What changed in this filing

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Item 1. Financial Statements

2024-08-07 compared with 2024-05-09 · 545 added, 339 removed, 784 unchanged (53% of the section changed)

1 unchanged sentence

Core Scientific, Inc.

Consolidated Balance Sheets

Condensed Consolidated Balance Sheets

(in thousands, except par value)

10 unchanged sentences

Operating lease right-of-use assets 75,783 7,844

Intangible assets, net 2,136 2,247

Other noncurrent assets 17,816 21,865

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$ 0.00001 par value;

2,000,000 shares authorized;

none issued and outstanding

2,000,000 and nil shares authorized at June 30, 2024 and December 31, 2023, respectively;

none issued and outstanding at June 30, 2024 and December 31, 2023

Common stock;

$ 0.00001 par value;

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

10,000,000 shares authorized at June 30, 2024 and December 31, 2023;

187,892 and 386,883 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 1,930,542 1,823,260

2 unchanged sentences

Total Liabilities and Stockholders’ Deficit $ 761,456 $ 712,156

See accompanying notes to unaudited consolidated financial statements.

See accompanying notes to unaudited condensed consolidated financial statements.

Core Scientific, Inc.

Consolidated Statements of Operations

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

Three Months Ended March 31,

Digital asset mining revenue

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Hosting revenue from customers 29,332 18,909

Hosting revenue from related parties

Digital asset self-mining revenue

$ 110,743 $ 97,082 $ 260,702 $ 195,108

Digital asset hosted mining revenue from customers

24,840 26,316 54,172 45,225

Digital asset hosted mining revenue from related parties

— 3,514 — 7,234

HPC hosting revenue 5,519 — 5,519 —

Total revenue

1 unchanged sentence

Cost of revenue:

Cost of digital asset mining 81,564 72,676

Cost of hosting services 20,081 16,198

Cost of digital asset self-mining

80,001 66,846 161,565 139,522

Cost of digital asset hosted mining services

17,393 23,107 37,474 39,305

Cost of HPC hosting services 4,891 — 4,891 —

Total cost of revenue

1 unchanged sentence

38,817 36,959 116,463 68,740

Gain from sales of digital assets

Change in fair value of digital assets

( 584 ) — ( 41 ) —

Gain from sale of digital assets

— 931 — 1,995

Impairment of digital assets — ( 1,127 ) — ( 2,183 )

Change in fair value of energy derivatives

Losses on disposal of property, plant and equipment

( 539 ) — ( 2,757 ) —

Gain (loss) on disposal of property, plant and equipment

268 ( 174 ) ( 3,552 ) ( 174 )

Operating expenses:

Research and development

2,174 1,640 3,973 3,055

Sales and marketing

2,966 1,084 3,948 2,092

General and administrative

3 unchanged sentences

Operating income

6,579 9,469 61,806 17,071

Non-operating (income) expenses, net:

1 unchanged sentence

120 — 170 ( 20,761 )

Interest expense, net

Interest expense (income), net

14,775 ( 36 ) 28,862 121

Reorganization items, net — 18,455 ( 111,439 ) 50,014

Change in fair value of warrant and contingent value rights

796,035 — 735,921 —

Other non-operating expense (income), net

401 181 2,147 ( 2,888 )

Total non-operating (income) expenses, net

Total non-operating expenses, net

811,331 18,600 655,661 26,486

Income (loss) before income taxes

Loss before income taxes

( 804,752 ) ( 9,131 ) ( 593,855 ) ( 9,415 )

Income tax expense

Net income (loss)

144 129 350 233

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

$ ( 804,896 ) $ ( 9,260 ) $ ( 594,205 ) $ ( 9,648 )

Net loss per share (Note 12):

$ ( 4.51 ) $ ( 0.02 ) $ ( 2.87 ) $ ( 0.03 )

Weighted average shares outstanding:

1 unchanged sentence

178,505 375,779 207,092 375,875

See accompanying notes to unaudited consolidated financial statements.

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

See accompanying notes to unaudited condensed consolidated financial statements.

Core Scientific, Inc.

Consolidated Statements of Changes in Stockholders’ Deficit

For the Three Months Ended March 31, 2024

Condensed Consolidated Statements of Changes in Stockholders’ Deficit

For the Three Months Ended June 30, 2024

(in thousands)

4 unchanged sentences

Shares Amount

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

— — — ( 804,896 ) ( 804,896 )

Stock-based compensation — — 8,494 — 8,494

Issuance of new common stock in connection with emergence

79 — 399 — 399

Restricted stock awards issued, net of tax withholding obligations

115 — ( 4 ) — ( 4 )

Exercise of warrants

54 — 420 — 420

Issuance of new common stock for New Secured Convertible Notes conversion

4,525 — 26,545 — 26,545

Issuance of new common stock for PIK interest

882 — 3,677 — 3,677

Balance at June 30, 2024 187,892 $ 2 $ 1,930,542 $ ( 3,014,418 ) $ ( 1,083,874 )

See accompanying notes to unaudited condensed consolidated financial statements.

Core Scientific, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Deficit

For the Six Months Ended June 30, 2024

(in thousands)

Common Stock Additional

Paid-In Capital Accumulated

Deficit Total

Stockholders’

Shares Amount

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

22 unchanged sentences

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.

Exercise of warrants

54 — 420 — 420

Issuance of new common stock for New Secured Convertible Notes conversion

4,525 — 26,545 — 26,545

Issuance of new common stock for PIK interest

882 — 3,677 — 3,677

Balance at June 30, 2024 187,892 $ 2 $ 1,930,542 $ ( 3,014,418 ) $ ( 1,083,874 )

See accompanying notes to unaudited condensed consolidated financial statements.

Core Scientific, Inc.

Consolidated Statements of Changes in Stockholders’ Deficit

For the Three Months Ended March 31, 2023

Condensed Consolidated Statements of Changes in Stockholders’ Deficit

For the Three And Six Months Ended June 30, 2023

(in thousands)

4 unchanged sentences

Shares Amount

Balance at April 1, 2023

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

— — — ( 9,260 ) ( 9,260 )

Stock-based compensation — — 14,280 — 14,280

Restricted stock awards issued, net of shares withheld for tax withholding obligations 1,250 — — — —

Balance at June 30, 2023

379,091 $ 36 $ 1,790,921 $ ( 2,183,398 ) $ ( 392,441 )

Balance at January 1, 2023

3 unchanged sentences

Restricted stock awards issued, net of shares withheld for tax withholding obligations 3,866 — — — —

Balance at March 31, 2023

Balance at June 30, 2023

379,091 $ 36 $ 1,790,921 $ ( 2,183,398 ) $ ( 392,441 )

See accompanying notes to unaudited consolidated financial statements.

See accompanying notes to unaudited condensed consolidated financial statements.

Core Scientific, Inc.

Consolidated Statements of Cash Flows

Condensed Consolidated Statements of Cash Flows

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from Operating Activities:

Net income (loss)

$ ( 594,205 ) $ ( 9,648 )

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

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

Depreciation and amortization 58,473 40,567

1 unchanged sentence

Stock-based compensation 7,434 26,553

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

Digital asset self-mining revenue

( 260,701 ) ( 195,108 )

Loss (gain) on debt extinguishment

3 unchanged sentences

Change in fair value of contingent value rights

Change in fair value of digital assets

Amortization of debt discount

4 unchanged sentences

( 143,791 ) —

Non-cash PIK interest expense

Changes in operating assets and liabilities:

2 unchanged sentences

Digital assets 262,968 195,322

Deposits for equipment

Prepaid expenses and other current assets 5,654 ( 976 )

7 unchanged sentences

Purchases of property, plant and equipment ( 35,029 ) ( 1,774 )

Investments in internally developed software — ( 714 )

Other ( 125 ) —

1 unchanged sentence

Cash flows from Financing Activities:

Proceeds from issuance of common stock

Proceeds from issuance of new common stock

Proceeds from draw from exit facility

3 unchanged sentences

Proceeds from exercise of stock options 9 —

Proceeds from exercise of warrants

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

3 unchanged sentences

Cash, cash equivalents and restricted cash—end of period $ 97,105 $ 76,760

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

Cash and cash equivalents $ 96,122 $ 57,593

Restricted cash $ 983 $ 19,167

Total cash, cash equivalents and restricted cash $ 97,105 $ 76,760

Supplemental disclosure of other cash flow information:

26 unchanged sentences

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

See accompanying notes to unaudited consolidated financial statements.

Issuance of new common stock for convertible notes conversion

Issuance of new common stock for PIK interest

See accompanying notes to unaudited condensed consolidated financial statements.

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

Notes to Unaudited Condensed Consolidated Financial Statements

ORGANIZATION AND DESCRIPTION OF BUSINESS

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 ).

(“Core Scientific” or the “Company”) is a leader in digital infrastructure for bitcoin mining and high-performance computing.

We operate dedicated, purpose-built facilities for digital asset mining and are a premier provider of digital infrastructure, software solutions and services to our third-party customers.

We employ our own large fleet of computers (“miners”) to earn digital assets for our own account and provide hosting services for large customers at our eight operational data centers in Georgia ( 2 ), Kentucky ( 1 ), North Carolina ( 1 ), North Dakota ( 1 ) and Texas ( 3 ).

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 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.

The Company focuses primarily on digital asset mining for its own account and has historically focused on providing hosting solutions for third-party digital asset miners.

Beginning on March 6, 2024, we have made a series of announcements relating to new contractual arrangements with a third-party provider of high-performance compute (“HPC”) operations for customers utilizing specialized cloud-based graphics processing units (“GPU”s).

These new arrangements leverage the Company’s existing infrastructure and expertise in third-party hosting solutions.

We believe that using our existing infrastructure for HPC customers provides more consistent dollar-based revenue and substantially less risk than our traditional bitcoin mining customers or our bitcoin self-mining operations.

Going forward we intend to focus our efforts on expanding our HPC customer base while maintaining our bitcoin self-mining operations.

We expect that third-party hosting for traditional mining customers will be limited unless strategically or economically advantageous.

We currently operate in three segments:

“Digital Asset Self-Mining,” consisting of digital asset mining for our own account, “Digital Asset Hosted Mining,” consisting of our digital infrastructure and third-party hosting services for digital asset mining, and “HPC Hosting,” consisting of our digital infrastructure and third-party hosting services for client HPC operations.

Prior to April 1, 2024, we operated only in the Digital Asset Self-Mining and Digital Asset Hosted Mining segments.

We believe our experience in digital asset self-mining can be applied 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 have secured significant contracts in these areas and intend to pursue additional opportunities therein using our knowledge, experience and digital infrastructure where favorable market opportunities exist.

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

Our HPC hosting services provide colocation, facilities operations, security and other services to third-party HPC customers to support workloads for machine learning and artificial intelligence.

Chapter 11 Filing and Emergence from Bankruptcy

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

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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.

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Basis of Presentation

Our consolidated balance sheet as of December 31, 2023, which was derived from our audited consolidated financial statements, and our unaudited interim 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

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

rules and regulations of the U.S.

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

Securities and Exchange Commission ("SEC").

2 unchanged sentences

All of these adjustments are of a normal recurring nature.

The interim consolidated results of operations and cash flows are not necessarily indicative of the consolidated results of operations and cash flows that might be expected for the entire year.

These 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.

The interim condensed consolidated results of operations and cash flows are not necessarily indicative of the consolidated results of operations and cash flows that might be expected for the entire year.

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

Debtor-in Possession

2 unchanged sentences

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.

For the six months ended June 30, 2024, the Company generated net loss of $ 594.2 million.

The Company had unrestricted cash and cash equivalents of $ 96.1 million as of June 30, 2024, compared to $ 50.4 million as of December 31, 2023.

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

As of June 30, 2024, the Company had net working capital of $ 43.0 million and a total stockholders’ deficit of $ 1.1 billion.

We continue to monitor the impact of the fourth halving event in April 2024 on our liquidity.

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, 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.

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 June 30, 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 condensed 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.

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

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

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

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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

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

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

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.

2 unchanged sentences

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 early adoption did not have a material impact on the Company’s condensed consolidated financial statements.

The Company did not have any digital asset holdings as of June 30, 2024.

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

The following table presents a roll-forward of total digital

Core Scientific, Inc.

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

The following table presents a roll-forward of total digital assets for the six months ended June 30, 2024, based on the fair value model under ASU 2023-08, and the six months ended June 30, 2023 (in thousands):

June 30, 2024 June 30, 2023

Digital assets, beginning of period

2 unchanged sentences

Digital assets, beginning of period, as adjusted

Digital asset mining revenue, net of receivables 1

Digital asset self-mining revenue, net of receivables 1

261,566 194,917

2 unchanged sentences

( 277,562 ) ( 199,646 )

Realized gain from sale of digital assets

Change in fair value of digital assets

Gain from sale of digital assets

Impairment of digital assets

Payment of board fee

( 89 ) ( 89 )

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.

1 As of June 30, 2024 and June 30, 2023, there was $ 0.8 million and $ 1.0 million, respectively, of digital asset receivable included in prepaid expenses and other current assets on the condensed consolidated balance sheets.

Use of Estimates

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

Some of the more significant estimates include assumptions used to estimate the Company’s ability to continue as a going concern, the valuation of digital assets, other intangible assets and property, plant and equipment, the initial measurement of lease liabilities, the fair value of derivative liabilities, and income taxes.

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

Some of the more significant estimates include assumptions used to estimate the Company’s ability to continue as a going concern, the valuation of digital assets, property, plant and equipment, the initial measurement of lease liabilities, stock-based compensation, the fair value of derivative liabilities, and income taxes.

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

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

Performance Obligations - Hosting Segment

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

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

As of 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.

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 June 30, 2024, the Company had cash and cash equivalents of $ 96.1 million, substantially all of which exceeded Federal Deposit Insurance Corporation insured limits.

Cash equivalents included $ 75.3 million of highly liquid money market funds, which are classified as Level 1 within the fair value hierarchy.

Restricted cash consists of cash held in escrow to pay for construction and development activities.

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Revenue Recognition - HPC Hosting Revenue

Our HPC hosting segment generates revenue by licensing data center space to our customers under licensing agreements.

These arrangements contain lease components for the right to use data center space and nonlease components for power delivery, physical security, and maintenance services.

We have elected the practical expedient available under ASC Topic 842, Leases , to combine the nonlease revenue components that have the same pattern of transfer as the related operating lease components into a single combined component.

The single combined component is accounted for under ASC Topic 842 as an operating lease if the lease components are the predominant components and is accounted for under ASC Topic 606 if the nonlease components are the predominant components.

The lease components are the predominant components in our current licensing arrangements and the single combined component in these arrangements are accounted for under the operating lease guidance of ASC Topic 842.

We have concluded that it is probable that substantially all of the payments will be collected over the term of the arrangements and recognize the total combined component license payments under the agreements on a straight-line basis over the non-cancellable term.

Straight-line license revenue represents the difference in revenue recognized during the period and the license payments due pursuant to the underlying arrangement as deferred revenue in the condensed consolidated balance sheets.

Certain arrangements include options to extend the term.

These extension options are not reasonably certain to be exercised and are excluded from the lease term and calculation of lease payments at lease commencement.

Certain licensing arrangements provide for variable payments for power delivery services and maintenance services on customer assets and reimbursements for lessor costs such as taxes.

Payments for physical security and other routine maintenance services are included in the fixed lease payments.

Power delivery services represent a stand ready obligation to make power available to the customer over the coterminous lease term and have the same pattern of transfer as the related operating lease components.

Customers may request and the Company may provide maintenance services on customer assets during the coterminous lease term.

Customers are charged monthly for fees incurred on these maintenance services delivered and actual power costs incurred at current utility or fuel cost rates.

These payments from customers for power delivery and maintenance services are recognized as variable lease payments in accordance with the practical expedient elected.

Variable lease payments are presented on a gross basis and are included in HPC hosting revenue in the condensed consolidated statements of operations.

Performance Obligation Commitments -

The Company’s performance obligation commitments relate to digital asset hosted mining services.

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

As of June 30, 2024, for contracts with original terms that exceed one year (typically ranging from 15 to 24 months), we expect to recognize approximately $ 37.7 million of revenue in the future related to performance obligations associated with existing hosted mining contracts.

The Company expects to recognize approximately 92 % of this amount over the next 12 months and the remainder thereafter.

Deferred Revenue

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.

Notes to Unaudited Consolidated Financial Statements

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.

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

The Company’s total deferred revenue balance as of June 30, 2024 and December 31, 2023, was $ 7.9 million and $ 9.8 million, respectively.

In the three and six months ended June 30, 2024, the Company recognized $ 0.1 million and $ 6.5 million of revenue, respectively, that was included in the deferred revenue balance as of the beginning of the year.

In the three and six months ended June 30, 2023, the Company recognized $ 14.3 million and $ 25.9 million of revenue, respectively, 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.

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Stock-Based Compensation

Under ASC 718, Stock Compensation (“ASC 718”) estimated fair value uses a fair-value-based method.

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

The estimated fair value of restricted stock units (“RSUs”) with only service conditions is based on the closing market price of the Company’s common stock on the date of grant.

The estimated fair value of market condition restricted stock units (“MSUs”) is estimated on the date of grant using the Monte-Carlo pricing model for each service and market condition tranche.

The estimated fair value of stock option awards is estimated on the date of grant using the Black-Scholes option-pricing model.

For stock option and RSU awards with only service conditions, the estimated fair value of the equity awards is recognized as expense on a straight-line basis, less actual forfeitures as they occur, over the requisite service period for the entire award, which is generally the vesting period.

For RSU awards with service and market conditions, the compensation expense is recognized for each separately vesting portion of the award, or tranche, as if it were a separate award with its own vesting and exercise conditions (i.e., on an accelerated attribution basis).

The estimated fair value of each tranche is recognized as expense on a straight-line basis, less actual forfeitures as they occur, over the requisite service for the tranche.

The requisite service period of each tranche is the greater of the derived service period from the market condition or the service condition vesting period.

See Note 10 — Stockholders' Deficit for more information about the service and market conditions associated with the Company’s equity awards.

Convertible and Other Notes Payable

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

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

Notes payable are initially recognized at their present value.

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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.

As of June 30, 2024 and December 31, 2023, Notes payable did not have any embedded derivatives required to be bifurcated.

Contingent Value Rights Liabilities

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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.

As of June 30, 2024, the CVRs were reported at a fair value of $ 12.9 million in Contingent value rights on the condensed consolidated balance sheets and the GUC CVRs were reported at a fair value of nil.

During the three and six months ended June 30, 2024, the decrease in fair value of $ 31.7 million and $ 73.4 million, respectively, was included in Change in fair value of warrant and contingent value rights on the Company’s Condensed Consolidated Statements of Operations.

Warrant Liabilities

2 unchanged sentences

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

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

As of 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

Notes to Unaudited Condensed Consolidated Financial Statements

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

As of June 30, 2024, the warrants were reported at a fair value of $ 1.16 billion in Warrant liabilities on the Condensed Consolidated Balance Sheets.

During the three and six months ended June 30, 2024, the increase in fair value of $ 827.7 million and $ 809.3 million, respectively, was included in Change in fair value of warrant and contingent value rights on the Company’s Condensed Consolidated Statements of Operations.

Accounting Standards Not Yet Adopted

7 unchanged sentences

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.

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

CHAPTER 11 FILING AND EMERGENCE FROM BANKRUPTCY

8 unchanged sentences

Replacement DIP Credit Agreement

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

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

On February 27, 2023, the Debtors entered into a senior secured super-priority replacement debtor-in-possession loan and security agreement governing the Replacement DIP Facility (the “Replacement DIP Credit Agreement”), with B.

2 unchanged sentences

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, 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 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.

Notes to Unaudited Consolidated Financial Statements

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.

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

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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 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 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.

As of December 31, 2023, liabilities that were affected by the Plan of Reorganization were classified as liabilities subject to compromise at the amounts expected to be allowed by the Bankruptcy Court, even if they may have been settled for lesser amounts as a result of the Plan of Reorganization or negotiations with creditors.

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

After the Effective Date, any resulting changes in classification were reflected in subsequent financial statements.

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

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

2 unchanged sentences

Among other things, the Bankruptcy Court authorized the Debtors to pay certain pre-petition claims relating to employee wages and benefits, taxes and critical vendors.

The Debtors are paying and intend to pay undisputed post-petition liabilities in the ordinary course of business.

In addition, the Debtors may reject certain pre-petition executory contracts and unexpired leases with respect to their operations with the approval of the Bankruptcy Court.

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

Core Scientific, Inc.

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 March 31,

The Debtors paid undisputed post-petition liabilities in the ordinary course of business.

In addition, the Debtors rejected certain pre-petition executory contracts and unexpired leases with respect to their operations with the approval of the Bankruptcy Court.

Any damages resulting from the rejection of executory contracts and unexpired leases were treated as general unsecured claims and paid in full.

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

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Professional fees and other bankruptcy related costs $ — $ 17,665 $ 21,480 $ 37,772

Negotiated settlements

— 85 ( 2,269 ) 85

Satisfaction of allowed claims:

Extinguishment of secured and other convertible notes

— — ( 10,831 ) —

Extinguishment of miner equipment lender loans and leases

1 unchanged sentence

Satisfaction of general unsecured creditor claims

— — ( 31,167 ) —

Satisfaction of cures and other claims

4 unchanged sentences

Reorganization items, net $ — $ 18,455 $ ( 111,439 ) $ 50,014

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.

During the six months ended June 30, 2024, there were significant reorganization related gains resulting primarily from satisfaction of allowed claims under the Plan of Reorganization on the Effective Date and negotiated settlements, partially offset by professional fees and other bankruptcy related costs.

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

2 unchanged sentences

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

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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

9 unchanged sentences

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.

Notes to Unaudited Consolidated Financial Statements

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

Property, plant and equipment, net as of June 30, 2024 and December 31, 2023 consist of the following (in thousands):

June 30, 2024 December 31, 2023 Estimated Useful Lives

Land and improvements 1

18 unchanged sentences

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.

2 Includes finance lease assets of $ 6.6 million and $ 6.6 million at June 30, 2024 and December 31, 2023, respectively.

3 Includes finance lease assets of $ 0.2 million and $ 40.0 million at June 30, 2024 and December 31, 2023, respectively.

4 Includes finance lease assets of $ 12.6 million and $ 12.7 million at June 30, 2024 and December 31, 2023, respectively.

5 Includes finance lease assets of $ 0.4 million and $ 0.4 million at June 30, 2024 and December 31, 2023, respectively.

6 Includes accumulated amortization for assets under finance leases of $ 10.8 million and $ 43.4 million at June 30, 2024 and December 31, 2023, respectively.

Depreciation expense, including amortization of finance lease assets, for the three months ended June 30, 2024 and 2023, was $ 29.3 million, and $ 20.4 million, respectively, and for the six months ended June 30, 2024 and 2023, was $ 58.1 million and $ 40.7 million, respectively.

Depreciation for the three months ended June 30, 2024 and 2023, allocated to costs of revenue was $ 29.2 million, and $ 20.4 million, respectively, and for the six months ended June 30, 2024 and 2023, was $ 58.0 million and $ 40.5 million, respectively.

Lessee Accounting

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.

In addition, certain leases contain bargain renewal options extending through 2051.

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 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 lease 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 lease expense.

In addition, certain leases contain

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 March 31, 2024 December 31, 2023

Notes to Unaudited Condensed Consolidated Financial Statements

bargain renewal options extending through 2051.

Variable lease payments are not included in the initial measurement of leases and are expensed as incurred.

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

Financial statement line item June 30, 2024 December 31, 2023

Operating lease right-of-use assets Operating lease right-of-use assets $ 75,783 $ 7,844

10 unchanged sentences

current portion Finance lease liabilities, net of current portion $ 553 $ 35,745

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.

Supplemental disclosure of noncash investing and financing activities in the Company’s Condensed Consolidated Statements of Cash Flows includes a decrease in lease liability due to lease satisfactions on the Effective Date of $ 50.7 million presented in Extinguishment of accounts payable, accrued expenses, finance lease liability, and notes payable upon emergence for the six months ended June 30, 2024.

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

Three Months Ended March 31,

Three Months Ended June 30,

Financial statement line item 2024 2023

Operating lease expense Cost of HPC hosting services $ 3,096 $ —

Operating lease expense General and administrative expenses 1,391 224

5 unchanged sentences

Total lease expense $ 4,996 $ 4,411

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.

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.

Six Months Ended June 30,

Financial statement line item 2024 2023

Operating lease expense Cost of HPC hosting services $ 3,096 $ —

Operating lease expense General and administrative expenses 2,793 598

Short-term lease expense General and administrative expenses 193 362

Finance lease expense:

Amortization of right-of-use assets Cost of revenue 649 7,128

Interest on lease liabilities Interest expense, net 1,040 742

Total finance lease expense 1,689 7,870

Total lease expense $ 7,771 $ 8,830

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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

March 31, 2024 March 31, 2023

June 30, 2024 June 30, 2023

Weighted Average Remaining Lease Term (Years)

4 unchanged sentences

Finance leases 12.4 % 12.8 %

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

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

Three Months Ended March 31,

Three Months Ended June 30,

Lease Payments

1 unchanged sentence

Finance lease payments $ 1,031 $ 1,168

Six Months Ended June 30,

Lease Payments

Operating lease payments $ 1,720 $ 598

Finance lease payments 1

$ 6,195 $ 2,248

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):

Of the $ 6.2 million of finance lease payments made during the six months ended June 30, 2024, $ 4.4 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 June 30, 2024, and thereafter (in thousands):

Operating leases Finance leases

10 unchanged sentences

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

Notes to Unaudited Condensed Consolidated Financial Statements

Lessor Accounting

We generate revenue by leasing property to customers under licensing agreements.

The manner in which we recognize these transactions in our financial statements is described in Note 2 — Summary of Significant Accounting Policies — Revenue Recognition — HPC Hosting Segment.

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

Three and Six Months Ended June 30, 2024

Lease Revenue

Operating lease revenue

Variable lease revenue

Total lease revenue

The following table represents the maturity analysis of operating lease payments expected to be received at June 30, 2024, and thereafter (in thousands):

Remaining 2024 $ 11,960

Thereafter 54,469

Total $ 158,462

Core Scientific, Inc.

Notes to Unaudited Condensed 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):

Notes payable as of June 30, 2024 and December 31, 2023, consist of the following (in thousands):

Stated Interest Rate

Effective Interest Rates

Maturities March 31, 2024 December 31, 2023

Maturities June 30, 2024 December 31, 2023

Replacement DIP Credit Agreement 1

28 unchanged sentences

Didado note 5.0 % 15.0 % 2027 11,313 13,000

Dalton note 5.0 % 5.0 % 2024 4,547 —

Harper note 5.0 % 15.0 % 2026 4,055 4,678

15 unchanged sentences

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

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

3 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.

1 unchanged sentence

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

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The Replacement DIP Facility 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 debtor-in-possession order and (ii) $ 35 million was made available following Bankruptcy Court approval of the final debtor-in-possession order on March 1, 2023.

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.

On January 4, 2024, the Company pre-paid the outstanding balance of $ 4.5 million on the Replacement DIP Facility provided by B.

3 unchanged sentences

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.

The note bore interest at a contractual rate of 5.0 % per annum and matured on May 2, 2024.

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.

19 unchanged sentences

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

Notes to Unaudited Condensed Consolidated Financial Statements

Exit Credit Agreement

29 unchanged sentences

Core Scientific, Inc.

Notes to Unaudited Consolidated Financial Statements

Notes to Unaudited Condensed 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.

2 unchanged sentences

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 present value of the Secured Notes’ cash flows at issuance 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;

7 unchanged sentences

New Secured Convertible Notes Indenture;

Interest Payment and Mandatory Conversion

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

The New Secured Convertible Notes bore 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 was 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 was three business days prior to the applicable interest payment date.

The Company exercised its option to make the June 15, 2024 interest payment 6 % in cash for approximately $ 6.0 million and 6 % in stock and issued 881,610 shares of its New Common Stock to the holders of the New Secured Convertible Notes on that date for total interest expense of approximately $ 9.8 million.

During the three months ended June 30, 2024, $ 26.4 million of New Secured Convertible Notes including interest were voluntarily converted for 4.5 million shares of New Common Stock.

On July 5, 2024, the mandatory conversion feature of the New Secured Convertible Notes pursuant to the Indenture, dated as of January 23, 2024 (the “Indenture”), by and among the Company, as issuer, Wilmington Trust, National Association (“Wilmington Trust”), as trustee and collateral agent, and the other parties thereto, was triggered when the trading price of the Company’s New Common Stock on a daily volume weighted average basis (“VWAP”) exceeded the applicable threshold specified in the Indenture for the 20th consecutive trading day.

In connection with the mandatory conversion of the Notes, which took place on July 10, 2024, each registered holder of the New Secured Convertible Notes was entitled to receive (1) a number of shares of the Company’s New Common Stock equal to the aggregate principal amount of his, her or its notes outstanding, divided by the conversion price of $ 5.8317 (not including fractional shares), and (2) an amount of cash equal to the number of the resulting fractional shares, multiplied by the closing trading price of the Company’s New Common Stock on July 9, 2024.

Following the mandatory conversion of the New Secured Convertible Notes, 40.1 million shares of the Company’s New Common Stock in the aggregate were issued in exchange for $ 233.6 million aggregate principal amount of the New Secured Convertible Notes.

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Description of the New Secured Convertible Notes Indenture Prior to the Mandatory Conversion

Below is a description of the New Secured Convertible Notes prior to their mandatory conversion on July 10, 2024.

There are currently no outstanding New Secured Convertible Notes.

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.

5 unchanged sentences

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

17 unchanged sentences

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.

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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.

The Company did not deliver an election notice on the Miner Equipment Lender Facility in June 2024 and paid the standard interest rate of 3.0 % cash interest and 10.0 % paid-in-kind (“PIK”) interest for the second quarter of 2024.

For the three months ended June 30, 2024, the Company paid $ 0.4 million in cash interest and $ 1.2 million in PIK interest on the BlockFi lender facility.

For the six months ended June 30, 2024, the Company paid $ 0.6 million in cash interest and $ 2.1 million in PIK interest on the BlockFi lender facility.

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”).

2 unchanged sentences

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

As of June 30, 2024, the Company believes it was in compliance with the provisions and financial covenants in their respective material debt agreements in all material respects.

CONTINGENT VALUE RIGHTS AND WARRANT LIABILITIES

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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

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

GUC Contingent Value Rights and Extinguishment

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”).

The terms of the GUC CVRs provided that unless the value of the GUC Equity Distribution, as implied by the volume weighted average (“VWAP”) of the closing price during any 20 trading days over any consecutive 30 trading day period during the period beginning on the Effective Date and ending on the date 18 months following the Effective Date (the “ GUC CVR Testing Period”), is equal to or in excess of the GUC Equity Distribution at Plan Value, the Company would 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.

On July 1, 2024, the GUC CVRs were extinguished following the VWAP of the Company’s New Common Stock exceeding the applicable threshold specified therein for 20 trading days within a 30 consecutive trading day period.

As of June 30, 2024, the GUC CVRs were estimated to have no fair value.

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”).

On the Effective Date and pursuant to the Plan of Reorganization and the Confirmation Order, the Company entered into a warrant agreement (the “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 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.

As of June 30, 2024, the Triggering Event for the Tranche 2 Warrants had not occurred.

The Tranche 1 and Tranche 2 Exercise Prices 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.

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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.

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(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.

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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.

During the three months ended June 30, 2024, 53,870 Tranche 1 Warrants were exercised, which resulted in cash receipts of $ 0.4 million.

The Tranche 2 Warrants became exercisable as of the close of trading on July 11, 2024, when the daily volume weighted average trading price of the Company’s New Common Stock exceeded $ 8.72 per share for the 20 th consecutive trading day pursuant to the Warrant Agreement.

FAIR VALUE MEASUREMENTS

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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.

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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).

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

As of June 30, 2024, observable Level 1 market data was available for the CVRs and Warrants.

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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 June 30, 2024 (in thousands):

June 30, 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 $ 12,946 $ — $ — $ 12,946

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

Total contingent value rights liabilities 12,946 — — 12,946

4 unchanged sentences

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):

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).

The following table summarizes the fair value of the energy forward purchase contract on the Company’s Condensed Consolidated Balance Sheets (in thousands):

Fair Value (Level 2)

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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,

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

Three Months Ended June 30, Six Months Ended June 30,

Financial statement line item

2024 2023 2024 2023

Energy forward purchase contract

Change in fair value of energy derivatives $ ( 539 ) $ — $ ( 2,757 ) $ —

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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):

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 June 30, 2024 (in thousands):

Balance at December 31, 2023 $ —

1 unchanged sentence

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.

Unrealized gains

Balance at June 30, 2024 $ —

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 as of June 30, 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 fair value of the GUC CVRs was previously 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.

1 unchanged sentence

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.

As of June 30, 2024, the GUC CVRs were estimated to have no fair value.

On July 1, 2024, the GUC CVR Trigger was met and the GUC CVRs were extinguished with no payment or further obligation.

Nonrecurring fair value measurements

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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

No non-financial assets were classified as Level 3 as of June 30, 2024 or December 31, 2023.

Fair value of financial instruments

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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.

As of June 30, 2024, the fair value of the Convertible Notes using Level 1 active market price was $ 390.3 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.

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Purported Shareholder Class Action (“Pang”)

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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.

A lead plaintiff was appointed in April 2023 and proofs of claim were filed in the Company’s Chapter 11 Cases.

After the Company filed its motion to dismiss and a subsequent motion for consideration with respect to remaining claims not dismissed, all remaining claims in the complaint against the individual defendants were subsequently dismissed without prejudice in April 2024.

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;

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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.

Notes to Unaudited Consolidated Financial Statements

On June 7, 2024, Plaintiff refiled its complaint asserting that the individual defendants violated the Securities Exchange Act by allegedly failing to disclose to investors that among other things the Company failed to disclose known trends or uncertainties that would have an impact on the Company’s financial performance.

Purported Shareholder Class Action (“Ihle”)

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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.

The Debtors are

Core Scientific, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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.

filed a complaint against the Company in the United States District Court for the Eastern District of Texas, alleging breach of contract for failing to pay when due certain payments allegedly owing under a contract for construction entered into between the parties.

The case has been stayed as a result of the Company’s filing of a petition for relief under chapter 11 of the United States Bankruptcy Code.

On January 18, 2024, the Bankruptcy Court entered the McCarthy Order approving the parties’ agreement to settle all claims and release all liens of McCarthy against the Company.

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

As of June 30, 2024 and December 31, 2023, there were no other material loss contingency accruals for legal matters.

Leases —See Note 5 — Leases for additional information.

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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.

Notes to Unaudited Consolidated Financial Statements

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

The Equity Rights Offering was oversubscribed and the aggregate subscriptions (including over 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.

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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.

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

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.

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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.

Incentive Pl an

In accordance with the Plan of Reorganization, the Company adopted an equity-based management incentive plan on April 26, 2024 (the “Incentive Plan”).

The Incentive Plan provides for the grant of nonqualified stock options, stock appreciation rights, shares of restricted stock, restricted stock units, performance awards, dividend equivalent rights and other stock-based awards.

The Incentive Plan provides for grants of up to 40,000,000 shares of the Company’s Common Stock in respect of awards, subject to adjustment as provided in the Incentive Plan, and limits the aggregate compensation that may be paid to the Company’s non-employee directors in respect of any single fiscal year (including awards under the Incentive Plan) to a total of $ 800,000

The form of outstanding grants under the Incentive Plan currently includes RSUs and MSUs.

The participants in the 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) is determined by the Compensation Committee of the Board of Directors in its discretion, as plan administrator.

Under the Incentive Plan, certain executives have been granted MSUs which are subject to the achievement of market-based share price goals and the executives’ continued service until the relevant vesting date.

The number of shares which vest as of the end of each measurement period on each vesting date are conditioned on the highest 20 -day volume weighted average price of the Company's share price achieved during the tranche’s measurement vesting period since grant.

The MSU vesting schedule is proportionate over a three-year service period where such proportions are identified as tranches with separate service conditions and measurement periods for the market conditions.

If certain market-based share price goals are not met during certain tranche measurement periods, the ability to satisfy such goals apply in subsequent measurement periods and permit vesting if such market conditions are then met (and the service conditions are then satisfied).

The following table presents additional information relating to each MSU award:

Share Price Goal

Incremental Units

Tranche Cumulative Units

December 31, 2024 Vesting:

$ 3.14 142,381 142,381

$ 5.00 142,381 284,762

$ 8.00 142,381 427,143

$ 10.00 142,381 569,524

$ 12.00 142,381 711,905

$ 14.00 142,381 854,286

December 31, 2025 Vesting:

$ 3.14 142,381 142,381

$ 5.00 142,381 284,762

$ 8.00 142,381 427,143

$ 10.00 142,381 569,524

$ 12.00 142,381 711,905

$ 14.00 142,381 854,286

December 31, 2026 Vesting:

$ 3.14 142,381 142,381

$ 5.00 142,381 284,762

$ 8.00 142,381 427,143

$ 10.00 142,381 569,524

$ 12.00 142,381 711,905

$ 14.00 142,381 854,286

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,

During the six months ended June 30, 2024, the Company did no t grant any stock options, while 1.9 million stock options expired or were forfeited.

Total unrecognized stock-based compensation expense related to unvested stock options was immaterial as of June 30, 2024.

A summary of RSU and MSU activity for the six months ended June 30, 2024, is as follows (amounts in thousands, except per share amounts):

Restricted Stock Units

Market Condition Restricted Stock Units

Shares Weighted-Average

Grant Date Fair

Value Number of

Shares Weighted-Average

Grant Date Fair

Unvested - January 1, 2024

38,358 $ 2.69 — $ —

Cancellation of common stock in connection with emergence

( 38,358 ) 2.69 — —

Issuance of new common stock in connection with emergence

3,836 26.93 — —

Unvested - Effective Date

3,836 26.93 — —

18,893 6.17 2,562 5.57

( 1,593 ) 25.74 — —

( 1,307 ) 27.08 — —

Unvested - June 30, 2024

19,829 $ 7.23 2,562 $ 5.57

As of June 30, 2024, the Company had approximately $ 124.0 million of unrecognized stock-based compensation expense related to RSUs, which is expected to be recognized over a weighted average time period of 3.0 years, and an additional $ 19.0 million of unrecognized stock-based compensation expense related to MSUs for which some or all of the requisite service has been provided under the service conditions but had market conditions that had not yet been achieved.

The unrecognized stock-based compensation expense related to MSUs is expected to be recognized over a weighted average time period of 1.6 years.

Stock-based compensation expense for the three and six months ended June 30, 2024 and 2023, is included in the Company’s Condensed Consolidated Statements of Operations as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Cost of revenue $ 2,199 $ 1,507 $ 3,158 $ 2,104

5 unchanged sentences

$ 8,494 $ 14,280 $ 7,434 $ 26,553

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 months ended March 31, 2024 and 2023 were as follows:

Three Months Ended March 31,

The income tax expense and effective income tax rate for the three and six months ended June 30, 2024 and 2023 were as follows:

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

(in thousands, except percentages)

2 unchanged sentences

— % ( 1.4 ) % ( 0.1 ) % ( 2.5 ) %

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

For the three and six months ended June 30, 2024, the Company recorded $ 0.1 million and $ 0.4 million, respectively, 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 ( 16.7 )%, state taxes 0.1 %, fair market value adjustments to the warrant liability ( 6.0 )% and other items 1.6 %.

federal statutory rate of 21.0% due to projected changes in the valuation allowance 3.2 %, state taxes 0.1 %, non-deductible loss on warrant and contingent liabilities ( 23.7 )% and other items ( 0.5 )%.

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.

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

For the three and six months ended June 30, 2023, the Company recorded $ 0.1 million and $ 0.2 million, respectively, of income tax expense.

The Company's estimated annual effective income tax rate was ( 2.5 )%, compared to the U.S.

1 unchanged sentence

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)

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS

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

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net loss $ ( 804,896 ) ( 9,260 ) $ ( 594,205 ) $ ( 9,648 )

Weighted average shares outstanding - basic

178,505 375,779 207,092 375,875

Effect of dilutive securities:

Convertible notes

Restricted stock units

Weighted average shares outstanding - diluted 178,505 375,779 207,092 375,875

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.

Net loss per share - basic

$ ( 4.51 ) $ ( 0.02 ) $ ( 2.87 ) $ ( 0.03 )

Net loss per share - diluted

$ ( 4.51 ) $ ( 0.02 ) $ ( 2.87 ) $ ( 0.03 )

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.

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

Three Months Ended March 31,

Three and Six Months Ended June 30, 2024

Three and Six Months Ended June 30, 2023

Stock options

Tranche 1 Warrants

98,313 14,892

Restricted stock and restricted stock units

18,778 39,937

Warrants — 14,892

Convertible Notes 40,059 69,988

4 unchanged sentences

The Company’s operating segments are aggregated into reportable segments only if they exhibit similar economic characteristics and have similar business activities.

The Company has two operating segments:

“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.

The Company now has three operating segments:

“Digital Asset Self-Mining”, consisting of digital asset mining for its own account;

“Digital Asset Hosted Mining”, consisting of our digital infrastructure and third-party hosting services for digital asset mining;

and “HPC Hosting”, consisting of our digital infrastructure and third-party hosting services for GPU-based HPC operations.

The Company’s HPC and cloud compute operations met the criteria to be considered a new segment during the second quarter of 2024.

The Digital Asset Self-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 Digital Asset Hosted Mining business generates revenue through the sale of consumption-based contracts for its digital asset hosted mining services which are recurring in nature.

The HPC Hosting business generates revenue through licensing agreements and orders with licensees that include fixed and variable payments on a recurring basis.

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

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The Company excludes certain operating expenses and other expenses from the allocations to operating segments.

Core Scientific, Inc.

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 March 31,

Mining Segment

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Digital Asset Self-Mining Segment

(in thousands, except percentages)

Digital asset mining revenue

Digital asset self-mining revenue

$ 110,743 $ 97,082 $ 260,702 $ 195,108

Cost of digital asset mining 81,564 72,676

Mining gross profit

Cost of digital asset self-mining

80,001 66,846 161,565 139,522

Mining gross margin

Hosting Segment

Hosting revenue $ 29,332 $ 22,629

Cost of hosting services 20,081 16,198

Hosting gross profit

Digital Asset Self-Mining gross profit

$ 30,742 $ 30,236 $ 99,137 $ 55,586

Hosting gross margin

Digital Asset Self-Mining gross margin 28 % 31 % 38 % 28 %

Digital Asset Hosted Mining Segment

Digital asset hosted mining revenue from customers $ 24,840 $ 29,830 $ 54,172 $ 52,459

Cost of digital asset hosted mining services 17,393 23,107 37,474 39,305

Digital Asset Hosted Mining gross profit

$ 7,447 $ 6,723 $ 16,698 $ 13,154

Digital Asset Hosted Mining gross margin

30 % 23 % 31 % 25 %

HPC Hosting Segment

HPC hosting revenue $ 5,519 $ — $ 5,519 $ —

Cost of HPC hosting services 4,891 — 4,891 —

HPC Hosting gross profit $ 628 $ — $ 628 $ —

HPC Hosting gross margin 11 % — % 11 % — %

Consolidated total revenue $ 141,102 $ 126,912 $ 320,393 $ 247,567

Consolidated cost of revenue

3 unchanged sentences

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.

28 % 29 % 36 % 28 %

For the three months ended June 30, 2024 and 2023, cost of revenue included depreciation expense of $ 28.2 million and $ 18.8 million, respectively, for the Digital Asset Self-Mining segment.

For the three months ended June 30, 2024 and 2023, cost of revenue included d epreciation expense of $ 1.0 million and $ 1.5 million, respectively for the Digital Asset Hosted Mining segment.

three months ended June 30, 2024 and 2023, cost of revenue included d epreciation expense of a nominal amount and nil , respectively for the HPC Hosting segment.

For the six months ended June 30, 2024 and 2023, cost of revenue included depreciation expense of $ 55.7 million and $ 38.8 million, respectively for the Digital Asset Self-Mining segment.

For the six months ended June 30, 2024 and 2023, cost of revenue included d epreciation expense of $ 2.3 million and $ 1.8 million, respectively, for the Digital Asset Hosted Mining segment.

For the six months ended June 30, 2024 and 2023, cost of revenue included d epreciation expense of a nominal amount and nil , respectively, for the HPC Hosting segment.

Concentrations of Revenue and Credit Risk

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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 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,

As of June 30, 2024 and December 31, 2023, all of the Company’s fixed assets were located in the United States.

For the three and six months ended June 30, 2024 and 2023, all of the Company’s revenue was generated in the United States.

For the three and six months ended June 30, 2024, 78 % 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 and six months ended June 30, 2023, 76 % and 79 %, respectively, of the Company’s total revenue was generated from digital asset mining of bitcoin from one customer.

For the three and six months ended June 30, 2024 and 2023, the concentration of customers comprising 10% or more of the Company’s Digital Asset Self-Mining, Digital Asset Hosted Mining, and HPC Hosting segment revenue were as follows:

Three Months Ended June 30, Three Months Ended June 30, Three Months Ended June 30,

2024 2023 2024 2023 2024 2023

Percent of Mining segment revenue:

Percent of Hosting segment revenue:

100 % 100 % N/A N/A

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,

Percent of Digital Asset Self-Mining segment revenue:

Percent of Digital Asset Hosted Mining segment revenue:

Percent of HPC Hosting segment revenue:

100 % 100 % N/A N/A N/A N/A

N/A N/A 58 % 49 % N/A N/A

N/A N/A 25 % 15 % N/A N/A

E (related party) **

N/A N/A N/A 12 % N/A N/A

N/A N/A N/A N/A 100 % N/A

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

Six Months Ended June 30, Six Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023 2024 2023

Percent of Digital Asset Self-Mining segment revenue:

Percent of Digital Asset Hosted Mining segment revenue:

Percent of HPC Hosting segment revenue:

100 % 100 % N/A N/A N/A N/A

N/A N/A 54 % 49 % N/A N/A

N/A N/A 25 % N/A N/A N/A

E (related party) **

N/A N/A N/A 14 % N/A N/A

N/A N/A N/A N/A 100 % N/A

* 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 C ondensed Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023, is as follows (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Reportable segment gross profit

$ 38,817 $ 36,959 $ 116,463 $ 68,740

Gain from sales of digital assets

Change in fair value of digital assets ( 584 ) — ( 41 ) —

Gain from sale of digital assets

— 931 — 1,995

Impairment of digital assets — ( 1,127 ) — ( 2,183 )

Change in fair value of energy derivatives

Losses on disposal of property, plant and equipment

( 539 ) — ( 2,757 ) —

Gain (loss) on disposal of property, plant and equipment

268 ( 174 ) ( 3,552 ) ( 174 )

Operating expenses:

Research and development

2,174 1,640 3,973 3,055

Sales and marketing

2,966 1,084 3,948 2,092

General and administrative

3 unchanged sentences

Operating income

6,579 9,469 61,806 17,071

Non-operating (income) expenses, net:

2 unchanged sentences

Interest expense, net

14,775 ( 36 ) 28,862 121

Reorganization items, net — 18,455 ( 111,439 ) 50,014

1 unchanged sentence

Other non-operating expense (income), net 401 181 2,147 ( 2,888 )

Total non-operating (income) expenses, net

Total non-operating expenses, net

811,331 18,600 655,661 26,486

Income (loss) before income taxes

Loss before income taxes

$ ( 804,752 ) $ ( 9,131 ) $ ( 593,855 ) $ ( 9,415 )

1 unchanged sentence

In the ordinary course of business, the Company from time to time has entered into various transactions with related parties.

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.

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 2023.

For the three and six months ended June 30, 2024, there were no related-party transactions.

For the three and six months ended June 30, 2023, the Company recognized hosting revenue of $ 3.5 million and $ 7.2 million, respectively, from contracts with related parties.

SUBSEQUENT EVENTS

On July 1, 2024, the GUC CVR obligations were extinguished pursuant to their terms when the VWAP of the Company’s New Common Stock on NASDAQ National Market System (“NMS”) exceeded $ 5.02 for 20 trading days within the applicable 30 consecutive trading day period.

On July 5, 2024, the mandatory conversion feature of the New Secured Convertible Notes was triggered when the VWAP of the Company’s New common stock on NASDAQ NMS exceeded the applicable threshold specified in the Indenture for the 20th consecutive trading day pursuant to the Indenture.

In connection with the mandatory conversion of the Notes, each registered holder of the New Secured Convertible Notes was entitled to receive (1) a number of shares of the Company’s New Common Stock equal to the aggregate principal amount of his, her or its notes outstanding, divided by the conversion price of $ 5.8317 (not including fractional shares), and (2) an amount of cash equal to the number of the resulting fractional shares, multiplied by the closing trading price of the Company’s New Common Stock on July 9, 2024.

Following the mandatory conversion of the New Secured Convertible Notes, 40.1 million shares of the Company’s New Common Stock in the aggregate were issued (or will be issued upon presentation for cancellation of the New Secured Convertible

Notes in the case of manual paper notes by the holders thereof) in exchange for the remaining $ 233.6 million aggregate principal amount of the New Secured Convertible Notes.

On July 5, 2024, the Company entered into a purchase agreement with Block, Inc.

for the purchase of 3 nanometer Application Specific Integrated Circuits chips (“ASIC chips”) representing approximately 15 EH/s of hashrate.

On July 12, 2024, the Company paid a $ 10.0 million deposit which will be applied evenly towards the ASIC chips.

Payments are due in installments, starting six months prior to delivery.

Delivery of the ASIC chips is expected to begin by the end of 2025.

From July 1, 2024 through the date these financial statements were issued, approximately 0.1 million Tranche 1 Warrants were exercised upon payment to the Company of $ 0.9 million in the aggregate exercise price.

The Tranche 2 Warrants became exercisable as of the close of trading on July 11, 2024, when the VWAP of the Company’s New Common Stock exceeded $ 8.72 per share for the 20 th consecutive trading day pursuant to the Warrant Agreement.

From July 11, 2024 through the date these financial statements were issued, approximately 36.7 million Tranche 2 Warrants were exercised.

Payment of the Tranche 2 Warrant exercise price in cash resulted in aggregate exercise price proceeds to the Company of approximately $ 0.3 million.

On August 6, 2024, the Company announced the exercise by CoreWeave of its option to contract for an additional 112 MW of infrastructure to host CoreWeave’s GPUs for its HPC operations.

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