10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on November 6, 2024
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 |
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For the quarterly period ended |
OR
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)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices)
(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 |
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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 |
☐ | ☒ |
Emerging growth company |
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Non-accelerated filer |
☐ | Smaller reporting 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 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 October 31, 2024, 279,253,024 shares of Common Stock, par value $0.00001, were outstanding.
TABLE OF CONTENTS
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3
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 “ability,” “aim,” “assume,” “estimate,” “plan,” “possible,” “project,” “forecast,” “goal,” “opportunity,” “intend,” “will,” “expect,” “anticipate,” “believe,” “enable,” “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 and in Item 1A. — “Risk Factors” of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024. These risk factors should be read to include our HPC Hosting segment, which met the criteria to be considered a new segment of the Company during the second quarter of 2024, and read in conjunction with 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.
4
Part I - Financial Information
Item 1. Financial Statements
5
Core Scientific, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except par value)
September 30, 2024 |
December 31, 2023 |
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Assets | (Unaudited) | ||||||||||
Current Assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash | |||||||||||
Accounts receivable |
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Digital assets | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Total Current Assets | |||||||||||
Property, plant and equipment, net | |||||||||||
Operating lease right-of-use assets | |||||||||||
Other noncurrent assets | |||||||||||
Total Assets | $ | $ | |||||||||
Liabilities and Stockholders’ Deficit | |||||||||||
Current Liabilities: | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued expenses and other current liabilities | |||||||||||
Deferred revenue | |||||||||||
Operating lease liabilities, current portion | |||||||||||
Finance lease liabilities, current portion | |||||||||||
Notes payable, current portion |
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Contingent value rights, current portion |
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Total Current Liabilities | |||||||||||
Operating lease liabilities, net of current portion | |||||||||||
Finance lease liabilities, net of current portion | |||||||||||
Convertible and other notes payable, net of current portion |
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Contingent value rights, net of current portion |
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Warrant liabilities |
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Other noncurrent liabilities | |||||||||||
Total liabilities not subject to compromise | |||||||||||
Liabilities subject to compromise | |||||||||||
Total Liabilities | |||||||||||
Commitments and contingencies (Note 9) |
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Stockholders’ Deficit: | |||||||||||
Preferred stock; $ |
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Common stock; $ |
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Additional paid-in capital | |||||||||||
Accumulated deficit | ( |
( |
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Total Stockholders’ Deficit | ( |
( |
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Total Liabilities and Stockholders’ Deficit | $ | $ |
See accompanying notes to unaudited condensed consolidated financial statements.
6
Core Scientific, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Revenue: | |||||||||||||||||||||||
Digital asset self-mining revenue |
$ | $ | $ | $ | |||||||||||||||||||
Digital asset hosted mining revenue from customers |
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Digital asset hosted mining revenue from related parties |
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HPC hosting revenue | |||||||||||||||||||||||
Total revenue |
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Cost of revenue: | |||||||||||||||||||||||
Cost of digital asset self-mining |
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Cost of digital asset hosted mining services |
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Cost of HPC hosting services | |||||||||||||||||||||||
Total cost of revenue |
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Gross (loss) profit |
( |
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Change in fair value of digital assets |
( |
( |
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Gain from sale of digital assets |
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Impairment of digital assets | ( |
( |
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Change in fair value of energy derivatives |
( |
||||||||||||||||||||||
Loss on disposal of property, plant and equipment |
( |
( |
( |
( |
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Operating expenses: |
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Research and development |
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Sales and marketing |
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General and administrative |
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Total operating expenses |
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Operating (loss) income |
( |
( |
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Non-operating (income) expenses, net: |
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Loss (gain) on debt extinguishment |
( |
( |
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Interest expense, net |
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Reorganization items, net | ( |
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Change in fair value of warrant and contingent value rights |
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Other non-operating (income) expense, net |
( |
( |
( |
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Total non-operating expenses, net |
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Loss before income taxes |
( |
( |
( |
( |
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Income tax expense |
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Net loss |
$ | ( |
$ | ( |
$ | ( |
$ | ( |
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Net loss per share (Note 12): |
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Basic |
$ | ( |
$ | ( |
$ | ( |
$ | ( |
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Diluted |
$ | ( |
$ | ( |
$ | ( |
$ | ( |
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Weighted average shares outstanding: |
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Basic |
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Diluted |
See accompanying notes to unaudited condensed consolidated financial statements.
7
Core Scientific, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Deficit
For the Three Months Ended September 30, 2024
(in thousands)
(Unaudited)
Common Stock | Additional Paid-In Capital |
Accumulated Deficit |
Total Stockholders’ Deficit |
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Shares | Amount | ||||||||||||||||||||||||||||
Balance at July 1, 2024 | $ | $ | $ | ( |
$ | ( |
|||||||||||||||||||||||
Net loss |
— | — | — | ( |
( |
||||||||||||||||||||||||
Stock-based compensation | — | — | — | ||||||||||||||||||||||||||
Restricted stock awards issued, net of tax withholding obligations |
— | — | |||||||||||||||||||||||||||
Exercise of warrants |
— | ||||||||||||||||||||||||||||
Issuance of new common stock for New Secured Convertible Notes conversion |
— | — | |||||||||||||||||||||||||||
Balance at September 30, 2024 | $ | $ | $ | ( |
$ | ( |
See accompanying notes to unaudited condensed consolidated financial statements.
8
Core Scientific, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Deficit
For the Nine Months Ended September 30, 2024
(in thousands)
(Unaudited)
Common Stock | Additional Paid-In Capital |
Accumulated Deficit |
Total Stockholders’ Deficit |
||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||
Balance at January 1, 2024 | $ | $ | $ | ( |
$ | ( |
|||||||||||||||||||||||
— | — | — | |||||||||||||||||||||||||||
Balance at January 1, 2024, adjusted |
( |
( |
|||||||||||||||||||||||||||
Net loss |
— | — | — | ( |
( |
||||||||||||||||||||||||
Stock-based compensation | — | — | — | ||||||||||||||||||||||||||
Cancellation of common stock in connection with emergence |
( |
( |
|||||||||||||||||||||||||||
Issuance of new common stock in connection with emergence |
— | ||||||||||||||||||||||||||||
Issuance of new common stock under the Equity Rights Offering |
— | — | |||||||||||||||||||||||||||
Issuance of new common stock for the Equity Rights Offering backstop commitment |
— | — | |||||||||||||||||||||||||||
Issuance of new common stock for Bitmain obligation |
— | — | |||||||||||||||||||||||||||
Conversion premium on the issuance of the New Secured Convertible Notes |
— | — | — | ||||||||||||||||||||||||||
Issuance of warrants |
— | — | ( |
— | ( |
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Exercise of stock options | — | — | — | ||||||||||||||||||||||||||
Restricted stock awards issued, net of tax withholding obligations |
— | ( |
— | ( |
|||||||||||||||||||||||||
Restricted stock awards forfeited | ( |
— | — | — | — | ||||||||||||||||||||||||
Exercise of warrants |
— | ||||||||||||||||||||||||||||
Issuance of new common stock for New Secured Convertible Notes conversion |
— | — | |||||||||||||||||||||||||||
Issuance of new common stock for PIK interest |
— | — | |||||||||||||||||||||||||||
Balance at September 30, 2024 | $ | $ | $ | ( |
$ | ( |
See accompanying notes to unaudited condensed consolidated financial statements.
9
Core Scientific, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Deficit
For the Three and Nine Months Ended September 30, 2023
(in thousands)
(Unaudited)
Common Stock | Additional Paid-In Capital |
Accumulated Deficit |
Total Stockholders’ Deficit |
||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||
Balance at July 1, 2023 | $ | $ | $ | — | $ | ( |
$ | ( |
|||||||||||||||||||||
Net loss |
— | — | — | ( |
( |
||||||||||||||||||||||||
Stock-based compensation | — | — | — | ||||||||||||||||||||||||||
Restricted stock awards issued, net of shares withheld for tax withholding obligations | — | — | — | — | |||||||||||||||||||||||||
Restricted stock awards forfeited | ( |
— | — | — | — | ||||||||||||||||||||||||
Balance at September 30, 2023 | $ | $ | $ | ( |
$ | ( |
Balance at January 1, 2023 |
$ | $ | $ | ( |
$ | ( |
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Net loss |
— | — | — | ( |
( |
||||||||||||||||||||||||
Stock-based compensation | — | — | — | ||||||||||||||||||||||||||
Restricted stock awards issued, net of shares withheld for tax withholding obligations | — | — | — | — | |||||||||||||||||||||||||
Restricted stock awards forfeited | ( |
— | — | — | — | ||||||||||||||||||||||||
Balance at September 30, 2023 | $ | $ | $ | ( |
$ | ( |
See accompanying notes to unaudited condensed consolidated financial statements.
10
Core Scientific, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Nine Months Ended September 30, |
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2024 | 2023 | ||||||||||
Cash flows from Operating Activities: | |||||||||||
Net loss |
$ | ( |
$ | ( |
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Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation and amortization | |||||||||||
Amortization of operating lease right-of-use assets | |||||||||||
Stock-based compensation | |||||||||||
Digital asset self-mining revenue |
( |
( |
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Loss (gain) on debt extinguishment |
( |
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Change in fair value of energy derivatives |
( |
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Change in fair value of warrant liabilities |
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Change in fair value of contingent value rights |
( |
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Change in fair value of digital assets |
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Amortization of debt discount |
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Losses on disposal of property, plant and equipment |
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Impairment of digital assets | |||||||||||
Gain on sale of digital assets | ( |
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Non-cash reorganization items |
( |
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Non-cash PIK interest expense |
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Changes in operating assets and liabilities: | |||||||||||
Accounts receivable, net | ( |
( |
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Accounts receivable from related parties | |||||||||||
Digital assets | |||||||||||
Deposits for equipment |
( |
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Prepaid expenses and other current assets | ( |
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Accounts payable | ( |
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Accrued expenses and other | ( |
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Deferred revenue | ( |
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Other noncurrent assets and liabilities, net | ( |
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Net cash provided by operating activities |
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Cash flows from Investing Activities: | |||||||||||
Purchases of property, plant and equipment | ( |
( |
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Investments in internally developed software | ( |
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Other | ( |
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Net cash used in investing activities | ( |
( |
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Cash flows from Financing Activities: | |||||||||||
Proceeds from issuance of new common stock |
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Proceeds for the issuance of |
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Issuance costs for |
( |
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Proceeds from draw from exit facility |
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Principal repayments of finance leases | ( |
( |
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Principal payments on debt | ( |
( |
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Restricted stock tax holding obligations | ( |
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Proceeds from exercise of stock options | |||||||||||
Proceeds from exercise of warrants |
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Net cash provided by (used in) financing activities |
( |
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Net increase in cash, cash equivalents and restricted cash | |||||||||||
Cash, cash equivalents and restricted cash—beginning of period | |||||||||||
Cash, cash equivalents and restricted cash—end of period | $ | $ | |||||||||
11
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: |
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Cash and cash equivalents | $ | $ | |||||||||
Restricted cash | |||||||||||
Total cash, cash equivalents and restricted cash | $ | $ | |||||||||
Supplemental disclosure of other cash flow information: | |||||||||||
Cash paid for interest | $ | $ | |||||||||
Income tax refunds |
$ | ( |
$ | ( |
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Cash paid for reorganization items |
$ | $ | |||||||||
Supplemental disclosure of noncash investing and financing activities: | |||||||||||
Change in accrued capital expenditures | $ | $ | ( |
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Decrease in equipment related to debt extinguishment | |||||||||||
Decrease in notes payable in exchange for equipment | ( |
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Reduction in plant, property, and equipment basis related to Bitmain purchase | ( |
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Reclass of other current and non-current assets to plant, property, and equipment | |||||||||||
Increase in right-of-use assets due to lease commencement | |||||||||||
Extinguishment of convertible notes upon emergence | ( |
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Extinguishment of accounts payable, accrued expenses, finance lease liability, and notes payable upon emergence | ( |
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Cancellation of common stock in connection with emergence | ( |
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Issuance of new common stock in connection with emergence | |||||||||||
Issuance of new common stock for Bitmain obligation | |||||||||||
Issuance of new common stock for the Equity Rights Offering backstop commitment | |||||||||||
Issuance of contingent value rights | |||||||||||
Issuance of warrants | |||||||||||
Issuance of New Secured Convertible Notes | |||||||||||
Issuance of Secured Notes, net of discount | |||||||||||
Issuance of Exit Credit Agreement including $ |
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Issuance of miner equipment lender facility loans | |||||||||||
Issuance of notes related to settlement | |||||||||||
Cumulative effect of adoption of ASU 2023-08, Accounting for and Disclosure of Crypto Assets | |||||||||||
Issuance of new common stock for New Secured Convertible Notes conversion |
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Issuance of new common stock for PIK interest |
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Noncash exercise of warrants |
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Property, plant and equipment disposed of through settlements |
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Purchase of insurance policies financed by short-term note payable |
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Issuance of notes payable through settlements |
See accompanying notes to unaudited condensed consolidated financial statements.
12
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 we provide hosting services for large bitcoin mining customers and are in the process of allocating and converting a significant portion of our nine operational data centers in Alabama (1), Georgia (2 ), Kentucky (1 ), North Carolina (1 ), North Dakota (1 ) and Texas (3 ), and our facility in development in Oklahoma to support artificial intelligence-related workloads under a series of contracts that entail the modification of certain of our data centers to deliver hosting services for high-performance computing (“HPC”). We derive the majority of our revenue from earning bitcoin for our own account (“self-mining”).
The Company has historically focused on designing, developing and operating digital infrastructure to engage in digital asset mining for its own account and providing hosting solutions for third-party digital asset miners. Beginning on March 6, 2024, we announced a series of new contractual agreements with a third-party provider of HPC operations for customers using specialized graphics processing units (“GPUs”). These new agreements leverage the Company’s existing digital infrastructure and expertise in third-party hosting solutions.
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.
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. The extension of our business into the HPC Hosting segment involves significant risk, including risks involving facility construction, supply chain and the risk of nonperformance by our single customer, as disclosed further in Part II, Item 1A. — “Risk Factors” in this Quarterly Report on Form 10-Q.
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.
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.
13
Core Scientific, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
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. The Plan of Reorganization (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) established 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. During the nine months ended September 30, 2024, we converted or repaid substantially all of the notes, credit agreements, and other payable obligations resulting from the Plan of Reorganization on the Effective date. The majority of this activity occurred during the three months ended September 30, 2024, through the mandatory conversion of the New Secured Convertible Notes (as defined below) and repayment of the Exit Credit Agreement (as defined below) and Secured Notes (as defined below) from proceeds from the 2029 Convertible Notes Offering (as defined below) issuance as described further in Note 6 — Convertible and Other Notes Payable.
Liquidity and Financial Condition
For the nine months ended September 30, 2024, the Company generated a net loss of $1.05 billion, of which $1.22 billion related to the change in the fair value of warrants which will be settled with common stock shares. The Company had unrestricted cash and cash equivalents of $253.0 million as of September 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, revenue from contracts with customers, and the issuance of debt and common stock. As of September 30, 2024, the Company had net working capital of $201.3 million and a total stockholders’ deficit of $729.4 million. Management has concluded that as of September 30, 2024, the Company’s capital, cash flow from operations, and other sources of liquidity are sufficient to fund its operations and debt service obligations for at least the next 12 months following the date these condensed consolidated financial statements were issued.
Digital Assets
The Company sells bitcoin it receives through mining. As of August 19, 2024, the Company is no longer required to sell bitcoin it earns through mining within ten days of receipt as provided by the terms of the recently extinguished debt facilities (Exit Credit Agreement, the Secured Notes and the New Secured Convertible Notes). See Note 6 — Convertible and Other Notes Payable. In the future, the Company intends to optimize cash received from bitcoin mining which may entail, subject to market conditions, holding bitcoin for future sale at any particular point in time. 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.
14
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 did not have any digital asset holdings as of September 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 nine months ended September 30, 2024, based on the fair value model under ASU 2023-08, and the nine months ended September 30, 2023 (in thousands):
September 30, 2024 | September 30, 2023 | ||||||||||
Digital assets, beginning of period |
$ | $ | |||||||||
Cumulative effect of ASU 2023-08, adopted January 1, 2024 |
|||||||||||
Digital assets, beginning of period, as adjusted |
|||||||||||
Digital asset self-mining revenue, net of receivables1
|
|||||||||||
Mining proceeds from shared hosting |
|||||||||||
Proceeds from sales of digital assets |
( |
( |
|||||||||
Change in fair value of digital assets |
( |
||||||||||
Gain from sale of digital assets |
|||||||||||
Impairment of digital assets |
( |
||||||||||
Payment of board fee |
( |
( |
|||||||||
Other |
( |
||||||||||
Digital assets, end of period |
$ | $ |
1 As of September 30, 2024 and December 31, 2023, there was $0.7 million and $1.7 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 September 30, 2024, the Company had cash and cash equivalents of $253.0 million, substantially all of which exceeded Federal Deposit Insurance Corporation insured limits. Cash equivalents included $243.8 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.
15
Core Scientific, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Property, Plant and Equipment, Net
Property, plant, and equipment includes the cost of land, buildings, and improvements for datacenter and support facilities and the Company’s corporate office space. Property and equipment further consists of computer, mining, network, electrical and other equipment, including property and equipment under finance leases. Property, plant and equipment, net is stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are capitalized at cost and amortized over the shorter of their estimated useful lives or the lease term. Future obligations related to finance leases are presented as Finance lease liabilities, current portion and Finance lease liabilities, net of current portion in the Company’s Consolidated Balance Sheets. Depreciation expense, including amortization of assets held under finance leases, is primarily included in Cost of revenue in the Company’s Consolidated Statements of Operations.
Property, plant and equipment capitalized costs include the directly identifiable costs incurred to acquire, construct, install, or otherwise prepare the asset for its intended use and to put it into service. Directly identifiable costs include construction payroll and benefits, demolition necessary for construction to purpose, and other direct capital project costs. Intersegment transfers of property, plant, and equipment are recorded at their net carrying value with no resulting gain or loss.
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 September 30, 2024, for contracts with original terms that exceed one year (typically ranging from 15 to 24 months), we expect to recognize approximately $16.2 million of revenue in the future related to performance obligations associated with existing hosted mining contracts. The Company expects to recognize approximately 100 % of this amount over the next 12 months.
16
Core Scientific, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
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 September 30, 2024 and December 31, 2023, was $16.9 million and $9.8 million, respectively.
In the three and nine months ended September 30, 2024, the Company recognized $0.1 million and $6.6 million of revenue, respectively, that was included in the deferred revenue balance as of the beginning of the year.
In the three and nine months ended September 30, 2023, the Company recognized $2.7 million and $20.5 million of revenue, respectively, that was included in the deferred revenue balance as of the beginning of the year.
Advanced payments are typically recognized in the following month for hosted mining services and are generally recognized within 30 months of license order commencement for HPC hosting services.
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 September 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
17
Core Scientific, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
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 loss.
On the Effective Date, the CVRs and GUC CVRs were recognized at their fair value of $86.3 million. On July 1, 2024, the GUC CVR obligations were extinguished as described in Note 7 — Contingent Value Rights and Warrant Liabilities. As of September 30, 2024, the CVRs were reported at a fair value of $7.0 million in Contingent value rights on the Condensed Consolidated Balance Sheets. During the three and nine months ended September 30, 2024, the decrease in fair value of $6.0 million and $79.3 million, respectively, was included in Change in fair value of warrant and contingent value rights on the Company’s Condensed Consolidated Statements of Operations.
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).
On the Effective Date, the warrants were recognized at their fair value of $345.9 million. As of September 30, 2024, the warrants were reported at a fair value of $1.02 billion in Warrant liabilities on the Condensed Consolidated Balance Sheets. During the three and nine months ended September 30, 2024, the decrease in fair value of $414.5 million and the increase in fair value of $1.22 billion, respectively, were 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. The amendments in ASU 2023-07 will be applied retrospectively and are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. 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).” The amendments in ASU 2023-09 will be applied on a prospective basis and are effective for annual periods beginning after December 15, 2024, with early adoption permitted. 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.
18
Core Scientific, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
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.
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 under secured, 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.
19
Core Scientific, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Professional fees and other bankruptcy related costs | $ | $ | $ | $ | |||||||||||||||||||
Negotiated settlements |
( |
( |
( |
||||||||||||||||||||
Satisfaction of allowed claims: |
|||||||||||||||||||||||
Extinguishment of secured and other convertible notes |
( |
||||||||||||||||||||||
Extinguishment of miner equipment lender loans and leases |
( |
||||||||||||||||||||||
Satisfaction of general unsecured creditor claims |
( |
||||||||||||||||||||||
Satisfaction of cures and other claims |
|||||||||||||||||||||||
Total satisfaction of allowed claims |
( |
||||||||||||||||||||||
Reimbursed claimant professional fees |
|||||||||||||||||||||||
Debtor-in-possession financing costs | |||||||||||||||||||||||
Reorganization items, net | $ | $ | $ | ( |
$ |
During the nine months ended September 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.
Liabilities subject to compromise consisted of the following (in thousands):
December 31, 2023 | |||||
Accounts payable | $ | ||||
Accrued expenses and other current liabilities | |||||
Accounts payable, and accrued expenses and other current liabilities | $ | ||||
Debt subject to compromise | $ | ||||
Accrued interest on liabilities subject to compromise | |||||
Leases, debt and accrued interest | |||||
Liabilities subject to compromise | $ |
20
Core Scientific, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
4. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net as of September 30, 2024 and December 31, 2023 consist of the following (in thousands):
September 30, 2024 | December 31, 2023 | Estimated Useful Lives | |||||||||||||||
Land and improvements1
|
$ | $ | |||||||||||||||
Building and improvements2
|
|||||||||||||||||
Mining and network equipment3
|
|||||||||||||||||
Electrical equipment4
|
|||||||||||||||||
Other property, plant and equipment5
|
|||||||||||||||||
Total |
|||||||||||||||||
Less: accumulated depreciation and amortization6
|
|||||||||||||||||
Total |
|||||||||||||||||
Add: Construction in progress |
|||||||||||||||||
Property, plant and equipment, net |
$ | $ |
1 Estimated useful life of improvements. Land is not depreciated.
2 Includes finance lease assets of $1.0 million and $6.6 million at September 30, 2024 and December 31, 2023, respectively.
3 Includes finance lease assets of nil and $40.0 million at September 30, 2024 and December 31, 2023, respectively.
4 Includes finance lease assets of $8.7 million and $12.7 million at September 30, 2024 and December 31, 2023, respectively.
5 Includes finance lease assets of $0.4 million and $0.4 million at September 30, 2024 and December 31, 2023, respectively.
6 Includes accumulated amortization for assets under finance leases of $3.8 million and $43.4 million at September 30, 2024 and December 31, 2023, respectively.
5. LEASES
Lessee Accounting
The Company has entered into non-cancellable operating and finance leases for office space, data facilities, computer and networking equipment, electrical infrastructure and office equipment, with lease periods expiring through 2051. Variable lease payments are not included in the initial measurement of leases and are expensed as incurred.
On September 30, 2024, the Company entered into a lease agreement by and between the Company and Aubix, LLC (the "Aubix Lease") for approximately 5.7 acres of land, including a 40,000 square foot building that the Company intends to use for its HPC hosting operations. The Aubix Lease is anticipated to commence in November 2024 as the Company begins occupancy of the leased space. The term of the Aubix Lease is 10 years from the commencement date. The Company has the right to extend the term of the Aubix Lease up to an additional 15 years in 5 year increments. The total future minimum lease payments related to the Aubix Lease is approximately $43.5 million.
21
Core Scientific, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
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 | September 30, 2024 | December 31, 2023 | ||||||||||||||||||
Assets: | ||||||||||||||||||||
Operating lease right-of-use assets | Operating lease right-of-use assets | $ | $ | |||||||||||||||||
Finance lease right-of-use assets |
$ | $ | ||||||||||||||||||
Liabilities: | ||||||||||||||||||||
Operating lease liabilities, current portion |
Operating lease liabilities, current portion |
$ | $ | |||||||||||||||||
Operating lease liabilities, net of current portion |
Operating lease liabilities, net of current portion |
$ | $ | |||||||||||||||||
Finance lease liabilities, current portion | Finance lease liabilities, current portion | $ | $ | |||||||||||||||||
Finance lease liabilities, net of current portion |
Finance lease liabilities, net of current portion | $ | $ |
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 nine months ended September 30, 2024.
The components of lease expense were as follows (in thousands):
Three Months Ended September 30, | ||||||||||||||||||||
Financial statement line item | 2024 | 2023 | ||||||||||||||||||
Operating lease expense | Cost of HPC hosting services | $ | $ | |||||||||||||||||
Operating lease expense | General and administrative expenses | ( |
||||||||||||||||||
Short-term lease expense | General and administrative expenses | |||||||||||||||||||
Finance lease expense: | ||||||||||||||||||||
Amortization of right-of-use assets | Cost of revenue | |||||||||||||||||||
Interest on lease liabilities | Interest expense, net | |||||||||||||||||||
Total finance lease expense | ||||||||||||||||||||
Total lease expense | $ | $ |
Nine Months Ended September 30, | ||||||||||||||||||||
Financial statement line item | 2024 | 2023 | ||||||||||||||||||
Operating lease expense | Cost of HPC hosting services | $ | $ | |||||||||||||||||
Operating lease expense | General and administrative expenses | |||||||||||||||||||
Short-term lease expense | General and administrative expenses | |||||||||||||||||||
Finance lease expense: | ||||||||||||||||||||
Amortization of right-of-use assets | Cost of revenue | |||||||||||||||||||
Interest on lease liabilities | Interest expense, net | |||||||||||||||||||
Total finance lease expense | ||||||||||||||||||||
Total lease expense | $ | $ |
22
Core Scientific, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
Information relating to the lease term and discount rate is as follows:
September 30, 2024 | September 30, 2023 | ||||||||||
Weighted Average Remaining Lease Term (Years) | |||||||||||
Operating leases | |||||||||||
Finance leases | |||||||||||
Weighted Average Discount Rate | |||||||||||
Operating leases | % | % | |||||||||
Finance leases | % | % |
Information relating to lease payments is as follows (in thousands):
Nine Months Ended September 30, | |||||||||||
2024 | 2023 | ||||||||||
Lease Payments | |||||||||||
Operating lease payments | $ | $ | |||||||||
Finance lease payments1
|
$ | $ | |||||||||
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 September 30, 2024, and thereafter (in thousands):
Operating leases | Finance leases | ||||||||||
Remaining 2024 |
$ | $ | |||||||||
2025 | |||||||||||
2026 | |||||||||||
2027 | |||||||||||
2028 | |||||||||||
Thereafter | |||||||||||
Total lease payments | |||||||||||
Less: imputed interest | |||||||||||
Total | $ | $ |
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 Months Ended September 30, 2024 | Nine Months Ended September 30, 2024 |
||||||||||
Lease Revenue |
|||||||||||
Operating lease revenue |
$ | $ | |||||||||
Variable lease revenue |
|||||||||||
Total lease revenue |
$ | $ |
23
Core Scientific, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
The following table represents the maturity analysis of operating lease payments expected to be received at September 30, 2024, and thereafter (in thousands):
Operating leases | |||||
Remaining 2024 | $ | ||||
2025 | |||||
2026 | |||||
2027 | |||||
2028 | |||||
Thereafter | |||||
Total | $ |
24
Core Scientific, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
6. CONVERTIBLE AND OTHER NOTES PAYABLE
Notes payable as of September 30, 2024 and December 31, 2023, consist of the following (in thousands):
Stated Interest Rate |
Effective Interest Rates |
Maturities | September 30, 2024 | December 31, 2023 | ||||||||||||||||||||||
Replacement DIP Credit Agreement1
|
2024 | $ | $ | |||||||||||||||||||||||
Exit Credit Agreement | 2027 | |||||||||||||||||||||||||
Other Convertible Notes2
|
2025 | |||||||||||||||||||||||||
Secured Convertible Notes2
|
2025 | |||||||||||||||||||||||||
Secured Notes | 2028 | |||||||||||||||||||||||||
New Secured Convertible Notes |
2029 | |||||||||||||||||||||||||
2029 Convertible Notes | 2029 |
|||||||||||||||||||||||||
Miner Financing: | ||||||||||||||||||||||||||
Blockfi loan | 2023 | |||||||||||||||||||||||||
Blockfi takeback loan | 2029 | |||||||||||||||||||||||||
Liberty/Stonebriar loan | 2024 | |||||||||||||||||||||||||
Liberty/Stonebriar takeback loan | 2029 |