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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended June 30, 2022 |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to |
Commission file number 001-40046
Core Scientific, Inc.
(Exact name of registrant as specified in its charter)
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|
|
|
|
|
Delaware |
|
86-1243837 |
|
|
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
210 Barton Springs Road
Suite 300
Austin, Texas
(Address of Principal Executive Offices)
78704
(Zip Code)
(512) 402-5233
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
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|
|
|
|
|
|
|
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Common stock, par value $0.0001 per share |
CORZ |
The Nasdaq Global Select Market |
Warrants, exercisable for shares of common stock |
CORZW |
The Nasdaq Global Select Market |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
|
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|
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|
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|
|
|
|
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|
Large accelerated filer |
☐ |
|
Accelerated filer |
☐ |
Non-accelerated filer |
☒ |
|
Smaller reporting company |
☒ |
|
|
|
Emerging growth company |
☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
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|
Common Stock, par value $0.0001 per share |
|
Shares Outstanding as of August 12, 2022 |
|
|
357,294,622 |
TABLE OF CONTENTS
Part I - Financial Information
Item 1. Financial Statements
Core Scientific, Inc.
Consolidated Balance Sheets
(in thousands, except par value)
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2022 |
|
December 31, 2021 |
Assets |
(Unaudited) |
|
|
Current Assets: |
|
|
|
Cash and cash equivalents |
$ |
128,542 |
|
|
$ |
117,871 |
|
Restricted cash |
11,938 |
|
|
13,807 |
|
Accounts receivable, net |
2,840 |
|
|
1,382 |
|
Accounts receivable from related parties |
677 |
|
|
300 |
|
Deposits for equipment |
165,662 |
|
|
358,791 |
|
Digital assets |
40,664 |
|
|
234,298 |
|
Prepaid expenses and other current assets |
161,234 |
|
|
30,111 |
|
Total Current Assets |
511,557 |
|
|
756,560 |
|
Property, plant and equipment, net |
1,049,070 |
|
|
597,304 |
|
|
|
|
|
Goodwill |
266,038 |
|
|
1,055,760 |
|
Intangible assets, net |
3,590 |
|
|
8,195 |
|
Other noncurrent assets |
14,903 |
|
|
21,045 |
|
Total Assets |
$ |
1,845,158 |
|
|
$ |
2,438,864 |
|
Liabilities, Redeemable Preferred Stock and Stockholders’ Equity |
|
|
|
Current Liabilities: |
|
|
|
Accounts payable |
$ |
31,252 |
|
|
$ |
11,617 |
|
Accrued expenses and other |
124,488 |
|
|
67,862 |
|
Deferred revenue |
71,837 |
|
|
63,417 |
|
Deferred revenue from related parties |
36,923 |
|
|
72,945 |
|
Derivative warrant liabilities |
5,808 |
|
|
— |
|
|
|
|
|
Finance lease liabilities, current portion |
28,570 |
|
|
28,452 |
|
Notes payable, current portion |
217,674 |
|
|
75,996 |
|
Total Current Liabilities |
516,552 |
|
|
320,289 |
|
|
|
|
|
Finance lease liabilities, net of current portion |
48,701 |
|
|
62,145 |
|
Notes payable, net of current portion (includes $726,554 and $557,007 at fair value) |
852,323 |
|
|
652,213 |
|
Other noncurrent liabilities |
11,130 |
|
|
18,531 |
|
Total Liabilities |
1,428,706 |
|
|
1,053,178 |
|
Contingently redeemable convertible preferred stock; $0.0001 par value; 2,000,000 shares authorized; — and 10,826 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively; $— and $45,164 total liquidation preference at June 30, 2022 and December 31, 2021, respectively |
— |
|
|
44,476 |
|
Commitments and contingencies (Note 10) |
|
|
|
Stockholders’ Equity: |
|
|
|
Common stock; $0.0001 par value; 10,000,000 shares authorized at both June 30, 2022 and December 31, 2021; 353,481 and 271,576 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively |
35 |
|
|
27 |
|
Additional paid-in capital |
1,695,748 |
|
|
1,379,581 |
|
Accumulated deficit |
(1,304,111) |
|
|
(27,432) |
|
Accumulated other comprehensive income (loss) |
24,780 |
|
|
(10,966) |
|
Total Stockholders’ Equity |
416,452 |
|
|
1,341,210 |
|
Total Liabilities, Redeemable Preferred Stock and Stockholders’ Equity |
$ |
1,845,158 |
|
|
$ |
2,438,864 |
|
See accompanying notes to unaudited consolidated financial statements.
Core Scientific, Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Revenue: |
|
|
|
|
|
|
|
Hosting revenue from customers |
$ |
31,338 |
|
|
$ |
11,895 |
|
|
$ |
58,676 |
|
|
$ |
20,251 |
|
Hosting revenue from related parties |
7,598 |
|
|
6,667 |
|
|
13,474 |
|
|
11,003 |
|
Equipment sales to customers |
3,507 |
|
|
36,457 |
|
|
3,923 |
|
|
60,499 |
|
Equipment sales to related parties |
11,687 |
|
|
9,519 |
|
|
37,576 |
|
|
17,403 |
|
Digital asset mining revenue |
109,842 |
|
|
10,765 |
|
|
242,842 |
|
|
20,393 |
|
Total revenue |
163,972 |
|
|
75,303 |
|
|
356,491 |
|
|
129,549 |
|
Cost of revenue: |
|
|
|
|
|
|
|
Cost of hosting services |
43,644 |
|
|
17,550 |
|
|
74,875 |
|
|
29,379 |
|
Cost of equipment sales |
13,541 |
|
|
31,100 |
|
|
36,076 |
|
|
57,331 |
|
Cost of digital asset mining |
94,070 |
|
|
2,115 |
|
|
162,820 |
|
|
3,768 |
|
Total cost of revenue |
151,255 |
|
|
50,765 |
|
|
273,771 |
|
|
90,478 |
|
Gross profit |
12,717 |
|
|
24,538 |
|
|
82,720 |
|
|
39,071 |
|
|
|
|
|
|
|
|
|
Gain (loss) from sales of digital assets |
11,808 |
|
|
(16) |
|
|
13,971 |
|
|
14 |
|
Impairment of digital assets |
(150,213) |
|
|
— |
|
|
(204,198) |
|
|
— |
|
Impairment of goodwill and other intangibles |
(790,753) |
|
|
— |
|
|
(790,753) |
|
|
— |
|
Losses on exchange or disposal of property, plant and equipment |
(13,057) |
|
|
(17) |
|
|
(13,057) |
|
|
(17) |
|
Operating expenses: |
|
|
|
|
|
|
|
Research and development |
14,773 |
|
|
1,437 |
|
|
18,113 |
|
|
2,645 |
|
Sales and marketing |
10,238 |
|
|
720 |
|
|
11,636 |
|
|
1,254 |
|
General and administrative |
90,874 |
|
|
6,822 |
|
|
131,034 |
|
|
10,617 |
|
Total operating expenses |
115,885 |
|
|
8,979 |
|
|
160,783 |
|
|
14,516 |
|
Operating (loss) income |
(1,045,383) |
|
|
15,526 |
|
|
(1,072,100) |
|
|
24,552 |
|
Non-operating (income) expenses, net: |
|
|
|
|
|
|
|
Loss on debt extinguishment |
— |
|
|
7,974 |
|
|
— |
|
|
8,016 |
|
Interest expense, net |
27,116 |
|
|
10,846 |
|
|
48,792 |
|
|
12,981 |
|
Fair value adjustment on convertible notes |
(195,061) |
|
|
— |
|
|
190,976 |
|
|
— |
|
Fair value adjustment on derivative warrant liabilities |
(22,189) |
|
|
— |
|
|
(32,464) |
|
|
— |
|
Other non-operating expenses, net |
3,876 |
|
|
2 |
|
|
3,519 |
|
|
2 |
|
Total non-operating (income) expenses, net |
(186,258) |
|
|
18,822 |
|
|
210,823 |
|
|
20,999 |
|
(Loss) income before income taxes |
(859,125) |
|
|
(3,296) |
|
|
(1,282,923) |
|
|
3,553 |
|
Income tax (benefit) expense |
(48,650) |
|
|
118 |
|
|
(6,244) |
|
|
118 |
|
Net (loss) income |
$ |
(810,475) |
|
|
$ |
(3,414) |
|
|
$ |
(1,276,679) |
|
|
$ |
3,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per share (Note 14): |
|
|
|
|
|
|
|
Basic |
$ |
(2.49) |
|
|
$ |
(0.02) |
|
|
$ |
(4.04) |
|
|
$ |
0.02 |
|
Diluted |
$ |
(2.49) |
|
|
$ |
(0.02) |
|
|
$ |
(4.04) |
|
|
$ |
0.02 |
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
Basic |
324,967 |
|
|
158,890 |
|
|
316,269 |
|
|
158,338 |
|
Diluted |
324,967 |
|
|
158,890 |
|
|
316,269 |
|
|
177,342 |
|
See accompanying notes to unaudited consolidated financial statements.
Core Scientific, Inc.
Consolidated Statements of Comprehensive (Loss) Income
(in thousands, except per share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Net (loss) income |
$ |
(810,475) |
|
|
$ |
(3,414) |
|
|
$ |
(1,276,679) |
|
|
$ |
3,435 |
|
Other comprehensive income, net of income taxes: |
|
|
|
|
|
|
|
Change in fair value attributable to instrument-specific credit risk of convertible notes measured at fair value under the fair value option, net of tax effect of $—, $—, $— and $— |
8,582 |
|
|
— |
|
|
35,746 |
|
|
— |
|
Total other comprehensive income, net of income taxes |
8,582 |
|
|
— |
|
|
35,746 |
|
|
— |
|
Comprehensive (loss) income |
$ |
(801,893) |
|
|
$ |
(3,414) |
|
|
$ |
(1,240,933) |
|
|
$ |
3,435 |
|
See accompanying notes to unaudited consolidated financial statements.
Core Scientific, Inc.
Consolidated Statements of Changes in Contingently Redeemable Convertible Preferred Stock and Stockholders’ Equity
(in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingently Redeemable Convertible Preferred Stock |
|
|
Common Stock |
|
Additional Paid-In Capital |
|
Accumulated Deficit |
|
Accumulated Other Comprehensive Income |
|
Total Stockholders’ Equity |
|
Shares |
|
Amount |
|
|
Shares |
|
Amount |
|
|
|
|
Balance at March 31, 2022 |
— |
|
|
— |
|
|
|
324,564 |
|
|
32 |
|
|
1,604,116 |
|
|
(493,636) |
|
|
16,198 |
|
|
1,126,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
(810,475) |
|
|
— |
|
|
(810,475) |
|
Other comprehensive income |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
8,582 |
|
|
8,582 |
|
Stock-based compensation |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
115,492 |
|
|
— |
|
|
— |
|
|
115,492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock - employee stock options |
— |
|
|
— |
|
|
|
1,321 |
|
|
— |
|
|
3,846 |
|
|
— |
|
|
— |
|
|
3,846 |
|
Issuance of common stock - restricted stock and restricted stock units, net of shares withheld for tax withholding obligations |
— |
|
|
— |
|
|
|
27,399 |
|
|
3 |
|
|
(29,280) |
|
|
— |
|
|
— |
|
|
(29,277) |
|
Issuance of common stock - exercise of convertible notes |
— |
|
|
— |
|
|
|
197 |
|
|
— |
|
|
1,574 |
|
|
— |
|
|
— |
|
|
1,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2022 |
— |
|
|
— |
|
|
|
353,481 |
|
|
35 |
|
|
1,695,748 |
|
|
(1,304,111) |
|
|
24,780 |
|
|
416,452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2021 |
10,826 |
|
|
44,476 |
|
|
|
271,576 |
|
|
27 |
|
|
1,379,581 |
|
|
(27,432) |
|
|
(10,966) |
|
|
1,341,210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
(1,276,679) |
|
|
— |
|
|
(1,276,679) |
|
Other comprehensive income |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
35,746 |
|
|
35,746 |
|
Stock-based compensation |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
136,065 |
|
|
— |
|
|
— |
|
|
136,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock - employee stock options |
— |
|
|
— |
|
|
|
1,321 |
|
|
— |
|
|
3,846 |
|
|
— |
|
|
— |
|
|
3,846 |
|
Issuance of common stock - restricted stock and restricted stock units, net of shares withheld for tax withholding obligations |
— |
|
|
— |
|
|
|
34,202 |
|
|
4 |
|
|
(29,281) |
|
|
— |
|
|
— |
|
|
(29,277) |
|
Issuance of common stock - exercise of convertible notes |
— |
|
|
— |
|
|
|
197 |
|
|
— |
|
|
1,574 |
|
|
— |
|
|
— |
|
|
1,574 |
|
Issuance of common stock - exercise of warrants |
— |
|
|
— |
|
|
|
3,001 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Conversion of contingently redeemable preferred stock to common stock |
(10,826) |
|
|
(44,476) |
|
|
|
10,826 |
|
|
1 |
|
|
44,475 |
|
|
— |
|
|
— |
|
|
44,476 |
|
Issuances of common stock - Merger with XPDI |
— |
|
|
— |
|
|
|
30,778 |
|
|
3 |
|
|
163,456 |
|
|
— |
|
|
— |
|
|
163,459 |
|
Issuances of common stock - vendor settlement |
— |
|
|
— |
|
|
|
1,580 |
|
|
— |
|
|
12,674 |
|
|
— |
|
|
— |
|
|
12,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs attributable to issuance of common stock and equity instruments - Merger with XPDI |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
(16,642) |
|
|
— |
|
|
— |
|
|
(16,642) |
|
Balance at June 30, 2022 |
— |
|
|
— |
|
|
|
353,481 |
|
|
35 |
|
|
1,695,748 |
|
|
(1,304,111) |
|
|
24,780 |
|
|
416,452 |
|
See accompanying notes to unaudited consolidated financial statements.
Core Scientific, Inc.
Consolidated Statements of Changes in Contingently Redeemable Convertible Preferred Stock and Stockholders’ Equity
(in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingently Redeemable Convertible Preferred Stock |
|
|
Common Stock |
|
Additional Paid-In Capital |
|
Accumulated Deficit |
|
Accumulated Other Comprehensive Income |
|
Total Stockholders’ Equity |
|
Shares |
|
Amount |
|
|
Shares |
|
Amount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2021 |
10,826 |
|
|
44,476 |
|
|
|
157,786 |
|
|
16 |
|
|
165,036 |
|
|
(67,895) |
|
|
— |
|
|
97,157 |
|
Net loss |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
(3,414) |
|
|
— |
|
|
(3,414) |
|
Stock-based compensation |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
2,136 |
|
|
— |
|
|
— |
|
|
2,136 |
|
Issuances of common stock- warrants and options |
— |
|
|
— |
|
|
|
40 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Balance at June 30, 2021 |
10,826 |
|
|
44,476 |
|
|
|
157,826 |
|
|
16 |
|
|
167,172 |
|
|
(71,309) |
|
|
— |
|
|
95,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020 |
6,766 |
|
|
$ |
44,476 |
|
|
|
98,607 |
|
|
$ |
1 |
|
|
$ |
163,967 |
|
|
$ |
(74,744) |
|
|
$ |
— |
|
|
$ |
89,224 |
|
Retroactive application of the recapitalization |
4,060 |
|
|
— |
|
|
|
59,179 |
|
|
15 |
|
|
(15) |
|
|
— |
|
|
— |
|
|
— |
|
Balance at December 31, 2020, as adjusted |
10,826 |
|
|
44,476 |
|
|
|
157,786 |
|
|
16 |
|
|
163,952 |
|
|
(74,744) |
|
|
— |
|
|
89,224 |
|
Net income |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
3,435 |
|
|
— |
|
|
3,435 |
|
Stock-based compensation |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
2,724 |
|
|
— |
|
|
— |
|
|
2,724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuances of common stock- warrants and options |
— |
|
|
— |
|
|
|
40 |
|
|
— |
|
|
496 |
|
|
— |
|
|
— |
|
|
496 |
|
Balance at June 30, 2021 |
10,826 |
|
|
44,476 |
|
|
|
157,826 |
|
|
16 |
|
|
167,172 |
|
|
(71,309) |
|
|
— |
|
|
95,879 |
|
See accompanying notes to unaudited consolidated financial statements.
Core Scientific, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
2022 |
|
2021 |
Cash flows from Operating Activities: |
|
|
|
Net (loss) income |
$ |
(1,276,679) |
|
|
$ |
3,435 |
|
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: |
|
|
|
Depreciation and amortization |
91,974 |
|
|
5,991 |
|
Amortization of operating lease right-of-use assets |
107 |
|
|
— |
|
Stock-based compensation |
136,795 |
|
|
2,724 |
|
Digital asset mining revenue |
(242,842) |
|
|
(20,393) |
|
Deferred income taxes |
(8,527) |
|
|
— |
|
|
|
|
|
Gain on sale of intangible assets |
(5,904) |
|
|
— |
|
Loss on debt extinguishment |
— |
|
|
8,016 |
|
Fair value adjustment on derivative warrant liabilities |
(32,464) |
|
|
— |
|
Fair value adjustment on convertible notes |
206,859 |
|
|
2,580 |
|
Fair value adjustment on other liabilities |
9,430 |
|
|
— |
|
Amortization of debt discount and debt issuance costs |
3,920 |
|
|
742 |
|
Losses on exchange or disposal of property, plant and equipment |
13,057 |
|
|
17 |
|
|
|
|
|
Impairment of digital assets |
204,198 |
|
|
— |
|
Impairment of goodwill and other intangibles |
790,753 |
|
|
— |
|
|
|
|
|
Changes in working capital components: |
|
|
|
Accounts receivable, net |
(1,458) |
|
|
(6,800) |
|
Accounts receivable from related parties |
(377) |
|
|
(16,061) |
|
Digital assets |
232,278 |
|
|
20,207 |
|
Deposits for equipment for sales to customers |
36,953 |
|
|
(260,568) |
|
Prepaid expenses and other current assets |
(24,246) |
|
|
17,079 |
|
Accounts payable |
4,186 |
|
|
3,893 |
|
Accrued expenses and other |
33,297 |
|
|
3,267 |
|
Deferred revenue |
8,421 |
|
|
18,977 |
|
Deferred revenue from related parties |
(36,022) |
|
|
116,908 |
|
Other noncurrent assets and liabilities, net |
(2,436) |
|
|
(21,345) |
|
Net cash provided by (used in) operating activities |
141,273 |
|
|
(121,331) |
|
Cash flows from Investing Activities: |
|
|
|
Purchases of property, plant and equipment |
(238,537) |
|
|
(39,075) |
|
|
|
|
|
Deposits for self-mining equipment |
(217,677) |
|
|
— |
|
Proceeds from sale of intangibles |
10,850 |
|
|
— |
|
Other |
(276) |
|
|
(142) |
|
Net cash used in investing activities |
(445,640) |
|
|
(39,217) |
|
Cash flows from Financing Activities: |
|
|
|
Proceeds from issuance of common stock, net of transaction costs |
198,857 |
|
|
496 |
|
Proceeds from debt, net of issuance costs |
216,257 |
|
|
245,372 |
|
Repurchase of common shares to pay employee withholding taxes |
(29,278) |
|
|
— |
|
Principal repayments of finance leases |
(23,177) |
|
|
— |
|
Principal payments on debt |
(49,490) |
|
|
(35,670) |
|
|
|
|
|
Net cash provided by financing activities |
313,169 |
|
|
210,198 |
|
Net increase in cash, cash equivalents and restricted cash |
8,802 |
|
|
49,650 |
|
Cash, cash equivalents and restricted cash—beginning of period |
131,678 |
|
|
8,721 |
|
Cash, cash equivalents and restricted cash—end of period |
$ |
140,480 |
|
|
$ |
58,371 |
|
See accompanying notes to unaudited consolidated financial statements.
Core Scientific, Inc.
Notes to Unaudited Consolidated Financial Statements
Notes to Unaudited Consolidated Financial Statements
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
MineCo Holdings, Inc. was incorporated on December 13, 2017 in the State of Delaware and changed its name to Core Scientific, Inc. (“Legacy Core Scientific”) pursuant to an amendment to its Certificate of Incorporation dated June 12, 2018. On August 17, 2020 Legacy Core Scientific engaged in a holdco restructuring to facilitate a borrowing arrangement by Legacy Core Scientific pursuant to which Legacy Core Scientific was merged with and into a wholly owned subsidiary of Core Scientific Holding Co. and became a wholly owned subsidiary of Core Scientific Holding Co. and the stockholders of Legacy Core Scientific became the shareholders of Core Scientific Holding Co. On January 19, 2022, Core Scientific Holding Co. merged with Power & Digital Infrastructure Acquisition Corp., a Delaware corporation (“XPDI”), and XPDI Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of XPDI (“Merger Sub”), consummated the transactions contemplated under the merger agreement, following the approval at the special meeting of the stockholders of XPDI held on January 19, 2022. In connection with the closing of the merger, XPDI changed its name from Power & Digital Infrastructure Acquisition Corp. to Core Scientific, Inc. (“Core Scientific” or the “Company”). The Company, headquartered in Austin, Texas, is an infrastructure, technology and services company that conducts, or plans to conduct, the following business activities:
•Owning and operating computer equipment used to process transactions conducted on one or more blockchain networks in exchange for transaction processing fees rewarded in digital currency assets, commonly referred to as mining;
•Owning and operating datacenter facilities in the U.S. to provide colocation and hosting services for distributed ledger technology, also commonly known as blockchain;
•Developing blockchain-based platforms and applications, including infrastructure management, security technologies, mining optimization, and recordkeeping;
Merger Agreement
In 2021, XPDI entered into a certain Agreement and Plan of Reorganization and Merger, dated as of July 20, 2021, as amended on October 1, 2021, and as further amended on December 29, 2021, by and among Core Scientific Holding Co., XPDI Merger Sub and XPDI (the “Merger Agreement”). XPDI’s stockholders approved the transactions (collectively, the “Merger”) contemplated by the Merger Agreement at a special meeting of stockholders held on January 19, 2022 (the “Special Meeting”).
Pursuant to the terms of (a) the Merger Agreement and (b) that certain Agreement and Plan of Merger, dated as of October 1, 2021, as amended on January 14, 2022, by and among XPDI, Core Scientific Holding Co., XPDI Merger Sub 3, LLC, a Delaware limited liability company and wholly owned subsidiary of XPDI (“Merger Sub 3”), and Blockcap, Inc., a Nevada corporation and wholly owned subsidiary of Core Scientific (“Blockcap”), the Merger was effected by (i) the merger of Merger Sub with and into Core Scientific (the “First Merger”), which occurred on January 19, 2022 (the “Closing Date”), with Core Scientific surviving the First Merger as a wholly owned subsidiary of XPDI, (ii) the merger of Core Scientific with and into XPDI (the “Second Merger”), which occurred on January 20, 2022, with XPDI surviving the Second Merger, and (iii) following the closing of the Second Merger on January 20, 2022, the merger of Blockcap with and into Merger Sub 3 (the “Third Merger”), with Merger Sub 3 surviving the Third Merger as a wholly owned subsidiary of XPDI under the name “Core Scientific Acquired Mining LLC.” Immediately prior to the effective time of the First Merger (such effective time of the First Merger, the “Effective Time”), XPDI filed a Second Amended and Restated Certificate of Incorporation (the “Post-Combination Charter”) with the Secretary of State of the State of Delaware pursuant to which XPDI changed its name from “Power & Digital Infrastructure Acquisition Corp.” to “Core Scientific, Inc.” (hereinafter referred to as the “Company” or “New Core”) and redesignated its Class A common stock, par value $0.0001 per share (“XPDI Class A Common Stock”), and Class B common stock, par value $0.0001 per share (“XPDI Class B Common Stock”), as common stock, par value $0.0001, of the Company (“New Core Common Stock”). The Exchange Ratio (as defined in the Merger Agreement) was 1.6001528688 of a share of New Core Common Stock per fully-diluted share of Core Scientific Common Stock.
In connection with the Special Meeting and the Merger, holders of 12.3 million of the 34.5 million then-outstanding shares of Class A common stock of XPDI exercised their right to redeem their shares for cash at a redemption price of approximately $10.00 per share, for an aggregate redemption amount of $123.5 million.
Core Scientific, Inc.
Notes to Unaudited Consolidated Financial Statements
The Merger provided gross proceeds of approximately $221.6 million from the XPDI trust account, resulting in approximately $195.0 million in net cash proceeds to Core Scientific, after the payment of transaction expenses, which is presented within Proceeds from issuance of common stock, net of transaction costs on the consolidated statements of cash flows. Following the Transaction, former Core Scientific stockholders owned 90.7%, former XPDI public stockholders owned 6.7% and XPDI’s sponsor owned 2.6% of the issued and outstanding shares of common stock, respectively, of the Company, excluding the impact of unvested restricted stock units and options. The proceeds from the Merger were used to fund mining equipment purchases and infrastructure build-out.
The Merger is accounted for as a reverse recapitalization with the Company being the accounting acquirer. A reverse recapitalization does not result in a new basis of accounting. Accordingly, the reverse recapitalization was treated as the equivalent of Core Scientific Holding Co. issuing stock for the net assets of XPDI, accompanied by a recapitalization. The net assets of XPDI are stated at historical costs, with no goodwill or other intangible assets recorded. The Company identified $18.6 million of direct and incremental transaction costs, which consist of legal, accounting, and other professional services directly related to the Merger, of which $10.7 million were recorded in other noncurrent assets on the consolidated balance sheets as of December 31, 2021 and the remaining $7.9 million were recognized in the six months ended June 30, 2022. These transaction costs have been allocated to all instruments assumed or issued in the merger on a relative fair value basis as of the date of the merger. Transaction costs of $16.6 million have been allocated to equity-classified instruments and recognized as an adjustment to additional paid-in capital within total stockholders’ equity. The cash outflows related to these costs have been netted against the proceeds from the issuance of common stock upon the Merger with XPDI within financing activities on the Company’s consolidated statement of cash flows. Transaction costs of $2.0 million have been allocated to liability-classified instruments that are measured at fair value through earnings and have been recognized as a charge within general and administrative expenses in the six months ended June 30, 2022.
Immediately prior to the Effective Time, each share of Series A convertible preferred stock, par value $0.00001, of Core Scientific automatically converted into one share of Core Scientific common stock, par value $0.00001 per share (“Core Scientific Common Stock”), and each share of Series B convertible preferred stock, par value $0.00001, of Core Scientific automatically converted into one share of Core Scientific Common Stock.
In addition, immediately prior to the Effective Time, each share of XPDI Class B Common Stock automatically converted into one share of New Core Common Stock. 1.7 million shares (“SPAC Vesting Shares”) are subject to vesting conditions, and will vest i) upon the date on which New Core Common Stock’s volume-weighted average price is greater than $12.50 per share for any