9 unchanged sentences
• Our business is highly dependent on a small number of digital asset mining equipment suppliers.
−Removed: • Our business is capital intensive, and failure to obtain the necessary capital when needed may force us to delay, limit or terminate our expansion efforts or other operations.
−Removed: • If future prices of bitcoin are not sufficiently high, our business, results of operations and financial condition could be materially and adversely affected.
−Removed: • We may not be able to obtain new hosting and transaction processing hardware or purchase such hardware at competitive prices during times of high demand.
−Removed: • Our business is heavily impacted by social, political, economic and other events and circumstances in countries outside of the United States, most particularly China and other non-Western countries.
−Removed: China’s shifting position on mining activity within its borders could reduce our revenue and profitability.
+Added: • Our business is capital intensive, and failure to obtain the necessary capital when needed may force us to delay, limit or terminate our expansion efforts or other operations, which could have a material adverse effect on our business, financial condition and results of operations.
+Added: • We may need to raise additional capital to grow our business and satisfy our anticipated future liquidity needs, and we may not be able to raise it on terms acceptable to us, or at all.
+Added: • If future prices of bitcoin are not sufficiently high, our business, results of operations and financial condition could be materially and adversely affected, which may have a negative impact on the trading price of our securities.
+Added: • Our success depends in large part on our ability to mine digital assets profitably and to attract customers for our hosting capabilities.
+Added: • A slowdown in the demand for blockchain technology or blockchain hosting resources and other market and economic conditions could have a material adverse effect on our business, financial condition and results of operations.
• A significant portion of our assets are pledged to our senior secured noteholders, and our miners are pledged to certain other lenders.
−Removed: This obligation may limit our ability to obtain additional capital to grow our business and failure to repay obligations to our noteholders and other lenders when due will have a material adverse effect on our business and could result in foreclosure on our assets.
+Added: • Our revenue comes from a small number of customers.
• We are subject to risks associated with our need for significant electric power and the limited availability of power resources, which could have a material adverse effect on our business, financial condition and results of operations.
An inability to purchase and develop additional sources of low-cost renewable sources of energy effectively will have a material adverse effect on our business, financial condition and results of operations.
+Added: • We may not be able to obtain new hosting and transaction processing hardware or purchase such hardware at competitive prices during times of high demand.
+Added: • Our business is heavily impacted by social, political, economic and other events and circumstances in countries outside of the United States, most particularly China and other non-Western countries.
+Added: China’s shifting position on mining activity within its borders could reduce our revenue and profitability.
• We plan to continue to acquire other businesses or receive offers to be acquired, which could require significant management attention, disrupt our business or dilute stockholder value.
−Removed: • We generate significant revenue from a limited number of hosting facilities in Kentucky, Georgia, North Carolina and North Dakota and a significant disruption to operations in this region could have a material adverse effect our business, financial condition and results of operations.
+Added: • We generate significant revenue from a limited number of hosting facilities in Kentucky, Georgia, North Carolina, North Dakota and Texas.
+Added: • We may be vulnerable to security breaches.
• Our future success depends on our ability to keep pace with rapid technological changes that could make our current or future technologies less competitive or obsolete.
8 unchanged sentences
• Losses relating to our business may be uninsured, or insurance may be limited.
−Removed: • Diversification of our business by mining or investing in additional digital assets, financial instruments and/or businesses could require significant investment or expose us to trading risks.
+Added: • Because there has been limited precedent set for financial accounting for bitcoin and other digital assets, the determinations that we have made for how to account for digital assets transactions may be subject to change.
• As more processing power is added to a network, our relative percentage of total processing power on that network is expected to decline absent significant capital investment, which has an adverse impact on our ability to generate revenue from processing transactions on that network.
2 unchanged sentences
• Digital assets are subject to extreme price volatility.
−Removed: The value of digital assets is dependent on a number of factors.
• Any loss or destruction of a private key required to access a digital asset of ours is irreversible.
2 unchanged sentences
• Our interactions with a blockchain may expose us to SDN or blocked persons or cause us to violate provisions of law that did not contemplate distribute ledger technology.
−Removed: • We have identified material weaknesses in our internal control over financial reporting.
+Added: • Legacy Core Scientific has identified material weaknesses in its internal control over financial reporting.
+Added: Such material weaknesses may result in material misstatements of Core’s financial statements or cause it to fail to meet its periodic reporting obligations.
+Added: Core may also identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control.
+Added: • XPDI has identified a material weakness in its internal control over financial reporting.
+Added: This material weakness could continue to adversely affect Core’s ability to report its results of operations and financial condition accurately and in a timely manner.
Risks Related to our Business and Industry
11 unchanged sentences
Our mining operations can only be successful and ultimately profitable if the costs, including hardware and electricity costs, associated with mining digital assets are lower than the price of the digital assets we mine when we sell them.
+Added: Falling digital asset prices, significantly higher energy prices, inflation and supply chain disruptions have increased electricity costs, delayed miner deployments and reduced our profitability.
Our miners experience ordinary wear and tear from operation and may also face more significant malfunctions caused by factors which may be beyond our control.
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Moreover, in order to grow our hosting business, we need additional hosting facilities to increase our capacity for more miners.
−Removed: The costs of constructing, developing, operating and maintaining hosting facilities and growing our hosting operations may increase in the future, which may make it more difficult for us to expand our business and to operate our hosting facilities profitably.
+Added: The costs of constructing, developing, operating and maintaining hosting facilities and growing our hosting operations have increased significantly and may continue to increase in the future, which have made it difficult for us to expand our business and to operate our hosting facilities profitably.
We will need to raise additional funds through equity or debt financings in order to meet our operating and capital needs.
−Removed: Additional debt or equity financing may not be available when needed or, if available, may not be available on satisfactory terms.
−Removed: An inability to generate sufficient cash from operations or to obtain additional debt or equity financing would adversely affect our results of operations.
−Removed: Additionally, if this happens, we may not be able to mine digital assets as efficiently or in similar amounts as our competition and, as a result, our business and financial results could suffer.
−Removed: We may not be able to obtain new hosting and transaction processing hardware or purchase such hardware at competitive prices during times of high demand, which could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Historically, an increase in interest and demand for digital assets has led to a shortage of hosting and transaction processing hardware and increased prices.
−Removed: We and our customers and potential customers have experienced, and may in the future experience, difficulty in obtaining new equipment or replacement components for our and their existing equipment, including graphics processing units and application-specific integrated circuit chipsets and computer servers, which has had, and in the future may have, a material impact on the demand for our services and associated revenue.
−Removed: Currently, restrictions on digital asset mining in China have increased availability of used mining equipment and decreased prices of new mining equipment.
−Removed: In addition, these restrictions have decreased available mining facilities in China and increased demand for hosting in countries outside of China including the U.S.
−Removed: To the extent miners view this used equipment as a viable alternative to purchasing new miners from us our equipment sales may suffer, which could have a material adverse effect on our business, financial condition and results of operations.
+Added: Current market conditions have made raising additional debt or equity financing difficult and may not be available when needed or, if available, may not be available on satisfactory terms.
+Added: An inability to generate sufficient cash from operations or to obtain additional debt or equity financing have adversely affected our results of operations.
+Added: We may need to raise additional capital to grow our business and satisfy our anticipated future liquidity needs, and we may not be able to raise it on terms acceptable to us, or at all.
+Added: Growing and operating our business will require significant cash outlays, liquidity reserves and capital expenditures and commitments to respond to business challenges, including developing or enhancing new or existing products.
+Added: As of June 30, 2022, we had cash and cash equivalents of approximately $128.5 million.
+Added: If cash on hand, cash generated from operations, and the net proceeds from this offering are not sufficient to meet our cash and liquidity needs, we may need to seek additional capital, potentially through debt or equity financings.
+Added: To the extent that we raise additional capital through the sale of additional equity or convertible securities, your ownership interest may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder.
+Added: Debt financing, if available, would result in increased fixed payment obligations and a portion of
+Added: our operating cash flows, if any, being dedicated to the payment of principal and interest on such indebtedness.
+Added: In addition, debt financing may involve agreements that include restrictive covenants that impose operating restrictions, such as restrictions on the incurrence of additional debt, the making of certain capital expenditures or the declaration of dividends.
+Added: Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our products.
+Added: Even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or in light of specific strategic considerations.
+Added: If we are unable to obtain funding on a timely basis, we may be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, operating results and prospects and cause the price of the common stock to decline
If future prices of bitcoin are not sufficiently high, our business, results of operations and financial condition could be materially and adversely affected, which may have a negative impact on the trading price of our securities.
−Removed: Our financial condition and results of operations are, and are expected to increasingly be, reliant on our ability to sell the bitcoin we mine at a price greater than our costs to produce that bitcoin.
−Removed: As the price for new miners we buy increases, our cost to produce a single bitcoin also increases, therefore requiring a corresponding increase in the price of bitcoin for us to maintain our results of operations.
−Removed: If future prices of bitcoin are not sufficiently high, we may not realize the benefit of the capital expenditures we incur each time we acquire new miners.
−Removed: If this occurs, our business, results of operations and financial condition could be materially and adversely affected, which may have a negative impact on the trading price of our securities, which may have a materially adverse impact on investors’ investment in our Company.
+Added: Our financial condition and results of operations is reliant on our ability to sell the bitcoin we mine at a price greater than our costs to produce that bitcoin.
+Added: The recent reduction in Bitcoin prices and our decision to sell bitcoin to increase our cash balances have impacted our balance sheet.
+Added: As our cost to produce a single bitcoin increases, if future prices of bitcoin are not sufficiently high, we may not realize the benefit of the capital expenditures we have incurred to acquire miners and develop new data centers.
+Added: If this trend continues, our business, results of operations and financial condition could be materially and adversely affected, which may have a negative impact on the trading price of our securities, which may have a materially adverse impact on investors’ investment in our Company.
Our success depends in large part on our ability to mine digital assets profitably and to attract customers for our hosting capabilities.
−Removed: Increases in power costs or our inability to mine digital assets efficiently and to sell digital assets at favorable prices will reduce our operating margins, impact our ability to attract customers for our services and harm our growth prospects and could have a material adverse effect on our business, financial condition and results of operations.
+Added: Increases in power costs have impacted our inability to mine digital assets efficiently and reduced bitcoin pricing have reduced our operating margins.
+Added: Continued increases in power costs and unfavorable prices for digital assets will impact our ability to attract customers for our services, harm our growth prospects and could have a continuing material adverse effect on our business, financial condition and results of operations.
Our growth depends in large part on our ability to successfully mine digital assets and to attract customers for our hosting capabilities.
−Removed: We may not be able to attract customers to our hosting capabilities for a number of reasons, including if:
−Removed: • there is a reduction in the demand for our services due to macroeconomic factors in the markets in which we operate;
−Removed: • we fail to provide competitive pricing terms or effectively market them to potential customers;
+Added: We may not be able to attract customers to our hosting capabilities or successfully mine digital assets for a number of reasons, including if:
+Added: • there is a reduction in the demand for our services or digital assets due to macroeconomic factors in the markets in which we operate, including high energy costs, supply chain disruptions and reduced demand for digital assets at favorable prices;
+Added: • we fail to provide competitive colocation terms or effectively market them to potential customers;
• we provide hosting services that are deemed by existing and potential customers or suppliers to be inferior to those of our competitors, or that fail to meet customers’ or suppliers’ ongoing and evolving program qualification standards, based on a range of factors, including available power, preferred design features, security considerations and connectivity;
9 unchanged sentences
• a decline in the adoption and use of bitcoin and other similar digital assets within the technology industry or a decline in value of digital assets;
−Removed: • increased costs of complying with existing or new government regulations applicable to digital assets and other factors;
−Removed: • a downturn in the market for blockchain hosting space generally, which could be caused by an oversupply of or reduced demand for blockchain space;
+Added: • increased costs of digital asset mining or complying with existing or new government regulations applicable to digital assets and other factors;
+Added: • a downturn in the market for blockchain hosting space generally, which could be caused by an oversupply of or reduced demand for blockchain space or unfavorable market price for digital assets;
• any transition by our customers of blockchain hosting from third-party providers like us to customer-owned and operated facilities;
2 unchanged sentences
• availability of an adequate supply of new generation digital asset mining equipment to enable us to mine digital assets at scale and for customers who want to host with us to be able to do so;
−Removed: • the degree of difficulty in mining digital assets and the trading price of such assets.
+Added: • the degree of difficulty in mining digital assets and the cost of mining or trading price of such assets.
To the extent that any of these or other adverse conditions exist, they are likely to have an adverse impact on our mining rewards and market demand and pricing for our services, which could have a material adverse effect on our business, financial condition and results of operations.
2 unchanged sentences
Macroeconomic conditions that affect the economy and the economic outlook of the United States and the rest of the world could adversely affect our customers and vendors, which could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Our business is heavily impacted by social, political, economic and other events and circumstances in countries outside of the United States, most particularly China and other non-Western countries.
−Removed: China’s shifting position on mining activity within its borders could reduce our revenue and profitability.
−Removed: Our business is heavily impacted by social, political, economic and other events and circumstances in countries outside of the United States, most particularly in China and other non-Western countries.
−Removed: These events and circumstances are largely outside of our influence and control.
−Removed: We are heavily dependent on the Chinese manufacture of equipment, much of which has historically been for sale within China and other countries outside the United States.
−Removed: We believe that historically China was a location of significant digital asset mining at low electric power rates.
−Removed: Recently, China and other foreign governments have taken action to prohibit or significantly restrict digital asset mining.
−Removed: For example, in May and June 2021, in their efforts to curb digital asset trading and mining, regulators in several Chinese Provinces, including Qinghai, Inner Mongolia and Sichuan, announced policies to curb or ban local digital asset mining operations.
−Removed: Following the ban announcement, the price of bitcoin experienced a drop of over 30% in May.
−Removed: The long-term impact of such restrictions is unknown and could be detrimental to our business and profitability.
−Removed: Currently, the restrictions in China have enhanced our business by reducing the number of operating digital asset miners and decreasing the mining difficulty which has increased our digital asset yield and increased revenue.
−Removed: Whether or not the lack of mining activity in China will negatively impact Chinese miner manufacturing and the development, price, availability of new and enhanced mining equipment is unknown.
−Removed: Should China or other countries that currently restrict digital asset mining eliminate such restrictions or actually seek to enhance such mining activity, the likely increase in mining activity would likely reduce our revenue and profitability.
−Removed: In addition, unforeseen global events such as the armed conflict between Russia and Ukraine could adversely affect our business and results of operations.
−Removed: In late February 2022, Russian military forces launched significant military action against Ukraine.
−Removed: Around the same time, the United States, the United Kingdom, the European Union, and several other nations announced a broad array of new or expanded sanctions, export controls, and other measures against Russia and others supporting Russia’s economy or military efforts.
−Removed: This armed conflict between Russia and Ukraine, including any resulting sanctions, export controls or other restrictive actions that may be imposed by the United States and/or other countries, have created global security concerns that could result in a regional conflict and otherwise have a lasting impact on regional and global economies, any or all of which could adversely affect our business and results of operations.
−Removed: While we do not currently believe our mining activities have been impacted, we cannot be certain what the overall impact of this conflict will be on our business.
Continuing coronavirus outbreaks may have a material adverse impact on our business, liquidity, financial condition and results of operations.
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Our historical financial results may not be indicative of our future performance.
−Removed: In the first quarter of 2022, we generated limited revenue and incurred substantial losses and may continue to incur losses for the foreseeable future.
−Removed: We had a net loss of $466.2 million for three months ended March 31, 2022 and a net income of $6.8 million for the three months ended March 31, 2021.
−Removed: As of March 30, 2022, our accumulated deficit was $493.6 million.
−Removed: Our historical results are not indicative of our future perfo rmance.
+Added: In the first half of 2022, we generated limited revenue and incurred substantial losses and may continue to incur losses for the foreseeable future.
+Added: We had a net loss of $810.5 million and $1.28 billion, respectively, for the three and six months ended June 30, 2022.
+Added: As of June 30, 2022, our accumulated deficit was $1.30 billion.
+Added: Our historical results are not indicative of our future performance.
If we are not able to successfully develop our business, it will have a material adverse effect on our business, financial condition and results of operations.
6 unchanged sentences
Our results of operations may be materially impacted if we are required to record a significant charge due to an impairment of our goodwill, intangible assets or long-lived assets.
+Added: For example, in connection with our acquisition of Blockcap, we recognized a goodwill impairment of $788.7 million.
Separately, we assess our digital assets, which currently predominately consists of bitcoin, for impairment on a daily basis.
3 unchanged sentences
Our results of operations may be materially impacted if we are required to record a significant charge due to an impairment of our goodwill, intangible assets or long-lived assets.
−Removed: A significant portion of our assets are pledged to our senior secured noteholders, and our miners are pledged to certain other lenders.
+Added: A significant portion of our assets are pledged to our senior secured noteholders, and certain of our miners are pledged to certain other lenders.
This obligation may limit our ability to obtain additional capital to grow our business and failure to repay obligations to our noteholders and other lenders when due will have a material adverse effect on our business and could result in foreclosure on our assets.
A significant portion of our assets are pledged to our senior secured noteholders.
−Removed: As of March 31, 2022, we owed our senior secured convertible noteholders $530 million, comprised of $515 million of principal outstanding for convertible notes issued and $15 million for payment-in-kind interest capitalized through March 31, 2022.
+Added: As of June 30, 2022, we owed our senior secured convertible noteholders $536.3 million, comprised of $513.3 million of principal outstanding for convertible notes issued and $23.0 million for payment-in-kind interest capitalized through June 30, 2022.
The notes have a maturity date of April 19, 2025, accrue interest at a rate of 10% per annum (of which 4% is payable in cash and 6% is payable in kind), and are convertible under certain circumstances into shares of our capital stock.
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A default would have a material adverse effect on our business and our stockholders could lose their entire investment in us.
−Removed: In addition, our miners are pledged to certain other lenders in connection with our commercial transactions therewith.
+Added: In addition, certain of our miners are pledged to certain other lenders in connection with our commercial transactions therewith.
Any failure to satisfy our obligations under the arrangements with such lenders could result in foreclosing on our miners, which would have a material adverse effect on our business and results of operations.
−Removed: Our revenue comes from a small number of customers, and the loss of, or significant decrease in business from, a number of these customers or our failure to continually attract new customers could have a material adverse effect on our business, financial condition and results of operations.
+Added: In August 2022, the Company entered into two amended and restated bridge promissory notes (the “Amended Bridge Notes”), one in an aggregate principal amount of $60.0 million with B.
+Added: Riley Commercial Capital, LLC (“B.
+Added: Riley Commercial Capital”) and one in an aggregate principal amount of $15.0 million with an affiliate of B.
+Added: Riley Commercial Capital (“B.
+Added: Riley Commercial Capital”).
+Added: The Amended Bridge Notes amortize monthly and mature on June 1, 2023.
+Added: The Amended Bridge Notes bear interest at a rate of 7% per annum.
+Added: As of August 1, 2022, giving effect to the monthly amortization, the Amended Bridge Notes had an aggregate principal amount of $57 million.
+Added: The Amended Bridge Notes require the proceeds of (i) any equity issuances, (ii) any additional secured debt (other than purchase money debt) in excess of $500 million and (iii) any ELOC sales in an amount equal to 25% of the net cash proceeds received from any such ELOC sale, in each case, to be applied by the Company to repay the outstanding principal amount of the Amended Bridge Notes.
+Added: Until repaid the Amended Bridge Notes will significantly restrict the Company’s ability to refinance its secured debt and raise additional capital to fund its business operations.
+Added: Our revenue comes from a small number of customers, and the insolvency of, loss of, or significant decrease in business from, a number of these customers or our failure to continually attract new customers could have a material adverse effect on our business, financial condition and results of operations.
We have generated a significant portion of our historical revenue from a small number of hosting customers.
−Removed: Historically, Blockcap was one of our largest hosting customers and represented a significant portion of our revenue.
−Removed: For the three months ended March 31, 2021, Argo Innovation Labs Inc., a subsidiary of Argo Blockchain PLC (collectively, “Argo”), accounted for 51% of our hosting and equipment sales revenue.
+Added: For the six months ended June 30, 2022, our largest and second largest customers accounted for approximately 25.4% and 21.2% of the Company’s Equipment Sales and Hosting segment revenue, respectively, and approximately 8.1% and 6.7% of the Company’s total revenue, respectively.
Any failure to meet our end-users’ expectations, including, but not limited to, any inability to meet their requirements for increased hosting capacity at attractive rates, could result in cancellation or non-renewal of our business relationships.
3 unchanged sentences
Accordingly, if we fail to obtain significant additional customers or fail to increase our self-mining operations, it could have a material adverse effect on our business, financial condition and results of operations.
+Added: To the extent one or more of our key customers commences bankruptcy proceedings pursuant to Title 11 of the United States Bankruptcy Code, our contracts with such customers may be subject to rejection under applicable provisions of the Code or, if we so agree, may be renegotiated.
+Added: Further, during any such bankruptcy proceeding, prior to assignment and assumption, rejection or renegotiation of such contracts, the bankruptcy court may temporarily authorize the payment of value for our services less than contractually required, which could have a material adverse effect on our business, financial condition and results of operations and cash flows.
+Added: The resolution of any outstanding claims against such a customer or counterparty is dependent on the terms of the plan of reorganization and is inherently uncertain.
+Added: For example, in July 2022, Celsius Networks, the parent company of Celsius Mining LLC (“Celsius”), filed for voluntary relief under Chapter 11 of the Bankruptcy Code.
+Added: Celsius is one of our two largest customers.
+Added: Celsius may take actions in its Chapter 11 proceeding to terminate or renegotiate its agreements with us and/or seek to reduce our claims for services and damages to which we may be entitled.
+Added: Our recovery on our claims will be subject to factors outside of our control.
+Added: The reduction of our claims for services and damages to which we may be entitled or the reduction in recovery rates for those claims for services and damages could have a material effect on our business, financial condition, results of operations and cash flows.
Delays in the expansion of existing hosting facilities or the construction of new hosting facilities or significant cost overruns could present significant risks to our business and could have a material adverse effect on our business, financial condition and results of operations.
3 unchanged sentences
We may face challenges in obtaining suitable land to build new hosting facilities, as we need to work closely with the local power suppliers and local governments of the places where our proposed hosting facilitates are located.
−Removed: Delays in actions that require the assistance of such third parties, in receiving required permits and approvals or in mediations with local communities, if any, may negatively impact our construction timelines and budget or result in any new hosting facilities not being completed at all.
+Added: We also may face challenges in generating cash or obtaining financing necessary to complete planned facilities on time.
+Added: Delays in actions that require the assistance of such third parties, in receiving required permits and approvals or in mediations with local communities, if any, and lack of available capital, may negatively impact our construction timelines and budget or result in any new hosting facilities not being completed at all.
Our facilities in Georgia and North Dakota became operational during the fourth quarter of 2021.
1 unchanged sentence
Additional expansion of existing hosting facilities and construction of new hosting facilities is also being contemplated.
−Removed: Such expansion and construction require us to rely on the experience of one or more designers, general contractors and subcontractors, and such designers or contractors may experience financial or other problems during the design or construction process.
+Added: Such expansion and construction require us to procure and rely on the experience of one or more designers, general contractors and subcontractors, and we or such designers or contractors may experience financial or other problems during the design or construction process that could delay completion of planned facilities.
We may also experience quality control issues as we implement any upgrades in our hosting capacity through the installation and maintenance of chipsets and servers or new cooling technologies such as immersion and water curtain cooling.
2 unchanged sentences
If we experience significant delays in the supply of power required to support any hosting facility expansion or new construction, the progress of such projects could deviate from our original plans, which could cause material and negative effects on our revenue growth, profitability and results of operations.
−Removed: Any material delay in completing these projects, or any substantial cost increases or quality issues in connection with these projects, could materially delay our ability to deliver our hosting capacity, cause us to incur penalties under hosting contracts, result in reduced order volume and materially adversely affect our business, financial condition and results of operations.
+Added: Any material delay in completing these projects, or any substantial cost increases or failure to obtain sufficient capital to complete such facilities, could materially delay our ability to deliver our hosting capacity, cause us to incur penalties under hosting contracts, result in reduced order volume and materially adversely affect our business, financial condition and results of operations.
We are subject to risks associated with our need for significant electric power and the limited availability of power resources, which could have a material adverse effect on our business, financial condition and results of operations.
5 unchanged sentences
Energy costs and availability are vulnerable to seasonality, with increased costs primarily in the summer months and risks of outages and power grid damage as a result of inclement weather, animal incursion, sabotage and other events out of our control.
+Added: Recently we have experienced increased weather temperatures at all of our facilities requiring us to curtail our power usage more frequently.
+Added: Additionally, we were recently notified that The Board of Water, Light and Sinking Fund Commissioners of the City of Dalton, Georgia (d/b/a Dalton Utilities, “Dalton”) intends to increase the cost of electricity to all its customers, including us.
+Added: We are evaluating its options to reduce the impact of any such increase in the cost of electricity provided by Dalton, which may be significant.
Although we aim to build and operate energy efficient hosting facilities, there can be no assurance such facilities will be able to deliver sufficient power to meet the growing needs of our business.
1 unchanged sentence
Pursuant to these power contracts, if we fail to curtail our power usage when called upon or fail to satisfy certain eligibility requirements for monthly bill credits, our power costs would increase.
−Removed: Any system downtime resulting from insufficient power resources or power outages could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Our operations do not run on back-up generators in the event of a power outage.
−Removed: Increased power costs and limited availability and curtailment of power resources will reduce our revenue and have a material and adverse effect on our cost of revenue and results of operations.
−Removed: Any system downtime resulting from insufficient power resources or power outages could have a material adverse effect on our business, financial condition and results of operations.
+Added: Any system downtime resulting from curtailments, insufficient power resources or power outages could have a material adverse effect on our business, financial condition and results of operations.
+Added: Our operations do not run on back-up generators in the event of a power outage or curtailment.
+Added: Increased power costs and limited availability and
+Added: curtailment of power resources will reduce our revenue and have a material and adverse effect on our cost of revenue and results of operations.
+Added: Any system downtime resulting from insufficient power resources, curtailment or power outages could have a material adverse effect on our business, financial condition and results of operations.
Because the mining portion of our business consumes a large amount of energy, it is not practical or economical for our operations to run on back-up generators in the event of a power outage.
+Added: We may not be able to obtain new hosting and transaction processing hardware or purchase such hardware at competitive prices during times of high demand, which could have a material adverse effect on our business, financial condition and results of operations .
+Added: Historically, an increase in interest and demand for digital assets has led to a shortage of hosting and transaction processing hardware and increased prices.
+Added: We and our customers and potential customers have experienced, and may in the future experience, difficulty in obtaining new equipment or replacement components for our and their existing equipment, including graphics processing units and application-specific integrated circuit chipsets and computer servers, which has had, and in the future may have, a material impact on the demand for our services and associated revenue.
+Added: Currently, restrictions on digital asset mining in China have increased availability of used mining equipment and decreased prices of new mining equipment.
+Added: In addition, these restrictions have decreased available mining facilities in China and increased demand for hosting in countries outside of China including the U.S.
+Added: To the extent miners view this used equipment as a viable alternative to purchasing new miners from us our equipment sales may suffer, which could have a material adverse effect on our business, financial condition and results of operations .
+Added: Our business is heavily impacted by social, political, economic and other events and circumstances in countries outside of the United States, most particularly China and other non-Western countries.
+Added: China’s shifting position on mining activity within its borders could reduce our revenue and profitabilit y.
+Added: Our business is heavily impacted by social, political, economic and other events and circumstances in countries outside of the United States, most particularly in China and other non-Western countries.
+Added: These events and circumstances are largely outside of our influence and control.
+Added: We are heavily dependent on the Chinese manufacture of equipment, much of which has historically been for sale within China and other countries outside the United States.
+Added: We believe that historically China was a location of significant digital asset mining at low electric power rates.
+Added: Recently, China and other foreign governments have taken action to prohibit or significantly restrict digital asset mining.
+Added: For example, in May and June 2021, in their efforts to curb digital asset trading and mining, regulators in several Chinese Provinces, including Qinghai, Inner Mongolia and Sichuan, announced policies to curb or ban local digital asset mining operations.
+Added: Following the ban announcement, the price of bitcoin experienced a drop of over 30% in May.
+Added: The long-term impact of such restrictions is unknown and could be detrimental to our business and profitability.
+Added: Currently, the restrictions in China have enhanced our business by reducing the number of operating digital asset miners and decreasing the mining difficulty which has increased our digital asset yield and increased revenue.
+Added: Whether or not the lack of mining activity in China will negatively impact Chinese miner manufacturing and the development, price, availability of new and enhanced mining equipment is unknown.
+Added: Should China or other countries that currently restrict digital asset mining eliminate such restrictions or actually seek to enhance such mining activity, the likely increase in mining activity would likely reduce our revenue and profitability.
+Added: In addition, unforeseen global events such as the armed conflict between Russia and Ukraine could adversely affect our business and results of operations.
+Added: In late February 2022, Russian military forces launched significant military action against Ukraine.
+Added: Around the same time, the United States, the United Kingdom, the European Union, and several other nations announced a broad array of new or expanded sanctions, export controls, and other measures against Russia and others supporting Russia’s economy or military efforts.
+Added: This armed conflict between Russia and Ukraine, including any resulting sanctions, export controls or other restrictive actions that may be imposed by the United States and/or other countries, have created global security concerns that could result in a regional conflict and otherwise have a lasting impact on regional and global economies, any or all of which could adversely affect our business and results of operations.
+Added: To the extent that this conflict has increased the global cost of energy and disrupted the demand for and price of digital assets, it has and could continue to have an impact on our busines s.
Governments and government regulators may potentially restrict the ability of electricity suppliers to provide electricity to hosting and transaction processing operations such as ours, which could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Although we have not experienced it since our inception, governments or government regulators may potentially restrict electricity suppliers from providing electricity to hosting facilities and hosting and transaction processing operators in times of electricity shortage or may otherwise potentially restrict or prohibit the provision of electricity to transaction process operators like us.
−Removed: For example, on May 14, 2018, the Chelan County Public Utility District in Washington approved a three-month extension of a moratorium on the approval of electric service for new digital asset transaction operators in Chelan County.
+Added: Governments or government regulators may potentially restrict electricity suppliers from providing electricity to hosting facilities and hosting and transaction processing operators in times of electricity shortage or may otherwise potentially restrict or prohibit the provision of electricity to transaction process operators like us.
+Added: For example, on May 14, 2018, the Chelan County Public Utility District in Washington approved a three-month extension of a moratorium on the approval of electric service for new digital
+Added: asset transaction operators in Chelan County.
In March 2018, the City of Plattsburgh, New York, placed an 18-month moratorium on transaction processing to preserve natural resources, the health of its residents and the “character and direction” of the city after residents complained about significantly higher electricity bills.
−Removed: In the event government regulators issue moratoriums or impose bans or restrictions involving hosting operations or transaction processing in jurisdictions in which we operate, we will not be able to continue our operations in such jurisdictions.
−Removed: A moratorium, ban or restriction could have a material adverse effect our business, financial condition and results of operations.
+Added: Additionally, the Environmental Conservation Committee of the New York State Assembly has voted to advance legislation that would establish a moratorium on proof-of-work authentication methods for blockchain cryptocurrency mining, for operations such as power plants that generate their own electricity using carbon-based fuels.
+Added: A companion bill is in the New York State Senate Environmental Conservation Committee.
+Added: The legislation aims to amend state environmental conservation law to establish the moratorium, as well as requiring a comprehensive generic environmental statement review.
+Added: If the moratorium legislation becomes law effective immediately, the state would not approve new applications, or permits to operations that utilize a carbon-based fuel to generate “behind the meter” electric energy to mine cryptocurrency using proof-of-work authentication methods to validate blockchain transactions for a period of two years.
+Added: Additionally, the state would not approve application or permit renewals during that two-year period .
+Added: In the event government regulators issue additional moratoriums or impose bans or restrictions involving hosting operations or transaction processing in jurisdictions in which we operate, we will not be able to continue our operations in such jurisdictions.
+Added: A moratorium, ban or restriction could have a material adverse effect on our business, financial condition and results of operations.
Power outages in our hosting facilities could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Although we control, operate and have access to our servers and all of the other components of our network, we are still vulnerable to disruptions and power outages resulting from weather, animal incursions, accidents, equipment failures, curtailments, acts of war, sabotage and other events.
+Added: Although we control, operate and have access to our servers and all of the other components of our network, we are still vulnerable to disruptions, curtailments and power outages resulting from weather, animal incursions, accidents, equipment failures, curtailments, acts of war, sabotage and other events.
We do not have backup power generators for our blockchain operations in the event of a power outage.
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If we overestimate our business’ capacity requirements or the demand for our services and therefore secure excess data center capacity, our operating margins could be materially reduced.
−Removed: If we underestimate our data center capacity requirements, we may not be able to service the expanding needs of our existing customers and may be required to limit new customer acquisition, which could have a material adverse effect on our business, financial condition and results of operations.
+Added: If we underestimate our data center capacity requirements, we may not be able to service the required or expanding needs of our existing customers and may be required to limit new customer acquisition, which could have a material adverse effect on our business, financial condition and results of operations.
We plan to continue to acquire other businesses or receive offers to be acquired, which could require significant management attention, disrupt our business or dilute stockholder value.
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We may not be able to find suitable acquisition candidates and we may not be able to complete acquisitions on favorable terms in the future, if at all.
−Removed: In July 2021, we acquired Blockcap, one of our largest hosting customers for digital asset mining, and its subsidiary, Radar Relay, Inc.
−Removed: (“RADAR”), a developer of financial products related to blockchain technologies, d eveloper tools, and network services including network staking, liquid staking, and trading.
+Added: In July 2021, we acquired Blockcap, one of our largest hosting customers for digital asset mining.
The acquisition of Blockcap and any future acquisitions may not ultimately strengthen our competitive position or achieve our goals, and could ultimately be viewed negatively.
−Removed: If we fail to successfully integrate Blockcap, RADAR or other future acquisitions, or the people or technologies associated with those acquisitions, into our company, our results of operations could be adversely affected.
+Added: If we fail to successfully integrate Blockcap or other future acquisitions, or the people or technologies associated with those acquisitions, into our company, our results of operations could be adversely affected.
Any integration process will require significant time and resources, require significant attention from management and disrupt the ordinary functioning of our business, and we may not be able to manage the process successfully, which could harm our business.
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We may have to pay cash, incur debt or issue equity securities to pay for any such acquisition, each of which could affect our financial condition or the value of our capital stock.
−Removed: The sale of equity to finance any such acquisitions could result in dilution to our stockholders.
+Added: The sale of equity to finance any such acquisitions could result in dilution to our
+Added: stockholders.
If we incur more debt, it would result in increased fixed obligations and could also subject us to covenants or other restrictions that would impede our ability to flexibly operate our business.
−Removed: If we do not successfully integrate Blockcap, Blockcap’s subsidiary, RADAR, or future acquisitions or strategic partnerships that we may enter into, we may not realize the anticipated benefits of any such acquisitions or partnerships, which could have a material adverse effect on our business, financial condition and results of operations.
−Removed: On July 30, 2021, we acquired Blockcap, one of our largest hosting customers, and Blockcap’s subsidiary RADAR, a developer of financial products related to blockchain technologies, developer tools, and network services including network staking, liquid staking, and trading.
+Added: We may not realize the anticipated benefits of Blockcap or any future such acquisitions or partnership, which could have a material adverse effect on our business, financial condition and results of operations.
+Added: On July 30, 2021, we acquired Blockcap, one of our largest hosting customers.
In the future we expect to contemplate and pursue acquisitions to expand and diversify our business.
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We cannot, however, provide assurance that we will be able to identify any potential acquisition or strategic partnership candidates, consummate any additional acquisitions or enter into any strategic partnerships in the future or that any such future acquisitions or strategic partnerships will be successfully integrated or advantageous to us.
−Removed: Blockcap, RADAR and other entities we acquire may not achieve the revenue and earnings we anticipate, or their liabilities may exceed our expectations.
−Removed: We could face integration issues pertaining to the internal controls and operational functions of Blockcap and RADAR, and we also could fail to realize cost efficiencies or synergies that we anticipated from the Blockcap acquisition or other acquisition candidates.
−Removed: The pursuit of potential acquisitions or the integration of Blockcap and RADAR could divert our management’s attention and cause us to incur expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated.
−Removed: Client dissatisfaction or performance problems with Blockcap or RADAR could have a material adverse effect on our reputation as a whole.
−Removed: We may be unable to profitably manage Blockcap, RADAR or other acquired entities, or we may fail to integrate them successfully without incurring substantial expenses, delays or other problems.
−Removed: We may not achieve the anticipated benefits from the acquisition of Blockcap, RADAR or future acquisitions or strategic partnerships due to a number of factors, including:
+Added: Blockcap and other entities we acquire may not achieve the long-term revenue and earnings we anticipated, or their liabilities may exceed our expectations.
+Added: We could fail to realize synergies that we anticipated from the Blockcap acquisition or other acquisition candidates.
+Added: The pursuit of potential acquisitions could divert our management’s attention and cause us to incur expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated.
+Added: We may be unable to profitably manage acquired entities, or we may fail to integrate them successfully without incurring substantial expenses, delays or other problems.
+Added: We may not achieve the anticipated benefits from the acquisition of Blockcap, future acquisitions or strategic partnerships due to a number of factors, including:
• inability or difficulty integrating and benefiting from acquired technologies or solutions in a profitable manner, including as a result of reductions in operating income, increases in expenses, failure to achieve synergies or otherwise;
−Removed: • unanticipated costs or liabilities associated with Blockcap and RADAR or another acquisition or strategic partnership;
−Removed: • difficulty integrating the accounting systems, operations and personnel of Blockcap and RADAR;
−Removed: • adverse effects to our existing business relationships and clients or to Blockcap’s business relationships and clients as a result of the acquisition;
−Removed: • loss of key employees, particularly those of Blockcap and RADAR;
−Removed: • assumption of potential liabilities of Blockcap and RADAR, including regulatory noncompliance or acquired litigation, and expenses relating to contractual disputes of the acquired business for, infringement of intellectual property rights, data privacy violations or other claims;
+Added: • unanticipated costs or liabilities associated with Blockcap or another acquisition or strategic partnership;
+Added: • loss of key employees;
+Added: • assumption of potential liabilities of Blockcap, including regulatory noncompliance or acquired litigation, and expenses relating to contractual disputes of the acquired business for, infringement of intellectual property rights, data privacy violations or other claims;
• difficulty in acquiring suitable businesses, including challenges in predicting the value an acquisition will ultimately contribute to our business;
• use of substantial portions of our available cash or assumption of additional indebtedness to consummate an acquisition.
−Removed: If we fail to successfully integrate Blockcap and RADAR or other businesses that we may acquire or strategic partnerships that we may enter into, we may not realize any of the benefits we anticipate in connection with any such acquisitions or partnerships, which could have a material adverse effect on our business, financial condition and results of operations.
+Added: If we fail to successfully integrate other businesses that we may acquire or strategic partnerships that we may enter into, we may not realize any of the benefits we anticipate in connection with any such acquisitions or partnerships, which could have a material adverse effect on our business, financial condition and results of operations.
If there are significant changes to the method of validating blockchain transactions, such changes could reduce demand for our blockchain hosting services.
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The services we provide are subject to failures resulting from numerous factors, including:
−Removed: • power loss;
+Added: • power loss, curtailment and disruption;
• equipment failure;
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In such cases, we could be liable for substantial damage awards, which would as a result have a material adverse effect on our business, financial condition and results of operations.
−Removed: We generate significant revenue from a limited number of hosting facilities in Kentucky, Georgia and North Carolina and a significant disruption to operations in this region could have a material adverse effect our business, financial condition and results of operations.
−Removed: A significant portion of our critical business operations are concentrated in Kentucky, Georgia and North Carolina.
+Added: We generate significant revenue from a limited number of hosting facilities in Kentucky, Georgia, North Carolina, North Dakota and Texas and a significant disruption to operations in any region could have a material adverse effect on our business, financial condition and results of operations.
+Added: A significant portion of our critical business operations are concentrated in Kentucky, Georgia, North Carolina, North Dakota and Texas.
A significant disruption to facilities in this region could materially and adversely affect our operations.
Additional facilities and development of new facilities, however, will require additional capital investment to reach full “build out.” An event beyond our control, including, but not limited to, an act of God (including, but not limited to, fires, explosions, earthquakes, drought, hurricanes, tidal waves, floods and other extreme weather events), war, hostilities (whether war is declared or not), acts of foreign enemies, embargo, rebellion, revolution, insurrection, military or usurped power, civil war, contamination by radioactivity or chemical weapon, riot, strikes, protests, lockouts, disorder, acts or threats of terrorism, pandemics or other catastrophic events that result in the destruction or disruption of any of our critical business or IT systems could severely affect our ability to conduct normal business operations, and, as a result, could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Our success is dependent on the ability of our management team and our ability to attract, develop, motivate and retain other well-qualified employees, including the integration of the Blockcap management team, which may be more difficult, costly or time-consuming than expected.
+Added: Our success is dependent on the ability of our management team and our ability to attract, develop, motivate and retain other well-qualified employees, which may be more difficult, costly or time-consuming than expected.
Our success depends largely on the development and execution of our business strategy by our senior management team.
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We may be unable to retain our directors, senior executives and key personnel or attract and retain new directors, senior executives and key personnel in the future, any of which could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Additionally, our success depends upon our ability to integrate the Blockcap management team into our existing Company.
−Removed: The potential for unexpected costs, delays and challenges that may arise in integrating the management team of the two companies or the departure of management or key employees in connection with the merger could have a material adverse effect on our business, financial condition and results of operations.
Competition for employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to support our business, which in turn could have a material adverse effect on our business, financial condition and results of operation.
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Any breaches that may occur could expose us to increased risk of lawsuits, regulatory penalties, loss of existing or potential customers, harm to our reputation and increases in our security costs, which could have a material adverse effect on our business, financial condition and results of operations.
−Removed: In addition, any assertions of alleged security breaches or systems failure made against us, whether true or not, could harm our reputation, cause us to incur substantial legal fees and have a material adverse effect on our business, financial condition and results of operations.
+Added: In addition, any assertions of alleged security breaches or systems failure made against us, whether true or not, could harm our reputation, cause us to incur substantial legal fees and have a material adverse effect on our business, financial condition and results of
Whether or not any such assertion actually develops into litigation, our management may be required to devote significant time and attention to dispute resolution (through litigation, settlement or otherwise), which would detract from our management’s ability to focus on our business.
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If competitors introduce superior technologies for hosting operations or transaction processing, and we cannot make upgrades to our hardware or software to remain competitive, it could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Facebook’s development of a digital asset may adversely affect the value of Bitcoin and other digital assets.
−Removed: In May 2019, Facebook announced its plans for a digital asset called Libra, which faced significant government scrutiny.
−Removed: In July 2019, Facebook announced that Libra will not launch until all regulatory concerns have been met.
−Removed: Facebook rebranded the digital asset to Diem in 2020.
−Removed: The massive social network and 27 other partners are estimating that the Diem digital coin and Facebook’s corresponding digital wallet, would be a way to make sending payments around the world as easy as it is to send a photo.
−Removed: Facebook’s significant resources and ability to engage the world via social media may enable it to bring Diem to market rapidly and to deploy it across industries more rapidly and successfully than previous digital assets.
−Removed: Facebook’s size and market share may cause its digital asset to succeed to the detriment and potential exclusion of existing digital assets, such as Bitcoin.
Our compliance and risk management methods might not be effective and may result in outcomes that could adversely affect our reputation, operating results, and financial condition.
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For these reasons, we may not be able to utilize a material portion of the NOLs, even if we have taxable income.
−Removed: We may not be able to adequately protect our intellectual property rights and other proprietary rights, which could have a material adverse effect on business, financial condition and results of operations.
+Added: We may not be able to adequately protect our intellectual property rights and other proprietary rights, which could have a material adverse effect on our business, financial condition and results of operations.
We may not be able to obtain broad protection in the United States or internationally for all of our existing and future intellectual property and other proprietary rights, and we may not be able to obtain effective protection for our intellectual property and other proprietary rights in every country in which we operate.
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In addition, we also face significant competition from other users and/or companies that are processing transactions on one or more digital asset networks, as well as other potential financial vehicles, including securities, derivatives or futures backed by, or linked to, digital assets through entities similar to us, such as exchange-traded funds.
−Removed: Market and financial conditions, and other
−Removed: conditions beyond our control, may make it more attractive to invest in other financial vehicles, or to invest in digital assets directly.
+Added: Market and financial conditions, and other conditions beyond our control, may make it more attractive to invest in other financial vehicles, or to invest in digital assets directly.
Such events could have a material adverse effect on our business, financial condition and results of operations and potentially the value of any digital assets we hold or expect to acquire for our own account.
−Removed: Our projections are subject to significant risks, assumptions, estimates and uncertainties, including assumptions regarding the demand for our hosting services and the adoption of bitcoin and other digital assets.
+Added: Our projections are subject to significant risks, assumptions, estimates and uncertainties, including assumptions regarding the demand for and cost of our hosting services and the adoption of bitcoin and other digital assets.
As a result, our projected revenues, market share, expenses and profitability may differ materially from our expectations in any given quarter or fiscal year.
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Accordingly, we do not believe that we are an inadvertent investment company by virtue of the 40% inadvertent investment company test as described in the second bullet point above.
−Removed: Although we do not believe any of the digital assets we may own, acquire or mine are securities, there is still some regulatory uncertainty on the subject, see “— There is no one unifying principle governing the regulatory status of digital
−Removed: assets nor whether digital assets are securities in any particular context.
+Added: Although we do not believe any of the digital assets we may own, acquire or mine are securities, there is still some regulatory uncertainty on the subject, see “— There is no one unifying principle governing the regulatory status of digital assets nor whether digital assets are securities in any particular context.
Regulatory changes or actions in one or more countries may alter the nature of an investment in us or restrict the use of digital assets in a manner that adversely affects our business, prospects or operations .” If certain digital assets, including Bitcoin, were to be deemed securities, and consequently, investment securities by the SEC, we could be deemed an inadvertent investment company.
+Added: Similarly, if we were to acquire digital assets deemed investment
+Added: securities to hold for our own account or to engage in certain transactions, such as loan or repurchase transactions, we could be deemed an inadvertent investment company.
If we were to be deemed an inadvertent investment company, we may seek to rely on Rule 3a-2 under the 1940 Act, which allows an inadvertent investment company a grace period of one year from the earlier of (a) the date on which the issuer owns securities and/or cash having a value exceeding 50% of the issuer’s total assets on either a consolidated or unconsolidated basis or (b) the date on which the issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S.
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There can be no assurance that we will be able to maintain our exclusion from registration as an investment company under the 1940 Act.
−Removed: In addition, as a consequence of our seeking to avoid the need to register under the 1940 Act on an ongoing basis, we may be limited in our ability to engage in digital asset mining operations or otherwise make certain investments, and these limitations could result in our holding assets we may wish to sell or selling assets we may wish to hold, which could materially and adversely affect our business, financial condition and results of operations.
+Added: In addition, as a consequence of our seeking to avoid the need to register under the 1940 Act on an ongoing basis, we may be limited in our ability to engage in digital asset mining operations or otherwise make certain investments or engage in certain transactions, and these limitations could result in our holding assets we may wish to sell or selling assets we may wish to hold, which could materially and adversely affect our business, financial condition and results of operations.
If regulatory changes or interpretations of our activities require our registration as a money services business (“MSB”) under the regulations promulgated by the Financial Crimes Enforcement Network (“FinCEN”) under the authority of the U.S.
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Bitcoin and other digital assets are viewed differently by different regulatory and standards setting organizations globally as well as in the United States on the federal and state levels.
−Removed: For example, the Financial Action Task Force considers a digital asset as currency or an asset, and the Internal Revenue Service (“IRS”) considers a digital asset as property and not currency.
+Added: For example, the Financial Action Task Force considers a digital asset as currency or an asset, and the U.S.
+Added: Internal Revenue Service (“IRS”) considers a digital asset as property and not currency.
Further, the IRS applies general tax principles that apply to property transactions to transactions involving virtual currency.
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Section 5(a) of the Securities Act provides that, unless a registration statement is in effect as to a security, it is unlawful for any person, directly or indirectly, to engage in the offer or sale of securities in interstate commerce.
−Removed: Section 5© of the Securities Act provides a similar prohibition against offers to sell, or offers to buy, unless a registration statement has been filed.
+Added: Section 5(c) of the Securities Act provides a similar prohibition against offers to sell, or offers to buy, unless a registration statement has been filed.
Although, we do not intend to be engaged in the offer or sale of securities in the form of ICO offerings, and we do not believe our planned mining activities would require registration for us to conduct such activities and accumulate digital assets.
The SEC, CFTC, Nasdaq, IRS or other governmental or quasi-governmental agency or organization may conclude that our activities involve the offer or sale of “securities,” or ownership of “investment securities,” and we may be subject to regulation or registration requirements under various federal laws and related rules.
−Removed: Such regulation or the inability to meet the requirements to continue operations, would have a
−Removed: material adverse effect on our business and operations.
−Removed: We may also face similar issues with various state securities regulators who may interpret our actions as subjecting us to regulation, or requiring registration, under state securities laws, banking laws, or money transmitter and similar laws, which are also an unsettled area or regulation that exposes us to risks.
+Added: Such regulation or the inability to meet the requirements to continue operations, would have a material adverse effect on our business and operations.
+Added: We may also face similar issues with various state securities regulators who
+Added: may interpret our actions as subjecting us to regulation, or requiring registration, under state securities laws, banking laws, or money transmitter and similar laws, which are also an unsettled area or regulation that exposes us to risks.
Regulatory changes or actions may restrict the use of digital assets or the operation of digital asset networks in a manner that may require us to cease certain or all operations, which could have a material adverse effect on our business, financial condition and results of operations.
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with respect to its September 2017 offering of Kin.
−Removed: According to articles published by various news outlets, the SEC
−Removed: has allegedly issued numerous subpoenas and information requests to technology companies, advisers and individuals involved in the digital asset space and ICOs, as part of a broad inquiry into the digital asset market.
+Added: According to articles published by various news outlets, the SEC has allegedly issued numerous subpoenas and information requests to technology companies, advisers and individuals involved in the digital asset space and ICOs, as part of a broad inquiry into the digital asset market.
Recently, a number of proposed ICOs have sought to rely on Regulation A and have filed with the SEC a Form 1-A covering a distribution of a digital token.
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Although our activities are not focused on raising capital or assisting others that do so, the federal securities laws are very broad.
−Removed: We cannot provide assurance as to whether the SEC will continue or increase its enforcement with respect to digital assets or ICOs, including taking enforcement action against any person engaged in the sale of unregistered securities in violation of the Securities Act or any person acting as an unregistered investment company in violation of the Investment Company Act of 1940, as amended (the “Investment Company Act”).
+Added: We cannot provide assurance as to whether the SEC will continue or increase its enforcement with respect to digital assets or ICOs, including taking enforcement action against any person engaged in the sale of unregistered securities in violation of the Securities Act or any person acting as an unregistered investment company in violation of the 1940 Act.
Because the SEC has held that certain digital assets are securities based on the current rules and law, we may be required to register and comply with the rules and regulations under federal securities laws.
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Generally, we rely primarily on a combination of white papers and other disclosure documents prepared by the creators of applicable digital assets, as well as on our management’s ability to obtain adequate information to evaluate the potential implications of transacting in these digital assets.
−Removed: However, such white papers and other disclosure documents and information may contain misleading and/or fraudulent statements (which may include statements concerning the creators’ ability to deliver in a timely fashion
−Removed: the product and/or service disclosed in their white papers and other disclosure documents) and/or may not reveal any unlawful activities by the creators.
+Added: However, such white papers and other disclosure documents and information may contain misleading and/or fraudulent statements (which may include statements concerning the creators’ ability to deliver in a timely fashion the product and/or service disclosed in their white papers and other disclosure documents) and/or may not reveal any unlawful activities by the creators.
Recently, there has been an increasing number of investigations and lawsuits by the SEC and the CFTC involving digital asset creators for fraud and misappropriation, among other charges.
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We may not have adequate sources of recovery if the digital assets held by us are lost, stolen or destroyed due to third-party digital asset services, which could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Certain digital assets held by us are stored using Bittrex, Inc.
−Removed: (“Bittrex”) and Coinbase Global, Inc.
−Removed: (“Coinbase”), each a third-party digital asset service.
−Removed: We believe that the security procedures that Bittrex and Coinbase utilize, such as dual authentication security, secured facilities, segregated accounts and cold storage, are reasonably designed to safeguard our bitcoin and other digital
−Removed: assets from theft, loss, destruction or other issues relating to hackers and technological attack.
+Added: Certain digital assets held by us are stored using Genesis Custody Limited (“Genesis”), Coinbase Global, Inc.
+Added: (“Coinbase”) and Bittrex, Inc.
+Added: (“Bittrex”), each a third-party digital asset service.
+Added: We believe that the security procedures that Genesis, Coinbase and Bittrex utilize, such as dual authentication security, secured facilities, segregated accounts and cold storage, are reasonably designed to safeguard our bitcoin and other digital assets from theft, loss, destruction or other issues relating to hackers and technological attack.
Nevertheless, the security procedures cannot guarantee the prevention of any loss due to a security breach, software defect or act of God that may be borne by us.
−Removed: In addition, Bittrex and Coinbase’s limited liability under its services agreement with us may limit our ability to recover losses relating to our bitcoin.
+Added: In addition, Genesis, Coinbase and Bittrex’s limited liability under its services agreement with us may limit our ability to recover losses relating to our bitcoin.
If such digital assets are lost, stolen or destroyed under circumstances rendering a third party liable to us, it is possible that the responsible third party may not have the financial resources or insurance sufficient to satisfy any or all of our claims against the third party, or have the ability to retrieve, restore or replace the lost, stolen or destroyed digital assets due to governing network protocols and the strength of the cryptographic systems associated with such digital assets.
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Many believe that such sales created a downward pressure on the price of bitcoin.
+Added: The current macroeconomic environment, inflationary pressures and capital constraints have resulted in large scale selling of digital assets for cash that has contributed to the decrease in the price of digital assets, including bitcoin.
Any such similar events, or other unforeseen actions by holders of a significant amount of digital assets, could have a material adverse effect on our business, financial condition and results of operations.
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To the extent a non-U.S.
−Removed: jurisdiction with a significant share of the market of digital asset owners or users imposes onerous tax burdens on such owners or users, or imposes sales, use, or value added tax on acquisitions and dispositions of digital assets for fiat currency, such actions could result in decreased demand for digital assets in such jurisdiction, which could impact the price of digital assets and have a material adverse effect on our business, financial condition, and results of operations.
+Added: jurisdiction with a significant share of the market of digital asset owners or users imposes onerous tax burdens on such owners or users, or imposes sales, use, or value added tax on acquisitions and dispositions of digital assets for fiat currency, such
+Added: actions could result in decreased demand for digital assets in such jurisdiction, which could impact the price of digital assets and have a material adverse effect on our business, financial condition and results of operations.
Changes to, or changes to interpretations of, the U.S.
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In 2022, significant changes to U.S.
−Removed: federal income tax laws were proposed, including increasing the U.S.
+Added: federal income tax laws were proposed by the current presidential administration, including increasing the U.S.
income tax rate applicable to corporations from 21% to 28% and changes implicating information reporting with respect to digital assets.
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The added cost of any environmental taxes, charges, assessments or penalties levied on such power plants could be passed on to us, increasing the cost to run our hosting facilities.
−Removed: Any enactment of laws or promulgations of regulations regarding greenhouse gas emissions by the United States, or any domestic or foreign jurisdiction in which we conduct business, could have a material adverse effect on our business, financial condition or results of operations.
+Added: Any enactment of laws or promulgations of regulations regarding greenhouse gas emissions by the United States, or any domestic or foreign jurisdiction in which we conduct business, could have a material adverse effect on our business, financial condition and results of operations.
Latency in confirming transactions on a network could result in a loss of confidence in the network, which could have a material adverse effect on our business, financial condition and results of operations.
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The possible crossing of the 50% threshold indicates a greater risk in that a single mining pool could exert authority over the validation of Bitcoin transactions.
−Removed: To the extent that the Bitcoin or other digital asset ecosystems, including developers and administrators of mining pools, do not act to ensure greater decentralization of Bitcoin or other digital asset mining processing power, the feasibility of a malicious actor obtaining control of the processing power on the Bitcoin or other network will increase, which may adversely affect an investment us.
+Added: To the extent that the Bitcoin or other digital asset ecosystems, including developers and administrators of mining pools, do not act to ensure greater decentralization of Bitcoin or other digital asset mining processing power, the feasibility of a malicious actor obtaining control of the processing power on the Bitcoin or other network will increase, which may adversely affect an investment in us.
Transaction processing operators may sell a substantial amount of digital assets into the market, which may exert downward pressure on the price of the applicable digital asset and, in turn, could have a material adverse effect on our business, financial condition and results of operations.
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In a low profit margin environment, a higher percentage could be sold more rapidly, thereby potentially depressing digital asset prices.
−Removed: Lower digital asset prices could result in further tightening of profit margins for professionalized mining operations creating a network effect that may further reduce the price of digital assets until mining operations with higher operating costs become unprofitable forcing them to reduce mining power or cease mining operations temporarily.
+Added: Lower digital asset prices could result in further tightening of profit margins for professionalized mining operations creating a network effect that may further reduce the price of digital assets until mining operations with higher operating
+Added: costs become unprofitable forcing them to reduce mining power or cease mining operations temporarily.
Such circumstances could have a material adverse effect on our business, prospects or operations and potentially the value of bitcoin and any other digital assets we mine or otherwise acquire or hold for our own account.
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If we are forced to sell digital assets at low prices, it could have a material adverse effect on our business, financial condition and results of operations.
−Removed: From time to time we have sold, and we may sell in the future, a portion of our digital assets to pay for costs and expenses, which has reduced, and may reduce in the future, the amount of digital assets we hold, thus preventing us from recognizing any gain from the appreciation in value of the digital assets we have sold and may sell in the future.
−Removed: From time to time, we have sold, and we may sell in the future, a portion of our digital assets to pay for costs and expenses incurred, capital expenditures and other working capital, irrespective of then-current digital asset prices.
−Removed: Our past sales of digital assets have reduced the amount of digital assets we currently hold.
+Added: We recently sold our digital assets, and may from time to time sell all or a portion of digital assets we mine in the future, to pay for costs and expenses, which has reduced the amount of digital assets we hold, thus preventing us from recognizing any gain from the appreciation in value of the digital assets we have sold and may sell in the future.
+Added: We recently sold our digital assets, and may from time to time sell all or a portion of digital assets we mine in the future, to pay for costs and expenses incurred, capital expenditures and other working capital, irrespective of then-current digital asset prices.
+Added: Our past sales of digital assets have reduced the amount of digital assets we hold.
When we sell a digital asset, we are unable to benefit from any future appreciation in the underlying value of that digital asset.
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The value of digital assets is dependent on a number of factors, any of which could have a material adverse effect on our business, financial condition and results of operations.
−Removed: We currently generate a small portion of our revenue from processing blockchain transactions, in return for which receive digital assets.
−Removed: In connection with our recent merger with Blockcap, we anticipate that a much larger portion of our revenue will come from processing blockchain transactions in the form of digital assets like Bitcoin.
+Added: We currently generate a portion of our revenue from processing blockchain transactions, in return for which receive digital assets like Bitcoin.
We believe the value of digital assets related to our business is dependent on a number of factors, including, but not limited to:
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Third parties may assert intellectual property rights claims relating to the operation of digital assets and the holding and transfer of such assets.
−Removed: Regardless of the merit of any intellectual property rights claims or other legal action, any threatened action that reduces confidence in the long-term viability of any or all of the networks or other similar peer-to-peer networks, or in the ability of end-users to hold and transfer digital assets, may have a material adverse effect on our business, results of operations and financial condition.
+Added: Regardless of the merit of any intellectual property rights claims or other legal action, any threatened action that reduces confidence in the long-term viability of any or all of the networks or other similar peer-to-peer networks, or in the ability of end-users to hold and transfer digital assets, may have a material adverse effect on our business, financial condition and results of operations.
Additionally, a meritorious intellectual property rights claim could prevent us and other end-users from holding or transferring the digital assets, which could have a material adverse effect on our business, financial condition and results of operations.
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A soft fork or hard fork in a particular digital asset that we process could have a negative effect on the value of that digital asset and could have a material adverse effect on our business, financial condition and results of operations.
−Removed: The digital assets held by us may be subject to loss, damage, theft or restriction on access, which could have a material adverse effect on our business, financial condition or results of operations.
+Added: The digital assets held by us may be subject to loss, damage, theft or restriction on access, which could have a material adverse effect on our business, financial condition and results of operations.
There is a risk that some or all of the digital assets held or hosted by us could be lost, stolen or destroyed.
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Our security procedures and operational infrastructure may be breached due to the actions of outside parties, error or malfeasance of one of our employees, or otherwise, and, as a result, an unauthorized party may obtain access to our digital asset accounts, private keys, data or digital assets.
−Removed: Although we implement a number of security procedures with various elements such as two-factor verification, segregated accounts and secured facilities and plan to implement the maintenance of data on computers and/or storage media that is not directly connected to, or accessible from, the internet and/or networked with other computers (“cold storage”), to minimize the risk of loss, damage and theft, and we update such security procedures whenever reasonably practicable, we cannot guarantee the prevention of such loss, damage or theft, whether caused intentionally, accidentally or by an act of God.
+Added: Although we implement a number of security procedures with various elements such as two-factor verification, segregated accounts and secured facilities and plan to implement the maintenance of
+Added: data on computers and/or storage media that is not directly connected to, or accessible from, the internet and/or networked with other computers (“cold storage”), to minimize the risk of loss, damage and theft, and we update such security procedures whenever reasonably practicable, we cannot guarantee the prevention of such loss, damage or theft, whether caused intentionally, accidentally or by an act of God.
Additionally, outside parties may attempt to fraudulently induce our employees to disclose sensitive information in order to gain access to our infrastructure.
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As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the applicable listing standards of the Nasdaq.
−Removed: We expect that the requirements of these rules and regulations will
−Removed: continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly and place significant strain on our personnel, systems and resources.
+Added: We expect that the requirements of these rules and regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly and place significant strain on our personnel, systems and resources.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.
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We may also identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control.
−Removed: Risks Related to Ownership of Our Securities
+Added: Risks Related to Ownership of Our Securities and Other General Matters
An active trading market for our common stock may never develop or be sustained.
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Future sales and issuances of our capital stock or rights to purchase capital stock could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to decline.
−Removed: We may issue additional securities, including shares of common stock underlying warrants or as a result of the conversion of convertible notes or the exercise of options or RSUs.
+Added: We may issue additional securities, including shares of common stock underlying warrants or as a result of the conversion of convertible notes or the exercise of options or restricted stock units (“RSUs”).
Future sales and issuances of our capital stock or rights to purchase our capital stock could result in substantial dilution to our existing stockholders.
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New investors in such subsequent transactions could gain rights, preferences and privileges senior to those of holders of our common stock.
−Removed: In addition, our ability to raise additional capital through the sale of equity or convertible debt securities could be significantly impacted by the resale of shares of common stock by selling securityholders pursuant to this prospectus which could result in a significant decline in the trading price of our common stock and potentially hinder our ability to raise capital at terms that are acceptable to us or at all.
−Removed: Sales of our common stock, or the perception of such sales, by us or the selling securityholders in the public market could cause the market price of our common stock to drop significantly, even if our business is doing well, and certain selling securityholder still may receive significant proceeds.
+Added: Sales of our common stock, or the perception of such sales, in the public market could cause the market price of our common stock to drop significantly, even if our business is doing well, and certain selling securityholders still may receive significant proceeds.
The sale of our securities in the public market or the perception that such sales could occur, could harm the prevailing market price of our securities.
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Resales of our common stock may cause the market price of our securities to drop significantly, even if our business is doing well.
−Removed: Pursuant to our second amended and restated bylaws (the “Bylaws”) and certain lock-up agreements entered into prior to the consummation of the Business Combination by and among Core and the stockholders and employees signatories thereto, certain stockholders of Core, including Legacy Core’s stockholders and the Sponsor, which held approximately 90.7% and 2.6%, respectively, of our outstanding common stock as of the closing of the Business Combination, agreed that, with respect to our common stock (including securities convertible into our common stock) held by Legacy Core’s stockholders, through the date that is 180 days after the closing of the Business Combination, with respect to the Private Placement Warrants and any of our common stock issuable upon the exercise of the Private Placement Warrants, through the date that is 30 days after the closing of the Business Combination, and, with respect to the Founder Shares, through the date that is one year after the closing of the Business Combination, subject to certain exceptions, to not, without the prior written consent of the our board of directors, among other things, sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly any shares of our common stock, the Private Placement Warrants, our common stock issuable upon the exercise of the Private Placement Warrants, as applicable, held by the respective parties.
+Added: Pursuant to our second amended and restated bylaws (the “Bylaws”) and certain lock-up agreements entered into prior to the consummation of the Business Combination by and among Core and the stockholders and employees signatories thereto, certain stockholders of Core, including Legacy Core Scientific’s stockholders and XPDI Sponsor LLC (the “Sponsor”), which held approximately 90.7% and 2.6%, respectively, of our outstanding common stock as of the closing of the Business C ombination, agreed that, with respect to our common stock (including securities convertible into our common stock) held by Legacy Core Scientific’s stockholders, through the date that is 180 days after the closing of the Business Combination, with respect to the Private Placement Warrants and any of our common stock issuable upon the exercise of the Private Placement Warrants, through the date that is 30 days after the closing of the Business Combination, and, with respect to the Founder Shares, through the date that is one year after the closing of the Business Combination, subject to certain exceptions, to not, without the prior written consent of the our board of directors, among other things, sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly any shares of our common stock, the Private Placement Warrants, our common stock issuable upon the exercise of the Private Placement Warrants, as applicable, held by the respective parties.
Our board of directors can terminate these restrictions at any time and may do so to increase the number of shares eligible for resale on the public market.
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(i) provide that we will file a registration statement to register for resale of the securities held by the parties thereto under the Securities Act and (ii) afford each such party “piggyback” registration rights with respect to any underwritten offerings by the other stockholders and by us.
−Removed: We filed a resale Registration Statement on Form S-1 under the Securities Act to register certain shares of common stock or securities convertible into or exchangeable for shares of common stock issued in connection with the Business Combination, which has not been declared effective as of the date of this Quarterly Report on Form 10-Q.
−Removed: We may file additional such registration statements in the future.
−Removed: The shares of common stock being registered for resale includes shares that were purchased at prices that may be significantly below the trading price of our common stock and the sale of which would result in the selling securityholder realizing a significant gain.
−Removed: In December 2020, XPDI Sponsor paid in the aggregate $25,000, or approximately $0.003 per share, for 7,187,500 Founder Shares.
−Removed: In January 2021, XPDI Sponsor transferred 30,000 such Founder Shares to each of XPDI’s independent directors.
−Removed: In February 2021, XPDI issued a dividend of 1,437,500 Founder Shares to XPDI Sponsor.
−Removed: Subsequently at the closing of the Business Combination in January 2022, pursuant to previous agreement, XPDI Sponsor sold to the anchor investors 1,293,750 Founder Shares for an aggregate purchase price of approximately $4,500, or approximately $0.003 per share.
−Removed: In addition, XPDI Sponsor and the anchor investors purchased the 6,266,667 Private Placement Warrants at a price of $1.50 per Private Placement Warrant.
−Removed: In connection with the Business Combination, the issuance of shares of common stock as merger consideration and the assumption and conversion of assumed warrants, options and restricted stock units into the right to purchase or receive shares of Core common stock were based on an acquiror share value of $10.00 per share.
−Removed: The shares of common stock being offered for resale by the selling securityholders represent approximately 39.1% of shares outstanding on a fully diluted basis (including 80,893,015 shares of common stock issuable upon conversion of the Convertible Notes) as of April 11, 2022.
−Removed: Given the substantial number of shares of common stock being registered for potential resale by selling securityholders, the sale of shares by the selling securityholders, or the perception in the market that the selling securityholders of a large number of shares intend to sell shares, could increase the volatility of the market price of our common stock or result in a significant decline in the public trading price of our common stock.
−Removed: Even if our trading price is significantly below $10.00, the offering price for the units offered in XPDI’s IPO, certain of the selling securityholders, including XPDI Sponsor, may still have an incentive to sell shares of our common stock because they purchased the shares at prices lower than the public investors or the current trading price of our common stock.
−Removed: For example, based on the closing price of our common stock of $8.15 as of April 11, 2022, XPDI Sponsor and other holders of the Founder Shares would experience a potential profit of up to approximately $8.147 per share, or approximately $70.3 million in the aggregate.
+Added: We filed a resale Registration Statement on Form S-1 (the “Resale Registration Statement”) under the Securities Act to register certain shares of common stock or securities convertible into or exchangeable for shares of common stock issued in connection with the Business Combination and we may file additional such registration statements in the future.
+Added: Additionally, the Company entered into entered into a common stock purchase agreement (the “B.
+Added: Riley Purchase Agreement”) and a registration rights agreement with B.
+Added: Riley Principal Capital II, LLC (“B.
+Added: Pursuant to the B.
+Added: Riley Purchase Agreement, subject to the satisfaction of the conditions set forth in the B.
+Added: Riley Purchase Agreement, the Company will have the right to sell up to $100,000,000 of shares of the Company’s common stock, subject to certain limitations and conditions.
+Added: The Company filed a Registration Statement on Form S-1 (the “B.
+Added: Riley Registration Statement” and, together with the Resale Registration Statement, the “Registration Statements”) under the Securities Act to register the resale of shares of common stock sold pursuant to the B.
+Added: Riley Purchase Agreement, which has not yet been declared effective as of the date of this Quarterly Report on Form 10-Q.
+Added: The shares of common stock being offered for resale by the s elling securityholders pursuant to the Registration Statements represent approx imately 53.2% of s hares outstanding on a fully diluted basis as of August 12, 2022.
+Added: Given the substantial number of
+Added: shares of common stock being registered for potential resale by the s elling securityholders , the sale of shares by the s elling securityholders , or the perception in the market that the s elling securityholders of a large number of shares intend to sell shares, could increase the volatility of the market price of our common stock or result in a significant decline in the public trading price of our common stock.
+Added: Even if our trading price is significantly below $10.00, the offering price for the units offered in XPDI’s IPO, certain of the selling securityholders, including the Sponsor, may still have an incentive to sell shares of our common stock because they purchased the shares at prices lower than the public investors or the current trading price of our common stock.
+Added: For example, based on the closing price of our common stock of $2.91 as of August 18, 2022, the Sponsor and other holders of the Founder Shares would experience a potential profit of up to approximately $2.917 per share, or approximately $25.2 million in the aggregate.
Sales of a substantial number of shares of our common stock in the public market could occur at any time, particularly after expiration of the above-mentioned lock-up periods and the registration of the resale of our securities discussed above.
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We filed a Registration Statement on Form S-8 under the Securities Act to register shares of common stock or securities convertible into or exchangeable for shares of common stock issued pursuant to this plan and may file additional such registration statements in the future.
−Removed: In addition, we registered for resale 168,292,178 shares subject to the Core assumed options and Core assumed RSUs and to be issued under various Legacy Core equity incentive plans under such Registration Statement on Form S-8.
+Added: In addition, we registered for resale 122,292,178 shares subject to the Core assumed options and Core assumed RSUs and to be issued under various Legacy Core Scientific equity incentive plans under such Registration Statement on Form S-8.
All Form S-8 registration statements automatically become effective upon filing.
Accordingly, shares registered under such registration statements may be immediately available for sale in the open market.
−Removed: The Warrants may never be in the money, and may expire worthless.
−Removed: The exercise price of the Warrants is $11.50 per share.
+Added: The Public Warrants and Private Placement Warrants may never be in the money, and may expire worthless.
+Added: The exercise price of the Public Warrants and Private Placement Warrants is $11.50 per share.
We believe the likelihood that warrant holders will exercise the warrants, and therefore the amount of cash proceeds that we would receive, is dependent upon the trading price of our common stock.
−Removed: If the trading price for our common stock is less than $11.50 per share, we believe holders of the Warrants will be unlikely to exercise their Warrants.
−Removed: There is no guarantee that the Warrants will be in the money following the time they become exercisable and prior to their expiration, and as such, the Warrants may expire worthless and we may receive no proceeds from the exercise of the Warrants.
+Added: If the trading price for our common stock is less than $11.50 per share, we believe holders of the Public Warrants and Private Placement Warrants will be unlikely to exercise their warrants.
+Added: There is no guarantee that the Public Warrants and Private Placement Warrants will be in the money following the time they become exercisable and prior to their expiration, and as such, the Public Warrants and Private Placement Warrants may expire worthless and we may receive no proceeds from the exercise of the warrants.
Because we have not conducted an underwritten offering of our securities, no underwriter has conducted due diligence of our business, operations or financial condition or reviewed our disclosure.
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Such due diligence may include calls with the issuer’s management, review of material agreements, and background checks on key personnel, among other investigations.
−Removed: Because we became publicly traded through a business combination with XPDI, a SPAC (as defined below), rather through an underwritten offering of its ordinary shares, no underwriter has conducted diligence on Legacy Core or XPDI in order to establish a due diligence defense with respect to the disclosure presented in this Quarterly Report on Form 10-Q.
+Added: Because we became publicly traded through a business combination with XPDI, a SPAC (as defined below), rather through an underwritten offering of its ordinary shares, no underwriter has conducted diligence on Legacy Core Scientific or XPDI in order to establish a due diligence defense with respect to the disclosure presented in this Quarterly Report on Form 10-Q.
If such investigation had occurred, certain information in our public disclosures may have been presented in a different manner or additional information may have been presented at the request of such underwriter.
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The Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the Warrant Agreement (as defined below) governing our warrants initially issued by XPDI.
−Removed: As a result of the SEC Statement, we reevaluated the accounting treatment of its 8,625,000 Public Warrants and 6,266,667 Private Placement Warrants, which were initially issued by XPDI, a SPAC, and determined to classify the warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings.
−Removed: As a result, included on XPDI’s unaudited condensed consolidated balance sheets filed with the SEC are derivative liabilities related to embedded features contained within our warrants.
+Added: As a result of the SEC Statement, we reevaluated the accounting treatment of our 8,625,000 Public Warrants and 6,266,667 Private Placement Warrants, which were initially issued by XPDI, a SPAC, and determined to classify the warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings.
+Added: As a result, included on our unaudited condensed consolidated balance sheets filed with the SEC are derivative liabilities related to embedded features contained within our warrants.
Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”), provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations.
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We may be required to take write-downs or write-offs, or may be subject to restructuring, impairment or other charges that could have a significant negative effect on our financial condition, results of operations and the price of our common stock, which could cause you to lose some or all of your investment.
−Removed: Factors outside of Legacy Core’s control may arise at any time.
+Added: Factors outside of Legacy Core Scientific’s control may arise at any time.
As a result of these factors, Core may be forced to later write-down or write-off assets, restructure operations or incur impairment or other charges that could result in Core reporting losses.
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Provisions in our corporate charter documents and under Delaware law may prevent or frustrate attempts by our stockholders to change our management or hinder efforts to acquire a controlling interest in us, and the market price of our common stock may be lower as a result.
−Removed: Certain provisions of our Charter and our Bylaws may have an anti-takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by our stockholders.
+Added: Certain provisions of our second amended and restated certificate of incorporation (the “Charter”) and our Bylaws may have an anti-takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by our stockholders.
These provisions provide for, among other things:
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• our board of directors have the express authority to make, alter or repeal the Bylaws.
−Removed: Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the DGCL, which prohibit a person who owns 15% or more of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
+Added: Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law (“DGCL”), which prohibit a person who owns 15% or more of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
These anti-takeover provisions could make it more difficult or frustrate or prevent a third party to acquire our company, even if the third party’s offer may be considered beneficial by many of our stockholders.
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As a result, stockholders must rely on sales of their common stock after price appreciation as the only way to realize any future gains on their investment.
−Removed: If the merger’s benefits do not meet the expectations of financial analysts, the market price of our common stock may decline.
−Removed: The market price of the our common stock may decline as a result of the merger if we do not achieve the perceived benefits of the merger as rapidly, or to the extent anticipated by, financial analysts or if the effect of the merger on our financial results is not consistent with the expectations of financial analysts.
−Removed: Accordingly, holders of our common stock may experience a loss as a result of a decline in the market price of our common stock.
−Removed: In addition, a decline in the market price of our common stock could adversely affect our ability to issue additional securities and to obtain additional financing in the future.
Our management has limited experience in operating a public company.
The requirements of being a public company may strain our resources and divert management’s attention, and the increases in legal, accounting and compliance expenses may be greater than we anticipate.
−Removed: We are incurring significant legal, accounting and other expenses that Legacy Core did not incur as a private company, and may and may incur additional expenses once we are no longer an “emerging growth company” or a “smaller reporting company.” We are subject to the reporting requirements of the Exchange Act, and are required to comply with the applicable requirements of the U.S.
+Added: We are incurring significant legal, accounting and other expenses that Legacy Core Scientific did not incur as a private company, and may and may incur additional expenses once we are no longer an “emerging growth company” or a “smaller reporting company.” We are subject to the reporting requirements of the Exchange Act, and are required to comply with the applicable requirements of the U.S.
Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as the rules and regulations subsequently implemented by the SEC and the listing standards of the Nasdaq, including changes in corporate governance practices and the establishment and maintenance of effective disclosure and financial controls.
1 unchanged sentence
Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives.
−Removed: Moreover, these rules and regulations have increased, and will continue to increase, Legacy Core’s historical legal and financial compliance costs and will make some activities more time-consuming and costly.
+Added: Moreover, these rules and regulations have increased, and will continue to increase, Legacy Core Scientific’s historical legal and financial compliance costs and will make some activities more time-consuming and costly.
For example, these rules and regulations may make it more difficult and more expensive for us to attract and retain qualified members of its board of directors as compared to a private company.
In particular, we have incurred and expect to continue to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act, which will increase when we are no longer an “emerging growth company” or a “smaller reporting company” with revenues of less than $100 million.
−Removed: We have hired and will continue to hire additional accounting and financial staff, and engage outside consultants, all with appropriate public company experience and technical accounting knowledge and maintain an internal audit function, which will increase its operating expenses.
−Removed: Moreover, we have incurred and may continue to incur additional compensation costs in the event that we decide to pay cash compensation closer to that of other publicly listed companies, which would increase its general and administrative expenses and could materially and adversely affect its profitability.
+Added: We have hired and will continue to hire additional accounting and financial staff, and engage outside consultants, all with appropriate public company experience and technical accounting knowledge and maintain an internal audit function, which will increase our operating expenses.
+Added: Moreover, we have incurred and may continue to incur additional compensation costs in the event that we decide
+Added: to pay cash compensation closer to that of other publicly listed companies, which would increase our general and administrative expenses and could materially and adversely affect our profitability.
Our executive officers have limited experience in the management of a publicly traded company.
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The development and implementation of the standards and controls necessary for us to continue to achieve the level of accounting standards required of a public company may require costs greater than expected.
−Removed: It is possible that we will be required to further expand our employee base and hire additional employees to support its operations as a public company, which will increase our operating costs in future periods.
+Added: It is possible that we will be required to further expand our employee base and hire additional employees to support our operations as a public company, which will increase our operating costs in future periods.
We qualify as an “emerging growth company” within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, such decision could make our securities less attractive to investors and may make it more difficult to compare our performance to the performance of other public companies.
3 unchanged sentences
We will remain an emerging growth company until the earliest of (1) the last day of the fiscal year (a) following February 12, 2026, the fifth anniversary of the Initial Public Offering, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
−Removed: We cannot predict whether investors will find our securities less attractive because of its reliance on these exemptions.
+Added: We cannot predict whether investors will find our securities less attractive because of our reliance on these exemptions.
If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
1 unchanged sentence
The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but that any such an election to opt out is irrevocable.
−Removed: We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, it, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
+Added: We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of our financial statements with those of another public company, which is neither an emerging growth company nor an emerging growth company which has opted out of the extended transition period, difficult or impossible because of the potential differences in accounting standards used.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.