What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-04-04 compared with 2022-03-30 · 230 added, 239 removed, 110 unchanged (81% of the section changed)

During the year ended December 31, 2021 and prior to the Business Combination, XPDI was a blank check company incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.

For more information on the Business Combination, see the section entitled “Explanatory Note” elsewhere in this Report.

Following the Business Combination, Core is a best-in-class

large-scale operator of dedicated, purpose-built facilities for digital asset mining and a premier provider of blockchain infrastructure, software solutions and services.

We mine digital assets for our own account and provide hosting services for other large-scale miners.

We are one of the largest blockchain infrastructure, hosting provider and digital asset mining companies in North America, with approximately 457MW of power as of December 31, 2021, and 497MW as of January 31, 2022.

We mine Bitcoin, Ethereum and other digital assets for third-party hosting customers and for our own account at our six fully operational data centers in North Carolina (2), Georgia (2), North Dakota (1) and Kentucky (1).

In addition, in October 2021, we announced the entry of an agreement with the City of Denton, Texas and an affiliate of Tenaska Energy, Inc.

to develop our seventh facility, a blockchain data center in Denton, Texas, which became operational in February 2022 with an initial operating capacity approaching 22 MW and is expected to have 300MW of power when completed.

In February 2022, the Muskogee City-County Port Authority announced an agreement with us to develop a 500MW data center at the Port of Muskogee John T.

Griffin Industrial Park.

We began digital asset mining in 2018 and in 2020 became one of the largest North American providers of hosting services for third-party mining customers.

Historically, we derived almost all of our revenue from third-party hosting fees and the resale of digital asset mining machines.

In July 2021, we completed the acquisition of Blockcap, one of our largest hosting customers.

Blockcap is a blockchain technology company with industrial scale digital asset mining operations.

Chapter 11 Reorganization

On December 21, 2022 (the “Petition Date”), Core Scientific, Inc.

(the “Company or “we””) and certain of its affiliates (collectively, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) seeking relief under Chapter 11 of the United States Code (the “Bankruptcy Code”).

The Chapter 11 Cases are jointly administered under Case No.

The Debtors continue to operate their business and manage their properties as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

The Debtors filed various “first day” motions with the Bankruptcy Court requesting customary relief, which were generally approved by the Bankruptcy Court on December 22, 2022, that have enabled the Company to operate in the ordinary course while under Chapter 11 protection.

In connection with the filing of the Chapter 11 Cases, the Company entered into a restructuring support agreement (together with all exhibits and schedules thereto, the (“Restructuring Support Agreement”) with the ad hoc group of noteholders, representing more than 70% of the holders of its convertible notes (the “Ad Hoc Noteholder Group”) pursuant to which the Ad Hoc Noteholder Group agreed to provide commitments for a debtor-in-possession facility (the “Original DIP Facility”) of more than $57 million and agreed to support the syndication of up to an additional $18 million in new money DIP (defined below) facility loans to all holders of convertible notes.

The Restructuring Support Agreement was terminated by the Company pursuant to a “fiduciary out” which permitted the Company to pursue better alternatives.

On February 2, 2023, the Bankruptcy Court entered an interim order (the “Replacement Interim DIP Order”) authorizing, among other things, the Debtors to obtain senior secured non-priming super-priority replacement post-petition financing (the “Replacement DIP Facility”).

On February 27, 2023, the Debtors entered into a Senior Secured Super-Priority Replacement Debtor-in-Possession Loan and Security Agreement governing the Replacement DIP Facility (the “Replacement DIP Credit Agreement”), with B.

Riley Commercial Capital, LLC, as administrative agent (the “Administrative Agent”), and the lenders from time to time party thereto (collectively, the “Replacement DIP Lender”).

Proceeds of the Replacement DIP Facility were used to, among other things, repay amounts outstanding under the Original DIP Facility, including payment of all fees and expenses required to be paid under the terms of the Original DIP Facility.

These funds, along with ongoing cash generated from operations, were anticipated to provide the necessary financing to effectuate the planned restructuring, facilitate the emergence from Chapter 11, and cover the fees and expenses of legal and financial advisors.

On March 1, 2023, the Bankruptcy Court entered an order approving the Replacement DIP Facility on a final basis and the terms under which the Debtors are authorized to use the cash collateral of the holders of their convertible notes (the “Final DIP Order”).

The Replacement DIP Facility, among other things, provides for a non-amortizing super-priority senior secured term loan facility in an aggregate principal amount not to exceed $70 million.

Under the Replacement DIP Facility, (i) $35 million was made available following Bankruptcy Court approval of the Interim DIP Order and (ii) $35 million was made available following Bankruptcy Court approval of the Final DIP Order.

Loans under the Replacement DIP Facility will bear interest at a rate of 10%, which will be payable in kind in arrears on the first day of each calendar month.

The Administrative Agent received an upfront payment equal to 3.5% of the aggregate commitments under the Replacement DIP Facility on February 3, 2023, payable in kind, and the Replacement DIP Lender will receive an exit premium equal to 5% of the amount of the loans being repaid, reduced or satisfied, payable in cash.

The Replacement DIP Credit Agreement includes representations and warranties, covenants applicable to the Debtors, and events of default.

If an event of default under the Replacement DIP Credit Agreement occurs, the Administrative Agent may, among other things, permanently reduce any remaining commitments and declare the outstanding obligations under the Replacement

DIP Credit Agreement to be immediately due and payable.

The maturity date of the Replacement DIP Credit Agreement is December 22, 2023, which can be extended, under certain conditions, by an additional three months to March 22, 2024.

The Replacement DIP Credit Agreement will also terminate on the date that is the earliest of the following (i) the effective date of any chapter 11 plan of reorganization with respect to the Borrowers (as defined in the Replacement DIP Credit Agreement) or any other Debtor;

(ii) the consummation of any sale or other disposition of all or substantially all of the assets of the Debtors pursuant to section 363 of the Bankruptcy Code;

(iii) the date of the acceleration of the Loans and the termination of the Commitments (whether automatically, or upon any Event of Default or as otherwise provided in the Replacement DIP Credit Agreement);

and (iv) conversion of the Chapter 11 Cases into cases under chapter 7 of the Bankruptcy Code.

The Bankruptcy Court has appointed two official committees:

the Official Committee of Unsecured Creditors (the "Creditors' Committee"), which represents general unsecured creditors, and the Official Committee of Equity Security Holders (the “Equity Committee”), which represents equity security holders.

These committees have the right to be heard on all matters that come before the Bankruptcy Court and have important roles in the Chapter 11 Cases.

The Debtors are required to bear certain costs and expenses of the committees, including those of their counsel and financial advisors.

Delisting of Common Stock and Warrants

On December 13, 2022, the Company received written notice from Nasdaq notifying the Company that, because the closing bid price for the Company’s securities had fallen below $1.00 per share for 30 consecutive business days, the Company no longer met the minimum bid price requirement for continued inclusion on the Nasdaq Global Select Market pursuant to Nasdaq Listing Rule 5450(a)(1) (the “Bid Price Requirement”).

On December 22, 2022, the Company received written notice (the “Delisting Notice”) from Nasdaq notifying the Company that, as a result of the Chapter 11 Cases, and in accordance with Nasdaq Listing Rules 5101, 5110(b) and IM-5101-1, the staff of Nasdaq had determined that the Company’s common stock would be delisted from Nasdaq.

In the Delisting Notice, the staff of Nasdaq referenced concerns about the Company’s ability to sustain compliance with all requirements for continued listing on Nasdaq and public interest concerns related to the Chapter 11 Cases.

Trading of the Company’s securities was suspended at the opening of business on January 3, 2023, and our common stock and the common stock warrants began trading on the OTC Markets, operated by the OTC Markets Group, Inc, under the symbols “CORZQ” and “CRZWQ”, respectively.

The Company requested an appeal of Nasdaq’s determination and a hearing before a Nasdaq hearings panel, but subsequently withdrew its appeal after further consideration and discussion with representatives of Nasdaq.

The Company is a best-in-class large-scale operator of dedicated, purpose-built facilities for digital asset mining and a premier provider of blockchain infrastructure, software solutions and services.

We mine digital assets for our own account and provide colocation hosting services for other large-scale miners.

We began digital asset mining in 2018 and in 2020 became one of the largest North American providers of colocation hosting services for third-party mining customers.

Historically, we derived almost all of our revenue from third-party colocation hosting fees and the resale of digital asset mining machines and currently derive almost all of our revenue from self-mining bitcoin.

We predominately mine bitcoin for third-party hosting customers and for our own account at our eight fully operational data centers in Georgia (2), Kentucky (1), North Carolina (2), North Dakota (1) and Texas (2).

In February 2022, the Muskogee City-County Port Authority (Oklahoma) announced an agreement with us to develop a 500MW data center at the Port of Muskogee John T.

Griffin Industrial Park which remains substantially undeveloped.

Since July 2018, we have operated for ourselves and on behalf of our customers and related parties, miners of varying models, types, and manufacturers, but primarily miners of bitcoin manufactured by Bitmain Technologies, Ltd (“Bitmain”).

We have accumulated significant expertise in the installation, operation, optimization, and repair of digital mining equipment.

We have expanded our self-mining operation to take advantage of favorable market conditions and leverage our expertise for our own account.

Although our business operations date uninterrupted back to 2018 (and was known as “Core Scientific” (“Old Core”)), the current corporate entity operating our business was formerly known as Power & Digital Infrastructure Acquisition Corp.

(“XPDI”) which was a special purpose acquisition corporation formed for the purpose of acquiring an operating business like Old Core.

On July 20, 2021, XPDI, Core Scientific Holding Co., and XPDI Merger Sub entered into a merger agreement (the “Merger Agreement”) which provided for the business combination transactions provided therein (the “Business Combination”) pursuant to which the business of Old Core was combined with XPDI and XPDI changed its name to Core Scientific, Inc.

(“New Core” or the “Company”).

XPDI’s stockholders approved the transactions contemplated by the Business Combination at a special meeting of stockholders held on January 19, 2022.

See our Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information on the Business Combination.

In July 2021, Old Core completed the acquisition of Blockcap, Inc.

(“Blockcap”), one of Old Core’s largest hosting customers.

Prior to its acquisition, Blockcap had retained Old Core to host in the data centers operated by Old Core Blockcap’s industrial scale digital asset mining operations.

Blockcap’s primary historical business was the mining of digital asset coins and tokens, primarily bitcoin and, to a lesser extent, Siacoin and Ethereum.

At the time of the Core/Blockcap merger, Blockcap claimed to be the largest independent cryptocurrency mining operator in North America.

While Blockcap sold or exchanged the digital assets it mined to fund its growth strategies or for general corporate purposes from time to time, it generally retained its digital assets as investments in anticipation of continued adoption of digital assets as a “store of value” and a more accessible and efficient medium of exchange than traditional fiat currencies.

Prior to its acquisition by Legacy Core, Blockcap purchased Radar Relay, Inc.

(“RADAR”) on July 1, 2021.

An early stage company, RADAR is focused on technology enhancement and development in the digital asset industry.

The estimated consideration for the acquisition $65.0 million consisted of the issuance of 5,996,311 Blockcap common shares, subject to post-closing adjustments.

The acquisition of Blockcap significantly expands our self-mining operations and increases the number of miners we own.

We intend to utilize RADAR’s business assets and the technical expertise of its principals in enhancing our existing blockchain mining technology and software and in further strengthening our leadership position and value creation potential through the development of decentralized finance (DeFi) products and services.

Our hosting business provides a full suite of services to digital asset mining customers.

We provide deployment, monitoring, troubleshooting, optimization and maintenance of our customer’s digital asset mining equipment and provide necessary electrical power and repair and other infrastructure services necessary to operate, maintain and efficiently mine digital assets.

Historically, we operated in two segments:

“mining” consisting of digital asset mining for our own account, and “hosting, Artificial Intelligence and other” consisting of our blockchain infrastructure and third-party hosting business, and our AI software-as-a-service

offerings and platforms.

Going forward, we anticipate that our mining and hosting operations will comprise all or substantially all of our business activities, though we continue to evaluate additional infrastructure and blockchain service offerings, including decentralized finance (DeFi).

Our business strategy is to continue to grow our self-mining operations by significantly increasing the number of miners dedicated to producing digital assets for our own account, and to continue to develop and grow the infrastructure and facilities necessary to house and support our robust third-party hosting business as well as our self-mining operation.

Following the Blockcap acquisition, we significantly expanded our self-mining operation and consequently reevaluated our digital asset investment policy.

Moving forward, we intend to adopt an investment policy pursuant to which an investment committee comprised of corporate officers use common risk management techniques to manage our assets in light of specified liquidity criteria.

Liquidity will be maintained through management of a portfolio of money market instruments, obligations of the U.S.

government, bank deposits, commercial paper, and certain digital asset currencies and digital asset instruments, each of which must satisfy certain risk criteria.

The investment committee will retain the discretion to manage these approved investment instruments, including digital asset currencies and instruments, in accordance with the investment policy, which may involve opportunistic sales or conversions of digital asset currencies and instruments in light of market and other conditions.

We may also explore adjacent lines of businesses that leverage our mining expertise and bitcoin assets.

At the time of its acquisition, Blockcap claimed to be the largest independent cryptocurrency mining operator in North America.

While Blockcap did sell or exchange the digital assets it mined to fund its growth strategies or for general corporate purposes from time to time, it generally retained its digital assets as investments in anticipation of

continued adoption of digital assets as a “store of value” and a more accessible and efficient medium of exchange than traditional fiat currencies.

Our hosting colocation business provides a full suite of services to digital asset mining customers.

We provide deployment, monitoring, troubleshooting, optimization and maintenance of our customers’ digital asset mining equipment and provide necessary electrical power and repair and other infrastructure services necessary to operate, maintain and efficiently mine digital assets.

We operate in two segments:

“mining” consisting of digital asset mining for our own account, and “hosting and equipment sales” consisting of our blockchain infrastructure and third-party hosting business, and associated sales of mining equipment to customers.

Our business strategy is to grow our revenue and profitability by increasing the capacity and efficiency of our self-mining fleet and by enhancing our third-party colocation business.

We intend to strategically develop the infrastructure necessary to support business growth and profitability and take advantage of adjacent opportunities that leverage our mining expertise and capabilities.

Blockchain and Digital Assets

Blockchains are decentralized digital ledgers that record and enable secure peer-to-peer

transactions without third-party intermediaries.

Blockchains are decentralized digital ledgers that record and enable secure peer-to-peer transactions without third-party intermediaries (“Blockchains”).

Blockchains enable the existence of digital assets by allowing participants to confirm transactions without the need for a central certifying authority.

When a participant requests a transaction, a peer-to-peer

computer network consisting of nodes validates the transaction and the user’s status using known algorithms.

When a participant requests a transaction, a peer-to-peer computer network consisting of nodes validates the transaction and the user’s status using known algorithms.

After the transaction is verified, it is combined with other transactions to create a new block of data for the ledger.

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As each new block refers back to and “connects” with the immediately prior solved block associated with it, the addition of a new block adds to the blockchain in a manner similar to a new link being added to a chain.

Digital assets (also known as cryptocurrency) are a medium of exchange that uses encryption techniques to control the creation of units and to verify the transfer of funds.

Consumers use digital assets because they offer lower cost and faster peer-to-peer

payment options without the need to provide personal details.

Digital assets (also known as cryptocurrency) are a medium of exchange that use encryption techniques to control the creation of units and to verify the transfer of funds.

Consumers use digital assets because they offer lower cost and faster peer-to-peer payment options without the need to provide personal details.

Every single transaction, and the ownership of every single digital asset in circulation, is recorded in the blockchain, which effectively contains a record of all account balances.

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These miners update stored records each time a transaction is made and ensure the authenticity of information.

The miners receive a transaction fee for their service in the form of a portion of the new digital “coins” that are issued.

Each account on the blockchain is identified solely by its unique public key, which renders it effectively anonymous, and is secured with its associated private key, which is kept secret, like a password.

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Because the network operates in a decentralized manner, it does not rely on governmental authorities or financial institutions to create, transmit or determine the value of digital assets.

Rather, value is determined by market factors, supply and demand for the units, with prices being set in transfers by mutual agreement or through barter among transacting parties, as well as by the number of merchants that may accept the digital asset.

As digital asset transactions can be broadcast to the digital asset network by any user’s blockchain and digital assets can be transferred without the involvement of intermediaries or third parties, there are currently little to no transaction costs in direct peer-to-peer

transactions.

Rather, value is determined by market factors, primarily the supply and demand for the units, with prices being set in transfers by mutual agreement or through barter among transacting parties, as well as by the number of merchants that may accept the digital asset.

Units of digital assets can be converted to fiat currencies, such as the U.S.

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Digital asset prices are quoted on various exchanges and demonstrate extreme volatility.

Digital assets have been viewed by the user community to offer several advantages over traditional (also known as ‘fiat’) currency, including:

The user community has viewed digital assets to offer several advantages over traditional (also known as ‘fiat’) currency, including:

• Acting as a fraud deterrent, as digital assets recorded on a blockchain are virtually impossible to counterfeit, reverse, or modify;

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• Decentralized transaction processing at any time of day without any central authority (governments or financial institutions);

Universal value free from currency exchange rates.

• Universal value.

The market for digital assets has been growing exponentially.

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Bitcoin remains the leading digital asset in terms of market capitalization, which, based on data sourced from coinmarketcap.com, exceeded $875.9 billion as of December 31, 2021.

During the year ended December 31, 2022, the trading price of one bitcoin

ranged from a high of $48,086.84 in March 2022 to a low of $15,599.05 in November 2022.

As of March 25, 2023, based on data sourced from coinmarketcap.com, the trading price of one bitcoin was $27,494.71.

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As a result, to maximize the opportunities to receive a reward, most large-scale miners have joined with other miners in “mining pools” where the computing power of each pool participant is coordinated to complete the block on the blockchain and mining rewards are distributed to participants in accordance with the rules of the mining pool.

Fees payable to the operator of the pool vary but are typically as much as 2% of the reward earned and are deducted from the amounts earned by each pool participant.

Fees payable to the operator of the pool vary but are typically as much as 0.01% to 2% of the reward earned and are deducted from the amounts earned by each pool participant.

Mining pools are subject to various risks including connection issues, outages and other disruptions which can impact the quantity of digital assets earned by participants.

Mathematically Controlled Supply

The method for creating new bitcoin is mathematically controlled in a manner such that the supply of bitcoin grows at a limited rate based on a pre-determined

The number of bitcoin awarded for solving a

new block is automatically halved every 210,000 blocks.

The method for creating new bitcoin is mathematically controlled in a manner such that the supply of bitcoin grows at a limited rate, based on a pre-determined schedule.

The number of bitcoin awarded for solving a new block is automatically halved every 210,000 blocks.

This means every block up to and including block 210,000 produced a reward of 50 bitcoin, while blocks beginning with 210,001 produced a reward of 25 bitcoin.

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This deliberately controlled rate of bitcoin creation means that the number of bitcoin in existence will never exceed 21 million and that bitcoin cannot be devalued through excessive production unless the bitcoin network’s source code (and the underlying protocol for bitcoin issuance) is altered.

We monitor the blockchain network and, as of August 1, 2021 based on the information we collected from our network access, approximately 18.77 million bitcoin have been mined.

We monitor the blockchain network and, as of December 31, 2022, based on the information we collected from our network access, approximately 19 million bitcoin have been mined.

Our Operations and Solutions

As a large-scale, vertically integrated provider of blockchain solutions, we believe that we are well positioned to serve customers in a rapidly expanding market for digital assets, blockchain solutions, and digital asset mining.

We believe that the adoption and mainstream use of bitcoin and the blockchain technology on which it is based has accelerated the demand for bitcoin and other digital currencies.

As one of the largest blockchain hosting providers in North America, we focus on clients with large-scale deployments and provide power, racks, proprietary thermodynamic management (heat dissipation and airflow management), redundant connectivity, 24/7 security as well as our proprietary software platforms, Minder TM

and MinderOS TM

, which provide infrastructure management and custom firmware that are designed to increase performance and energy efficiency.

Our blockchain business is one of the only large-scale, vertically integrated digital asset mining and blockchain infrastructure and hosting solutions business in North America.

Our rapidly growing digital asset mining operation is focused on the generation of digital assets by solving complex cryptographic algorithms to validate transactions on specific digital asset network blockchains, which is commonly referred to as “mining.”

Our proprietary data centers in North Carolina, Georgia, Kentucky and North Dakota are purpose-built facilities optimized for the unique requirements of high density blockchain computer servers.

These facilities feature access to attractive long-term power contracts at stable rates and high emissions-free content.

We currently have six fully operational data centers in North Carolina (2), Georgia (2), North Dakota (1) and Kentucky (1), with approximately 497MW of operating electric power as of January 31, 2022.

In addition, we opened a seventh facility in Denton, Texas in February 2022 with an initial operating capacity approaching 22 MW and expect to achieve full capacity of 300MW when completed.

In February 2022, the Muskogee City-County Port Authority announced an agreement with us to develop a 500MW data center at the Port of Muskogee John T.

Griffin Industrial Park.

Our existing, completed facilities leverage our specialized construction proficiency by employing high-density, low-cost

engineering and power designs.

Our proprietary thermodynamic system manages heat and airflow to deliver a best-in-class

uptime and ultimately increasing mining rewards to us and our customers.

Our North Dakota facility is expected to benefit from our operational mining experience and techniques to maximize operational efficiency.

Since July 2018, we have hosted for ourselves and on behalf of our customers and related parties, miners of varying models, types and manufacturers.

We have accumulated significant expertise in the installation, operation, optimization and repair of digital mining equipment.

We have expanded our self-mining operation to take advantage of favorable market conditions and leverage our expertise for our own account.

We believe that our self-mining activity as a percentage of our overall mining activity will continue to increase by significantly increasing our investment in miners.

As of January 31, 2022, we have contracts to procure more than 135,000 miners for our self-mining operation and more than 85,000 miners for our hosting for customers and related parties.

We anticipate delivery of these new miners over the next twelve months.

Our digital assets, primarily bitcoin, are mined to custodial wallets at Bittrex and Coinbase, each of which provides us protection through dual authentication security.

Access is controlled by dual authentication to separate authentication from account access so that two authorized individuals are required to access our accounts.

We monitor transaction and account balances through the Bittrex or Coinbase client portal, as applicable.

In addition, Bittrex sends an email notification to our treasury department whenever there is a successful login to our account, and bank account withdrawals will only be permitted if they are sent to our synced bank account.

As of December 31, 2021, nearly all of the digital assets of Legacy Core and Blockcap were stored at Bittrex and Coinbase, respectively.

In July 2021, we acquired Blockcap, one of our largest hosting customers.

As a result of the merger we acquired all of the digital asset mining machines owned by Blockcap and hosted by us in our facilities, and have dedicated them to self-mining.

As a result, the existing hosting agreement between Legacy Core and Blockcap was terminated.

Included in the Blockcap transaction was Blockcap’s subsidiary, RADAR.

As a large-scale bitcoin digital asset miner and provider of blockchain solutions, we believe that we are well positioned to serve customers in a rapidly expanding market for digital asset mining and blockchain solutions.

We believe that the adoption and

mainstream use of bitcoin and the blockchain technology on which it is based has accelerated the demand for bitcoin and other digital currencies.

As one of the largest owner operator of digital asset mining infrastructure in North America, we focus on colocation clients with large-scale deployments and provide power, racks, proprietary thermodynamic management (heat dissipation and airflow management), redundant connectivity, 24/7 security as well as our proprietary software platforms, MinderTM and MinderOSTM, which provide infrastructure management and custom firmware that are designed to increase performance and energy efficiency.

Our blockchain business is one of the only large-scale, vertically integrated digital asset mining and blockchain infrastructure and hosting solutions businesses in North America.

Our digital asset mining operation is focused on the generation of bitcoin by solving complex cryptographic algorithms to validate transactions on specific digital asset network blockchains, which is commonly referred to as “mining.”

Our proprietary data centers in Georgia, Kentucky, North Carolina, North Dakota, and Texas are purpose-built facilities optimized for the unique requirements of high density blockchain computer servers.

We currently have eight fully operational data centers in Georgia (2), Kentucky (1), North Carolina (2), North Dakota (1) and Texas (2), with approximately 592MW of operating electric power as of December 31, 2022.

Our existing, completed facilities leverage our specialized construction proficiency by employing high-density, low-cost engineering and power designs.

Our proprietary thermodynamic system manages heat and airflow to deliver best-in-class uptime and, ultimately, increasing mining rewards to us and our customers.

Since July 2018, Core Scientific has hosted for itself and its customers, miners of varying models, types and manufacturers.

As a result, we have accumulated significant expertise in the installation, operation, optimization and repair of digital mining equipment.

In July 2021 we completed the acquisition of Blockcap, one of Old Core’s largest hosting customers.

Blockcap’s primary historical business was the mining of digital asset coins and tokens, primarily bitcoin and, to a lesser extent, Siacoin and Ethereum.

The acquisition of Blockcap significantly expanded Core Scientific’s self-mining operations and is the source of a large number of miners we own.

We have two operating segments:

“Equipment Sales and Hosting,” which consists primarily of our blockchain infrastructure and third-party hosting business and equipment sales to customers, and “Mining,” consisting of digital asset mining for our own account.

The blockchain hosting business generates revenue through the sale of electricity-based consumption contracts for our hosting services which are recurring in nature.

Equipment sales revenue is derived from our ability to leverage our partnerships with leading equipment manufacturers to secure equipment in advance, which is then sold to our customers when they are unable to obtain them otherwise.

The Mining operation segment generates revenue from operating owned computer equipment as part of a pool of users that process transactions conducted on one or more blockchain networks.

In exchange for these services, we receive digital assets in the form of bitcoin.

Mining Equipment

Digital asset mining is dependent on specialized digital asset mining hardware utilizing application-specific integrated circuit (“ASIC”) chips to solve blocks on blockchains using the 256-bit

secure hashing algorithm.

Almost all of these miners are produced outside of the United States, mostly in China and Southeast Asia, by a few manufacturers, the largest of which is Bitmain Technologies, Ltd (“Bitmain”).

We have entered into agreements with Bitmain to supply most of the miners we intend to acquire for our mining operations throughout 2021 and 2022.

We own and host specialized computers (“miners”) configured for the purpose of validating transactions on multiple digital asset network blockchains (referred to as, “mining”), predominantly the bitcoin network.

Substantially all of the miners we own and host were manufactured by Bitmain and incorporate ASIC chips specialized to solve blocks on the bitcoin blockchains using the 256-bit secure hashing algorithm (“SHA-256”) in return for bitcoin digital asset rewards.

We have entered into and facilitated agreements with vendors to supply mining equipment for our and our users’ digital asset mining operations.

We prepay a significant portion of the purchase price for these new miners as partially refundable deposits, with delivery expected to occur in monthly installments through the first quarter of 2023, and the remainder of the purchase price for these new miners is payable in installments, with payment due in advance of the scheduled delivery dates set forth in the applicable purchase agreement.

As of December 31, 2022, all new miners have been paid for in arrangements with our customers.

As of December 31, 2022, we had deployed approximately 234,000 bitcoin miners, which number consists of approximately 153,000 self-miners and approximately 81,000 hosted miners, which represented 15.7 exahash per second (“EH/s”) and 8.0 EH/s for self-miners and hosted miners, respectively.

Mining Equipment

Digital asset mining is dependent on specialized digital asset mining hardware utilizing application-specific integrated circuit (“ASIC”) chips to solve blocks on blockchains using the 256-bit secure hashing algorithm.

Almost all of these miners are produced outside of the United States, mostly in China and Southeast Asia, by a few manufacturers, the largest of which is Bitmain.

We have entered into agreements with Bitmain from time to time to supply most of the miners we intend to acquire for our mining operations.

These agreements, like those of other miner manufacturers, generally require significant refundable deposits payable months in advance of delivery and additional advance payments in monthly installments thereafter.

These agreements also contain other terms and conditions favorable to the manufacturer.

As the market value of digital assets has increased, the demand for the newest, most efficient miners has also increased, leading to scarcity in the supply, and thereby a resulting increase in the price of miners.

As a result of the terms of our agreements with Bitmain, we believe we are the only non-Bitmain repair center with Bitmain trained repair technicians in North America, allowing Core to service and repair its Bitmain miners in-house.

Our mining business is highly dependent upon digital asset mining equipment suppliers such as Bitmain providing an adequate supply of new generation digital asset mining machines at economical prices to enable profitable mining by us and by third-party customers intending to purchase our hosting and other solutions.

Power Providers and Facility Development

We have an experienced in-house

power and facility development team focused on sourcing, evaluating, developing and constructing the facilities where we self-mine digital assets and host for other third-party mining equipment.

We have experienced in-house power and facility development teams focused on sourcing, evaluating, developing and constructing the facilities where we self-mine digital assets and host for other third-party mining equipment.

Historically, we have contracted with large electric utility providers to provide a sufficient supply of electricity to power the mining operations in our facilities.

We have fixed and interruptible bi-lateral

power supply agreements with electric power suppliers for of each of our facilities.

These agreements provide for both firm and interruptible power supply through each provider’s transmission system to dedicated substations owned by the power provider, the local utility or us.

We own the dedicated substation at our Kentucky facility and our North Dakota facility.

Where we own the substation, we contract with the local power utility for repair and maintenance services.

We believe that our relationships with our power suppliers are good and that we have sufficient supply to conduct our business operations as presently contemplated.

In 2021, we spent approximately $43.0 million on renewable and emission free non-renewable

energy sources.

As of September 30, 2021, over 50% of the power used in our operation was generated from non-carbon

emitting sources by local power providers pursuant to long-term power contracts.

We assess whether power is generated from non-emitting

energy sources by analyzing dispatch reports produced by utilities on a per facility basis, or in the absence of such reports, grid generation mix reports received from our utility providers on

aggregated basis.

Based on this review of utility dispatch reports, we determine megawatts per hour (“MWH”) generated from carbon emitting sources.

We then determine total CO 2

emissions per MWH from such sources (with coal generating an average of a ton of CO 2

per MWH generated and natural gas an average of half-a-ton

per MWH generated) to calculate our total Green House Gas (“GHG”) emission rate based on EPA guidelines.

We leverage our GHG rate to determine the number of green e-certified

renewable energy credits (“RECs”) we are required to purchase to achieve net carbon neutral status.

By purchasing 530,000 RECs, we believe that we have purchased a number of RECs in excess of that required to achieve net carbon neutral status.

In April 2021 we entered into an agreement with a power company that operates wind farms in North Dakota to supply 530,000 Green-e

certified RECs for an aggregate purchase price of $1.6 million.

Under the REC program, a REC seller is required to disclose the quantity, type and geographic source of renewable energy underlying each certificate, which helps ensure that credits are not sold more than once.

Based on a preliminary assessment, we believe our purchased volume of RECs was sufficient to meet our needs for 2021.

Once our final energy consumption is known for 2021 upon receipt of the final GHG emission reports from our suppliers which are expected to be provided to us in the second quarter of 2022, we intend to re-assess

our use of carbon-free energy by analyzing updated dispatch and generation mix reports, after which we may decide to purchase additional RECs.

We expect to continue to maintain its net carbon neutral status by increasing our overall use of renewable power and by purchasing RECs when necessary.

We are currently actively engaged in negotiations with utilities, municipalities, alternative power brokers and other professionals to source and identify sources of green renewable power across the United States to increase the utilization of green renewable power in our operations.

We expect that these activities and negotiations will result in a significant increase in the number of our mining facilities, megawatts under contract, mining capacity and utilization of green renewable energy.

We have fixed, variable and interruptible bi-lateral power supply consumption agreements with electric power suppliers at our various facilities.

These agreements provide for both firm and interruptible power supply through each provider’s transmission and distribution systems to dedicated substations owned by the power provider, the local utility or the Company.

We value our relationships with our power providers and work to leverage our operating capabilities to take full advantage of any interruptible programs and all cost saving opportunities.

Supplier Agreements

Industrial Power Contract and Related Arrangements with Murphy Electric Power Board

On December 15, 2017, our predecessor BCV 77, LLC (“BCV 77”) entered into an Industrial Power Contract (as amended from time to time, the “Murphy IPC”) with Murphy Electric Power Board (“Murphy”) for the supply of electric power to its plant in Marble, North Carolina.

BCV 77 subsequently assigned the Murphy IPC to, and the Murphy IPC was assumed by, Legacy Core on February 19, 2018, in connection with Legacy Core’s acquisition of the account with Murphy formerly held by BCV 77 at its plant in Marble, North Carolina.

BCV 77, together with its affiliates, is a major stockholder of Legacy Core prior to the merger and will remain a major stockholder following the merger.

For more information regarding recent related party transactions among BCV 77 and its affiliated entities, on the one hand, and Legacy Core on the other hand, please see the section titled “ Certain Relationships and Related Person Transactions

Under the Murphy IPC, Murphy agreed to provide Legacy Core with an electric power capacity of up to 10,000 kilowatts (kW), for which Legacy Core agreed to pay Murphy in accordance with the applicable monthly rates and charges as modified or replaced from time to time by agreement between the parties, subject to a minimum monthly bill of not less than $15,000.

Legacy Core currently pays Murphy on average approximately $450,000 per month for its provision of the power capacity, taking into effect any bill credits available to Legacy Core pursuant to the Murphy IP Product Agreement and the ICA, as defined and summarized below.

The Murphy IPC provides for an initial term of five years and automatically renews for an additional five-year term following the initial term and for one-year

terms thereafter, unless either party terminates the Murphy IPC by prior written notice no later than three months prior to the expiry of the then-existing term.

In connection with the Murphy IPC, Legacy Core entered into an Interruptible Power Product Agreement (the “Murphy IP Product Agreement”) with Murphy, as distributor, and the Tennessee Valley Authority (“TVA”), as power provider, effective September 1, 2018.

Under the Murphy IP Product Agreement, Legacy

Core agreed to curtail its power demand upon notice from TVA, if TVA determines, in its sole judgment, it is necessary or appropriate to do so to ensure the operation and reliability of its system.

In return, TVA provides credits to Legacy Core’s monthly power bill.

Legacy Core assumes all risk of loss, injury or damage resulting from any interruption or curtailment of power.

The Murphy IP Product Agreement provides for a term of five years, and may be terminated by any party by at least three years’ written notice, or by Murphy or TVA upon at least 60 days’ notice if Legacy Core does not meet certain eligibility requirements or benchmarks of performance under the Murphy IP Product Agreement.

The Murphy IPC cannot be terminated sooner than the date on which the Murphy IP Product Agreement can be terminated using the methods listed above.

In addition, on October 10, 2018, Legacy Core entered into an Investment Credit Agreement (the “ICA”) with Murphy and TVA.

The ICA provides that TVA will reward Legacy Core in the form of monthly credits on Legacy Core’s bill for firm power, if Legacy Core meets certain eligibility requirements, which include maintaining 500kW of power demand, annual capital investment benchmarks in Core’s hosting sites, minimum workforce requirements, satisfying TVA’s financial viability review and continued compliance with the Murphy IPC.

The ICA has a term of five years, unless terminated earlier.

Copies of the Murphy IPC, the Murphy IP Product Agreement and the ICA, along with the amendments thereto, are attached as Exhibits 10.23, 10.24 and 10.25, respectively, to this Report.

Industrial Power Contract with Murphy Electric Power Board

The Company currently operates its “Marble 1” facility in Marble, North Carolina at a power capacity up to 35,000 kW under an Industrial Power Contract (the “Murphy IPC”) originally executed on December 15, 2017 with Murphy Electric Power Board (the “MEPB”).

MEPB operates as a local power company partner to the larger Tennessee Valley Authority (“TVA”) system.

The Company’s Marble 1 power rates are governed by MEPB’s published rate schedule for large manufacturing service customers.

Under that schedule, our rates are historically stable with some month-to-month variability dictated by the MEPB’s monthly fuel rider.

In an effort to lower overall operating costs, the Company also participates in MEPB’s interruptible power program which allows MEPB to curtail our power usage for a limited number of hours each year.

By making its usage curtailable and thereby ‘usable’ by MEPB/TVA, the Company is awarded a monthly bill credit commensurate with the amount of kilowatts it has agreed to provide back to the system when called upon.

Additionally, the Company participates in an economic development program offered by MEPB/TVA which is designed to incent capital investment and employment.

Program awards are determined annually and paid monthly in the form of a bill credit.

Master Services Agreement and Power Arrangements with Duke Energy Carolinas, LLC

On June 25, 2018, Legacy Core entered into a Master Services Agreement (the “MSA”) with Duke Energy Carolinas, LLC (“Duke”).

Pursuant to the MSA, Legacy Core engaged Duke to perform certain design, procurement, construction and project management activities and installation services related to the installation of overhead circuits to feed Legacy Core’s transformers.

Legacy Core paid approximately $400,000 to Duke for the services.

The MSA also governs the terms and conditions of future work orders to be entered into between Legacy Core and Duke.

Either party may terminate the MSA upon 30 days prior written notice.

Legacy Core also entered into an Electric Service Agreement (the “ESA”) with Duke, effective June 10, 2019, for the supply of electric power to Legacy Core’s plant in Marble, North Carolina.

The ESA provides for an electrical power capacity of 24,000kW, which can be adjusted based on Legacy Core’s consumption, but will not exceed 48,000kW.

Legacy Core agreed to pay to Duke in accordance with certain service rate schedules as modified or replaced from time to time by agreement between the parties.

Legacy Core currently pays Duke on average approximately $92,000 per month for its provision of the power capacity.

The ESA provides for an initial term of 2.5 years, with a subsequent one-year

automatic renewal provision until the ESA is terminated.

Either Legacy Core or Duke may terminate the ESA by prior written notice no later than 60 days in advance of the termination of the then-existing term.

Copies of the MSA and the ESA are attached as Exhibits 10.26 and 10.27, respectively, to this Report.

The Company currently operates its “Marble 2” facility in Marble, North Carolina at a power capacity up to 69,000 kW under a Master Services Agreement (the “MSA”) originally executed with Duke Energy Carolinas, LLC (“Duke”) on June 25, 2018.

The Company also entered into an Electric Service Agreement (the “ESA”) with Duke, effective June 10, 2019, for the supply of electric power to Marble 2.

The Company’s Marble 2 power rates are governed by Duke Energy Carolinas published rate schedule which is overseen by the North Carolina Utilities Commission (the “NCUC”).

Rates are largely stable with some seasonality and are subject to adjustment as approved by the NCUC.

Further, the Company works to lower operating costs by participating in interruptible power and economic development incentive programs.

Electric Service Agreements with Dalton Utilities

On October 11, 2018, Legacy Core, through its wholly-owned subsidiary, American Property Acquisitions VII, LLC, entered into an Amended and Restated Electric Service Agreement with The Board of Water, Light and Sinking Fund Commissioners of the City of Dalton, Georgia (d/b/a Dalton Utilities, “Dalton”) for the supply of electric power to each of its hosting sites located at Boring Drive, Dalton, Georgia (the “Boring Drive Site”) and Industrial South, Dalton, Georgia (the “Industrial South Site”).

The agreement for the Boring Drive Site provides for an electrical power capacity of up to 120,000kW, and the agreement for the Industrial South Site provides for an electrical power capacity of up to 50,000kW.

Under each agreement, Legacy Core agreed to pay to Dalton $0.0364 on a kW per hour basis as modified from time to time, but not to exceed $0.042 prior to December 31, 2021.

Each agreement has an indefinite term, which can be terminated by Legacy Core for convenience by providing 60 days written notice to Dalton.

Copies of the agreements for the Boring Drive Site and the Industrial South Site are attached as Exhibits 10.29 and 10.28, respectively, to this Report.

The Company currently operates two facilities at two separate locations in Dalton, Georgia at a total power capacity of 195,000 kW under an Electric Service Agreement originally executed on October 11, 2018 with The Board of Water, Light and Sinking Fund Commissioners (the “Board of Commissioners”) of the City of Dalton, Georgia (d/b/a Dalton Utilities, “Dalton”) for the supply of electric power to each of its hosting sites located at Boring Drive, Dalton, Georgia (the “Boring Drive Site”) and Industrial South, Dalton, Georgia (the “Industrial South Site”).

The Company’s base power rates in Dalton are governed by Dalton’s Board of Commissioners are subject to change once each year.

Additionally, the Board of Commissioners imposes a monthly Fuel Costs Adjustment (“FCA”) tied largely to local natural gas power prices.

The FCA, like natural gas, is seasonal in nature.

Firm Power Contract and Related Arrangements with Tennessee Valley Authority

Effective as of May 1, 2019, Legacy Core entered into a Firm Power Contract, which was subsequently amended in February and April 2020 (as amended, the “FPC”), with TVA for the supply of electric power to Legacy Core’s site near Calvert City, Kentucky.

Subject to other terms and conditions, the FPC provides for an electrical power capacity of 125,000kW of firm power during “onpeak hours,” and an electrical power capacity of 125,000kW of firm power during “offpeak hours.” Legacy Core agreed to pay TVA for such supply in accordance with certain service rate schedules as modified or replaced from time to time by agreement between the parties.

Legacy Core currently pays TVA on average approximately $625,000 per month for its provision of the power capacity, taking into effect any bill credits available to Legacy Core pursuant to the TVA IP Product Agreement, as defined and summarized below.

The FPC provides for an automatic one-year

renewal beginning on May 1, 2021.

The FPC may be terminated on or after April 29, 2025 by either Legacy Core or TVA upon at least five years’ written notice, but in no event, shall the FPC be terminated sooner than the date on which the TVA IP Product Agreement (as defined below) can be terminated.

In connection with the FPC, Legacy Core entered into an Interruptible Power Product Agreement with TVA (the “TVA IP Product Agreement”), effective May 1, 2020.

Under the TVA IP Product Agreement, Legacy Core agreed to curtail its power demand upon notice from TVA, if TVA determines, in its sole judgment, it is necessary or appropriate to do so to ensure the operation and reliability of its system.

In return, TVA provides credits to Legacy Core’s monthly power bill.

Legacy Core assumes all risk of loss, injury or damage resulting from any interruption or curtailment of power.

The TVA IP Product Agreement provides for a term of five years, and may be terminated by any party by at least three years’ written notice, or by TVA upon at least 60 days’ notice if Legacy Core does not meet certain eligibility requirements or benchmarks of performance under the TVA IP Product Agreement.

The TVA IP Product Agreement continues in effect during the term of the FPC, unless it is sooner terminated using the methods listed above.

Copies of the FPC and the TVA IP Product Agreement, along with the amendments thereto, are attached as Exhibits 10.30 and 10.31, respectively, to this Report.

Sales and Purchase Arrangements with Bitmain

Since 2018, Legacy Core has entered into multiple sales and purchase agreements with Bitmaintech Pte.

and/or its affiliates (collectively, “Bitmain”) for the purchase of digital currency miners from Bitmain.

Under the terms of such agreements, Bitmain has the right to discontinue the sale of its miners and/or to make changes thereto at any time without prior approval from or notice to Legacy Core.

In addition, Bitmain (and/or its licensors, as applicable) retains the intellectual property rights to such miners.

Under the terms of the agreements, Legacy Core agreed to indemnify Bitmain from all claims arising and any and all damages, suits, claims, judgments, liabilities, losses, fees, costs or expenses of any kind, including legal fees, whatsoever arising out of or incidental to Bitmain’s products pursuant to the agreements.

Each agreement will remain in effect for as long as one or more shipping orders are outstanding thereunder, and may be terminated upon either party’s uncured material breach or upon insolvency proceedings against Legacy Core.

A copy of a form of such agreements with Bitmain is attached as Exhibit 10.32 to this Report.

Our Go-to-Market

We sell our services through direct sales teams with leads generated from technology partners, customer referrals, and through our corporate marketing efforts.

Our go-to-market

strategy is focused on acquiring new customers and driving increased use of our services for existing customers.

Core entered into a Firm Power Contract (“FPC”) with TVA for the supply of electric power to Core’s site near Calvert City, Kentucky.

The Calvert City facility operates at a rate of up to 150,000 kW.

Subject to other terms and conditions, Core operates as a Large Manufacturing Service customer in accordance with certain TVA service rate schedules as modified or replaced from time to time by agreement between the parties.

The FPC may be terminated on or after April 29, 2025 by either Core or TVA upon at least five years’ written notice.

Similar to our MEPB/TVA governed Marble 1 facility, the Company works to lower operating costs by participating in interruptible power and economic development incentive programs.

Electric Service Agreement with Nodak/Minnkota

Core entered into an Electric Service Agreement (the “ESA”) with Nodak Electric Cooperative and Minnkota Power Cooperative (“MPC”) to supply power to it 100,000 kW mining facility in Grand Forks, North Dakota.

Operations at the Grand Forks facility began in June of 2022.

The ESA provides a fixed annual rate for power, escalating slightly over time through 2026.

As part of that agreement, and in an effort to reduce its fixed rate for power, the Company agreed to curtail its operations for a fixed number of hours each year at the direction of MPC.

The Company does retain the right to disregard curtailment calls and pay hourly market prices when deemed economically favorable to its bottom line.

Power Purchase Agreement with the City of Denton

Effective as of September 3, 2021, Core entered into a Power Purchase Agreement with the City of Denton, Texas, d/b/a Denton Municipal Electric, a Texas Municipal Corporation and Home-Rule City.

The agreement provides for an electrical power capacity of up to 297,000kW for a term of seven years at the Denton Energy Center.

The price point for the energy delivered is designated as the ERCOT North Zone 15-min real-time index price as published by ERCOT plus ancillary services, transmission/distribution, taxes, and fees.

The transmission and distribution utility serving the site is Denton Municipal Electric.

Master Energy Sales Agreement with MP2 Energy, LLC a Shell Subsidiary

Effective as of September 16, 2022, Core entered into a Master Energy Sales Agreement with retail electric provider MP2 Energy, LLC.

The agreement provides for electrical power for the Cottonwood and Cedarvale data centers in Pecos, TX.

The price point for the energy delivered is designated as the ERCOT West Zone 15-min real-time index price as published by ERCOT plus ancillary services, transmission/distribution, taxes, and fees.

The transmission and distribution utility serving the sites is Texas-New Mexico Power.

We operate in a highly competitive industry with an increasing number of participants.

Our self-mining operations compete with mining operations throughout the world to complete new blocks in the blockchain and earn the reward in the form of an established unit of a digital asset.

Our self-mining operations compete with mining operations throughout the world to complete new blocks on the blockchain and earn the reward in the form of an established unit of a digital asset.

We compete on the basis of our total number of miners, the degree of mining difficulty, the efficiency of our mining operations and the fiat value of the mining reward.

While miners of digital assets historically range from individual enthusiasts and entrepreneurs to large public company mining operations and large company mining hosting operations with dedicated data centers, the vast majority of mining is now undertaken and further trending towards large-scale, industrial mining farms.

A mining pool is created when mining participants pool the processing power of their miners over a network and mine transactions together.

Rewards are then distributed proportionately to the pool participants based on the work/hash power contributed to solving a block.

Our self-mining operations also compete with non-digital

asset operations for access to suitable real estate and access to affordable and dependable electric power.

Our self-mining operations also compete with non-digital asset operations for access to suitable real estate and access to affordable and dependable electric power.

In addition to competing to solve new blocks, we compete to acquire new miners, to raise capital, to obtain access to facilities for location of mining operations, and to develop or acquire new technologies.

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Our success in our hosting operations depends on our ability to supply hosting space and power, our performance with respect to installation, operation and repair of customer equipment, our ability to obtain replacement parts, the value of our service offering to our customers and the availability of mining equipment.

A significant percentage of mining equipment is manufactured by a single supplier and almost all mining equipment is provided by a small number of manufacturers.

We believe that we compete favorably as a provider of hosting services because of the design, size, quality and geographic distribution of our existing facility operations, our proprietary technology and software, our power contracts, our commitment to net carbon neutral operations, our experience and expertise and our relationships with equipment manufacturers.

To compete effectively as a hosting provider we will have to market our services effectively to large scale miners that value our ability to host at scale and who are willing to pay a premium hosting fee for our high up-time and operational expertise.

Several public companies (traded in the United States, Canada, and internationally), such as the following, may be considered competitors to the Company:

• Applied Digital Corp.;

• Argo Blockchain PLC;

• Bit Digital, Inc.;

Bitcoin Investment Trust;

• Bitfarms Technologies Ltd.

(formerly Blockchain Mining Ltd);

Blockchain Industries, Inc.

(formerly Omni Global Technologies, Inc.);

• Cipher Mining Inc.;

Coinbase, Inc.;

Digihost International, Inc.;

DMG Blockchain Solutions Inc.;

DPW Holdings, Inc.

(through its ownership of Digital Farms Inc.);

Greenidge Generation Holdings Inc.;

HashChain Technology, Inc.;

• Cleanspark, Inc.;

• Greenidge Generation Holding Inc.;

• Hive Blockchain Technologies Inc.;

• Hut 8 Mining Corp.;

Layer1 Technologies, Inc.;

• Iris Energy Ltd.

• Marathon Digital Holdings, Inc.;

MGT Capital Investments, Inc.;

Northern Data AG;

Overstock.com Inc.;

Riot Blockchain, Inc.

• Mawson Infrastructure Group Inc.;

• Riot Platforms, Inc.;

• Stronghold Digital Mining, Inc.;

• TeraWulf Inc.

The digital assets industry is a highly competitive and evolving industry and new competitors and/or emerging technologies could enter the market and affect our competitiveness in the future.

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Intellectual Property

Intellectual property is an important aspect of our business, and we seek protection for our intellectual property as appropriate.

We seek protection for our intellectual property as appropriate.

To establish and protect our proprietary rights, we rely upon a combination of patent, copyright, trade secret and trademark laws and contractual restrictions such as confidentiality agreements, licenses and intellectual property assignment agreements.

As of February 4, 2022, we had over 70 filed patent applications and issued patents in technologies such as blockchain, data center management, infrastructure and cooling.

We have filed over 70 patent applications and obtained issued patents in technologies such as blockchain, data center management, infrastructure and cooling.

We maintain a policy requiring our employees, contractors, consultants and other third parties to enter into confidentiality and proprietary rights agreements to control access to our proprietary information.

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As a result, open-source development and licensing practices can limit the value of our software copyright assets.

We continually review our development efforts to assess the existence and patentability of new intellectual property.

We pursue the registration of our domain names, trademarks and service marks in the United States and in certain locations outside the United States.

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and internal regulators.

For example, the Cyber-Digital Task Force of the U.S.

In October 2020, the Cyber-Digital Task Force of the U.S.

Department of Justice published a report entitled “Cryptocurrency:

An Enforcement Framework” in October 2020 that detailed the Department’s view with respect to digital assets and the tools at the Department’s disposal to deal with threats posed by digital assets.

In March 2021, the nominee for Chair of the U.S.

Securities and Exchange Commission expressed the

need for investor protection along with promotion of innovation in the digital asset space.

An Enforcement Framework” that detailed the Department’s view with respect to digital assets and the tools at the Department’s disposal to deal with threats posed by digital assets.

In February 2021, representatives of the government of Inner Mongolia, China announced plans to ban digital asset mining within the province due to the energy and rare earth mineral demands of the industry.

Government regulation of blockchain and digital assets is under active consideration by the United States federal government via its agencies and regulatory bodies, as well as by similar entities in other countries and transnational organizations, such as the European Union.

State and local regulations also may apply to our activities and other activities in which we may participate in the future.

In March 2021, the nominee for Chair of the U.S.

Securities and Exchange Commission (“SEC”) expressed the need for investor protection along with promotion of innovation in the digital asset space.

In March 2022, President Biden signed an Executive Order outlining an “whole-of-government” approach to addressing the risks and harnessing the potential benefits of digital assets and its underlying technology.

The executive order lays out a national policy for digital assets over six highlighted priorities.

In January 2023, the U.S.

House of Representatives created a new congressional subcommittee focused on digital assets, the Subcommittee of Digital Assets, Financial Technology and Inclusion, operating under the House Financial Services Committee.

In addition to the activities of the United States federal government and its various agencies and regulatory bodies, government regulation of blockchain and digital assets is also under active consideration by similar entities in other countries and transnational organizations, such as the European Union.

State and local regulations within the United States also may apply to our activities and other activities in which we may participate in the future.

Other governmental or semi-governmental regulatory bodies have shown an interest in regulating or investigating companies engaged in blockchain or digital asset businesses.

For instance, the SEC has taken an active role in regulating the use of public offerings of proprietary coins (so-called

“initial coin offerings”) and has made statements and official promulgations as to the status of certain digital assets as “securities” subject to regulation by the SEC.

The effect of any regulatory change, either by the Federal, state, local or foreign governments or any self-regulatory agencies on the Company is impossible to predict, but such change could be substantial and may have a material adverse effect on the Company’s business, financial condition and results of operations.

While we are unaware of significant adverse governmental or regulatory action adverse to Bitcoin or Ethereum mining in the United States, there is no guarantee that future regulation or adverse action will not take place and interpretation of existing regulations in a manner adverse to our business is possible.

For instance, the SEC has taken an active role in regulating the use of public offerings of proprietary coins (so-called “initial coin offerings”) and has made statements and official promulgations as to the status of certain digital assets as “securities” subject to regulation by the SEC.

The effect of any regulatory change by the federal, state, local or foreign governments or any self-regulatory agencies on the Company is impossible to predict, but such change could be substantial and may have a material adverse effect on the Company’s business, financial condition and results of operations.

For example, in November 2022, the State of New York enacted a law prohibiting new proof of work mining activities that use power generated from carbon inputs.

While the Company does not currently operate in New York and we are unaware of other significant governmental or regulatory action adverse to bitcoin mining in the United States, there is no guarantee that future regulation or adverse action will not take place and interpretation of existing regulations in a manner adverse to our business is possible.

In addition, various foreign jurisdictions either have adopted, or may adopt, laws, regulations or directives that affect digital assets, digital asset networks, and their users and participants.

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Presently, we do not believe any U.S.

or State regulatory body has taken any action or position adverse to our main digital asset, Bitcoin, with respect to its production, sale, and use as a medium of exchange;

however, future changes to existing regulations or entirely new regulations may affect our business in ways it is not presently possible for us to predict with any reasonable degree of reliability.

or state regulatory body other than the

State of New York has taken any action or position adverse to our main digital asset, bitcoin, with respect to its production, sale, and use as a medium of exchange;

however, future changes to existing regulations or entirely new regulations may affect our business in ways it is not presently possible for us to predict with any reasonable degree of certainty.

As the regulatory and legal environment evolves, we may become subject to new laws, such as further regulation by the SEC and other agencies, which may affect our mining and other activities.

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All aspects of our business require specialized knowledge and technical skill.

Such knowledge and skills include the areas of blockchain technology, research and development, digital currency assets, digital currency market, digital asset operations, human resource management, data privacy, as well as legal compliance, finance and accounting.

We believe that we have adequate personnel and resources with the specialized skills required to carry out our operations successfully.

Such knowledge and skills include the areas of blockchain technology, research and development, digital assets, digital asset market, digital asset operations, human resource management, data privacy, as well as legal, compliance, finance and accounting.

We believe that we have adequate personnel and resources with the specialized skills required to conduct our operations successfully.

As of December 31, 2022, we had 235 full-time employees.

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None of our employees are represented by a labor union or covered by collective bargaining agreements, and we have not experienced any work stoppages.

We believe our relationship with our employees is good.

Recent Developments

The Business Combination closed on January 19, 2022.

At the effective time of the First Merger, among other things, each share of Class A common stock of XPDI converted into one share of Common Stock of the Company.

In addition, XPDI issued 8,625,000 shares of Class B common stock prior to its initial public offering (the “founder shares”).

At the effective time of the First Merger, each share of such Class B common stock of XPDI converted into one share of Common Stock of the Company.

Each outstanding warrant exercisable for shares of Class A common stock became exercisable for an equal number of shares of our Common Stock.

As of the Closing Date and following the completion of the Business Combination, the Company had 317,279,900 shares of Common Stock issued and outstanding held of record by approximately 498 holders, and 20,991,129 warrants (consisting of (i) 8,625,000 shares underlying XPDI’s public warrants, (ii) 6,266,667 shares underlying XPDI’s private placement warrants and (iii) 6,099,462 shares underlying warrants held by Legacy Core investors) outstanding held of record by approximately 13 holders.

In connection with the consummation of the Business Combination, XPDI changed its name to “Core Scientific, Inc.” Our Common Stock is now listed on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “CORZ” and public warrants to purchase the Common Stock at an exercise price of $11.50 per share are listed on the Nasdaq under the symbol “CORZW.”

Chapter 11 Filing

On December 21, 2022, Core Scientific, Inc.

(the “Company”) and certain of its affiliates (collectively, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) seeking relief under Chapter 11 of the United States Code (the “Bankruptcy Code”).

The Chapter 11 Cases are jointly administered under Case No.

In connection with the filing of the Chapter 11 Cases, the Company entered into a restructuring support agreement (together with all exhibits and schedules thereto, the “Restructuring Support Agreement”) with the ad hoc group of noteholders, representing more than 70% of the holders of its convertible notes (the “Ad Hoc Noteholder Group”) pursuant to which the Ad Hoc Noteholder Group agreed to provide commitments for a debtor-in-possession facility (the “Original DIP Facility”) of more than $57 million and agreed to support the syndication of up to an additional $18 million in new money DIP (defined below) facility loans to all holders of convertible notes.

The Restructuring Support Agreement was terminated by the Company pursuant to a “fiduciary out” which permitted the Company to pursue better alternatives.

Riley Commercial Capital, LLC, as administrative agent (the “Administrative Agent”), and the lenders from time to time party thereto (collectively, the “Replacement DIP Lender”).

The Replacement DIP Facility, among other things, provides for a non-amortizing super-priority senior secured term loan facility in an aggregate principal amount not to exceed $70 million.

Under the Replacement DIP Facility, (i) $35 million was made

available following Bankruptcy Court approval of the Interim DIP Order and (ii) $35 million was made available following bankruptcy Court approval of the Final DIP Order.

Loans under the Replacement DIP Facility will bear interest at a rate of 10%, which will be payable in kind in arrears on the first day of each calendar month.

The Replacement DIP Credit Agreement includes representations and warranties, covenants applicable to the Debtors, and events of default.

The maturity date of the Replacement DIP Credit Agreement is December 22, 2023, which can be extended, under certain conditions, by an additional three months to March 22, 2024.

(ii) the consummation of any sale or other disposition of all or substantially all of the assets of the Debtors pursuant to section 363 of the Bankruptcy Code;

and (iv) conversion of the Chapter 11 Cases into cases under chapter 7 of the Bankruptcy Code.

The Bankruptcy Court has appointed two official committees:

These committees have the right to be heard on all matters that come before the Bankruptcy Court and have important roles in the Chapter 11 Cases.

The Debtors are required to bear certain costs and expenses of the committees, including those of their counsel and financial advisors.

Court filings and other documents related to the Chapter 11 process are available on a separate website administered by our claims agent, Stretto, at https://cases.stretto.com/corescientific/.

Information is also available by calling 949-404-4152 (toll-free in the U.S.) or +1-888-765-7875 (for parties outside the U.S.).

Documents and other information available on such website are not part of this document and shall not be deemed incorporated by reference in this document.

Corporate Information

We were originally known as Power & Digital Infrastructure Acquisition Corp.

On January 19, 2022, Legacy Core, XPDI, and Merger Sub consummated the Business Combination, following the approval at the special meeting of the stockholders of XPDI held on January 19, 2022.

In connection with the Business Combination, we changed our name from Power & Digital Infrastructure Acquisition Corp.

to Core Scientific, Inc.

(“XPDI”) which was a special purpose acquisition corporation formed for the purpose of acquiring an operating business like Old Core.

(“New Core” or the “Company”).

XPDI’s stockholders approved the transactions contemplated by the Business Combination at a special meeting of stockholders held on January 19, 2022.

See our Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information on the Business Combination.

Available Information

Our internet address is www.corescientific.com.

The contents of our website are not part of this Annual Report on Form 10-K and our internet address is included in this document as an inactive textual reference only.

We currently make our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy reports and all amendments to those reports available free of charge on our website as soon as reasonably practicable after we file such reports with, or furnish such reports to, the SEC.

You can access our filings through the SEC’s internet site:

www.sec.gov (intended to be an inactive textual reference only)

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.

What changed 10-K

Item 1. Business