 5.18(a) | |
Company Intellectual Property | | | 3.17(a) | |
Company Material Contract | | | 3.12(a) | |
Company Merger Consideration | | | 2.1(c)(i) | |
Company Name Change | | | 1.5(c) | |
Company Organizational Documents | | | 3.2 | |
Company Owned Intellectual Property | | | 3.17(b) | |
Company Permits | | | 3.19(a) | |
Company Real Property | | | 3.18(a) | |
Company Real Property Leases | | | 3.18(b) | |
Company Related Parties | | | 7.6(d)(ii) | |
Company Response Action | | | 5.1 | |
Company Stock Certificates | | | 2.1(e) | |
Company Termination Fee | | | 7.6(c) | |
Company Voting Agreement | | | Recitals | |
Covered Persons | | | 5.17(a) | |
CVR Agreement | | | Recitals | |
DGCL | | | Recitals | |
Dissenting Shares | | | 2.4(a) | |
Effect | | | 8.1(i) | |
ERISA | | | 3.13(a) | |
Exchange Act | | | 3.3(b) | |
Exchange Agent | | | 2.2(a) | |
Exchange Fund | | | 2.2(b) | |
Exchange Ratio | | | 2.1(c)(i) | |
Excluded Company Shares | | | 2.1(c)(iii) | |
Term
|
| |
Section
|
| | ||
Expenses | | | 5.12 | | | ||
Fair Market Value | | | 2.3(a) | | | ||
First Certificate of Merger | | | 1.3(a) | | | ||
First Effective Time | | | 1.3(a) | | | | |
First Merger | | | Recitals | | | | |
Fully Diluted Basis | | | 8.1(u) | | | | |
Governmental Authorizations | | | 3.3 | | | | |
HoldCo | | | Preamble | | | | |
HoldCo Certificate of Incorporation | | | 1.5(d) | | | | |
Indemnified Parties | | | 5.8(a) | | | | |
Insurance Policies | | | 3.23 | | | | |
Intended Tax Treatment | | | 1.7 | | | | |
IRS | | | 3.13(b) | | | | |
Legacy Sale | | | Recitals | | | | |
Legal Actions | | | 3.11 | | | | |
Liabilities | | | 3.9 | | | | |
Maximum Company Liability Amount | | | 7.6(d)(ii) | | | | |
Maximum Parent Liability Amount | | | 7.6(d)(i) | | | | |
MBCA | | | Recitals | | | | |
Merger Sub I | | | Preamble | | | | |
Merger Sub II | | | Preamble | | | | |
Parent Financial Advisor | | | 4.25 | | | | |
Parent | | | Preamble | | | | |
Parent Adverse Recommendation Change | | | 5.4(c)(v) | | | | |
Parent Benefit Plan | | | 4.14(a) | | | | |
Parent Board | | | Recitals | | | | |
Parent Board Recommendation | | | Recitals | | | | |
Parent Book-Entry Shares | | | 2.1(d) | | | | |
Parent Cash Consideration | | | 2.1(a)(i) | | | | |
Parent Disclosure Letter | | | Article IV | | | | |
Parent Entities | | | Preamble | | | | |
Parent Insurance Policies | | | 4.24 | | | | |
Parent Intellectual Property | | | 4.18(a) | | | | |
Parent Material Contract | | | 4.13(a) | | | | |
Parent Merger Consideration | | | 2.1(a)(i) | | | | |
Parent Organizational Documents | | | 4.2 | | | | |
Parent Owned Intellectual Property | | | 4.18(b) | | | | |
Parent Permits | | | 4.20(a) | | | | |
Parent Real Property | | | 4.19(a) | | | | |
Parent Real Property Leases | | | 4.19(b) | | | | |
Parent Registered IP | | | 4.18(a) | | | | |
Parent Registration Statement | | | 4.3(b) | | | | |
Parent Related Parties | | | 7.6(d)(i) | | | | |
Term
|
| |
Section
|
| | | ||||
Parent Response Action | | | 5.2 | | | | | | ||
Parent RSU Award | | | 2.3(b) | | | | | | ||
Parent SEC Reports | | | 4.8(a) | | | | | | ||
Parent Share Consideration | | | 2.1(a)(i) | | | | | | ||
Parent Stock Certificates | | | 2.1(d) | | | | | | ||
Parent Stock Option | | | 2.3(a) | | | | | | ||
Parent Surviving Company | | | 1.1(a) | | | | | | ||
Parent Termination Fee | | | 7.6(b) | | | | | | ||
Parent Voting Agreement | | | Recitals | | | | | | ||
Permits | | | 3.19(a) | | | | | | ||
Predecessor | | | 8.1(ww) | | | | | | ||
Registered IP | | | 3.17(a) | | | | | | ||
Residual Shares | | | 2.3(d) | | | | | | ||
Rights Agent | | | Recitals | | | | | | ||
SEC | | | 4.3(b) | | | | | | ||
Second Certificate of Merger | | | 1.3(b) | | | | | | ||
Second Effective Time | | | 1.3(b) | | | | | | ||
Second Merger | | | Recitals | | | | | | ||
Shareholder Litigation | | | 5.17(a) | | | | | | ||
Stock Equivalent | | | 8.1(fff) | | | | | | ||
Surviving Company | | | 1.1(b) | | | | | | ||
Termination Date | | | 7.2(a) | | | | | | ||
Transactions | | | Recitals | | | | | | ||
WARN Act | | | 3.14(c) | | | | | | ||
| | | | | | | | | | |
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| | | | G-3 | | | |
| | | | G-4 | | | |
| | | | G-11 | | | |
| | | | G-16 | | | |
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| | | | G-18 | | | |
| | | | G-19 | | |
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TeraWulf Unaudited Condensed Consolidated Financial Statements | | | | | | | |
| | | | H-4 | | | |
| | | | H-5 | | | |
| | | | H-6 | | | |
| | | | H-7 | | | |
| | | | H-8 | | | |
TeraWulf Audited Financial Statements | | | | | | | |
| | | | H-23 | | | |
| | | | H-24 | | | |
| | | | H-25 | | | |
| | | | H-26 | | | |
| | | | H-27 | | | |
| | | | H-28 | | | |
IKONICS Unaudited Condensed Financial Statements | | | | | | | |
| | | | H-36 | | | |
| | | | H-37 | | | |
| | | | H-38 | | | |
| | | | H-39 | | | |
| | | | H-40 | | | |
IKONICS Audited Financial Statements | | | | | | | |
| | | | H-48 | | | |
| | | | H-50 | | | |
| | | | H-51 | | | |
| | | | H-52 | | | |
| | | | H-53 | | | |
| | | | H-54 | | | |
Beowulf Electricity & Data Inc. | | | | | | | |
Unaudited Interim Financial Statements as of June 30, 2021 and for the period from inception (April 14, 2021) to June 30, 2021:
|
| | | | | | |
| | | | H-66 | | | |
| | | | H-67 | | | |
| | | | H-68 | | | |
| | | | H-69 | | | |
| | | | H-70 | | |
| | |
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|
| |||
NAUTILUS CRYPTOMINE LLC | | | | | | | |
CONDENSED FINANCIAL STATEMENTS (unaudited) | | | | | | | |
| | | | H-78 | | | |
| | | | H-79 | | | |
| | | | H-80 | | | |
| | | | H-81 | | | |
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (unaudited) | | | | | | | |
| | | | H-82 | | | |
| | | | H-82 | | | |
| | | | H-84 | | | |
| | | | H-84 | | | |
| | | | H-85 | | | |
| | | | H-86 | | | |
| | | | H-87 | | | |
| | | | H-88 | | |
| | |
Page
|
| |||
Unaudited Condensed Consolidated Financial Statements as of and for the three months ended June 30, 2021:
|
| | | | | | |
| | | | H-4 | | | |
| | | | H-5 | | | |
| | | | H-6 | | | |
| | | | H-7 | | | |
| | | | H-8 | | |
| | |
June 30, 2021
|
| |
March 31, 2021
|
| ||||||
ASSETS | | | | | | | | | | | | | |
CURRENT ASSETS: | | | | | | | | | | | | | |
Cash and cash equivalents
|
| | | $ | 31,721 | | | | | $ | 6,300 | | |
Prepaid expenses
|
| | | | 1,938 | | | | | | 5 | | |
Other current assets
|
| | | | 278 | | | | | | — | | |
Total current assets
|
| | | | 33,937 | | | | | | 6,305 | | |
Equity in net assets of investee
|
| | | | 42,100 | | | | | | — | | |
Property, plant and equipment, net
|
| | | | 916 | | | | | | — | | |
Right-of-use asset
|
| | | | 1,064 | | | | | | — | | |
Deposits
|
| | | | 407 | | | | | | 23,700 | | |
Other assets
|
| | | | 400 | | | | | | — | | |
TOTAL ASSETS
|
| | | $ | 78,824 | | | | | $ | 30,005 | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | |
CURRENT LIABILITIES: | | | | | | | | | | | | | |
Acounts payable and accrued liabilities
|
| | | $ | 4,065 | | | | | $ | 1,739 | | |
Current portion of operating lease liability
|
| | | | 48 | | | | | | — | | |
Total current liabilities
|
| | | | 4,113 | | | | | | 1,739 | | |
Operating lease liability, net of current portion
|
| | | | 1,037 | | | | | | — | | |
TOTAL LIABILITIES
|
| | | | 5,150 | | | | | | 1,739 | | |
Commitments and Contingencies (See Note 7) | | | | | | | | | | | | | |
Series A redeemable convertible preferred stock, $0.001 par value, 2,000,000 authorized; 2,000,000 issued and outstanding; contingent redemption amount $25 per share
|
| | | | 49,815 | | | | | | — | | |
STOCKHOLDERS’ EQUITY: | | | | | | | | | | | | | |
Common stock, $0.001 par value, 100,000,000 authorized, 50,000,000 issued
and outstanding |
| | | | 50 | | | | | | 50 | | |
Additional paid-in capital
|
| | | | 29,892 | | | | | | 29,892 | | |
Accumulated deficit
|
| | | | (6,083) | | | | | | (1,676) | | |
Total stockholders’ equity
|
| | | | 23,859 | | | | | | 28,266 | | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
| | | $ | 78,824 | | | | | $ | 30,005 | | |
| | |
2021
|
| |||
Revenue
|
| | | $ | — | | |
Cost of operations: | | | | | | | |
Operating expense
|
| | | | 115 | | |
Selling, general and administrative
|
| | | | 4,152 | | |
Total cost of operations
|
| | | | 4,267 | | |
Operating loss
|
| | | | (4,267) | | |
Income tax expense (benefit)
|
| | | | — | | |
Equity in net loss of investee, net of tax
|
| | | | 140 | | |
Net loss
|
| | | $ | (4,407) | | |
Loss per common share: | | | | | | | |
Basic and diluted
|
| | | $ | (0.09) | | |
Weighted average common shares outstanding: | | | | | | | |
Basic and diluted
|
| | | | 50,000,000 | | |
| | |
Redeemable
Convertible Preferred Stock |
| | |
Common Stock
|
| |
Additional
Paid-in Capital |
| |
Accumulated
Deficit |
| |
Total
|
| |||||||||||||||||||||||||||
|
Number
|
| |
Amount
|
| | |
Number
|
| |
Amount
|
| ||||||||||||||||||||||||||||||||
Balances as of March 31, 2021
|
| | | | — | | | | | $ | — | | | | | | | 50,000,000 | | | | | $ | 50 | | | | | $ | 29,892 | | | | | $ | (1,676) | | | | | $ | 28,266 | | |
Issuance of Series A
preferred stock, net of issuance costs |
| | | | 2,000,000 | | | | | | 49,815 | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Net loss
|
| | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | — | | | | | | (4,407) | | | | | | (4,407) | | |
Balances as of June 30, 2021
|
| | | | 2,000,000 | | | | | $ | 49,815 | | | | | | | 50,000,000 | | | | | $ | 50 | | | | | $ | 29,892 | | | | | $ | (6,083) | | | | | $ | 23,859 | | |
| | |
2021
|
| |||
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | |
Net loss
|
| | | $ | (4,407) | | |
Adjustments to reconcile net loss to net cash used in operating activities:
|
| | | | | | |
Equity in net loss of investee, net of tax
|
| | | | 140 | | |
Changes in operating assets and liabilities:
|
| | | | | | |
Increase in prepaid expenses
|
| | | | (1,933) | | |
Increase in other current assets
|
| | | | (278) | | |
Increase in lease right-of-use asset
|
| | | | 12 | | |
Increase in accounts payable and accrued liabilities
|
| | | | 1,741 | | |
Increase in operating lease liability
|
| | | | 9 | | |
Net cash used in operating activities
|
| | | | (4,716) | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | |
Investments in joint venture related to direct payments made on behalf of joint venture
|
| | | | (30,390) | | |
Reimbursable payments for deposits on plant and equipment made on behalf of a joint venture partner
|
| | | | (29,640) | | |
Reimbursement of payments for deposits on plant and equipment made on behalf of a joint venture partner
|
| | | | 29,640 | | |
Reimbursement from joint venture partner for deposits on plant and equipment contributed to the joint venture
|
| | | | 11,850 | | |
Purchases of plant and equipment
|
| | | | (916) | | |
Deposits on plant and equipment
|
| | | | (407) | | |
Net cash used in investing activities
|
| | | | (19,863) | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | |
Proceeds from issuance of Series A preferred stock
|
| | | | 50,000 | | |
Net cash provided by financing activities
|
| | | | 50,000 | | |
Net change in cash and cash equivalents
|
| | | | 25,421 | | |
Cash and cash equivalents at beginning of period
|
| | | | 6,300 | | |
Cash and cash equivalents at end of period
|
| | | $ | 31,721 | | |
Supplemental disclosure of non-cash activities: | | | | | | | |
Right-of-use asset obtained in exchange for lease obligation
|
| | | $ | 1,076 | | |
Contribution of deposits on plant and equipment to joint venture
|
| | | $ | 11,850 | | |
Series A preferred stock issuance costs in accrued liabilities
|
| | | $ | 185 | | |
Deferred financing costs in accrued liabilities
|
| | | $ | 400 | | |
| | |
2021
|
| |||
Construction in process
|
| | | $ | 916 | | |
| | | | | 916 | | |
Less: accumulated depreciation
|
| | | | — | | |
| | | | $ | 916 | | |
| Year ending March 31: | | | | | | | |
|
2022
|
| | | $ | 75 | | |
|
2023
|
| | | | 150 | | |
|
2024
|
| | | | 150 | | |
|
2025
|
| | | | 150 | | |
|
2026
|
| | | | 150 | | |
|
Thereafter
|
| | | | 775 | | |
| | | | | $ | 1,450 | | |
|
Undiscounted cash flows of the operating lease
|
| | | $ | 1,450 | | |
|
Unamortized discount
|
| | | | 365 | | |
|
Total operating lease liability
|
| | | | 1,085 | | |
|
Current portion of operating lease liability
|
| | | | 48 | | |
|
Operating lease liability, net of current portion
|
| | | $ | 1,037 | | |
|
Payment of TeraWulf 50% share of Minerva May 2021 incremental deposit
|
| | | $ | (6,140) | | |
|
Payment of TeraWulf 50% share of Bitmain initial deposit
|
| | | | (23,500) | | |
|
Other direct payments
|
| | | | (750) | | |
|
Investments in joint venture related to direct payments made on behalf of joint venture
|
| | | $ | (30,390) | | |
|
Payment of Talen 50% share of Minerva May 2021 incremental deposit
|
| | | $ | (6,140) | | |
|
Payment of Talen 50% share of Bitmain initial deposit
|
| | | | (23,500) | | |
|
Reimbursable payments for deposits on plant and equipment made on behalf of a joint venture partner
|
| | | $ | (29,640) | | |
|
Talen reimbursement of 50% share of Minerva May 2021 incremental deposit
|
| | | $ | 6,140 | | |
|
Talen reimbursement 50% share of Bitmain initial deposit
|
| | | | 23,500 | | |
|
Reimbursement of payments for deposits on plant and equipment made on behalf of a joint venture partner
|
| | | $ | 29,640 | | |
|
Talen reimbursement of 50% share of Minerva initial deposit paid by TeraWulf in the period ended March 31, 2021
|
| | | $ | 11,850 | | |
|
Reimbursement from joint venture partner for deposits on plant and equipment contributed to the joint venture
|
| | | $ | 11,850 | | |
|
Minerva Purchase Agreement assignment: TeraWulf 50% share of Minerva initial deposit paid by TeraWulf in the period ended March 31, 2021
|
| | | $ | 11,850 | | |
|
Contribution of deposits on plant and equipment to joint venture (non-cash activity)
|
| | | $ | 11,850 | | |
Entity
|
| |
%
Ownership |
| |
Initial
Investment |
| |
Additional
Investment |
| |
Net loss
Inception to Date |
| |
Company’s
Variable Interest in Entity |
| |
Commitment
to Future Additional Contributions(1) |
| |
Company’s
Maximum Exposure to Loss in Entity(2) |
| |||||||||||||||||||||
Nautilus
|
| | | | 50% | | | | | $ | 18,000 | | | | | $ | 24,240 | | | | | $ | (140) | | | | | $ | 42,100 | | | | | $ | 113,760 | | | | | $ | 155,860 | | |
| | |
Three months
ended June 30, 2021 |
| |||
Condensed statement of operations information: | | | | | | | |
Revenue
|
| | | $ | — | | |
Operating expense
|
| | | | 281 | | |
| | |
Three months
ended June 30, 2021 |
| |||
Net loss
|
| | | $ | (281) | | |
|
| | |
June 30, 2021
|
| |||
Condensed balance sheet information: | | | | | | | |
Noncurrent assets
|
| | | $ | 112,467 | | |
Total assets
|
| | | $ | 112,467 | | |
Current liabilities
|
| | | $ | 498 | | |
Equity
|
| | | | 111,969 | | |
Total liabilities and equity
|
| | | $ | 112,467 | | |
| | |
2021
|
| |||
ASSETS | | | | | | | |
CURRENT ASSETS: | | | | | | | |
Cash and cash equivalents
|
| | | $ | 6,300 | | |
Other current assets
|
| | | | 5 | | |
Total current assets
|
| | | | 6,305 | | |
OTHER ASSETS: | | | | | | | |
Deposits
|
| | | | 23,700 | | |
TOTAL ASSETS
|
| | | $ | 30,005 | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | |
CURRENT LIABILITIES: | | | | | | | |
Accounts payable and accrued liabilities
|
| | | $ | 1,739 | | |
Total current liabilities
|
| | | | 1,739 | | |
TOTAL LIABILITIES
|
| | | | 1,739 | | |
Commitments and Contingencies (See Note 5) | | | | | | | |
STOCKHOLDERS’ EQUITY: | | | | | | | |
Common stock, $0.001 par value, 100,000,000 authorized, 50,000,000 issued
and outstanding |
| | | | 50 | | |
Additional paid-in capital
|
| | | | 29,892 | | |
Accumulated deficit
|
| | | | (1,676) | | |
Total stockholders’ equity
|
| | | | 28,266 | | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
| | | $ | 30,005 | | |
| | |
2021
|
| |||
Revenue
|
| | | $ | — | | |
Cost of operations: | | | | | | | |
Operating expense
|
| | | | 853 | | |
Selling, general and administrative
|
| | | | 823 | | |
Total cost of operations
|
| | | | 1,676 | | |
Operating loss
|
| | | | (1,676) | | |
Loss from operations before income taxes
|
| | | | (1,676) | | |
Income tax expense (benefit)
|
| | | | — | | |
Net loss
|
| | | $ | (1,676) | | |
Loss per common share: | | | | | | | |
Basic and diluted
|
| | | $ | (0.05) | | |
Weighted average common shares outstanding: | | | | | | | |
Basic and diluted
|
| | | | 32,923,077 | | |
| | |
Common Stock
|
| |
Additional
Paid-in Capital |
| |
Accumulated
Deficit |
| |
Total
|
| ||||||||||||||||||
| | |
Number
|
| |
Amount
|
| ||||||||||||||||||||||||
Balances as of February 8, 2021
|
| | | | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
Issuance of common stock, net of issuance
costs |
| | | | 50,000,000 | | | | | | 50 | | | | | | 29,892 | | | | | | — | | | | | | 29,942 | | |
Net loss
|
| | | | — | | | | | | — | | | | | | — | | | | | | (1,676) | | | | | | (1,676) | | |
Balances as of March 31, 2021
|
| | | | 50,000,000 | | | | | $ | 50 | | | | | $ | 29,892 | | | | | $ | (1,676) | | | | | $ | 28,266 | | |
| | |
2021
|
| |||
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | |
Net loss
|
| | | $ | (1,676) | | |
Adjustments to reconcile net loss to net cash used in operating activities:
|
| | | | | | |
Changes in operating assets and liabilities:
|
| | | | | | |
Increase in other current assets
|
| | | | (5) | | |
Increase in accounts payable and accrued liabilities
|
| | | | 1,681 | | |
Net cash provided by (used in) operating activities
|
| | | | — | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | |
Deposits on plant and equipment
|
| | | | (23,700) | | |
Net cash used in investing activities
|
| | | | (23,700) | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | |
Proceeds from issuance of common stock
|
| | | | 30,000 | | |
Net cash provided by financing activities
|
| | | | 30,000 | | |
Net change in cash and cash equivalents
|
| | | | 6,300 | | |
Cash and cash equivalents at beginning of period
|
| | | | — | | |
Cash and cash equivalents at end of period
|
| | | $ | 6,300 | | |
Supplemental disclosure of cash flow information: | | | | | | | |
Cash paid during the period for: | | | | | | | |
Interest
|
| | | $ | — | | |
Income taxes
|
| | | $ | — | | |
Non-cash investing and financing activities: | | | | | | | |
Common stock issuance costs in accrued liabilities
|
| | | $ | 58 | | |
| | |
2021
|
| |||
Deferred tax assets: | | | | | | | |
Net operating loss carryforwards
|
| | | $ | 461 | | |
Valuation allowance
|
| | | | (461) | | |
Total deferred tax assets
|
| | | $ | — | | |
| | |
2021
|
| |||
Current: | | | | | | | |
Federal
|
| | | $ | — | | |
State
|
| | | | — | | |
Foreign
|
| | | | — | | |
Total current expense (benefit)
|
| | | | — | | |
Deferred: | | | | | | | |
Federal
|
| | | | — | | |
State
|
| | | | — | | |
Foreign
|
| | | | — | | |
Total deferred expense (benefit)
|
| | | | — | | |
Total expense (benefit) for income taxes
|
| | | $ | — | | |
| | |
2021
|
| |||
Statutory US federal rate
|
| | | | 21.00% | | |
State income taxes, net of federal impact
|
| | | | 6.52% | | |
Change in valuation allowance
|
| | | | (27.52)% | | |
Effective income tax rate
|
| | | | 0.00% | | |
| | |
June 30,
|
| |
December 31,
|
| ||||||
| | |
2021
|
| |
2020
|
| ||||||
| | |
(unaudited)
|
| | | | | | | |||
ASSETS | | | | | | | | | | | | | |
CURRENT ASSETS: | | | | | | | | | | | | | |
Cash
|
| | | $ | 2,260,855 | | | | | $ | 3,693,845 | | |
Trade receivables, less allowance of $54,000 in 2021 and $55,000 in 2020
|
| | | | 1,651,035 | | | | | | 2,119,213 | | |
Inventories
|
| | | | 1,607,828 | | | | | | 1,644,975 | | |
Prepaid expenses and other assets
|
| | | | 162,786 | | | | | | 125,969 | | |
Income taxes receivable
|
| | | | 30,412 | | | | | | 219,451 | | |
Total current assets
|
| | | | 5,712,916 | | | | | | 7,803,453 | | |
PROPERTY, PLANT, AND EQUIPMENT, at cost: | | | | | | | | | | | | | |
Land and building
|
| | | | 9,556,586 | | | | | | 9,556,586 | | |
Machinery and equipment
|
| | | | 5,271,367 | | | | | | 5,263,586 | | |
Office equipment
|
| | | | 1,420,494 | | | | | | 1,417,219 | | |
Vehicles
|
| | | | 245,674 | | | | | | 245,674 | | |
| | | | | 16,494,121 | | | | | | 16,483,065 | | |
Less accumulated depreciation
|
| | | | (9,410,087) | | | | | | (9,094,702) | | |
Total property, plant and equipment at cost, net
|
| | | | 7,084,034 | | | | | | 7,388,363 | | |
INTANGIBLE ASSETS, less accumulated amortization of $205,697 in 2021 and $207,399 in 2020
|
| | | | 245,832 | | | | | | 243,583 | | |
Total assets
|
| | | $ | 13,042,782 | | | | | $ | 15,435,399 | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | |
CURRENT LIABILITIES | | | | | | | | | | | | | |
Current portion of long-term debt
|
| | | $ | — | | | | | $ | 2,688,396 | | |
Accounts payable
|
| | | | 1,521,736 | | | | | | 459,836 | | |
Accrued compensation
|
| | | | 466,547 | | | | | | 279,755 | | |
Other accrued liabilities
|
| | | | 99,774 | | | | | | 168,066 | | |
Total current liabilities
|
| | | | 2,088,057 | | | | | | 3,596,053 | | |
COMMITMENTS AND CONTINGENCIES | | | | | | | | | | | | | |
STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | |
Preferred stock, par value $.10 per share; authorized 250,000 shares; issued
none |
| | | | — | | | | | | — | | |
Common stock, par value $.10 per share; authorized 4,750,000 shares; issued and outstanding 1,980,694 shares in 2021 and 1,976,354 in 2020
|
| | | | 198,069 | | | | | | 197,635 | | |
Additional paid-in-capital
|
| | | | 2,902,790 | | | | | | 2,743,930 | | |
Retained earnings
|
| | | | 7,853,866 | | | | | | 8,897,781 | | |
Total stockholders’ equity
|
| | | | 10,954,725 | | | | | | 11,839,346 | | |
Total liabilities and stockholders’ equity
|
| | | $ | 13,042,782 | | | | | $ | 15,435,399 | | |
| | |
Three Months Ended
|
| |
Six Months Ended
|
| ||||||||||||||||||
| | |
June 30,
|
| |
June 30,
|
| ||||||||||||||||||
| | |
2021
|
| |
2020
|
| |
2021
|
| |
2020
|
| ||||||||||||
NET SALES
|
| | | $ | 4,251,348 | | | | | $ | 2,572,439 | | | | | $ | 7,324,756 | | | | | $ | 6,069,631 | | |
COST OF GOODS SOLD
|
| | | | 2,822,044 | | | | | | 2,187,544 | | | | | | 4,899,120 | | | | | | 4,531,504 | | |
GROSS PROFIT
|
| | | | 1,429,304 | | | | | | 384,895 | | | | | | 2,425,636 | | | | | | 1,538,127 | | |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
|
| | | | 1,944,502 | | | | | | 1,202,307 | | | | | | 3,128,093 | | | | | | 2,983,327 | | |
RESEARCH AND DEVELOPMENT EXPENSES
|
| | | | 128,895 | | | | | | 201,234 | | | | | | 263,817 | | | | | | 384,814 | | |
LOSS FROM OPERATIONS
|
| | | | (644,093) | | | | | | (1,018,646) | | | | | | (966,274) | | | | | | (1,830,014) | | |
INTEREST EXPENSE
|
| | | | (82,498) | | | | | | (24,623) | | | | | | (102,340) | | | | | | (46,107) | | |
OTHER INCOME
|
| | | | 5,138 | | | | | | 1,766 | | | | | | 5,175 | | | | | | 8,683 | | |
LOSS BEFORE INCOME TAXES
|
| | | | (721,453) | | | | | | (1,041,503) | | | | | | (1,063,439) | | | | | | (1,867,438) | | |
INCOME TAX EXPENSE (BENEFIT)
|
| | | | 823 | | | | | | — | | | | | | (19,524) | | | | | | (238,929) | | |
NET LOSS
|
| | | $ | (722,276) | | | | | $ | (1,041,503) | | | | | $ | (1,043,915) | | | | | $ | (1,628,509) | | |
LOSS PER COMMON SHARE | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic
|
| | | $ | (0.37) | | | | | $ | (0.53) | | | | | $ | (0.53) | | | | | $ | (0.82) | | |
Diluted
|
| | | $ | (0.37) | | | | | $ | (0.53) | | | | | $ | (0.53) | | | | | $ | (0.82) | | |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Basic
|
| | | | 1,977,959 | | | | | | 1,976,354 | | | | | | 1,977,368 | | | | | | 1,976,354 | | |
Diluted
|
| | | | 1,977,959 | | | | | | 1,976,354 | | | | | | 1,977,368 | | | | | | 1,976,354 | | |
| | |
Common Stock
|
| |
Additional
Paid-in Capital |
| |
Retained
Earnings |
| |
Total
Stock- holders’ Equity |
| ||||||||||||||||||
| | |
Shares
|
| |
Amount
|
| ||||||||||||||||||||||||
BALANCE AT MARCH 31, 2021
|
| | | | 1,977,104 | | | | | $ | 197,710 | | | | | $ | 2,787,733 | | | | | $ | 8,576,142 | | | | | $ | 11,561,585 | | |
Net loss
|
| | | | — | | | | | | — | | | | | | — | | | | | | (722,276) | | | | | | (722,276) | | |
Exercise of stock options
|
| | | | 2,250 | | | | | | 225 | | | | | | 21,074 | | | | | | — | | | | | | 21,299 | | |
Restricted stock vested
|
| | | | 1,340 | | | | | | 134 | | | | | | (134) | | | | | | — | | | | | | — | | |
Stock based compensation
|
| | | | — | | | | | | — | | | | | | 94,117 | | | | | | — | | | | | | 94,117 | | |
BALANCE AT JUNE 30, 2021
|
| | | | 1,980,694 | | | | | $ | 198,069 | | | | | $ | 2,902,790 | | | | | $ | 7,853,866 | | | | | $ | 10,954,725 | | |
| | |
Common Stock
|
| |
Additional
Paid-in Capital |
| |
Retained
Earnings |
| |
Total
Stock- holders’ Equity |
| ||||||||||||||||||
| | |
Shares
|
| |
Amount
|
| ||||||||||||||||||||||||
BALANCE AT MARCH 31, 2020
|
| | | | 1,976,354 | | | | | $ | 197,635 | | | | | $ | 2,725,650 | | | | | $ | 8,750,095 | | | | | $ | 11,673,380 | | |
Net loss
|
| | | | — | | | | | | — | | | | | | — | | | | | | (1,041,503) | | | | | | (1,041,503) | | |
Stock based compensation
|
| | | | — | | | | | | — | | | | | | 3,688 | | | | | | — | | | | | | 3,688 | | |
BALANCE AT JUNE 30, 2020
|
| | | | 1,976,354 | | | | | $ | 197,635 | | | | | $ | 2,729,338 | | | | | $ | 7,708,592 | | | | | $ | 10,635,565 | | |
| | |
Common Stock
|
| |
Additional
Paid-in Capital |
| |
Retained
Earnings |
| |
Total
Stock- holders’ Equity |
| ||||||||||||||||||
| | |
Shares
|
| |
Amount
|
| ||||||||||||||||||||||||
BALANCE AT DECEMBER 31,
2020 |
| | | | 1,976,354 | | | | | $ | 197,635 | | | | | $ | 2,743,930 | | | | | $ | 8,897,781 | | | | | $ | 11,839,346 | | |
Net loss
|
| | | | — | | | | | | — | | | | | | — | | | | | | (1,043,915) | | | | | | (1,043,915) | | |
Exercise of stock options
|
| | | | 3,000 | | | | | | 300 | | | | | | 27,390 | | | | | | — | | | | | | 27,690 | | |
Restricted stock vested
|
| | | | 1,340 | | | | | | 134 | | | | | | (134) | | | | | | — | | | | | | — | | |
Stock based compensation
|
| | | | — | | | | | | — | | | | | | 131,604 | | | | | | — | | | | | | 131,604 | | |
BALANCE AT JUNE 30, 2021
|
| | | | 1,980,694 | | | | | $ | 198,069 | | | | | $ | 2,902,790 | | | | | $ | 7,853,866 | | | | | $ | 10,954,725 | | |
| | |
Common Stock
|
| |
Additional
Paid-in Capital |
| |
Retained
Earnings |
| |
Total
Stock- holders’ Equity |
| ||||||||||||||||||
| | |
Shares
|
| |
Amount
|
| ||||||||||||||||||||||||
BALANCE AT DECEMBER 31,
2019 |
| | | | 1,976,354 | | | | | $ | 197,635 | | | | | $ | 2,721,962 | | | | | $ | 9,337,101 | | | | | $ | 12,256,698 | | |
Net loss
|
| | | | — | | | | | | — | | | | | | — | | | | | | (1,628,509) | | | | | | (1,628,509) | | |
Stock based compensation
|
| | | | — | | | | | | — | | | | | | 7,376 | | | | | | — | | | | | | 7,376 | | |
BALANCE AT JUNE 30, 2020
|
| | | | 1,976,354 | | | | | $ | 197,635 | | | | | $ | 2,729,338 | | | | | $ | 7,708,592 | | | | | $ | 10,635,565 | | |
| | |
Six Months Ended
June 30, |
| |||||||||
| | |
2021
|
| |
2020
|
| ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | | | | | | |
Net loss
|
| | | $ | (1,043,915) | | | | | $ | (1,628,509) | | |
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities: |
| | | | | | | | | | | | |
Depreciation
|
| | | | 315,385 | | | | | | 335,435 | | |
Amortization
|
| | | | 98,548 | | | | | | 18,452 | | |
Stock based compensation
|
| | | | 131,604 | | | | | | 7,376 | | |
Net gain on sale and disposal of equipment
|
| | | | — | | | | | | (2,324) | | |
Loss on intangible asset abandonment
|
| | | | — | | | | | | 16,906 | | |
Changes in working capital components:
|
| | | | | | | | | | | | |
Trade receivables
|
| | | | 468,178 | | | | | | 1,020,699 | | |
Inventories
|
| | | | 37,147 | | | | | | (501,404) | | |
Prepaid expenses and other assets
|
| | | | (36,817) | | | | | | 749,076 | | |
Income tax receivable
|
| | | | 189,039 | | | | | | (247,011) | | |
Accounts payable
|
| | | | 1,061,900 | | | | | | (446,417) | | |
Accrued expenses
|
| | | | 118,500 | | | | | | (511,614) | | |
Net cash provided by (used in) operating activities
|
| | | | 1,339,569 | | | | | | (1,189,335) | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | | | | | | |
Purchases of property equipment
|
| | | | (11,056) | | | | | | (149,916) | | |
Proceeds from sales of equipment
|
| | | | — | | | | | | 18,297 | | |
Purchases of intangible assets
|
| | | | (15,958) | | | | | | (12,483) | | |
Proceeds on sale of short-term investments
|
| | | | — | | | | | | 2,205,000 | | |
Net cash (used in) provided by investing activities
|
| | | | (27,014) | | | | | | 2,060,898 | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | | | | | | |
Proceeds from paycheck protection program loan
|
| | | | — | | | | | | 1,214,500 | | |
Payment on long-term debt
|
| | | | (2,773,235) | | | | | | (71,603) | | |
Proceeds from exercise of stock options
|
| | | | 27,690 | | | | | | — | | |
Net cash (used in) provided by financing activities
|
| | | | (2,745,545) | | | | | | 1,142,897 | | |
NET (DECREASE) INCREASE IN CASH
|
| | | | (1,432,990) | | | | | | 2,014,460 | | |
CASH AT BEGINNING OF PERIOD
|
| | | | 3,693,845 | | | | | | 963,649 | | |
CASH AT END OF PERIOD
|
| | | $ | 2,260,855 | | | | | $ | 2,978,109 | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | | | | | | | | | | | | | |
Cash paid for interest
|
| | | $ | 24,089 | | | | | $ | 37,998 | | |
Net cash received (paid for) income taxes, net
|
| | | $ | 208,562 | | | | | $ | (8,082) | | |
| | |
Jun 30, 2021
|
| |
Dec 31, 2020
|
| ||||||
Raw materials
|
| | | $ | 1,286,151 | | | | | $ | 1,323,655 | | |
Work-in-progress
|
| | | | 399,738 | | | | | | 428,753 | | |
Finished goods
|
| | | | 1,140,543 | | | | | | 1,065,458 | | |
Reduction to LIFO cost
|
| | | | (1,218,604) | | | | | | (1,172,891) | | |
Total Inventories
|
| | | $ | 1,607,828 | | | | | $ | 1,644,975 | | |
| | |
Three Months Ended
|
| |||||||||
| | |
Jun 30, 2021
|
| |
Jun 30, 2020
|
| ||||||
Weighted average common shares outstanding
|
| | | | 1,977,959 | | | | | | 1,976,354 | | |
Dilutive effect of stock options and restricted stock units
|
| | | | — | | | | | | — | | |
Weighted average common and common equivalent shares
outstanding |
| | | | 1,977,959 | | | | | | 1,976,354 | | |
| | |
Six Months Ended
|
| |||||||||
| | |
Jun 30, 2021
|
| |
Jun 30, 2020
|
| ||||||
Weighted average common shares outstanding
|
| | | | 1,977,368 | | | | | | 1,976,354 | | |
Dilutive effect of stock options and restricted stock units
|
| | | | — | | | | | | — | | |
Weighted average common and common equivalent shares
outstanding |
| | | | 1,977,368 | | | | | | 1,976,354 | | |
| | |
2021
|
| |
2020
|
| ||||||
Dividend yield
|
| | | | — | | | | | | — | | |
Expected volatility
|
| | | | 51.6% | | | | | | 40.3% | | |
Expected life of option (years)
|
| | | | 10 | | | | | | 10 | | |
Risk-free interest rate
|
| | | | 0.5% | | | | | | 1.4% | | |
Fair value of each option on grant date
|
| | | $ | 6.84 | | | | | $ | 2.90 | | |
| | |
Shares
|
| |
Weighted
Average Exercise Price |
| ||||||
Outstanding at January 1, 2021
|
| | | | 17,500 | | | | | $ | 6.97 | | |
Granted
|
| | | | 10,000 | | | | | | 11.50 | | |
Exercised
|
| | | | (3,000) | | | | | | 9.23 | | |
Expired and forfeited
|
| | | | (1,000) | | | | | | 10.75 | | |
Outstanding at June 30, 2021
|
| | | | 23,500 | | | | | $ | 8.45 | | |
Exercisable at June 30, 2021
|
| | | | 5,165 | | | | | $ | 6.54 | | |
| | |
Number of
Shares |
| |
Weighted
Average Grant Date Fair Value |
| ||||||
Unvested shares at January 1, 2021
|
| | | | 54,300 | | | | | $ | 6.11 | | |
Granted
|
| | | | 36,550 | | | | | | 11.01 | | |
Vested
|
| | | | (1,340) | | | | | | 11.30 | | |
Forfeited or surrendered
|
| | | | (2,400) | | | | | | 6.11 | | |
Unvested shares at June 30, 2021
|
| | | | 87,110 | | | | | | 8.09 | | |
| | |
IKONICS
|
| |||||||||||||||||||||||||||||||||
| | |
Chromaline
|
| |
IKONICS
Imaging |
| |
DTX
|
| |
AMS
|
| |
Unalloc.
|
| |
Total
|
| ||||||||||||||||||
Net sales
|
| | | $ | 2,653,733 | | | | | $ | 1,264,855 | | | | | $ | 85,444 | | | | | $ | 247,316 | | | | | $ | — | | | | | $ | 4,251,348 | | |
Cost of goods sold
|
| | | | 1,905,738 | | | | | | 644,071 | | | | | | 34,260 | | | | | | 237,975 | | | | | | — | | | | | | 2,822,044 | | |
Gross profit
|
| | | | 747,995 | | | | | | 620,784 | | | | | | 51,184 | | | | | | 9,341 | | | | | | — | | | | | | 1,429,304 | | |
Selling general and administrative*
|
| | | | 289,928 | | | | | | 259,219 | | | | | | 32,001 | | | | | | 58,869 | | | | | | 1,304,485 | | | | | | 1,944,502 | | |
Research and development*
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 128,895 | | | | | | 128,895 | | |
Income (loss) from operations
|
| | | $ | 458,067 | | | | | $ | 361,565 | | | | | $ | 19,183 | | | | | $ | (49,528) | | | | | $ | (1,433,380) | | | | | $ | (644,093) | | |
| | |
IKONICS
|
| |||||||||||||||||||||||||||||||||
| | |
Chromaline
|
| |
IKONICS
Imaging |
| |
DTX
|
| |
AMS
|
| |
Unalloc.
|
| |
Total
|
| ||||||||||||||||||
Net sales
|
| | | $ | 1,619,986 | | | | | $ | 625,800 | | | | | $ | 49,053 | | | | | $ | 277,600 | | | | | $ | — | | | | | $ | 2,572,439 | | |
Cost of goods sold
|
| | | | 1,407,362 | | | | | | 419,985 | | | | | | 24,346 | | | | | | 335,851 | | | | | | — | | | | | | 2,187,544 | | |
Gross profit (loss)
|
| | | | 212,624 | | | | | | 205,815 | | | | | | 24,707 | | | | | | (58,251) | | | | | | — | | | | | | 384,895 | | |
Selling general and administrative*
|
| | | | 366,136 | | | | | | 224,573 | | | | | | 30,059 | | | | | | 57,035 | | | | | | 524,504 | | | | | | 1,202,307 | | |
Research and development*
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 201,234 | | | | | | 201,234 | | |
Loss from operations
|
| | | $ | (153,512) | | | | | $ | (18,758) | | | | | $ | (5,352) | | | | | $ | (115,286) | | | | | $ | (725,738) | | | | | $ | (1,018,646) | | |
| | |
IKONICS
|
| |||||||||||||||||||||||||||||||||
| | |
Chromaline
|
| |
IKONICS
Imaging |
| |
DTX
|
| |
AMS
|
| |
Unalloc.
|
| |
Total
|
| ||||||||||||||||||
Net sales
|
| | | $ | 4,352,414 | | | | | $ | 2,351,456 | | | | | $ | 161,755 | | | | | $ | 459,131 | | | | | $ | — | | | | | $ | 7,324,756 | | |
Cost of goods sold
|
| | | | 3,140,523 | | | | | | 1,193,726 | | | | | | 77,052 | | | | | | 487,819 | | | | | | — | | | | | | 4,899,120 | | |
Gross profit (loss)
|
| | | | 1,211,891 | | | | | | 1,157,730 | | | | | | 84,703 | | | | | | (28,688) | | | | | | — | | | | | | 2,425,636 | | |
Selling general and administrative*
|
| | | | 547,930 | | | | | | 475,755 | | | | | | 62,040 | | | | | | 117,490 | | | | | | 1,924,878 | | | | | | 3,128,093 | | |
Research and development*
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 263,817 | | | | | | 263,817 | | |
Income (loss) from operations
|
| | | $ | 663,961 | | | | | $ | 681,975 | | | | | $ | 22,663 | | | | | $ | (146,178) | | | | | $ | (2,188,695) | | | | | $ | (966,274) | | |
| | |
IKONICS
|
| |||||||||||||||||||||||||||||||||
| | |
Chromaline
|
| |
IKONICS
Imaging |
| |
DTX
|
| |
AMS
|
| |
Unalloc.
|
| |
Total
|
| ||||||||||||||||||
Net sales
|
| | | $ | 3,584,326 | | | | | $ | 1,595,899 | | | | | $ | 161,582 | | | | | $ | 727,824 | | | | | $ | — | | | | | $ | 6,069,631 | | |
Cost of goods sold
|
| | | | 2,825,631 | | | | | | 897,708 | | | | | | 76,092 | | | | | | 732,073 | | | | | | — | | | | | | 4,531,504 | | |
Gross profit (loss)
|
| | | | 758,695 | | | | | | 698,191 | | | | | | 85,490 | | | | | | (4,249) | | | | | | — | | | | | | 1,538,127 | | |
Selling general and administrative*
|
| | | | 792,355 | | | | | | 503,435 | | | | | | 64,432 | | | | | | 160,144 | | | | | | 1,462,961 | | | | | | 2,983,327 | | |
Research and development*
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 384,814 | | | | | | 384,814 | | |
Income (loss) from operations
|
| | | $ | (33,660) | | | | | $ | 194,756 | | | | | $ | 21,058 | | | | | $ | (164,393) | | | | | $ | (1,847,775) | | | | | $ | (1,830,014) | | |
| | |
Jun 30, 2021
|
| |
Dec 31, 2020
|
| ||||||
Chromaline
|
| | | $ | 1,150,630 | | | | | $ | 1,676,592 | | |
IKONICS Imaging
|
| | | | 356,216 | | | | | | 396,116 | | |
DTX
|
| | | | 26,759 | | | | | | 35,983 | | |
AMS
|
| | | | 155,409 | | | | | | 57,676 | | |
Unallocated
|
| | | | (37,979) | | | | | | (47,154) | | |
Total
|
| | | $ | 1,651,035 | | | | | $ | 2,119,213 | | |
| | |
December 31,
2020 |
| |
December 31,
2019 |
| ||||||
ASSETS | | | | | | | | | | | | | |
CURRENT ASSETS: | | | | | | | | | | | | | |
Cash and cash equivalents
|
| | | $ | 3,693,845 | | | | | $ | 963,649 | | |
Short-term investments
|
| | | | — | | | | | | 2,205,000 | | |
Trade receivables, less allowance of $55,000 in 2020 and $58,000 in 2019
|
| | | | 2,119,213 | | | | | | 2,434,718 | | |
Inventories, net
|
| | | | 1,644,975 | | | | | | 2,180,536 | | |
Prepaid expenses and other assets
|
| | | | 125,969 | | | | | | 906,916 | | |
Income taxes receivable
|
| | | | 219,451 | | | | | | 1,369 | | |
Total current assets
|
| | | | 7,803,453 | | | | | | 8,692,188 | | |
PROPERTY, PLANT, AND EQUIPMENT, at cost: | | | | | | | | | | | | | |
Land and building
|
| | | | 9,556,586 | | | | | | 9,556,984 | | |
Machinery and equipment
|
| | | | 5,263,586 | | | | | | 5,198,784 | | |
Office equipment
|
| | | | 1,417,219 | | | | | | 1,402,369 | | |
Vehicles
|
| | | | 245,674 | | | | | | 245,674 | | |
| | | | | 16,483,065 | | | | | | 16,403,811 | | |
Less accumulated depreciation
|
| | | | (9,094,702) | | | | | | (8,487,827) | | |
Total property, plant and equipment at cost, net
|
| | | | 7,388,363 | | | | | | 7,915,984 | | |
PATENTS, less accumulated amortization of $207,399 in 2020 and $181,609 in 2019
|
| | | | 243,583 | | | | | | 271,369 | | |
Total assets
|
| | | $ | 15,435,399 | | | | | $ | 16,879,541 | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | |
CURRENT LIABILITIES | | | | | | | | | | | | | |
Current portion of long-term debt
|
| | | $ | 2,688,396 | | | | | $ | 133,287 | | |
Accounts payable
|
| | | | 459,836 | | | | | | 761,641 | | |
Accrued compensation
|
| | | | 279,755 | | | | | | 382,303 | | |
Other accrued liabilities
|
| | | | 168,066 | | | | | | 657,255 | | |
Total current liabilities
|
| | | | 3,596,053 | | | | | | 1,934,486 | | |
LONG-TERM LIABILITIES | | | | | | | | | | | | | |
Long-term debt, less current portion
|
| | | | — | | | | | | 2,688,357 | | |
Total liabilities
|
| | | | 3,596,053 | | | | | | 4,622,843 | | |
COMMITMENTS AND CONTINGENCIES | | | | | | | | | | | | | |
STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | |
Preferred stock, par value $.10 per share; authorized 250,000 shares; issued none
|
| | | | — | | | | | | — | | |
Common stock, par value $.10 per share; authorized 4,750,000 shares; issued and outstanding 1,976,354 shares in 2020 and 2019
|
| | | | 197,635 | | | | | | 197,635 | | |
Additional paid-in-capital
|
| | | | 2,743,930 | | | | | | 2,721,962 | | |
Retained earnings
|
| | | | 8,897,781 | | | | | | 9,337,101 | | |
Total stockholders’ equity
|
| | | | 11,839,346 | | | | | | 12,256,698 | | |
Total liabilities and stockholders’ equity
|
| | | $ | 15,435,399 | | | | | $ | 16,879,541 | | |
| | |
Year Ended
December 31, |
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
NET SALES
|
| | | $ | 13,432,220 | | | | | $ | 17,618,559 | | |
COST OF GOODS SOLD
|
| | | | 9,527,143 | | | | | | 12,221,370 | | |
GROSS PROFIT
|
| | | | 3,905,077 | | | | | | 5,397,189 | | |
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
|
| | | | 5,019,604 | | | | | | 5,483,586 | | |
RESEARCH AND DEVELOPMENT EXPENSES
|
| | | | 671,493 | | | | | | 870,279 | | |
LOSS FROM OPERATIONS
|
| | | | (1,786,020) | | | | | | (956,676) | | |
INTEREST EXPENSE
|
| | | | (86,561) | | | | | | (90,058) | | |
OTHER INCOME
|
| | | | 1,223,261 | | | | | | 61,176 | | |
LOSS BEFORE INCOME TAXES
|
| | | | (649,320) | | | | | | (985,558) | | |
INCOME TAX BENEFIT
|
| | | | (210,000) | | | | | | (172,000) | | |
NET LOSS
|
| | | $ | (439,320) | | | | | $ | (813,558) | | |
LOSS PER COMMON SHARE | | | | | | | | | | | | | |
Basic
|
| | | $ | (0.22) | | | | | $ | (0.41) | | |
Diluted
|
| | | $ | (0.22) | | | | | $ | (0.41) | | |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | | | | | | | | | | | | | |
Basic
|
| | | | 1,976,354 | | | | | | 1,980,253 | | |
Diluted
|
| | | | 1,976,354 | | | | | | 1,980,253 | | |
| | |
Common Stock
|
| |
Additional
Paid-in Capital |
| |
Retained
Earnings |
| |
Total
Stock- holders’ Equity |
| ||||||||||||||||||
|
Shares
|
| |
Amount
|
| ||||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2018
|
| | | | 1,983,553 | | | | | $ | 198,355 | | | | | $ | 2,723,024 | | | | | $ | 10,189,651 | | | | | $ | 13,111,030 | | |
Net loss
|
| | | | — | | | | | | — | | | | | | — | | | | | | (813,558) | | | | | | (813,558) | | |
Common stock repurchased
|
| | | | (7,199) | | | | | | (720) | | | | | | (9,883) | | | | | | (38,992) | | | | | | (49,595) | | |
Stock based compensation
|
| | | | — | | | | | | — | | | | | | 8,821 | | | | | | — | | | | | | 8,821 | | |
BALANCE AT DECEMBER 31, 2019
|
| | | | 1,976,354 | | | | | | 197,635 | | | | | | 2,721,962 | | | | | | 9,337,101 | | | | | | 12,256,698 | | |
Net loss
|
| | | | — | | | | | | — | | | | | | — | | | | | | (439,320) | | | | | | (439,320) | | |
Stock based compensation
|
| | | | — | | | | | | — | | | | | | 21,968 | | | | | | — | | | | | | 21,968 | | |
BALANCE AT DECEMBER 31, 2020
|
| | | | 1,976,354 | | | | | $ | 197,635 | | | | | $ | 2,743,930 | | | | | $ | 8,897,781 | | | | | $ | 11,839,346 | | |
| | |
Year Ended
December 31, |
| |||||||||
| | |
2020
|
| |
2019
|
| ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | | | | | | |
Net loss
|
| | | $ | (439,320) | | | | | $ | (813,558) | | |
Adjustments to reconcile net loss to net cash used in operating activities:
|
| | | | | | | | | | | | |
Depreciation
|
| | | | 661,565 | | | | | | 639,997 | | |
Amortization
|
| | | | 36,489 | | | | | | 43,014 | | |
Stock based compensation
|
| | | | 21,968 | | | | | | 8,821 | | |
Forgiveness on paycheck protection loan
|
| | | | (1,214,500) | | | | | | — | | |
Net gain on sale and disposal of equipment
|
| | | | (2,325) | | | | | | (8,482) | | |
Deferred income taxes
|
| | | | — | | | | | | (183,000) | | |
Abandonment of patents
|
| | | | 16,906 | | | | | | 92,833 | | |
Changes in operating assets and liabilities:
|
| | | | | | | | | | | | |
Trade receivables
|
| | | | 315,505 | | | | | | (219,503) | | |
Inventories
|
| | | | 535,561 | | | | | | (133,948) | | |
Prepaid expenses and other assets
|
| | | | 780,947 | | | | | | (531,554) | | |
Income tax receivable
|
| | | | (218,082) | | | | | | 1,399 | | |
Accounts payable
|
| | | | (301,805) | | | | | | 114,113 | | |
Accrued expenses
|
| | | | (591,737) | | | | | | 512,837 | | |
Net cash used in operating activities
|
| | | | (398,828) | | | | | | (477,031) | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | | | | | | |
Purchases of property and equipment
|
| | | | (149,916) | | | | | | (478,353) | | |
Proceeds from sales of equipment
|
| | | | 18,297 | | | | | | 15,596 | | |
Purchases of patents
|
| | | | (14,910) | | | | | | (19,665) | | |
Purchases of short-term investments
|
| | | | — | | | | | | (5,635,000) | | |
Proceeds on sale of short-term investments
|
| | | | 2,205,000 | | | | | | 6,125,000 | | |
Net cash provided by investing activities
|
| | | | 2,058,471 | | | | | | 7,578 | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | | | | | | |
Proceeds from paycheck protection program loan
|
| | | | 1,214,500 | | | | | | — | | |
Principal payments on long-term debt
|
| | | | (143,947) | | | | | | (140,440) | | |
Repurchase of common stock
|
| | | | — | | | | | | (49,595) | | |
Net cash provided by (used in) financing activities
|
| | | | 1,070,553 | | | | | | (190,035) | | |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
| | | | 2,730,196 | | | | | | (659,488) | | |
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
|
| | | | 963,649 | | | | | | 1,623,137 | | |
CASH AND CASH EQUIVALENTS AT END OF YEAR
|
| | | $ | 3,693,845 | | | | | $ | 963,649 | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | | | | | | | | | | | | | |
Cash paid for interest
|
| | | $ | 75,227 | | | | | $ | 79,008 | | |
Cash paid for income taxes, net
|
| | | $ | 8,082 | | | | | $ | 9,457 | | |
| | |
Dec 31, 2020
|
| |
Dec 31, 2019
|
| ||||||
Raw materials
|
| | | $ | 1,323,655 | | | | | $ | 1,667,154 | | |
Work-in-progress
|
| | | | 428,753 | | | | | | 419,906 | | |
Finished goods
|
| | | | 1,065,458 | | | | | | 1,449,854 | | |
Reduction to LIFO cost
|
| | | | (1,172,891) | | | | | | (1,356,378) | | |
Total Inventories
|
| | | $ | 1,644,975 | | | | | $ | 2,180,536 | | |
| | |
Years
|
|
Buildings
|
| |
15 – 40
|
|
Machinery and equipment
|
| |
5 – 10
|
|
Office equipment
|
| |
3 – 10
|
|
Vehicles
|
| |
3
|
|
| | |
Dec 31, 2020
|
| |
Dec 31, 2019
|
| ||||||
Weighted average common shares outstanding
|
| | | | 1,976,354 | | | | | | 1,980,253 | | |
Dilutive effect of stock options and restricted stock units
|
| | | | — | | | | | | — | | |
Weighted average common and common equivalent shares outstanding
|
| | | | 1,976,354 | | | | | | 1,980,253 | | |
| | |
2020
|
| |
2019
|
| ||||||
Current: | | | | | | | | | | | | | |
Federal
|
| | | $ | (216,000) | | | | | $ | — | | |
State
|
| | | | 6,000 | | | | | | 11,000 | | |
| | | | | (210,000) | | | | | | 11,000 | | |
Deferred — Federal
|
| | | | — | | | | | | (183,000) | | |
| | | | $ | (210,000) | | | | | $ | (172,000) | | |
| | |
2020
|
| |
2019
|
| ||||||
Expected provision for federal income taxes
|
| | | $ | (136,000) | | | | | $ | (207,000) | | |
State income taxes, net of federal benefit
|
| | | | (24,000) | | | | | | (7,000) | | |
Permanent items
|
| | | | (249,000) | | | | | | 11,000 | | |
Research and development credit
|
| | | | (23,000) | | | | | | (29,000) | | |
Change in valuation allowance
|
| | | | 440,000 | | | | | | 51,000 | | |
Change in tax law allowing NOL carryback claim
|
| | | | (217,000) | | | | | | — | | |
Prior year true-ups and other
|
| | | | (1,000) | | | | | | 9,000 | | |
| | | | $ | (210,000) | | | | | $ | (172,000) | | |
| | |
2020
|
| |
2019
|
| ||||||
Deferred tax liabilities: | | | | | | | | | | | | | |
Accrued vacation
|
| | | $ | 33,000 | | | | | $ | 21,000 | | |
Inventories reserve
|
| | | | 17,000 | | | | | | 42,000 | | |
Allowance for doubtful accounts
|
| | | | 2,000 | | | | | | 3,000 | | |
Allowance for sales returns
|
| | | | 10,000 | | | | | | 10,000 | | |
Research and development credit carryforward
|
| | | | 285,000 | | | | | | 245,000 | | |
Accrued self-insured medical
|
| | | | — | | | | | | 3,000 | | |
Property and equipment
|
| | | | (257,000) | | | | | | (295,000) | | |
Patents
|
| | | | (50,000) | | | | | | (53,000) | | |
Net operating loss
|
| | | | 411,000 | | | | | | 230,000 | | |
Other
|
| | | | 17,000 | | | | | | 8,000 | | |
Valuation allowance
|
| | | | (468,000) | | | | | | (214,000) | | |
Net deferred tax liabilities
|
| | | $ | — | | | | | $ | — | | |
| | |
December 31, 2020
|
| |
December 31, 2019
|
| ||||||||||||||||||
|
Gross
Carrying Amount |
| |
Accumulated
Amortization |
| |
Gross
Carrying Amount |
| |
Accumulated
Amortization |
| ||||||||||||||
Amortized intangible assets: | | | | | | | | | | | | | | | | | | | | | | | | | |
Patents
|
| | | $ | 450,982 | | | | | $ | (207,399) | | | | | $ | 452,978 | | | | | $ | (181,609) | | |
| | |
2020
|
| |
2019
|
| ||||||
Aggregate amortization expense:
|
| | | | | | | | | | | | |
For the years ended December 31
|
| | | $ | 25,790 | | | | | $ | 31,869 | | |
|
2021
|
| | | $ | 25,000 | | |
|
2022
|
| | | | 25,000 | | |
|
2023
|
| | | | 25,000 | | |
|
2024
|
| | | | 24,000 | | |
|
2025
|
| | | | 24,000 | | |
|
Thereafter
|
| | | | 67,000 | | |
| | |
Chromaline
|
| |
IKONICS
Imaging |
| |
DTX
|
| |
AMS
|
| |
Unalloc.
|
| |
Total
|
| ||||||||||||||||||
Net sales
|
| | | $ | 8,475,743 | | | | | $ | 3,709,318 | | | | | $ | 294,929 | | | | | $ | 952,230 | | | | | $ | — | | | | | $ | 13,432,220 | | |
Cost of goods sold
|
| | | | 6,222,902 | | | | | | 1,972,076 | | | | | | 140,866 | | | | | | 1,191,299 | | | | | | — | | | | | | 9,527,143 | | |
Gross profit (loss)
|
| | | | 2,252,841 | | | | | | 1,737,242 | | | | | | 154,063 | | | | | | (239,069) | | | | | | — | | | | | | 3,905,077 | | |
Selling, general, and administrative*
|
| | | | 1,297,045 | | | | | | 880,404 | | | | | | 125,752 | | | | | | 275,147 | | | | | | 2,441,256 | | | | | | 5,019,604 | | |
Research and development*
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 671,493 | | | | | | 671,493 | | |
Income (loss) from operations
|
| | | $ | 955,796 | | | | | $ | 856,838 | | | | | $ | 28,311 | | | | | $ | (514,216) | | | | | $ | (3,112,749) | | | | | $ | (1,786,020) | | |
| | |
Chromaline
|
| |
IKONICS
Imaging |
| |
DTX
|
| |
AMS
|
| |
Unalloc.
|
| |
Total
|
| ||||||||||||||||||
Net sales
|
| | | $ | 11,472,111 | | | | | $ | 4,191,175 | | | | | $ | 393,804 | | | | | $ | 1,561,469 | | | | | $ | — | | | | | $ | 17,618,559 | | |
Cost of goods sold
|
| | | | 8,389,404 | | | | | | 2,273,641 | | | | | | 157,650 | | | | | | 1,400,675 | | | | | | — | | | | | | 12,221,370 | | |
Gross profit
|
| | | | 3,082,707 | | | | | | 1,917,534 | | | | | | 236,154 | | | | | | 160,794 | | | | | | — | | | | | | 5,397,189 | | |
Selling, general, and administrative*
|
| | | | 1,832,473 | | | | | | 1,081,847 | | | | | | 149,924 | | | | | | 361,342 | | | | | | 2,058,000 | | | | | | 5,483,586 | | |
Research and development*
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 870,279 | | | | | | 870,279 | | |
Income (loss) from operations
|
| | | $ | 1,250,234 | | | | | $ | 835,687 | | | | | $ | 86,230 | | | | | $ | (200,548) | | | | | $ | (2,928,279) | | | | | $ | (956,676) | | |
| | |
Dec 31, 2020
|
| |
Dec 31, 2019
|
| ||||||
Chromaline
|
| | | $ | 1,676,592 | | | | | $ | 1,916,066 | | |
IKONICS Imaging
|
| | | | 396,116 | | | | | | 304,791 | | |
DTX
|
| | | | 35,983 | | | | | | 13,919 | | |
AMS
|
| | | | 57,676 | | | | | | 252,363 | | |
Unallocated
|
| | | | (47,154) | | | | | | (52,421) | | |
Total
|
| | | $ | 2,119,213 | | | | | $ | 2,434,718 | | |
| | |
2020
|
| |
2019
|
|
Dividend yield
|
| |
0
|
| |
0
|
|
Expected volatility
|
| |
40.3%
|
| |
37.5%
|
|
Expected life of option (years)
|
| |
10
|
| |
5
|
|
Risk-free interest rate
|
| |
1.4%
|
| |
1.7%
|
|
Fair value of each option on grant date
|
| |
$2.90
|
| |
$2.53
|
|
| | |
Shares
|
| |
Weighted
Average Exercise Price |
| ||||||
Outstanding at January 1, 2020
|
| | | | 19,250 | | | | | $ | 11.32 | | |
Granted
|
| | | | 10,000 | | | | | | 5.67 | | |
Exercised
|
| | | | — | | | | | | — | | |
Expired and forfeited
|
| | | | (11,750) | | | | | | 12.99 | | |
Outstanding at December 31, 2020
|
| | | | 17,500 | | | | | $ | 6.97 | | |
Exercisable at December 31, 2020
|
| | | | 5,332 | | | | | $ | 9.19 | | |
| | |
Number of
Shares |
| |
Weighted
Average Grant Date Fair Value |
| ||||||
Unvested shares at January 1, 2020
|
| | | | — | | | | | | — | | |
Granted
|
| | | | 54,300 | | | | | $ | 6.11 | | |
Vested
|
| | | | — | | | | | | — | | |
Forfeited or surrendered
|
| | | | — | | | | | | — | | |
Unvested shares at December 31, 2020
|
| | | | 54,300 | | | | | | 6.11 | | |
|
2021
|
| | | | 2,773,000 | | |
|
Less: Unamortized debt issuance costs
|
| | | | 85,000 | | |
|
Less: Current portion
|
| | | | 2,688,000 | | |
|
Long-term portion
|
| | | $ | — | | |
| | |
Page
|
| |||
Unaudited Interim Financial Statements as of June 30, 2021 and for the period from inception (April 14, 2021) to June 30, 2021:
|
| | | | | | |
| | | | H-66 | | | |
| | | | H-67 | | | |
| | | | H-68 | | | |
| | | | H-69 | | | |
| | | | H-70 | | |
| ASSETS | | | | | | | |
| Current Assets | | | | | | | |
|
Cash and cash equivalents
|
| | | $ | 878 | | |
|
Accounts receivable
|
| | | | 199 | | |
|
Total Current Assets
|
| | | | 1,077 | | |
| Property, Plant and Equipment | | | | | | | |
|
Property, plant and equipment
|
| | | | 4 | | |
|
Less accumulated depreciation
|
| | | | — | | |
|
Property, Plant and Equipment, net
|
| | | | 4 | | |
|
Total Assets
|
| | | $ | 1,081 | | |
| LIABILITIES & STOCKHOLDER’S DEFICIT | | | | | | | |
| Current Liabilities | | | | | | | |
|
Accounts payable
|
| | | $ | 5 | | |
|
Accrued liabilities
|
| | | | 268 | | |
|
Deferred revenue
|
| | | | 1,350 | | |
|
Total Current Liabilities
|
| | | | 1,623 | | |
| Stockholder’s Deficit | | | | | | | |
|
Common stock $0.01 par value, 100 authorized and issued
|
| | | | — | | |
|
Receivable from affiliates, net
|
| | | | (586) | | |
|
Retained earnings
|
| | | | 44 | | |
|
Total Stockholder’s Deficit
|
| | | | (542) | | |
|
Total Liabilities & Stockholder’s Deficit
|
| | | $ | 1,081 | | |
|
Revenue
|
| | |
$
|
1,867
|
| |
| Cost of Operations | | | | | | | |
|
Operating expenses
|
| | | | 775 | | |
|
Selling, general and administrative
|
| | | | 1,048 | | |
|
Total Cost of Operations
|
| | | | 1,823 | | |
|
OPERATING INCOME
|
| | | | 44 | | |
|
Income from Operations Before Income Taxes
|
| | | | 44 | | |
|
Income Tax (Provision) Benefit
|
| | | | — | | |
|
Net Income
|
| | | $ | 44 | | |
| | |
Common Stock
|
| |
Receivable
from Affiliates, net |
| |
Retained
Earnings |
| | | | | | | |||||||||||||||
| | |
Number
|
| |
Amount
|
| |
Total
|
| |||||||||||||||||||||
Balances as of April 14, 2021
|
| | | | 100 | | | | | $ | — | | | | | $ | — | | | | | $ | — | | | | | $ | — | | |
Receivable from affiliates, net
|
| | | | — | | | | | | — | | | | | | (586) | | | | | | — | | | | | | (586) | | |
Net income
|
| | | | — | | | | | | — | | | | | | — | | | | | | 44 | | | | | | 44 | | |
Balances as of June 30, 2021
|
| | | | 100 | | | | | $ | — | | | | | $ | (586) | | | | | $ | 44 | | | | | $ | (542) | | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |||||
|
Net Income
|
| | | $ | 44 | | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | |
|
Increase in accounts receivable
|
| | | | (199) | | |
|
Increase in accounts payable
|
| | | | 5 | | |
|
Increase in accrued liabilities
|
| | | | 268 | | |
|
Increase in deferred revenue
|
| | | | 1,350 | | |
|
Net cash provided by operating activities
|
| | | | 1,468 | | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | |
|
Purchases of plant and equipment
|
| | | | (4) | | |
|
Net cash used in investing activities
|
| | | | (4) | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | |
|
Receivable from affiliates, net
|
| | | | (586) | | |
|
Net cash used in financing activities
|
| | | | (586) | | |
|
Net Increase in Cash and Cash Equivalents
|
| | | | 878 | | |
|
Cash and Cash Equivalents At Beginning of Period
|
| | | | — | | |
|
Cash and Cash Equivalents At End of Period
|
| | | $ | 878 | | |
| | |
April 14 to
June 30, 2021 |
| |||
Bitcoin mining services
|
| | | $ | 1,715 | | |
Energy infrastructure services
|
| | | | 152 | | |
Total revenue
|
| | | $ | 1,867 | | |
| | |
Page
|
| |||
CONDENSED FINANCIAL STATEMENTS (unaudited) | | | | | | | |
| | | | H-78 | | | |
| | | | H-79 | | | |
| | | | H-80 | | | |
| | | | H-81 | | | |
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (unaudited) | | | | | | | |
| | | | H-82 | | | |
| | | | H-82 | | | |
| | | | H-84 | | | |
| | | | H-84 | | | |
| | | | H-85 | | | |
| | | | H-86 | | | |
| | | | H-87 | | | |
| | | | H-88 | | |
| | |
Three Months Ended
|
| |||
| | |
June 30, 2021
|
| |||
Revenues | | | | $ | — | | |
Expenses | | | | | | | |
Development | | | |
|
(281)
|
| |
Net Income (Loss)
|
| | | $ | (281) | | |
| | |
June 30,
2021 |
| |||
Assets | | | | | | | |
Property, plant and equipment
|
| | |
$
|
83,197
|
| |
Intangible assets
|
| | |
|
29,270
|
| |
Total Assets
|
| | | $ | 112,467 | | |
Liabilities and Equity | | | | | | | |
Accounts payable and accrued liabilities
|
| | |
$
|
498
|
| |
Total current liabilities
|
| | | | 498 | | |
Members’ Equity
|
| | | | 111,969 | | |
Total Liabilities and Equity
|
| | | $ | 112,467 | | |
| | |
Three Months Ended
|
| |||
| | |
June 30, 2021
|
| |||
Operating Activities | | | | | | | |
Net income (loss)
|
| | |
$
|
(281)
|
| |
Change in assets and liabilities: | | | | | | | |
Accounts payable and accrued liabilities
|
| | |
|
281
|
| |
Net cash provided by (used in) operating activities
|
| | | | — | | |
Investing Activities | | | | | | | |
Expenditures for property, plant and equipment
|
| | |
|
(82,980)
|
| |
Net cash provided by (used in) investing activities
|
| | | | (82,980) | | |
Financing Activities | | | | | | | |
Contributions from members
|
| | |
|
82,980
|
| |
Net cash provided by (used in) financing activities
|
| | | | 82,980 | | |
Net Increase (Decrease) in Cash and Cash Equivalents | | | | | — | | |
Cash and cash equivalents at beginning of period
|
| | |
|
—
|
| |
Cash and cash equivalents at end of period
|
| | |
$
|
—
|
| |
Supplemental Information: | | | | | | | |
Increase (decrease) in capital expenditure accruals
|
| | |
$
|
217
|
| |
Non-cash intangible asset and capital contribution related to ground lease and electricity
sub-metering arrangement |
| | |
|
29,270
|
| |
| | |
TeraWulf
(Thales) LLC(a) |
| |
Cumulus
Coin LLC(a) |
| |
Total Members’
Equity |
| |||||||||
Opening Balance, April 1, 2021
|
| | | $ | — | | | | | $ | — | | | | | $ | — | | |
Net income (loss)
|
| | |
|
(140)
|
| | | |
|
(141)
|
| | | |
|
(281)
|
| |
Non-cash contributions from members(b)(c)
|
| | |
|
—
|
| | | |
|
29,270
|
| | | |
|
29,270
|
| |
Cash contributions from members
|
| | |
|
41,490
|
| | | |
|
41,490
|
| | | |
|
82,980
|
| |
June 30, 2021
|
| | | $ | 41,350 | | | | | $ | 70,619 | | | | | $ | 111,969 | | |
| | |
June 30, 2021
|
| |||
Construction work in progress
|
| | | $ | 83,197 | | |
| | |
June 30, 2021
|
| |||
Electricity sub-metering arrangement
|
| | | $ | 29,270 | | |
|
Exhibit
|
| |
Description of Exhibit
|
|
| 10.4‡ | | | | |
| 10.5‡ | | | | |
| 10.6‡ | | | | |
| 10.7‡ | | | | |
| 10.8‡ | | | | |
| 10.9‡ | | | | |
| 10.10 | | | | |
| 23.1 | | | | |
| 23.2 | | | | |
| 23.3 | | | Consent of Faegre Drinker Biddle & Reath LLP (included in Exhibit 5.1 and Exhibit 8.1) | |
| 99.1‡ | | | | |
| 99.2† | | | Form of Proxy Card for Special Meeting of IKONICS Corporation | |
| 99.3† | | | Consents of Persons About to Become a Director | |
| 101‡ | | | Financial statements for the period ended June 30, 2021 filed with the SEC on August 12, 2021 formatted in Inline Extensible Business Reporting Language (iXBRL); (i) Condensed Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020, (ii) Condensed Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020 (unaudited), (iii) Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2021 and 2020 (unaudited), (iv) Condensed Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020 (unaudited), and (v) Notes to Condensed Financial Statements (unaudited) | |
| | | |
TELLURIDE HOLDCO, INC.
|
| |||
| | | | By: | | |
/s/ Glenn Sandgren
Glenn Sandgren
Chief Executive Officer |
|
|
Signature
|
| |
Title
|
|
|
/s/ Glenn Sandgren
Glenn Sandgren
|
| |
Chief Executive Officer, Director
(principal executive officer) |
|
|
/s/ Jon Gerlach
Jon Gerlach
|
| |
Chief Financial Officer, Director
(principal financial and accounting officer) |
|
Exhibit 5.1
Faegre Drinker Biddle & Reath LLP
2200 Wells Fargo Center
+1 612 766 7000 main +1 612 766 1600 fax |
November 3, 2021
Telluride Holdco, Inc.
9 Federal Street
Easton, Maryland, 21601
Ladies and Gentlemen:
We have acted as counsel to IKONICS Corporation, a Minnesota corporation (“Parent”), in connection with the preparation and filing of the Registration Statement on Form S-4 (File No. 333-258335), filed by Telluride Holdco, Inc. (“Holdco”) with the United States Securities and Exchange Commission on July 30, 2021, as amended on August 2, 2021, August 11, 2021, and the date hereof (the “Registration Statement”), under the Securities Act of 1933, as amended (the “Securities Act”), relating to, among other things, the registration of up to 104,550,200 shares (the “Shares”) of Holdco’s common stock, par value $0.001 per share (“Common Stock”), as described in the Registration Statement. The Shares are issuable pursuant to the Agreement and Plan of Merger, dated as of June 24, 2021, as amended by the Amendment to Agreement and Plan of Merger, dated August 5, 2021, and the Amendment No. 2 to Agreement and Plan of Merger, dated September 17, 2021 (as amended, the “Merger Agreement”), by and among Parent, Holdco, Telluride Merger Sub I, Inc. (“Merger Sub I”), Telluride Merger Sub II, Inc. (“Merger Sub II”), and TeraWulf Inc. (the “Company”), pursuant to which, among other things, Merger Sub I will merge with and into Parent, with Parent surviving such merger as a wholly-owned subsidiary of Holdco, and, immediately following the effective time of such merger, Merger Sub II will merge with and into the Company, with the Company surviving such merger as a wholly-owned subsidiary of Holdco (collectively, the “Mergers”).
This opinion letter is being delivered in accordance with the requirements of Item 601(b)(5) of Regulation S-K.
For purposes of this opinion letter, we have examined:
(a) the Registration Statement;
(b) the Merger Agreement;
(c) the Certificate of Incorporation of Holdco in effect as of the date hereof (the “Current Certificate of Incorporation”);
(d) the form of Amended and Restated Certificate of Incorporation of Holdco, included as Appendix F to the proxy statement/prospectus that forms a part of the Registration Statement (the “Amended and Restated Certificate of Incorporation”), which, subject to approval by the stockholders of HoldCo and filing with the Secretary of State of the State of Delaware, will (i) amend and restate the Current Certificate of Incorporation and (ii) become effective prior to the issuance of any Shares;
(e) the Bylaws of Holdco in effect as of the date hereof (the “Current Bylaws”);
IKONICS Corporation
November 3, 2021
Page 2
(f) the form of Amended and Restated Bylaws of Holdco included as Appendix G to the proxy statement/prospectus that forms a part of the Registration Statement (the “Amended and Restated Bylaws”), which, subject to approval by the board of directors of HoldCo or by the stockholders of HoldCo, will (i) amend and restate the Current Bylaws and (ii) become effective prior to the issuance of any Shares; and
(g) the proceedings taken by Holdco relating to the issuance of the Shares and related matters.
We also have examined originals, or copies certified or otherwise authenticated to our satisfaction, of such other corporate records and other records, agreements, documents, certificates and instruments, and have made such examination of statutes and decisions and reviewed such questions of law, as we have considered necessary or appropriate as a basis for the opinions hereinafter set forth. As to questions of fact material to this opinion, we have relied upon certificates or comparable documents of public officials and of officers and representatives of Holdco, without any independent verification thereof or other investigation.
In rendering the opinions set forth below, we have assumed, without investigation: (a) the genuineness of signatures, including electronic signatures, appearing upon agreements, instruments, certifications, documents, and proceedings, (b) that each document submitted to us for review is accurate and complete, each such document that is an original is authentic and each such document that is a copy conforms to an authentic original, (c) the legal capacity of natural persons to enter into and perform the referenced instrument or agreement or to carry out their role in the transactions contemplated thereby, (d) the truth, accuracy and completeness of the information, representations and warranties contained in the agreements, documents, instruments, certificates and records we have reviewed, and (e) the absence of any undisclosed modifications to the agreements and instruments reviewed by us. In making our examination of executed documents, we have assumed that each of the parties thereto, other than HoldCo, had the requisite power and authority to enter into and perform its obligations thereunder, each such party duly authorized, executed and delivered such documents, and such documents are valid and binding obligations of such parties, enforceable against such parties in accordance with their respective terms.
In rendering the opinions set forth below, we have also assumed that (i) if issued in physical form, the certificates evidencing the Shares will be executed by authorized officers of Holdco, registered by the transfer agent and registrar of Holdco, and will conform to the specimen certificate, if any, established to evidence the Common Stock or, if issued in book-entry form, an appropriate account statement evidencing the Shares credited to the recipient’s account maintained with said transfer agent and registrar will be issued by the transfer agent and registrar and (ii) the issuance of the Shares will be properly recorded in the books and records of HoldCo.
Based upon the foregoing, and subject to the qualifications, assumptions and limitations stated herein, we are of the opinion that all necessary corporate action on the part of or on the behalf of Holdco has been taken to authorize the issuance of the Shares and when (i) the Registration Statement becomes effective under the Securities Act, (ii) the stockholders of each of Parent and the Company approve the Merger Agreement, (iii) the Mergers are consummated in accordance with the Merger Agreement, (iv) the Amended and Restated Certificate of Incorporation has been filed with the Secretary of State of the State of Delaware and becomes effective, (v) the Amended and Restated Bylaws become effective, and (vi) the Shares are issued and delivered in accordance with the terms and conditions of the Merger Agreement and in the manner specified in the Registration Statement, the Shares will be validly issued, fully paid and nonassessable.
The foregoing opinion also assumes that (a) Holdco will remain duly organized, validly existing and in good standing under the laws of the State of Delaware, (b) at the time the Shares are issued or delivered, (i) there will not have occurred any change in the law or in the Amended and Restated Certificate of Incorporation or Amended and Restated Bylaws of Holdco affecting the authorization, issuance or delivery of such Shares, and (ii) no relevant corporate actions will have been modified or rescinded., and (c) the Shares will be issued within the limits of the then remaining authorized but unreserved and unissued amounts of such Shares under the Amended and Restated Certificate of Incorporation, .
IKONICS Corporation
November 3, 2021
Page 3
This opinion is limited to the General Corporation Law of the State of Delaware. We express no opinion as to any other matters, including without limitation any matters relating to the securities or blue sky laws of any jurisdiction or any rules or regulations thereunder, and no opinion may be inferred or implied beyond that expressly stated herein.
We hereby consent to the filing of this opinion letter as Exhibit 5.1 to the Registration Statement and to the reference to us under the caption “Legal Matters” in the Registration Statement. In giving this consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the U.S. Securities and Exchange Commission thereunder.
This opinion letter is rendered as of the date hereof, and we assume no responsibility for updating this opinion letter or the opinions or statements set forth herein to take into account any event, action, interpretation or change in law or facts occurring subsequent to the date hereof that may affect the validity of any of such opinions or statements.
Very truly yours,
Faegre Drinker Biddle & Reath LLP |
|
/s/ Joshua L. Colburn | |
By: Joshua L. Colburn, Partner |
Exhibit 8.1
IKONICS Corporation
4832 Grand Avenue
Duluth, Minnesota 55807
TeraWulf Inc.
9 Federal Street
Easton, Maryland 21601
RE: | Tax Consequences of Mergers |
Dear Ladies and Gentlemen:
We have acted as counsel to IKONICS Corporation, a Minnesota corporation (“IKONICS”), in connection with (i) that certain Agreement and Plan of Merger, dated as of June 24, 2021 (the “Merger Agreement”), by and among IKONICS, Telluride Holdco, Inc., a Delaware corporation and direct wholly owned subsidiary of Parent (“HoldCo”), Telluride Merger Sub I, Inc., a Minnesota corporation and direct wholly owned subsidiary of HoldCo (“Merger Sub I”), Telluride Merger Sub II, Inc., a Delaware corporation and direct wholly owned subsidiary of HoldCo (“Merger Sub II”), and TeraWulf Inc., a Delaware corporation (“TeraWulf”), providing for (x) the merger of Merger Sub I with and into IKONICS, with IKONICS continuing as the surviving corporation (the “First Merger”) and (y) the merger of Merger Sub II with and into TeraWulf, with TeraWulf continuing as the surviving corporation (the “Second Merger” and, together with the First Merger, the “Mergers”), and (ii) the preparation and filing of the related Registration Statement (File No. 333- 258335) on Form S-4 (as amended and supplemented through the date hereof, the “Registration Statement”), which includes the proxy statement/prospectus of IKONICS and TeraWulf (as amended and supplemented through the date hereof, the “Proxy Statement/Prospectus”), filed with the Securities and Exchange Commission (the “Commission”). Capitalized terms not defined herein have the meanings specified in the Merger Agreement unless otherwise indicated.
This opinion letter is being delivered in accordance with the requirements of Item 601(b)(8) of Regulation S-K in connection with the Registration Statement and the Proxy Statement/Prospectus. In rendering our opinion, we have examined originals or copies, certified or otherwise identified to our satisfaction, of the following documents (the “Relevant Documents”):
1. | The Merger Agreement (including any exhibits and schedules thereto); |
2. | The Registration Statement, including the Proxy Statement/Prospectus; |
3. | A representations letter, dated as of November 3, 2021, submitted to us by a duly authorized representative of IKONICS for purposes of this opinion (the “IKONICS Representations Letter”); and |
4. | A representations letter, dated as of November 3, 201, submitted to us by a duly authorized representative of TeraWulf for purposes of this opinion (the “TeraWulf Representations Letter” and, together with the IKONICS Representations Letter, the “Representations Letters”); and |
5. | Such other documents, certificates, instruments and corporate records as we have deemed necessary or appropriate for purposes hereof. |
For purposes of this opinion, we have assumed, without independent verification thereof or other investigation, that (i) the Mergers will be consummated in the manner described in the Registration Statement, including satisfaction of all covenants and conditions to the obligations of the parties without amendment or waiver thereof, and in accordance with the Minnesota Business Corporation Act and the Delaware General Corporation Law; (ii) the statements, representations, warranties and other information set forth in the Merger Agreement, the Representations Letters and other documents, certificates, instruments and records we have reviewed are true, accurate and complete as of the date hereof and will remain true and accurate as of the Effective Time of the Mergers; (iii) all statements in the Representations Letters made “to the best knowledge” of any person or entity, or otherwise qualified, are true, accurate and complete as if made without such qualification; and (iv) as to all matters in which a person or entity making a representation has represented that such person or entity or a related party is not a party to, does not have, or is not aware of, any plan, intention, understanding or agreement to take an action, there is in fact no plan, intention, understanding or agreement and such action will not be taken.
In addition, we have assumed the genuineness of all signatures, including electronic signatures, , the legal capacity of natural persons, the authenticity of all documents submitted to us as originals and the conformity with original documents of all documents submitted to us as copies, the absence of any undisclosed modifications to the agreements and instruments reviewed by us, the fact that each party to the agreements and other documents reviewed by us has the power and capacity to execute, deliver and perform all obligations under such documents, the due authorization of all requisite action with respect to such documents (including the execution and delivery thereof) by each party thereto, and the validity and binding effect of such documents upon each party.
Applicable Law
Section 351(a) of the Code1
Under Section 351(a), one or more persons may transfer property to a corporation in exchange for stock in the corporation without the recognition of gain or loss. In particular, a transfer of property qualifies for non-recognition treatment if: (1) property2 is transferred to a newly-formed corporation (“Newco”) by one or more transferors; (2) solely in exchange for stock of Newco; and (3) immediately after the exchange, the transferor(s) are in “control”3 of Newco.4
In general, the tax consequences of a Section 351(a) exchange are as follows:
1. | No gain or loss is recognized by Newco upon receipt of property from the transferor(s) in exchange for Newco stock;5 |
2. | The basis of the Newco stock to be received by the transferor(s) is the same as the basis of the property exchanged;6 |
3. | The holding period of the Newco stock to be received by the transferor(s) includes the period during which the property exchanged was held, provided such property was held as a capital asset by the transferor(s) on the date of the exchange;7 |
4. | The basis of the property of the transferor(s) received by Newco is the same as the basis of such property in the hands of the transferor(s);8 and |
1 All “Section” references refer to the Internal Revenue Code of 1986, as amended, unless otherwise stated.
2 For purposes of Section 351(a), the term “property” is defined broadly, with Section 351(a) stating only three specific exclusions to “property” (relating to services, certain debt of the corporation, and accrued interest owed by the corporations). See Section 351(d).
3 “Control” for purposes of Section 351(a) is as set forth in Section 368(c).
4 Section 351(a).
5 Section 1032(a).
6 Section 358(a)(1).
7 Section 1223(1).
8 Section 362(a).
2
5. | The holding period of the transferor(s) property to be received by Newco includes the period during which such property was held by the transferor(s).9 |
Horizontal Double-Dummy Structure
Simultaneous reverse subsidiary mergers10 constitute a transaction known as the “horizontal double-dummy technique.”11
The mechanics of this transaction are as follows:
1. A new corporation is organized (again, “Newco”), along with two wholly-owned subsidiaries of Newco (“S1” and “S2”);
2. Pursuant to an integrated plan, S1 and S2 are merged into existing target corporation 1 (“T1”) and existing target corporation 2 (“T2”), respectively; and
3. T1 and T2 outstanding stock, respectively, is exchanged for common stock of Newco, so that following the transaction, T1 and T2 are wholly-owned subsidiaries of Newco.12
The two subsidiary corporations (i.e., S1 and S2) and the two reverse subsidiary mergers (i.e., the merger of S1 and S2 into T1 and T2 respectively) are disregarded and the mergers are treated as the acquisition by Newco of property (i.e., the outstanding stock of T1 and T2) in exchange for Newco common stock.13 Therefore, each of the exchanges will constitute a Section 351(a) exchange, and no gain or loss is recognized by the transferors of T1 and T2 stock upon receipt of Newco stock in exchange for T1 or T2 stock.14
The tax consequences of the horizontal double-dummy transaction are as follows:
1. No gain or loss is recognized by Newco upon the receipt of T1 and T2 stock in exchange for Newco stock.15
2. The basis of T1 and T2 stock received by Newco in the exchange is the same as the basis of such stock in the hands of the transferors of T1 and T2 stock immediately prior to the exchange.16
9 Section 1223(2).
10 A reverse subsidiary merger is a merger in which the buyer (as the acquiring corporation) forms a subsidiary and that acquiring corporation subsidiary merges with and into the company to be acquired (the target corporation). See Section 368(a)(2)(E). As a result, the target corporation becomes a wholly-owned subsidiary of the acquiring corporation. Id.
11 Martin D. Ginsburg, Jack S. Levin, & Donald E. Rocap, Mergers, Acquisitions, and Buyouts: A Transactional Analysis of the Governing Tax Legal, and Accounting Considerations, vol. 2, ¶904, n.1 (2021) (“The quoted term, in use more than 2 decades among M&A lawyers and corporate tax professionals, is descriptive of the transaction's corporate mechanics: simultaneous transitory subsidiary (reverse) mergers of newly formed corporations into [a parent corporation] and [the target corporation].”).
12 See P.L.R. 8822062 (Mar. 7, 1988).
13 See Rev. Rul. 79-273, 1979-2 C.B. 125; Rev. Rul. 78-250, 1978-1 C.B. 83; Rev. Rul. 73-427, 1973-2C.B. 301; Rev. Rul. 67-448, C.B. 144; P.L.R. 8822062 (Mar. 7, 1988); P.L.R. 7915011 (Jan. 1, 1979).
14 P.L.R. 8822062.
15 Section 1032(a).
16 Section 362(a).
3
3. The basis of Newco stock to be received by the transferors of T1 and T2 stock will be the same as the basis of the T1 and T2 stock surrendered in the exchange.17
4. The holding period of the Newco stock to be received by the transferors of T1 and T2 stock will include the period during which T1 and T2 exchanged stock was held, provided the T1 and T2 stock is held has a capital asset on the date of the exchange.18
5. The holding period of the T1 and T2 stock to be received by Newco will include periods during which such stock was held by the transferors of T1 and T2 stock before the exchange.19
Based on our review of the Relevant Documents, and in light of the foregoing legal authorities, we are of the opinion that the simultaneous reverse subsidiary mergers executed by IKONICS and TeraWulf will constitute a horizontal double-dummy transaction. Therefore we are of the opinion that the mergers will constitute a Section 351(a) exchange. The U.S. federal income tax consequences of the receipt of property other than stock is as described in the discussion of “Material U.S. Federal Income Taxes” set forth in the Form S-4. In addition, the discussion in the section of the Registration Statement entitled “Material U.S. Federal Income Tax Consequences” constitutes our opinion as to the U.S. federal income tax consequences of the receipt of property other than stock in the Mergers.
Additional Qualifications and Limitations
Our opinions are based on the facts as set forth in the Relevant Documents and in this opinion letter. You have represented to us that the facts set forth above are, to your knowledge and belief after reasonably inquiry, accurate and complete in all material respects. If any of such facts are inaccurate or incomplete in any material respect, then our opinions may be adversely affected.
In rendering the opinions set forth above, we have considered the relevant provisions of the Code and the Treasury Regulations promulgated thereunder, the related legislative history, and interpretations of the foregoing expressed in court decisions and existing administrative rulings of the Internal Revenue Service (“IRS”), all as of the date hereof. These provisions and interpretations are subject to change, which may or may not be retroactive in effect, and which could result in modifications of our conclusions. This letter is a statement of our opinion, and is not a guarantee that the conclusions set forth in this letter will be sustained if challenged by the IRS or litigated in a court of law. This letter is not binding on the IRS or the courts and it is possible the IRS may successfully take a contrary position.
Our opinion is limited to the United States federal income tax matters as expressly set forth herein. We express no opinion as to any matter which is not expressly set forth herein. In particular, we express no opinion on the tax consequences of the Mergers or matters addressed herein for federal gift, estate, and generation skipping transfer tax purposes or under the income tax laws of any state or foreign jurisdiction.
Our opinion being furnished in connection with the filing of the Registration Statement and may not be used or relied upon for any of purpose. We hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement, and to the references therein to us. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933 as amended, or the rules and regulations of the Commission promulgated thereunder.
Sincerely yours, | ||
FAEGRE DRINKER BIDDLE & REATH LLP | ||
By: | /s/ Lisa R. Pugh | |
Lisa R. Pugh, Partner |
17 Section 358(a)(1).
18 Section 1223(1).
19 Section 1223(2).
4
Exhibit 10.10
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of [●], 2021 (as amended, supplemented or otherwise modified from time to time, this “Agreement”), is made and entered into by and among:
(i) TeraWulf Inc. (formerly known as Telluride Holdco, Inc.), a Delaware corporation (the “Company”); and
(ii) TeraCub Inc. (formerly known as TeraWulf Inc.), a Delaware corporation (the “Target”), for the benefit of the stockholders of the Target party to this Agreement (together with their respective successors and permitted assigns and any person or entity who hereafter becomes a party to this Agreement pursuant to Section 5.2, collectively, the “Stockholders”).
WHEREAS, the Company and the Target are party to that certain Agreement and Plan of Merger, dated as of June 24, 2021 (as amended, supplemented or otherwise modified from time to time, the “Merger Agreement”), by and among IKONICS Corporation, a Minnesota corporation, the Company, Telluride Merger Sub I, Inc., a Minnesota corporation (“Merger Sub I”), and Telluride Merger Sub II, Inc., a Delaware corporation (“Merger Sub II”), and the Target, pursuant to which and subject to the terms and conditions set forth therein, among other things, Merger Sub II will merge with and into the Target (the “Merger”) and, as a result of the Merger, the Target will become a wholly-owned subsidiary of the Company and shares of the Target’s common stock (including shares of the Target’s preferred stock converted into shares of the Target’s common stock) outstanding immediately prior to the Merger will automatically be converted into the right to receive shares of the Company Common Stock in accordance with, and subject to the terms conditions set forth in, the Merger Agreement;
WHEREAS, the Target and the Stockholders are party to that certain Second Amended and Restated Stockholders Agreement, dated as of May 26, 2021 (as amended, supplemented or otherwise modified from time to time, the “Stockholders Agreement”), pursuant to which, among other things, in connection with a Qualified Listing Event (as defined in the Stockholders Agreement), the Target is required to enter into a registration rights agreement containing terms and conditions determined by the Majority Beowulf Stockholders (as defined in the Stockholders Agreement), which shall include customary demand and piggyback registration rights for the benefit of the Stockholders, subject to blackout, cutback, lock-up, indemnification and other customary provisions;
WHEREAS, the Merger, together with the other transactions contemplated by the Merger Agreement (collectively, the “Transactions”), will constitute a Qualified Listing Event within the meaning of the Stockholders Agreement;
WHEREAS, this Agreement contains terms and conditions acceptable to the Majority Beowulf Stockholders and is intended to serve as the registration rights agreement contemplated by the Stockholders Agreement; and
WHEREAS, in connection with the consummation of the Transactions and in satisfaction of the Target’s obligations pursuant to the Stockholders Agreement, the Company and the Target, for the benefit of the Stockholders desire to enter into this Agreement, pursuant to which the Company shall grant the Stockholders certain registration rights with respect to the Registrable Securities (as defined below) on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the representations, covenants and agreements contained herein and certain other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The terms defined in this Article I shall, for all purposes of this Agreement, have the respective meanings set forth below:
“Adverse Disclosure” means any public disclosure of material non-public information, which disclosure, in the good faith judgment of the Company’s Chief Executive Officer or the Chief Financial Officer or the Board, after consultation with counsel to the Company, (i) would be required to be made in any Registration Statement or Prospectus in order for the applicable Registration Statement or Prospectus not to contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein (in the case of any prospectus and any preliminary prospectus, in the light of the circumstances under which they were made) not misleading, (ii) would not be required to be made at such time if the Registration Statement were not being filed, declared effective or used, as the case may be, and (iii) the Company has a bona fide business purpose for not making such information public.
“Action” means any claim, action, suit, audit, examination, assessment, arbitration, mediation or inquiry, or any proceeding or investigation, by or before any Governmental Authority.
“Agreement” shall have the meaning given in the Preamble.
“Board” means the board of directors of the Company.
“Block Trade” shall have the meaning given in Section 2.4.1.
“Closing” shall have the meaning given in the Merger Agreement.
“Closing Date” shall have the meaning given in the Merger Agreement.
“Commission” means the Securities and Exchange Commission.
2
“Company” shall have the meaning given in the Preamble and includes the Company’s successors by recapitalization, merger, consolidation, spin-off, reorganization or similar transaction.
“Company Common Stock” means the common stock of the Company, par value $0.001 per share.
“Demanding Stockholder” shall have the meaning given in Section 2.1.4.
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.
“FINRA” means the Financial Industry Regulatory Authority, Inc.
“Form S-1 Shelf” shall have the meaning given in Section 2.1.1.
“Form S-3 Shelf” shall have the meaning given in Section 2.1.1.
“Governmental Authority” means any federal, state, provincial, municipal, local or foreign government, governmental authority, regulatory or administrative agency (which for the purposes of this Agreement shall include FINRA and the Commission), governmental commission, department, board, bureau, agency or instrumentality, court or tribunal.
“Governmental Order” means any order, judgment, injunction, decree, writ, stipulation, determination or award, in each case, entered by or with any Governmental Authority.
“Law” means any statute, law, ordinance, rule, regulation or Governmental Order, in each case, of any Governmental Authority.
“Maximum Number of Securities” shall have the meaning given in Section 2.1.5.
“Merger” shall have the meaning given in the Recitals.
“Merger Agreement” shall have the meaning given in the Recitals.
“Minimum Takedown Threshold” shall have the meaning given in Section 2.1.4.
“Misstatement” means an untrue statement of a material fact or an omission to state a material fact required to be stated in a Registration Statement or Prospectus or necessary to make the statements in a Registration Statement or Prospectus (in the case of a Prospectus, in the light of the circumstances under which they were made) not misleading.
“Permitted Transferees” means any person or entity to whom a holder of Registrable Securities is permitted to transfer such Registrable Securities prior to the expiration of any applicable lock-up period.
“Piggyback Registration” shall have the meaning given in Section 2.2.1.
3
“Prospectus” means the prospectus included in any Registration Statement, as supplemented by any and all prospectus supplements and as amended by any and all post-effective amendments and including all material incorporated by reference in such prospectus.
“Registrable Security” means (a) any outstanding shares of the Company Common Stock held by a Stockholder immediately following the Closing (including shares of the Company Common Stock issuable pursuant to the Merger Agreement), (b) any warrants or any shares of the Company Common Stock that may be acquired by the Stockholders upon the exercise of a warrant or other right to acquire the Company Common Stock held by a Stockholder immediately following the Closing, (c) any shares of the Company Common Stock or warrants to purchase shares of the Company Common Stock (including any shares of the Company Common Stock issued or issuable upon the exercise of any such warrant) otherwise acquired or owned by a Stockholder following the date hereof to the extent that such securities are “restricted securities” (as defined in Rule 144) or are otherwise held by an “affiliate” (as defined in Rule 144) of the Company, and (d) any other equity security of the Company or any of its subsidiaries issued or issuable with respect to any securities referenced in clause (a), (b) or (c) above by way of a stock dividend or stock split or in connection with a recapitalization, merger, consolidation, spin-off, reorganization or similar transaction; provided, however, that, as to any particular Registrable Security, such securities shall cease to be Registrable Securities upon the earliest to occur of (A) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement by the applicable Stockholder, (B) such securities shall have been otherwise transferred, new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent public distribution of such securities shall not require registration under the Securities Act, (C) such securities shall have ceased to be outstanding, (D) such securities may be sold without registration pursuant to Rule 144 or any successor rule promulgated under the Securities Act (but with no volume or other restrictions or limitations including as to manner or timing of sale) and (E) such securities have been sold to, or through, a broker, dealer or underwriter in a public distribution or other public securities transaction.
“Registration” means a registration, including any related Shelf Takedown, effected by preparing and filing a registration statement, prospectus or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement becoming effective.
“Registration Expenses” means the expenses of a Registration, including, without limitation, the following:
(A) all registration and filing fees (including fees with respect to filings required to be made with FINRA) and any national securities exchange on which the Company Common Stock is then listed;
4
(B) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of outside counsel for the Underwriters in connection with blue sky qualifications of Registrable Securities);
(C) printing, messenger, telephone and delivery expenses;
(D) reasonable fees and disbursements of counsel for the Company;
(E) reasonable fees and disbursements of all independent registered public accountants of the Company incurred specifically in connection with such Registration; and
(F) reasonable fees and expenses of one legal counsel selected by the majority-in-interest of the Demanding Stockholders in an Underwritten Offering.
“Registration Statement” means any registration statement that covers Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus included in such registration statement, amendments (including post-effective amendments) and supplements to such registration statement, and all exhibits to and all material incorporated by reference in such registration statement.
“Requesting Stockholders” shall have the meaning given in Section 2.1.5.
“Securities Act” means the Securities Act of 1933, as amended from time to time.
“Shelf” means the Form S-1 Shelf, the Form S-3 Shelf or any Subsequent Shelf Registration, as the case may be.
“Shelf Registration” means a registration of securities pursuant to a registration statement filed with the Commission in accordance with, and pursuant to, Rule 415 promulgated under the Securities Act (or any successor rule then in effect).
“Shelf Takedown” means an Underwritten Shelf Takedown or any proposed transfer or sale using a Registration Statement, including a Piggyback Registration.
“Stockholder Information” shall have the meaning given in Section 4.1.2.
“Stockholders” shall have the meaning given in the Preamble, for so long as such person or entity holds any Registrable Securities.
“Stockholders Agreement” shall have the meaning given in the Recitals.
“Subsequent Shelf Registration” shall have the meaning given in Section 2.1.2.
“Transactions” shall have the meaning given in the Recitals.
5
“Transfer” means the (a) sale of, offer to sell, contract or agreement to sell, hypothecate, pledge, grant of any option to purchase or otherwise dispose of or agreement to dispose of, directly or indirectly, or establishment or increase of a put equivalent position or liquidation with respect to or decrease of a call equivalent position within the meaning of Section 16 of the Exchange Act with respect to any security, (b) entry into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any security, whether any such transaction is to be settled by delivery of such securities, in cash or otherwise, or (c) public announcement of any intention to effect any transaction specified in clause (a) or (b).
“Underwriter” means a securities dealer who purchases any Registrable Securities as principal and not as part of such dealer’s market-making activities.
“Underwritten Offering” means a Registration in which securities of the Company are sold to an Underwriter in a firm commitment underwriting for distribution to the public.
“Underwritten Shelf Takedown” shall have the meaning given in Section 2.1.4.
“Withdrawal Notice” shall have the meaning given in Section 2.1.6.
ARTICLE II
REGISTRATIONS AND OFFERINGS
2.1 Shelf Registration.
2.1.1 Filing. The Company shall file within thirty (30) days of the Closing Date, and shall use commercially reasonable efforts to cause to be declared effective as soon as practicable thereafter, a Registration Statement for a Shelf Registration on Form S-1 (the “Form S-1 Shelf”) or, if the Company is eligible to use a Registration Statement on Form S-3, a Shelf Registration on Form S-3 (the “Form S-3 Shelf”), in each case, covering the resale of all the Registrable Securities (determined as of two (2) business days prior to such filing) on a delayed or continuous basis. Such Shelf shall provide for the resale of the Registrable Securities included therein pursuant to any method or combination of methods legally available to, and requested by, any Stockholder named therein. The Company shall maintain a Shelf in accordance with the terms hereof, and shall prepare and file with the SEC such amendments, including post-effective amendments, and supplements as may be necessary to keep a Shelf continuously effective, available for use and in compliance with the provisions of the Securities Act until such time as there are no longer any Registrable Securities.
2.1.2 Subsequent Shelf Registration. If any Shelf ceases to be effective under the Securities Act for any reason at any time while Registrable Securities are still outstanding, the Company shall, subject to Section 3.4, use its commercially reasonable efforts to as promptly as is reasonably practicable cause such Shelf to again become effective under the Securities Act (including obtaining the prompt withdrawal of any order suspending the effectiveness of such Shelf), and shall use its commercially reasonable efforts to amend such Shelf in a manner reasonably expected to result in the withdrawal of any order suspending the effectiveness of such Shelf or file an additional registration statement as a Shelf Registration (a “Subsequent Shelf Registration”) registering the resale of all Registrable Securities (determined as of two (2) business days prior to such filing), and pursuant to any method or combination of methods legally available to, and requested by, any Stockholder named therein. If a Subsequent Shelf Registration is filed, the Company shall use its commercially reasonable efforts to (i) cause such Subsequent Shelf Registration to become effective under the Securities Act as promptly as is reasonably practicable after the filing thereof (it being agreed that the Subsequent Shelf Registration shall be an automatic shelf registration statement (as defined in Rule 405 promulgated under the Securities Act) if the Company is a well-known seasoned issuer (as defined in Rule 405 promulgated under the Securities Act) at the most recent applicable eligibility determination date) and (ii) keep such Subsequent Shelf Registration continuously effective, available for use and in compliance with the provisions of the Securities Act until such time as there are no longer any Registrable Securities. Any such Subsequent Shelf Registration shall be on Form S-3 to the extent that the Company is eligible to use such form. Otherwise, such Subsequent Shelf Registration shall be on another appropriate form.
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2.1.3 Additional Registerable Securities. In the event that any Stockholder holds Registrable Securities that are not registered for resale on a delayed or continuous basis, the Company, upon request of a Stockholder then holding at least five (5)% of the shares of the Company Common Stock issued and outstanding, shall promptly use its commercially reasonable efforts to cause the resale of such Registrable Securities to be covered by either, at the Company’s option, the Shelf (including by means of a post-effective amendment) or a Subsequent Shelf Registration and cause the same to become effective as soon as practicable after such filing and such Shelf or Subsequent Shelf Registration shall be subject to the terms hereof.
2.1.4 Requests for Underwritten Shelf Takedowns. At any time and from time to time when an effective Shelf is on file with the Commission, any Stockholder or group of Stockholders who then holds at least twenty-five (25)% of the issued and outstanding shares of the Company Common Stock that constitutes Registrable Securities (any of such Stockholders being, in such case, a “Demanding Stockholder”) may request to sell all or any portion of its Registrable Securities in an Underwritten Offering or other coordinated offering that is registered pursuant to the Shelf (each, an “Underwritten Shelf Takedown”); provided, however, that the Company shall only be obligated to effect an Underwritten Shelf Takedown if such offering shall include Registrable Securities proposed to be sold by the Demanding Stockholder with a total offering price reasonably expected to exceed, in the aggregate, $50 million (the “Minimum Takedown Threshold”). All requests for Underwritten Shelf Takedowns shall be made by giving written notice to the Company, which shall specify the approximate number of Registrable Securities proposed to be sold in the Underwritten Shelf Takedown. The Demanding Stockholder initiating the request shall have the right to select the Underwriters for such offering (which shall consist of one or more reputable nationally recognized investment banks), subject to the Company’s prior approval (which shall not be unreasonably withheld, conditioned or delayed). Notwithstanding anything to the contrary in this Section 2.1.4 and this Agreement, there shall be no limit to the number of Underwritten Shelf Takedowns that may be requested by any Demanding Stockholder. Notwithstanding anything to the contrary in this Agreement, the Company may effect any Underwritten Offering pursuant to any then effective Registration Statement, including a Form S-3, that is then available for such offering.
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2.1.5 Reduction of Underwritten Offering. If the managing Underwriter or Underwriters in an Underwritten Shelf Takedown, in good faith, advise the Company, the Demanding Stockholders and the Stockholders requesting piggyback rights pursuant to this Agreement with respect to such Underwritten Shelf Takedown (the “Requesting Stockholders”) (if any) in writing that the dollar amount or number of Registrable Securities that the Demanding Stockholders and the Requesting Stockholders (if any) desire to sell, taken together with all other shares of the Company Common Stock or other equity securities that the Company desires to sell and all other shares of the Company Common Stock or other equity securities, if any, that have been requested to be sold in such Underwritten Offering pursuant to separate written contractual piggyback registration rights held by any other stockholders, exceeds the maximum dollar amount or maximum number of equity securities that can be sold in the Underwritten Offering without adversely affecting the proposed offering price, the timing, the distribution method or the probability of success of such offering (such maximum dollar amount or maximum number of such securities, as applicable, the “Maximum Number of Securities”), then the Company shall include in such Underwritten Offering, before including any shares of the Company Common Stock or other equity securities proposed to be sold by Company or by other holders of the Company Common Stock or other equity securities the following: (i) first, the Registrable Securities of the Demanding Stockholders and the Requesting Stockholders (if any) (pro rata based on the respective number of Registrable Securities that each Demanding Stockholder and Requesting Stockholder (if any) has requested be included in such Underwritten Shelf Takedown and the aggregate number of Registrable Securities that the Demanding Stockholders and Requesting Stockholders have requested be included in such Underwritten Shelf Takedown) that can be sold without exceeding the Maximum Number of Securities; (ii) second, to the extent that the Maximum Number of Securities has not been reached under Section 2.1.5(i), the Company Common Stock or other equity securities that Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; and (iii) third, to the extent that the Maximum Number of Securities has not been reached under Section 2.1.5(i) and 2.1.5 (ii), the Company Common Stock or other equity securities of any other Stockholder or any other person that Company is obligated to include in such Underwritten Offering pursuant to separate written contractual arrangements with such persons and that can be sold without exceeding the Maximum Number of Securities. To facilitate the allocation of Registrable Securities in accordance with the above provisions, the Company or the Underwriters may round the number of shares allocated to any Stockholder to the nearest one-hundred (100) shares. The Company shall not be required to include any Registrable Securities in such Underwritten Shelf Takedown unless the Stockholders accept the terms of the underwriting as agreed upon between the Company and its Underwriters.
2.1.6 Withdrawal. Prior to the filing of the applicable “red herring” prospectus or prospectus supplement used for marketing such Underwritten Shelf Takedown, a majority-in-interest of the Demanding Stockholders initiating an Underwritten Shelf Takedown shall have the right to withdraw from such Underwritten Shelf Takedown for any or no reason whatsoever upon written notification (a “Withdrawal Notice”) to the Company and the Underwriter or Underwriters (if any) of their intention to withdraw from such Shelf Takedown. If withdrawn, a demand for an Underwritten Shelf Takedown shall not constitute a demand for an Underwritten Shelf Takedown for purposes of Section 2.1.4. Following the receipt of any Withdrawal Notice, the Company shall promptly forward such Withdrawal Notice to any other Stockholders that had elected to participate in such Shelf Takedown. Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with a Shelf Takedown prior to its withdrawal under this Section 2.1.6.
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2.2 Piggyback Registration.
2.2.1 Piggyback Rights. Subject to Section 2.4.3, if the Company or any Stockholder proposes to conduct a registered offering of, or if the Company proposes to file a Registration Statement under the Securities Act with respect to the Registration of, equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into equity securities, for its own account or for the account of stockholders of the Company (or by the Company and by the stockholders of the Company, including, without limitation, an Underwritten Shelf Takedown pursuant to Section 2.1), other than a Registration Statement (or any registered offering with respect thereto) (i) filed in connection with any employee stock option or other benefit plan, (ii) pursuant to a Registration Statement on Form S-4 (or similar form that relates to a transaction subject to Rule 145 under the Securities Act or any successor rule thereto), (iii) for an offering of debt that is convertible into equity securities of the Company, (iv) for a dividend reinvestment plan or (v) for a rights offering, then the Company shall give written notice of such proposed offering to all of the Stockholders of Registrable Securities as soon as practicable but not less than ten (10) days before the anticipated filing date of such Registration Statement or, in the case of an Underwritten Offering pursuant to a Shelf Registration, the applicable “red herring” prospectus or prospectus supplement used for marketing such offering, which notice shall (A) describe the amount and type of securities to be included in such offering, the intended method(s) of distribution and the name of the proposed managing Underwriter or Underwriters, if any, in such offering, and (B) offer to all of the Stockholders of Registrable Securities the opportunity to include in such registered offering such number of Registrable Securities as such Stockholders may request in writing within five (5) days after receipt of such written notice (such registered offering, a “Piggyback Registration”). Subject to Section 2.2.2, the Company shall, in good faith, cause such Registrable Securities to be included in such Piggyback Registration and, if applicable, shall use its commercially reasonable efforts to cause the managing Underwriter or Underwriters of such Piggyback Registration to permit the Registrable Securities requested by the Stockholders pursuant to this Section 2.2.1 to be included therein on the same terms and conditions as any similar securities of the Company included in such registered offering and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. The inclusion of any Stockholder’s Registrable Securities in a Piggyback Registration shall be subject to such Stockholder’s agreement to enter into an underwriting agreement in customary form with the Underwriter(s) selected for such Underwritten Offering.
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2.2.2 Reduction of Piggyback Registration. If the managing Underwriter or Underwriters in an Underwritten Offering that is to be a Piggyback Registration, in good faith, advise the Company and the Stockholders of Registrable Securities participating in the Piggyback Registration in writing that the dollar amount or number of shares of the Company Common Stock or other equity securities that the Company desires to sell, taken together with (i) the shares of the Company Common Stock or other equity securities, if any, as to which Registration or a registered offering has been demanded pursuant to separate written contractual arrangements with persons or entities other than the Stockholders of Registrable Securities hereunder, (ii) the Registrable Securities as to which registration has been requested pursuant to Section 2.2, and (iii) the shares of the Company Common Stock or other equity securities, if any, as to which Registration or a registered offering has been requested pursuant to separate written contractual piggyback registration rights of other stockholders of the Company, exceeds the Maximum Number of Securities, then:
(a) If the Registration or registered offering is undertaken for the Company’s account, the Company shall include in any such Registration or registered offering: (A) first, the shares of the Company Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; (B) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (A), the Registrable Securities of Stockholders exercising their rights to register their Registrable Securities pursuant to Section 2.2.1, pro rata, based on the respective number of Registrable Securities that each Stockholder has requested be included in such Underwritten Offering and the aggregate number of Registrable Securities that the Stockholders have requested to be included in such Underwritten Offering, which can be sold without exceeding the Maximum Number of Securities; and (C) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A) and (B), the shares of the Company Common Stock or other equity securities, if any, as to which Registration or a registered offering has been requested pursuant to written contractual piggyback registration rights of other stockholders of the Company, which can be sold without exceeding the Maximum Number of Securities;
(b) If the Registration or registered offering is pursuant to a request by persons or entities other than the Stockholders of Registrable Securities, then the Company shall include in any such Registration or registered offering: (A) first, the shares of the Company Common Stock or other equity securities, if any, of such requesting persons or entities, other than the Stockholders of Registrable Securities, which can be sold without exceeding the Maximum Number of Securities; (B) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (A), the Registrable Securities of Stockholders exercising their rights to register their Registrable Securities pursuant to Section 2.2.1, pro rata, based on the respective number of Registrable Securities that each Stockholder has requested be included in such Underwritten Offering and the aggregate number of Registrable Securities that the Stockholders have requested to be included in such Underwritten Offering, which can be sold without exceeding the Maximum Number of Securities; (C) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A) and (B), the shares of the Company Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; and (D) fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (A), (B) and (C), the shares of the Company Common Stock or other equity securities for the account of other persons or entities that the Company is obligated to register pursuant to separate written contractual arrangements with such persons or entities, which can be sold without exceeding the Maximum Number of Securities; and
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(c) If the Registration or registered offering is pursuant to a request by Stockholder(s) of Registrable Securities pursuant to Section 2.1, then the Company shall include in any such Registration or registered offering securities pursuant to Section 2.1.5.
2.2.3 Piggyback Registration Withdrawal. Any Stockholder of Registrable Securities (other than a Demanding Holder, whose right to withdrawal from an Underwritten Shelf Takedown, and related obligations, shall be governed by Section 2.1.6) shall have the right to withdraw from a Piggyback Registration for any or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters (if any) of his, her or its intention to withdraw from such Piggyback Registration prior to the effectiveness of the Registration Statement filed with the Commission with respect to such Piggyback Registration or, in the case of a Piggyback Registration pursuant to a Shelf Registration, the filing of the applicable “red herring” prospectus or prospectus supplement with respect to such Piggyback Registration used for marketing such transaction. Notwithstanding anything to the contrary in this Agreement (other than Section 2.1.6), the Company shall be responsible for the Registration Expenses incurred in connection with the Piggyback Registration prior to its withdrawal under this Section 2.2.3.
2.2.4 Unlimited Piggyback Registration Rights. For purposes of clarity, subject to Section 2.1.6, any Piggyback Registration effected pursuant to Section 2.2 shall not be counted as a demand for an Underwritten Shelf Takedown under Section 2.1.4.
2.3 Market Stand-off. In connection with any Underwritten Offering of equity securities of the Company (other than a Block Trade), each Stockholder is given an opportunity to participate in the Underwritten Offering pursuant to the terms of this Agreement agrees that it shall not Transfer any shares of the Company Common Stock or other equity securities of the Company (other than those included in such offering pursuant to this Agreement), without the prior written consent of the Company, during the ninety (90)-day period beginning on the date of pricing of such offering or such shorter period during which the Company agrees not to conduct an underwritten primary offering of the Company Common Stock, except in the event the Underwriters managing the offering otherwise agree by written consent. Each Stockholder agrees to execute a customary lock-up agreement in favor of the Underwriters to such effect (in each case, on substantially the same terms and conditions as all such Stockholders).
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2.4 Block Trades.
2.4.1 Notwithstanding the foregoing, at any time and from time to time when an effective Shelf is on file with the Commission and effective, if a Demanding Stockholder wishes to engage in an underwritten or other coordinated registered offering not involving a “roadshow,” an offer commonly known as a “block trade” (a “Block Trade”), with a $50 million total offering price reasonably expected to exceed, in the aggregate, then notwithstanding the time periods provided for in Section 2.1.4, such Demanding Stockholder need only to notify the Company of the Block Trade at least five (5) business days prior to the day such offering is to commence and the Company shall as expeditiously as possible use its commercially reasonable efforts to facilitate such Block Trade; provided, however, that the Demanding Stockholders representing a majority of the Registrable Securities wishing to engage in the Block Trade shall use reasonable best efforts to work with the Company and any Underwriters prior to making such request in order to facilitate preparation of the registration statement, prospectus and other offering documentation related to the Block Trade.
2.4.2 Prior to the filing of the applicable “red herring” prospectus or prospectus supplement used in connection with a Block Trade, a majority-in-interest of the Demanding Stockholders initiating such Block Trade shall have the right to submit a Withdrawal Notice to the Company and the Underwriter or Underwriters (if any) of their intention to withdraw from such Block Trade. Notwithstanding anything to the contrary in this Agreement, the Company shall be responsible for the Registration Expenses incurred in connection with a block trade prior to its withdrawal under this Section 2.4.2.
2.4.3 Notwithstanding anything to the contrary in this Agreement, Section 2.2 shall not apply to a Block Trade initiated by a Demanding Stockholder pursuant to this Agreement.
2.4.4 The Demanding Stockholder initiating a Block Trade shall have the right to select the Underwriters for such Block Trade (which shall consist of one or more reputable, nationally recognized investment banks).
ARTICLE III
COMPANY PROCEDURES
3.1 General Procedures. In connection with any Shelf and/or Shelf Takedown, the Company shall use its commercially reasonable efforts to effect such Registration to permit the sale of such Registrable Securities in accordance with the intended plan of distribution thereof, and pursuant thereto the Company shall, as expeditiously as possible:
3.1.1 prepare and file with the Commission as soon as practicable a Registration Statement with respect to such Registrable Securities and use its reasonable best efforts to cause such Registration Statement to become effective and remain effective until all Registrable Securities have ceased to be Registrable Securities;
3.1.2 prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement, and such supplements to the Prospectus, as may be reasonably requested by any Stockholder or as may be required by the rules, regulations or instructions applicable to the registration form used by the Company or by the Securities Act or rules and regulations thereunder to keep the Registration Statement effective until all Registrable Securities covered by such Registration Statement are sold in accordance with the intended plan of distribution set forth in such Registration Statement or supplement to the Prospectus;
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3.1.3 prior to filing a Registration Statement or Prospectus, or any amendment or supplement thereto, furnish without charge to the Underwriters, if any, and the Stockholders of Registrable Securities included in such Registration, and such Stockholders’ legal counsel, copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case, including all exhibits thereto and documents incorporated by reference therein), the Prospectus included in such Registration Statement (including each preliminary Prospectus), and such other documents as the Underwriters and the Stockholders of Registrable Securities included in such Registration or the legal counsel for any such Stockholders may request in order to facilitate the disposition of the Registrable Securities owned by such Stockholders;
3.1.4 prior to any public offering of Registrable Securities (i) register or qualify the Registrable Securities covered by the Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as the Stockholders of Registrable Securities included in such Registration Statement (in light of their intended plan of distribution) may request (or provide evidence satisfactory to such Stockholders that the Registrable Securities are exempt from such registration or qualification) and (ii) take such action necessary to cause such Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be necessary or advisable to enable the Stockholders of Registrable Securities included in such Registration Statement to consummate the disposition of such Registrable Securities in such jurisdictions; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify or take any action to which it would be subject to general service of process or taxation in any such jurisdiction where it is not then otherwise so subject;
3.1.5 cause all such Registrable Securities to be listed on each national securities exchange on which similar securities issued by the Company are then listed;
3.1.6 provide a transfer agent or warrant agent, as applicable, and registrar for all such Registrable Securities no later than the effective date of such Registration Statement;
3.1.7 advise each seller of such Registrable Securities, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for such purpose and promptly use its reasonable best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued;
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3.1.8 at least five (5) days prior to the filing of any Registration Statement or Prospectus or any amendment or supplement to such Registration Statement or Prospectus (or such shorter period of time as may be necessary in order to comply with the Securities Act, the Exchange Act, and the rules and regulations promulgated under the Securities Act or Exchange Act, as applicable), furnish a copy thereof to each seller of such Registrable Securities or its counsel (excluding any exhibits thereto and any filing made under the Exchange Act that is to be incorporated by reference therein);
3.1.9 notify the Stockholders, at any time when a Prospectus relating to such Registration Statement is required to be delivered under the Securities Act, of the happening of any event as a result of which the Prospectus included in such Registration Statement, as then in effect, includes a Misstatement and then to correct such Misstatement as set forth in Section 3.4;
3.1.10 permit a representative of the Stockholders, the Underwriters, if any, and any attorney or accountant retained by such Stockholders or Underwriter to participate, at each such person’s own expense, in the preparation of the Registration Statement and cause the Company’s officers, directors and employees to supply all information reasonably requested by any such representative, Underwriter, attorney or accountant in connection with the Registration; provided, however, that such representatives or Underwriters agree to confidentiality arrangements reasonably satisfactory to the Company prior to the release or disclosure of any such information;
3.1.11 obtain a “comfort” letter from the Company’s independent registered public accountants in the event of an Underwritten Offering or other coordinated offering that is registered pursuant to a Registration Statement, in customary form and covering such matters of the type customarily covered by “comfort” letters as the managing Underwriter or other similar type of sales agent or placement agent may reasonably request, and reasonably satisfactory to a majority-in-interest of the participating Stockholders;
3.1.12 on the date the Registrable Securities are delivered for sale pursuant to such Registration, obtain an opinion, dated such date, of counsel representing the Company for the purposes of such Registration, addressed to the Stockholders, the placement agent or sales agent, if any, and the Underwriters, if any, covering such legal matters with respect to the Registration in respect of which such opinion is being given as the Stockholders, placement agent, sales agent, or Underwriter may reasonably request and as are customarily included in such opinions and negative assurance letters and reasonably satisfactory to a majority-in-interest of the participating Stockholders;
3.1.13 in the event of any Underwritten Offering or other coordinated offering that is registered pursuant to a Registration Statement, enter into and perform its obligations under an underwriting agreement, sales agreement or placement agreement, in usual and customary form, with the managing Underwriter, sales agent or placement agent of such offering;
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3.1.14 make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve (12) months beginning with the first day of the Company’s first full calendar quarter after the effective date of the Registration Statement which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any successor rule then in effect);
3.1.15 if the Registration involves the Registration of Registrable Securities involving gross proceeds in excess of $50 million with respect to an Underwritten Offering pursuant to Section 2.1.4, use its reasonable efforts to make available senior executives of the Company to participate in customary “road show” presentations that may be reasonably requested by the Underwriter in such Underwritten Offering; and
3.1.16 otherwise, in good faith, cooperate reasonably with, and take such customary actions as may reasonably be requested by the Stockholders, in connection with such Registration.
Notwithstanding the foregoing, the Company shall not be required to provide any documents or information to an Underwriter or other sales agent or placement agent if such Underwriter or other sales agent or placement agent has not then been named with respect to the applicable Underwritten Offering or other coordinated offering that is registered pursuant to a Registration Statement.
3.2 Registration Expenses. The Registration Expenses of all Registrations shall be borne by the Company. It is acknowledged by the Stockholders that the Stockholders shall bear all incremental selling expenses relating to the sale of Registrable Securities, such as Underwriters’ or agents’ commissions and discounts, brokerage fees, Underwriter marketing costs and, other than as set forth in the definition of “Registration Expenses,” all reasonable fees and expenses of any legal counsel representing the Stockholders.
3.3 Requirements for Participation in Registration Statement Underwritten Offerings. Notwithstanding anything in this Agreement to the contrary, if any Stockholder does not provide the Company with its requested Stockholder Information, the Company may exclude such Stockholder’s Registrable Securities from the applicable Registration Statement or Prospectus if the Company determines, based on the advice of counsel, that such information is necessary to effect the registration and such Stockholder continues thereafter to withhold such information. No person may participate in any Underwritten Offering or other coordinated offering for equity securities of the Company pursuant to a Registration initiated by the Company hereunder unless such person (i) agrees to sell such person’s securities on the basis provided in any arrangements approved by the Company and (ii) completes and executes all customary questionnaires, powers of attorney, indemnities, lock-up agreements, underwriting or other agreements and other customary documents as may be reasonably required under the terms of such arrangements. The exclusion of a Stockholder’s Registrable Securities as a result of this Section 3.3 shall not affect the registration of the other Registrable Securities to be included in such Registration.
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3.4 Suspension of Sales; Adverse Disclosure; Restrictions on Registration Rights.
3.4.1 Upon receipt of written notice from the Company that a Registration Statement or Prospectus contains a Misstatement, each of the Stockholders shall forthwith discontinue disposition of Registrable Securities until it has received copies of a supplemented or amended Prospectus correcting the Misstatement (it being understood that the Company hereby covenants to prepare and file such supplement or amendment as soon as practicable after the time of such notice) or until it is advised in writing by the Company that the use of the Prospectus may be resumed.
3.4.2 If the filing, initial effectiveness or continued use of a Registration Statement in respect of any Registration at any time would (i) require the Company to make an Adverse Disclosure, (ii) require the inclusion in such Registration Statement of financial statements that are unavailable to the Company for reasons beyond the Company’s control, or (iii) in the good faith judgment of the majority of the Board such Registration, be seriously detrimental to the Company and the majority of the Board concludes as a result that it is essential to defer such filing, initial effectiveness or continued use at such time, the Company may, upon giving prompt written notice of such action to the Stockholders, delay the filing or initial effectiveness of, or suspend use of, such Registration Statement for the shortest period of time determined in good faith by the Company to be necessary for such purpose. In the event the Company exercises its rights under this Section 3.4.2, the Stockholders agree to suspend, immediately upon their receipt of the notice referred to above, their use of the Prospectus relating to any Registration in connection with any sale or offer to sell Registrable Securities.
3.4.3 (a) During the period starting with the date sixty (60) days prior to the Company’s good faith estimate of the date of the filing of, and ending on a date one-hundred-and-twenty (120) days after the effective date of, a Company-initiated Registration and provided that the Company continues to actively employ, in good faith, all reasonable efforts to maintain the effectiveness of the applicable Shelf Registration Statement, or (b) if, pursuant to Section 2.1.4, Stockholders have requested an Underwritten Shelf Takedown and the Company and such Stockholders are unable to obtain the commitment of underwriters to firmly underwrite such offering, the Company may, upon giving prompt written notice of such action to the Stockholders, delay any other registered offering pursuant to Section 2.1.4 or 2.4.
3.5 Reporting Obligations. As long as any Stockholder shall own Registrable Securities, the Company, at all times while it shall be a reporting company under the Exchange Act, covenants to file timely (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Sections 13(a) or 15(d) of the Exchange Act and to promptly furnish the Stockholders with true and complete copies of all such filings; provided, however, that any documents publicly filed or furnished with the Commission pursuant to the EDGAR System shall be deemed to have been furnished or delivered to the Stockholders pursuant to this Section 3.5. The Company further covenants that it shall take such further action as any Stockholder may reasonably request, all to the extent required from time to time to enable such Stockholder to sell shares of the Company Common Stock held by such Stockholder without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act (or any successor rule then in effect). Upon the request of any Stockholder, the Company shall deliver to such Stockholder a written certification of a duly authorized officer as to whether it has complied with such requirements.
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ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
4.1 Indemnification.
4.1.1 The Company agrees to indemnify, to the extent permitted by law, each Stockholder of Registrable Securities, its officers, directors and agents and each person who controls such Stockholder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and out-of-pocket expenses (including, without limitation, reasonable outside attorneys’ fees) resulting from any untrue or alleged untrue statement of material fact contained in any Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information or affidavit so furnished in writing to the Company by such Stockholder expressly for use therein.
4.1.2 In connection with any Registration Statement in which a Stockholder of Registrable Securities is participating, such Stockholder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such Registration Statement or Prospectus (the “Stockholder Information”) and, to the extent permitted by law, shall indemnify the Company, its directors, officers and agents and each person who controls the Company (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and out-of-pocket expenses (including, without limitation, reasonable outside attorneys’ fees) resulting from any untrue or alleged untrue statement of material fact contained in any Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such Stockholder expressly for use therein; provided, however, that the obligation to indemnify shall be several, not joint and several, among such Stockholders of Registrable Securities, and the liability of each such Stockholder of Registrable Securities shall be in proportion to and limited to the net proceeds received by such Stockholder from the sale of Registrable Securities pursuant to such Registration Statement. The Stockholders of Registrable Securities shall indemnify the Underwriters, their officers, directors and each person who controls such Underwriters (within the meaning of the Securities Act) to the same extent as provided in the foregoing with respect to indemnification of the Company.
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4.1.3 Any person entitled to indemnification herein shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any person’s right to indemnification hereunder to the extent such failure has not materially prejudiced the indemnifying party) and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent shall not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. No indemnifying party shall, without the consent of the indemnified party, consent to the entry of any judgment or enter into any settlement which cannot be settled in all respects by the payment of money (and such money is so paid by the indemnifying party pursuant to the terms of such settlement) or which settlement does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.
4.1.4 The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling person of such indemnified party and shall survive the transfer of securities. The Company and each Stockholder of Registrable Securities participating in an offering also agrees to make such provisions as are reasonably requested by any indemnified party for contribution to such party in the event the Company’s or such Stockholder’s indemnification is unavailable for any reason.
4.1.5 If the indemnification provided under Section 4.1 from the indemnifying party is unavailable or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities and out-of-pocket expenses referred to herein, then the indemnifying party, in lieu of indemnifying the indemnified party, shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities and out-of-pocket expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, was made by, or relates to information supplied by, such indemnifying party or indemnified party, and the indemnifying party’s and indemnified party’s relative intent, knowledge, access to information and opportunity to correct or prevent such action; provided, however, that the liability of any Stockholder under this Section 4.1.5 shall be limited to the amount of the net proceeds received by such Stockholder in such offering giving rise to such liability. The amount paid or payable by a party as a result of the losses or other liabilities referred to above shall be deemed to include, subject to the limitations set forth in Sections 4.1.1, 4.1.2 and 4.1.3, any legal or other fees, charges or out-of-pocket expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 4.1.5 were determined by pro rata allocation or by any other method of allocation, which does not take account of the equitable considerations referred to in this Section 4.1.5. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution pursuant to this Section 4.1.5 from any person who was not guilty of such fraudulent misrepresentation.
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ARTICLE V
MISCELLANEOUS
5.1 Notices. All notices and other communications among the parties shall be in writing and shall be deemed to have been duly given (i) when delivered in person, (ii) when delivered after posting in the United States mail having been sent registered or certified mail return receipt requested, postage prepaid, (iii) when delivered by FedEx or other nationally recognized overnight delivery service or (iv) when e-mailed during normal business hours (and otherwise as of the immediately following Business Day), addressed as follows. Any notice or communication under this Agreement must be addressed, if to the Company, to TeraWulf Inc., 9 Federal Street, Easton, Maryland 21601, attention: Chief Legal Officer, and, if to any Stockholder, at such Stockholder’s address or number as set forth in the Company’s books and records. Any party may change its address for notice at any time and from time to time by written notice to the other parties hereto, and such change of address shall become effective thirty (30) days after delivery of such notice as provided in this Section 5.1.
5.2 Assignment; Third-Party Beneficiaries.
5.2.1 This Agreement and the rights, duties and obligations of the Company hereunder may not be assigned or delegated by the Company in whole or in part.
5.2.2 A Stockholder may assign or delegate such Stockholder’s rights, duties or obligations under this Agreement, in whole or in part, to any person to whom it transfers Registrable Securities; provided, however, that such Registrable Securities remain Registrable Securities following such transfer and such person agrees to become bound by the terms and provisions of this Agreement.
5.2.3 No assignment by any party hereto of such party’s rights, duties and obligations hereunder shall be binding upon or obligate the Company unless and until the Company shall have received (i) written notice of such assignment as provided in Section 5.1 and (ii) the written agreement of the assignee, in a form reasonably satisfactory to the Company, to be bound by the terms and provisions of this Agreement (which may be accomplished by an addendum or certificate of joinder to this Agreement).
5.2.4 Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns. Any attempted assignment in violation of the terms of this Section 5.2.4 shall be null and void ab initio.
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5.2.5 This Agreement shall not confer any rights or benefits on any persons that are not parties hereto[; provided, however, it is understood that the Stockholders are intended third party beneficiaries hereof and shall be deemed for all purposes hereto parties hereto].
5.3 Captions; Counterparts. The captions in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
5.4 Governing Law. THIS AGREEMENT, AND ALL CLAIMS OR CAUSES OF ACTION BASED UPON, ARISING OUT OF, OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF [DELAWARE], WITHOUT GIVING EFFECT TO PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES WOULD REQUIRE OR PERMIT THE APPLICATION OF LAWS OF ANOTHER JURISDICTION.
5.5 Jurisdiction; Waiver of Jury Trial.
5.5.1 Any Action based upon, arising out of or related to this Agreement, or the transactions contemplated hereby, shall be brought in the Court of Chancery of the State of Delaware or, if such court declines to exercise jurisdiction, any federal or state court located in New York County, New York, and each of the parties irrevocably submits to the exclusive jurisdiction of each such court in any such Action, waives any objection it may now or hereafter have to personal jurisdiction, venue or to convenience of forum, agrees that all claims in respect of the Action shall be heard and determined only in any such court, and agrees not to bring any Action arising out of or relating to this Agreement or the transactions contemplated hereby in any other court. Nothing herein contained shall be deemed to affect the right of any party to serve process in any manner permitted by Law, or to commence legal proceedings or otherwise proceed against any other party in any other jurisdiction, in each case, to enforce judgments obtained in any Action brought pursuant to this Section 5.5.1.
5.5.2 EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION BASED UPON, ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
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5.6 Amendments and Modifications. Upon the written consent of (a) the Company and (b) the holders of a majority of the total Registrable Securities, compliance with any of the provisions, covenants and conditions set forth in this Agreement may be waived, or any of such provisions, covenants or conditions may be amended or modified; provided, however, that, in the event any such waiver, amendment or modification would be materially adverse to the rights or obligations hereunder of any Stockholder that owns at least [●] percent ([●]%) of the Registrable Securities, the prior written consent of such Stockholder shall also be required; provided, further, that, in the event any such waiver, amendment or modification would be (i) materially adverse to the rights or obligations hereunder of any Stockholder in a manner disproportionate to the other Stockholders or (ii) materially adverse to the rights and obligations personal to a Stockholder or specifically refer to such Stockholder by name, the prior written consent of such Stockholder shall also be required. No course of dealing between any Stockholder or the Company and any other party hereto or any failure or delay on the part of a Stockholder or the Company in exercising any rights or remedies under this Agreement shall operate as a waiver of any rights or remedies of any Stockholder or the Company. No single or partial exercise of any rights or remedies under this Agreement by a party shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or thereunder by such party.
5.7 Term. This Agreement shall terminate with respect to any Stockholder on the date that such Stockholder no longer holds any Registrable Securities. The provisions of Section 3.5 and Article IV shall survive any termination.
5.8 Stockholder Information. As a condition to its being deemed a beneficiary of the Company’s obligations hereunder, each Stockholder agrees, if requested in writing, to represent to the Company the total number of Registrable Securities held by such Stockholder in order for the Company to make determinations hereunder.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first written above.
COMPANY: | ||
TeraWulf Inc. | ||
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Name: | ||
Title: | ||
TeraCub Inc. | ||
By: | ||
Name: | ||
Title: | ||
STOCKHOLDERS: | ||
[ ] | ||
By: | ||
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[TeraWulf Inc.—Signature Page to Registration Rights Agreement]
SCHEDULE A
Stockholders
Exhibit 23.1
Consent of Independent Auditor
We consent to the use in this Amendment No. 5 to the Registration Statement (No. 333-258335) on Form S-4 of Telluride Holdco, Inc. of our report dated July 28, 2021 relating to the financial statements of TeraWulf Inc., included in the Prospectus, which is part of this Registration Statement.
We also consent to the reference of our firm under the heading “Experts” in such Registration Statement.
/s/ RSM US LLP
Boston, Massachusetts
November 2, 2021
1
Exhibit 23.2
Consent of Independent Registered Public Accounting Firm
We consent to the use in this Amendment No. 5 to the Registration Statement (No. 333-258335) on Form S-4 of Telluride Holdco, Inc. of our report dated March 2, 2021, relating to the financial statements of IKONICS Corporation appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to our firm under the heading “Experts” in such Prospectus.
/s/ RSM US LLP
Minneapolis, Minnesota
November 2, 2021