August 7, 2024 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from to

Commission file number 001-40046

Core Scientific, Inc.

(Exact name of registrant as specified in its charter)

Delaware

86-1243837

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

838 Walker Road

Suite 21-2105

Dover, Delaware

(Address of Principal Executive Offices)

19904

(Zip Code)

(512) 402-5233

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.00001 per share	CORZ	The Nasdaq Global Select Market
Warrants, each whole warrant exercisable for one share of common stock at an exercise price of $6.81 per share	CORZW	The Nasdaq Global Select Market
Warrants, each whole warrant exercisable for one share of common stock at an exercise price of $0.01 per share	CORZZ	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 every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Emerging growth company

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Table of Contents

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 Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of August 2, 2024, 258,223,230 shares of Common Stock, par value $0.00001, were outstanding.

Table of Contents

TABLE OF CONTENTS


		Page
Part I. Financial Information
Item 1.	Financial Statements	5
	Condensed Consolidated Balance Sheets (Unaudited)	6
	Condensed Consolidated Statements of Operations (Unaudited)	7

	Condensed Consolidated Statements of Changes in Stockholders’ Deficit (Unaudited)	8
	Condensed Consolidated Statements of Cash Flows (Unaudited)	11
	Notes to Unaudited Condensed Consolidated Financial Statements	13
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	44
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	73
Item 4.	Controls and Procedures	74

Part II. Other Information
Item 1.	Legal Proceedings	75
Item 1A.	Risk Factors	75
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76
Item 3.	Defaults Upon Senior Securities	76
Item 4.	Mine Safety Disclosures	76
Item 5.	Other Information	77
Item 6.	Exhibits	78
Signatures		79

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements may be identified by the use of words such as “aim,” “estimate,” “plan,” “project,” “forecast,” “goal,” “intend,” “will,” “expect,” “anticipate,” “believe,” “seek,” “target” or other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding projections, estimates and forecasts of revenue and other financial and performance metrics, projections of market opportunity and expectations, the Company’s ability to scale and grow its business, and the advantages and expected growth of the Company. These statements are provided for illustrative purposes only and are based on various assumptions, whether or not identified in this Quarterly Report on Form 10-Q, and on the current expectations of the Company’s management. These forward-looking statements are not intended to serve, and must not be relied on by any investor, as a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of the Company.

These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions, known or unknown, that could cause actual results to vary materially from those indicated or anticipated. These risks, assumptions and uncertainties include those described in Item 1A. — “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. These risk factors should be read to include our new HPC Hosting segment described herein and read in conjunction with changes to certain of our risk factors disclosed under the caption “Item 1A. — “Risk Factors” in this Quarterly Report on Form 10-Q. If one or more of these risks or uncertainties materializes, or if underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. There may be additional risks that the Company could not presently know or that the Company currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect the Company’s expectations, plans or forecasts of future events and views as of the date of this Quarterly Report on Form 10-Q and should not be relied upon as representing the Company’s assessments as of any date subsequent to the date of this Quarterly Report on Form 10-Q. The Company anticipates that subsequent events and developments will cause the Company’s assessments to change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so except as required under applicable securities laws. Accordingly, you should not place undue reliance on these forward-looking statements, which speak only as of the date they are made.

Table of Contents

Part I - Financial Information

Item 1. Financial Statements

Core Scientific, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value)


	June 30, 2024		December 31, 2023
Assets	(Unaudited)
Current Assets:
Cash and cash equivalents	$	96,122	$	50,409
Restricted cash	983		19,300
Accounts receivable	4,676		1,001


Digital assets	—		2,284
Prepaid expenses and other current assets	16,082		24,022

Total Current Assets	117,863		97,016
Property, plant and equipment, net	549,994		585,431
Operating lease right-of-use assets	75,783		7,844


Other noncurrent assets	17,816		21,865
Total Assets	$	761,456	$	712,156
Liabilities and Stockholders’ Deficit
Current Liabilities:
Accounts payable	$	8,491	$	154,751
Accrued expenses and other current liabilities	28,949		179,636
Deferred revenue	7,912		9,830


Operating lease liabilities, current portion	5,427		77
Finance lease liabilities, current portion	2,717		19,771
Notes payable, current portion	18,370		124,358
Contingent value rights, current portion	2,958		—

Total Current Liabilities	74,824		488,423
Operating lease liabilities, net of current portion	67,068		1,512
Finance lease liabilities, net of current portion	553		35,745
Convertible and other notes payable, net of current portion	526,756		684,082
Contingent value rights, net of current portion	9,988		—
Warrant liabilities	1,155,103		—
Other noncurrent liabilities	11,038		—
Total liabilities not subject to compromise	1,845,330		1,209,762
Liabilities subject to compromise	—		99,335
Total Liabilities	1,845,330		1,309,097
Commitments and contingencies (Note 9)
Stockholders’ Deficit:
Preferred stock; $0.00001 par value; 2,000,000 and nil shares authorized at June 30, 2024 and December 31, 2023, respectively; none issued and outstanding at June 30, 2024 and December 31, 2023	—		—
Common stock; $0.00001 par value; 10,000,000 shares authorized at June 30, 2024 and December 31, 2023; 187,892 and 386,883 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively	2		36
Additional paid-in capital	1,930,542		1,823,260
Accumulated deficit	(3,014,418)		(2,420,237)

Total Stockholders’ Deficit	(1,083,874)		(596,941)
Total Liabilities and Stockholders’ Deficit	$	761,456	$	712,156

See accompanying notes to unaudited condensed consolidated financial statements.

Core Scientific, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue:
Digital asset self-mining revenue	$	110,743	$	97,082	$	260,702	$	195,108
Digital asset hosted mining revenue from customers	24,840		26,316		54,172		45,225
Digital asset hosted mining revenue from related parties	—		3,514		—		7,234
HPC hosting revenue	5,519		—		5,519		—
Total revenue	141,102		126,912		320,393		247,567
Cost of revenue:
Cost of digital asset self-mining	80,001		66,846		161,565		139,522
Cost of digital asset hosted mining services	17,393		23,107		37,474		39,305
Cost of HPC hosting services	4,891		—		4,891		—
Total cost of revenue	102,285		89,953		203,930		178,827
Gross profit	38,817		36,959		116,463		68,740
Change in fair value of digital assets	(584)		—		(41)		—
Gain from sale of digital assets	—		931		—		1,995
Impairment of digital assets	—		(1,127)		—		(2,183)
Change in fair value of energy derivatives	(539)		—		(2,757)		—


Gain (loss) on disposal of property, plant and equipment	268		(174)		(3,552)		(174)
Operating expenses:
Research and development	2,174		1,640		3,973		3,055
Sales and marketing	2,966		1,084		3,948		2,092
General and administrative	26,243		24,396		40,386		46,160
Total operating expenses	31,383		27,120		48,307		51,307
Operating income	6,579		9,469		61,806		17,071
Non-operating (income) expenses, net:
Loss (gain) on debt extinguishment	120		—		170		(20,761)
Interest expense (income), net	14,775		(36)		28,862		121


Reorganization items, net	—		18,455		(111,439)		50,014
Change in fair value of warrant and contingent value rights	796,035		—		735,921		—
Other non-operating expense (income), net	401		181		2,147		(2,888)
Total non-operating expenses, net	811,331		18,600		655,661		26,486
Loss before income taxes	(804,752)		(9,131)		(593,855)		(9,415)
Income tax expense	144		129		350		233
Net loss	$	(804,896)	$	(9,260)	$	(594,205)	$	(9,648)
Net loss per share (Note 12):
Basic	$	(4.51)	$	(0.02)	$	(2.87)	$	(0.03)
Diluted	$	(4.51)	$	(0.02)	$	(2.87)	$	(0.03)
Weighted average shares outstanding:
Basic	178,505		375,779		207,092		375,875
Diluted	178,505		375,779		207,092		375,875

Certain prior year amounts have been reclassified for consistency with the current year presentation.

See accompanying notes to unaudited condensed consolidated financial statements.

Core Scientific, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Deficit

For the Three Months Ended June 30, 2024

(in thousands)

(Unaudited)


	Common Stock		Additional Paid-In Capital			Accumulated Deficit				Total Stockholders’ Deficit
		Shares			Amount
Balance at April 1, 2024		182,237	$	2		$	1,891,011	$	(2,209,522)		$	(318,509)
Net loss		—	—			—		(804,896)			(804,896)

Stock-based compensation		—	—			8,494		—			8,494

Issuance of new common stock in connection with emergence		79	—			399		—			399






Restricted stock awards issued, net of tax withholding obligations		115	—			(4)		—			(4)

Exercise of warrants		54	—			420		—			420
Issuance of new common stock for New Secured Convertible Notes conversion		4,525	—			26,545		—			26,545
Issuance of new common stock for PIK interest		882	—			3,677		—			3,677


Balance at June 30, 2024		187,892	$	2		$	1,930,542	$	(3,014,418)		$	(1,083,874)

See accompanying notes to unaudited condensed consolidated financial statements.

Core Scientific, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Deficit

For the Six Months Ended June 30, 2024

(in thousands)

(Unaudited)


	Common Stock		Additional Paid-In Capital			Accumulated Deficit				Total Stockholders’ Deficit
		Shares			Amount
Balance at January 1, 2024		386,883	$	36		$	1,823,260	$	(2,420,237)		$	(596,941)
Cumulative effect of adoption of ASU 2023-08, Accounting for and Disclosure of Crypto Assets		—	—			—		24			24
Balance at January 1, 2024, adjusted		386,883	36			1,823,260		(2,420,213)			(596,917)
Net loss		—	—			—		(594,205)			(594,205)

Stock-based compensation		—	—			7,434		—			7,434
Cancellation of common stock in connection with emergence		(386,883)	(36)			36					—
Issuance of new common stock in connection with emergence		152,576	2			296,893		—			296,895
Issuance of new common stock under the Equity Rights Offering		15,649	—			55,000		—			55,000
Issuance of new common stock for the Equity Rights Offering backstop commitment		2,111	—			5,475		—			5,475
Issuance of new common stock for Bitmain obligation		10,735	—			27,839		—			27,839
Conversion premium on the issuance of the New Secured Convertible Notes		—	—			33,202		—			33,202
Issuance of warrants		—	—			(345,856)		—			(345,856)
Exercise of stock options		—	—			9		—			9
Restricted stock awards issued, net of tax withholding obligations		1,400	—			(3,392)		—			(3,392)
Restricted stock awards forfeited		(40)	—			—		—			—
Exercise of warrants		54	—			420		—			420
Issuance of new common stock for New Secured Convertible Notes conversion		4,525	—			26,545		—			26,545
Issuance of new common stock for PIK interest		882	—			3,677		—			3,677

Balance at June 30, 2024		187,892	$	2		$	1,930,542	$	(3,014,418)		$	(1,083,874)

See accompanying notes to unaudited condensed consolidated financial statements.

Core Scientific, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Deficit

For the Three And Six Months Ended June 30, 2023

(in thousands)

(Unaudited)


	Common Stock			Additional Paid-In Capital				Accumulated Deficit		Total Stockholders’ Deficit
	Shares	Amount

Balance at April 1, 2023	377,841	$	36	$	1,776,641	$	—	$	(2,174,138)	$	(397,461)
Net loss	—	—		—				(9,260)		(9,260)
Stock-based compensation	—	—		14,280				—		14,280

Restricted stock awards issued, net of shares withheld for tax withholding obligations	1,250	—		—				—		—
Balance at June 30, 2023	379,091	$	36	$	1,790,921			$	(2,183,398)	$	(392,441)


Balance at January 1, 2023	375,225	$	36	$	1,764,368	$	(2,173,750)	$	(409,346)
Net loss	—	—		—		(9,648)		(9,648)
Stock-based compensation	—	—		26,553		—		26,553

Restricted stock awards issued, net of shares withheld for tax withholding obligations	3,866	—		—		—		—
Balance at June 30, 2023	379,091	$	36	$	1,790,921	$	(2,183,398)	$	(392,441)

See accompanying notes to unaudited condensed consolidated financial statements.

Core Scientific, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	Six Months Ended June 30,
	2024		2023
Cash flows from Operating Activities:
Net loss	$	(594,205)	$	(9,648)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	58,473		40,567
Amortization of operating lease right-of-use assets	2,752		469
Stock-based compensation	7,434		26,553
Digital asset self-mining revenue	(260,701)		(195,108)



Loss (gain) on debt extinguishment	170		(20,761)
Change in fair value of energy derivatives	(2,262)		—
Change in fair value of warrant liabilities	809,320		—
Change in fair value of contingent value rights	(73,379)		—


Change in fair value of digital assets	41		—
Amortization of debt discount	1,125		—
Losses on disposal of property, plant and equipment	3,552		174
Impairment of digital assets	—		2,183


Gain on sale of digital assets	—		(1,995)
Non-cash reorganization items	(143,791)		—
Non-cash PIK interest expense	2,339		—
Changes in operating assets and liabilities:
Accounts receivable, net	(3,675)		(1,025)
Accounts receivable from related parties	—		23
Digital assets	262,968		195,322

Prepaid expenses and other current assets	5,654		(976)
Accounts payable	(11,480)		23,282
Accrued expenses and other	(46,257)		(6,499)
Deferred revenue	(1,917)		(14,175)
Other noncurrent assets and liabilities, net	7,217		(409)
Net cash provided by operating activities	23,378		37,977
Cash flows from Investing Activities:
Purchases of property, plant and equipment	(35,029)		(1,774)


Investments in internally developed software	—		(714)
Other	(125)		—
Net cash used in investing activities	(35,154)		(2,488)
Cash flows from Financing Activities:
Proceeds from issuance of new common stock	55,000		—


Proceeds from draw from exit facility	20,000		—
Principal repayments of finance leases	(4,466)		(2,260)
Principal payments on debt	(28,348)		(8,709)

Restricted stock tax holding obligations	(3,390)		—
Proceeds from exercise of stock options	9		—
Proceeds from exercise of warrants	367		—
Net cash provided by provided by (used in) financing activities	39,172		(10,969)
Net increase in cash, cash equivalents and restricted cash	27,396		24,520


Cash, cash equivalents and restricted cash—beginning of period	69,709		52,240
Cash, cash equivalents and restricted cash—end of period	$	97,105	$	76,760

Reconciliation of cash, cash equivalents, and restricted cash within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows above:
Cash and cash equivalents	$	96,122	$	57,593
Restricted cash	$	983	$	19,167
Total cash, cash equivalents and restricted cash	$	97,105	$	76,760

Supplemental disclosure of other cash flow information:
Cash paid for interest	$	18,074	$	742
Income tax refunds	$	(1,288)	$	(336)
Cash paid for reorganization items	$	53,835	$	—

Supplemental disclosure of noncash investing and financing activities:
Change in accrued capital expenditures	$	(10,997)	$	(26,330)
Decrease in equipment related to debt extinguishment	—		17,849
Decrease in notes payable in exchange for equipment	—		(38,610)
Reduction in plant, property, and equipment basis related to Bitmain purchase	(26,101)		—
Reclass of other current and non-current assets to plant, property, and equipment	8,187		—
Decrease in right-of-use assets due to lease termination	(6,560)		—
Increase in right-of-use assets due to lease commencement	70,690		—
Increase in lease liability due to lease commencement	69,577		—
Extinguishment of convertible notes upon emergence	(559,902)		—
Extinguishment of accounts payable, accrued expenses, finance lease liability, and notes payable upon emergence	(321,773)		—
Cancellation of common stock in connection with emergence	(37)		—
Issuance of new common stock in connection with emergence	296,891		—
Issuance of new common stock for Bitmain obligation	27,839		—
Issuance of new common stock for the Equity Rights Offering backstop commitment	5,475		—
Issuance of contingent value rights	86,325		—
Issuance of warrants	345,856		—
Issuance of New Secured Convertible Notes	260,000		—
Issuance of Secured Notes, net of discount	149,520		—
Issuance of Exit Credit Agreement including $1.2 million paid in kind upfront fee	41,200		—
Issuance of miner equipment lender facility loans	52,947		—
Issuance of notes related to settlement	9,092		—
Cumulative effect of adoption of ASU 2023-08, Accounting for and Disclosure of Crypto Assets	24		—
Issuance of new common stock for convertible notes conversion	26,390		—
Issuance of new common stock for PIK interest	3,676		—

See accompanying notes to unaudited condensed consolidated financial statements.

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Core Scientific, Inc. (“Core Scientific” or the “Company”) is a leader in digital infrastructure for bitcoin mining and high-performance computing. We operate dedicated, purpose-built facilities for digital asset mining and are a premier provider of digital infrastructure, software solutions and services to our third-party customers. We employ our own large fleet of computers (“miners”) to earn digital assets for our own account and provide hosting services for large customers at our eight operational data centers in Georgia (2), Kentucky (1), North Carolina (1), North Dakota (1) and Texas (3). We derive the majority of our revenue from earning bitcoin for our own account (“self-mining”).

The Company focuses primarily on digital asset mining for its own account and has historically focused on providing hosting solutions for third-party digital asset miners. Beginning on March 6, 2024, we have made a series of announcements relating to new contractual arrangements with a third-party provider of high-performance compute (“HPC”) operations for customers utilizing specialized cloud-based graphics processing units (“GPU”s). These new arrangements leverage the Company’s existing infrastructure and expertise in third-party hosting solutions. We believe that using our existing infrastructure for HPC customers provides more consistent dollar-based revenue and substantially less risk than our traditional bitcoin mining customers or our bitcoin self-mining operations. Going forward we intend to focus our efforts on expanding our HPC customer base while maintaining our bitcoin self-mining operations. We expect that third-party hosting for traditional mining customers will be limited unless strategically or economically advantageous.

We currently operate in three segments: “Digital Asset Self-Mining,” consisting of digital asset mining for our own account, “Digital Asset Hosted Mining,” consisting of our digital infrastructure and third-party hosting services for digital asset mining, and “HPC Hosting,” consisting of our digital infrastructure and third-party hosting services for client HPC operations. Prior to April 1, 2024, we operated only in the Digital Asset Self-Mining and Digital Asset Hosted Mining segments.

We believe our experience in digital asset self-mining can be applied to the design, development and operation of large-scale data centers configured to optimize the performance of specialized computers for other specific, high-value applications such as cloud computing, machine learning and artificial intelligence. We have secured significant contracts in these areas and intend to pursue additional opportunities therein using our knowledge, experience and digital infrastructure where favorable market opportunities exist.

Our digital asset hosted mining business provides a full suite of services to our digital asset mining customers. We provide deployment, monitoring, troubleshooting, optimization and maintenance of our customers’ digital asset mining equipment and provide necessary electrical power, repair and other infrastructure services necessary for our customers to operate, maintain and efficiently mine digital assets.

Our HPC hosting services provide colocation, facilities operations, security and other services to third-party HPC customers to support workloads for machine learning and artificial intelligence.

Chapter 11 Filing and Emergence from Bankruptcy

On December 21, 2022, the Company and certain of its affiliates (collectively, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) seeking relief under Chapter 11 of the United States Code (the “Bankruptcy Code”). The Chapter 11 Cases were jointly administered under Case No. 22-90341. The Debtors continued to operate their business and manage their properties as “debtors-in-possession” (“DIP”) under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. For detailed discussion about the Chapter 11 Cases, refer to Note 3 — Chapter 11 Filing and Emergence from Bankruptcy.

On January 15, 2024, the Debtors filed the Fourth Amended Joint Chapter 11 Plan of Reorganization of Core Scientific, Inc. and its Debtor Affiliates (with Technical Modifications) (the “Plan of Reorganization”) with the Bankruptcy Court. On January 16, 2024, the Bankruptcy Court entered an order (the “Confirmation Order”) among other things, confirming the Plan of Reorganization. On January 23, 2024 (the “Effective Date”), the conditions to the effectiveness of the Plan of Reorganization were satisfied or waived and the Company emerged from bankruptcy.

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The Company was not required to apply fresh start accounting based on the provisions of Accounting Standards Codification (“ASC”) 852, Reorganizations, since the entity’s reorganization value immediately before the date of confirmation is more than the total of all its post-petition liabilities and allowed claims.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Refer to the significant accounting policies described in Note 2 — Summary of Significant Accounting Policies to the consolidated financial statements and accompanying notes in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2023.

Basis of Presentation

Our consolidated balance sheet as of December 31, 2023, which was derived from our audited consolidated financial statements, and our unaudited interim condensed consolidated financial statements provided herein have been prepared in accordance with the instructions for Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). However, in our opinion, the disclosures made therein are adequate to make the information presented not misleading. We believe the unaudited interim financial statements herein furnished reflect all adjustments which are, in the opinion of management, necessary to present a fair statement of the results for the interim periods presented. All of these adjustments are of a normal recurring nature. The interim condensed consolidated results of operations and cash flows are not necessarily indicative of the consolidated results of operations and cash flows that might be expected for the entire year. These condensed consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Debtor-in Possession

On the Effective Date, the Company emerged from bankruptcy and was no longer considered debtors-in-possession under the Bankruptcy Code. For detailed discussion about the Chapter 11 Cases and our emergence from bankruptcy, refer to Note 3 — Chapter 11 Filing and Emergence from Bankruptcy.

Liquidity and Financial Condition

For the six months ended June 30, 2024, the Company generated net loss of $594.2 million. The Company had unrestricted cash and cash equivalents of $96.1 million as of June 30, 2024, compared to $50.4 million as of December 31, 2023. The Company has historically generated cash primarily through sales of digital assets received as digital asset self-mining revenue and through revenue from contracts with customers as well as the issuance of common stock and debt. As of June 30, 2024, the Company had net working capital of $43.0 million and a total stockholders’ deficit of $1.1 billion. We continue to monitor the impact of the fourth halving event in April 2024 on our liquidity.

The Plan of Reorganization at the Effective Date (i) eliminated substantial debt and debt service, (ii) established new debt in the form of a secured credit agreement, publicly traded notes and convertible notes, and debt to equipment lenders, and (iii) new publicly traded equity and warrants. The settlement of accrued and payable claims through new debt and equity issuance and the extension of debt service to future periods on the Effective Date substantially eliminated the reported working capital deficit at December 31, 2023. When combined with the additional liquidity of the available delayed-draw term loan and the expected cash flows from operations, management has concluded that as of June 30, 2024, the Company’s capital, liquidity and cash flow from operations is sufficient to fund its operations and debt service obligations for at least the next 12 months from the date these condensed consolidated financial statements were issued.

Digital Assets

Currently the Company is required by its existing debt agreements to sell bitcoin it earns within ten days of receipt. Digital assets are classified as current assets on the Company’s Condensed Consolidated Balance Sheets. Sales of digital assets awarded to the Company through its self-mining activities are classified as cash flows from operating activities. The Company does not have any off-balance sheet holdings of digital assets and does not safeguard digital assets for third parties.

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-08, Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”). ASU 2023-08 is intended to improve the accounting for certain crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value recognized in net income (loss). The amendments also improve the information provided to investors about an entity’s crypto asset holdings by requiring disclosure about significant holdings, contractual sale restrictions, and changes during the reporting period. ASU 2023-08 is effective for annual and interim reporting periods beginning after December 15, 2024, with early adoption permitted.

The Company’s digital assets are within the scope of ASU 2023-08 and the Company elected to early adopt the new standard effective January 1, 2024. The transition guidance requires a cumulative-effect adjustment as of the beginning of the current fiscal year for any difference between the carrying amount of the Company’s digital assets and fair value. The early adoption did not have a material impact on the Company’s condensed consolidated financial statements.

The Company did not have any digital asset holdings as of June 30, 2024. The Company’s digital assets have active markets with observable prices and are considered Level 1 fair value measurements. The following table presents a roll-forward of total digital assets for the six months ended June 30, 2024, based on the fair value model under ASU 2023-08, and the six months ended June 30, 2023 (in thousands):


	June 30, 2024		June 30, 2023
Digital assets, beginning of period	$	2,284	$	724
Cumulative effect of ASU 2023-08, adopted January 1, 2024	24		—
Digital assets, beginning of period, as adjusted	2,308		724
Digital asset self-mining revenue, net of receivables1	261,566		194,917
Mining proceeds from shared hosting	13,818		4,610
Proceeds from sales of digital assets	(277,562)		(199,646)
Change in fair value of digital assets	(41)		—
Gain from sale of digital assets	—		1,988
Impairment of digital assets	—		(2,183)
Payment of board fee	(89)		(89)

Digital assets, end of period	$	—	$	321

1 As of June 30, 2024 and June 30, 2023, there was $0.8 million and $1.0 million, respectively, of digital asset receivable included in prepaid expenses and other current assets on the condensed consolidated balance sheets.

Use of Estimates

The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Some of the more significant estimates include assumptions used to estimate the Company’s ability to continue as a going concern, the valuation of digital assets, property, plant and equipment, the initial measurement of lease liabilities, stock-based compensation, the fair value of derivative liabilities, and income taxes. These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from management’s estimates.

Cash, Cash Equivalents, and Restricted Cash

Cash and cash equivalents include all cash balances and highly liquid investments with original maturities of three months or less from the date of acquisition. As of June 30, 2024, the Company had cash and cash equivalents of $96.1 million, substantially all of which exceeded Federal Deposit Insurance Corporation insured limits. Cash equivalents included $75.3 million of highly liquid money market funds, which are classified as Level 1 within the fair value hierarchy. Restricted cash consists of cash held in escrow to pay for construction and development activities.

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Revenue Recognition - HPC Hosting Revenue

Our HPC hosting segment generates revenue by licensing data center space to our customers under licensing agreements. These arrangements contain lease components for the right to use data center space and nonlease components for power delivery, physical security, and maintenance services. We have elected the practical expedient available under ASC Topic 842, Leases, to combine the nonlease revenue components that have the same pattern of transfer as the related operating lease components into a single combined component. The single combined component is accounted for under ASC Topic 842 as an operating lease if the lease components are the predominant components and is accounted for under ASC Topic 606 if the nonlease components are the predominant components. The lease components are the predominant components in our current licensing arrangements and the single combined component in these arrangements are accounted for under the operating lease guidance of ASC Topic 842.

We have concluded that it is probable that substantially all of the payments will be collected over the term of the arrangements and recognize the total combined component license payments under the agreements on a straight-line basis over the non-cancellable term. Straight-line license revenue represents the difference in revenue recognized during the period and the license payments due pursuant to the underlying arrangement as deferred revenue in the condensed consolidated balance sheets. Certain arrangements include options to extend the term. These extension options are not reasonably certain to be exercised and are excluded from the lease term and calculation of lease payments at lease commencement.

Certain licensing arrangements provide for variable payments for power delivery services and maintenance services on customer assets and reimbursements for lessor costs such as taxes. Payments for physical security and other routine maintenance services are included in the fixed lease payments. Power delivery services represent a stand ready obligation to make power available to the customer over the coterminous lease term and have the same pattern of transfer as the related operating lease components. Customers may request and the Company may provide maintenance services on customer assets during the coterminous lease term. Customers are charged monthly for fees incurred on these maintenance services delivered and actual power costs incurred at current utility or fuel cost rates. These payments from customers for power delivery and maintenance services are recognized as variable lease payments in accordance with the practical expedient elected. Variable lease payments are presented on a gross basis and are included in HPC hosting revenue in the condensed consolidated statements of operations.

Performance Obligation Commitments -

The Company’s performance obligation commitments relate to digital asset hosted mining services. The Company has performance obligations associated with commitments in customer digital asset hosted mining contracts for future services that have not yet been recognized in the financial statements. As of June 30, 2024, for contracts with original terms that exceed one year (typically ranging from 15 to 24 months), we expect to recognize approximately $37.7 million of revenue in the future related to performance obligations associated with existing hosted mining contracts. The Company expects to recognize approximately 92% of this amount over the next 12 months and the remainder thereafter.

Deferred Revenue

The Company records contract liabilities in Deferred revenue on the Condensed Consolidated Balance Sheets when cash payments are received in advance of performance and recognizes them as revenue when the performance obligations are satisfied. The Company’s total deferred revenue balance as of June 30, 2024 and December 31, 2023, was $7.9 million and $9.8 million, respectively.

In the three and six months ended June 30, 2024, the Company recognized $0.1 million and $6.5 million of revenue, respectively, that was included in the deferred revenue balance as of the beginning of the year.

In the three and six months ended June 30, 2023, the Company recognized $14.3 million and $25.9 million of revenue, respectively, that was included in the deferred revenue balance as of the beginning of the year.

Advanced payments for hosting services are typically recognized in the following month and are generally recognized within one year.

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Stock-Based Compensation

Under ASC 718, Stock Compensation (“ASC 718”) estimated fair value uses a fair-value-based method. Stock-based compensation expense is measured at the grant date based on the estimated fair value of the equity award. The estimated fair value of restricted stock units (“RSUs”) with only service conditions is based on the closing market price of the Company’s common stock on the date of grant. The estimated fair value of market condition restricted stock units (“MSUs”) is estimated on the date of grant using the Monte-Carlo pricing model for each service and market condition tranche. The estimated fair value of stock option awards is estimated on the date of grant using the Black-Scholes option-pricing model.

For stock option and RSU awards with only service conditions, the estimated fair value of the equity awards is recognized as expense on a straight-line basis, less actual forfeitures as they occur, over the requisite service period for the entire award, which is generally the vesting period. For RSU awards with service and market conditions, the compensation expense is recognized for each separately vesting portion of the award, or tranche, as if it were a separate award with its own vesting and exercise conditions (i.e., on an accelerated attribution basis). The estimated fair value of each tranche is recognized as expense on a straight-line basis, less actual forfeitures as they occur, over the requisite service for the tranche. The requisite service period of each tranche is the greater of the derived service period from the market condition or the service condition vesting period. See Note 10 — Stockholders' Deficit for more information about the service and market conditions associated with the Company’s equity awards.

Convertible and Other Notes Payable

Convertible and other notes payable (“Notes payable”) are accounted for under ASC 470, Debt (“ASC 470”) and are presented at their carrying value, which is their remaining par or face amount net of any related unamortized premium, discount and issuance costs. Notes payable are initially recognized at their present value. When cash proceeds are received for the issuance of Notes payable the proceeds are used to establish their present value. When cash proceeds are not received for the issuance of Notes payable, their present value is based on the consideration exchanged. This present value generally will be the Notes payable’s cash flows discounted at a market rate when it is more evident than the noncash consideration exchanged. When the present value of Notes payable on issuance varies from its par or face amount, an original discount or premium results and any related issuance costs are used to determine an effective interest rate. Original premium, discount and issuance costs are amortized using the level effective rate interest method. Amortization is recognized as a component of current interest expense.

Notes payable are evaluated at issuance to determine whether or not they have features or terms which would be treated as embedded derivatives that are required to be bifurcated under ASC 815, Derivatives and Hedging (“ASC 815”). As of June 30, 2024 and December 31, 2023, Notes payable did not have any embedded derivatives required to be bifurcated.

Contingent Value Rights Liabilities

As described in Note 7 — Contingent Value Rights and Warrant Liabilities, on the Effective Date, pursuant to the Plan of Reorganization, the Company entered into a contingent value rights agreement (the “Contingent Value Rights Agreement”) which provides for the issuance of the contingent value rights (the “CVRs”) to certain creditors and provides for the issuance of CVRs issued to holders of allowed general unsecured claims (“GUC”) (in such capacity, the “GUC Payees”) (the “GUC CVRs”). The CVRs and GUC CVRs are equity-linked instruments which are either only cash settled or in some instances share settled at the Company’s sole discretion. The Company determined that these equity-linked instruments are not indexed to the Company’s stock and are required to be recognized as liabilities which are, initially and subsequently, measured at fair value with changes in value reflected in Net income (loss).

On the Effective Date, the CVRs and GUC CVRs were recognized at their fair value of $86.3 million. As of June 30, 2024, the CVRs were reported at a fair value of $12.9 million in Contingent value rights on the condensed consolidated balance sheets and the GUC CVRs were reported at a fair value of nil. During the three and six months ended June 30, 2024, the decrease in fair value of $31.7 million and $73.4 million, respectively, was included in Change in fair value of warrant and contingent value rights on the Company’s Condensed Consolidated Statements of Operations.

Warrant Liabilities

As described in Note 7 — Contingent Value Rights and Warrant Liabilities, on the Effective Date, pursuant to the Plan of Reorganization, holders of the Company’s previous common stock received warrants. The warrants are equity-linked instruments. The Company determined that these equity-linked instruments are not indexed to the Company’s stock and are required to be recognized as liabilities which are, initially and subsequently, measured at fair value with changes in value reflected in Net income (loss).

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

On the Effective Date, the warrants were recognized at their fair value of $345.9 million. As of June 30, 2024, the warrants were reported at a fair value of $1.16 billion in Warrant liabilities on the Condensed Consolidated Balance Sheets. During the three and six months ended June 30, 2024, the increase in fair value of $827.7 million and $809.3 million, respectively, was included in Change in fair value of warrant and contingent value rights on the Company’s Condensed Consolidated Statements of Operations.

Accounting Standards Not Yet Adopted

In December 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which will improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This update will be effective for the Company during the annual reporting period beginning January 1, 2025. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. Under this ASU, public business entities must annually “(1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income [or loss] by the applicable statutory income tax rate).” This update will be effective for the Company during the annual reporting period beginning January 1, 2025. The Company is currently evaluating the impact this ASU will have on its consolidated financial statements and related disclosures.

There are no other new accounting pronouncements that are expected to have a significant impact on the Company’s unaudited condensed consolidated financial statements.

3. CHAPTER 11 FILING AND EMERGENCE FROM BANKRUPTCY

Chapter 11

On December 21, 2022 (the “Petition Date”), the Debtors filed the Chapter 11 Cases in the Bankruptcy Court seeking relief under Chapter 11 of the Bankruptcy Code. The Chapter 11 Cases are jointly administered under Case No. 22-90341. The Debtors continued to operate their business and managed their properties as DIP under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

On June 20, 2023, the Debtors filed with the Bankruptcy Court (i) a proposed Joint Chapter 11 Plan of Reorganization of Core Scientific, Inc. and its Debtor Affiliates and a related proposed form of Disclosure Statement, and on January 15, 2024, the Debtors filed the Fourth Amended Joint Chapter 11 Plan of Reorganization of Core Scientific, Inc. and its Affiliated Debtors (with Technical Modifications) with the Bankruptcy Court.

On January 16, 2024, the Bankruptcy Court entered the Confirmation Order among other things, confirming the Plan of Reorganization. On the Effective Date, the conditions to the effectiveness of the Plan of Reorganization were satisfied or waived and the Company emerged from bankruptcy.

Replacement DIP Credit Agreement

On February 2, 2023, the Bankruptcy Court entered an interim order authorizing, among other things, the Debtors to obtain senior secured non-priming super-priority replacement post-petition financing (the “Replacement DIP Facility”). On February 27, 2023, the Debtors entered into a senior secured super-priority replacement debtor-in-possession loan and security agreement governing the Replacement DIP Facility (the “Replacement DIP Credit Agreement”), with B. Riley Commercial Capital, LLC, as administrative agent (the “Administrative Agent”), and the lenders from time to time party thereto (collectively, the “Replacement DIP Lender”). Proceeds of the Replacement DIP Facility were used to, among other things, repay amounts outstanding under the original debtor-in-possession facility that was entered into in connection with the filing of the Chapter 11 Cases (the “Original DIP Facility”), including payment of all fees and expenses required to be paid under the terms of the Original DIP Facility. These funds, along with ongoing cash generated from operations, were anticipated to provide the necessary financing to effectuate the planned restructuring, facilitate the emergence from Chapter 11, and cover the fees and expenses of legal and financial advisors.

In January 2024, the Replacement DIP Facility was repaid in full and terminated on the Effective Date of the Company’s Plan of Reorganization.

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Reorganization items, net and Liabilities Subject to Compromise

Effective on December 21, 2022, the Company began to apply the provisions of ASC 852, Reorganizations (“ASC 852”), which is applicable to companies under bankruptcy protection, and requires amendments to the presentation of certain financial statement line items. ASC 852 requires that the financial statements for periods including and after the filing of the Chapter 11 Cases distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Expenses (including professional fees), realized gains and losses, and provisions for losses that can be directly associated with the reorganization must be reported separately as Reorganization items, net in the Consolidated Statements of Operations beginning December 21, 2022, the date of filing of the Chapter 11 Cases. As of December 31, 2023, liabilities that were affected by the Plan of Reorganization were classified as liabilities subject to compromise at the amounts expected to be allowed by the Bankruptcy Court, even if they may have been settled for lesser amounts as a result of the Plan of Reorganization or negotiations with creditors. If there was uncertainty about whether a secured claim was undersecured, or would be impaired under the Plan of Reorganization, the entire amount of the claim was included with prepetition claims in liabilities subject to compromise. After the Effective Date, any resulting changes in classification were reflected in subsequent financial statements.

As a result of the filing of the Chapter 11 Cases on December 21, 2022, the classification of pre-petition indebtedness was generally subject to compromise pursuant to the Plan of Reorganization. Generally, actions to enforce or otherwise effect payment of pre-bankruptcy filing liabilities were stayed. The Bankruptcy Court granted the Debtors authority to pay certain pre-petition claims in designated categories and subject to certain terms and conditions. This relief generally was designed to preserve the value of the Debtors’ businesses and assets. Among other things, the Bankruptcy Court authorized the Debtors to pay certain pre-petition claims relating to employee wages and benefits, taxes and critical vendors. The Debtors paid undisputed post-petition liabilities in the ordinary course of business. In addition, the Debtors rejected certain pre-petition executory contracts and unexpired leases with respect to their operations with the approval of the Bankruptcy Court. Any damages resulting from the rejection of executory contracts and unexpired leases were treated as general unsecured claims and paid in full.

Reorganization items, net incurred as a result of the Chapter 11 Cases presented separately in the accompanying Condensed Consolidated Statements of Operations were as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Professional fees and other bankruptcy related costs	$	—	$	17,665	$	21,480	$	37,772
Negotiated settlements	—		85		(2,269)		85
Satisfaction of allowed claims:
Extinguishment of secured and other convertible notes	—		—		(10,831)		—
Extinguishment of miner equipment lender loans and leases	—		—		(102,024)		—
Satisfaction of general unsecured creditor claims	—		—		(31,167)		—
Satisfaction of cures and other claims	—		—		231		—
Total satisfaction of allowed claims	—		—		(143,791)		—
Reimbursed claimant professional fees	—		—		12,802		—
Debtor-in-possession financing costs	—		705		339		12,157
Reorganization items, net	$	—	$	18,455	$	(111,439)	$	50,014

During the six months ended June 30, 2024, there were significant reorganization related gains resulting primarily from satisfaction of allowed claims under the Plan of Reorganization on the Effective Date and negotiated settlements, partially offset by professional fees and other bankruptcy related costs. These reorganization related impacts were classified as Reorganization items, net until the Effective Date. Reorganization costs incurred after the Effective Date have been classified as General and administrative expense.

The accompanying Consolidated Balance Sheet as of December 31, 2023, includes amounts classified as Liabilities subject to compromise, which represented liabilities the Company estimated would be allowed as claims in the Chapter 11 Cases by the Court. These amounts represented the Company's estimate of known or potential obligations to be resolved in connection with the Chapter 11 Cases.

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Liabilities subject to compromise consisted of the following (in thousands):


	December 31, 2023
Accounts payable	$	36,678
Accrued expenses and other current liabilities	20,300
Accounts payable, and accrued expenses and other current liabilities	$	56,978

Debt subject to compromise	$	41,777
Accrued interest on liabilities subject to compromise	580
Leases, debt and accrued interest	42,357
Liabilities subject to compromise	$	99,335

Pre-petition unsecured and secured claims which were identified as impaired and subject to compromise during the bankruptcy process were reclassified to Liabilities subject to compromise. Final determination of the value at which liabilities were settled was made when the Plan of Reorganization became effective and the Company emerged from bankruptcy.

4. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net as of June 30, 2024 and December 31, 2023 consist of the following (in thousands):


	June 30, 2024		December 31, 2023		Estimated Useful Lives
Land and improvements1	$	20,730	$	21,852	20 years
Building and improvements2	252,722		191,615		12 to 39 years
Mining and network equipment3	422,640		414,284		3 to 5 years
Electrical equipment4	82,267		64,810		5 to 15 years
Other property, plant and equipment5	2,779		2,935		5 to 7 years
Total	781,138		695,496
Less: accumulated depreciation and amortization6	348,251		293,974
Total	432,887		401,522
Add: Construction in progress	117,107		183,909
Property, plant and equipment, net	$	549,994	$	585,431

1 Estimated useful life of improvements. Land is not depreciated.

2 Includes finance lease assets of $6.6 million and $6.6 million at June 30, 2024 and December 31, 2023, respectively.

3 Includes finance lease assets of $0.2 million and $40.0 million at June 30, 2024 and December 31, 2023, respectively.

4 Includes finance lease assets of $12.6 million and $12.7 million at June 30, 2024 and December 31, 2023, respectively.

5 Includes finance lease assets of $0.4 million and $0.4 million at June 30, 2024 and December 31, 2023, respectively.

6 Includes accumulated amortization for assets under finance leases of $10.8 million and $43.4 million at June 30, 2024 and December 31, 2023, respectively.

Depreciation expense, including amortization of finance lease assets, for the three months ended June 30, 2024 and 2023, was $29.3 million, and $20.4 million, respectively, and for the six months ended June 30, 2024 and 2023, was $58.1 million and $40.7 million, respectively. Depreciation for the three months ended June 30, 2024 and 2023, allocated to costs of revenue was $29.2 million, and $20.4 million, respectively, and for the six months ended June 30, 2024 and 2023, was $58.0 million and $40.5 million, respectively.

5. LEASES

Lessee Accounting

The Company has entered into non-cancellable operating and finance leases for office, data facilities, computer and networking equipment, electrical infrastructure and office equipment, with lease periods expiring through 2035. In addition, certain leases contain

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

bargain renewal options extending through 2051. Variable lease payments are not included in the initial measurement of leases and are expensed as incurred.

The components of operating and finance leases are presented on the Company’s Condensed Consolidated Balance Sheets as follows (in thousands):


	Financial statement line item	June 30, 2024		December 31, 2023
Assets:
Operating lease right-of-use assets	Operating lease right-of-use assets	$	75,783	$	7,844
Finance lease right-of-use assets	Property, plant and equipment, net	$	9,017	$	16,268
Liabilities:
Operating lease liabilities, current portion	Operating lease liabilities, current portion	$	5,427	$	77
Operating lease liabilities, net of current portion	Operating lease liabilities, net of current portion	$	67,068	$	1,512
Finance lease liabilities, current portion	Finance lease liabilities, current portion	$	2,717	$	19,771
Finance lease liabilities, net of current portion	Finance lease liabilities, net of current portion	$	553	$	35,745

Supplemental disclosure of noncash investing and financing activities in the Company’s Condensed Consolidated Statements of Cash Flows includes a decrease in lease liability due to lease satisfactions on the Effective Date of $50.7 million presented in Extinguishment of accounts payable, accrued expenses, finance lease liability, and notes payable upon emergence for the six months ended June 30, 2024.

The components of lease expense were as follows (in thousands):


		Three Months Ended June 30,
	Financial statement line item	2024		2023
Operating lease expense	Cost of HPC hosting services	$	3,096	$	—
Operating lease expense	General and administrative expenses	1,391		224
Short-term lease expense	General and administrative expenses	75		182
Finance lease expense:
Amortization of right-of-use assets	Cost of revenue	315		3,572
Interest on lease liabilities	Interest expense, net	119		433
Total finance lease expense		434		4,005
Total lease expense		$	4,996	$	4,411


		Six Months Ended June 30,
	Financial statement line item	2024		2023
Operating lease expense	Cost of HPC hosting services	$	3,096	$	—
Operating lease expense	General and administrative expenses	2,793		598
Short-term lease expense	General and administrative expenses	193		362
Finance lease expense:
Amortization of right-of-use assets	Cost of revenue	649		7,128
Interest on lease liabilities	Interest expense, net	1,040		742
Total finance lease expense		1,689		7,870
Total lease expense		$	7,771	$	8,830

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Information relating to the lease term and discount rate is as follows:


	June 30, 2024		June 30, 2023
Weighted Average Remaining Lease Term (Years)
Operating leases	6.9		10.7
Finance leases	1.1		1.5
Weighted Average Discount Rate
Operating leases	9.3	%	6.5	%
Finance leases	12.4	%	12.8	%

Information relating to lease payments is as follows (in thousands):


	Three Months Ended June 30,
	2024		2023
Lease Payments
Operating lease payments	$	1,651	$	261
Finance lease payments	$	1,031	$	1,168


	Six Months Ended June 30,
	2024		2023
Lease Payments
Operating lease payments	$	1,720	$	598
Finance lease payments1	$	6,195	$	2,248

1 Approximately $4.6 million of finance lease liabilities were reinstated pursuant to the Plan of Reorganization. Of the $6.2 million of finance lease payments made during the six months ended June 30, 2024, $4.4 million related to cure payments from emergence on the Effective Date.

The Company’s minimum payments under noncancelable operating and finance leases having initial terms and bargain renewal periods in excess of one year are as follows at June 30, 2024, and thereafter (in thousands):


	Operating leases		Finance leases
Remaining 2024	$	5,289	$	1,661
2025	13,568		1,855
2026	14,365		3
2027	14,721		—
2028	15,143		—
Thereafter	35,997		—
Total lease payments	99,083		3,519
Less: imputed interest	26,588		249
Total	$	72,495	$	3,270

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Lessor Accounting

We generate revenue by leasing property to customers under licensing agreements. The manner in which we recognize these transactions in our financial statements is described in Note 2 — Summary of Significant Accounting Policies — Revenue Recognition — HPC Hosting Segment.

The components of lease revenue were as follows (in thousands):


	Three and Six Months Ended June 30, 2024
Lease Revenue
Operating lease revenue	$	3,818
Variable lease revenue	1,701
Total lease revenue	$	5,519

The following table represents the maturity analysis of operating lease payments expected to be received at June 30, 2024, and thereafter (in thousands):


	June 30, 2024
Remaining 2024	$	11,960
2025	22,080
2026	22,632
2027	23,311
2028	24,010
Thereafter	54,469
Total	$	158,462

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

6. CONVERTIBLE AND OTHER NOTES PAYABLE

Notes payable as of June 30, 2024 and December 31, 2023, consist of the following (in thousands):


	Stated Interest Rate	Effective Interest Rates	Maturities	June 30, 2024		December 31, 2023
Replacement DIP Credit Agreement1	10.0%	10.0%	2024	$	—	$	4,273
Exit Credit Agreement	9.0%	9.0%	2027	61,200		—
Other Convertible Notes2	10.0%	10.0%	2025	—		322,396
Secured Convertible Notes2	10.0%	10.0%	2025	—		237,584
Secured Notes	12.5%	12.6%	2028	150,000		—
New Secured Convertible Notes	6.0% - 10.0%	10.0%	2029	233,610		—
Miner Financing:
Blockfi loan	9.7% - 13.1%	10.1% - 13.1%	2023	—		53,913
Blockfi takeback loan	3.0% - 8.0%	11.9%	2029	48,921		—
Liberty/Stonebriar loan	10.6%	10.6%	2024	—		6,968
Liberty/Stonebriar takeback loan	3.0% - 8.0%	11.9%	2029	6,366		—
ACM note	—%	15.0%	2025	4,935		6,519
Mass Mutual Barings loans	9.8% - 13.0%	9.8% - 13.0%	2025	—		63,844
Anchor Labs loan	12.5%	12.5%	2024	—		25,159
Trinity loan	11.0%	11.0%	2024	—		23,356
Equipment and Settlement:
Bremer loan	5.5%	5.5%	2027	12,664		18,331
HMC note	5.0%	15.0%	2026	12,056		14,208
Didado note	5.0%	15.0%	2027	11,313		13,000

Harper note	5.0%	15.0%	2026	4,055

Form: 10-Q

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