What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-09 compared with 2023-11-06 · 778 added, 712 removed, 345 unchanged (81% of the section changed)

1 unchanged sentence

Core Scientific, Inc.

(Debtor-in-Possession)

Consolidated Balance Sheets

(in thousands, except par value)

September 30,

2024 December 31,

3 unchanged sentences

Restricted cash 16,151 19,300

Accounts receivable, net of allowance of $ 8,724 and $ 8,724 , respectively

Accounts receivable from related parties — 23

Accounts receivable

Digital assets — 2,284

Prepaid expenses and other current assets 27,937 24,022

Assets held for sale 36,069 —

Total Current Assets 143,320 97,016

9 unchanged sentences

Deferred revenue 9,250 9,830

Deferred revenue from related parties — 496

Operating lease liabilities, current portion 2,619 77

1 unchanged sentence

Notes payable, current portion

23,333 124,358

Contingent value rights, current portion

Total Current Liabilities 138,145 488,423

1 unchanged sentence

Finance lease liabilities, net of current portion 1,170 35,745

Notes payable, net of current portion 679,559 —

Convertible and other notes payable, net of current portion

556,573 684,082

Contingent value rights, net of current portion

Warrant liabilities

Other noncurrent liabilities 11,040 —

4 unchanged sentences

Stockholders’ Deficit:

Preferred stock;

$ 0.00001 par value;

2,000,000 shares authorized;

none issued and outstanding

Common stock;

$ 0.00001 par value;

10,000,000 shares authorized at both September 30, 2023 and December 31, 2022;

385,868 and 375,225 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

10,000,000 shares authorized at March 31, 2024 and December 31, 2023;

182,237 and 386,883 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital 1,891,011 1,823,260

4 unchanged sentences

Core Scientific, Inc.

(Debtor-in-Possession)

Consolidated Statements of Operations

(in thousands, except per share amounts)

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

Digital asset mining revenue

$ 149,959 $ 98,026

1 unchanged sentence

Hosting revenue from related parties

2,828 9,185 10,062 22,659

Equipment sales to customers

— 7,468 — 11,391

Equipment sales to related parties

— 29,693 — 67,269

Digital asset mining revenue

83,056 80,495 278,164 323,337

Total revenue

1 unchanged sentence

Cost of revenue:

Cost of hosting services 24,882 44,975 64,187 119,850

Cost of equipment sales — 27,917 — 63,993

Cost of digital asset mining 81,564 72,676

Cost of hosting services 20,081 16,198

Total cost of revenue

101,645 88,874

Gross profit (loss)

77,646 31,781

Gain from sales of digital assets

363 11,036 2,358 25,007

Impairment of digital assets — ( 1,056 )

Impairment of goodwill and other intangibles — ( 268,512 ) — ( 1,059,265 )

Impairment of property, plant and equipment — ( 59,259 ) — ( 59,259 )

Losses on exchange or disposal of property, plant and equipment ( 340 ) — ( 514 ) ( 13,057 )

Change in fair value of energy derivatives

Losses on disposal of property, plant and equipment

Operating expenses:

Research and development

2,253 6,192 5,308 24,305

Sales and marketing

1,041 39 3,133 11,675

General and administrative

2 unchanged sentences

16,924 24,187

Operating (loss) income

( 12,044 ) ( 401,374 ) 5,027 ( 1,473,474 )

Non-operating expenses, net:

Gain on debt extinguishment

Operating income

Non-operating (income) expenses, net:

Loss (gain) on debt extinguishment

50 ( 20,761 )

Interest expense, net

2,196 25,942 2,317 74,734

Fair value adjustment on convertible notes — ( 4,123 ) — 186,853

Fair value adjustment on derivative warrant liabilities — ( 521 ) — ( 32,985 )

Reorganization items, net ( 111,439 ) 31,559

Other non-operating (income) expenses, net

Change in fair value of warrant and contingent value rights

Other non-operating expense (income), net

1,746 ( 3,069 )

Total non-operating expenses, net

Total non-operating (income) expenses, net

( 155,670 ) 7,886

Loss before income taxes

Income (loss) before income taxes

210,897 ( 284 )

Income tax expense

114 10,642 347 4,398

$ ( 41,146 ) $ ( 434,792 ) $ ( 50,794 ) $ ( 1,711,471 )

Net loss per share (Note 11):

$ ( 0.11 ) $ ( 1.23 ) $ ( 0.13 ) $ ( 5.38 )

Net income (loss)

$ 210,691 $ ( 388 )

Net income (loss) per share (Note 12):

Weighted average shares outstanding:

3 unchanged sentences

Core Scientific, Inc.

(Debtor-in-Possession)

Consolidated Statements of Comprehensive Loss

(in thousands)

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Net loss $ ( 41,146 ) $ ( 434,792 ) $ ( 50,794 ) $ ( 1,711,471 )

Other comprehensive income, net of income taxes:

Change in fair value attributable to instrument-specific credit risk of convertible notes measured at fair value under the fair value option, net of tax effect of $ — , $ — , $ — and $ — respectively

— 47,832 — 83,578

Total other comprehensive income, net of income taxes

— 47,832 — 83,578

Comprehensive loss $ ( 41,146 ) $ ( 386,960 ) $ ( 50,794 ) $ ( 1,627,893 )

See accompanying notes to unaudited consolidated financial statements.

Core Scientific, Inc.

(Debtor-in-Possession)

Consolidated Statements of Changes in Stockholders’ (Deficit) Equity

For the Three and Nine Months Ended September 30, 2023

Consolidated Statements of Changes in Stockholders’ Deficit

For the Three Months Ended March 31, 2024

(in thousands)

3 unchanged sentences

Stockholders’

(Deficit) Equity

Shares Amount

Balance at July 1, 2023 379,091 $ 36 $ 1,790,921 $ ( 2,183,398 ) $ ( 392,441 )

Net loss — — — ( 41,146 ) ( 41,146 )

Stock-based compensation — — 14,861 — 14,861

Restricted stock awards issued, net of shares withheld for tax withholding obligations 7,154 — — — —

Restricted stock awards forfeited ( 377 ) — — — —

Balance at September 30, 2023 385,868 $ 36 $ 1,805,782 $ ( 2,224,544 ) $ ( 418,726 )

Balance at January 1, 2024 386,883 $ 36 $ 1,823,260 $ ( 2,420,237 ) $ ( 596,941 )

Net loss — — — ( 50,794 ) ( 50,794 )

Cumulative effect of adoption of ASU 2023-08, Accounting for and Disclosure of Crypto Assets

Balance at January 1, 2024, adjusted

386,883 36 1,823,260 ( 2,420,213 ) ( 596,917 )

— — — 210,691 210,691

Stock-based compensation — — ( 1,060 ) — ( 1,060 )

Restricted stock awards issued, net of shares withheld for tax withholding obligations 11,020 — — — —

Restricted stock awards forfeited ( 377 ) — — — —

Balance at September 30, 2023 385,868 $ 36 $ 1,805,782 $ ( 2,224,544 ) $ ( 418,726 )

See accompanying notes to unaudited consolidated financial statements.

Core Scientific, Inc.

(Debtor-in-Possession)

Consolidated Statements of Changes in Contingently Redeemable Convertible Preferred Stock and Stockholders’ (Deficit) Equity

For the Three and Nine Months Ended September 30, 2022

(in thousands)

Contingently Redeemable

Convertible Preferred

Stock Common Stock Additional

Paid-In Capital Accumulated

Deficit Accumulated Other Comprehensive Income

Stockholders’

(Deficit) Equity

Shares Amount Shares Amount

Balance at July 1, 2022

Cancellation of common stock in connection with emergence

( 386,883 ) ( 36 ) 36 — —

Issuance of new common stock in connection with emergence

152,497 2 296,494 — 296,496

Other comprehensive income, net of $ — income taxes

Issuance of new common stock under the Equity Rights Offering

15,649 — 55,000 — 55,000

Stock-based compensation — — — — 29,884 — — 29,884

Restricted stock awards issued, net of shares withheld for tax withholding obligations — — 4,897 — ( 2,349 ) — — ( 2,349 )

Restricted stock awards forfeited — — ( 2,268 ) — — — — —

Issuances of common stock - equity line of credit — — 7,315 1 13,039 — — 13,040

Issuances of common stock - financing transaction fees — — 1,285 — 2,960 — — 2,960

Balance at September 30, 2022

Issuance of new common stock for the Equity Rights Offering backstop commitment

2,111 — 5,475 — 5,475

Contingently Redeemable

Convertible Preferred

Stock Common Stock Additional

Issuance of new common stock for Bitmain obligation

10,735 — 27,839 — 27,839

Conversion premium on the issuance of the New Secured Convertible Notes

— — 33,202 — 33,202

Issuance of warrants

— — ( 345,856 ) — ( 345,856 )

Exercise of stock options — — 9 — 9

Restricted stock awards issued, net of tax withholding obligations

1,285 — ( 3,388 ) — ( 3,388 )

Restricted stock awards forfeited ( 40 ) — — — —

Balance at March 31, 2024 182,237 $ 2 $ 1,891,011 $ ( 2,209,522 ) $ ( 318,509 )

See accompanying notes to unaudited consolidated financial statements.

Core Scientific, Inc.

Consolidated Statements of Changes in Stockholders’ Deficit

For the Three Months Ended March 31, 2023

(in thousands)

Common Stock Additional

Paid-In Capital Accumulated

Deficit Accumulated Other Comprehensive Income (Loss)

Deficit Total

Stockholders’

Shares Amount Shares Amount

Shares Amount

Balance at January 1, 2023

1 unchanged sentence

— — — ( 388 ) ( 388 )

Other comprehensive income, net of $ — income taxes

— — — — — — 83,578 83,578

Stock-based compensation — — 12,273 — 12,273

Exercise of stock options — — 1,321 — 3,846 — — 3,846

Restricted stock awards issued, net of shares withheld for tax withholding obligations 2,616 — — — —

Restricted stock awards forfeited — — ( 2,268 ) — — — — —

Exercise of convertible notes — — 197 — 1,574 — — 1,574

Cashless exercise of warrants — — 3,001 — — — — —

Issuances of common stock - equity line of credit — — 7,315 1 13,039 — — 13,040

Conversion of contingently redeemable preferred stock to common stock ( 10,826 ) ( 44,476 ) 10,826 1 44,475 — — 44,476

Issuances of common stock - Merger with XPDI — — 30,778 3 163,456 — — 163,459

Issuances of common stock - financing transaction fees — — 1,285 — 2,960 — — 2,960

Issuances of common stock - vendor settlement — — 1,580 — 12,674 — — 12,674

Costs attributable to issuance of common stock and equity instruments - Merger with XPDI — — — — ( 16,642 ) — — ( 16,642 )

Balance at September 30, 2022

Balance at March 31, 2023

377,841 $ 36 $ 1,776,641 $ ( 2,174,138 ) $ ( 397,461 )

1 unchanged sentence

Core Scientific, Inc.

(Debtor-in-Possession)

Consolidated Statements of Cash Flows

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from Operating Activities:

Net income (loss)

$ 210,691 $ ( 388 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 28,996 20,094

2 unchanged sentences

Digital asset mining revenue ( 149,959 ) ( 98,026 )

Deferred income taxes — 3,434

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

Gain on debt extinguishment

Fair value adjustment on derivative warrant liabilities — ( 32,985 )

Fair value adjustment on convertible notes — 210,968

Fair value adjustment on other liabilities — 9,498

Equity line of credit expenses — 1,431

Amortization of debt discount and debt issuance costs — 6,172

Losses on exchange or disposal of property, plant and equipment 514 13,057

Loss (gain) on debt extinguishment

50 ( 20,761 )

Change in fair value of energy derivatives

Change in fair value of warrant liabilities

Change in fair value of contingent value rights

Amortization of debt discount

Losses on disposal of property, plant and equipment

Impairment of digital assets — 1,056

Impairment of goodwill, other intangibles and property, plant and equipment — 1,118,524

Provision for doubtful accounts — 5,943

Gain on sale of digital assets ( 543 ) ( 1,064 )

Non-cash reorganization items

( 143,791 ) —

Changes in operating assets and liabilities:

3 unchanged sentences

Deposits for equipment

( 600 ) ( 66,932 )

Prepaid expenses and other current assets ( 5,989 ) 1,152

2 unchanged sentences

Deferred revenue ( 580 ) ( 8,629 )

Deferred revenue from related parties — ( 65,954 )

Other noncurrent assets and liabilities, net 7,402 ( 302 )

Net cash provided by operating activities

22,174 19,942

Cash flows from Investing Activities:

Purchases of property, plant and equipment ( 31,894 ) ( 1,539 )

Cash acquired in acquisition — —

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

Proceeds from the sale of intangibles — 10,850

Investments in internally developed software ( 840 ) —

Other ( 76 ) ( 330 )

1 unchanged sentence

Cash flows from Financing Activities:

Proceeds from issuance of common stock, net of transaction costs — —

Proceeds from issuance of common stock upon Merger with XPDI, net of transaction costs — 210,534

Proceeds from debt, net of issuance costs — 216,182

Repurchase of common shares to pay employee withholding taxes — ( 31,627 )

Proceeds from issuance of common stock

Proceeds from draw from exit facility

Principal repayments of finance leases ( 3,554 ) —

Principal payments on debt ( 13,702 ) ( 1,021 )

Payment for transaction costs — —

Net cash (used in) provided by financing activities ( 26,352 ) 268,066

Restricted stock tax holding obligations ( 3,390 ) —

Proceeds from exercise of stock options 9 —

Net cash provided by provided by (used in) financing activities

54,363 ( 1,021 )

Net increase in cash, cash equivalents and restricted cash 44,567 17,052

5 unchanged sentences

$ ( 1 ) $ ( 300 )

Cash paid for reorganization items, net

Cash paid for reorganization items

Supplemental disclosure of noncash investing and financing activities:

2 unchanged sentences

Decrease in notes payable in exchange for equipment — ( 38,610 )

Payment-in-kind interest — 24,103

Cashless exercise of warrants — 3,001

Property, plant and equipment obtained in exchange transaction

Property, plant and equipment disposed of through settlements

Purchase of insurance policies financed by short-term note payable

Issuance of notes payable through settlements

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

Reduction in plant, property, and equipment basis related to Bitmain purchase ( 26,101 ) —

Reclass of other current and non-current assets to plant, property, and equipment 8,890 —

Decrease in right-of-use assets due to lease termination ( 6,560 ) —

Increase in right-of-use assets due to lease commencement 70,690 —

Increase in lease liability due to lease commencement 70,690 —

Extinguishment of convertible notes upon emergence ( 559,902 ) —

Extinguishment of accounts payable, accrued expenses, finance lease liability, and notes payable upon emergence ( 321,773 ) —

Cancellation of common stock in connection with emergence ( 37 ) —

Issuance of new common stock in connection with emergence 296,494 —

Issuance of new common stock for Bitmain obligation 27,839 —

Issuance of new common stock for the Equity Rights Offering backstop commitment 5,475 —

Issuance of contingent value rights 86,325 —

Issuance of warrants 345,856 —

Issuance of new secured convertible notes 260,000 —

Issuance of secured notes, net of discount 149,520 —

Issuance of Exit Credit Agreement including $ 1.2 million paid in kind upfront fee

Issuance of miner equipment lender facility loans 52,947 —

Issuance of notes related to settlement 9,092 —

Cumulative effect of adoption of ASU 2023-08, Accounting for and Disclosure of Crypto Assets 24 —

See accompanying notes to unaudited consolidated financial statements.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Unaudited Consolidated Financial Statements

ORGANIZATION AND DESCRIPTION OF BUSINESS

MineCo Holdings, Inc.

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.

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.

completed the acquisition of Blockcap, Inc.

(“Blockcap”).

Prior to its acquisition, Blockcap was one of Old 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.

to Core Scientific, Inc.

(“Core Scientific” or the “Company”).

Core Scientific is a best-in-class, large-scale operator of purpose-built facilities for digital asset mining.

We mine digital assets for our own account and provide colocation hosting services for other large-scale miners at our eight operational data centers in Georgia ( 2 ), Kentucky ( 1 ), North Carolina ( 2 ), North Dakota ( 1 ) and Texas ( 2 ).

Currently, we derive the majority of our revenue from self-mining bitcoin.

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

We are one of the largest blockchain infrastructure, digital asset mining and colocation hosting provider companies in North America.

As of September 30, 2023, we had approximately 1,500 MW of contracted power capacity at our sites, including 500 MW of power allocated to the Muskogee, Oklahoma data center, 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, repair and other infrastructure services necessary to operate, maintain and efficiently mine digital assets.

Core Scientific, Inc.

(“Core Scientific” or the “Company”) is an operator of dedicated, purpose-built facilities for digital asset mining and a premier provider of digital infrastructure, software solutions and services to our third-party customers.

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”).

We operate in two segments:

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

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 colocation 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

“Mining,” consisting of digital asset mining for our own account, and “Hosting,” consisting of our digital infrastructure and third-party hosting business for digital asset mining and specialized Graphics Processing Unit (“GPU”) cloud compute customers.

Our hosting business provides a full suite of services to our digital asset mining and GPU cloud compute customers.

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

We believe our experience in digital asset mining can be applied favorably to the design, development and operation of large-scale data centers configured to optimize the performance of specialized computers for other specific, high-value applications such as cloud computing, machine learning and artificial intelligence.

We intend to look for opportunities to expand our business into these areas using our knowledge, experience and existing infrastructure where favorable market opportunities exist.

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” (“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.

On June 20, 2023 the Debtors filed with the Bankruptcy Court 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 (the “Plan”) and a related Disclosure Statement (the “Disclosure Statement”).

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

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Unaudited Consolidated Financial Statements

economic terms of the Plan (the “Mediated Settlement”).

The Debtors, the Ad Hoc Noteholder Group and the Equity Committee will continue to work and negotiate in good faith to document the Mediated Settlement, resolve certain open issues and revise the Plan and Disclosure Statement to incorporate the terms of the Mediated Settlement.

The Chapter 11 Cases were jointly administered under Case No.

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

For detailed discussion about the Chapter 11 Cases, refer to Note 3 — Chapter 11 Filing and Emergence from Bankruptcy.

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

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

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

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

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2 unchanged sentences

Our consolidated balance sheet as of December 31, 2023, which was derived from our audited consolidated financial statements, and our unaudited interim consolidated financial statements provided herein have been prepared in accordance with the instructions for Form 10-Q.

Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to rules and regulations of the U.S.

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

rules and regulations of the U.S.

Securities and Exchange Commission ("SEC").

However, in our opinion, the disclosures made therein are adequate to make the information presented not misleading.

We believe the unaudited interim financial statements furnished reflect all adjustments which are, in the opinion of management, necessary to present a fair statement of the results for the interim periods presented.

We believe the unaudited interim financial statements herein furnished reflect all adjustments which are, in the opinion of management, necessary to present a fair statement of the results for the interim periods presented.

All of these adjustments are of a normal recurring nature.

1 unchanged sentence

These consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Revision of Previously Issued Financial Statements

See Note 14 — Revision of Previously Issued Financial Statements.

Going Concern

For the nine months ended September 30, 2023, the Company generated a net loss of $ 50.8 million.

The Company had unrestricted cash and cash equivalents of $ 42.1 million as of September 30, 2023, compared to $ 15.9 million as of December 31, 2022.

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.

As of September 30, 2023, the Company had a total stockholders’ deficit of $ 418.7 million.

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

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 a Chapter 11 plan of reorganization (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 (as defined below)) and other motions filed with the Bankruptcy Court throughout the duration of the Chapter 11 Cases, 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, enter into contracts with customers, vendors and suppliers, continue to earn revenue and pay vendors and suppliers in the ordinary course of business.

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

On the Effective Date, the Company emerged from bankruptcy and was no longer considered debtors-in-possession under the Bankruptcy Code.

For detailed discussion about the Chapter 11 Cases and our emergence from bankruptcy, refer to Note 3 — Chapter 11 Filing and Emergence from Bankruptcy.

Liquidity and Financial Condition

For the three months ended March 31, 2024, the Company generated net income of $ 210.7 million.

The Company had unrestricted cash and cash equivalents of $ 98.1 million as of March 31, 2024, compared to $ 50.4 million as of December 31, 2023.

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 through revenue from contracts with customers.

As of March 31, 2024, the Company had net working capital of $ 5.2 million and a total stockholders’ deficit of $ 318.5 million.

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 eliminated the reported working capital deficit at December 31, 2023.

When combined with the additional liquidity of the available delayed-draw term loan and the expected cash flows from operations, management has concluded that as of March 31, 2024, the Company’s capital, liquidity and cash flow from operations is sufficient to fund its operations and debt service obligations for at least the next 12 months from the date these consolidated financial statements were issued.

Digital Assets

Currently the Company is required by its existing debt agreements to sell bitcoin it earns within ten days of receipt.

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

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

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

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

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

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

The Company’s digital assets are within the scope of ASU 2023-08 and the Company elected to early adopt the new standard effective January 1, 2024.

The transition guidance requires a cumulative-effect adjustment as of the beginning of the current fiscal year for any difference between the carrying amount of the Company’s digital assets and fair value.

As a result of the Company’s early adoption, the Company recorded a $ 24 thousand increase to Digital assets and a $ 24 thousand decrease to Accumulated deficit on the Consolidated Balance Sheets as of January 1, 2024.

The Company did not have any digital asset holdings as of March 31, 2024.

The Company’s digital assets have active markets with observable prices and are considered Level 1 fair value measurements.

The following table presents a roll-forward of total digital

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Unaudited Consolidated Financial Statements

assets for the three months ended March 31, 2024, based on the fair value model under ASU 2023-08, and the three months ended March 31, 2023 (in thousands):

March 31, 2024 March 31, 2023

Digital assets, beginning of period

$ 2,284 $ 724

Cumulative effect of ASU 2023-08, adopted January 1, 2024

Digital assets, beginning of period, as adjusted

Digital asset mining revenue, net of receivables 1

149,644 98,026

Mining proceeds from shared hosting

Proceeds from sales of digital assets

( 160,777 ) ( 98,384 )

Realized gain from sale of digital assets

Impairment of digital assets

Payment of board fee

Digital assets, end of period

1 As of March 31, 2024 and March 31, 2023, there was $ 2.0 million and $ 1.2 million, respectively, of digital asset receivable included in prepaid expenses and other current assets on the consolidated balance sheets.

Digital assets are classified as current assets on the Company’s Consolidated Balance Sheets.

In accordance with certain of the Company’s credit and note agreements, the Company is currently required to sell its bitcoin within ten days of receipt.

The Company does not have any off-balance sheet holdings of digital assets and does not safeguard digital assets for third parties.

Use of Estimates

The preparation of the Company’s unaudited 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, 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 digital assets, other intangible assets and property, plant and equipment, the initial measurement of lease liabilities, the fair value of derivative liabilities, and income taxes.

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

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

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include all cash balances and highly liquid investments with original maturities of three months or less from the date of acquisition.

As of September 30, 2023 and December 31, 2022, cash equivalents included $ 34.1 million and $ 10.2 million, respectively, of highly liquid money market funds which are classified as Level 1 within the fair value hierarchy.

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

As of September 30, 2023 and December 31, 2022, the Company had restricted cash of $ 21.8 million and $ 36.4 million, respectively.

Accounts Receivable and Allowance for Doubtful Accounts

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 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 selling, general and administrative expenses in the consolidated statements of operations.

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

For the nine months ended September 30, 2023 and 2022, the Company did not record any credit losses or recoveries.

Based on the Company’s current and historical collection experience, the Company recorded an allowance for doubtful accounts of $ 8.7 million as of September 30, 2023 and December 31, 2022.

Performance Obligations - Hosting Segment

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

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.

For contracts with original terms that exceed one year (typically ranging from 15 to 48 months), those commitments not yet recognized as of September 30, 2023 and December 31, 2022, were $ 100.8 million and $ 159.6 million, respectively.

As of March 31, 2024, for contracts with original terms that exceed one year (typically ranging from 15 to 24 months), we expect to recognize approximately $ 58.3 million of revenue in the future related to performance obligations associated with existing hosting contracts.

The Company expects to recognize approximately 89 % of this amount over the next 12 months and the remainder thereafter.

Deferred Revenue

The Company records contract liabilities in Deferred revenue and Other non-current liabilities on the Company’s Consolidated Balance Sheets when cash payments are received in advance of performance and recognizes them as revenue when the performance obligations are satisfied.

The Company’s total deferred revenue balance as of September 30, 2023 and December 31, 2022, was $ 64.3 million and $ 80.4 million, respectively, all from advance payments received during the periods then ended.

In the three and nine months ended September 30, 2023, the Company recognized $ 2.7 million and $ 20.5 million of revenue, respectively, that was included in the deferred revenue balance as of the beginning of the year.

The Company records contract liabilities in Deferred revenue on the Consolidated Balance Sheets when cash payments are received in advance of performance and recognizes them as revenue when the performance obligations are satisfied.

The Company’s total deferred revenue balance as of March 31, 2024 and December 31, 2023, was $ 9.3 million and $ 9.8 million, respectively.

In the three months ended March 31, 2024, the Company recognized $ 6.4 million of revenue that was included in the deferred revenue balance as of the beginning of the year.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Unaudited Consolidated Financial Statements

In the three and nine months ended September 30, 2022, the Company recognized $ 30.9 million and $ 79.6 million of revenue, respectively, that was included in the deferred revenue balance as of the beginning of the year.

In the three months ended March 31, 2023, the Company recognized $ 11.6 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 are generally recognized within one year.

Recently Adopted Accounting Standards

Measurement of Credit Losses

In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update (“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.

The Company adopted this new guidance on January 1, 2023, and the adoption did not have a material impact on the Company’s unaudited consolidated financial statements.

Convertible and Other Notes Payable

Convertible and other notes payable (“Notes payable”) are accounted for under ASC 470, Debt (“ASC 470”) are presented at their carrying value, which is their remaining par or face amount net of any related unamortized premium, discount and issuance costs.

Notes payable are initially recognized at their present value.

When cash proceeds are received for the issuance of Notes payable the proceeds are used to establish their present value.

When cash proceeds are not received for the issuance of Notes payable their present value is based on the consideration exchanged.

This present value generally will be the Notes payable’s cash flows discounted at a market rate when it is more evident than the noncash consideration exchanged.

When the present value of Notes payable on issuance varies from its par or face amount, an original discount or premium results and any related issuance costs are used to determine an effective interest rate.

Original premium, discount and issuance costs are amortized using the level effective rate interest method.

Amortization is recognized as a component of current interest expense.

Notes payable are evaluated at issuance to determine whether or not they have features or terms which would be treated as embedded derivatives that are required to be bifurcated under ASC 815, Derivatives and Hedging (“ASC 815”).

At December 31, 2023 and March 31, 2024, Notes payable did not have any embedded derivatives required to be bifurcated.

Contingent Value Rights Liabilities

As described in Note 7 — Contingent Value Rights and Warrant Liabilities, on the Effective Date, pursuant to the Plan of Reorganization, the Company entered into a contingent value rights agreement (the “Contingent Value Rights Agreement”) which provides for the issuance of the contingent value rights (the “CVRs”) to certain creditors and provides for the issuance of CVRs issued to holders of allowed general unsecured claims (“GUC”) (in such capacity, the “GUC Payees”) (the “GUC CVRs”).

The CVRs and GUC CVRs are equity-linked instruments which are either only cash settled or in some instances share settled at the Company’s sole discretion.

The Company determined that these equity-linked instruments are not indexed to the Company’s stock and are required to be recognized as liabilities which are, initially and subsequently, measured at fair value with changes in value reflected in Net income (loss).

On the Effective Date, the CVRs and GUC CVRs were recognized at their fair value of $ 86.3 million.

As of March 31, 2024, the CVRs and GUC CVRs were reported at a fair value of $ 44.6 million in Contingent value rights on the consolidated balance sheets.

During the three months ended March 31, 2024, the change in fair value of $ 41.7 million was included in Change in fair value of warrant and contingent value rights on the Company’s Consolidated Statements of Operations.

Warrant Liabilities

As described in Note 7 — Contingent Value Rights and Warrant Liabilities, on the Effective Date, pursuant to the Plan of Reorganization, holders of the Company’s previous common stock received warrants.

The warrants are equity-linked instruments.

On the Effective Date, the warrants were recognized at their fair value of $ 345.9 million.

As of March 31, 2024, the warrants were reported at a fair value of $ 327.5 million in Warrant liabilities on the Consolidated Balance Sheets.

During the three months ended March 31, 2024, the change in fair value of $ 18.4 million was included in Change in fair value of warrant and contingent value rights on the Company’s Consolidated Statements of Operations.

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

Accounting Standards Not Yet Adopted

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

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

This update will be effective for the Company during the annual reporting period beginning January 1, 2025.

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

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

Improvements to Income Tax Disclosures.

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

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

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

CHAPTER 11 FILING AND OTHER RELATED MATTERS

CHAPTER 11 FILING AND EMERGENCE FROM BANKRUPTCY

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.

On June 20, 2023 the Debtors filed with the Bankruptcy Court 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.

Original DIP Credit Agreement and Restructuring Support Agreement

In connection with the Chapter 11 Cases, the Debtors entered into a Senior Secured Super-Priority Debtor-in-Possession Loan and Security 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 (collectively, the “Original DIP Lenders”).

The Original DIP Lenders are also holders or affiliates, partners or investors of holders under the Company’s notes sold pursuant to (i) the Secured Convertible Note Purchase Agreement, dated as of April 19, 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 (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

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Unaudited Consolidated Financial Statements

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

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

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

and its Debtor Affiliates and a related proposed form of Disclosure Statement, and on January 15, 2024, the Debtors filed the Fourth Amended Joint Chapter 11 Plan of Reorganization of Core Scientific, Inc.

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

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

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

Replacement DIP Credit Agreement

2 unchanged sentences

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

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

Proceeds of the Replacement DIP Facility were used to, among other things, repay amounts outstanding under the original debtor-in-possession facility that was entered into in connection with the filing of the Chapter 11 Cases (the “Original DIP Facility”), including payment of all fees and expenses required to be paid under the terms of the Original DIP Facility.

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

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.

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

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

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

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

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

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

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

The Replacement DIP Credit Agreement will also terminate on the date that is the earliest of the following (i) the effective date of the Plan with respect to the Borrowers (the “Plan”) (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.

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 5 — Notes Payable.

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 miners serving as collateral under the NYDIG Loan back to NYDIG over a period of several

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Unaudited Consolidated Financial Statements

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 extinguishment of debt 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 agree 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 nine months ended September 30, 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 Debtor’s lease of the Denton facility in exchange for Debtors execution lease cure costs totaling $ 1.5 million.

The satisfaction of the settlement resulted in a loss of $ 1.5 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the three months ended September 30, 2023.

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 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 three months ended September 30, 2023.

See Note 5 — Notes Payable for further discussion of the promissory note.

Celsius Mining LLC Settlement

On September 14, 2023, the Debtors and Celsius entered into a purchase and sale agreement (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 Debtor’s 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.

In connection with the PSA the parties released and (iv) unequivocally release 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.

As of September 30, 2023, there were $ 36.1 million of assets held for sale on the Company’s Consolidated Balance Sheets related to the sale of the Cedarvale Facility.

Refer to Note 8 — Commitments and Contingencies for further discussion of the sale.

ACM ELF ST LLC Lease Settlement

In September 2023, the Company entered into a $ 7.2 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 three months ended September 30, 2023.

See Note 5 — Notes Payable for further discussion of the promissory note.

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

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

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Unaudited Consolidated Financial Statements

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 Debtor’s Muskogee datacenter in exchange for 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 of bankruptcy.

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.

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

Reorganization items, net and Liabilities Subject to Compromise

2 unchanged sentences

Expenses (including professional fees), realized gains and losses, and provisions for losses that can be directly associated with the reorganization must be reported separately as Reorganization items, net in the Consolidated Statements of Operations beginning December 21, 2022, the date of filing of the Chapter 11 Cases.

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, even if they may be settled for lesser amounts as a result of the Plan or negotiations with creditors.

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, even if they may be settled for lesser amounts as a result of the Plan of Reorganization or negotiations with creditors.

The amounts currently classified as liabilities subject to compromise may be subject to future adjustments depending on Bankruptcy Court actions, further developments with respect to disputed claims, determinations of secured status of certain claims, the values of any collateral securing such claims, or other events.

Any resulting changes in classification will be reflected in subsequent financial statements.

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.

If there is uncertainty about whether a secured claim is undersecured, or will be impaired under the Plan of Reorganization, 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 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.

3 unchanged sentences

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

While the Chapter 11 Cases are pending, the Debtors do not anticipate making interest payments due under their pre-petition debt instruments pursuant to the protection under the Plan.

The contractual interest expense pursuant to our pre-petition debt instruments that was not recognized in our consolidated statements of operations was $ 19.2 million and $ 60.7 million for the three and nine months ended September 30, 2023, respectively.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Unaudited 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):

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

Professional fees and other bankruptcy related costs $ 21,480 $ 20,107

Settlements with creditors:

Priority Power

( 4,878 ) ( 4,878 )

ACM ELF ST LLC Lease

Negotiated settlements

Satisfaction of allowed claims:

Extinguishment of secured and other convertible notes

Extinguishment of miner equipment lender loans and leases

( 102,024 ) —

Huband-Mantor Construction

Total settlements with creditors

Satisfaction of general unsecured creditor claims

Satisfaction of cures and other claims

Total satisfaction of allowed claims

( 143,791 ) —

Reimbursed claimant professional fees

Debtor-in-possession financing costs 339 11,452

Reorganization items, net $ ( 111,439 ) $ 31,559

The Company has incurred and continues to incur 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 September 30, 2023 and December 31, 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.

During the three months ended March 31, 2024, there were significant reorganization related gains resulting primarily from satisfaction of allowed claims under the Plan of Reorganization on the Effective Date and negotiated settlements, partially offset by professional fees and other bankruptcy related costs.

These reorganization related impacts were classified as Reorganization items, net until the Effective Date.

Reorganization costs incurred after the Effective Date have been classified as General and administrative expense.

The accompanying Consolidated Balance Sheet as of December 31, 2023 includes amounts classified as Liabilities subject to compromise, which represented liabilities the Company estimated would be allowed as claims in the Chapter 11 Cases by the Court.

These amounts represented the Company's estimate of known or potential obligations to be resolved in connection with the Chapter 11 Cases.

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

September 30, 2023 December 31, 2022

December 31, 2023

Accounts payable $ 36,678

1 unchanged sentence

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

Operating lease liability $ — $ 13,868

Financing lease liability — 70,796

Debt subject to compromise $ 41,777

2 unchanged sentences

Liabilities subject to compromise $ 99,335

Pre-petition unsecured claims, and secured claims which ultimately may be determined to be impaired during the bankruptcy process and therefor subject to compromise, have been classified 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 no longer likely to be subject to compromise as of September 30, 2023.

This determination is the primary reason for the decrease in the Liabilities subject to compromise balance, with Court approved settlements contributing nominally to the reductions.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Unaudited Consolidated Financial Statements

Final 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.

DIGITAL ASSETS

Activity related to our digital asset balances for the nine months ended September 30, 2023 and 2022 was as follows (in thousands):

September 30, 2023 September 30, 2022

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

Digital asset mining revenue, net of receivables *

278,100 323,337

Mining proceeds from shared hosting 10,321 —

Proceeds from sales of digital assets ( 287,769 ) ( 350,795 )

Gain from sales of digital assets 2,351 25,007

Impairment of digital assets ( 2,864 ) ( 212,184 )

Payment of board fee ( 304 ) —

Digital assets, end of period $ 559 $ 19,663

* As of September 30, 2023, there was $ 0.9 million 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.

The Company had total digital assets of $ 0.6 million and $ 0.7 million, at September 30, 2023 and December 31, 2022, respectively.

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

NOTES PAYABLE

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

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.

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

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

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Unaudited Consolidated Financial Statements

Notes payable as of September 30, 2023 and December 31, 2022, consist of the following (in thousands):

Stated Interest Rate

Effective Interest Rates

Maturities September 30, 2023 December 31, 2022

Kentucky note 5.0 % 5.0 % 2023 $ 529 $ 529

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 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 %

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

Secured Convertible Notes 1

10.0 % 10.0 % 2025 237,584 237,584

Other Convertible Notes 2

10.0 % 10.0 % 2025 322,396 322,396

Original DIP Credit Agreement 3

PROPERTY, PLANT AND EQUIPMENT, NET

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

March 31, 2024 December 31, 2023 Estimated Useful Lives

Land and improvements 1

$ 20,583 $ 21,852 20 years

Building and improvements

168,470 164,495 12 to 39 years

Mining and network equipment 2

450,921 441,404 1 to 5 years

Electrical equipment 3

65,006 64,810 5 to 10 years

Other property, plant and equipment 4

2,788 2,935 5 to 7 years

707,767 695,496

Replacement DIP Credit Agreement 4

accumulated depreciation and amortization 5

320,394 293,974

HMC loan — 15.0 % 2026

ACM financing — 15.0 % 2025

First Insurance loan — 7.6 % 2024

Other 2,618 2,960

Notes payable, prior to reclassification to Liabilities subject to compromise 851,454 880,937

Notes payable in Liabilities subject to compromise 5

387,373 401,522

Unamortized discount and debt issuance costs - post-petition

Total notes payable, net 807,880 36,242

current maturities

Construction in progress

188,596 183,909

Notes payable, net of current portion

Property, plant and equipment, net

$ 575,969 $ 585,431

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

2 Other Convertible Notes includes principal balance at issuance and PIK interest.

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

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 September 30, 2023 and December 31, 2022, respectively, at their expected allowed amount.

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

As of September 30, 2023 and December 31, 2022, $ 0.7 million and $ 12.6 million, respectively, of accrued interest was classified as Liabilities subject to compromise.

HMC Loan - 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 loan”) in connection with its settlement and release from all claims.

The note bears interest at a contractual rate per annum of 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 $ 7.2 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

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Unaudited Consolidated Financial Statements

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 %

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 an additional $ 6.2 million mandatory prepayment under the Replacement DIP Credit Agreement on July 7, 2023.

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.

The principal amount of the Convertible Notes as of September 30, 2023, reflects the proceeds received plus any PIK interest added to the principal balance of the notes.

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.

At maturity, any Secured Convertible Notes not converted will be owed two times the original face value plus accrued interest;

any Other Convertible Notes not converted will be owed the original face value plus accrued interest.

In addition, at any time (both before and after the merger with XPDI), the Company has the right to prepay the Convertible Notes at the minimum payoff of two times the outstanding principal amount plus accrued interest.

All of the Convertible Notes, totaling $ 560.0 million as of September 30, 2023, are scheduled to mature on April 19, 2025, which includes $ 237.6 million for the principal amount of the Secured Convertible Notes which have payoff at maturity of two times the principal amount of the note plus accrued interest.

The total amount that would be owed on the Secured Convertible Notes outstanding as of September 30, 2023, if held to maturity was $ 475.2 million.

FAIR VALUE MEASUREMENTS

Level 3 Recurring Fair Value Measurements

Securities are transferred from Level 2 to Level 3 when observable market prices for similar securities are no longer available and unobservable inputs become significant to the fair value measurement.

All transfers into and out of Level 3 are assumed to occur at the beginning of the quarterly reporting period in which they occur.

As of September 30, 2023 and December 31, 2022, there were no Level 3 financial instruments.

Nonrecurring fair value measurements

The Company’s non-financial assets, including digital assets, property, plant and equipment, and intangible assets are measured at estimated fair value on a nonrecurring basis.

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, for more information regarding fair value considerations when measuring impairment.

No non-financial assets were classified as Level 3 as of September 30, 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.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Unaudited Consolidated Financial Statements

1 Estimated useful life of improvements.

Land is not depreciated.

2 Includes finance lease assets of $ 6.8 million and $ 46.6 million at March 31, 2024 and December 31, 2023, respectively.

3 Includes finance lease assets of $ 12.7 million and $ 12.7 million at March 31, 2024 and December 31, 2023, respectively.

4 Includes finance lease assets of $ 0.4 million and $ 0.4 million at March 31, 2024 and December 31, 2023, respectively.

5 Includes accumulated amortization for assets under finance leases of $ 10.5 million and $ 43.4 million at March 31, 2024 and December 31, 2023, respectively.

Depreciation expense, including amortization of finance lease assets, for the three months ended March 31, 2024 and 2023, was $ 28.8 million, and $ 20.2 million, respectively.

Depreciation for the three months ended March 31, 2024 and 2023, allocated to costs of revenue was $ 28.7 million, and $ 20.2 million, respectively.

Mining and network equipment

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

The majority of our purchases are made on multi-month contracts with installment payments due in advance of scheduled deliveries.

Delivery schedules have ranged from one month to 12 months.

As of December 31, 2023, we had two active purchase agreements with Bitmain.

The first agreement was for the acquisition of Antminer S19J XP miners with a combined exahash of 4.08 or 28,400 miners, all of which have been delivered as of March 31, 2024.

The second agreement was for the acquisition of Antminer S21 miners with a combined exahash of 2.52 or approximately 12,900 miners.

As of March 31, 2024, the Company had received approximately 4,790 miners.

The remaining miners were received in April 2024.

As of the reporting date of this Quarterly Report on Form 10-Q, we have completed all 2024 payments due on miners ordered for deployment this year.

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

1 unchanged sentence

The Company recognizes lease expense for these leases on a straight-line basis over the lease term, which includes any bargain renewal options.

The Company recognizes rent expense on a straight-line basis over the lease period.

The Company recognizes lease expense on a straight-line basis over the lease period.

In addition to minimum rent, certain leases require payment of real estate taxes, insurance, common area maintenance charges, and other executory costs.

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 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.

Differences between lease expense and rent paid are recognized as adjustments to operating lease right-of-use assets on the Company’s Consolidated Balance Sheets.

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

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

Financial statement line item September 30, 2023 December 31, 2022

Financial statement line item March 31, 2024 December 31, 2023

Operating lease right-of-use assets Operating lease right-of-use assets $ 77,766 $ 7,844

10 unchanged sentences

current portion Finance lease liabilities, net of current portion $ 1,170 $ 35,745

Operating and finance lease liabilities subject to compromise Liabilities subject to compromise $ — $ 84,664

* December 31, 2022 revised to reflect the impact of the 2022 impairments of property, plant and equipment.

Supplemental disclosure of noncash investing and financing activities in the Company’s Consolidated Statements of Cash Flows includes a decrease in lease liability due to lease satisfactions on the Effective Date of $ 50.7 million presented in Extinguishment of accounts payable, accrued expenses, finance lease liability, and notes payable upon emergence for the quarter ended March 31, 2024.

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

Three Months Ended September 30,

Financial statement line item 2023 2022

Operating lease expense General and administrative expenses $ 77 $ 589

Short-term lease expense General and administrative expenses 161 195

Finance lease expense:

Amortization of right-of-use assets Cost of revenue 2,580 9,040

Interest on lease liabilities Interest expense, net 766 2,278

Total finance lease expense 3,346 11,318

Total lease expense $ 3,584 $ 12,102

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Unaudited Consolidated Financial Statements

Nine Months Ended September 30,

Three Months Ended March 31,

Financial statement line item 2024 2023

6 unchanged sentences

Total lease expense $ 2,790 $ 4,921

In determining the discount rate used to measure the right-of-use asset and lease liability, we use rates implicit in the lease, or if not readily available, we use our incremental borrowing rate.

In determining the discount rate used to initially measure the present value of the right-of-use asset and lease liability, we use rates implicit in the lease, or if not readily available, we use our estimated incremental borrowing rate.

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

Determining our incremental borrowing rate, especially if there are insufficient observable borrowings near the time of lease commencement, may require significant judgment.

If there are insufficient recent borrowings near the time of lease commencement, we utilize a rate based on published index rates of credit quality similar to ours adjusted for similar collateral and tenure.

Estimating an incremental borrowing rate may require significant judgment.

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

September 30, 2023 September 30, 2022

March 31, 2024 March 31, 2023

Weighted Average Remaining Lease Term (Years)

4 unchanged sentences

Finance leases 12.3 % 12.4 %

The following tables summarize the Company’s supplemental cash flow information (in thousands):

Nine Months Ended September 30,

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

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

Three Months Ended March 31,

Lease Payments

1 unchanged sentence

Finance lease payments 1

Supplemental Noncash Information

Operating lease right-of-use assets obtained in exchange for lease obligations 1

(Decrease) increase in finance lease right-of-use assets as a result of lease modification

$ 4,628 $ 1,080

Decrease in ROU related due to termination $ 13,144 $ —

Decrease in lease liability due to 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.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Unaudited Consolidated Financial Statements

The Company’s minimum payments under noncancelable operating and finance leases having initial terms and bargain renewal periods in excess of one year are as follows at September 30, 2023, and thereafter (in thousands):

1 Approximately $ 4.6 million of finance lease liabilities were reinstated pursuant to the Plan of Reorganization.

Of the $ 4.6 million of finance lease payments made during the three months ended March 31, 2024, $ 3.6 million related to cure payments from emergence on the Effective Date.

The Company’s minimum payments under noncancelable operating and finance leases having initial terms and bargain renewal periods in excess of one year are as follows at March 31, 2024, and thereafter (in thousands):

Operating leases Finance leases

2 unchanged sentences

2025 13,568 1,862

2026 14,365 3

2027 14,721 —

2028 15,143 —

Thereafter 35,997 —

2 unchanged sentences

Total $ 71,641 $ 4,188

Balance Sheet Classification

As discussed in 5 — 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 (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.

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

CONVERTIBLE AND OTHER NOTES PAYABLE

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

Stated Interest Rate

Effective Interest Rates

Maturities March 31, 2024 December 31, 2023

Replacement DIP Credit Agreement 1

10.0 % 10.0 % 2024 $ — $ 4,273

Exit Credit Agreement 9.0 % 9.0 % 2027 61,200 —

Other Convertible Notes 2

10.0 % 10.0 % 2025 — 322,396

Secured Convertible Notes 3

10.0 % 10.0 % 2025 — 237,584

Secured Notes 12.5 % 12.6 % 2028 150,000 —

New Secured Convertible Notes

6.0 % - 10.0 %

10.0 % 2029 260,000 —

Miner Financing:

Blockfi loan 9.7 % - 13.1 %

10.1 % - 13.1 %

2023 — 53,913

Blockfi takeback loan 3.0 % - 8.0 %

11.9 % 2029 47,734 —

Liberty/Stonebriar loan 10.6 % 10.6 % 2024 — 6,968

Liberty/Stonebriar takeback loan 3.0 % - 8.0 %

11.9 % 2029 6,211 —

ACM note — % 15.0 % 2025 5,704 6,519

Mass Mutual Barings loans 9.8 % - 13.0 %

9.8 % - 13.0 %

2025 — 63,844

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

Trinity loan 11.0 % 11.0 % 2024 — 23,356

Equipment and Settlement:

Bremer loan 5.5 % 5.5 % 2027 13,641 18,331

HMC note 5.0 % 15.0 % 2026 13,347 14,208

Didado note 5.0 % 15.0 % 2027 12,294 13,000

Dalton note 5.0 % 5.0 % 2024 4,547 —

Harper note 5.0 % 15.0 % 2026 4,522 4,678

Trilogy note 5.0 % 15.0 % 2026 2,927 2,927

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

First Insurance note 7.6 % 7.6 % 2024 640 2,538

Stockholder loan 10.0 % 20.0 % 2023 — 10,000

Kentucky Note 5.0 % 5.0 % 2023 — 529

Other 5.0 % - 7.7 %

7.1 % - 15.0 %

Notes payable, prior to reclassification to Liabilities subject to compromise 584,013 854,453

Notes payable in Liabilities subject to compromise 4

Unamortized discounts - post-petition

Total notes payable, net 579,906 808,440

current maturities

23,333 124,358

Convertible and other notes payable, net of current portion

$ 556,573 $ 684,082

1 Replacement DIP Credit Agreement, see Note 3 — Chapter 11 Filing and Emergence from Bankruptcy for further information.

2 Other Convertible Notes included principal balance at issuance and PIK interest.

3 Secured Convertible Notes included principal balance at issuance and PIK interest.

2 Other Convertible Notes included principal balance at issuance and PIK interest.

1 Replacement DIP Credit Agreement, see Note 3 — Chapter 11 Filing and Emergence from Bankruptcy for further information.

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

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

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

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

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 Facility was terminated on the Effective Date.

On January 24, 2024, the Company entered into a settlement agreement with Dalton Utilities which resulted in the issuance of an unsecured promissory note with a principal amount of $ 9.1 million dated December 29, 2023.

The note bears interest at a contractual rate of 5.0 % per annum and has a maturity date of May 2, 2024.

The Company is required to make monthly payments of principal and interest.

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.

Extinguishments

On the Effective Date, the holders of Secured and Other Convertible Notes received Secured Notes Indenture, New Secured Convertible Notes Indenture, New Common Stock and CVRs.

Certain holders of New Secured Convertible Notes also funded and received the Exit Credit Agreement.

The exchange and underlying agreements were executed contemporaneously and in contemplation of each other and were analyzed on a combined basis under ASC 470.

The Company determined that extinguishment accounting was applicable, as the debt terms in the exchange are substantially different:

(a) the present value of the cash flows of the new and remaining instruments differ by more than 10%, (b) the fair value of the conversion option changed by more than 10% of the carrying amount of the original instruments, and (c) a substantive conversion feature was added to the debt terms.

The gain on extinguishment is reported in Reorganization items, net.

Two previous miner equipment lender loans were exchanged for Miner Equipment Lender Agreements.

The Company determined that extinguishment accounting was applicable, as the loans had original maturities near the exchange on the Effective Date.

The remaining miner equipment lender loans and leases were exchanged for New Common Stock.

The Company determined that extinguishment accounting was applicable, as the remaining miner equipment lender loans and leases were settled by the issuance of equity-classified shares.

The gain on extinguishment is reported in Reorganization items, net.

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 on the Effective Date

Exit Credit Agreement

Secured Notes Indenture $ 150,000

New Secured Convertible Notes Indenture

Miner Equipment Lender Agreements

In addition, approximately $ 15.0 million of debt was reinstated pursuant to the Plan of Reorganization.

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

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).

At issuance, the Company identified embedded features in the Exit Facility and evaluated them for potential bifurcation in accordance with ASC 815-15.

The identified embedded features were determined to be clearly and closely related to the debt host and not subject to bifurcation.

The present value of the Exit Facility’s cash flows were estimated to be equal to its par amount, therefore no discount or premium was recorded on issuance.

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 Secured Notes prior to maturity.

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

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

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.

At issuance, the Company identified embedded features in the Secured Notes and evaluated them for potential bifurcation in accordance with ASC 815-15.

The identified embedded features were determined to be clearly and closely related to the debt host and not subject to bifurcation.

The present value of the Secured Notes’ cash flows were estimated to be $ 149.5 million, the discount is amortized to result in recognition of a level effective interest rate.

The Secured Notes Indenture contains affirmative and negative covenants consistent with those in the Exit Facility and the New Secured Convertible Notes Indenture (as defined below) 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.

New 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 “New Secured Convertible Notes”) pursuant to a secured convertible notes indenture (the “New 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 New Secured Convertible Notes (in such capacity, the “Secured Convertible Notes Agent”).

The New Secured Convertible Notes were issued to holders of the Company’s April convertible notes and August convertible notes.

The maturity date of the New Secured Convertible Notes is January 23, 2029.

The New 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 10.0 % per annum, or (ii) in cash at a rate of 6.0 % of per annum and in stock at a rate of 6.0 % 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 New 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 New 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 New Secured Convertible Notes Indenture), the holders of the New Secured Convertible Notes have the right to require the Company to purchase all or any portion of such holder’s New Secured Convertible Notes at the principal amount thereof plus accrued interest to the repurchase date.

Holders may elect to convert the New 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 New 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 New 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 of $ 7.79 .

At issuance, the Company identified embedded features in the New Secured Convertible Notes and evaluated them for potential bifurcation in accordance with ASC 815-15.

The conversion feature was determined to be indexed to the Company’s own stock and

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

would be classified in equity if it were freestanding meeting a scope exception from derivative accounting under ASC 815.

The other identified embedded features were determined to be clearly and closely related to the debt host and not subject to bifurcation.

Convertible debt instruments not specifically addressed in other GAAP are accounted for in accordance with ASC 470-20.

Under that guidance a substantial premium is presumed to attributable to the conversion feature.

A conversion feature which is not bifurcated as a derivative is initially recognized in equity as additional paid-in capital.

The New Secured Convertible Notes were estimated to have a present value of $ 293.2 million on issuance.

$ 260.0 million was initially recognized as debt and $ 33.2 million was initially recognized as additional paid-in capital.

Under the relevant guidance, neither balance is subject to recognition of recurring remeasurements.

The New 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 New 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 (BlockFi and Stonebriar)

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 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 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, the Secured Notes Agent and the Exit Agent (as defined in the Plan of Reorganization) with respect to the Equipment Priority Collateral.

The present value of the Miner Equipment Lender Facility’s cash flows were estimated to be equal to its par amount, therefore no discount or premium was recorded on issuance.

The Miner Equipment Lender Facility contains customary covenants, representations and warranties.

As of March 31, 2024, the Company believes it was in compliance with the provisions and financial covenants in their respective material debt agreements in all material respects.

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

CONTINGENT VALUE RIGHTS AND WARRANT LIABILITIES

Contingent Value Rights Agreement

On the Effective Date, under the terms of the Plan of Reorganization, the Company entered into the Contingent Value Rights Agreement and recorded the liabilities at fair value as of the Effective Date.

Pursuant to the Contingent Value Rights Agreement, the Company issued 51,783,625 CVRs to holders of the Company’s April convertible notes and August convertible notes who received New Common Stock (as defined in Note 10 — Stockholders' Deficit) (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) $ 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.

GUC Contingent Value Rights

On the Effective Date, pursuant to the Plan of Reorganization, the Company issued (i) 20,335,491 shares of New Common Stock, to holders of allowed general unsecured claims (the “GUC Equity Distribution”) and (ii) GUC CVRs to holders of allowed general unsecured claims.

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”).

Warrant Agreement

On the Effective Date and pursuant to the Plan of Reorganization and the Confirmation Order, the Company entered into a warrant agreement providing for the issuance 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

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

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 “Triggering Event”).

At March 31, 2024, the Triggering Event for the Tranche 2 Warrants had not occurred.

The Tranche 1 Exercise Price and the price per share used to determine a Triggering Event are subject to adjustment for specific events as set forth in the Warrant Agreement.

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 Tranche 1 Warrants and Tranche 2 Warrants began trading on the Nasdaq Global Select Market under the symbols “CORZW” and “CORZZ,” respectively.

FAIR VALUE MEASUREMENTS

The Company measures certain assets and liabilities at fair value on a recurring or non-recurring basis in certain circumstances.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

Level 3 — Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants.

These valuations require significant judgment.

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.

Recurring Fair Value Measurements

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 (the “Energy Derivatives”).

The Energy Derivatives are recognized as derivatives in accordance with ASC 815 initially and subsequently measured at fair value with changes in value reflected in Net income (loss).

At March 31, 2024 observable Level 2 inputs, such as forward energy prices and discount rates, were available for the energy forward purchase contract.

The CVRs, GUC CVRs and Warrants are recognized as derivative liabilities in accordance with ASC 815 initially and subsequently measured at fair value with changes in value reflected in Net income (loss).

When these instruments were recognized on the Effective Date, observable market data was not available.

At March 31, 2024 observable Level 1 market data was available for the CVRs and Warrants.

The following presents the levels of the fair value hierarchy for the Company's derivatives measured at fair value on a recurring basis as of March 31, 2024 (in thousands):

March 31, 2024

Fair value hierarchy

Level 1 Level 2 Level 3 Fair value

Energy derivatives liability:

Energy derivatives

$ — $ 1,465 $ — $ 1,465

Total energy derivatives liability

— 1,465 — 1,465

Contingent value rights liabilities:

Contingent value rights 41,427 — — 41,427

GUC contingent value rights — — 3,174 3,174

Total contingent value rights liabilities 41,427 — 3,174 44,601

Warrants liability:

Warrants 327,465 — — 327,465

Total warrants liability 327,465 — — 327,465

Total liabilities measured at fair value on a recurring basis $ 368,892 $ — $ 3,174 $ 372,066

Level 2 Recurring Fair Value Measurements

The 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)

Financial statement line item

2024 December 31,

Energy forward purchase contract

Accrued expenses and other current liabilities

$ 1,465 $ 2,262

Core Scientific, Inc.

Notes to Unaudited 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):

Three Months Ended March 31,

Financial statement line item

Energy forward purchase contract

Change in fair value of energy derivatives $ ( 2,218 ) $ —

Level 3 Recurring Fair Value Measurements

The following presents a rollforward of the activity for the GUC CVRs liability measured at fair value on a recurring basis using Level 3 inputs as of March 31, 2024 (in thousands):

Balance at December 31, 2023 $ —

Unrealized gains

Balance at March 31, 2024 $ 3,174

The CVRs and warrants had no balance at December 31, 2023, on the Effective Date they were measured using Level 3 inputs as no market existed for them at that time.

Since the Effective Date active markets have developed for those instruments and the Company uses Level 1 quoted market prices for their valuation at March 31, 2024.

All transfers into and out of Level 3 are assumed to occur at the beginning of the quarterly reporting period in which they occur.

As of December 31, 2023, there were no Level 3 financial instruments.

The fair value of the GUC CVRs was estimated using simulated Company stock price paths in a Monte Carlo simulation model.

The inputs into the simulation model are similar to those used in Black-Scholes option models.

They include the Company’s stock price and dividend yield, risk-free rate, term and estimated volatility.

The estimated volatility is considered to be a significant unobservable input into the simulation model.

At March 31, 2024, the valuation technique has not changed during the period since the Effective Date.

The following presents significant Level 3 unobservable inputs used to measure the fair value of GUC CVRs as of March 31, 2024 (dollars in thousands):

Fair value Unobservable Input Measure

GUC contingent value rights

$ 3,174 Estimated Volatility 120.0 %

There is inherent uncertainty in an estimate of fair value from the use of significant unobservable inputs.

An increase in the estimated volatility used in the model would be expected to increase the fair value of the GUC CVRs.

Nonrecurring fair value measurements

The Company’s non-financial assets, including property, plant and equipment, and intangible assets are measured at estimated fair value on a nonrecurring basis.

These assets are adjusted to fair value only when an impairment is recognized, or the underlying asset is held for sale.

No non-financial assets were classified as Level 3 as of March 31, 2024 or December 31, 2023.

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

Fair value of financial instruments

The Company’s financial instruments, that are not subject to recurring fair value measurements, include cash and cash equivalents, restricted cash, accounts receivable, net, accounts payable, leases, notes payable and certain accrued expenses and other liabilities.

Except for the Convertible Notes, the carrying amount of these financial instruments materially approximate their fair values.

At March 31, 2024 the fair value of the Convertible Notes using Level 1 active market price was $ 230.4 million.

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 $ 28.2 million was paid as of March 31, 2024, $ 15.1 million was satisfied with the use of coupons, and $ 7.1 million was included in Accrued expenses and other current liabilities on the Company's Consolidated Balance Sheets.

As of March 31, 2024, the Company had received approximately 4,790 miners.

The remaining miners were received in April 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.

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.

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 Debtor’s 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

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.

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.

On April 22, 2024, the Court granted the Company’s motion for reconsideration and dismissed without prejudice all remaining claims contained in the plaintiff’s complaint.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Unaudited Consolidated Financial Statements

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,.

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.

filed a demand for arbitration with JAMS alleging the existence and breach of a contract for hosting services.

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 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.

The Debtors have objected to Sphere 3D Corp.’s proof of claim and intends to contest the entirety of the claim in the Chapter 11 Cases.

A hearing on the matter is expected during the first quarter of 2024.

Purported Shareholder Class Action (“Ihle”)

On July 24, 2023, Plaintiff Brad Ihle filed a purported class action complaint against certain officers and directors of Power & Digital Infrastructure Acquisition Corp.

(the former name of the current corporate entity operating our business, or “XPDI”) and XMS Sponsor LLC et al, in the Court of Chancery State of Delaware.

The complaint alleges breach of fiduciary duties arising out of the merger of XPDI and the entity that conducted our business operations prior to the merger (“Legacy Core”) and the marketing and solicitation of shareholders pursuant to that merger agreement dated July 20, 2021.

Certain of the defendants have notified the Company of their intention to seek defense and indemnification in this matter pursuant to Delaware law and the Company’s bylaws.

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, Mr.

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 Mr.

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.

In November 2022, McCarthy Building Companies, Inc.

1 unchanged sentence

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.

In November 2022, plaintiff Mei Peng filed a putative class action (the “Putative Class Action”) in the United States District Court, Western District of Texas, Austin Division, asserting that the Company violated the Securities Exchange Act of 1934, as amended, 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 the Company's profitability and ability to continue as a going concern.

On May 5, 2023, plaintiff filed an amended complaint removing the Company as a defendant and asserting that certain officers, directors and former officers and directors of the Company violated the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended, as a result of allegedly false and misleading statements regarding the business of the Company.

In April 2023, the lead plaintiff in the matter filed a proof of claim related to the Putative Class Action filed against the Debtors in the Chapter 11 Cases and in August 2023 filed an amended proof of claim to reflect an amendment to the Putative Class Action reserving the right to add Core Scientific as a defendant following the conclusion of the Chapter 11 Cases.

In September the lead plaintiff filed a motion with the Bankruptcy Court requesting the grant of (i) class treatment, (ii) certification of the class for purposes of its class proof of claim, and (iii) other relief.

The Debtors timely filed its objection and support objecting to the relief requested and the stated basis for the relief requested.

In September 2023 Harlin Dean filed a proof of claim against the Debtors in the Chapter 11 Cases seeking to recover approximately $ 8 million in severance pay and hypothetical proceeds from the sale of Company stock allegedly due following his resignation from the Company in 2022.

The Debtors timely filed an objection to Mr.

Dean’s proof of claim denying any obligation to Mr.

Dean resulting from his resignation of employment and requesting disallowance of the proof of claim.

In October 2023, Mr.

Dean filed a Motion for Summary Judgment with respect to his claims.

The Debtors intend to respond timely to the motion and vigorously contest the claims.

As of September 30, 2023 and December 31, 2022, there were no other material loss contingency accruals for legal matters.

Leases —See Note 7 — Leases for further information.

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.

As of March 31, 2024 and December 31, 2023, there were no other material loss contingency accruals for legal matters.

Leases —See Note 5 — Leases for additional information.

STOCKHOLDERS' DEFICIT

Stock-Based Compensation

Stock-based compensation expense relates primarily to expense for restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and stock options.

As of September 30, 2023, we had unvested or unexercised stock-based awards outstanding representing approximately 60.7 million shares of our common stock, consisting of approximately 38.6 million RSAs and RSUs with a weighted

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.

On the Effective Date, the Company issued 15,648,896 shares on account of the Equity Rights Offering in exchange for the cash proceeds.

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 over

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Unaudited Consolidated Financial Statements

average per share fair value of $ 2.74 , and options to purchase approximately 22.0 million shares of our common stock with a weighted average exercise price of $ 8.81 .

During the three and nine months ended September 30, 2023, the Company did not grant any stock options, RSUs or RSAs.

During the three and nine months ended September 30, 2023, nil and 1.9 million stock options were cancelled, respectively, and 1.3 million and 6.6 million RSAs and RSUs were forfeited, respectively.

Stock-based compensation expense for the three and nine months ended September 30, 2023 and 2022, is included in the Company’s Consolidated Statements of Operations as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

subscriptions) exceeded the number of ERO Shares offered to be purchased as part of the Equity Rights Offering.

The results of the Equity Rights Offering rendered the previously arranged Backstop Commitment unnecessary however on the Effective Date the Company issued 2,111,178 New Common Stock shares on account of the underlying backstop fee associated with the Backstop Commitment.

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.

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) New 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, 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.

On the Effective Date, pursuant to the Plan of Reorganization, the Company issued or held in reserve as issuable:

• 176,266,782 shares of New Common Stock;

• 4,725,091 shares of New Common Stock held in reserve for disputed claims;

• 180,241,211 Warrants, composed of 98,313,313 Tranche 1 Warrants and 81,927,898 Tranche 2 Warrants;

• 51,783,625 CVRs;

The 4,725,091 shares of New Common Stock held in reserve for disputed claims will be distributed in settlement of previously disputed claims which become allowed by the Court.

On the one year anniversary from the Effective Date, or at such earlier date as all disputed claims are considered resolved, any reserved shares not distributed in settlement of previously disputed claims which become allowed will be issued to holders of the common stock immediately prior to the Effective Date.

As these shares will be issued and only the recipient is contingent, the Company accounts for these shares as outstanding in its Consolidated Balance Sheets and in the Basic and Diluted Weighted average shares outstanding in its Consolidated Statements of Operations as of the Effective Date.

Shares estimated by the Company to be issued to disputed claims are included in the gain on satisfaction of the GUC claims reported in Reorganization items, net.

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 or 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 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

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

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 adopted 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.

The Board of Directors adopted the Management Incentive Plan on April 26, 2024.

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.

Stock-Based Compensation

Stock-based compensation expense relates primarily to expense for restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and stock options.

As of March 31, 2024, we had unvested or unexercised stock-based awards outstanding representing approximately 2.5 million shares of our common stock, consisting of approximately 1.1 million RSAs and RSUs with a weighted average per share fair value of $ 28.63 , and options to purchase approximately 1.5 million shares of our common stock with a weighted average exercise price of $ 81.91 .

During the three months ended March 31, 2024, the Company did not grant any stock options, RSUs or RSAs.

During the three months ended March 31, 2024, 0.8 million stock options were cancelled, and 1.3 million RSAs and RSUs were forfeited, respectively.

Stock-based compensation expense for the three months ended March 31, 2024 and 2023, is included in the Company’s Consolidated Statements of Operations as follows (in thousands):

Three Months Ended March 31,

Cost of revenue $ 959 $ 597

5 unchanged sentences

$ ( 1,060 ) $ 12,273

1 Includes $( 0.1 ) million and $ 0.6 million that was recorded as an adjustment to accrued expenses and other within total current liabilities during the three and nine months ended September 30, 2022, respectively.

2 Includes $ 1.0 million of stock-based compensation that were provided in severance as part of restructuring charges incurred during the three and nine months ended September 30, 2022.

As of September 30, 2023, total unrecognized stock-based compensation expense related to unvested stock options was approximately $ 62.6 million, which is expected to be recognized over a weighted average time period of 2.3 years.

As of September 30, 2023, the Company had approximately $ 50.8 million of unrecognized stock-based compensation expense related to RSAs and RSUs, which is expected to be recognized over a weighted average time period of 2.3 years, and an additional $ 13.1 million of unrecognized stock-based compensation expense related to RSUs for which some or all of the requisite service had been provided under the service conditions but had performance conditions that had not yet been achieved .

1 Includes reversal of stock-based compensation expense due to $ 6.1 million in forfeitures incurred during the three months ended March 31, 2024.

Stock-based compensation expense excluding the impact of these forfeitures would have been approximately $ 5.1 million.

As of March 31, 2024, total unrecognized stock-based compensation expense related to unvested stock options was immaterial.

As of March 31, 2024, the Company had approximately $ 15.6 million of unrecognized stock-based compensation expense related to RSAs and RSUs, which is expected to be recognized over a weighted average time period of 2.1 years, and an additional $ 7.1 million of unrecognized stock-based compensation expense related to RSUs for which some or all of the requisite service had been provided under the service conditions but had performance conditions that had not yet been achieved.

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

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.

1 unchanged sentence

Valuation allowances are recorded as appropriate to reduce deferred tax assets to the amount considered likely to be realized.

The income tax expense and effective income tax rate for the three and nine months ended September 30, 2023 and 2022 were as follows:

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

The income tax expense and effective income tax rate for the three months ended March 31, 2024 and 2023 were as follows:

Three Months Ended March 31,

(in thousands, except percentages)

2 unchanged sentences

0.1 % ( 36.6 ) %

For the nine months ended September 30, 2023, the Company recorded $ 0.3 million of income tax expense which consisted of discrete state taxes.

For the three months ended March 31, 2024, the Company recorded $ 0.2 million of income tax expense which consisted of discrete state taxes.

The Company's estimated annual effective income tax rate without consideration of discrete items is 0.0 %, compared to the U.S.

federal statutory rate of 21.0% due to projected changes in the valuation allowance 2.3 %, state taxes ( 0.4 )%, non-deductible transaction costs ( 22.8 )% and other items ( 0.1 )%.

federal statutory rate of 21.0% due to projected changes in the valuation allowance ( 16.7 )%, state taxes 0.1 %, fair market value adjustments to the warrant liability ( 6.0 )% and other items 1.6 %.

The Company has a full valuation allowance on its net deferred tax asset as the evidence indicates that it is not more likely than not expected to realize such asset.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Unaudited Consolidated Financial Statements

For the nine months ended September 30, 2022, the Company recorded $ 4.4 million of income tax expense, which included a discrete tax expense of $ 9.1 million related to stock-based compensation and an increase in the valuation allowance on a capital loss.

For the three months ended March 31, 2023, the Company recorded $ 0.1 million of income tax expense.

The Company's estimated annual effective income tax rate was ( 36.6 )%, compared to the U.S.

federal statutory rate of 21.0% due to a goodwill impairment ( 12.2 )%, change in valuation allowance ( 6.7 )%, state taxes 0.8 %, non-deductible interest ( 0.6 )%, and other items ( 2.5 )%.

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS

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):

Three Months Ended September 30, Nine Months Ended September 30,

federal statutory rate of 21.0% due to a change in the valuation allowance 43.8 %, state taxes ( 7.1 )%, non-deductible transaction costs ( 58.8 )% and other items ( 0.1 )%.

The Company has a full valuation allowance on its net deferred tax asset as the evidence indicates that it is not more likely than not expected to realize such asset.

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings (loss) per share (in thousands, except per share amounts):

Three Months Ended March 31,

Net income (loss) $ 210,691 ( 388 )

Interest expense related to convertible notes, net of tax 8,392 —

Diluted net income (loss)

$ 219,083 $ ( 388 )

Net loss $ ( 41,146 ) $ ( 434,792 ) $ ( 50,794 ) $ ( 1,711,471 )

Weighted average shares outstanding - basic

Dilutive share-based compensation awards — — — —

Weighted average shares outstanding - diluted 382,483 354,195 378,107 318,169

Net loss per share - basic

230,954 375,419

Net loss per share - diluted

$ ( 0.11 ) $ ( 1.23 ) $ ( 0.13 ) $ ( 5.38 )

Pote ntially dilutive securities include securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive and contingently issuable shares and warrants for which all necessary conditions for issuance had not been satisfied by the end of the period.

Effect of dilutive securities:

Convertible notes

Restricted stock units

Weighted average shares outstanding - diluted 282,531 375,419

Net income (loss) per share - basic

Net income (loss) per share - diluted

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

Pote ntially dilutive securities include securities not included in the calculation of diluted net income (loss) per share because to do so would be anti-dilutive.

Potentially dilutive securities are as follows (in common stock equivalent shares, in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Stock options

22,025 27,024 22,025 27,024

Tranche 1 Warrants

98,313 14,892

Restricted stock and restricted stock units

38,646 53,996 38,646 53,996

Convertible Notes — 69,997

5 unchanged sentences

The Company has two operating segments:

“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.

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

“Mining”, consisting of digital asset mining for its own account;

and “Hosting”, which consists primarily of its digital infrastructure and third-party hosting business for digital asset mining and specialized GPU cloud compute customers.

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

The primary financial measures used by the chief operating decision maker (“CODM”) to evaluate performance and allocate resources are revenue and gross profit.

4 unchanged sentences

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Unaudited Consolidated Financial Statements

The following table presents revenue and gross profit by reportable segment for the periods presented (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

Mining Segment

(in thousands, except percentages)

Digital asset mining revenue

$ 149,959 $ 98,026

Cost of digital asset mining 81,564 72,676

Mining gross profit

$ 68,395 $ 25,350

Mining gross margin

Hosting Segment

Hosting revenue $ 29,332 $ 22,629

Equipment sales — 37,161 — 78,660

Total revenue 29,848 82,077 82,307 195,726

Cost of revenue:

Cost of hosting services 20,081 16,198

Cost of equipment sales — 27,917 — 63,993

Total cost of revenue 24,882 72,892 64,187 183,843

$ 4,966 $ 9,185 $ 18,120 $ 11,883

Mining Segment

Digital asset mining income $ 83,056 $ 80,495 $ 278,164 $ 323,337

Total revenue

83,056 80,495 278,164 323,337

Cost of revenue:

Cost of digital asset mining 72,603 116,756 212,125 279,576

Total cost of revenue 72,603 116,756 212,125 279,576

Gross profit (loss)

Hosting gross profit

$ 9,251 $ 6,431

Consolidated total revenue

Hosting gross margin

$ 179,291 $ 120,655

1 unchanged sentence

$ 101,645 $ 88,874

Consolidated gross profit (loss)

Consolidated gross profit

$ 77,646 $ 31,781

For the three months ended September 30, 2023 and 2022, cost of revenue included d epreciation expense of $ 1.9 million and $ 3.3 million, respectively for the Hosting segment.

For the three months ended September 30, 2023 and 2022, cost of revenue included depreciation expense of $ 22.0 million and $ 61.1 million, respectively for the Mining segment.

For the nine months ended September 30, 2023 and 2022, cost of revenue included depreciation expense of $ 3.7 million and $ 8.2 million, respectively for the Hosting segment.

For the nine months ended September 30, 2023 and 2022, cost of revenue included depreciation expense of $ 60.8 million and $ 146.8 million, respectively for the Mining segment.

Consolidated gross margin

For the three months ended March 31, 2024 and 2023, cost of revenue included depreciation expense of $ 27.5 million and $ 19.9 million, respectively for the Mining segment.

For the three months ended March 31, 2024 and 2023, cost of revenue included d epreciation expense of $ 1.3 million and $ 0.2 million, respectively for the Hosting segment.

Concentrations of Revenue and Credit Risk

2 unchanged sentences

The Company places its cash and cash equivalents with major financial institutions, which management assesses to be of high credit quality, in order to limit the exposure to credit risk.

As of September 30, 2023 and December 31, 2022, all of the Company’s fixed assets were located in the United States.

For the three and nine months ended September 30, 2023 and 2022, all of the Company’s revenue was generated in the United States.

For the three and nine months ended September 30, 2023, 74 % and 77 %, respectively, of the Company’s total revenue was generated from digital asset mining of bitcoin, which is subject to extreme price volatility.

As of September 30, 2023, substantially all of our digital assets were held by one third-party digital asset service.

As of December 31, 2022, substantially all of our digital assets were held by two third-party digital asset services.

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Unaudited Consolidated Financial Statements

For the three and nine months ended September 30, 2023 and September 30, 2022, the concentration of customers comprising 10% or more of the Company’s total revenue are as follows:

Three Months Ended September 30, Three Months Ended September 30,

2023 2022 2023 2022

Percent of total revenue:

Percent of Hosting segment revenue:

E (related party) 1

N/A 23 % N/A 46 %

12 % N/A 45 % N/A

Nine Months Ended September 30, Nine Months Ended September 30,

As of March 31, 2024 and December 31, 2023, all of the Company’s fixed assets were located in the United States.

For the three months ended March 31, 2024 and 2023, all of the Company’s revenue was generated in the United States.

For the three months ended March 31, 2024 and 2023, 84 % and 81 %, respectively, of the Company’s total revenue was generated from digital asset mining of bitcoin from one customer, which is subject to extreme price volatility.

For the three months ended March 31, 2024 and 2023, the concentration of customers comprising 10% or more of the Company’s Mining and Hosting segment revenue were as follows:

Three Months Ended March 31, Three Months Ended March 31,

2024 2023 2024 2023

Percent of total revenue:

Percent of Mining segment revenue:

Percent of Hosting segment revenue:

E (related party) 1

100 % 100 % N/A N/A

11 % N/A 48 % N/A

1 This customer was labeled as Customer A in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023.

The label was updated to conform to the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

2 This customer was labeled as Customer D in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.

A reconciliation of the reportable segment gross profit to loss before income taxes included in the Company’s Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022, is as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Reportable segment gross profit (loss)

N/A N/A 52 % N/A

N/A N/A 25 % N/A

N/A N/A 10 % N/A

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

A reconciliation of the reportable segment gross profit to loss before income taxes included in the Company’s Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023, is as follows (in thousands):

Three Months Ended March 31,

Reportable segment gross profit

$ 77,646 $ 31,781

Gain from sales of digital assets

363 11,036 2,358 25,007

Impairment of digital assets — ( 1,056 )

Impairment of goodwill and other intangibles — ( 268,512 ) — ( 1,059,265 )

Impairment of property, plant and equipment — ( 59,259 ) — ( 59,259 )

Losses on exchange or disposal of property, plant and equipment ( 340 ) — ( 514 ) ( 13,057 )

Change in fair value of energy derivatives

Losses on disposal of property, plant and equipment

Operating expenses:

Research and development

2,253 6,192 5,308 24,305

Sales and marketing

1,041 39 3,133 11,675

General and administrative

2 unchanged sentences

16,924 24,187

Operating (loss) income

( 12,044 ) ( 401,374 ) 5,027 ( 1,473,474 )

Non-operating expenses, net:

Gain on debt extinguishment

Operating income

Non-operating (income) expenses, net:

Loss (gain) on debt extinguishment

50 ( 20,761 )

Interest expense, net

2,196 25,942 2,317 74,734

Fair value adjustment on convertible notes — ( 4,123 ) — 186,853

Fair value adjustment on derivative warrant liabilities — ( 521 ) — ( 32,985 )

Reorganization items, net ( 111,439 ) 31,559

Other non-operating (income) expenses, net ( 1,090 ) 1,478 ( 3,978 ) 4,997

Total non-operating expenses, net

Change in fair value of warrant and contingent value rights ( 60,114 ) —

Other non-operating expense (income), net 1,746 ( 3,069 )

Total non-operating (income) expenses, net

( 155,670 ) 7,886

Loss before income taxes

Income (loss) before income taxes

$ 210,897 $ ( 284 )

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Unaudited Consolidated Financial Statements

RELATED-PARTY TRANSACTIONS

In the ordinary course of business, the Company from time to time has entered 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.

For the three and nine months ended September 30, 2023, the Company recognized hosting revenue from the contracts with these entities of $ 2.8 million and $ 10.1 million, r espectively.

For the three and nine months ended September 30, 2022, the Company recognized hosting revenue from the contracts with these entities of $ 9.2 million and $ 22.7 million , respectively.

In addition, for the three and nine months ended September 30, 2023, there was no equipment sales revenue recognized to these same various entities.

For the three and nine months ended September 30, 2022, there was equipment sales revenue recognized of $ 29.7 million and $ 67.3 million to these same various entities.

A nominal amount w as receivable from these entities as of September 30, 2023 and December 31, 2022.

The Company reimburses certain officers and directors of the Company for use of a personal aircraft for flights taken on Company business.

F or the three and nine months ended September 30, 2023, the Company did not incur personal aircraft reimbursements.

For the three and nine months ended September 30, 2022, the Company incurred reimbursements of $ 0.7 million and $ 1.8 million, respectively.

As of September 30, 2023 and December 31, 2022, there were no reimbursements payable.

REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

During the review of the Company’s consolidated financial statements for the three and six months ended June 30, 2023, the Company identified an error in in which cost of revenue from the three months ended June 30, 2023 was recorded during the three months ended March 31, 2023.

The error resulted in an overstatement in cost of revenue for the three months ended March 31, 2023.

This error also resulted in an overstatement of accrued expenses and other current liabilities as of March 31, 2023.

Based on management’s evaluation of the SEC Staff’s Accounting Bulletins Nos.

99 (“SAB 99”) and 108 (“SAB 108”) and interpretations therewith, the Company concluded that the aforementioned errors were not material to the Company’s previously filed March 31, 2023, consolidated financial statements.

This is further supported by the fact that the error would not likely have materially impacted a reasonable investor’s opinion of the Company’s financial condition and results of operations.

The following table presents the effect of the revision on the Company’s Consolidated Balance Sheets (in thousands):

March 31, 2023

As Corrected As Filed Change

Liabilities and Stockholders’ Deficit

Current Liabilities:

Accrued expenses and other current liabilities $ 47,299 $ 58,596 $ ( 11,297 )

Total Current Liabilities 203,449 214,746 ( 11,297 )

Total Liabilities 1,157,480 1,168,777 ( 11,297 )

Stockholders’ Deficit:

Accumulated deficit ( 2,174,138 ) ( 2,185,435 ) 11,297

Total Stockholders’ Deficit $ ( 397,461 ) $ ( 408,758 ) $ 11,297

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Unaudited Consolidated Financial Statements

The following table presents the effect of the revision on the Company’s Consolidated Statement of Operations for the three months ended March 31, 2023 (in thousands):

Three Months Ended March 31, 2023

As Corrected As Filed Change

Cost of revenue:

Cost of hosting services $ 16,198 $ 18,826 $ ( 2,628 )

Cost of digital asset mining 72,676 81,345 ( 8,669 )

Total cost of revenue 88,874 100,171 ( 11,297 )

Gross profit 31,781 20,484 11,297

Operating income (loss) 7,602 ( 3,695 ) 11,297

Loss before income taxes

( 284 ) ( 11,581 ) 11,297

( 388 ) ( 11,685 ) 11,297

Net loss per share:

Basic $ — $ ( 0.03 ) $ 0.03

Diluted $ — $ ( 0.03 ) $ 0.03

Weighted average shares outstanding:

375,419 375,419 —

The following table presents the effect of the revision on the Company’s Consolidated Statements of Changes in Stockholders’ Deficit (in thousands):

Three Months Ended March 31, 2023

Accumulated Deficit Total Stockholders’ Deficit

As corrected - Net loss $ ( 388 ) $ ( 388 )

As filed - Net loss $ ( 11,685 ) $ ( 11,685 )

Change - Net loss $ 11,297 $ 11,297

As corrected - Balance at March 31, 2023 $ ( 2,174,138 ) $ ( 397,461 )

As filed - Balance at March 31, 2023 $ ( 2,185,435 ) $ ( 408,758 )

Change - Balance at March 31, 2023 $ 11,297 $ 11,297

Core Scientific, Inc.

(Debtor-in-Possession)

Notes to Unaudited Consolidated Financial Statements

The following table presents the effect of the revision on the Company’s Consolidated Statements of Cash Flow (in thousands):

Three Months Ended March 31, 2023

As Corrected As Filed Change

Cash flows from Operating Activities:

$ ( 388 ) $ ( 11,685 ) $ 11,297

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Changes in operating assets and liabilities:

Accrued expenses and other ( 906 ) 10,391 ( 11,297 )

Net cash provided by (used in) operating activities $ 19,942 $ 19,942 $ —

Net increase (decrease) in cash, cash equivalents and restricted cash $ 17,052 $ 17,052 $ —

Cash, cash equivalents and restricted cash—beginning of period 52,240 52,240 —

Cash, cash equivalents and restricted cash—end of period $ 69,292 $ 69,292 $ —

SUBSEQUENT EVENTS

Bitmain Purchase Agreement

Subsequent to September 2023, the Company executed a purchase agreement with Bitmain for the acquisition of 12,600 Antminer S21 model miners for use in the Company's operations, for a total purchase price of approximately $ 50.4 million, of which $ 0.6 million was paid as a deposit as of September 30, 2023.

All miners are expected to be received and deployed by the third quarter of 2024.

On October 2, 2023, the Bankruptcy Court entered the J.W.

Didado Order approving the parties agreement to settle all claims of Didado against the Debtors.

For further discussion of this settlement, refer to Note 3 — Chapter 11 Filing and Other Related Matters.

On October 30, 2023, the Debtors reached an agreement in principle (the “Restructuring Term Sheet”) with the Ad Hoc Noteholder Group and the Equity Committee regarding the terms of a chapter 11 plan of reorganization, subject to the finalization of the Debtors’ Third Amended Joint Chapter 11 Plan of Reorganization of Core Scientific, Inc.

and its Debtor Affiliates and a related Disclosure Statement, and the execution of a restructuring support agreement (the “Restructuring Support Agreement”) and other definitive documentation, which the Debtors expect to enter into with the Ad Hoc Noteholder Group and the Equity Committee in the coming days.

The Restructuring Support Agreement, if and when executed by the Debtors, the Ad Hoc Noteholder Group and the Equity Committee, is expected to include terms consistent with those terms set forth in the Restructuring Term Sheet.

The Company had agreements to provide hosting services to various entities that are managed and invested in by individuals who were directors and executives of Core Scientific during fiscal year 2023.

For the three months ended March 31, 2024, there were no related-party transactions.

For the three months ended March 31, 2023, the Company recognized hosting revenue of $ 3.7 million from the contracts with related-parties.

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-Q

Item 1. Financial Statements