What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-13 compared with 2023-04-04 · 1003 added, 850 removed, 1179 unchanged (61% of the section changed)

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Core Scientific, Inc.

(the “Company”) as of December 31, 2022, the related consolidated statements of operations, comprehensive loss, changes in contingently redeemable convertible preferred stock and stockholders’ deficit, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As more fully described in Note 2, the Company has incurred significant losses, has a working capital deficit, and limited cash.

In addition, the Company has filed voluntary petitions in the United States Bankruptcy Court for the Southern District of Texas seeking relief under Chapter 11 of the United States Code.

As a result, substantial doubt exists regarding the Company’s ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 2.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Adoption of New Accounting Standard

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in 2022 due to the adoption of ASU No.

2016-02, Leases (Topic 842) , as amended, effective January 1, 2022, using the modified retrospective approach.

We have audited the accompanying consolidated balance sheets of Core Scientific, Inc.

(the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive (loss) income, changes in contingently redeemable convertible preferred stock and stockholders’ (deficit) equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Subsequent Event

As discussed in Note 1 to the consolidated financial statements, the Company and certain of its affiliates (collectively the “Debtors”) filed voluntary petitions on December 21, 2022 with the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) for relief under the provisions of Chapter 11 of the United States Bankruptcy Code.

The Bankruptcy Court confirmed the Debtors Plan of Reorganization on January 16, 2024 and the Debtors emerged from Bankruptcy on January 23, 2024.

The Plan of Reorganization is discussed in Note 17 to the consolidated financial statements.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ Marcum LLP

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Los Angeles, CA

April 3, 2023

March 12, 2024

Report of Independent Registered Public Accounting Firm

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Core Scientific, Inc.

and subsidiaries (Debtor-in-Possession) (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income (loss), changes in contingently redeemable convertible preferred stock and stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with U.S.

We have audited the consolidated statement of operations, comprehensive income (loss), changes in contingently redeemable convertible preferred stock and stockholder’s equity, and cash flows of Core Scientific, Inc.

and subsidiaries (Debtor-in-Possession) (the Company) for the year ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year in the period ended December 31, 2021, in conformity with U.S.

generally accepted accounting principles.

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Accounts receivable from related parties — 23

Deposits for equipment — 358,791

Digital assets 2,284 724

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Operating lease right-of-use assets 7,844 20,430

Goodwill — 1,055,760

Intangible assets, net 2,247 1,704

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Total Assets $ 712,156 $ 807,686

Liabilities, Contingently Redeemable Preferred Stock and Stockholders’ (Deficit) Equity

Liabilities and Stockholders’ Deficit

Current Liabilities:

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Accrued expenses and other current liabilities

179,636 17,952

Operating lease liabilities, current portion 77 769

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Deferred revenue from related parties — 496

Finance lease obligations, current portion — 28,452

Finance lease liabilities, current portion 19,771 —

Notes payable, current portion 124,358 36,242

Total Current Liabilities 488,423 186,789

Finance lease obligations, net of current portion — 62,145

Finance lease liabilities, net of current portion

Operating lease liabilities, net of current portion 1,512 720

Notes payable, net of current portion (includes $ — and $ 557,007 at fair value)

Notes payable, net of current portion 684,082 —

Other noncurrent liabilities — 2,210

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Total Liabilities 1,309,097 1,217,032

Contingently redeemable preferred stock;

$ 0.0001 par value;

2,000,000 and 50,000 shares authorized at December 31, 2022 and 2021, respectively;

— and 10,826 shares issued and outstanding at December 31, 2022 and 2021, respectively;

$ — and 45,164 total liquidation preference at December 31, 2022 and 2021, respectively

Commitments and contingencies (Note 10)

Stockholders’ (Deficit) Equity:

Stockholders’ Deficit:

Common stock;

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Accumulated deficit ( 2,420,237 ) ( 2,173,750 )

Accumulated other comprehensive loss — ( 10,966 )

Total Stockholders’ (Deficit) Equity ( 409,346 ) 1,341,210

Total Liabilities, Contingently Redeemable Preferred Stock and Stockholders’ (Deficit) Equity $ 807,686 $ 2,438,864

Total Stockholders’ Deficit ( 596,941 ) ( 409,346 )

Total Liabilities and Stockholders’ Deficit $ 712,156 $ 807,686

See accompanying notes to consolidated financial statements.

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— 71,438 109,859

Digital asset mining income

Digital asset mining revenue

390,333 397,796 216,925

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123,459 8,400 238,862

(Loss) gain on legal settlement

Loss on legal settlement

— — ( 2,636 )

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Impairment of digital assets ( 4,406 ) ( 231,315 ) ( 37,206 )

Change in fair value of derivative instruments ( 3,918 ) — —

Impairment of goodwill and other intangibles — ( 1,059,265 ) —

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108,111 252,973 72,222

Operating (loss) income

Operating income (loss)

8,961 ( 2,109,553 ) 131,494

Non-operating expenses, net:

Loss on debt from extinguishment

(Gain) loss on debt extinguishment

( 20,065 ) 287 8,016

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Reorganization items, net 191,122 ( 197,405 ) —

Other non-operating expenses, net

Other non-operating (income) expenses, net

( 2,530 ) 5,232 2

Total non-operating expense, net

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( 245,804 ) ( 2,163,409 ) 63,075

Income tax (benefit) expense

Income tax expense (benefit)

683 ( 17,091 ) 15,763

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( 246,487 ) ( 2,146,318 ) 47,312

Deemed dividend from common to preferred exchange — — ( 10,478 )

Net (loss) income attributable to common stockholders $ ( 2,146,318 ) $ 47,312 $ ( 22,684 )

Net (loss) income per share (Note 14):

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Shares Amount Shares Amount

Balance at January 1, 2020 (as previously reported)

4,421 $ 29,526 99,141 $ 1 $ 168,866 $ ( 62,538 ) $ — $ 106,329

Retroactive application of the recapitalization 2,653 — 59,499 15 ( 15 ) — —

Balance at January 1, 2020, as adjusted

7,074 29,526 158,640 16 168,851 ( 62,538 ) — 106,329

Net loss — — — — — ( 12,206 ) — ( 12,206 )

Stock-based compensation — — — — 3,037 — — 3,037

Exchange of common stock for Series A contingently redeemable convertible preferred stock 2,882 12,308 ( 1,754 ) — ( 12,308 ) — — ( 12,308 )

Issuance of Series A contingently redeemable convertible preferred stock 366 1,545 — — — — — —

Issuance of Series B contingently redeemable convertible preferred stock 502 1,097 — — — — — —

Issuance of common stock - asset acquisition — — 899 — 1,967 — — 1,967

Exercise of warrants and stock options — — — — 2,405 — — 2,405

Balance at December 31, 2020 10,826 $ 44,476 157,786 $ 16 $ 163,952 $ ( 74,744 ) $ — $ 89,224

10,826 $ 44,476 157,786 $ 16 $ 163,952 $ ( 74,744 ) $ — $ 89,224

Net income — — — — — 47,312 — 47,312

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10,826 $ 44,476 271,576 $ 27 $ 1,379,581 $ ( 27,432 ) $ ( 10,966 ) $ 1,341,210

— — — — — ( 2,146,318 ) — ( 2,146,318 )

Net loss — — — — — ( 2,146,318 ) — ( 2,146,318 )

Other comprehensive income, net of income taxes — — — — — — 10,966 10,966

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$ — $ — 375,225 $ 36 $ 1,764,368 $ ( 2,173,750 ) $ — $ ( 409,346 )

Net loss — — — — — ( 246,487 ) — ( 246,487 )

Stock-based compensation — — — — 58,892 — — 58,892

Exercise of stock options — — 3 — — — — —

Restricted stock awards issued, net of shares withheld for tax withholding obligations — — 12,046 — — — — —

Restricted stock awards forfeited — — ( 391 ) — — — — —

Balance at December 31, 2023

— $ — 386,883 $ 36 $ 1,823,260 $ ( 2,420,237 ) $ — $ ( 596,941 )

See accompanying notes to consolidated financial statements.

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Cash flows from Operating Activities:

Net (loss) income

$ ( 246,487 ) $ ( 2,146,318 ) $ 47,312

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Digital asset mining income

( 390,333 ) ( 397,796 ) ( 216,925 )

Deferred income taxes — ( 18,521 ) 9,528

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Gain on sale of intangible assets — ( 5,904 ) —

Loss on debt extinguishment

287 8,016 1,333

Gain (loss) on debt extinguishment ( 20,065 ) 287 8,016

Gain (loss) on issuance of notes payable through settlements

Fair value adjustment on derivative warrant liabilities — ( 37,937 ) —

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Losses on disposals of property, plant and equipment

Impairments of digital assets 231,315 37,206 4

1,956 28,025 118

Impairment of digital assets

4,406 231,315 37,206

Impairment of goodwill, other intangibles and property, plant and equipment — 1,649,938 —

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Reorganization

— ( 199,707 ) —

Changes in working capital components:

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Accounts payable 118,596 26,713 ( 21,991 )

Accrued expenses and other 17,229 56,200 1,625

Accrued expenses and other current liabilities 130,382 17,229 56,200

Deferred revenue ( 47,807 ) 16,483 184,340

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Purchases of property, plant and equipment ( 16,161 ) ( 383,980 ) —

Proceeds from sale of Cedarvale 13,998 —

Cash paid in acquisitions — — ( 365,210 )

Deposits (credits) for self-mining equipment — ( 217,677 ) 704

Proceeds from sales (acquisition) of intangibles 10,850 ( 59,275 ) —

Proceeds from sales of coupons — 10,850 ( 59,275 )

Investments in internally developed software ( 833 ) — —

Other — 29 ( 59 )

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Principal payments on debt ( 40,991 ) ( 113,290 ) ( 49,281 )

Net cash provided by financing activities 306,153 603,532 40,723

Net cash (used in) provided by financing activities ( 44,649 ) 306,153 603,532

(Decrease) increase in cash, cash equivalents, and restricted cash 17,469 ( 79,438 ) 122,957

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Income tax payments $ ( 370 ) $ 5,756 $ 9,619

Cash paid for reorganization items, net $ 86,539 $ — $ —

Supplemental disclosure of noncash investing and financing activities:

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$ — $ — $ 1,138,838

Accrued capital expenditures

Change in accrued capital expenditures

$ 2,731 $ 69,286 $ 9,002

Increase in notes payable for acquisition of property, plant and equipment

$ — $ — $ 19,882

Decrease in notes payable in exchange for equipment

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Payment-in-kind interest $ — $ 31,382 $ 7,274

Common stock issuances for acquisition of long-lived assets

$ — $ — $ 1,486

Decrease in equipment related to debt extinguishment $ 17,849 $ — $ —

Property, plant and equipment disposed of through settlements $ 6,301 $ — $ —

Purchase of insurance policies financed by short-term note payable $ 5,011 $ — $ —

Issuance of notes payable through settlements $ 38,547 $ — $ —

Reconciliation of cash, cash equivalents, and restricted cash within the consolidated balance sheets to the amounts shown in the consolidated statements of cash flows above:

Cash and cash equivalents $ 50,409 $ 15,884 $ 117,871

Restricted cash 19,300 36,356 13,807

Total cash, cash equivalents and restricted cash $ 69,709 $ 52,240 $ 131,678

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

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was incorporated on December 13, 2017, in the State of Delaware and changed its name to Core Scientific, Inc.

(“Old Core”) pursuant to an amendment to its Certificate of Incorporation dated June 12, 2018.

On August 17, 2020 Old Core engaged in a holdco restructuring to facilitate a borrowing arrangement by Old Core pursuant to which Old Core was merged with and into a wholly owned subsidiary of Core Scientific Holding Co.

(“Legacy Core”) pursuant to an amendment to its Certificate of Incorporation dated June 12, 2018.

On August 17, 2020, Legacy Core engaged in a holdco restructuring to facilitate a borrowing arrangement by Legacy Core pursuant to which Legacy Core was merged with and into a wholly owned subsidiary of Core Scientific Holding Co.

and became a wholly owned subsidiary of Core Scientific Holding Co.

and the stockholders of Old Core became the stockholders of Core Scientific Holding Co.In July 2021, Core Scientific Holding Co.

and the stockholders of Legacy Core became the stockholders of Core Scientific Holding Co.

In July 2021, Core Scientific Holding Co.

completed the acquisition of Blockcap, Inc.

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

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

(“Blockcap”).

Prior to its acquisition, Blockcap was one of Legacy Core’s largest hosting customers.

On January 19, 2022, following the approval at the special meeting of the stockholders of Power & Digital Infrastructure Acquisition Corp., a Delaware corporation (“XPDI”), Core Scientific Holding Co.

merged with XPDI, and XPDI Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of XPDI (“Merger Sub”), consummated the transactions contemplated under the merger agreement.

In connection with the closing of the merger, XPDI changed its name from Power & Digital Infrastructure Acquisition Corp.

In connection with the closing of that merger (the “Business Combination”), XPDI changed its name from Power & Digital Infrastructure Acquisition Corp.

to Core Scientific, Inc.

(“Core Scientific” or the “Company”).

The Company, headquartered in Austin, Texas, is 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 are one of the largest blockchain infrastructure, hosting provider and digital asset mining companies in North America, with approximately 457 MW of power as of December 31, 2021, and 592 MW of power as of December 31, 2022.

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 500 MW data center at the Port of Muskogee John T.

Griffin Industrial Park which remains substantially undeveloped.

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.

Core Scientific is an operator of dedicated, purpose-built facilities for digital asset mining and a premier provider of blockchain infrastructure, software solutions and services.

The Company currently focuses primarily on digital asset mining.

We employ our own large fleet of computers (“miners”) to earn digital assets for our own account and provide hosting services for large customers at our seven operational data centers in Georgia ( 2 ), Kentucky ( 1 ), North Carolina ( 1 ), North Dakota ( 1 ) and Texas ( 2 ).

We derive the majority of our revenue from earning bitcoin for our own account (“self-mining”).

Our hosting 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, 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.

Chapter 11 Filing

“Mining,” consisting of digital asset mining for our own account, and “Hosting,” consisting of our blockchain infrastructure and third-party hosting business.

During 2022 and 2021, our “Hosting” segment also included sales of mining equipment to customers and was referred to as “Hosting and Equipment Sales.”

Our business strategy is to grow our revenue and profitability by increasing the capacity and efficiency of our self-mining fleet and entering into strategic, revenue-enhancing hosting opportunities with third parties.

We intend to develop the infrastructure necessary to support business growth and profitability and capture adjacent opportunities that leverage our mining infrastructure, expertise and capabilities.

Chapter 11 Filing and Emergence from Bankruptcy

On December 21, 2022, the Company and certain of its affiliates (collectively, the “Debtors”) filed voluntary petitions (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) seeking relief under Chapter 11 of the United States Code (the “Bankruptcy Code”).

The Chapter 11 Cases 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 continue to operate their business and manage their properties as “debtors-in-possession” (“DIP”) under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

The Debtors have 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.

For detailed discussion about the Chapter 11 Cases, refer to Note 3 — Chapter 11 Filing and Other Related Matters.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the consolidated financial statements.

On January 15, 2024, the Debtors filed the Fourth Amended Joint Chapter 11 Plan of Reorganization of Core Scientific, Inc.

and its Debtor Affiliates (with Technical Modifications) (the “Plan of Reorganization”) with the Bankruptcy Court.

On January 16, 2024, the Bankruptcy Court entered an order (the “Confirmation Order”) among other things, confirming the Plan of Reorganization.

On January 23, 2024 (the “Effective Date”), the conditions to the effectiveness of the Plan of Reorganization were satisfied or waived and the Company emerged from bankruptcy.

Core Scientific, Inc.

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Notes to Consolidated Financial Statements

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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All intercompany balances and transactions have been eliminated in consolidation.

Going Concern

The consolidated financial statements have been prepared on a going concern basis.

For the year ended December 31, 2022, the Company generated a net loss of $ 2.1 billion.

The Company had unrestricted cash and cash equivalents of $ 15.9 million as of December 31, 2022, compared to $ 117.9 million as of December 31, 2021.

The decrease in cash and cash equivalents for the year ended December 31, 2022 primarily reflected $ 205.2 million of cash provided by operating activities (including $ 58.1 million of interest payments on debt), $ 590.8 million of cash used in investing activities (including $ 384.0 million of purchases of property, plant and equipment and $ 217.7 million of deposits for self-mining equipment), partially offset by $ 306.2 million of cash provided by financing activities (including $ 113.3 million of principal payments on debt).

The Company has historically generated cash primarily from the issuance of common stock and debt, through sales of digital assets received as digital asset mining revenue and from operations through contracts with customers.

During the year ended December 31, 2022, the average price of bitcoin declined to $ 28,198 compared to $ 47,437 for the year ended December 31, 2021.

At the same time the Company’s power costs in its Mining Segment increased $ 136.5 million compared to the year ended December 31, 2021, reflecting increases in both power usage and power rates.

These factors contributed to the Company’s gross profit of $ 8.4 million for the year ended December 31, 2022, as compared to a gross profit of $ 238.9 million for the year ended December 31, 2021.

In addition, as discussed in Note 14 — Commitments and Contingencies, in July 2022, one of the Company’s largest customers filed for voluntary relief under chapter 11 of the Bankruptcy Code.

Our ability to continue as a going concern is contingent upon, among other things, our ability to, subject to the Bankruptcy Court’s approval, implement the Plan, successfully emerge from the Chapter 11 Cases and generate sufficient liquidity from the restructuring to meet our obligations and operating needs.

As a result of risks and uncertainties related to (i) the Company’s ability to successfully consummate the Plan and emerge from the Chapter 11 Cases, and (ii) the effects of disruption from the Chapter 11 Cases making it more difficult to maintain business, financing and operational relationships, together with the Company’s recurring losses from operations and accumulated deficit, substantial doubt exists regarding our ability to continue as a going concern.

For detailed discussion about the Chapter 11 Cases and the Plan, refer to Note 3 — Chapter 11 Filing and Other Related Matters.

Debtor-in Possession

In general, as debtors-in-possession under the Bankruptcy Code, we are authorized to continue to operate as an ongoing business but may not engage in transactions outside the ordinary course of business without the prior approval of the Bankruptcy Court.

Pursuant to certain motions and applications intended to limit the disruption of the bankruptcy proceedings on our operations (the First Day Motions) and other motions filed with the Bankruptcy Court, the Bankruptcy Court has authorized us to conduct our business activities in the ordinary course, including, among other things and subject to the terms and conditions of such orders, authorizing us to obtain DIP financing, pay employee wages and benefits, settle certain de minimis disputes and pay vendors and suppliers in the ordinary course for all goods and services.

For detailed discussion about the Chapter 11 Cases, refer to Note 3 — Chapter 11 Filing and Other Related Matters.

As of December 31, 2023, we were debtors-in-possession under the Bankruptcy Code.

As such, we were authorized to continue to operate as an ongoing business but may not engage in transactions outside the ordinary course of business without the prior approval of the Bankruptcy Court.

For detailed discussion about the Chapter 11 Cases and our emergence from bankruptcy, refer to Note 3 — Chapter 11 Filing and Other Related Matters and Note 17 — Subsequent Events.

Liquidity and Financial Condition

For the year ended December 31, 2023, the Company generated a net loss of $ 246.5 million.

The Company had unrestricted cash and cash equivalents of $ 50.4 million as of December 31, 2023.

As of December 31, 2023, the Company had a working capital deficit of $ 391.4 million and a total stockholders’ deficit of $ 596.9 million.

The Company’s status in bankruptcy along with its historical financial performance resulted in the Company previously concluding and disclosing that there was substantial doubt regarding its ability to continue as a going concern.

The Plan of Reorganization at the Effective Date (i) eliminated substantial debt and debt service, (ii) established new debt in the form of a secured credit agreement, publicly traded notes and convertible notes, and debt to equipment lenders secured by mining machines, and (iii) new publicly traded equity and warrants.

The settlement of accrued and payable claims through new debt and equity issuance and the extension of debt service to future periods on the Effective Date substantially eliminates the reported working capital deficit at December 31, 2023.

When combined with the additional liquidity of the available delayed-draw term loan and the expected cash flows from operations, management has concluded that the Company’s capital, liquidity and cash flow from operations is sufficient to fund its operations and debt service obligations for at least the next 12 months and that its previous conclusion regarding substantial doubt has been alleviated.

For detailed discussion about our emergence from bankruptcy, refer to Note 17 — Subsequent Events.

Use of Estimates

The consolidated assets, liabilities and results of operations prior to the reverse recapitalization are those of Core Scientific Holding Co.

The outstanding shares and corresponding capital amounts, and losses per share, prior to the reverse recapitalization, have been retroactively adjusted in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations .

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period.

Some of the more significant estimates include assumptions used to estimate its ability to continue as a going concern, the valuation of the Company’s common shares and the determination of the grant date fair value of stock-based compensation awards for periods prior to the Merger, the valuation of digital assets, goodwill, other intangible assets and property, plant and equipment, the fair value of convertible debt, derivative warrants, acquisition purchase price accounting, and income taxes.

Some of the more significant estimates include assumptions used to estimate the Company’s ability to continue as a going concern, the valuation of the Company’s common shares and the determination of the grant date fair value of stock-based compensation awards for periods prior to the Business Combination, the valuation of digital assets, goodwill, other intangible assets and property, plant and equipment, the fair value of convertible debt, derivative warrants, acquisition purchase price accounting, and income taxes.

These estimates are based on information available as of the date of the financial statements;

therefore, actual results could differ from management’s estimates.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

Cash, Cash Equivalents, and Restricted Cash

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Restricted cash consists of cash held in escrow under the Original DIP Credit Agreement and in escrow to pay for construction and development activities.

The following table provides a reconciliation of the amount of cash, cash equivalents, and restricted cash reported on the Company’s Consolidated Balance Sheets to the total of the same amount shown in the consolidated statements of cash flows (in thousands):

Cash and cash equivalents

$ 15,884 $ 117,871

Restricted Cash

36,356 13,807

Total cash, cash equivalents and restricted cash

$ 52,240 $ 131,678

Accounts Receivable and Allowance for Doubtful Accounts

The Company records accounts receivable at the amount billed to the customer based on the contractual terms, net of the allowance for doubtful accounts.

The Company records an allowance for doubtful accounts based on an estimate of amounts that are not collectible.

The Company’s credit risk is mitigated by certain customer prepayments, and for transactions that are not prepaid, the relatively short collection period.

The Company does not require collateral for accounts receivable, however, the Company’s hosting customer agreements allow the Company to use customer equipment for processing transactions on digital asset networks until the Company has recovered the past due receivables.

Accounts receivable also includes sales tax receivable.

The Company records adjustments to the allowance when new information becomes available that indicates they are required.

The Company writes off accounts receivable in the period in which it deems the receivable to be uncollectible.

The Company records recoveries of accounts receivable previously written off when it is known that they will be received.

The Company’s allowance for doubtful accounts was $ 8.7 million as of December 31, 2022.

The Company had no allowance for doubtful accounts as of December 31, 2021.

The Company’s accounts receivable balance consists of amounts due from its hosting customers.

The Company records accounts receivable at the invoiced amount less an allowance for any potentially uncollectible accounts under the current expected

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

credit loss (“CECL”) impairment model and presents the net amount of the financial instrument expected to be collected.

The CECL impairment model requires an estimate of expected credit losses, measured over the contractual life of an instrument, which considers forecasts of future economic conditions in addition to information about past events and current conditions.

Based on this model, the Company considers many factors, including the age of the balance, collection history, and current economic trends.

Bad debts are written off after all collection efforts have ceased.

Allowances for credit losses are recorded as a direct reduction from an asset’s amortized cost basis.

Credit losses and recoveries are recorded in general and administrative expenses in the consolidated statements of operations.

Recoveries of financial assets previously written off are recorded when received.

For the years ended December 31, 2023 and 2022, the Company did not record any credit losses or recoveries.

The Company’s allowance for doubtful accounts was nil and $ 8.7 million as of December 31, 2023 and 2022, respectively.

Valuation of Common Stock

The Company determined the fair value of New Core Common Stock using the most observable inputs available, including quoted prices of XPDI Class A Common Stock and sales the Company’s Series A and Series B Contingently Redeemable Convertible Preferred Stock, discussed in Note 15 — Contingently Redeemable Convertible Preferred Stock.

The Company also uses the market approach, which estimates the value of the Company’s business by applying valuation multiples derived from the observed valuation multiples of comparable public companies to the Company’s expected financial results.

Upon completion of the Business Combination (as discussed in Note 4 — Business Combinations, Acquisitions and Restructuring) in fiscal 2022, the Company determined the fair value of New Core Common Stock (as defined below) using the most observable inputs available, including quoted prices of XPDI Class A Common Stock and sales of the Company’s Series A and Series B Contingently Redeemable Convertible Preferred Stock.

The Company also used the market approach, which estimated the value of the Company’s business by applying valuation multiples derived from the observed valuation multiples of comparable public companies to the Company’s expected financial results.

The Company retained the services of certified valuation specialists to assist with the valuation of the Company’s common stock.

Certain inputs for the New Core Common Stock fair value were unobservable and significant to the resulting fair value measurement, resulting in Level 3 instrument classification.

Applying these valuation and allocation approaches involves the use of estimates, judgments and assumptions that are highly complex and subjective, such as those regarding the Company’s expected future revenue, expenses, valuation multiples, the selection of comparable public companies and the probability of future events.

1 unchanged sentence

Digital Assets

The Company’s digital asset policy prior to the Blockcap acquisition on July 30, 2021, included selling all digital assets and converting them into fiat currency shortly after they are mined, typically within 1-3 days, in order to fund the growth of the Company’s operations.

Following the Blockcap acquisition, the Company significantly expanded its self-mining operation and consequently reevaluated its digital asset investment policy and, at that time, began holding a more significant portion of its digital assets mined on its balance sheet.

Since that time, the Company has sold or held its digital assets as dictated by liquidity and funding

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

Sales of digital assets awarded to the Company through its self-mining activities are classified as cash flows from operating activities regardless of the length of time for which the digital assets are held.

The Company has sold or held its digital assets as dictated by liquidity and funding needs.

Currently the Company is required by covenant to sell bitcoin it receives as consideration shortly after receipt.

Sales of digital assets awarded to the Company through its self-mining activities are classified as cash flows from operating activities.

The Company’s digital assets are accounted for as intangible assets with indefinite useful lives.

The Company initially recognizes digital assets that are received as digital asset mining revenue based on the fair value of the digital assets when received.

Digital assets that are received as digital asset mining revenue are initially measured at fair value as discussed below in Digital Asset Mining Revenue.

Digital assets that are purchased in an exchange of one digital asset for another digital asset are recognized at the fair value of the asset surrendered.

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To the extent that an impairment loss is recognized, the loss establishes the new cost basis of the digital asset.

For the years ended December 31, 2022, 2021 and 2020, the Company recognized impairments of digital assets of $ 231.3 million, $ 37.2 million, and nil respectively.

For the years ended December 31, 2023, 2022 and 2021, the Company recognized impairments of digital assets of $ 4.4 million, $ 231.3 million, and $ 37.2 million, respectively.

For the years ended December 31, 2023, 2022 and 2021, the Company recognized net gains of $ 3.9 million, $ 44.3 million, and $ 4.8 million respectively, on sales of digital assets.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

Activity related to our digital asset balances for the years ended December 31, 2023 and 2022 were as follows (in thousands):

1 unchanged sentence

Digital assets, beginning of period $ 724 $ 234,298

Digital asset mining revenue

Digital asset mining revenue, net of receivables *

389,456 397,796

Blockcap acquisition — 77,560

Proceeds from sales of digital assets and other ( 444,353 ) ( 27,858 )

Mining proceeds from shared hosting 17,626 —

Proceeds from sales of digital assets

( 404,686 ) ( 444,353 )

Gain from sales of digital assets 3,886 44,298

Impairment of digital assets ( 4,406 ) ( 231,315 )

Payment of board fee ( 316 ) —

Digital assets, end of period $ 2,284 $ 724

Digital assets are available to be sold as a source of funds, if needed, for current operations and are classified as current assets on the Company’s Consolidated Balance Sheets, the details of which are presented below.

2022 December 31

Bitcoin (BTC) $ 724 $ 224,843

Ethereum (ETH) — 4,665

Other — 4,790

Total digital assets $ 724 $ 234,298

The Company does not have any off-balance sheet holdings of digital assets.

* As of December 31, 2023 and 2022, there was $ 1.7 million and $ 0.8 million, respectively, of digital asset receivable included in prepaid expenses and other current assets on the consolidated balance sheets.

Digital assets are available to be sold as a source of funds, if needed, for current operations and are classified as current assets on the Company’s Consolidated Balance Sheets.

In connection with the credit and note agreements described in Note 17 — Subsequent Events, the Company is required to sell its bitcoin within ten days of receipt.

The Company does not have any off-balance sheet holdings of digital assets nor does it have the obligation to safeguard digital assets for third parties.

Property, Plant and Equipment, Net

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Leasehold improvements are capitalized at cost and amortized over the shorter of their estimated useful lives or the lease term.

Future obligations related to finance leases are presented as Finance lease obligations, current portion and Finance lease obligations, net of current portion in the Company’s Consolidated Balance Sheets.

Future obligations related to finance leases are presented as Finance lease liabilities, current portion and Finance lease liabilities, net of current portion in the Company’s Consolidated Balance Sheets.

Depreciation expense, including amortization of assets held under finance leases, is primarily included in Cost of revenue in the Company’s Consolidated Statements of Operations.

Self-mining computer equipment that is subsequently contracted for sale to customers is valued at the lower of cost or net realizable value, with any write-down recognized as Cost of Equipment Sales in the Company’s Consolidated Statements of Operations.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

Long-Lived Asset Impairments

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Long-lived assets to be disposed of are reported at the lower of the carrying amount or estimated fair value less costs to sell.

See Note 5 - Property, Plant and Equipment, net for additional discussion of long-lived asset impairments during the year ended December 31, 2022.

See Note 5 — Property, Plant and Equipment, Net, for discussion of long-lived asset impairments related to property, plant and equipment, including impairments.

The total purchase price of any of the Company’s acquisitions is allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values as of the acquisition date.

The excess of the purchase price over those fair values is recorded as goodwill.

When stock is issued as consideration, the fair value assigned to the tangible and intangible assets acquired and liabilities assumed are based on estimates and assumptions around the valuation of the Company’s common stock at the time of the acquisition.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

The Company does not amortize goodwill, but tests it for impairment annually as of October 31, or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable.

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The quantitative test compares the fair value of the reporting unit with its carrying amount.

If the carrying amount exceeds its fair value, the excess of the carrying amount over the fair value is recognized as an impairment loss, and the resulting measurement of goodwill becomes its new cost basis.

As of December 31, 2022, the Company had no remaining Goodwill.

As of December 31, 2021, the carrying amount of Goodwill was $ 1.06 billion with no accumulated impairment losses or impairment losses for the year.

See Note 6 - Goodwill for additional discussion on goodwill and its impairments during the year ended December 31, 2022.

The Company identified goodwill impairment triggering events during the year ended December 31, 2022.

These events included declines in the market price of bitcoin, the market price of the Company’s stock and the Company’s market capitalization.

As a result, the Company performed the quantitative test to compare the fair value to the carrying amount for each reporting unit at June 30, 2022.

Sustained and further deterioration in market prices and in the Company’s financial position resulted in additional quantitative testing at September 30, 2022.

The Company concluded that the carrying value of the Mining reporting unit exceeded its fair value and, as such, recorded a $ 996.5 million impairment of goodwill in its Mining reporting unit for the year ended December 31, 2022.

The Company concluded the carrying amount of the Equipment Sales and Hosting reporting unit exceeded its fair value and, as such, recorded a $ 58.2 million impairment of goodwill in its Equipment Sales and Hosting reporting unit for the year ended December 31, 2022.

These impairments are presented within impairment of goodwill and other intangibles on the Company’s Consolidated Statements of Operations.

As of December 31, 2023 and 2022, the Company had no remaining goodwill.

Energy Forward Purchase Contract

In October 2023, the Company entered into an energy forward purchase contract to fix a specified component of the energy price related to forecasted energy purchases at the Cottonwood 1 facility from November 1, 2023 through May 31, 2024, respectively, in incremental blocks of 48 MW per month.

The energy forward purchase contract minimizes price volatility risk as energy is purchased at a fixed rate, addressing exposures related to changes in operating costs.

The Company did not enter into the forward purchase contract for speculative or trading purposes.

The Company determined the forward purchase contract meets the definition of a derivative because it has a notional amount, no initial net investment, and can be net settled.

The forward purchase contract is not designated as a hedging instrument for accounting.

The forward purchase contract is recorded and initially measured at its fair value and is subsequently remeasured at its fair value each reporting period, with changes in fair value reported in net (loss) income.

T he following table summarizes the fair value of the energy forward purchase contract on the Company’s Consolidated Balance Sheets (in thousands):

Fair Value (Level 2) as of December 31,

Financial statement line item

Energy forward purchase contract

Accrued expenses and other current liabilities

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

The Company recorded the following gains/(losses) related to the energy forward purchase contract on the Company’s Consolidated Statements of Operations (in thousands):

Year Ended December 31,

Financial statement line item

Energy forward purchase contract

Change in fair value of derivative instruments

$ ( 3,918 ) $ —

Derivative Warrant Liabilities

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.

The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.

The classification of derivative instruments, including whether such instruments should be classified as liabilities or as equity, is re-assessed at the end of each reporting period.

The Public Warrants and the Private Placement Warrants have been recognized as derivative liabilities.

The Company has public warrants and private placement warrants that have been recognized as derivative liabilities.

Accordingly, the Company recognized the warrant instruments as liabilities at fair value and adjusted the instruments to fair value at each reporting period.

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The initial and subsequent estimated fair value of both the public warrants and private placement warrants was based on the listed price in an active market for the public warrants.

After the Petition Date, discussed in Note 3 - Chapter 11 Filing and Other Related Matters below, the Public Warrants and Private Placement Warrants were moved to liabilities subject to compromise.

After the Petition Date, as defined below, discussed in Note 3 — Chapter 11 Filing and Other Related Matters below, the public warrants and private placement warrants were moved to liabilities subject to compromise.

See Note 11 — Derivative Warrant Liabilities for additional discussion.

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Debt issuance costs are presented in the consolidated balance sheets as a direct deduction from the carrying amount of the debt liability consistent with the debt discount.

Revenue From Contracts With Customers - Digital Asset Mining Revenue

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue Recognition (“ASC 606”).

The core principle of the revenue standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

The following five steps are applied to achieve that core principle:

Identify the contract with the customer

Identify the performance obligations in the contract

Determine the transaction price

Allocate the transaction price to the performance obligations in the contract

Recognize revenue when the Company satisfies a performance obligation

In order to identify the performance obligations in a contract with a customer, an entity must assess the promised goods or services in the contract and identify each promised good or service that is distinct.

A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:

• The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct);

• The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).

Core Scientific, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

Revenue From Contracts With Customers - Digital Asset Mining Income

The Company derives its digital asset mining income from operating its owned computer equipment as part of a pool of users, facilitated by a pool operator, that processes transactions conducted on one or more blockchain networks.

The contracts with pool operators are terminable at any time by either party.

In exchange for providing computing power to the pool, the Company is entitled to receive digital currency assets from the mining pool operator which is a variable amount based on either (a) the amount of computing power the Company has contributed to the mining pool or (b) a fractional share of the digital currency asset award the mining pool operator receives from the blockchain network upon successfully adding a block to the blockchain, based on the proportion of computing power the Company contributed to the mining pool operator to the total computing power contributed by all mining pool participants in processing the block.

Providing computing power in digital asset transaction verification services is an output of the Company’s ordinary activities.

Providing such computing power is the only performance obligation in the Company’s arrangements with mining pool operators.

The transaction consideration the Company receives, if any, is noncash consideration that is variable depending on the payout methodology used by the pool operator.

In certain arrangements, the Company does not have a reliable means to estimate its relative share of the rewards until they are paid to it and the variable consideration is constrained until the Company receives the consideration, at which time revenue is recognized.

The Company measures consideration at fair value on the date received, which is historically not materially different than the fair value at inception of the arrangement or the time the Company has earned the award from the pools.

The Company’s digital asset mining income is sensitive to changes in the market prices of digital currency assets which may be significant.

There is no significant financing component in these transactions.

Revenue From Contracts With Customers - Hosting and Equipment Sales

The Company primarily generates revenue from contracts with customers from hosting services and, sales of computer equipment.

The Company generally recognizes revenue when the promised service is performed, or control of the promised equipment is transferred to customers.

If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.

The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer.

The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both.

When determining the transaction price, an entity must consider the effects of all of the following:

• Variable consideration

• Constraining estimates of variable consideration

• The existence of a significant financing component in the contract

• Noncash consideration

• Consideration payable to a customer

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized under the accounting contract will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The transaction price is allocated to each performance obligation on a relative standalone selling price basis.

The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time, as appropriate.

Application of the five-step model to the Company’s mining operations

One of the Company’s ongoing major or central operations is to provide a service of performing hash calculations to third-party pool operators alongside collectives of third-party bitcoin miners (such collectives, “mining pools”) as a participant.

The Company considers the third-party mining pool operators to be its customers under Topic 606.

Contract inception and our enforceable right to consideration begins when we commence providing hash calculation services to the mining pool operators.

Each party to the contract has the unilateral right to terminate the contract at any time without any compensation to the other party for such termination.

As such, the duration of a contract is less than a day and may be continuously renewed multiple times throughout the day.

The implied renewal option is not a material right because there are no upfront or incremental fees in the initial contract and the terms, conditions, and compensation amount for the renewal options are at the then market rates.

The Company is entitled to non-cash compensation based on the Full-Pay-Per-Share (“FPPS”) model of the mining pool it is a participant in.

FPPS pools pay block rewards and transaction fees, less mining pool fees and the participants are entitled to non-cash consideration even if a block is not successfully validated by the mining pool operator.

The Company is entitled to compensation once it begins to perform hash calculations for the pool operator in accordance with the operator’s specifications over a 24-hour period beginning mid-night UTC and ending 23:59:59 UTC on a daily basis.

The non-cash consideration that we are entitled to for providing hash calculations to the pool operator under the FPPS payout method is made up of block rewards and transaction fees less pool operator expenses determined as follows:

• The non-cash consideration in the form of a block reward is based on the total blocks expected to be generated on the Bitcoin Network for the daily 24-hour period beginning midnight UTC and ending 23:59:59 UTC in accordance with the following formula:

the daily hash calculations that we provided to the pool operator as a percent of the Bitcoin Network’s implied hash calculations as determined by the network difficulty, multiplied by the total Bitcoin Network block rewards expected to be generated for the same daily period.

• The non-cash consideration in the form of transaction fees paid by transaction requestors is based on the share of total actual fees paid over the daily 24-hour period beginning midnight UTC and ending 23:59:59 UTC in accordance with the following formula:

total actual transaction fees generated on the Bitcoin Network during the 24-hour period as a percent of total block rewards the Bitcoin Network actually generated during the same 24-hour period, multiplied by the block rewards we earned for the same 24-hour period noted above.

• The block reward and transaction fees earned by the Company is reduced by mining pool fees charged by the operator for operating the pool based on a rate schedule per the mining pool contract.

The mining pool fee is only incurred to the extent we perform hash calculations and generate revenue in accordance with the pool operator’s payout formula during the same 24-hour period beginning mid-night UTC daily.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

The above non-cash consideration is variable, since the amount of block reward earned depends on the amount of hash calculations we perform;

the amount of transaction fees we are entitled to depends on the actual Bitcoin Network transaction fees over the same 24-hour period;

and the operator fees for the same 24-hour period are variable since it is determined based on the total block rewards and transaction fees in accordance with the pool operator’s agreement.

While the non-cash consideration is variable, the Company has the ability to estimate the variable consideration at contract inception with reasonable certainty without the risk of significant revenue reversal.

The Company does not constrain this variable consideration because it is probable that a significant reversal in the amount of revenue recognized from the contract will not occur when the uncertainty is subsequently resolved and recognizes the non-cash consideration on the same day that control is transferred, which is the same day as contract inception.

The Company measures the non-cash consideration based on the volume weighted average spot rates of aggregated exchanges over a 24-hour period beginning mid-night UTC and ending 23:59:59 UTC on the day of contract inception using the Company’s primary bitcoin pricing source system.

The Company recognizes non-cash consideration on the same day that control of the contracted service is transferred to the pool operator, which is the same day as the contract inception.

Prior to 2022, in certain arrangements, the Company did not have a reliable means to estimate its relative share of the rewards until they were paid to it and the variable consideration was constrained until the Company received the consideration, at which time revenue was recognized.

The Company measured consideration at fair value on the date received, which was typically not materially different than the fair value at inception of the arrangement or the time the Company had earned the award from the pools.

Direct expenses associated with providing hash calculation services to a third-party operated mining pool are recorded as cost of revenues.

Depreciation and amortization expenses on fixed and right-of-use assets, including digital asset mining equipment, used to provide the services are also recorded as a component of cost of revenues.

Revenue From Contracts With Customers - Hosting

The Company primarily generates revenue from contracts with customers from hosting services.

Prior to fiscal 2023, the “Hosting” segment also included sales of mining equipment to customers and was referred to as “Hosting and Equipment Sales”, when the Company also recognized revenue from contracts with customers from sales of computer equipment, in which the Company generally recognized revenue when control of the promised equipment was transferred to customers.

The Company generally recognizes revenue when the promised service is performed.

Revenue excludes any amounts collected on behalf of third parties, including sales and indirect taxes.

Performance Obligations

The Company’s performance obligations primarily relate to hosting services and equipment sales, which are described below.

The Company has performance obligations associated with commitments in customer hosting contracts for future services and commitments to acquire and deploy customer equipment that have not yet been recognized in the financial statements.

For contracts with original terms that exceed one year (typically ranging from 18 to 48 months), those commitments not yet recognized as of December 31, 2022 and 2021, were $ 159.6 million and $ 1.05 billion, respectively.

T he $ 159.6 million remaining performance obligation as of December 31, 2022, relates solely to the hosting services performance obligation because all equipment sales’ performance obligation commitments had been fulfilled and revenue recognized as of December 31,2022 .

The Company’s performance obligations primarily relate to hosting services, which are described below.

The Company has performance obligations associated with commitments in customer hosting contracts for future services that have not yet been recognized in the financial statements.

As of December 31, 2023, for contracts with original terms that exceed one year (typically ranging from 15 to 24 months), we expect to recognize approximately $ 78.1 million of revenue in the future related to performance obligations associated with existing hosting contracts.

As of December 31, 2023, unsatisfied performance obligations that are expected to be recognized in 2024 and 2025 are $ 68.4 million and $ 9.7 million, respectively.

Hosting Services

We regularly enter contracts that include hosting services, for which revenue is recognized as services are performed on a variable (power consumption) basis.

We recognize variable hosting revenue each month as the uncertainty related to the consideration is resolved, hosting services are provided to our customers, and our customers utilize the hosting services (the customer simultaneously receives and consumes the benefits of the Company’s performance).

The Company regularly enters contracts that include hosting services, for which revenue is recognized as services are performed on a variable basis.

The Company performs hosting services that enable customers to run blockchain and other high-performance computing operations.

8 unchanged sentences

Notes to Consolidated Financial Statements

Equipment Sales

We entered contracts with more than one performance obligation.

For example, we entered into contacts that include both hosting services and sales of computer equipment to those same customers, for which revenue is recognized at the point in time when control of the equipment is transferred to the customer (typically at the start of the contract period).

For these contracts, revenue is recognized based on the relative standalone selling price of each performance obligation in the contract.

The Company recognizes revenue from sales of computer equipment to customers at the point in time when control of the equipment is transferred to the customer, which generally occurs upon deployment of the equipment.

Customers make a series of deposits on equipment purchases with the final payment typically being due at least one month prior to deployment.

Self-mining computer equipment that is subsequently sold to customers is recognized as Equipment Sales to Customers in the Company’s Consolidated Statements of Operations.

Due to the change to Bitmain worldwide sale strategy, we do not expect to enter equipment sales contracts in the future or to have any equipment sales revenue after December 31, 2022.

Equipment Sales (Applicable to years ended December 31, 2022 and 2021)

The Company entered into contracts with more than one performance obligation.

For example, the Company entered into contracts that include both hosting services and sales of computer equipment to those same customers, for which revenue is recognized at the point in time when control of the equipment is transferred to the customer (typically at the start of the contract period).

For these contracts, revenue was recognized based on the relative standalone selling price of each performance obligation in the contract.

The Company recognized revenue from sales of computer equipment to customers at the point in time when control of the equipment is transferred to the customer, which generally occurred upon deployment of the equipment.

Customers made a series of deposits on equipment purchases with the final payment typically being due at least one month prior to deployment.

Self-mining computer equipment that was subsequently sold to customers was recognized as Equipment Sales to Customers in the Company’s Consolidated Statements of Operations.

We do not expect to enter equipment sales contracts in the future or to have any equipment sales revenue after December 31, 2022.

Deferred Revenue

1 unchanged sentence

The Company’s current and non-current deferred revenue balance as of December 31, 2023 and 2022, was $ 9.8 million and $ 80.4 million, respectively, all from advance payments received during the years then ended.

In the year ended December 31, 2022, the Company recognized $ 88.6 million of revenue that was included in the deferred revenue balance as of the beginning of the year, primarily due to the deployment of customer equipment for which advanced payment had been received from customers prior to January 1, 2021.

In the year ended December 31, 2021, the Company recognized $ 44.5 million of revenue that was included in the deferred revenue balance as of the beginning of the year, primarily due to the performance of hosting services for which advance payments had been received from customers prior to January 1, 2020.

In the year ended December 31, 2023, the Company recognized $ 21.0 million of revenue that was included in the deferred revenue balance as of the beginning of the year.

Of the remaining deferred revenue balance, $ 20.5 million and $ 33.0 million were released as a result of the Celsius and Gryphon claim settlements, respectively.

See Note 3 — Chapter 11 Filing and Other Related Matters for further details on the settlements.

In the year ended December 31, 2022, the Company recognized $ 88.6 million of revenue that was included in the deferred revenue balance as of the beginning of the year.

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

3 unchanged sentences

The Company classifies deposits for digital asset mining equipment based on the expected predominant source and use of the cash flows for the equipment that has been contracted for purchase.

Prior to the acquisition of Blockcap on July 30, 2021, described in Note 4 — Business Combinations, Acquisitions and Restructuring, the Company expected that the predominant source and use of the cash flows for orders of digital asset mining equipment would be related to customer sales.

Prior to the acquisition of Blockcap on July 30, 2021, the Company expected that the predominant source and use of the cash flows for orders of digital asset mining equipment would be related to customer sales.

Beginning with orders placed subsequent to July 30, 2021, the Company expects that the predominant source and use of cash flows for digital asset mining equipment will be related to the Company’s own self-mining operations.

10 unchanged sentences

Stock-Based Compensation

The Company recognizes the cost of services received in exchange for awards of equity instruments based upon the fair value of those awards on the grant date.

For the years ended December 31, 2022, 2021 and 2020, the Company’s consolidated operating results included $ 36.6 million, $ 0.9 million, and $ 0.4 million of stock-based compensation expense related to restricted stock units issued to employees, respectively, and $ 146.3 million, $ 5.8 million, and $ 2.6 million of stock-based compensation expense related to stock options issued to employees and consultants, respectively.

In addition, for the year ended December 31, 2021, the Company recognized $ 32.2 million of post-combination expense for share-based compensation awards related to the Blockcap acquisition described in Note 4 — Business Combinations, Acquisitions and Restructuring.

The total tax benefit related to stock-based compensation was nil , $ 6.1 million, and $ 0.7 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Stock-based compensation expense for the years ended December 31, 2022, 2021 and 2020 is included in the Company’s Consolidated Statements of Operations as follow:

Year Ended December 31,

2022 2021 2020

Cost of revenue $ 25,779 $ 4,084 $ —

Research and development 22,093 1,140 —

Sales and marketing 9,401 836 —

General and administrative 1

125,621 32,877 3,038

Total stock-based compensation expense 1

$ 182,894 $ 38,937 $ 3,038

1 Includes $ 1.0 million of stock-based compensation that was provided in severance as part of restructuring charges incurred during the year ended December 31, 2022.

Stock-based compensation expense is measured at the grant date based on the value of the equity award.

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Prior to January 1, 2022, the Company did not match contributions made by participants in the 401(k) Plan.

During the years ended December 31, 2023 and 2022, the Company recognized matching contributions cost of $ 1.0 million and $ 1.1 million, respectively.

Earnings Per Share

The Company computes earnings per share (“EPS”) following Financial Accounting Standards Board (“FASB”) ASC Topic 260, Earnings per share .

The Company computes earnings per share (“EPS”) following ASC Topic 260, Earnings per share .

Basic EPS is measured as the income or loss available to common stockholders divided by the weighted average common shares outstanding for the period.

Diluted EPS presents the dilutive effect on a per-share basis from the potential

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

conversion of convertible securities or the exercise of options and or warrants;

Diluted EPS presents the dilutive effect on a per-share basis from the potential conversion of convertible securities or the exercise of options and or warrants;

the dilutive impacts of potentially convertible securities are calculated using the if-converted method;

1 unchanged sentence

Securities that are potentially an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from diluted EPS calculation.

The Company is subject to income taxes mainly in the jurisdictions in which it provides various infrastructure, technology and colocation and hosting services.

The Company is subject to income taxes mainly in the jurisdictions in which it provides various infrastructure, technology and hosting services.

The Company’s tax position requires significant judgment in order to properly evaluate and quantify tax positions and to determine the provision for income taxes.

5 unchanged sentences

In assessing the need for a valuation allowance, the Company considered all available evidence, including recent operating results, projections of future taxable income, the reversal of taxable temporary differences, and the feasibility of tax planning strategies.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

GAAP sets forth a two-step approach to recognizing and measuring uncertain tax positions.

3 unchanged sentences

Accrued interest and penalties are included in the related tax liability line in the Company’s Consolidated Balance Sheets.

No penalties or interest have been recognized or accrued for unrecognized tax benefits for the years ended December 31, 2022 and 2021.

The Company adjusts its reserves for tax positions in light of changing facts and circumstances, such as the closing of a tax audit, the refinement of an estimate based on new facts or changes in tax laws.

5 unchanged sentences

Recently Adopted Accounting Standards

Simplifying Income Taxes

In December 2019, the FASB issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes , which simplifies the accounting for income taxes by removing the exceptions to the incremental approach for intra-period tax allocation in certain situations, the requirement to recognize a deferred tax liability for a change in the status of a foreign investment, and the general methodology for computing income taxes in an interim period when year-to date loss exceeds the anticipated loss for the year.

The amendments also simplify the accounting for income taxes with regard to franchise tax, the evaluation of step up in the tax basis goodwill in certain business combinations, allocating current and deferred tax expense to legal entities that are not subject to tax and enacted change in tax laws or rates.

The standard was applied on a prospective basis beginning January 1, 2022 and the adoption of this standard did not have a material effect on the Company’s consolidated financial statements.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

In February 2016, the FASB issued ASU No.

2016-02, Leases-(Topic 842) .

Under this new guidance, lessees are required to recognize for all leases (with the exception of short-term leases):

1) a lease liability equal to the lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis and 2) a right-of-use asset which will represent the lessee’s right to use, or control the use of, a specified asset for the lease term (“ROU asset”).

The Company adopted Topic 842 effective for the Company’s annual and interim reporting periods beginning January 1, 2022.

The adoption of Topic 842 required the Company to recognize non-current assets and liabilities for right-of-use assets and operating lease liabilities on its Consolidated Balance Sheet, but it did not have a material effect on the Company’s results of operations or cash flows.

Topic 842 also requires additional footnote disclosures to the

Company’s consolidated financial statements.

A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application.

The Company adopted the new standard on January 1, 2022, and used the effective date as the date of initial application.

Consequently, financial information has not been updated, and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2022.

The new standard provides a number of optional practical expedients in transition.

The Company has elected the ‘package of practical expedients’, which permits the Company not to reassess prior conclusions about lease identification, lease classification and initial direct costs under the new standard.

The Company has not elected the use-of-hindsight or the practical expedient pertaining to land easements;

the latter not being applicable to the Company.

The new standard also provides practical expedients for the Company’s ongoing accounting.

The Company has elected the short-term lease recognition exemption for all leases that qualify.

This means, for those leases that qualify, the Company does not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition.

The Company has not elected to apply the practical expedient to not separate lease and non-lease components for the Company’s leases as of the transition date of January 1, 2022, but may apply the practical expedient prospectively to certain asset classes.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

The cumulative effect of initially applying the new lease standard on January 1, 2022 is as follows (in thousands):

January 1, 2022

Beginning Balance Cumulative Effect Adjustment Beginning Balance, As Adjusted

Prepaid expenses and other current assets $ 30,111 $ ( 453 ) $ 29,658

Other noncurrent assets $ 21,045 $ 1,814 $ 22,859

Accrued expenses and other current liabilities $ 67,862 $ ( 188 ) $ 67,674

Other noncurrent liabilities $ 18,531 $ ( 1,173 ) $ 17,358

The most significant judgments and impacts upon adoption of the standard include the following:

• We recognized right-of-use assets and operating lease liabilities for operating leases that have not previously been recorded.

The lease liability for operating leases is based on the net present value of future minimum lease payments.

The right-of-use asset for operating leases is based on the lease liability adjusted for the reclassification of certain balance sheet amounts such as prepaid rent.

Deferred and prepaid rent are no longer presented separately but are included in the balance of operating lease right-of-use assets.

• In determining the discount rate used to measure the right-of-use asset and lease liability, rates implicit in the leases were not readily available and therefore we used an estimate of our incremental borrowing rate.

Our incremental borrowing rate was based on an estimated secured rate with reference to recent borrowings of similar collateral and tenure.

• Certain line items in the Company’s Consolidated Balance Sheets have been renamed to align with the new terminology presented in the new lease standard;

“Capital lease obligations, current portion” and “Capital lease obligations, net of current portion” are now presented as “Finance lease liabilities, current portion” and “Finance lease liabilities, net of current portion” on the Consolidated Balance Sheets, respectively.

• Upon adoption on January 1, 2022, Operating lease right-of-use assets of $ 6.7 million were recorded in Other noncurrent assets , which included $ 0.5 million related to prepaid rent that was reclassified from Prepaid expenses and other current assets and $ 4.8 million related to prepaid rent and other that had already previously been presented as Other noncurrent assets on the Consolidated Balance Sheets.

In addition, upon adoption on January 1, 2022, the current portion of operating lease liabilities of $ 0.2 million were recorded in Accrued expenses and other and the noncurrent portion of operating lease liabilities of $ 1.2 million were recorded within Other noncurrent liabilities on the Consolidated Balance Sheets.

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Measurement of Credit Losses on Financial Instruments , which requires an entity to measure credit losses for certain financial instruments and financial assets, including trade receivables.

Under this update, on initial recognition and at each reporting period, an entity is required to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument.

The Company adopted ASU 2016-13 as of January 1, 2023, and the adoption did not have a material impact on the Company’s consolidated financial statements.

In December 2023, the FASB issued Accounting Standards Update 2023-08, Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60):

Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”).

ASU 2023-08 is intended to improve the accounting for certain crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value recognized in net income.

The amendments also improve the information provided to investors about an entity’s crypto asset holdings by requiring disclosure about significant holdings, contractual sale restrictions, and changes during the reporting period.

ASU 2023-08 is effective for annual and interim reporting periods beginning after December 15, 2024, with early adoption permitted.

The Company elected to early adopt the new standard effective January 1, 2024.

The financial statement impact upon adoption was not material.

Under the Company’s current bitcoin strategy, the impact of the adoption on 2024 financial performance is expected to be immaterial.

Accounting Standards Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Measurement of Credit Losses on Financial Instruments , which will require an entity to measure credit losses for certain financial instruments and financial assets, including trade receivables.

Under this update, on initial recognition and at each reporting period, an entity will be required to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument.

This update will be effective for and adopted by the Company during the annual reporting period beginning January 1, 2023, including interim periods within that reporting period.

The adoption of this standard is not expected to have a material effect on the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which will improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

This update will be effective for the Company during the annual reporting period beginning January 1, 2025.The Company is currently evaluating the impact this ASU will have on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

Under the ASU, PBEs must annually “(1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income [or loss] by the applicable statutory income tax rate).” This update will be effective for the Company during the annual reporting period beginning January 1, 2025.

The Company is currently evaluating the impact this ASU will have on its consolidated financial statements and related disclosures.

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

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CHAPTER 11 FILING AND OTHER RELATED MATTERS

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

On December 21, 2022 (the “Petition Date”), the Debtors filed the Chapter 11 Cases in the Bankruptcy Court seeking relief under Chapter 11 of the Bankruptcy Code.

The Chapter 11 Cases are jointly administered under Case No.

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.

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

On June 20, 2023 the Debtors filed with the Bankruptcy Court (i) a proposed Joint Chapter 11 Plan of Reorganization of Core Scientific, Inc.

and its Debtor Affiliates and a related proposed form of Disclosure Statement;

(ii) on August 8, 2023, the Amended Joint Chapter 11 Plan of Reorganization of Core Scientific, Inc.

and its Debtor Affiliates and a related Disclosure Statement;

and (iii) on September 7, 2023, the Second Amended Joint Chapter 11 Plan of Reorganization of Core Scientific, Inc.

and its Debtor Affiliates and a related Disclosure Statement;

(iv) on November 16, 2023, the Debtors filed the Third Amended Joint Chapter 11 Plan of Reorganization of Core Scientific, Inc.

and its Debtor Affiliates and a related Disclosure Statement;

and (v) on January 15, 2024, the Debtors filed the Fourth Amended Joint Chapter 11 Plan of Reorganization of Core Scientific, Inc.

and its Affiliated Debtors (with Technical Modifications) with the Bankruptcy Court.

On September 19, 2023, the Debtors, the ad hoc group of the Debtors’ secured convertible notes holders (the “Ad Hoc Noteholder Group”) and the equity committee (the “Equity Committee”) reached an agreement in principle with respect to the economic terms of the Plan of Reorganization (the “Mediated Settlement”).

The Debtors, the Ad Hoc Noteholder Group and the Equity Committee continued to work and negotiate in good faith to document the Mediated Settlement, resolve certain open issues and culminating in the Plan of Reorganization.

On January 16, 2024, the Bankruptcy Court entered the Confirmation Order among other things, confirming the Plan of Reorganization.

On the Effective Date, the conditions to the effectiveness of the Plan of Reorganization were satisfied or waived and the Company emerged from bankruptcy.

See Note 17 — Subsequent Events for additional details.

Original DIP Credit Agreement and Restructuring Support Agreement

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(as successor of Core Scientific Holding Co.), the guarantors party thereto from time to time, U.S.

Bank National Association, as note agent and collateral agent, and the purchasers of the notes issued thereunder, and (ii) the Convertible Note Purchase Agreement, dated as of August 20, 2021, (as amended, restated, amended and restated, supplemented or otherwise modified from time to time), by and among Core Scientific, Inc.

Bank National Association, as note agent and collateral agent, and the purchasers of the notes issued thereunder (the “Secured Convertible Notes”), and (ii) the Convertible Note Purchase Agreement, dated as of August 20, 2021 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time), by and among Core Scientific, Inc.

(as successor of Core Scientific Holding Co.), the guarantors party thereto from time to time, U.S.

Bank National Association, as note agent and collateral agent, and the purchasers of the notes issued thereunder (collectively, the “Convertible Notes”).

Also 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.

Bank National Association, as note agent and collateral agent, and the purchasers of the notes issued thereunder (the “Other Convertible Notes,” and together with the Secured Convertible Notes, the “Convertible Notes”).

Also 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 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 debtor-in-possession facility loans to all holders of Convertible Notes.

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

Replacement DIP Credit Agreement

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

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

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

(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.

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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,

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.

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”).

On July 4, 2023, the Debtors, the Administrative Agents and the Replacement DIP Lender entered into the First Amendment to the Replacement DIP Credit Agreement.

For detailed discussion about the First Amendment, refer to Note 10 — Commitments and Contingencies.

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

NYDIG Settlement

On February 26, 2023, the Bankruptcy Court entered an order (the “NYDIG Order”), whereby the Debtors and NYDIG agreed that the Debtors would transfer the miners serving as collateral under the NYDIG Loan back to NYDIG over a period of several months in exchange for the full extinguishment of the NYDIG Loan.

The final shipment of miners serving as collateral under the NYDIG loan occurred during the quarter ended March 31, 2023, after which the NYDIG Loan was extinguished in full and the Company recorded a $ 20.8 million Gain on debt extinguishment in the Company’s Consolidated Statements of Operations.

Priority Power Settlement

On March 20, 2023, the Bankruptcy Court entered an order (the “Priority Power Order”), whereby the Debtors and Priority Power Management, LLC (“Priority Power”) agreed that the Debtors would transfer equipment to Priority Power and assume an Energy Management and Consulting Services Agreement and other new agreements.

Priority Power was determined to have a single aggregate allowed claim of $ 20.8 million, which was secured by a perfected mechanic’s lien.

The claim was deemed paid and fully satisfied by transfer of specific equipment from the Debtors to Priority Power on the date of the Priority Power Order, thereby releasing all Priority Power liens.

The satisfaction of the obligation and transfer of the equipment is a noncash transaction which occurred during the quarter ended March 31, 2023, and resulted in a gain of $ 4.9 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023.

City of Denton Lease Settlement

On August 16, 2023, the Bankruptcy Court entered an order (the “City of Denton Order”), approving the parties’ agreement to settle all claims of City of Denton and Denton Municipal Electric (“Denton”) against the Debtors and releasing any and all liens related to the Debtors’ lease of the Denton facility in exchange for the Debtors’ execution lease cure costs totaling $ 1.5 million.

There was no impact to the Consolidated Statements of Operations as a result of the satisfaction of the settlement.

Core Scientific, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

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.

For detailed discussion about the Replacement DIP Facility, refer to Note 21 — Subsequent Events.

Huband-Mantor Construction Settlement

On August 18, 2023, the Bankruptcy Court entered an order (the “HMC Order”), approving the parties’ agreement to settle all claims of Huband-Mantor Construction (“HMC”) and its subcontractors against the Debtors and releasing any and all liens in favor of HMC and its subcontractors in exchange for the Debtors’ payment of $ 2 million and the Debtors’ execution of a promissory note in favor of HMC in the principal amount of $ 15.5 million.

The promissory note is secured by a mortgage of the Debtors Cottonwood 1 facility in Texas.

The satisfaction of the settlement resulted in a loss of $ 8.3 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023.

See Note 7 — Notes Payable for further discussion of the promissory note.

Celsius Mining LLC Settlement

On September 14, 2023, the Debtors and Celsius Mining LLC (“Celsius”) entered into a purchase and sale agreement, as amended, (the “PSA”) that provides, in addition to a full mutual release of claims asserted against each party in the respective bankruptcy cases, for a cash payment by Celsius to the Company of $ 14.0 million and a full and final release of all claims of Celsius against the Debtors related to the Celsius Contracts, in exchange for the Debtors’:

(i) sale to Celsius of the Debtors’ Ward County, Texas bitcoin mining data center site (the “Cedarvale Facility”) and certain related assets, (ii) grant to Celsius of a perpetual, non-transferable (except as described in Section 14 of the PSA), non-exclusive limited license to use identified Company intellectual property solely as and to the extent necessary to (x) finish construction and development of the Cedarvale Facility, (y) develop and construct other mining facilities on other properties owned or leased by Celsius similar in type and scope to the Cedarvale Facility, and (z) operate all of the foregoing, (iii) assumption and assignment to Celsius of certain executory contracts, and (iv) unequivocal release of claims against Celsius asserted by the Company in connection with the Celsius Chapter 11 Cases and the Company’s Chapter 11 Cases.

On November 2, 2023, the Company received the payment of $ 14.0 million from Celsius in connection with the PSA.

The sale of the Cedarvale Facility resulted in a loss of $ 2.2 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023.

Refer to Note 10 — Commitments and Contingencies for further discussion of the sale.

ACM ELF ST LLC Lease Settlement

In September 2023, the Company entered into a $ 7.5 million equipment finance agreement with ACM ELF ST LLC in settlement and satisfaction of a previous equipment finance agreement which resulted in a gain of $ 5.0 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023.

See Note 7 — Notes Payable for further discussion of the promissory note.

Didado Electric, LLC Settlement

On October 2, 2023, the Bankruptcy Court entered an order (the “J.W.

Didado Order”), approving the parties’ agreement to settle all claims of W.

Didado Electric, LLC (“Didado”) against the Debtors and releasing any and all liens related to the Debtors’ Muskogee datacenter in exchange for the Debtors’ execution of an unsecured promissory note in favor of Didado in the principal amount of $ 13 million to be paid over 36 months upon emergence from bankruptcy.

The satisfaction of the settlement resulted in a loss of $ 0.7 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023.

Trilogy LLC Settlement

On October 2, 2023, the Bankruptcy Court entered an order (the “Trilogy Order”), approving the parties’ agreement to settle all claims of Trilogy LLC (“Trilogy”) against the Debtors and releasing any and all liens related to the Trilogy contracts in exchange for the Debtors’ execution of an unsecured promissory note in favor of Trilogy in the principal amount of $ 2.9 million to be paid over 30 months starting three months after the confirmation date.

The satisfaction of the settlement resulted in a gain of $ 0.4 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023.

Harper Construction Company, Inc.

On November 4, 2023, the Bankruptcy Court entered an order (the “Harper Order”), approving the parties agreement to settle all claims of Harper Construction Company, Inc (“Harper”) against the Debtors and releasing any and all liens related to the Debtors’ Muskogee datacenter in exchange for the Debtors’ execution of an unsecured promissory note in favor of Harper in the principal

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

amount of $ 4.7 million to be paid over 30 months starting forty-five days after the emergence date.

The satisfaction of the settlement resulted in a loss of $ 5.0 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023.

Dalton Settlement

On December 29, 2023, the Bankruptcy Court entered an order (the “Dalton Settlement Agreement”), approving the parties’ agreement to settle all claims of Dalton Utilities (“Dalton”) against the Debtors including the Dalton Cure Claims in exchange for Debtors’ execution of an unsecured promissory note.

As of December 31, 2023 , the Company accrued the face value of the pending settlement of $ 9.1 million as the execution of the promissory note is still pending.

The satisfaction of the settlement resulted in a gain of $ 1.1 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023.

Maddox Settlement

On January 16, 2024, the Bankruptcy Court entered an order (the “Maddox Settlement”) approving the parties’ agreement to terminate and reject all existing purchase orders and enter into a new purchase order.

Pursuant to the new purchase order, the Company will pay a total purchase price of $ 2.8 million in seven equal monthly installments to Maddox Industrial Transformer LLC (“Maddox”) for 39 18 kilovolt transformers.

The satisfaction of the settlement resulted in a loss of $ 1.3 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023.

Sphere 3D Corp.

and Gryphon Settlement

On January 16, 2024, the Bankruptcy Court entered an order (the “Core-Sphere-Gryphon Order”), granting Sphere 3D Corp (“Sphere”) an allowed $ 10 million general unsecured claim and a complete and final release of all claims of Sphere and Gryphon Digital Mining, Inc.

(“Gryphon”) against the Debtors related to the hosting contracts.

As part of the resolution, all miners have been returned to the client.

Furthermore, the adversary proceeding was dismissed with prejudice, against both Gryphon and Sphere.

The satisfaction of the settlement resulted in a gain of $ 23.3 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023.

McCarthy & Humphrey Settlement

On January 18, 2024, the Bankruptcy Court entered an order (the “McCarthy Order”) approving the parties’ agreement to settle all claims and release all liens of McCarthy Building Companies, Inc.

(“McCarthy”) and Humphrey & Associates, Inc.

(“Humphrey”) against the Company in exchange for cash payments ($ 6.8 million to McCarthy and $ 5.6 million to Humphrey) within 90 days of emergence and promissory notes (to McCarthy in principal amount of $ 5.4 million and to Humphrey in principal amount of $ 1.4 million).

However, if the Company delivers notice to McCarthy to proceed with construction activities, the Company will make the cash payments within three business days of such notice, and pay off the promissory notes in full within one business day of such notice.

As the amount of the expected settlement results in amounts that are estimable and probable, the Company accrued for those liabilities as of December 31, 2023.

The satisfaction of the settlement resulted in a loss of $ 4.6 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023.

Foundry Settlement

On January 16, 2024, the Bankruptcy Court entered an order (the “Foundry Order”), granting Foundry Digital LLC (“Foundry”) an allowed $ 5.5 million general unsecured claim and a comprehensive release of all claims of Foundry against the Debtors.

Concurrently, hosting contracts are assumed, and common stock in Core after emergence from bankruptcy have been confirmed as part of the resolution.

The satisfaction of the settlement resulted in a gain of $ 12.6 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023.

Oklahoma Gas & Electric Settlement

On January 24, 2024, the Bankruptcy Court entered an order (the “OG&E Order”), granting Oklahoma Gas & Electric Company (“OG&E”) an allowed $ 4.8 million general unsecured claim in full and final satisfaction of all claims of OG&E against the

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

The satisfaction of the settlement resulted in a loss of $ 4.8 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023.

Reorganization items, net and Liabilities Subject to Compromise

Effective on December 21, 2022, we began to apply the provisions of ASC 852, Reorganizations (“ASC 852”), which is applicable to companies under bankruptcy protection, and requires amendments to the presentation of certain financial statement line items.

Effective on December 21, 2022, the Company began to apply the provisions of ASC 852, Reorganizations (“ASC 852”), which is applicable to companies under bankruptcy protection, and requires amendments to the presentation of certain financial statement line items.

ASC 852 requires that the financial statements for periods including and after the filing of the Chapter 11 Cases distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business.

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If there is uncertainty about whether a secured claim is undersecured, or will be impaired under the Plan, the entire amount of the claim is included with prepetition claims in liabilities subject to compromise.

As a result of the filing of the Chapter 11 Cases on December 21, 2022, the classification of pre-petition indebtedness is generally subject to compromise pursuant to the Plan.

Generally, actions to enforce or otherwise effect payment of pre-bankruptcy filing liabilities are stayed.

Although payment of pre-petition claims generally is not permitted, the Bankruptcy Court granted the Debtors authority to pay certain pre-petition claims in designated categories and subject to certain terms and conditions.

As a result of the filing of the Chapter 11 Cases on December 21, 2022, the classification of pre-petition indebtedness is generally subject to compromise pursuant to the Plan of Reorganization.

Generally, actions to enforce or otherwise effect payment of pre-bankruptcy filing liabilities were stayed.

The Bankruptcy Court granted the Debtors authority to pay certain pre-petition claims in designated categories and subject to certain terms and conditions.

This relief generally was designed to preserve the value of the Debtors’ businesses and assets.

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Any damages resulting from the rejection of executory contracts and unexpired leases are treated as general unsecured claims.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

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

Year Ended December 31, 2022

Years Ended December 31,

Professional fees and other bankruptcy related costs $ 92,195 $ 2,302

Settlements with creditors:

Priority Power ( 4,878 ) —

ACM ELF ST LLC Lease ( 5,003 ) —

Celsius - Cedarvale PSA 2,175 —

McCarthy 4,590 —

Dalton ( 1,122 ) —

Gryphon ( 23,260 ) —

Foundry ( 12,636 ) —

Other, net 14 —

Total settlements with creditors

Post-petition interest, fees and other cures

Debtor-in-possession financing costs 24,885 —

Write-off of debt issuance costs and original issue net discount on liabilities subject to compromise

(Gain) from adjustment of liabilities subject to compromise fair value to expected allowed amount

Professional fees and other bankruptcy related costs 2,302

— ( 203,236 )

Reorganization items, net $ 191,122 $ ( 197,405 )

The Company has incurred and continues to incur significant costs associated with the reorganization, primarily legal and professional fees, which were classified as Reorganization items, net subsequent to our petition.

Write-off of deferred debt issuance

The Company incurred significant costs associated with the reorganization, primarily debtor-in-possession financing costs and legal and professional fees, which were classified as Reorganization items, net subsequent to our petition.

The accompanying Consolidated Balance Sheets as of December 31, 2023 and 2022, include amounts classified as Liabilities subject to compromise, which represent liabilities the Company anticipates will be allowed as claims in the Chapter 11 Cases.

These amounts represent the Company's current estimate of known or potential obligations to be resolved in connection with the Chapter 11 Cases and may differ from actual future settlement amounts paid.

Differences between liabilities estimated and claims filed, or to be filed, will be investigated and resolved in connection with the claims resolution process.

Core Scientific, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

costs, the write-off of original issue net discount related to debt subject to compromise, and the derecognition of the fair value adjustments to liabilities transferred to subject to compromise were also included in Reorganization items, net.

The accompanying consolidated balance sheets as of December 31, 2022, includes amounts classified as Liabilities subject to compromise, which represent liabilities the Company anticipates will be allowed as claims in the Chapter 11 Cases.

Differences between liabilities estimated and claims filed, or to be filed, will be investigated and resolved in connection with the claims resolution process.

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

December 31, 2022

Liabilities subject to compromise consisted of liabilities reclassified from the following balance sheet categories (in thousands):

December 31, 2023 December 31, 2022

Accounts payable $ 36,678 $ 20,908

Other current liabilities 64,493

Accounts payable, and other current liabilities $ 85,401

Accrued expenses and other current liabilities 20,300 64,493

Accounts payable, and accrued expenses and other current liabilities $ 56,978 $ 85,401

Operating lease liability $ — $ 13,868

4 unchanged sentences

Liabilities subject to compromise $ 99,335 $ 1,027,313

Determination of the value at which liabilities will ultimately be settled cannot be made until the Plan becomes effective and the Company emerges from bankruptcy.

The Company will continue to evaluate and adjust the amount and classification of its pre-petition liabilities.

Such adjustments may be material.

Any additional liabilities that are subject to compromise will be recognized accordingly, and the aggregate amount of Liabilities subject to compromise may change.

Pre-petition unsecured and secured claims which were identified as impaired and subject to compromise during the bankruptcy process have been reclassified as Liabilities subject to compromise.

During the quarter ended September 30, 2023, improvements in the Company’s condition and other developments indicated that secured claims which were initially considered subject to compromise at the beginning of the bankruptcy process and at December 31, 2022, were determined to no longer be subject to compromise as of September 30, 2023 and December 31, 2023.

This determination is the primary reason for the decrease in the reclassification of debt, leases, accounts payable and accrued expenses and other current liabilities to the Liabilities subject to compromise balance, with Court approved settlements contributing nominally to the reductions.

Final determination of the value at which liabilities were settled was made when the Plan of Reorganization became effective and the Company emerged from bankruptcy.

BUSINESS COMBINATIONS, ACQUISITIONS AND RESTRUCTURING

2 unchanged sentences

XPDI’s stockholders approved the transactions (collectively, the “Merger”) contemplated by the Merger Agreement at a special meeting of stockholders held on January 19, 2022 (the “Special Meeting”).

Pursuant to the terms of (a) the Merger Agreement and (b) that certain Agreement and Plan of Merger, dated as of October 1, 2021, as amended on January 14, 2022, by and among XPDI, Core Scientific Holding Co., XPDI Merger Sub 3, LLC, a Delaware limited liability company and wholly owned subsidiary of XPDI (“Merger Sub 3”), and Blockcap, Inc., a Nevada corporation and wholly owned subsidiary of Core Scientific (“Blockcap”), the Merger was effected by (i) the merger of Merger Sub with and into Core Scientific (the “First Merger”), which occurred on January 19, 2022 (the “Closing Date”), with Core Scientific surviving the First Merger as a wholly owned subsidiary of XPDI, (ii) the merger of Core Scientific with and into XPDI (the “Second Merger”), which occurred on January 20, 2022, with XPDI surviving the Second Merger, and (iii) following the closing of the Second Merger on January 20, 2022, the merger of Blockcap with and into Merger Sub 3 (the “Third Merger”), with Merger Sub 3 surviving the Third Merger as a wholly owned subsidiary of XPDI under the name “Core Scientific Acquired Mining LLC.” Immediately prior to the effective time of the First Merger (such effective time of the First Merger, the “Effective Time”), XPDI filed a Second Amended and Restated Certificate of Incorporation (the “Post-Combination Charter”) with the Secretary of State of the State of Delaware pursuant to which XPDI changed its name from “Power & Digital Infrastructure Acquisition Corp.” to “Core Scientific, Inc.” (hereinafter referred to as the “Company” or “New Core”) and redesignated its Class A common stock, par value $ 0.0001 per share (“XPDI Class A Common Stock”), and Class B common stock, par value $ 0.0001 per share (“XPDI Class B Common Stock”), as common stock, par value $ 0.0001 , of the Company (“New Core Common Stock”).

The Exchange Ratio (as defined in the Merger Agreement) was 1.6001528688 of a share of New Core Common Stock per fully-diluted share of Old Core.

Pursuant to the terms of (a) the Merger Agreement and (b) that certain Agreement and Plan of Merger, dated as of October 1, 2021, as amended on January 14, 2022, by and among XPDI, Core Scientific Holding Co., XPDI Merger Sub 3, LLC, a Delaware limited liability company and wholly owned subsidiary of XPDI (“Merger Sub 3”), and Blockcap, Inc., a Nevada corporation and wholly owned subsidiary of Core Scientific (“Blockcap”), the Business Combination was effected by (i) the merger of Merger Sub with and into Core Scientific (the “First Merger”), which occurred on January 19, 2022 (the “Closing Date”), with Core Scientific surviving the First Merger as a wholly owned subsidiary of XPDI, (ii) the merger of Core Scientific with and into XPDI (the “Second Merger”), which occurred on January 20, 2022, with XPDI surviving the Second Merger, and (iii) following the closing of the Second Merger on January 20, 2022, the merger of Blockcap with and into Merger Sub 3 (the “Third Merger”), with Merger Sub 3 surviving the Third Merger as a wholly owned subsidiary of XPDI under the name “Core Scientific Acquired Mining LLC.” Immediately prior to the effective time of the First Merger (such effective time of the First Merger, the “Effective Time”), XPDI filed a Second Amended and Restated Certificate of Incorporation (the “Post-Combination Charter”) with the Secretary of State of the State of Delaware pursuant to which XPDI changed its name from “Power & Digital Infrastructure Acquisition Corp.” to “Core Scientific, Inc.” (hereinafter referred to as the “Company” or “New Core”) and redesignated its Class A common stock, par value $ 0.0001 per share (“XPDI Class A Common Stock”), and Class B common stock, par value $ 0.0001 per share (“XPDI Class B Common Stock”), as common stock, par value $ 0.0001 , of the Company (“New Core Common Stock”).

The Exchange Ratio (as defined in the Merger Agreement) was 1.60015286880 of a share of New Core Common Stock per fully-diluted share of Legacy Core.

Core Scientific, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

In connection with the Special Meeting and the Merger, holders of 12.3 million of the 34.5 million then-outstanding shares of XPDI Class A Common Stock exercised their right to redeem their shares for cash at a redemption price of approximately $ 10.00 per share, for an aggregate redemption amount of $ 123.5 million.

The Merger provided gross proceeds of approximately $ 221.6 million from the XPDI trust account, resulting in approximately $ 201.0 million in net cash proceeds to Core Scientific, after the payment of transaction expenses, which is presented within proceeds from issuance of common stock, net of transaction costs on the consolidated statements of cash flows.

Following the Merger, Old Core stockholders owned 90.7 %, former XPDI public stockholders owned 6.7 % and XPDI’s sponsor owned 2.6 % of the issued and outstanding shares of New Core Common Stock, excluding the impact of unvested restricted stock units and options.

The proceeds from the Merger were used to fund mining equipment purchases and infrastructure build-out.

The Merger is accounted for as a reverse recapitalization with the Company being the accounting acquirer.

In connection with the Special Meeting and the Business Combination, holders of 12.3 million of the 34.5 million then-outstanding shares of XPDI Class A Common Stock exercised their right to redeem their shares for cash at a redemption price of approximately $ 10.00 per share, for an aggregate redemption amount of $ 123.5 million.

The Business Combination provided gross proceeds of approximately $ 221.6 million from the XPDI trust account, resulting in approximately $ 201.0 million in net cash proceeds to Core Scientific, after the payment of transaction expenses, which is presented within proceeds from issuance of common stock, net of transaction costs on the consolidated statements of cash flows.

Following the Business Combination, Legacy Core stockholders owned 90.7 %, former XPDI public stockholders owned 6.7 % and XPDI’s sponsor owned 2.6 % of the issued and outstanding shares of New Core Common Stock, excluding the impact of unvested restricted stock units and options.

The proceeds from the Business Combination were used to fund mining equipment purchases and infrastructure build-out.

The Business Combination is accounted for as a reverse recapitalization with the Company being the accounting acquirer.

A reverse recapitalization does not result in a new basis of accounting.

2 unchanged sentences

The net assets of XPDI are stated at historical costs, with no goodwill or other intangible assets recorded.

The Company identified $ 18.6 million of direct and incremental transaction costs, which consist of legal, accounting, and other professional services directly related to the Merger, of which $ 10.7 million were recorded in other noncurrent assets on the Company’s Consolidated Balance Sheets as of December 31, 2021, and the remaining $ 7.9 million were recognized during the year ended December 31, 2022.

These transaction costs have been allocated to all instruments assumed or issued in the Merger on a relative fair value basis as of the date of the Merger.

These transaction costs have been allocated to all instruments assumed or issued in the Business Combination on a relative fair value basis as of the date of the Business Combination.

Transaction costs of $ 16.6 million have been allocated to equity-classified instruments and recognized as an adjustment to additional paid-in capital within total stockholders’ (deficit) equity.

The cash outflows related to these costs have been netted against the proceeds from the issuance of New Core Common Stock upon the Merger with XPDI within financing activities on the Company’s consolidated statement of cash flows.

The cash outflows related to these costs have been netted against the proceeds from the issuance of New Core Common Stock upon the Business Combination with XPDI within financing activities on the Company’s consolidated statement of cash flows.

Transaction costs of $ 2.0 million have been allocated to liability-classified instruments that are measured at fair value through earnings and have been recognized as a charge within general and administrative expenses for the year ended December 31, 2022.

Immediately prior to the Effective Time, each share of Series A convertible preferred stock, par value $ 0.00001 , of Old Core automatically converted into one share of New Core Common Stock, and each share of Series B convertible preferred stock, par value $ 0.00001 , of Old Core automatically converted into one share of New Core Common Stock.

Immediately prior to the Effective Time, each share of Series A convertible preferred stock, par value $ 0.0001 , of Legacy Core automatically converted into one share of New Core Common Stock, and each share of Series B convertible preferred stock, par value $ 0.0001 , of Legacy Core automatically converted into one share of New Core Common Stock.

In addition, immediately prior to the Effective Time, each share of XPDI Class B Common Stock automatically converted into one share of New Core Common Stock.

1.7 million shares (“SPAC Vesting Shares”) are subject to vesting conditions, and will vest i) upon the date on which New Core Common Stock’s volume-weighted average price is greater than $ 12.50 per share for any 20 trading days within any 30 consecutive trading day period within five years of the Closing Date or ii) upon any change in control of the Company, or a sale of substantially all of the Company’s assets that results in a change of control that is consummated within five years of the Closing Date that results in a price per share paid to the holders of the Company’s Common Stock equal to or in excess of $ 12.50 per share.

As a result of the Merger, all of XPDI’s Class A Common Stock and Class B Common Stock automatically converted into shares of New Core Common Stock on a one -for-one basis.

As a result of the Business Combination, all of XPDI’s Class A Common Stock and Class B Common Stock automatically converted into shares of New Core Common Stock on a one -for-one basis.

XPDI’s 8.6 million public warrants issued in its initial public offering (the “Public Warrants”) and 6.3 million warrants issued in connection with private placement at the time of XPDI’s initial public offering (the “Private Placement Warrants”) became warrants for New Core Common Stock.

All share-based compensation awards were converted into comparable equity awards that are settled or exercisable for shares of New Core Common Stock.

As a result, each stock option and warrant was converted into an option or warrant to purchase shares New Core Common Stock based on an exchange ratio of 1.6001528688 .

As a result, each stock option and warrant was converted into an option or warrant to purchase shares of New Core Common Stock based on an exchange ratio of 1.60015286880 .

Each award of the Company’s restricted stock units (“RSUs”) was converted into RSUs of New Core based on an exchange ratio of 1.60015286880 .

5 unchanged sentences

Blockcap Acquisition

On July 30, 2021, the Company acquired 100 % of the equity interest in Blockcap, one of its largest hosting customers.

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

On July 30, 2021, the Company acquired 100 % of the equity interest in Blockcap, one of its largest hosting customers at the time.

Blockcap was a blockchain technology company with 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.

2 unchanged sentences

The acquisition of Blockcap significantly expanded the Company’s self-mining operations and increased the number of miners it owns.

Consideration consisted of the issuance of 113.9 million shares of the Company’s common stock, approximately 6.8 million shares of the Company’s restricted stock and approximately 7.3 million options to purchase shares of the Company’s common stock.

The acquisition has been accounted for as a business combination using the acquisition method of accounting, whereby the net assets acquired and the liabilities assumed were recorded at fair value.

The Company and Blockcap had preexisting relationships which were settled on the acquisition date.

Using the estimated purchase price for the transaction, the Company has allocated the purchase price to identifiable assets and liabilities based upon preliminary fair value estimates.

The excess of the purchase price over the fair value of the net identifiable assets acquired was allocated to goodwill.

In a business combination, the initial allocation of the purchase price is considered preliminary and therefore subject to change until the end of the measurement period (not to exceed one year from the acquisition date).

During the three months ended June 30, 2022, we determined that a measurement period adjustment to the accounting for the Blockcap acquisition was necessary based upon obtaining updated information about property, plant and equipment, net acquired, resulting in an increase in fair value of property, plant and equipment, net of $ 0.7 million, a decrease in goodwill of $ 1.0 million and additional depreciation expense of $ 0.3 million recognized in the three months ended June 30, 2022.

The measurement period for the Blockcap acquisition closed during the three months ended June 30, 2022.

The following table summarizes the fair values for each major class of assets acquired and liabilities assumed at the acquisition date.

The Company retained the services of certified valuation specialists to assist with assigning estimated values to certain acquired assets and assumed liabilities.

Amounts initially disclosed for the estimated values of certain acquired assets and liabilities assumed were adjusted through December 31, 2022, based on information arising after the initial preliminary valuation.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

Purchase Price Allocation

Consideration (in thousands) :

113.9 million common shares valued at $ 10.11 per share 1,2

Fair value of replaced Blockcap share-based payments attributable to pre-combination service 3

Settlement of Blockcap debt 4

Settlement of preexisting contracts 5

Total Consideration $ 1,138,838

Fair value of assets acquired, and liabilities assumed:

Cash and cash equivalents $ 704

Digital assets-Bitcoin 73,304

Digital assets-Ethereum 365

Digital assets-Bitcoin cash 8

Digital assets-Siacoin 554

Digital assets-Other 3,329

Other current assets 633

Intangible assets, net 2,925

Property, plant and equipment, net 98,965

Other noncurrent assets 1,293

Total assets acquired 182,080

Accounts payable 492

Accrued expenses and other 22,647

Deferred revenue 414

Other current liabilities 7,204

Deferred tax liability 9,003

Total liabilities assumed $ 39,760

Total identifiable net assets $ 142,320

Goodwill on acquisition $ 996,518

1 113.9 million common shares represent the equivalent Core Scientific common shares issued to Blockcap shareholders as consideration for the purchase.

2 The price per share of our common shares was estimated to be $ 10.11 .

As the Core Scientific common shares were not listed on a public marketplace, the calculation of the fair value of the common shares was subject to a greater degree of estimation.

Given the absence of a public market, an estimate of the fair value of the common shares was required at the time of the Blockcap Acquisition.

Objective and subjective factors were considered in determining the estimated fair value and because there was no active trading of the Core Scientific equity shares on an established securities market, an independent valuation specialist was engaged.

The valuation was determined by weighting the outcomes of scenarios estimating share value based on both public company valuations and private company valuations.

Both a market approach and common stock equivalency model were used to determine a range of outcomes, which were weighted based on probability to determine the result.

3 Reflects the estimated fair value of replaced Blockcap share-based payments allocated to purchase price based on the proportion of service related to the pre-combination period

4 Reflects the fair value of loans issued by the Company in July 2021 that were effectively used to settle debt that had previously been held by Blockcap.

Refer to Note 12 for further discussion of the debt issuance.

5 Blockcap had preexisting hosting and equipment contracts with the Company that were effectively settled by the Company’s acquisition of Blockcap.

As a result, the consideration transferred to Blockcap has been adjusted by the deferred revenue balances that were settled at the time of acquisition.

See Note 6 — Goodwill for a reconciliation of the carrying amount of goodwill at the beginning and end of the reporting period.

Intangible Assets

Other intangible assets acquired in the Blockcap acquisition consisted of $ 2.8 million developed technology intangibles and $ 0.1 million of customer relationships with a weighted-average useful life of 3 years.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

Transaction Costs

18 unchanged sentences

• The elimination of $ 19.2 million of expense recognized by Blockcap in July 2021, for the acceleration of certain equity awards of its CEO and others.

Because this acceleration was deemed to be in contemplation of the Merger, Core Scientific has recorded $ 23.3 million of compensation expense for the acceleration in its financial statements for the period ending December 31, 2021, which was determined based on the fair value of the awards at the time of the Merger.

Because this acceleration was deemed to be in contemplation of the Business Combination, Core Scientific has recorded $ 23.3 million of compensation expense for the acceleration in its financial statements for the period ending December 31, 2021, which was determined based on the fair value of the awards at the time of the Business Combination.

This adjustment is necessary to avoid duplication of the expense attributable to the combined company related to the acceleration of the same awards.

The selected unaudited pro forma condensed combined financial information is provided for illustrative purposes only and does not purport to represent what the actual consolidated results of operations would have been had the acquisition actually occurred on January 1, 2021, nor do they purport to project the future consolidated results of operations.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

For the periods subsequent to the acquisition, Blockcap contributed total revenues of $ 42.6 million and operating income of $ 15.5 million for the year ended December 31, 2021, that were included in the Company’s Consolidated Statements of Operations.

2 unchanged sentences

Management initiated a plan to exit certain activities, technologies and ancillary businesses, and to reduce portions of the Company’s workforce including those acquired through Blockcap’s acquisition of RADAR.

Management completed the restructuring plan in October 2022 and all expected costs of the restructuring plan have been recognized as of December 31, 2022.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

At June 30, 2022 Core had accrued and expensed estimated cash restructuring charges of $ 1.4 million relating to this restructuring plan.

Management completed the restructuring plan in October 2022 and all expected costs of the restructuring plan were recognized as of December 31, 2022.

Cash severance and related payments under the Company’s ongoing severance policy of $ 0.9 million were paid as compensation for the year ended December 31, 2022.

12 unchanged sentences

164,495 166,486 12 to 39 years

Computer, mining and network equipment 2

Mining and network equipment 2

441,404 448,346 1 to 5 years

6 unchanged sentences

293,974 268,233

401,522 436,635

Construction in progress

183,909 254,499

Property, plant and equipment, net

6 unchanged sentences

5 Includes accumulated amortization for assets under finance leases of $ 43.4 million and $ 41.7 million at December 31, 2023 and 2022, respectively.

Depreciation expense, including amortization of finance lease assets, for the years ended December 31, 2022 and 2021, was $ 224.1 million and $ 31.8 million, respectively.

Depreciation for the year ended December 31, 2022 and 2021, allocated to costs of revenue was $ 223.6 million and was $ 31.7 million, respectively.

Depreciation expense, including amortization of finance lease assets, for the years ended December 31, 2023, 2022 and 2021, was $ 95.7 million, $ 224.1 million, and $ 31.8 million, respectively.

Depreciation for the years ended December 31, 2023, 2022 and 2021, allocated to costs of revenue was $ 95.4 million, $ 223.6 million, and $ 31.7 million, respectively.

During the year ended December 31, 2022, the Company’s operating performance and liquidity continued to be severely impacted by the prolonged decrease in the price of bitcoin, the increase in electricity costs, the increase in the global Bitcoin network hash rate and an increase in additional operating costs related to these factors.

Additionally, primary and secondary market prices for ASIC miners of the type used by the Company in its business operations have decreased significantly from previous levels.

During the quarter ended September 30, 2022, the Company evaluated whether the estimated future undiscounted cash flows from the operation of its data center facilities would recover the carrying value of the property, plant and equipment located at the sites and used in site operations, including the Company’s deployed mining equipment.

Based on this evaluation, the Company determined that the carrying value of the property, plant and equipment at the Cedarvale, Texas facility site may no longer be fully recoverable by the cash flows of the site.

The Company measured the amount of impairment at the Cedarvale facility site as the difference between the carrying amount of the site asset group of $ 119.8 million and the estimated fair value of the site asset group of $ 60.5 million, resulting in an impairment of the facility site’s property, plant and equipment of $ 59.3 million for the quarter ended September 30, 2022.

During the quarter ended December 31, 2022, the Company evaluated whether the estimated future undiscounted cash flows from its operations would recover the carrying value of the property, plant and equipment asset groups located at the sites and used in

Additionally, primary and secondary market prices for

Core Scientific, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

site operations, including the Company’s deployed mining equipment.

application-specific integrated circuit (“ASIC”) miners of the type used by the Company in its business operations have decreased significantly from previous levels.

Based on this evaluation, the Company determined that the carrying value of its entire fleet of mining equipment and the other property, plant and equipment at the Cedarvale and Cottonwood, Texas facility sites may no longer be fully recoverable by the cash flows of those asset groups.

2 unchanged sentences

During the year ended December 31, 2022, the Company recognized impairments to property, plant and equipment of $ 590.7 million.

There were no impairments to long-lived assets for the years ended December 31, 2021 and 2020.

There were no impairments or indicators of impairment to long-lived assets for the years ended December 31, 2023 and 2021.

The Company’s analysis involved the use of a combination and corroboration of cost and market approaches.

10 unchanged sentences

The Company developed its estimates using the best information available at the time.

Changes in management’s estimates or any of its other assumptions used in its analysis could result in a different conclusion.

Continued elevated power costs, continued increases in the bitcoin network hash rate and a continuing depression or further decrease of bitcoin’s value in the market could result in further impairment of the Company’s property, plant and equipment.

The following table provides the reconciliation of the carrying amount of goodwill by segment at the beginning and end of the reporting period (in thousands):

Equipment Sales and Hosting Segment Mining Segment Total Goodwill

Balance as of December 31, 2021 $ 58,241 $ 997,519 $ 1,055,760

Subsequent measurement period adjustment — ( 1,000 ) ( 1,000 )

Impairment of goodwill ( 58,241 ) ( 996,519 ) ( 1,054,760 )

Balance as of December 31, 2022 $ — $ — $ —

As of December 31, 2022, after impairment, the Company had no remaining goodwill.

At December 31, 2021, the carrying amount of goodwill was $ 1.06 billion.

For the year ended December 31, 2022 there was a measurement period adjustment reducing goodwill by $ 1.0 million and accumulated impairment losses of $ 1.05 billion.

There were no goodwill adjustments or impairment losses for the year ended December 31, 2021.

The Company has the option to first assess qualitative factors to determine whether it is more likely than not that the fair values of the reporting units are less than their carrying amounts as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test.

If management determines that it is more likely than not that the fair value of a reporting unit is less than the reporting unit’s carrying

Core Scientific, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

amount, or management chooses not to perform a qualitative assessment, then the quantitative goodwill impairment test will be performed.

The quantitative test compares the fair value of the reporting unit with the reporting unit’s carrying amount.

The Company’s reporting units are the same as its reportable and operating segments.

The Company identified goodwill impairment triggering events during the year ended December 31, 2022.

These events included declines in the market price of bitcoin, the market price of the Company’s stock and the Company’s market capitalization.

As a result, the Company performed the quantitative test to compare the fair value to the carrying amount for each reporting unit at June 30, 2022.

Sustained and further deterioration in market prices and in the Company’s financial position resulted in additional quantitative testing at September 30, 2022.

These impairments are presented within impairment of goodwill and other intangibles on the Company’s Consolidated Statements of Operations.

The Company’s analysis during the year ended December 31, 2022, involved the use of a market approach.

Valuations using the market approach are derived from metrics of market transactions.

Significant judgments and assumptions used in the market approach includes the selection of comparable businesses based on the characteristics of each reporting unit, the consideration and application of relevant relative metrics and a reconciliation to the Company’s market capitalization to the fair value measured.

Sustained depressed bitcoin market value, increased power costs, decreased liquidity, and increased cost of financing, along with other factors have contributed to significant and sustained deterioration in the Company’s market capitalization.

The Company concluded that the fair value of its reporting units would no longer support the remaining acquired goodwill carrying values.

The Company developed its estimates using the best information available at the time.

Changes in management’s estimates or any of its other assumptions used in its analysis could result in a different conclusion.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

INTANGIBLE ASSETS, NET

Intangible assets, net as of December 31, 2022 and 2021 consist of the following (in thousands):

December 31, 2022

Gross Accumulated

Amortization Net

Amount Estimated Useful Lives

Internally-developed software

$ 1,452 $ ( 87 ) $ 1,365 3 - 8 years

344 ( 22 ) 322 20 years

66 ( 49 ) 17 8 years

Total intangible assets, net

$ 1,862 $ ( 158 ) $ 1,704

December 31, 2021

Gross Accumulated

Amortization Net

Amount Estimated Useful Lives

Internally-developed software

$ 10,093 $ ( 2,503 ) $ 7,590 3 - 8 years

423 ( 9 ) 414 20 years

Customer relationships 150 ( 21 ) 129 3 years

73 ( 11 ) 62 8 years

Total intangible assets, net

BALANCE SHEET COMPONENTS

Prepaid expenses and other current assets as of December 31, 2023 and 2022 consist of the following (in thousands):

Prepaid power

$ 7,325 $ 4,430

The Company amortizes intangible assets subject to amortization over their estimated useful lives.

Amortization of intangible assets is included within general and administrative expenses in the Company’s Consolidated Statements of Operations.

Amortization expense for intangible assets was $ 1.2 million and $ 1.6 million for the years ended December 31, 2022 and 2021, respectively.

During the year ended December 31, 2022, the Company recorded a $ 590.7 million impairment charge to internally developed software within impairment of goodwill and other intangibles in the Consolidated Statements of Operations.

The future five-year amortization of intangibles subject to amortization as of December 31, 2022 was as follows (in thousands):

Thereafter 108

Total $ 1,704

Sale of Intangible Assets

In March 2022, the Company reclassified $ 2.2 million of intangible assets that were previously acquired from Atrio Inc.

and RStor, Inc.

to be held for sale as a result of the expected sale of the software and related patents.

The intangible assets were sold in June 2022 for proceeds of $ 10.9 million, resulting in a gain on sale of intangible assets of $ 5.9 million.

The resulting gain is reflected within other non-operating expenses, net in the Consolidated Statements of Operations.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

Prepaid expenses and o ther current assets as of December 31, 2022 and 2021 consist of the following (in thousands):

Year Ended December 31,

Prepaid insurance

Prepaid expenses

$ 28,308 $ 27,055

Security deposits

Prepaid rent 46 453

Prepaid construction

Digital assets and receivables

Total prepaid expenses and other current assets

$ 24,022 $ 31,881

Prepaid expenses include prepayments of insurance premiums, rent expense, licenses, and subscriptions.

Security deposits represent payments by the Company primarily associated with utilities and leases.

Other noncurrent assets as of December 31, 2022 and 2021 consist of the following (in thousands):

Year Ended December 31,

Security deposits

$ 9,084 $ 2,079

Utility construction contributions

Prepaid rent 232 4,478

Capitalized transaction costs — 10,682

Other — 1,353

Total other noncurrent assets

$ 9,316 $ 21,045

Security deposits represents payments by the Company primarily associated with utilities and leases.

Utility construction contributions include amounts contributed to utilities for the construction of assets that allow the Company to obtain utility services, primarily electricity.

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other as of December 31, 2022 and 2021 consist of the following (in thousands):

Year Ended December 31,

Prepaid expenses includes prepayments related to subscriptions, rent, and other operating expenses.

Other includes prepayments of equipment and taxes, as well as security deposits associated with utilities and leases.

Accrued expenses and other current liabilities as of December 31, 2023 and 2022, consist of the following (in thousands):

Accrued interest 1

Accrued liabilities

Accrued expenses and other 20,283 11,590

Accrued inventory purchases

Accrued taxes

Vendor payable — 21,313

Customer deposits 1

Accrued interest — 5,521

Other current liabilities 6,775 1,642

Total accrued expenses and other $ 17,952 $ 67,862

1 Consists of amounts deposited by the Company’s customers relating to future tax estimates.

Should the deposits be unnecessary once the customer units are owned and deployed, the deposits are either applied against an existing equipment balance due, or applied against future hosting invoices.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

DERIVATIVE WARRANT LIABILITIES

As of December 31, 2022, the Company had 14.9 million warrants outstanding, including:

(a) 8.6 million Public Warrants and (b) 6.3 million Private Placement Warrants issued to XPDI Sponsor LLC (“Sponsor”) and certain institutional investors (“Anchor Investors”).

Each Public Warrant and Private Placement Warrant became exercisable 30 days following the Closing Date of the XPDI Merger and may be exercised for one share of common stock at an exercise price of $ 11.50 per share.

The Public Warrants and Private Placement Warrants expire January 19, 2027, which is five years after the Closing Date.

Redemption of Public Warrants when the price per share of common stock equals or exceeds $ 18.00

Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:

• in whole and not in part;

• at a price of $ 0.01 per warrant;

• upon a minimum of 30 days’ prior written notice of redemption to each warrant holder;

• if, and only if, the last reported sale price of common stock for any 20 trading days within a 30 -trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders equals or exceeds $ 18.00 per share (as adjusted).

The Company will not redeem the warrants as described above unless a registration statement under the Securities Act covering the issuance of the shares of common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of common stock is available throughout the 30 -day redemption period.

If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

Redemption of Public Warrants when the price per share of common stock equals or exceeds $ 10.00

Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:

• in whole and not in part;

• at $ 0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the “fair market value” (as defined below) of common stock;

• if, and only if, the last reported sales price of the Company’s common stock for any twenty ( 20 ) trading days within the thirty ( 30 ) trading-day period ending on the third trading day prior to the date on which notice of the redemption is given (the “Reference Value”) equals or exceeds $ 10.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant);

• if the Reference Value is less than $ 18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a warrant), the Private Placement Warrants must also concurrently be called for redemption on the same terms as the outstanding Public Warrants, as described above.

• The “fair market value” of common stock shall mean the volume-weighted average price of common stock during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of warrants.

In no event will the warrants be exercisable in connection with this redemption feature for more than 0.361 shares of Class A common stock per warrant (subject to adjustment).

Redemption of Private Placement Warrants

The terms of redemption of Private Placement Warrants are identical in all respects to those for the Public Warrants except that, so long as they are held by the Sponsor, Anchor Investors or their permitted transferees they will not be redeemable, except as described above in Redemption of Public Warrants when the price per share of common stock equals or exceeds $ 10.00 .

If the Private Placement Warrants are held by someone other than the Sponsor, the Anchor Investors or their respective permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

Effect of Chapter 11 Filing

As discussed in Note 3 - Chapter 11 Filing and Other Related Matters, liabilities that may be affected by the Plan must be classified as liabilities subject to compromise at the amounts expected to be allowed by the Bankruptcy Court.

The warrants have been classified as liabilities subject to compromise at their expected allowed amount of zero at December 31, 2022.

Their fair value of $ 335 thousand was derecognized as a gain in Reorganization items, net in the Company’s Consolidated Statements of Operations at December 31, 2022.

Total accrued expenses and other current liabilities

$ 179,636 $ 17,952

1 As a result of the Company's Chapter 11 Cases, the Company has not made any payments related to accrued interest for any debt obligations that are subject to compromise.

Accrued liabilities includes expenses related to settlements, audit fees, and security services.

Accrued expenses and other includes expenses related to advisor and legal fees, payroll and benefits, and other operating costs.

Other current liabilities primarily represents energy costs and other current liabilities.

Core Scientific, Inc.

3 unchanged sentences

The commencement of the Chapter 11 Cases constituted an event of default under certain of the Company's debt agreements.

Accordingly, all debt not reclassified as liabilities subject to compromise with original long-term stated maturities was classified as current on the consolidated balance sheets as of December 31, 2022.

However, any efforts to enforce payment obligations under the debt instruments are automatically stayed as a result of the Chapter 11 Cases and the creditors' rights in respect of the debt instruments are subject to the applicable provisions of the Bankruptcy Code.

Any efforts to enforce payment obligations under the debt instruments are automatically stayed as a result of the Chapter 11 Cases and the creditors' rights in respect of the debt instruments are subject to the applicable provisions of the Bankruptcy Code.

See Note 3 — Chapter 11 Filing and Other Related Matters for further information.

The stay applies to the ability of creditors to demand accelerated payments under default provisions, as a result, the Company continues to classify its notes and leases, not subject to compromise, according to the original payment schedules.

Notes payable as of December 31, 2023 and 2022 consist of the following (in thousands):

2022 December 31

Stated Interest Rate

Effective Interest Rates

Maturities December 31, 2023 December 31, 2022

Kentucky note 5.0 % 5.0 % 2023 $ 529 $ 529

Genesis loan — 552

NYDIG loan 11.0 % - 15.0 %

11.0 % - 17.0 %

Various — 38,573

Stockholder loan 10.0 % 20.0 % 2023 10,000 10,000

Trinity loan 11.0 % 11.0 % 2024 23,356 23,356

Bremer 18,331 15,066

Blockfi 53,913 60,000

Bremer loan 5.5 % 5.6 % 2026 18,331 18,331

Blockfi loan 9.7 % - 13.1 %

10.1 % - 13.1 %

2023 53,913 53,913

Anchor Labs loan 12.5 % 12.5 % 2024 25,159 25,159

Mass Mutual Barings loans 9.8 % - 13.0 %

Riley Bridge loans 41,777 —

9.8 % - 13.0 %

2025 63,844 63,844

Riley Bridge Notes 7.0 % 7.0 % 2023 41,777 41,777

Liberty loan 10.6 % 10.6 % 2024 6,968 6,968

4 unchanged sentences

Original DIP Credit Agreement 3

10.0 % 10.0 % 2023 — 35,547

Replacement DIP Credit Agreement 4

10.0 % 10.0 % 2024

5.0 % 15.0 % 2026

ACM financing — % 15.0 % 2025

First Insurance loan — % 7.6 % 2024

5.0 % 15.0 % 2026 2,927 —

5.0 % 15.0 % 2027 13,000 —

5.0 % 15.0 % 2026 4,678 —

Other 2,453 2,960

1 unchanged sentence

Notes payable in Liabilities subject to compromise 5

Unamortized discount and debt issuance costs 5

41,777 844,695

Fair value adjustments to convertible notes 6

( 808,148 ) 34,910

Unamortized discount and debt issuance costs - post-petition 6

Total notes payable, net 808,440 36,242

current maturities

124,358 36,242

Notes payable, net of current portion

$ 684,082 $ —

1 Secured Convertible Notes includes principal balance at issuance and PIK interest.

1 unchanged sentence

3 Original DIP Credit Agreement, see Note 3 - Chapter 11 Filing and Other Related Matters for further information.

4 In connection with the Company's Chapter 11 Cases, $ 844.7 million of outstanding notes payable have been reclassified to Liabilities subject to compromise in the

Company's consolidated balance sheets as of December 31, 2022 at their expected allowed amount.

Up to the Petition Date, the Company continued to accrue interest expense in relation to these reclassified debt instruments.

At December 31, 2022 $ 12.6 million of accrued interest was classified as liabilities subject to compromise.

4 Replacement DIP Credit Agreement, see Note 3 - Chapter 11 Filing and Other Related Matters for further information.

5 In connection with the Company's Chapter 11 Cases, $ 41.8 million and $ 844.7 million of outstanding notes payable have been reclassified to Liabilities subject to compromise in the Company's Consolidated Balance Sheets as of December 31, 2023 and 2022, respectively, at their expected allowed amount.

As of December 31, 2023 and 2022, $ 0.6 million and $ 12.6 million, respectively, of accrued interest was classified as Liabilities subject to compromise.

6 As a result of the Company's Chapter 11 Cases, the Company expensed $ 3.5 million of unamortized discount and debt issuance costs, net recorded in Reorganization items, net in the year ended December 31, 2022.

6 As a result of the Company's Chapter 11 Cases, the Company recognized a gain of $ 202.9 million from the derecognition of accumulated fair value adjustments recorded in Reorganization items, net in the year ended December 31, 2022.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

Kentucky Note —In December 2018, the Company entered into a five-year secured promissory note agreement for $ 2.4 million in connection with the acquisition of property in Kentucky for datacenter development (“Kentucky note”).

2 unchanged sentences

The loan is secured by the underlying property purchased.

Genesis Loan —In July 2020, the Company entered into a credit facility with Genesis Global Capital, LLC that provides capacity of up to $ 13.0 million to finance the Company’s acquisition of blockchain computing equipment (“Genesis loan”).

The Company borrowed $ 5.3 million in three installments and the borrowing capacity of the facility was reduced via an amendment in September 2020 to equal the actual amounts borrowed.

The loans under the credit facility are secured by the blockchain computing equipment and the Company is required to comply with an approved mining strategy and other restrictions on use of the collateral.

Loans under the credit facility have terms of 20 months, bear interest at a rate per annum of 16 % plus a fixed risk premium, and require monthly payments.

Interest expense on the loans has been recognized based on an effective interest rate of 28 %, which

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

includes the amortization of a debt discount.

The loan is secured by blockchain computing equipment financed by the loans.

The loan was paid off in April 2022.

NYDIG Loan —In October 2020, the Company entered into a master equipment finance agreement with NYDIG and received a loan of $ 0.8 million to finance the Company’s acquisition of blockchain computing equipment.

9 unchanged sentences

Interest expense on the loans issued in November 2021 has been recognized based on an effective interest rate of 11 %.

As discussed in Note 3 — Chapter 11 Filing and Other Related Matters, under the NYDIG Order, the final shipment of miners that served as collateral under the NYDIG loan occurred during the quarter ended March 31, 2023, after which the NYDIG Loan was extinguished in full and the Company recorded a $ 20.8 million Gain on extinguishment of debt in the Company’s Consolidated Statements of Operations.

Stockholder Loan —In January 2021, the Company borrowed $ 10.0 million from a stockholder for the purchase of blockchain computing equipment.

20 unchanged sentences

The loans require the Company to maintain the following financial covenants:

(1) a minimum debt service coverage ratio (defined in the agreement as EBITDA divided by scheduled principal and interest payments) of not less than 1.2 :1, measured annually beginning December 31, 2022;

and (2) a fixed charge coverage ratio (defined in the agreement as EBITDA minus net distributions divided by scheduled principal and interest payments) of 1 :1, measured annually beginning December 31, 2022.

The loans are secured by a first priority security interest in certain of the assets financed by the loans.

(1) a minimum debt service

Core Scientific, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

coverage ratio (defined in the agreement as EBITDA divided by scheduled principal and interest payments) of not less than 1.2 :1, measured annually beginning December 31, 2022;

The loans are secured by a first priority security interest in certain of the assets financed by the loans.

Additionally, an interest buydown agreement was made between Grand Forks Growth Fund and the Bank of North Dakota acting on behalf of the PACE Program for the purpose of a buydown on the interest for certain of the Company’s loans financed through Bremer Bank.

34 unchanged sentences

In August 2022, the Company issued 0.3 million shares of Common Stock to Mass Mutual Barings as an amendment fee.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

Riley Bridge Notes —In April 2022, the Company entered into a $ 60.0 million bridge promissory note with B.

3 unchanged sentences

In August 2022, the Company amended the Bridge Notes to, among other things, extend the maturity date to June 2023 (the “Amended Bridge Notes”).

Under the terms of the modified agreement, $ 37.5 million of principal payments previously due in the second half of 2022 are now due in the first half of 2023.

Under the terms of the modified agreement, $ 37.5 million of principal payments previously due in the

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

second half of 2022 are now due in the first half of 2023.

The Amended Bridge Notes require the proceeds of (i) any equity issuances (other than issuances consummated for purposes of making tax payments in connection with the vesting of restricted stock and restricted stock units and equity line of credit under the Equity Line of Credit discussed in Note 12 — Stockholders' (Deficit) Equity (“ELOC”) sales), (ii) any secured debt incurred on or after April 7, 2022 (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 us to repay the outstanding principal amount of the Amended Bridge Notes.

7 unchanged sentences

The loans are secured by a first priority security interest in the equipment purchased.

Convertible Notes —In April 2021, the Company entered into a secured convertible note purchase agreement and issued $ 215.0 million of secured convertible notes to new and existing lenders (the “Secured Convertible Notes”).

In addition, in August 2021 the Company entered into a convertible note purchase agreement and issued $ 299.8 million of convertible notes in August through November 2021 under substantially the same terms and conditions as the original April 2021 notes except that the August through November 2021 notes have a minimum payoff based on the face value plus accrued interest rather than two times the outstanding face amount plus accrued interest.

In addition, the August through November 2021 notes were unsecured until an initial public offering or SPAC merger and then became secured by a lien on the same collateral securing the Secured Convertible Notes in January 2022 upon the closing of the Merger Agreement with XPDI (together with the Secured Convertible Notes, the “Convertible Notes”).

In addition, the Company also issued $31.4 million from issuance through December 31, 2022 as payment-in-kind interest on convertible notes outstanding at the end of the period.

The Convertible Notes have a maturity date of April 2025 and bear interest at a rate of 10 % per annum, of which 4 % is payable in cash and 6 % is payable in kind.

Upon the closing of the Merger Agreement with XPDI in January 2022, the Convertible Notes became convertible into common shares at the option of the holder at a conversion price equal to $ 8.00 per share.

The proceeds from the Convertible Notes were used, in part, to repay $ 30.0 million of senior secured loans to Silverpeak Credit Partners LP.

During the year ended December 31, 2022, $ 1.6 million of Convertible Notes were exercised resulting in 0.2 million shares issued to the holders of the Convertible Notes that were exercised.

As discussed in Note 12 — Fair Value Measurements, the Company had elected to measure its Convertible Notes at fair value prior to the Petition Date and accordingly recognized $ 13.1 million of debt issuance costs as incurred at the time of issuance within interest expense, net in the Company’s Consolidated Statements of Operations.

HMC Note - In August 2023, in addition to a cash payment of $ 2 million, the Company entered into a $ 15.5 million secured promissory note agreement with Huband-Mantor Construction, Inc (the “HMC note”) in connection with its settlement and release from all claims.

The note bears interest at a contractual rate per annum of 5.0 % and has a term of 36 months from issuance, The Company is required to make monthly payments of principal and interest.

Interest expense on the note has been recognized based on an effective interest rate of 15.0 %.

The loan is secured by a security interest in the underlying property leased.

ACM Financing - In September 2023, the Company entered into a $ 7.5 million equipment finance agreement with ACM ELF ST LLC (the “ACM Loan”) in settlement and satisfaction of a previous equipment finance agreement.

The finance agreement has a term of 26 months from issuance.

Interest expense on the finance agreement has been recognized based on an effective rate of 15.0 %.

The finance agreement is secured by a security interest in the underlying equipment.

First Insurance Loan - In August 2023, the Company entered into an unsecured $ 5.0 million Insurance Premium Financing Agreement with First Insurance Funding, a Division of Lake Forest Bank & Trust Company (the “First Insurance loan”) to finance the renewal premium of property insurance policies.

Under the agreement, a down payment was paid in the amount of $ 2.1 million, and the Company will pay the balance in eight monthly installments commencing on September 24, 2023.

The contractual annual percentage interest rate is 0 %.

Interest expense on the note has been recognized based on an effective interest rate of 7.6 %

Replacement DIP Credit Agreement - On July 4, 2023, the Debtors, the Administrative Agent and the Replacement DIP Lenders entered into a First Amendment to the Replacement DIP Credit Agreement (the “First Amendment”).

The First Amendment, among other things, provides (i) that the Debtors may make certain transfers or payments in connection with settlements of certain third-party claims as described in the First Amendment and (ii) for a reduction in the excess cash threshold amount to the sum of $ 40.0 million and an amount (which shall not be less than zero ) equal to $ 5.0 million less the amount of any payments on account of prepetition claims, liens or cure costs made by any Obligor after June 30, 2023.

This excess cash threshold amount reduction resulted in the Debtors making additional mandatory prepayments of $ 28.9 million under the Replacement DIP Credit Agreement during the year ended December 31, 2023.

Trilogy Note - As discussed in Note 3 — Chapter 11 Filing and Other Related Matters, the Company entered into a settlement agreement with Trilogy LLC which resulted in the issuance of an unsecured Promissory note (the “Trilogy Note”) with a principal amount of $ 2.9 million dated October 6, 2023.

The note bears interest at a contractual rate per annum of 5.0 % and has a term of 30 months from issuance.

The Company is required to make monthly payments of principal and interest with interest being recognized using an effective interest rate of 15.0 %.

Didado Note - As discussed in Note 3 — Chapter 11 Filing and Other Related Matters, the Company entered into a settlement agreement with J.W.

Didado Electric, LLC, (“Didado”) which resulted in the issuance of an unsecured Promissory note (the “Didado Note”) with a principal amount of $ 13.0 million dated October 6, 2023.

The note bears interest at a contractual rate per annum of 5.0 % and has a term of 36 months from issuance.

The Company is required to make monthly payments of principal and interest with interest being recognized using an effective interest rate of 15.0 %.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

Harper Note - As discussed in Note 3 — Chapter 11 Filing and Other Related Matters, the Company entered into a settlement agreement with Harper Construction Company, Inc, (“Harper”) which resulted in the issuance of an unsecured Promissory note (the “Harper Note”) with a principal amount of $ 4.7 million dated November 9, 2023.

The note bears interest at a contractual rate per annum of 5.0 % and has a term of 30 months from issuance.

The Company is required to make monthly payments of principal and interest with interest being recognized using an effective interest rate of 15.0 %.

Convertible Notes - As discussed in Note 8 — Fair Value Measurements, the Company had elected to measure its Convertible Notes at fair value prior to the Petition Date and accordingly recognized $ 13.1 million of debt issuance costs as incurred at the time of issuance within interest expense, net in the Company’s Consolidated Statements of Operations for the year ended December 31, 2022.

The Company presented changes in fair value of the Convertible Notes during the periods prior to the Petition Date as follows:

(1) the 10 % contractual rate of interest on the convertible notes (consisting of 4 % cash interest and 6 % PIK interest) was presented as interest expense, net on the Consolidated Statements of Operations;

(2) changes in fair value attributable to the Company’s own credit risk were presented within Accumulated other comprehensive loss on the Company’s Consolidated Balance Sheets and as a component of Other comprehensive income (loss) on the Consolidated Statements of Comprehensive (Loss) Income;

and (3) other fair value changes were presented within Non-operating expenses, net on the Consolidated Statements of Operations.

The fair value option is not available to liabilities subject to compromise as they are recorded at their expected allowed amount.

At the Petition Date the accumulated fair value adjustment on the Convertible Notes was $ 130.3 million and the Accumulated other comprehensive loss related to changes in fair value attributable to the Company’s own credit risk was $ 72.6 million, these amounts were derecognized for a gain of $ 202.9 million reported in Reorganization items, net when the Convertible Notes were reclassified as Liabilities subject to compromise.

At the Petition Date, the accumulated fair value adjustment on the Convertible Notes was $ 130.3 million and the Accumulated other comprehensive loss related to changes in fair value attributable to the Company’s own credit risk was $ 72.6 million.

These amounts were derecognized for a gain of $ 202.9 million reported in Reorganization items, net when the Convertible Notes were reclassified as Liabilities subject to compromise during the year ended December 31, 2022.

The fair value of the Company’s Convertible Notes as of December 31, 2021, included the effect of a negotiation discount, which is a calibration adjustment that reflects the illiquidity of the instruments and the Company's negotiating position.

Since the transaction was an orderly transaction, the Company deemed that the fair value equaled the transaction price at initial recognition.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

significant increase in the fair value of the convertible notes (excluding interest expense and instrument-specific credit risk) for the year up until the Petition Date.

The following summarizes the fair value adjustments and debt issuance costs recognized on the Convertible Notes (in thousands):

However, the closing of the merger of XPDI (which represents the occurrence of a qualified financing event as defined by the terms of the notes) in January 2022 resulted in the elimination of the negotiation discount along with other changes in fair value resulted in a significant increase in the fair value of the convertible notes (excluding interest expense and instrument-specific credit risk) for the year up until the Petition Date.

The Convertible Notes did not have any fair value adjustments or recognized debt issuance costs in fiscal 2023.

The following summarizes the fair value adjustments and debt issuance costs recognized on the Convertible Notes for the year ended December 31, 2022 (in thousands):

Year Ended December 31,

13 unchanged sentences

All of the Convertible Notes, totaling $ 560.0 million as of December 31, 2023, are scheduled to mature on April 19, 2025, which includes $ 237.6 million for the face value of the Secured Convertible Notes which have payoff at maturity of two times the face value of the note plus accrued interest.

The total amount that would be owed on the Secured Convertible Notes outstanding as of December 31, 2022, if held to maturity was $ 475.2 million.

The total amount that would be owed on the Secured Convertible Notes outstanding as of December 31, 2023, if held to maturity was $ 475.2

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

The total amount that would be owed on the Convertible Notes if prepaid as of December 31, 2023, was $ 797.6 million.

9 unchanged sentences

The Company uses observable market data when determining fair value whenever possible and relies on unobservable inputs only when observable market data is not available.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

Recurring fair value measurements

Prior to the Petition Date the Public Warrants and the Private Placement Warrants were recognized as derivative liabilities in accordance with ASC 815, Derivatives and Hedging .

Prior to the Petition Date, the Public Warrants and Private Placement Warrants were recognized as derivative liabilities in accordance with ASC 815, Derivatives and Hedging .

Accordingly, the Company recognized the warrant instruments as liabilities at fair value and adjusted the instruments to fair value at each reporting period.

9 unchanged sentences

Upon the closing of the Merger Agreement with XPDI in January 2022, the conversion price for the Convertible Notes became fixed at 80 % of the financing price ($ 8.00 per share of common stock) and the holders now have the right to convert at any time until maturity.

Due to the occurrence of the SPAC merger and the subsequent significant decline in the Company’s stock price below the conversion price, the fair value of the Company’s convertible notes beginning with the three months ended June 30, 2022 was determined using a discounted cash flow model that considered the principal and interest payments, including the minimum payoff at maturity of two times the face value of the note plus accrued interest for the Secured Convertible Notes and the value of the call option that includes certain unobservable inputs that may be significant to the fair value measurement such as expected term and volatility of the call option.

At December 31, 2022 the Company did not have any remaining recurring fair value measurements.

Core Scientific, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

The following presents the levels of the fair value hierarchy for the Company's derivative warrant liabilities and the Convertible Notes by issuance date measured at fair value on a recurring basis as of December 31, 2021 (in thousands):

December 31, 2021

Fair value hierarchy

Principal Level 1 Level 2 Level 3 Fair value

Convertible notes:

April 19, 2021 1

$ 91,430 $ — $ — $ 101,078 $ 101,078

April 21, 2021 1

5,137 — — 5,674 5,674

April 23, 2021 1

46,229 — — 51,062 51,062

April 26, 2021 1

78,075 — — 86,165 86,165

August 20, 2021 2

50,597 — — 50,941 50,941

September 10, 2021 2

16,110 — — 16,472 16,472

September 23, 2021 2

76,051 — — 77,559 77,559

September 24, 2021 2

60,016 — — 61,179 61,179

September 27, 2021 2

1,974 — — 2,012 2,012

October 1, 2021 2

86,655 — — 87,150 87,150

November 10, 2021 2

9,823 — — 9,819 9,819

Accrued PIK interest 1,2,3

— — — 7,896 7,896

Total convertible notes $ 522,097 $ — $ — $ 557,007 $ 557,007

1 Secured Convertible Notes (includes principal balance at issuance and PIK interest) which considers the minimum payoff at maturity of two times the face value of the note plus accrued interest.

2 Other Convertible Notes (other than the Secured Convertible notes) which considers the minimum payoff at maturity of one times the face value of the note plus accrued interest.

3 Represents PIK interest accrued as of December 31, 2021 which was recorded as additional principal for each respective convertible note on January 1, 2022.

that includes certain unobservable inputs that may be significant to the fair value measurement such as expected term and volatility of the call option.

As of December 31, 2022, there were no recurring fair value measurements.

Refer to Energy Forward Purchase Contract in Note 2 — Summary of Significant Accounting Policies for fair value measurements as of December 31, 2023.

Level 3 Recurring Fair Value Measurements

The following presents a rollforward of the activity for the Convertible Notes measured at fair value on a recurring basis using Level 3 inputs as of December 31, 2022 (in thousands):

The following presents a rollforward of the activity for the Convertible Notes measured at fair value on a recurring basis using Level 3 inputs for the year ended December 31, 2022 (in thousands):

Convertible Notes

9 unchanged sentences

During the year ended December 31, 2022, the Convertible Notes were transferred from Level 3 out of recurring fair value measurements.

During the year ended December 31, 2021, the Convertible Notes were transferred from Level 2 to Level 3.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

Nonrecurring fair value measurements

1 unchanged sentence

These assets are adjusted to fair value only when an impairment is recognized, or the underlying asset is held for sale.

Refer to Note 2 — Summary of Significant Accounting Policies, Note 5 — Property, Plant and Equipment, Net, Note 6 — Goodwill and Note 7 — Intangible Assets, Net for more information regarding fair value considerations when measuring impairment.

Refer to Note 2 — Summary of Significant Accounting Policies and Note 5 — Property, Plant and Equipment, Net, for more information regarding fair value considerations when measuring impairment.

The estimated fair value of the Company’s digital assets as of December 31, 2023 and 2022, was $ 2.3 million and $ 0.7 million, respectively.

We estimate the fair values of our digital assets based on quoted prices in active markets (Level 1).

No non-financial assets were classified as Level 3 as of December 31, 2023 or December 31, 2022.

Fair value of financial instruments

The Company’s financial instruments include cash and cash equivalents, restricted cash, accounts receivable, net, accounts payable, notes payable and certain accrued expenses and other liabilities.

The carrying amount of these financial instruments, other than notes payable discussed below, approximates fair value due to the short-term nature of these instruments.

The fair value of the Company’s notes payable (excluding the Convertible Notes carried at fair value described above and the expected allowed amount transferred to Liabilities subject to compromise), which are carried at amortized cost, was determined based on a discounted cash flow approach using market interest rates of instruments with similar terms and maturities and an estimate for our standalone credit risk.

We classified the other notes payable as Level 3 financial instruments due to the considerable judgment required to develop assumptions of the Company’s standalone credit risk and the significance of those assumptions to the fair value measurement.

At December 31, 2022, the estimated fair value of the Company’s other notes payable, including both the current and noncurrent portion, was $ 36.2 million and equaled the carrying value of the Company’s other notes payable, including both the current and noncurrent portion.

At December 31, 2021, the estimated fair value and carrying value of the Company’s notes payable, including both the current and noncurrent portion, was $ 184.7 million and $ 171.2 million, respectively.

The Company has entered into non-cancellable operating and finance leases for office, data facilities, computer and networking equipment, electrical infrastructure and office equipment, with original lease periods expiring through 2033.

The Company’s financial instruments include cash and cash equivalents, restricted cash, accounts receivable, net, digital assets, accounts payable, notes payable and certain accrued expenses and other liabilities.

The carrying amount of these financial instruments materially approximate their fair values.

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

In addition, certain leases contain bargain renewal options extending through 2051.

3 unchanged sentences

Differences between rent expense and rent paid are recognized as adjustments to operating lease right-of-use assets on the Company’s Consolidated Balance Sheets.

For certain leases, the Company receives lease incentives, such as tenant improvement allowances, and records those as adjustments to operating lease right-of-use assets and

For certain leases, the Company receives lease incentives, such as tenant improvement allowances, and records those as adjustments to operating lease right-of-use assets and operating lease liabilities

Core Scientific, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

operating lease liabilities on the Company’s Consolidated Balance Sheets and amortizes the lease incentives on a straight-line basis over the lease term as an adjustment to rent expense.

on the Company’s Consolidated Balance Sheets and amortizes the lease incentives on a straight-line basis over the lease term as an adjustment to rent expense.

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

Financial statement line item December 31, 2022

Financial statement line item December 31, 2023 December 31, 2022

Operating lease right-of-use assets Operating lease right-of-use assets $ 7,844 $ 20,430

9 unchanged sentences

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

Financial statement line item Year Ended December 31, 2022

Year Ended December 31,

Financial statement line item 2023 2022

Operating lease expense General and administrative expenses $ 1,024 $ 1,937

9 unchanged sentences

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

December 31, 2022

December 31, 2023 December 31, 2022

Weighted Average Remaining Lease Term (Years)

15 unchanged sentences

Finance lease right-of-use assets obtained in exchange for lease obligations

Increase in finance lease right-of-use assets as a result of lease modification $ 693

1 Includes operating lease right-of-use assets of $ 6.7 million that were recorded upon adoption of Topic 842 on January 1, 2022.

Refer to Note 2 for further information.

The Company’s minimum payments under noncancelable operating and finance leases having initial terms and bargain renewal periods in excess of one year are as follows at December 31, 2022, and thereafter (in thousands):

Operating leases Finance leases

(Decrease) increase in finance lease right-of-use assets as a result of lease modification

$ ( 11,644 ) $ 693

Decrease in finance lease liability as a result of lease modification

$ ( 11,644 ) $ —

Decrease in right-of-use assets due to lease termination

$ ( 13,144 ) $ —

Decrease in lease liability due to lease termination

$ ( 13,517 ) $ —

1 Includes operating lease right-of-use assets of $ 6.7 million that were recorded upon adoption of Topic 842 on January 1, 2022.

Refer to Note 2 — Summary of Significant Accounting Policies for additional information.

Operating Leases

Finance Leases

$ 262 $ 62,859

2025 262 1,862

Thereafter 2,054 —

12 unchanged sentences

In December 2021, the Company entered into finance lease agreements with Liberty Commercial Finance LLC totaling $ 40.9 million for the purchase of bitcoin mining equipment, with a weighted average term of 3.2 years.

The leases bear interest at a weighted average rate per annum of 12.6 % and the Company is required to make monthly payments of principal and interest.

Interest expense on the lease has been recognized based on a weighted average effective interest rate of 12.6 %.

In December 2021, the Company entered into finance lease agreements with MassMutual Asset Finance LLC totaling $ 50.0 million for the purchase of bitcoin mining equipment, with a weighted average term of 3.2 years.

The leases bear interest at a

2 unchanged sentences

Notes to Consolidated Financial Statements

rate per annum of 10 % and the Company is required to make monthly payments of principal and interest.

weighted average rate per annum of 12.6 % and the Company is required to make monthly payments of principal and interest.

Interest expense on the lease has been recognized based on a weighted average effective interest rate of 12.6 %.

The leases bear interest at a rate per annum of 10 % and the Company is required to make monthly payments of principal and interest.

Interest expense on the leases has been recognized based on an effective interest rate of 10 %.

7 unchanged sentences

As discussed in Note 7 — Notes Payable, in October 2022, the Company determined not to make certain payments with respect to several of its debt facilities, equipment financing facilities and leases and other financings, including its two bridge promissory notes.

As a result, the creditors under these debt facilities may exercise remedies following any applicable grace periods and pursuant to any confirmed plan of reorganization, including electing to accelerate the principal amount of such debt, suing the Company for nonpayment, increasing interest rates to default rates, or taking action with respect to collateral, where applicable.

The Company has classified all of its finance lease liabilities as current liabilities as of December 31, 2022.

As a result, the creditors under these debt facilities may exercise remedies following any applicable grace periods (which have passed) and pursuant to any confirmed plan of reorganization, including electing to accelerate the principal amount of such debt, suing the Company for nonpayment, increasing interest rates to default rates, or taking action with respect to collateral, where applicable.

Remedies available under these debt facilities are stayed while the Company is under Chapter 11 protections.

COMMITMENTS AND CONTINGENCIES

In October 2023, the Company entered into a purchase agreement to acquire S21 miners with a combined exahash of 2.52 or approximately 12,900 miners from Bitmain for approximately $ 50.4 million, of which $ 2.4 million was paid as of December 31, 2023, and included in other current assets on the Company's consolidated balance sheets.

Delivery of the miners is expected between the first and second quarters of 2024.

In September 2023, the Company entered into a purchase agreement to acquire S19 XP miners with a combined exahash of 4.08 or 28,400 miners from Bitmain for approximately $ 77.1 million, of which $ 4.1 million was paid as of December 31, 2023.

As of December 31, 2023, the Company had received approximately 22,700 miners.

The remaining miners were received in January 2024.

As of the reporting date of this Annual Report on Form 10-K, we have completed payment on all new bitcoin miners ordered for 2024.

Legal Proceedings —The Company is subject to legal proceedings arising in the ordinary course of business.

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Unless otherwise indicated, the Company is unable to estimate reasonably possible losses in excess of any amounts accrued.

In July 2022, one of the Company’s largest customers, Celsius Mining LLC (“Celsius”), along with its parent company and certain affiliates, filed for voluntary relief under chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court for the Southern District of New York.

On September 28, 2022, Celsius filed a motion in the chapter 11 case alleging that the Company is violating the automatic stay with respect to the Master Services Agreement between Celsius and the Company (the “Celsius Agreement”).

Celsius is also using its Chapter 11 proceeding to withhold payment of certain charges billed to Celsius pursuant to the Celsius Agreement.

The Company strongly disagrees with the allegations made in the Celsius motion and the interpretation of the Celsius Agreement espoused therein and is vigorously defending its interests, including seeking resolution from the bankruptcy court and payment of any outstanding amounts owed under the Celsius Agreement (subject to applicable bankruptcy law in the Celsius chapter 11 case).

The parties have agreed to stay the proceedings, including the evidentiary hearing scheduled for November 18, 2022.

There can be no guarantee that the bankruptcy court will rule in the Company’s favor in a timely manner or that Celsius will honor the terms of the Celsius Agreement.

An adverse ruling by the bankruptcy court that provides Celsius the benefits of the Company’s hosting services without Celsius fully paying the costs of such services would have a material effect on the Company’s business, financial condition, results of operations and cash flows.

As of December 31, 2022, the Company had accrued $ 8.7 million as an allowance against amounts due from Celsius.

Purported Shareholder Class Action (“Pang”)

On November 14, 2022, Plaintiff Mei Pang filed a purported class-action complaint against Core Scientific, Inc., its former chief executive officer, Michael Levitt, and others in the United States District Court, Western District (Austin) of Texas asserting that the Company violated the Securities and Exchange Act by allegedly failing to disclose to investors that – among other things – the Company was vulnerable to litigation given its decision to pass power costs to its customers, that certain clients had breached their contracts, and that this impacted the Company’s profitability and ability to continue as a going concern.

The complaint seeks monetary damages.

Core filed a notice of suggestion of bankruptcy stating that its petition for bankruptcy—filed on December 21, 2022—operates as a stay to the continuation of this matter.

Plaintiff subsequently withdrew its claims against Core.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

On April 14, 2023, the Court appointed lead plaintiff for the purported class in Pang, individually and on behalf of a class of claimants, filed proofs of claim against the Company in its Chapter 11 Cases in the United States Bankruptcy Court, Southern District (Houston) of Texas based upon the allegations set forth in Pang and Core filed an objection to the proofs of claim.

On December 7, 2023, the United States Bankruptcy Court for the Southern District of Texas in Houston, sustained the Company’s objection to the filed class proof of claim without prejudice to re-file a proof of claim on an individual basis by December 20, 2023;

and denied plaintiff’s Motion for Class Treatment under Fed.

No individual proof of claim was filed by any of the class representatives of the purported class action by December 20, 2023, and a separately filed objection to confirmation of Debtors’ Fourth Amended Chapter 11 Plan and Disclosure Statement was overruled by the Bankruptcy Court on January 16, 2024.

On January 29, 2024, plaintiff filed a notice of appeal of the order confirming the Company’s Plan of Reorganization.

Following Core’s motion to dismiss in the District Court case, the Court dismissed without prejudice the 10(b) claim in its entirety for failure to plead scienter and loss causation and all but a single statement under Section 11 and Section 14 of the Exchange Act.

The Court also held that none of the Defendants other than Michael Levitt were control persons under Section 15 (even though Mr.

Levitt was not even named as a Defendant under Section 15).

Core filed a motion for reconsideration of the Court’s failure to dismiss the remaining Section 11 claim and filed an answer to the Plaintiff’s remaining claim.

Employment Claim

On September 30, 2022, Harlin Dean, a former executive of Blockcap, Inc.

(n/k/a Core Scientific Acquired Mining, LLC) sent a demand letter to the Company, seeking approximately $ 9.8 million.

Along with the demand letter, Mr.

Dean enclosed a complaint that had been filed in the 419 th Judicial District Court, Travis County, Texas, which asserted the following causes of action:

(1) breach of employment agreement;

(2) quantum meruit;

(3) promissory estoppel;

(4) conversion;

(5) declaratory relief;

(6) equitable relief/specific performance;

(7) imposition of constructive trust;

(8) accounting;

and (9) attorneys’ fees and costs.

According to Mr.

Dean, the Company failed to honor the terms of his employment agreement upon his resignation.

Following the Company’s filing of the Chapter 11 Cases, Dean filed proofs of claim in the Chapter 11 Cases alleging the Company breached Mr.

Dean’s employment agreement and various equity award agreements.

Dean seeks a total recovery of approximately $ 8 million.

The Debtors filed an objection to Mr.

Dean’s proofs of claim on September 19, 2023.

Dean filed a reply in support of his claim and moved for summary judgment on October 19.

Adjudication of the validity and value of Dean’s proof of claim is pending.

As a general unsecured creditor under the Plan of Reorganization, any amount determined to be owed to plaintiff will be paid in common shares of the Company as provided in the Plan of Reorganization.

Contract Claims

GEM Mining 1, LLC, GEM Mining 2, LLC, GEM Mining 2B, LLC, and GEM Mining 4, LLC (together “GEM”) have filed proofs of claim in the Chapter 11 Cases alleging the Company breached its hosting agreements with GEM and are seeking to recover approximately $ 4.1 million.

The Debtors filed an initial objection to GEM’s proofs of claim on May 4, 2023, and filed a supplemental objection on May 6, 2023.

GEM filed a response in opposition to Debtors’ objections on September 6, 2023.

Additionally, GEM 1 and GEM 4 filed proofs of claim in the Chapter 11 Case asserting approximately $ 8 million in rejection damages.

The Debtors are currently preparing an objection to these claims along with a reply to GEM’s response to the Debtors’ earlier filed objections.

As a general unsecured creditor under the Plan of Reorganization, any amount determined to be owed to plaintiff will be paid in common shares of the Company as provided in the Plan of Reorganization.

Celsius filed the Celsius Chapter 11 Cases in the United States Bankruptcy Court for the Southern District of New York under the Bankruptcy Code.

Celsius was one of the Company’s largest host-mining customers in July 2022.

Prior to the Celsius Chapter 11 Cases, Celsius paid the Company certain PPT Charges invoiced to Celsius pursuant to the Master Services Agreements between Celsius and the Company (the “Celsius Contracts”).

After commencing the Celsius Chapter 11 Cases, Celsius refused to pay all PPT Charges the Company invoiced to Celsius;

Celsius and the Company filed competing motions, pleadings, and proofs of claims and engaged in protracted litigation, discovery, and mediation.

On September 14, 2023, the Debtors and Celsius entered into a PSA that provides in addition to a full mutual release of claims asserted against each party in the respective bankruptcy cases for a cash payment by Celsius to the Company of $ 14.0 million and a full and final release of all claims of Celsius against the Debtors related to the Celsius Contracts, in exchange for the Debtors’, (i) sale to Celsius of the Debtors’ Cedarvale Facility and certain related assets, (ii) grant to Celsius of a perpetual, non-transferable (except as described in Section 14 of the PSA), non-exclusive limited license to use identified Company intellectual property solely as and to the extent necessary to (x) finish construction and development of the Cedarvale Facility, (y) develop and construct other

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

mining facilities on other properties owned or leased by Celsius similar in type and scope to the Cedarvale Facility, and (z) operate all of the foregoing, (iii) assumption and assignment to Celsius of certain executory contracts, and (iv) unequivocal release of claims against Celsius asserted by the Company in connection with the Celsius Chapter 11 Cases and the Company’s Chapter 11 Cases.

On November 2, 2023, the Company received the payment of $ 14.0 million from Celsius in connection with the PSA.

In November 2022, Sphere 3D Corp.

1 unchanged sentence

The arbitration demand alleges that the Company has failed to provide contracted for services and to return prepayments allegedly made by Sphere 3D for such services.

The Company denies the allegations contained in Sphere 3D’s arbitration demand and intends to vigorously defend its interests.

The arbitration demand was stayed by the filing of the Company Parties’ Chapter 11 Cases.

Refer to the discussion contained within this footnote under the subtitle “Effect of Automatic Stay.”

In April 2023, Sphere 3D Corp.

filed a proof of claim against the Debtors in the Chapter 11 Cases alleging a claim for approximately $ 39.5 million allegedly pursuant to a contract for services as to which the Debtors were allegedly a party and failed to perform and other claims related thereto.

On January 16, 2024, the Bankruptcy Court entered an order granting Sphere 3D Corp.

(“Sphere”) an allowed $ 10 million general unsecured claim and a complete and final release of all claims of Sphere and Gryphon Digital Mining, Inc.

(“Gryphon”) against the Debtors related to the hosting contracts.

As part of the resolution, all miners have been returned to the client.

Furthermore, the adversary proceeding was dismissed with prejudice, against both Gryphon and Sphere.

The satisfaction of the settlement resulted in a gain of $ 23.3 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023.

In November 2022, McCarthy Building Companies, Inc.

filed a complaint against the Company in the United States District Court for the Eastern District of Texas, alleging breach of contract for failing to pay when due certain payments allegedly owing under a contract for construction entered into between the parties.

In November 2022, plaintiff Mei Peng filed a putative class action in the United States District Court, Western District of Texas, Austin Division, asserting that the Company violated the Securities Exchange Act by failing to disclose to investors, among other things, that the Company was vulnerable to litigation, that certain clients had breached their agreements, and that this impacted

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

the Company's profitability and ability to continue as a going concern.

The Company denies the allegations contained in the complaint and intends to vigorously defend its interests.

The case has been stayed as a result of the Company’s filing of a petition for relief under chapter 11 of the United States Bankruptcy Code.

On January 18, 2024, the Bankruptcy Court entered the McCarthy Order approving the parties’ agreement to settle all claims and release all liens of McCarthy against the Company.

See Note 3 — Chapter 11 Filing and Other Related Matters for further details.

As of December 31, 2023 and 2022, there were no other material loss contingency accruals for legal matters.

Effect of Automatic Stay

Subject to certain exceptions under the Bankruptcy Code, the filing of the Company Parties’ Chapter 11 Cases automatically stayed the continuation of most legal proceedings or the filing of other actions against or on behalf of the Debtors or their property to recover on, collect or secure a claim arising prior to the Petition Date or to exercise control over property of the Debtors’ bankruptcy estates, unless and until the Bankruptcy Court modifies or lifts the automatic stay as to any such claim.

Notwithstanding the general application of the automatic stay described above, governmental authorities may determine to continue actions brought under their police and regulatory powers.

Leases —See Note 9 — Leases for further information.

Loss on legal settlements —The Company recognized a loss of $ 2.6 million during the year ended December 31, 2021, with respect to the resolution of legal actions for damages resulting from the early termination of agreements by former customers.

CONTINGENTLY REDEEMABLE CONVERTIBLE PREFERRED STOCK

The Company is authorized to issue 2.00 billion shares of preferred stock, $ 0.00010 par value.

Prior to the Merger with XPDI, the Company was authorized to issue 50.0 million shares of preferred stock, $ 0.0001 par value.

As of December 31, 2021, 10.8 million shares of preferred stock were issued and outstanding.

Upon the closing of the merger with XPDI on January 19, 2022, each share of Series A and Series B Preferred Stock automatically converted into one share of Old Core Common Stock and each outstanding share of Old Core Common Stock issued as a result of the conversion of Series A and Series B Preferred Stock in connection with the Merger was cancelled and extinguished and converted into the right to receive a number of shares of New Core Common Stock equal to the Exchange Ratio of 1.6001528688 .

All of the Company’s shares of contingently redeemable convertible preferred stock were converted into 10.8 million shares of New Core Common Stock during the year ended December 31, 2022.

As of December 31, 2021, 10.8 million shares of preferred stock were issued and outstanding (the below table is in thousands, except per share amounts).

Year Ended December 31, 2021

Authorized Shares

Outstanding Issuance

Share Net Proceeds Liquidation

Contingently Redeemable Convertible Preferred Stock:

14,641 10,324 $ 4.27 $ 31,070 $ 44,064

14,327 502 2.19 1,097 1,100

Total contingently redeemable convertible preferred stock

50,000 10,826 $ 32,167 $ 45,164

There were no additional contingently redeemable convertible preferred stock issuances in 2021.

STOCKHOLDERS' (DEFICIT) EQUITY

Authorized Capital— As of December 31, 2022, the Company was authorized to issue 10.0 billion shares of common stock, $ 0.0001 par value.

The holders of the Company’s common stock are entitled to one vote per share.

In January 2021, in connection with the stockholder loan described in Note 11 — Notes Payable, the Company issued a warrant to the stockholder to purchase up to 0.2 million shares of common stock at an exercise price of $ 4.21 per share.

The warrant is set to expire in January 2023 and is exercisable and unexercised as of December 31, 2022.

DERIVATIVE WARRANT LIABILITIES

As of December 31, 2023, the Company had 14.9 million warrants outstanding, including:

(a) 8.6 million Public Warrants and (b) 6.3 million Private Placement Warrants issued to XPDI Sponsor LLC (“Sponsor”) and certain institutional investors (“Anchor Investors”).

All of these warrants were cancelled without any payment therefore pursuant to the Plan of Reorganization.

Prior to the warrants’ cancellation under the Plan of Reorganization, each Public Warrant and Private Placement Warrant were exercisable 30 days following the Closing Date of the XPDI Merger for one share of common stock at an exercise price of $ 11.50 per share for the five years from the Closing Date (January 19, 2027).

Redemption of Private Placement Warrants

The Private Placement Warrants were also cancelled without payment pursuant to the Plan of Reorganization.

The terms of redemption of the Private Placement Warrants were identical in all respects to those for the Public Warrants except that, so long as they are held by the Sponsor, Anchor Investors or their permitted transferees they were not redeemable, except when the price per share of common stock equaled or exceeded $ 10.00 .

If the Private Placement Warrants were held by someone other than the Sponsor, the Anchor Investors or their respective permitted transferees, the Private Placement Warrants were redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

Effect of Chapter 11 Filing

As discussed in Note 3 - Chapter 11 Filing and Other Related Matters, liabilities that may be affected by the Plan of Reorganization must be classified as liabilities subject to compromise at the amounts expected to be allowed by the Bankruptcy Court.

The warrants were classified as liabilities subject to compromise at their expected allowed amount of zero as of December 31, 2023

Core Scientific, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

As a result of the Merger, all of XPDI’s Class A Common Stock and Class B Common Stock automatically converted into 30.8 million shares of New Core Common Stock on a one -for-one basis.

Following the Merger with XPDI, each share of common stock or warrant was converted to shares of New Core Common Stock or a warrant to purchase shares of New Core Common Stock based on an exchange ratio of 1.6001528688 .

Their fair value of $ 0.3 million was derecognized as a gain in Reorganization items, net in the Company’s Consolidated Statements of Operations for the year ended December 31, 2022.

STOCKHOLDERS' (DEFICIT) EQUITY

Authorized Capital— As of December 31, 2023, the Company was authorized to issue 10.0 billion shares of common stock, $ 0.00001 par value.

The holders of the Company’s common stock are entitled to one vote per share.

In January 2021, in connection with a stockholder loan, the Company issued a warrant to the stockholder to purchase up to 0.2 million shares of common stock at an exercise price of $ 4.21 per share.

The warrant expired unexercised in January 2023.

As a result of the Business Combination, all of XPDI’s Class A Common Stock and Class B Common Stock automatically converted into 30.8 million shares of Core common stock on a one -for-one basis.

Following the Business Combination with XPDI, each share of common stock or warrant was converted to shares of Core common stock or a warrant to purchase shares of Core common stock based on an exchange ratio of 1.60015286880 .

On January 15, 2024, the Debtors filed with the Bankruptcy Court the Plan of Reorganization, and on January 16, 2024, the Bankruptcy Court entered the Confirmation Order.

On the Effective Date, the Plan of Reorganization became effective in accordance with its terms and the Debtors emerged from the Chapter 11 Cases.

On the Effective Date, in connection with the effectiveness of, and pursuant to the terms of, the Plan of Reorganization and the Confirmation Order, the Company’s common stock outstanding immediately before the Effective Date was canceled and is of no further force or effect, and the new organizational documents of the Company became effective, authorizing the issuance of shares of common stock, par value $ 0.00001 per share (the “New Common Stock”).

In accordance with the foregoing, on the Effective Date, the Company, as reorganized on the Effective Date and in accordance with the Plan of Reorganization, issued the:

(i) New Common Stock, (ii) Warrants, (iii) CVRs, (iv) Secured Convertible Notes, (v) Secured Notes and (vi) the GUC CVRs (each, as defined below).

Such securities, rights, or interests were issued in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) provided by section 1145 of the Bankruptcy Code.

On the Effective Date, pursuant to the Plan of Reorganization, the Company issued, or will issue:

• 176,266,782 shares of New Common Stock;

• 180,241,211 Warrants;

• New Secured Convertible Notes in an aggregate principal amount of $ 260.0 million;

• New Secured Notes in an aggregate principal amount of $ 150.0 million;

• 51,783,625 CVRs;

Equity Line of Credit

In July 2022, the Company entered into a common stock purchase agreement (the “Equity Line of Credit”) and a Registration Rights Agreement (the “Registration Rights Agreement”) with B.

Pursuant to the Equity Line of Credit, subject to the satisfaction of the conditions set forth in the Equity Line of Credit, the Company will have the right to sell to B.

Pursuant to the Equity Line of Credit, the Company had the right to sell to B.

Riley, up to $ 100.0 million of shares of the Company’s common stock, par value $ 0.0001 per share (the “Common Stock”), subject to certain limitations and conditions set forth in the Equity Line of Credit, from time to time during the term of the Equity Line of Credit.

Sales of Common Stock pursuant to the Equity Line of Credit, and the timing of any sales, are solely at the Company’s option, and the Company is under no obligation to sell any securities to B.

Sales of Common Stock pursuant to the Equity Line of Credit, and the timing of any sales, were solely at the Company’s option, and the Company is under no obligation to sell any securities to B.

Riley under the Equity Line of Credit.

The per share purchase price that B.

Riley is required to pay for shares of the Company’s Common Stock in a Purchase effected by the Company pursuant to the Equity Line of Credit, if any, will be determined by reference to the volume weighted average price (“VWAP”) of the Common Stock, calculated in accordance with the Equity Line of Credit, for the period (the “Purchase Valuation Period”) beginning at the official open (or “commencement”) of the regular trading session on Nasdaq on the applicable Purchase Date (as defined in the Equity Line of Credit) for such Purchase, and ending at the earliest to occur of (i) 3:59 p.m., New York City time, on such Purchase Date or such earlier time publicly announced by the trading market as the official close of the regular trading session on such Purchase Date, (ii) such time that the total aggregate number (or volume) of shares of Common Stock traded on Nasdaq during such Purchase Valuation Period (calculated in accordance with the Equity Line of Credit) reaches the applicable share volume maximum amount for such Purchase (the “Purchase Share Volume Maximum”), calculated by dividing (a) the applicable Purchase Share Amount for such Purchase, by (b) 0.20 , and (iii) such time that the trading price of a share of Common Stock on Nasdaq during such Purchase Valuation Period (calculated in accordance with the Equity Line of Credit) falls below the applicable minimum price threshold for such Purchase specified by the Company in the Purchase Notice for such Purchase, or if the Company does not specify a minimum price threshold in such Purchase Notice, a price equal to 75.0 % of the closing sale price of the Common Stock on the trading day immediately prior to the applicable Purchase Date for such Purchase (the “Minimum Price Threshold”), less a fixed 3.0 % discount to the VWAP for such Purchase Valuation Period.

The net proceeds to the Company from sales that the Company elects to make to B.

Riley under the Equity Line of Credit, if any, will depend on the frequency and prices at which the Company sells shares of the Company’s Common Stock to B.

The Company expects that any proceeds received by the Company from such sales to B.

Riley will be used for general corporate purposes.

There are no restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the Equity Line of Credit or Registration Rights Agreement, other than a prohibition (with certain limited exceptions) on entering into specified “Variable Rate Transactions” (as such term is defined in the Equity Line of Credit) during the term of the Equity Line of Credit.

Such transactions include, among others, the issuance of convertible securities with a conversion or exercise price that is based upon or varies with the trading price of the Company’s Common Stock after the date of issuance, or the Company’s effecting or entering into an agreement to effect an “equity line of credit” or other substantially similar continuous offering with a third party, in which the Company may offer, issue or sell Common Stock or any securities exercisable, exchangeable or convertible into Common Stock at a future determined price.

The Equity Line of Credit will automatically terminate on the earliest to occur of (i) the first day of the month next following the 24 -month anniversary of the Commencement Date (as such term is defined in the Equity Line of Credit), (ii) the date on which B.

Riley shall have purchased from the Company under the Equity Line of Credit shares of Common Stock for an aggregate gross purchase price of $ 100.0 million, (iii) the date on which the Common Stock shall have failed to be listed or quoted on Nasdaq or another U.S.

national securities exchange identified as an “eligible market” in the Equity Line of Credit, (iv) the 30 th trading day after the date on which the Company commences a voluntary proceeding or any third party commences a bankruptcy proceeding against the Company that is not discharged or dismissed prior to such trading day, and (v) the date on which a bankruptcy custodian is appointed for all or substantially all of the Company’s property or the Company makes a general assignment for the benefit of creditors.

The Equity Line of Credit was terminated as a result of the Plan of Reorganization and the obligations of the parties under the Equity Line of Credit were extinguished.

As consideration for B.

Riley’s commitment to purchase shares of Common Stock at the Company’s direction upon the terms and subject to the conditions set forth in the Equity Line of Credit, upon execution of the Equity Line of Credit in July 2022, the Company issued 0.6 million shares to B.

Riley with a fair value of $ 1.1 million at issuance which was recorded within other non-

Core Scientific, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

The Company has the right to terminate the Equity Line of Credit at any time after Commencement, at no cost or penalty, upon five ( 5 ) trading days’ prior written notice to B.

Riley has the right to terminate the Equity Line of Credit upon five ( 5 ) trading days’ prior written notice to the Company upon the occurrence of certain events set forth in the Equity Line of Credit.

The Company and B.

Riley may also agree to terminate the Equity Line of Credit by mutual written consent, provided that no termination of the Equity Line of Credit will be effective until the fifth trading day immediately following the settlement date related to any pending purchase that has not been fully settled in accordance with the Equity Line of Credit.

Neither the Company nor B.

Riley may assign or transfer their respective rights and obligations under the Equity Line of Credit or the Registration Rights Agreement.

As consideration for B.

Riley with a fair value of $ 1.1 million at issuance which was recorded within other non-operating expenses, net on the Company’s Consolidated Statements of Operations and presented as equity line of credit expenses on the Consolidated Statements of Cash Flows.

operating expenses, net on the Company’s Consolidated Statements of Operations and presented as equity line of credit expenses on the Consolidated Statements of Cash Flows.

In addition, the Company reimbursed $ 0.1 million of reasonable legal fees and disbursements of B.

2 unchanged sentences

Riley of $ 20.7 million is net of $ 0.6 million for the fixed 3.0 % discount to the VWAP described above which was recorded within other non-operating expenses, net on the Company’s Consolidated Statements of Operations and presented as equity line of credit expenses on the Consolidated Statements of Cash Flows.

As of December 31, 2022, 56.9 million shares of Common Stock were available to be issued under the Equity Line of Credit.

As discussed in Note 11 — Notes Payable, 25 % of the net cash proceeds received for shares issued under the Equity Line of Credit is required to be applied by the Company to repay the outstanding principal amount of the Amended Bridge Notes.

As of December 31, 2022, the Company owed $ 5.3 million on the Amended Bridge Notes related to proceeds received under the Equity Line of Credit.

During the year ended December 31, 2023, the Company did not issue any shares under the Equity Line of Credit.

No shares of common stock were available to be issued under the Equity Line of Credit as of December 31, 2023, and the Equity Line of Credit was terminated as a result of the Plan of Reorganization.

Warrant Exercises

4 unchanged sentences

During the year ended December 31, 2022, 4.4 million of the warrants were exercised in a cashless exercise resulting in 3.0 million net shares issued to the warrant holders.

There were no warrant exercises during the year ended December 31, 2023.

Convertible Note Exercises

2 unchanged sentences

During the year ended December 31, 2022, $ 1.6 million of Convertible Notes were exercised resulting in 0.2 million shares issued to the holders of the Convertible Notes that were exercised.

There were no exercises of Convertible Notes during the year ended December 31, 2023.

SPAC Vesting Shares

1.7 million common shares are subject to vesting requirements, as described further in Note 1 — Organization and Description of Business.

1.7 million common shares are subject to vesting requirements, as described further in Note 4 — Business Combinations, Acquisitions and Restructuring.

These contingently issuable shares do not require future service in order to vest and do not result in stock-based compensation expense.

The SPAC Vesting Shares are accounted for as an equity contract, and meet the criteria for equity classification.

The Company has recorded the SPAC Vesting Shares within additional paid-in capital on the Company’s Consolidated Balance Sheets as of December 31, 2022.

The Company has recorded the SPAC Vesting Shares within additional paid-in capital on the Company’s Consolidated Balance Sheets as of December 31, 2023 and 2022.

Vendor Settlement

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

In March 2022, the Company issued 1.6 million shares of the Company’s common stock related to a vendor liability that had been assumed by the Company in July 2021 as part of the Blockcap acquisition.

1 unchanged sentence

During the year ended December 31, 2022, we recorded $ 9.5 million, within Other non-operating expenses, net on the Consolidated Statements of Operations related to changes in the fair value of the vendor liability.

As of December 31, 2022, the fair value of the liability of $ 18.1 million was recorded within Liabilities subject to compromise on the Consolidated Balance Sheets.

There were no changes in the fair value of the vendor liability during the year ended December 31, 2023.

As of December 31, 2023 and 2022, the fair value of the liability of $ 18.1 million was recorded within Liabilities subject to compromise on the Consolidated Balance Sheets.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

Equity Incentive Plans

3 unchanged sentences

Awards granted under the 2018 Plan were subject to a minimum vesting period of at least one year commencing from the date of grant.

Additionally, options granted under the plan must expire within ten years of the grant date and were required to be granted with exercise prices of no less than the fair value of the common stock on the grant date, as determined by the Company’s board of directors (the “Board”).

In July 2021, the Company acquired Blockcap.

10 unchanged sentences

Awards granted under the 2021 Plan are subject to a minimum vesting period of at least one year commencing from the date of grant.

Additionally, options granted under the plan must expire within ten years of the grant date and must be granted with exercise prices of no less than the fair value of the common stock on the grant date, as determined by the Company’s Board.

Following the consummation of the Merger, the Company expects that its Board will make grants of awards under the 2021 Plan to eligible participants.

The maximum number of shares of the Company’s common stock that may be issued under the 2021 Plan is 45.0 million shares, of which 30.6 million was available for issuance as of December 31, 2022.

Following the consummation of the Business Combination, the Company expects that its Board of Directors will make grants of awards under the 2021 Plan to eligible participants.

The maximum number of shares of the Company’s common stock that may be issued under the 2021 Plan is 45.0 million shares.

As of the Effective date of the Plan of Reorganization, the Company no longer grants equity incentive awards under the 2021 Plan.

Stock-Based Compensation

1 unchanged sentence

As of December 31, 2023, we had unvested or unexercised stock-based awards outstanding representing approximately 60.9 million shares of our common stock, consisting of approximately 38.4 million RSAs and RSUs and options to purchase approximately 22.6 million shares of our common stock.

On June 8, 2022, the compensation committee (the “Compensation Committee”) of the Board of the Company approved an amendment to the Company’s award agreement for the RSUs outstanding under the 2018 Plan, to provide for the waiver and elimination of the requirement that the Company undergo a “change in control” or a “public offering” for full vesting of the previously outstanding time-vested award (the “RSU Amendment”).

On June 8, 2022, the compensation committee (the “Compensation Committee”) of the Board of Directors of the Company approved an amendment to the Company’s award agreement for the RSUs outstanding under the 2018 Plan, to provide for the waiver and elimination of the requirement that the Company undergo a “change in control” or a “public offering” for full vesting of the previously outstanding time-vested award (the “RSU Amendment”).

Although the mergers that the Company underwent did not satisfy the event-based vesting requirement, they significantly reduced the possibility of the requirement being met as contemplated under the 2018 Plan.

The RSU Amendment was authorized and approved by the Board and the Compensation Committee as necessary, desirable, and in the best interest of the Company and its stockholders.

The RSU Amendment was authorized and approved by the Board of Directors and the Compensation Committee as necessary, desirable, and in the best interest of the Company and its stockholders.

As a result of the RSU Amendment, all outstanding RSUs under the 2018 Plan are subject only to time-based vesting, of which RSUs covering approximately 42.0 million shares of Common Stock were net settled, with approximately 15.0 million shares of Common Stock to be canceled and forfeited to satisfy tax withholding obligations in June 2022.

The Company recognizes the cost of services received in exchange for awards of equity instruments based upon the fair value of those awards on the grant date.

For the years ended December 31, 2023, 2022 and 2021, the Company’s consolidated operating results included $ 28.9 million, $ 36.6 million, and $ 0.9 million of stock-based compensation expense related to restricted stock units issued to employees, respectively, and $ 30.0 million, $ 146.3 million and $ 5.8 million of stock-based compensation expense related to stock options issued to employees and consultants, respectively.

In addition, for the year ended December 31, 2021, the Company recognized $ 32.2 million of post-combination expense for share-based compensation awards related to the Blockcap acquisition

Core Scientific, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

described in Note 4 — Business Combinations, Acquisitions and Restructuring.

The total tax benefit related to stock-based compensation was nil , nil , and $ 6.1 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Stock-based compensation expense for the years ended December 31, 2023, 2022 and 2021 is included in the Company’s Consolidated Statements of Operations as follow:

Year Ended December 31,

2023 2022 2021

Cost of revenue $ 5,050 $ 25,779 $ 4,084

Research and development 1,337 22,093 1,140

Sales and marketing 4,929 9,401 836

General and administrative 1

47,576 125,621 32,877

Total stock-based compensation expense 1

$ 58,892 $ 182,894 $ 38,937

1 Includes $ 1.0 million of stock-based compensation that was provided in severance as part of restructuring charges incurred during the year ended December 31, 2022.

Stock Options —Stock options granted under the 2018 Plan are granted at a price per share not less than the fair value at date of grant.

7 unchanged sentences

as a result, the expected dividend yield is 0 % as of December 31, 2023 and 2022.

The weighted-average assumptions for options granted for the years ended December 31, 2022 and 2021, are as follows:

Year Ended December 31,

Dividend yield

0.00 % 0.00 %

Expected volatility

72.29 % 72.57 %

Risk-free interest rate

1.82 % 1.39 %

Expected life (years)

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

A summary of stock option activity for the year ended December 31, 2023, is as follows (amounts in thousands, except per share amounts):

4 unchanged sentences

(in years) Aggregate

Options outstanding - December 31, 2021

( 1,321 ) 2.91

Options outstanding - January 1, 2023

Forfeited ( 674 ) 11.47

( 1,178 ) 10.04

Options outstanding - December 31, 2023

4 unchanged sentences

10,508 $ 7.42 5.8 $ —

The weighted-average grant date fair value of options granted for the year ended December 31, 2021, was $ 10.92 .

The total fair value of stock options vested during the year ended December 31, 2022 and 2021, was $ 0.6 million and $ 35.6 million, respectively.

The weighted-average grant date fair value of options granted was nil as no options were granted during the years ended December 31, 2023 and 2022.

The total fair value of stock options vested during the years ended December 31, 2023 and 2022, was nil and $ 0.6 million, respectively.

As of December 31, 2023, total unrecognized stock-based compensation expense related to unvested stock options was approximately $ 55.4 million, which is expected to be recognized over a weighted-average time period of 2.1 years.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

Restricted Stock Units —Restricted stock units (“RSUs”) granted in 2018 required that the holder elect before the date of grant whether the RSUs will vest either:

1 unchanged sentence

• Over a 4-year service period and upon either i) completion of an initial public offering of the Company’s common stock, or ii) upon consummation of a transaction resulting in a change in control of the Company.

RSUs granted in 2022 and 2021 generally vest over a 4 -year service period and upon either i) completion of an initial public offering of the Company’s common stock, or ii) upon consummation of a transaction resulting in a change in control of the Company.

RSUs granted as replacement awards in the Blockcap acquisition on July 30, 2021 vest based on a service period only and are not subject to any transaction-based vesting conditions.

RSUs granted in 2022 generally vest over a 4-year service period and upon either i) completion of an initial public offering of the Company’s common stock, or ii) upon consummation of a transaction resulting in a change in control of the Company.

A summary of RSU activity for the year ended December 31, 2023, is as follows (amounts in thousands, except per share amounts):

1 unchanged sentence

Grant Date Fair

Unvested - December 31, 2021

Unvested - January 1, 2023

45,216 $ 2.79

3 unchanged sentences

38,358 $ 2.69

As of December 31, 2022, the Company had approximately $ 98.2 million of unrecognized stock-based compensation expense, of which $ 75.3 million is expected to be recognized over a weighted-average time period of 3.0 years and $ 22.9 million is related to RSUs for which some or all of the requisite service had been provided under the service condition but had performance conditions that had not yet been achieved.

As of December 31, 2023, the Company had approximately $ 55.6 million of unrecognized stock-based compensation expense related to RSUs, of which $ 44.8 million is expected to be recognized over a weighted-average time period of 2.1 years and $ 10.8 million is related to RSUs for which some or all of the requisite service had been provided under the service condition but had performance conditions that had not yet been achieved.

For RSUs subject to both the service and performance conditions, the unrecognized compensation expense will be recognized as expense when it is probable that the performance conditions will be achieved.

The performance conditions for the RSUs are satisfied upon the earlier of a change in control or an initial public offering.

The closing of the Merger Agreement with XPDI in January 2022 did not meet the definition of a change in control or an initial public offering.

The performance condition can be met in future years only with respect to a change in control or waiver of the condition by the Company’s Board of Directors and is not expected to occur, if at all, prior to expiration of the applicable lock-up period.

If the performance conditions become probable of being achieved before the end of the requisite service period, the unrecognized compensation expense for which requisite service has not been provided will be recognized as expense prospectively on an accelerated attribution basis over the remaining requisite service period.

Current income tax expense represents the amount expected to be reported on the Company’s income tax returns, and deferred tax expense or benefit represents the change in net deferred tax assets and liabilities.

Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse.

Valuation allowances are recorded as appropriate to reduce deferred tax assets to the amount considered likely to be realized.

The Company had $ 17.1 million of income tax benefit for the year ended December 31, 2022 and $ 15.8 million income tax expense for the year ended December 31, 2021.

There was no income tax expense for the year ended December 31, 2020.

If the performance conditions become probable of being achieved before the end of the requisite service period, the unrecognized

Core Scientific, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

compensation expense for which requisite service has not been provided will be recognized as expense prospectively on an accelerated attribution basis over the remaining requisite service period.

Valuation allowances are recorded as appropriate to reduce deferred tax assets to the amount considered likely to be realized.

The Company had $ 0.7 million of income tax expense, $ 17.1 million income tax benefit and $ 15.8 million income tax expense for the years ended December 31, 2023, 2022 and 2021, respectively.

Year Ended December 31,

7 unchanged sentences

Total deferred tax — ( 18,521 ) 9,528

Total income tax (benefit) expense $ ( 17,091 ) $ 15,763 $ —

Total income tax expense (benefit)

$ 683 $ ( 17,091 ) $ 15,763

Core Scientific, Inc.

2 unchanged sentences

The reconciliation between the U.S.

statutory tax rate and the Company’s effective tax rate is presented as follows (in thousands):

statutory tax rate and the Company’s effective tax is presented as follows (in thousands):

Year Ended December 31,

7 unchanged sentences

Fair value adjustment - convertible notes — ( 10,942 ) 3,370

Reorganization costs

Non-deductible expenses — 288 ( 702 )

1 unchanged sentence

( 29,195 ) 241,892 ( 9,180 )

Deferred tax adjustments

Goodwill impairment — 221,499 —

Other permanent items

Total income tax expense

Total income tax expense (benefit)

$ 683 $ ( 17,091 ) $ 15,763

11 unchanged sentences

Property, plant and equipment, net

53,334 75,349 —

Digital asset impairment loss 6 — 8,368

11 unchanged sentences

Deferred tax liabilities:

Deferred settlement

( 6,031 ) — —

Operating lease ROU assets

( 1,791 ) ( 4,885 ) —

Property, plant and equipment, net

16 unchanged sentences

Change related to prior period adjustments

8,851 — ( 137 )

Acquisition deferred tax liabilities — — ( 9,003 )

5 unchanged sentences

The valuation allowance primarily relates to deferred tax assets for fixed assets, net operating loss carryforwards and capital loss carryforwards.

In connection with the Blockcap and Radar acquisition on July 30, 2021, the Company recognized a deferred tax liability of $ 9.0 million during the year.

As a result, the Company recorded an income tax benefit of $ 9.0 million for the release of the valuation allowance on the existing deferred tax assets because of the offset of the deferred tax liabilities established for fixed and intangible assets from the acquisition.

As of December 31, 2023, the Company has federal and state net operating loss carryforwards in the amount of $ 330.2 million and $ 106.6 million, respectively.

8 unchanged sentences

The Company completed a Section 382 study related to the acquired Blockcap tax attributes and determined there are no limitations on future utilization of the acquired attributes.

The Company had no unrecognized income tax benefits for the years ended December 31, 2022, 2021 and 2020.

To date, no interest and penalties have been recognized related to the underpayment of income taxes.

At December 31, 2023, we recorded a total amount of unrecognized tax benefit of $ 0.3 million.

The Company had no unrecognized income tax benefits as of December 31, 2022.

Accrued interest and penalties related to unrecognized tax benefits are recorded as income tax expense.

The Company continues to believe its positions are supportable;

9 unchanged sentences

the potentially dilutive effect of options or warrants are computed using the treasury stock method.

Securities that potentially have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the diluted EPS calculation.

On or after the closing of the Business Combination, dividend payments made to equity holders of the Company are also made ratably to holders of the Convertible Notes on an as-converted basis.

As a result, the Convertible Notes meet the

Core Scientific, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

Securities that potentially have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the diluted EPS calculation.

On or after the closing of the Merger, dividend payments made to equity holders of the Company are also made ratably to holders of the Convertible Notes on an as-converted basis.

As a result, the Convertible Notes meet the definition of participating securities based on their respective rights to receive dividends and they are treated as a separate class of securities in computing basic EPS using the two-class method.

definition of participating securities based on their respective rights to receive dividends and they are treated as a separate class of securities in computing basic EPS using the two-class method.

Under the two-class method, all earnings (distributed and undistributed) are allocated to common stock and participating securities.

1 unchanged sentence

Diluted EPS for the Convertible Notes is calculated under both the two-class and if-converted methods, and the more dilutive amount is reported.

Restricted stock awards assumed from Blockcap in July 2021 and the SPAC Vesting Shares issued as part of the XPDI Merger in January 2022 also have non-forfeitable rights to receive dividends, if declared, and meet the definition of participating securities.

Restricted stock awards assumed from the SPAC Vesting Shares issued as part of the XPDI Merger in January 2022 also have non-forfeitable rights to receive dividends, if declared, and meet the definition of participating securities.

Because these instruments do not have a contractual obligation to share in the losses of the Company, undistributed losses are not allocated to them.

As discussed in Note 1 — Organization and Description of Business, the shares and corresponding capital amounts and earnings per share available for common stockholders prior to the Merger with XPDI have been retroactively restated as shares reflecting the exchange ratio established in the Merger.

As a result of the Merger, the Company has retrospectively adjusted the weighted average number of shares of common stock outstanding prior to January 19, 2022, by multiplying them by the exchange ratio of 1.6001528688 used to determine the number of shares of Class A common stock into which they converted.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share (in thousands, except per share amounts):

2 unchanged sentences

Net (loss) income $ ( 246,487 ) $ ( 2,146,318 ) $ 47,312

Deemed dividend from common to preferred exchange — — ( 10,478 )

$ ( 2,146,318 ) $ 47,312 $ ( 22,684 )

Weighted average shares outstanding - basic 379,863 340,647 207,263

5 unchanged sentences

$ ( 0.65 ) $ ( 6.30 ) $ 0.20

On January 23, 2024, the Company emerged from bankruptcy, which resulted in various transactions that affected the capital structure of the Company.

Refer to Note 17 — Subsequent Events for more details.

Pote ntially dilutive securities includes securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive and contingently issuable shares for which all necessary conditions for issuance had not been satisfied by the end of the period.

Potentially dilutive securities are as follows (in common stock equivalent shares, in thousands):

Year Ended December 31,

2023 2022 2021

1 unchanged sentence

22,575 23,915 6,716

Preferred stock

14,892 18,311 —

1 unchanged sentence

38,358 45,217 84,035

Convertible Notes

69,998 69,998 —

Share settled liability — — 1,943

5 unchanged sentences

The Company has two operating segments:

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

“Hosting” which consists primarily of its blockchain infrastructure and third-party hosting business;

and “Mining” consisting of digital asset mining for its own account.

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

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

During 2022, our “Hosting” segment also included sales of mining equipment to customers and was referred to as “Hosting and Equipment Sales”.

The Mining 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, the Company receives digital assets.

The primary financial measures used by the CODM to evaluate performance and allocate resources are revenue and gross profit.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

The primary financial measures used by the chief operating decision maker (“CODM”) to evaluate performance and allocate resources are revenue and gross profit.

The CODM does not evaluate performance or allocate resources based on segment asset or liability information;

2 unchanged sentences

The Company excludes certain operating expenses and other expense from the allocations to operating segments.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

The following table presents revenue and gross profit by reportable segment for the periods presented (in thousands):

1 unchanged sentence

2023 2022 2021

Equipment Sales and Hosting Segment

Hosting Segment 1

Hosting revenue $ 112,067 $ 159,688 $ 79,323

6 unchanged sentences

$ 24,822 $ 5,686 $ 72,095

Gross margin 2

22 % 2 % 22 %

Mining Segment

Digital asset mining income

Digital asset mining revenue

$ 390,333 $ 397,796 $ 216,925

4 unchanged sentences

$ 98,637 $ 2,714 $ 166,767

Gross margin 2

25 % 1 % 77 %

Consolidated total revenue

4 unchanged sentences

$ 123,459 $ 8,400 $ 238,862

For the years ended December 31, 2022, 2021 and 2020, cost of revenue included depreciation expense of $ 12.1 million, $ 7.4 million and $ 7.4 million, respectively for the Equipment Sales and Hosting segment.

Consolidated gross margin (2)

25 % 1 % 44 %

1 During the year ended December 31.

2022, our “Hosting” segment also included sales of mining equipment to customers and was referred to as “Hosting and Equipment Sales”.

2 Gross margin is calculated as gross profit as a percentage of total revenue.

For the years ended December 31, 2023, 2022 and 2021, cost of revenue included depreciation expense of $ 6.9 million, $ 12.1 million and $ 7.4 million, respectively for the Hosting segment.

For the years ended December 31, 2023, 2022 and 2021, cost of revenue included depreciation expense of $ 88.5 million, $ 214.8 million and $ 24.3 million , respectively for the Mining segment.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

Concentrations of Revenue and Credit Risk

6 unchanged sentences

As of December 31, 2023 and 2022, substantially all of our digital assets were held by two third-party digital asset services.

For the years ended December 31, 2022, 2021 and 2020, the concentration of customers comprising 10% or more of the Company’s total revenue and Equipment Sales and Hosting segment revenue was as follows:

For the years ended December 31, 2023, 2022 and 2021, the concentration of customers comprising 10% or more of the Company’s total revenue are as follows:

Year Ended December 31, Year Ended December 31,

1 unchanged sentence

Percent of total revenue:

Percent of Equipment Sales and Hosting segment:

Percent of Hosting segment revenue:

N/A N/A 15 % N/A N/A 26 %

1 unchanged sentence

N/A 14 % N/A N/A 38 % N/A

D N/A N/A 13 % N/A N/A 14 %

11 % N/A N/A 49 % N/A N/A

1 On the Effective Date, Customer F became a minority shareholder of the Company.

Core Scientific, Inc.

11 unchanged sentences

Impairment of digital assets ( 4,406 ) ( 231,315 ) ( 37,206 )

Change in fair value of derivative instruments ( 3,918 ) — —

Impairment of goodwill and other intangibles — ( 1,059,265 ) —

10 unchanged sentences

108,111 252,973 72,222

Operating (loss) income

Operating income (loss)

8,961 ( 2,109,553 ) 131,494

Non-operating expense, net:

Loss on debt extinguishment and other

(Gain) loss on debt extinguishment and other

( 20,065 ) 287 8,016

4 unchanged sentences

Reorganization items, net 191,122 ( 197,405 ) —

Other non-operating expenses, net

Other non-operating (income) expenses, net

( 2,530 ) 5,232 2

Total non-operating expense, net

2 unchanged sentences

$ ( 245,804 ) $ ( 2,163,409 ) $ 63,075

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

RELATED-PARTY TRANSACTIONS

In the ordinary course of business, the Company enters into various transactions with related parties.

The Company has agreements to provide hosting services to various entities that are managed and invested in by individuals that are directors and executives of the Company.

The Company had agreements to provide hosting services to various entities that are managed and invested in by individuals that were directors and executives of the Company in 2023.

For the years ended December 31, 2023 and 2022, the Company recognized hosting revenue from the contracts with these entities of $ 10.1 million and $ 29.5 million , respectively.

In addition, for the years ended December 31, 2022 and 2021, there was equipment sales revenue recognized of $ 71.4 million and $ 109.9 million to these same various entities.

A nominal amount was receivable from these entities at December 31, 2022.

As of December 31, 2021, the Company had accounts receivable of $ 0.3 million from these entities.

During the year ended December 31, 2021, the Company entered various promissory notes with Blockcap, a related party entity that was managed by individuals that are directors and executives of the Company.

The Company had existing contracts for equipment sales and hosting services with Blockcap prior to the Company acquiring Blockcap on July 30, 2021, as described above.

The promissory notes deferred $ 32.7 million of amounts originally due in June through July 2021, from Blockcap contracts until August 2021.

The promissory notes were effectively settled by the Company’s acquisition of Blockcap.

During the year ended December 31, 2021, Company paid $ 0.1 million for management and professional fees from an affiliated company that had been accrued by Blockcap prior to being acquired on July 30, 2021.

The Company reimburses certain officers and directors of the Company for use of a personal aircraft for flights taken on Company business.

For the years ended December 31, 2022 and 2021, the Company incurred reimburseme nts of $ 1.9 million and $ 1.4 million , respectively.

In addition, for the years ended December 31, 2023 and 2022, there was equipment sales revenue recognized of nil and $ 71.4 million to these same various ent ities.

Receivables from these entities were nil as of December 31, 2023, and a no minal amount as of December 31, 2022 .

In 2022, the Company reimbursed its former chief executive officer, and its co-founder and director, for use of a personal aircraft for flights taken on Company business.

We did not make such reimbursements in fiscal 2023.

For the years ended December 31, 2023 and 2022, the Company incurred reimburseme nts of nil and $ 1.9 million , respectively.

Nominal amounts were payable at December 31, 2023 and 2022.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

SUBSEQUENT EVENTS

The Replacement DIP Facility

As previously discussed in Note 3 — Chapter 11 Filing and Other Related Matters, in connection with the Chapter 11 Cases, the Debtors entered into a Senior Secured Super-Priority Debtor-In-Possession Credit Agreement, dated as of December 22, 2022 (the “Original DIP Credit Agreement”), with Wilmington Savings Fund Society, FSB, as administrative agent, and the lenders from time to time party thereto, which was authorized, on an interim basis, pursuant to an order of the Bankruptcy Court on December 23, 2022 (the “Original Interim DIP Order”).

In connection therewith, the Company utilized $ 37.5 million of the approximately $ 57.3 million available under the Original DIP Credit Agreement.

Subsequent to the Original Interim DIP Order, the Debtors sought new financing with improved terms to replace the Original DIP Credit Agreement.

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

Riley Commercial Capital, LLC (the “Replacement DIP Lender”) and (ii) refinance the Original DIP Credit Agreement.

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 available following Bankruptcy Court approval pursuant to the Replacement Interim DIP Order and (ii) up to $ 35 million became available following Bankruptcy Court approval on a final basis (the “Final DIP Order”).

DIP 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 month.

The Replacement DIP Lender will receive an upfront commitment fee equal to 3.5 % of the aggregate commitments under the Replacement DIP Facility, payable in kind, and exit fees equal to 5 % of the amount of the DIP Loans being repaid, reduced or satisfied.

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

If an Event of Default under the Replacement DIP Facility occurs, the Replacement DIP Lender may, among other things, permanently reduce any remaining commitments and declare the outstanding obligations under the Replacement DIP Facility to be immediately due and payable.

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

The Replacement DIP Facility 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 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 DIP Loans and the termination of the DIP Commitments;

(iv) the date of the

Payoff of DIP

On January 4, 2024, the Company pre-paid the outstanding balance of $ 4.5 million on the Replacement DIP Facility provided by B.

Riley Financial, the Company’s DIP lender.

The $ 4.5 million payment included exit fees of approximately $ 0.2 million.

The Replacement DIP was terminated on the Effective Date.

Equity Rights Offering

On November 20, 2023, the Company commenced an equity rights offering (the “Equity Rights Offering”) of common shares of the reorganized Company (the “ERO Shares”) in an aggregate amount of $ 55 million.

Also, on November 16, 2023, the Company entered into an agreement (the “Backstop Commitment Letter”) with the parties named therein (the “Commitment Parties”), pursuant to which the Commitment Parties agreed to severally and not jointly backstop $ 37.1 million of the Equity Rights Offering (the “Backstop Commitment”), subject to the terms and conditions of the Backstop Commitment Letter.

The subscription period for the ERO expired on January 5, 2024.

The Equity Rights Offering was oversubscribed and the aggregate subscriptions (including oversubscriptions) exceeded the number of ERO Shares offered to be purchased as part of the Equity Rights Offering.

The results of the Equity Rights Offering render the previously arranged Backstop Commitment unnecessary.

Emergence from Bankruptcy

As disclosed in Note 1 — Organization and Description of Business, on December 21, 2022, the Debtors filed the Chapter 11 Cases in the Bankruptcy Court seeking relief under Chapter 11 of the Bankruptcy Code.

On January 15, 2024, the Debtors filed with the Bankruptcy Court the Plan of Reorganization, and on January 16, 2024, the Bankruptcy Court entered the Confirmation Order.

On the Effective Date, the Plan of Reorganization became effective in accordance with its terms and the Debtors emerged from the Chapter 11 Cases.

In accordance with the foregoing, on the Effective Date, the Company, as reorganized on the Effective Date and in accordance with the Plan of Reorganization, issued the:

(i) New Common Stock, (ii) Warrants, (iii) CVRs, (iv) Secured Convertible Notes, (v) Secured Notes and (vi) the GUC CVRs (each, as defined below).

On the Effective Date, pursuant to the Plan of Reorganization, the Company issued:

• 176,266,782 shares of New Common Stock (as defined below);

• 180,241,211 Warrants, composed of 98,313,313 Tranche 1 Warrants (as defined below) and 81,927,898 Tranche 2 Warrants (as defined below)

• 51,783,625 CVRs;

Core Scientific, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

DIP Agent’s written notice to the Borrowers of the occurrence of an Event of Default under the Replacement DIP Facility;

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

NYDIG Settlement

On February 26, 2023, the Bankruptcy Court entered an order (the “NYDIG Order”), whereby the Debtors and NYDIG agree that the Debtors would transfer the ASICs serving as collateral under the NYDIG Loan back to NYDIG over a period of several months in exchange for the full extinguishment of the NYDIG Loan.

The Company anticipates that the final shipment of ASICs serving as collateral under the NYDIG loan to occur on or about March 31, 2023, after which the NYDIG Loan will be extinguished in full.

Priority Power Settlement

On March 20, 2023, the Bankruptcy Court entered an order (the “Priority Power Order”), whereby the Debtors and Priority Power agree that the Debtors would transfer equipment to Priority Power and assume an Energy Management and Consulting Services Agreement and other new agreements.

On the Effective Date, pursuant to the Plan of Reorganization, the Company issued the following debt instruments, which are defined and described in further detail below (in thousands):

Principal Balance

Exit Credit Agreement

Secured Notes Indenture $ 150,000

Secured Convertible Notes Indenture

Miner Equipment Lender Agreements

In addition, approximately $ 4.6 million of finance lease liabilities and $ 15.0 million of debt were reinstated pursuant to the Plan of Reorganization.

Exit Credit Agreement

On the Effective Date, under the terms of the Plan of Reorganization, the Company entered into a credit and guaranty agreement, dated as of January 23, 2024 (the “Exit Credit Agreement”), by and among the Company, as borrower, the guarantors named therein, the lenders party thereto and Wilmington Trust, National Association, as administrative agent and collateral agent, consisting of an $ 80 million first-lien credit facility with certain holders of the Company’s April Convertible Notes and August Convertible Notes (in such capacity, the “Exit Lenders”) equal to (i) a $ 40 million term loan comprised of (x) a $ 20 million initial term loan and (y) a $ 20 million delayed-draw term loan and (ii) a $ 40 million roll-up of the outstanding balance of the April Convertible Notes and August Convertible Notes (the “Exit Facility”).

The Exit Facility will mature on January 23, 2027.

From the Effective Date, cash borrowings under the Exit Facility bear interest at 9.0 % per annum, payable on the first business day of each Fiscal Quarter (as defined in the Exit Credit Agreement), commencing on April 1, 2024.

The Exit Facility amortizes in equal quarterly installments of $ 1.25 million beginning on January 1, 2026.

Upon the occurrence and during the continuance of an Event of Default (as such term is defined in the Exit Credit Agreement), the obligations under the Exit Facility shall automatically bear interest at a rate equal to an additional 2.0 % per annum over the rate otherwise applicable, with such interest being payable in cash on each interest payment date (unless the administrative agent demands prior payment).

Obligations under the Exit Credit Agreement are secured by a valid and perfected lien and security interest on substantially all assets and property of the Company and the guarantors thereof, including a first-priority lien on all new, unencumbered miner equipment purchased by the Company or any subsidiary thereof other than the following, which are each secured by a second priority lien on, (i) Equipment Priority Collateral (as defined below) and (ii) future financed equipment.

Obligations under the Exit Credit Agreement are guaranteed by all direct and indirect subsidiaries of the Company.

The Exit Facility provides for affirmative, negative and financial covenants, that, among other things, limit the ability of the Company and, in certain cases, certain of the Company’s subsidiaries, to incur more indebtedness;

pay dividends, redeem stock or make other distributions;

make investments;

grant or permit certain liens;

transfer or sell assets;

merge or consolidate;

and enter into certain transactions with our affiliates.

The Exit Facility also imposes financial maintenance covenants in the form of a maximum leverage ratio and minimum liquidity requirements.

The Exit Facility contains certain events of default, including, without limitation, nonpayment of principal, nonpayment of interest, fees or other obligations after three business days, bankruptcy events of the Company or any of its subsidiaries and certain changes of control.

Secured Notes Indenture

On the Effective Date, under the terms of the Plan of Reorganization, the Company issued $ 150.0 million aggregate principal amount of senior secured notes due 2028 (the “Secured Notes”) pursuant to a secured notes indenture (the “Secured Notes Indenture”) among (i) the Company, as the issuer, (ii) the guarantors named therein and (iii) Wilmington Trust, National Association, as trustee and collateral agent (the “Secured Notes Agent”).

The maturity date of the Secured Notes is January 23, 2028.

The Secured Notes bear interest at a rate of 12.5 % per annum, payable on March 15, June 15, September 15 and December 15 of each year, beginning on June 15, 2024.

There is no amortization on the New Secured Notes prior to maturity.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

The Secured Notes are secured by a valid and perfected second lien and security interest on substantially all assets of the Company and the guarantors thereof, which liens are junior in priority to liens securing the Exit Facility and are subject to the terms of the New Intercreditor Agreement.

The Secured Notes are guaranteed by all direct and indirect subsidiaries of the Company.

The Company is entitled to prepay the notes prior to maturity.

If the notes are prepaid after the first year (including in the event that the notes are accelerated), or if the notes are not paid when due at the stated maturity, the Company is required to pay a premium on the outstanding principal amount equal to:

(a) 1.00 % of the aggregate principal amount of the notes then outstanding, if the notes are prepaid on or after the first anniversary of the Issue Date (as such term is defined in the Secured Notes Indenture) and prior to the second anniversary of the Issue Date, (b) 2.00 % of the aggregate principal amount of the notes then outstanding, if the notes are prepaid on or after the second anniversary of the Issue Date and prior to the third anniversary of the Issue Date and (c) 3.00 % of the aggregate principal amount of the notes then outstanding, if the notes are prepaid on or after the third anniversary of the Issue Date or if the notes are not paid when due at maturity, in each case whether such payment is made before or after an event of default or an acceleration (including any acceleration as a result of an insolvency proceeding) of all or part of the notes.

No prepayment premium shall be applicable in connection with any prepayment, repayment or refinancing that occurs prior to the first anniversary of the Issue Date.

The Secured Notes Indenture contains affirmative and negative covenants consistent with those in the Exit Facility and the Secured Convertible Notes Indenture that, among other things, limit the ability of the Company and, in certain cases, certain of the Company’s subsidiaries to incur more indebtedness;

pay dividends, redeem stock or make other distributions;

make investments;

grant or permit certain liens;

transfer or sell assets;

merge or consolidate;

and enter into certain transactions with its affiliates.

The Secured Notes Indenture contains certain events of default, including, without limitation, nonpayment of principal, nonpayment of fees, interest or other obligations after three business days, violations of the covenants (subject, in the case of certain affirmative covenants, to certain grace periods), and bankruptcy events of the Company or any of its subsidiaries.

Secured Convertible Notes Indenture

On the Effective Date, under the terms of the Plan of Reorganization, the Company issued $ 260.0 million aggregate principal amount of secured convertible notes due 2029 (the “Secured Convertible Notes”) pursuant to a secured convertible notes indenture (the “Secured Convertible Notes Indenture”) among (i) Core Scientific, Inc., as the issuer, (ii) the guarantors party thereto and (iii) Wilmington Trust, National Association, as trustee and as collateral agent for the Secured Convertible Notes (in such capacity, the “Secured Convertible Notes Agent”).

The Secured Convertible Notes were issued to holders of the Company’s April Convertible Notes and August Convertible Notes.

The maturity date of the Secured Convertible Notes is January 23, 2029.

The Secured Convertible Notes bear interest payable quarterly on March 15, June 15, September 15 and December 15, beginning on June 15, 2024, at the Company’s option, (i) in cash at a rate of 10 % per annum, or (ii) in cash at a rate of 6 % of per annum and in stock at a rate of 6 % of per annum (the “Cash/PIK Interest”);

provided that the payable-in-stock portion of the Cash/PIK Interest is payable in New Common Stock using a price equal to the volume weighted average price of the New Common Stock for the 20 -consecutive trading day period immediately preceding the date that is three business days prior to the applicable interest payment date.

The Secured Convertible Notes are secured by a valid and perfected third lien and security interest on substantially all assets of the Company and the guarantors thereof, and which liens are junior in priority to liens securing the Exit Facility and Secured Notes and are subject to the terms of the New Intercreditor Agreement.

The Secured Convertible Notes are guaranteed by all direct and indirect subsidiaries of the Company.

Upon the occurrence of a Fundamental Change (as such term is defined in the Secured Convertible Notes Indenture), the holders of the Secured Convertible Notes have the right to require the Company to purchase all or any portion of such holder’s Secured Convertible Notes at the principal amount thereof plus accrued interest to the repurchase date.

Holders may elect to convert the Secured Convertible Notes into shares of New Common Stock at any time prior to maturity at an initial conversion rate of 171.48 shares of New Common Stock per $1,000 principal amount of Secured Convertible Notes (equal to a conversion price of $ 5.8317 per share of New Common Stock), which the Company may deliver in cash, New Common Stock or a combination thereof.

The conversion price is subject to anti-dilution adjustments upon (among other triggering events) the occurrence of certain dilutive transactions, including share dividends, splits, combinations and reclassification.

The Secured Convertible Notes also automatically convert into New Common Stock if the volume weighted average price for each day for any 20 consecutive trading days is greater than or equal to 133.6 % of the as-adjusted conversion price.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

The Secured Convertible Notes Indenture contains affirmative and negative covenants consistent with those in the Exit Facility and the Secured Notes Indenture that, among other things, limit the ability of the Company and, in certain cases, certain of the Company’s subsidiaries to incur more indebtedness;

pay dividends, redeem stock or make other distributions;

make investments;

grant or permit certain liens;

transfer or sell assets;

merge or consolidate;

and enter into certain transactions with its affiliates.

The Secured Convertible Notes Indenture contains certain events of default, including, without limitation, nonpayment of principal, nonpayment of interest, fees or other obligations after three business days, and bankruptcy events of the Company or any of its subsidiaries.

Miner Equipment Lender Agreements

On the Effective Date, under the terms of the Plan of Reorganization, the Company entered into separate New Miner Equipment Lender Agreements (Election 2) with each Holder of an Allowed Miner Equipment Lender Secured Claim that is a Settling Miner Equipment Lender that elected on its Ballot (as defined in the RSA) to receive and is receiving the Miner Equipment Lender Treatment Election 2 (the “Election 2 Miner Equipment Facility Lenders”), in each case, in the principal amount of eighty percent ( 80 %) of each applicable Holders’ Allowed Miner Equipment Lender Claim as of the Effective Date (the “Miner Equipment Lender Facility”).

The maturity date on the Miner Equipment Lender Facility is January 23, 2029.

Loans issued under the Miner Equipment Lender Facility shall accrue interest (1) from the Effective Date to and including the second anniversary of the Effective Date, (x) if the Company does not deliver an Election Notice (as defined below), at a rate of 13.0 % per annum and shall be payable 3.0 % in cash interest and 10.0 % paid-in-kind, and (y) if the Company delivers a written notice to the Election 2 Miner Equipment Facility Lenders five (5) business days prior to the due date of any interest payment during this period (an “Election Notice”), the Company may elect to have interest accrue at either (a) 12.0 % per annum, payable 5.0 % in cash and 7.0 % paid-in-kind or (ii) 8.0 % per annum, payable in cash and (2) following the second anniversary of the Effective Date, at a rate of 10.0 % per annum, payable in cash.

Upon the occurrence and during the continuance of an Event of Default (as such term is defined in the New Miner Equipment Lender Agreements (Election 2)), the obligations under the Miner Equipment Lender Facility may, at the option of the Election 2 Miner Equipment Facility Lenders, accrue interest at a rate equal to an additional 2.0 % per annum over the rate otherwise applicable, with such interest being payable in cash on demand.

Loans issued under the Miner Equipment Lender Facility are secured by a first-priority, duly-perfected and validly enforceable lien on (i) the collateral securing each Election 2 Miner Equipment Facility Lenders’ existing equipment loan/lease and (ii) new, non-financed miners acquired by the Company after the Effective Date, in an aggregate amount of up to $ 18,204,559 (collectively, the “Equipment Priority Collateral”).

On the Effective Date, under the terms of the Plan of Reorganization, each Miner Equipment Facility Lender entered into a separate intercreditor agreement with the Secured Convertible Notes Agent (as defined below), the Secured Notes Agent (as defined below) and the Exit Agent with respect to the Equipment Priority Collateral.

The Miner Equipment Lender Facility contains customary covenants, representations and warranties.

Warrant Agreement

On the Effective Date and pursuant to the Plan of Reorganization and the Confirmation Order, the Company entered into a warrant agreement dated as January 23, 2024, (the “Warrant Agreement”) among the Company and Computershare Inc., a Delaware corporation and its affiliate, Computershare Trust Company, N.A., a federally chartered trust company (collectively, in such capacity, the “Warrant Agent”).

Pursuant to the Warrant Agreement, the Company was authorized to issue (i) an aggregate of 98,313,313 warrants, each exercisable for one share of New Common Stock at an exercise price of $ 6.81 per share (the “Tranche 1 Warrants”) and (ii) an aggregate of 81,927,898 warrants, each exercisable for one share of New Common Stock at an exercise price of $ 0.01 per share (the “Tranche 2 Warrants” and, together with the Tranche 1 Warrants, the “Warrants”).

Pursuant to the Plan of Reorganization, holders of the Company’s previous common stock received, for each share of the Company’s previous stock held, 0.253244 Tranche 1 Warrants and 0.211037 Tranche 2 Warrants.

Each whole Tranche 1 Warrant entitles the registered holder to purchase one whole share of New Common Stock at an exercise price of $ 6.81 per share (the “Tranche 1 Exercise Price”).

Each whole Tranche 2 Warrant entitles the registered holder to purchase one whole share of New Common Stock at an exercise price of $ 0.01 per share at any time following the time the volume weighted average price per share of New Common Stock equals or exceeds $ 8.72 per share on each trading day for 20 consecutive trading days (the “TEV Triggering Event”).

The Tranche 1 Exercise Price and the price per share used to determine a TEV Triggering Event are subject to certain adjustments as set forth in the Warrant Agreement.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

The Tranche 1 Warrants will expire on January 23, 2027, and the Tranche 2 Warrants will expire on January 23, 2029, each at 5:00 p.m., New York City time, or earlier upon the occurrence of certain events as set forth in the Warrant Agreement.

The Warrant Agreement provides that the Warrant Agreement, with respect to the Tranche 1 Warrants or Tranche 2 Warrants, may be amended with the prior written consent of holders holding a majority of the shares then issuable upon exercise of the Tranche 1 Warrants or Tranche 2 Warrants then outstanding, as applicable;

provided, however, that any amendment or supplement to the Warrant Agreement that would reasonably be expected to materially and adversely affect any right of a holder of Warrants shall require the written consent of such holder.

In addition, the consent of each holder of Warrants affected shall be required for any amendment pursuant to which the applicable exercise price would be increased, the number of shares issuable upon exercise of Warrants would be decreased (other than pursuant to adjustments provided in the Warrant Agreement) or the applicable expiration date would be revised to an earlier date;

provided, however, that the Company and the Warrant Agent may amend the Warrant Agreement without the consent of holders of Warrants to (i) to cure any ambiguity;

(ii) correct any defective provision;

or (iii) make any other provisions with respect to matters or questions arising under the Warrant Agreement as long as the new provisions do not adversely affect (other than a de minimis adverse effect) the interest of holders of Warrants.

The Warrants may be exercised upon prior written notice of such election, payment of the applicable exercise price (together with any applicable taxes and governmental charges) and, with respect to Warrants held through the book-entry facilities of the Depository (as defined in the Warrant Agreement), surrender of the warrant certificate on or prior to the settlement date.

The Tranche 2 Warrants may be exercised on a cashless basis, pursuant to which the holder shall be entitled to receive a number of shares of New Common Stock equal to one share of New Common Stock multiplied by a fraction equal to (x) the fair market value (as of the business day immediately preceding the date on which the exercise notice was delivered) of one share of New Common Stock, minus the applicable exercise price, divided by (y) such fair market value.

Holders of Warrants do not have the rights or privileges of holders of New Common Stock or any voting rights until they exercise their Warrants and receive shares of New Common Stock.

After the issuance of shares of New Common Stock upon exercise of the Warrants, each holder will be entitled to the same rights as holders of New Common Stock.

Pursuant to the Warrant Agreement, holders of Warrants may exercise their Warrants only for a whole number of shares of New Common Stock.

If, upon exercise, a holder would be entitled to receive a fractional interest in a share, such fractional interest will be rounded to the next higher whole number of the number of shares of New Common Stock to be issued to the holder.

Effective January 24, 2024, the Nasdaq Stock Market LLC has approved listing of the Tranche 1 Warrants and Tranche 2 Warrants on the Nasdaq Global Market, which will trade under the symbols “CORZW” and “CORZZ,” respectively.

Contingent Value Rights Agreement

On the Effective Date, under the terms of the Plan of Reorganization, the Company entered into a contingent value rights agreement (the “Contingent Value Rights Agreement”) among (i) the Company and (ii) Computershare Inc., a Delaware corporation and its affiliate, Computershare Trust Company, N.A., a federally chartered trust company (collectively, in such capacity, the “CVR Agent”).

Pursuant to the Contingent Value Rights Agreement, the Company issued 51,783,625 contingent value rights (the “CVRs”) to holders of the Company’s April Convertible Notes and August Convertible Notes who received New Common Stock pursuant to the Convertible Noteholders Equity Distribution (in such capacity, the “Payees”) in an aggregate amount of 51,783,625 shares of New Common Stock (the “Corresponding New Common Stock”).

The CVRs require the Company to make payments to each Payee, of:

(i) at the first testing date, cash equal to such Payee’s pro rata share (the “Year 1 Contingent Payment Obligation”) of the lesser of (a) $ 43,333,333.33 and (b) the difference between (1) $ 260,000,000 and (2) the fair market value of the Corresponding New Common Stock (the “First Anniversary Payment Amount”);

provided that the Year 1 Contingent Payment Obligation will be extinguished if the fair market value of the Corresponding New Common Stock is equal to or in excess of $ 260,000,000 with respect to the first testing date;

(ii) at the second testing date, cash or New Common Stock (or a combination of cash and New Common Stock), in the Company’s sole discretion, equal to such Payee’s pro rata share (the “Year 2 Contingent Payment Obligation”) of the lesser of (a) $ 43,333,333.33 and (b) the difference between (1) $ 260,000,000 minus the First Anniversary Payment Amount and (2) the fair market value of the Corresponding New Common Stock (the “Second Anniversary Payment Amount”);

provided that the Year 2 Contingent Payment Obligation will be extinguished if the fair market value of the Corresponding New Common Stock is equal to or in excess of $ 260,000,000 minus the First Anniversary Payment Amount, if any, with respect to the second testing date;

(iii) at the third testing date, cash or New Common Stock (or a combination of cash and New Common Stock), in the Company’s sole discretion, equal to such Payee’s pro rata share (the “Year 3 Contingent Payment Obligation”) of the lesser of (a)

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

$ 43,333,333.33 and (b) the difference between (1) $ 260,000,000 minus the sum of the First Anniversary Payment Amount and the Second Anniversary Payment Amount and (2) the fair market value of the Corresponding New Common Stock (the “Third Anniversary Payment Amount”);

provided that the Year 3 Contingent Payment Obligation will be extinguished if the fair market value of the Corresponding New Common Stock is equal to or in excess of $ 260,000,000 minus (1) the First Anniversary Payment amount, if any and (2) the Second Anniversary Payment Amount, if any, with respect to the third testing date.

In each case, the fair market value of the Corresponding New Common Stock is determined by the product of (i) the volume weighted average of the closing price calculated based on the weighted average price in the consecutive 60-day period immediately prior to the applicable testing date, multiplied by (ii) Corresponding New Common Stock as of the applicable testing date.

Equity Interests

On the Effective Date, all equity interests in the Company that existed immediately prior to the Effective Date were cancelled, including the Company’s then-existing common stock and warrants, and the Company issued or caused to be issued the New Common Stock in accordance with the terms of the Plan of Reorganization.

Debt Securities and Agreements

On the Effective Date, the obligations of the Company under the Company’s April Convertible Notes, August Convertible Notes, replacement debtor-in-possession credit agreement, stock certificates, book entries, and any other certificate, share, note, bond, indenture, purchase right, option, warrant, or other instrument or document, directly or indirectly, evidencing or creating any indebtedness or obligation of or ownership interest in the Debtors giving rise to any claim or interest (except such certificates, notes or other instruments or documents evidencing indebtedness or obligations of, or interests in, the Debtors that are specifically reinstated pursuant to the Plan of Reorganization) were cancelled, and the duties and obligations of all parties thereto were deemed satisfied in full, canceled, released, discharged, and of no force or effect.

New Common Stock and Preferred Stock

The Company is authorized to issue 10,000,000,000 shares of New Common Stock and 2,000,000,000 shares of preferred stock (the “Preferred Stock”), each having a par value of $ 0.00001 per share.

The rights and preferences of the New Common Stock shall at all times be subject to the rights of the Preferred Stock as may be set forth in one more certificates of designations filed with the Secretary of State of the State of Delaware from time to time in accordance with the Delaware General Corporation Law and the Charter.

The number of authorized shares of Preferred Stock and New Common Stock may be increased or decreased from time to time by the affirmative vote of the holders of at least a majority of the voting power of the Company’s then outstanding shares of stock entitled to vote thereon, voting together as a single class, and no vote of the holders of any of the New Common Stock or the Preferred Stock voting separately as a class or series shall be required therefor.

The Charter authorized the Board of Directors to provide for the issuance of a share or shares of Preferred Stock in one or more series and to fix for each such series (i) the number of shares constituting such series and the designation of such series, (ii) the voting powers (if any) of the shares of such series, (iii) the powers, preferences, and relative, participating, optional or other special rights of the shares of each such series, and (iv) the qualifications, limitations, and restrictions thereof.

The authority of the Board of Directors with respect to the Preferred Stock shall include, but not be limited to, determination of (i) the number of shares constituting any series, (ii) the dividend rate or rates on the shares of any series, (iii) the voting rights, if any, of such series and the number of votes per share, (iv) conversion privileges, (v) whether the shares of any series shall be redeemable, (vi) whether any series shall have a sinking fund for the redemption or purchase of shares of such series, (vii) the rights of the shares in the event of voluntary or involuntary liquidation, dissolution or winding up of the Company and (viii) any other powers, preferences, rights, qualifications, limitations and restrictions of any series.

Management Incentive Plan

In accordance with the Plan of Reorganization, the Board of Directors will adopt an equity-based management incentive plan (the “Management Incentive Plan”), under which up to ten percent of the New Common Stock issued and outstanding, on a fully diluted basis, on the date of the Effective Date may be issued to members of the Company’s management.

The Confirmation Order authorized and approved any (i) necessary action with respect to the Management Incentive Plan and (ii) reservation for issuance or share issuances pursuant to the Management Incentive Plan.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

The Board of Directors will adopt the Management Incentive Plan on or as soon as reasonably practicable after the Effective Date, but in any event no later than ninety days after the Effective Date.

The participants in the Management Incentive Plan, the timing and allocations of the awards to participants, and the other terms and conditions of such awards (including, but not limited to, vesting, exercise prices, base values, hurdles, forfeiture, repurchase rights and transferability) shall be determined by the Board of Directors in its discretion.

GUC Contingent Value Rights

On the Effective Date, pursuant to the Plan of Reorganization, the Company issued (i) 20,232,308 shares of New Common Stock, with an aggregate value, based on Plan Value, of $ 101,584,257 , to holders of Allowed General Unsecured Claims (the “GUC Equity Distribution”) and (ii) contingent value rights (the “GUC CVRs”) to Holders of Allowed General Unsecured Claims (in such capacity, the “GUC Payees”).

Within 45 days of the GUC CVR Testing Date (as defined below), the Company will be required to pay to each GUC Payee New Common Stock in an amount equal to the lesser of (i) such GUC Payee’s pro rata share of the New Common Stock with an aggregate value, based on Plan Value, of $ 7,100,000 and (ii) the difference between (a) the GUC Equity Distribution at Plan Value and (b) the value of the GUC Equity Distribution as implied by the volume weighted average of the closing price of the GUC Equity Distribution during the 60 trading days prior to the GUC CVR Testing Date;

provided that, to the extent that the value of the GUC Equity Distribution, as implied by the volume weighted average of the closing price during any 20 trading days over any consecutive 30 trading day period during the GUC CVR Testing Period, is equal to or in excess of the GUC Equity Distribution at Plan Value, the Company shall not owe any amounts to the GUC Payees and the GUC CVRs shall be immediately extinguished.

The testing period (the “GUC CVR Testing Period”) began on the Effective Date and will end on the date that is 18 months following the Effective Date (the “GUC CVR Testing Date”).

Federal Income Tax Consequences

As of December 31, 2023, the Tax Group had net operating loss (“NOL”) carryforwards of approximately $ 330.2 million (all of which are post-2017 NOLs that are subject to an 80% taxable income limitation) and certain other tax attributes before taking into account the implementation of the Plan.

An ownership change is not expected with the implementation of the Plan which would, if it occurred, limit our ability to utilize our NOL carryforwards under Sec.

382 of the Internal Revenue Code (the “Tax Code”).

However, certain future equity trading activity and other actions could result in an ownership change of the Tax Group independent of the Plan, which could adversely affect the ability of the Debtors to utilize their tax attributes.

In addition, as discussed below, in connection with and as a result of the implementation of the Plan, the amount of the Tax Group’s NOL carryforwards, and possibly certain other tax attributes, may be reduced.

In general, the Tax Code provides that a debtor in a bankruptcy case must reduce certain of its tax attributes - such as NOL carryforwards and current year NOLs, capital loss carryforwards, tax credits, and tax basis in assets - by the amount of any cancellation of debt (“COD”) incurred pursuant to a confirmed chapter 11 plan.

Based on the Plan, the Tax Group is expected to incur COD income for U.S.

federal income tax purposes as a result of the implementation of the Plan and, thus, expect that the Tax Group’s NOL carryforwards or other tax attributes will be reduced as a result of any COD incurred.

163(l) generally disallows a corporate issuer's interest deductions with respect to debt instruments payable in equity of the issuer or a related party.

A debt instrument is considered “payable in equity” if by the terms of the instrument, or at the option of an issuer or related party, a substantial amount of the principal or interest is (1) required to be paid in or converted into equity, or (2) determined by reference to the value of equity.

In addition, debt is considered payable in equity if the overall arrangement is such that it is “reasonably expected” that the issuer will pay in or by reference to equity, even if the issuer's payment in or by reference to equity is conditioned on events outside the issuer's control.

Pursuant to the current terms of certain new debts, the Debtors may pay a portion of the interest in stock and, under certain circumstances, require the conversion of such notes into stock.

In addition, a holder of the respective debts may at its option convert the notes into stock.

The proper application of Sec.

163(l) in the case of the new debts is subject to varying interpretations.

However, based on the current terms of the new debts, the Debtors expect disallowance of deductibility of certain interest with respect to the new debts under Sec.

CoreWeave Agreement

In March 2024, the Company entered into a hosting agreement with CoreWeave, Inc.

to supply up to 16 MW of data center infrastructure.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Consolidated Financial Statements

Austin Lease Agreement

In February 2024, the Company entered into a lease agreement for a data center in Austin, Texas with a current operating capacity of 12 MW (the “Austin Lease”).

The Austin Lease term is eight years .

Total lease payments are expected to be $ 97.8 million.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosures

As previously reported in our Current Report on Form 8-K filed with the SEC on October 28, 2022 (the “October 28 th Form 8-K”), at a meeting held on October 24, 2022, the Audit Committee of the Board of Directors of Core Scientific, Inc.

(the “Company”) approved the engagement of Marcum LLP (“Marcum”) as its independent registered public accounting firm for the fiscal year ending December 31, 2022, subject to Marcum’s completion of their client acceptance procedures.

At the same meeting, the Audit Committee approved the dismissal of Ernst & Young LLP (“EY”) as independent registered public accounting firm of the Company effective upon the date of the filing of the quarterly report on Form 10-Q for the quarter ending September 30, 2022.

The report of EY on the financial statements of Core Scientific Holding Co.

and its subsidiaries (“Legacy Core”) for the fiscal years ended December 31, 2021 and December 31, 2020, included in the Form 8-K/A of Core Scientific, Inc., which was filed with the SEC on March 31, 2022, did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.

In connection with the audits of Legacy Core’s consolidated financial statements for each of the two fiscal years ended December 31, 2021 and December 31, 2020, and for the Company’s financial statements in the subsequent interim periods through the date of the October 28 th Form 8-K there were no (i) disagreements, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions, between the Company and EY on any matters of accounting principles or practices, financial statement disclosure, or auditing scope and procedure, which, if not resolved to the satisfaction of EY, would have caused EY to make reference to the matter in their reports for such fiscal years, and (ii) no “reportable events” (as that term is defined in Item 304(a)(1)(v) of Regulation S-K), except for the following material weaknesses identified in connection with the audit of Legacy Core’s consolidated financial statements for the two fiscal years ended December 31, 2021 and December 31, 2020 and the review of the Company’s consolidated financial statements for the interim period ended March 31, 2022 and the interim period ended June 30, 2022 in Core Scientific’s internal control over financial reporting related to (i) insufficient accounting and supervision with respect to the appropriate level of technical accounting experience and appropriate processes and procedures to assess and apply the relevant accounting framework, particularly in new or non-routine areas, (ii) a lack of appropriate communication and recordkeeping, particularly related to equity transactions, (iii) design deficiencies in internal controls necessary to enforce appropriate segregation of duties for manual journal entries to our books and records, and (iv) design deficiencies in internal controls necessary to enforce appropriate segregation of duties for our digital asset wallets.

The Company provided EY with a copy of the disclosures it is making in the October 28 th Form 8-K and requested that EY furnish the Company a letter addressed to the U.S.

Securities and Exchange Commission stating whether it agrees with the above statements.

A copy of EY’s letter, dated October 28, 2022, was filed as Exhibit 16.1 to the October 28 th Form 8-K.

Subsequently, as reported on our Current Report on Form 8-K/A filed with the SEC on November 23, 2022 (the “November 23 rd 8-K/A), on November 22, 2022, Marcum completed its client acceptance procedures.

During the Company’s two most recent fiscal years ended December 31, 2021 and 2020, and the subsequent interim period through November 22, 2022, neither the Company nor anyone acting on its behalf consulted with Marcum regarding either:

(i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, in connection with which either a written report or oral advice was provided to the Company that Marcum concluded was a factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue;

or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K).

Not applicable.

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 8. Financial Statements and Supplementary Data