What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-06 compared with 2024-08-07 · 262 added, 268 removed, 743 unchanged (42% of the section changed)

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This MD&A is provided as a supplement to, and should be read in conjunction with, our unaudited condensed consolidated financial statements and the accompanying Notes to Unaudited Financial Statements (Part I, Item 1 of this Form 10-Q) as well as the financial and other information included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on March 13, 2024.

This section generally discusses the results of operations for the quarter ended June 30, 2024 compared to June 30, 2023.

This section generally discusses the results of operations for the three and nine months ended September 30, 2024 compared to September 30, 2023.

As discussed in the section titled “Cautionary Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” under Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on March 13, 2024,and under Part II, Item 1A in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, filed with the Securities and Exchange Commission on August 7, 2024.

Core Scientific 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”), primarily manufactured by Bitmain Technologies Limited (“Bitmain”), to produce bitcoin for our own account and provide hosting services for large bitcoin mining and high-performance compute (“HPC”) customers at our eight operational data centers in Georgia (2), Kentucky (1), North Carolina (1), North Dakota (1) and Texas (3).

We employ our own large fleet of computers (“miners”) to earn digital assets for our own account and to provide hosting services for large bitcoin mining customers and we are in the process of allocating and converting a significant portion of our nine operational data centers in Alabama (1), Georgia (2), Kentucky (1), North Carolina (1), North Dakota (1) and Texas (3), and our facility in development in Oklahoma to support artificial intelligence-related workloads under a series of contracts that entail the modification of certain of our data centers to deliver hosting services for high-performance computing (“HPC”).

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

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

We had an average hourly operating power demand of approximately 641 megawatts (“MW”) for the six months ended June 30, 2024.

We had secured approximately 1,200 MW of contracted power capacity at our sites as of June 30, 2024.

We had an average hourly operating power demand of approximately 607 megawatts (“MW”) for the nine months ended September 30, 2024.

We had secured approximately 1,200 MW of contracted power capacity at our sites as of September 30, 2024.

We also operate and manage one of the largest data center infrastructure asset bases among publicly listed North American miners with operational capacity of approximately 830 MW in support of our mining and HPC operations.

We improved our average self-mining fleet energy efficiency for the three months ended June 30, 2024, to 24.7 joules per terahash compared to 26.9 joules per terahash for the three months ended March 31, 2024.

Self-mining fleet energy efficiency is a measure of our fleet’s average energy efficiency over the period presented.

Our total revenue was $320.4 million and $247.6 million for the six months ended June 30, 2024 and 2023, respectively.

We had operating income of $61.8 million and $17.1 million for the six months ended June 30, 2024 and 2023, respectively.

We had net loss of $594.2 million and $9.6 million for the six months ended June 30, 2024 and 2023, respectively.

Our adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) was $134.0 million and $85.3 million for the six months ended June 30, 2024 and 2023, respectively.

Our average self-mining fleet energy efficiency for the three months ended September 30, 2024 was 24.5 joules per terahash, compared to 24.7 joules per terahash for the three months ended June 30, 2024.

Self-mining fleet energy efficiency is a measure of our fleet’s average actual energy efficiency over the period presented.

Beginning on March 6, 2024, we announced a series of new contractual agreements with a third-party provider of HPC operations for customers using specialized cloud-based graphics processing units (“GPUs”).

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

We believe that using our existing infrastructure for HPC hosting operations will provide more consistent dollar-based revenue and represents substantially less risk than for our traditional hosted bitcoin mining or our bitcoin self-mining operations.

As a result, we intend to focus our business development and marketing efforts on expanding our HPC hosting customer base.

We expect that third-party hosting for traditional bitcoin mining customers will decline significantly as a portion of our revenue mix.

Our total revenue was $415.7 million and $360.5 million for the nine months ended September 30, 2024 and 2023, respectively.

We generated operating income of $20.6 million and $5.0 million for the nine months ended September 30, 2024 and 2023, respectively.

We incurred net loss of $1.05 billion and $50.8 million for the nine months ended September 30, 2024 and 2023, respectively.

Our adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) was $144.2 million and $112.9 million for the nine months ended September 30, 2024 and 2023, respectively.

Adjusted EBITDA is a non-GAAP financial measure.

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(“CoreWeave”) to deliver 16 MW of infrastructure at the Company’s Austin, Texas facility.

Following commencement of operations in Texas, on June 3, 2024, the Company entered into a series of long-term contracts with CoreWeave to deliver approximately 200 MW of infrastructure to host CoreWeave’s HPC operations, which will require the Company to modify multiple existing sites.

The site modifications commenced in the second half of fiscal 2024 and operational status is expected in the first half of fiscal 2025.

Following the commencement of operations in the Austin, Texas facility, on June 3, 2024, the Company entered into a series of long-term contracts with CoreWeave to deliver approximately 200 MW of infrastructure to host CoreWeave’s HPC operations, which will require the Company to modify multiple existing sites.

The site modifications commenced in the second half of fiscal 2024 and operational status is expected to begin in the first half of fiscal 2025.

On June 25, 2024, the Company announced CoreWeave’s execution of an option to secure an additional 70 MW of infrastructure to host its HPC operations.

Operational status for the additional 70 MW is also expected in the second half of 2025.

Further, on August 6, 2024, the Company announced that CoreWeave executed an option to secure an additional 112 MW of infrastructure to host CoreWeave’s graphics processing units (“GPUs”) for HPC operations.

In April 2024, the Bitcoin protocol executed its fourth planned halving, wherein the bitcoin rewards issued for each solved block dropped from 6.25 bitcoin to 3.125 bitcoin, reducing the bitcoin received from bitcoin mining by 50% (excluding transactions fee rewards).

As a result, assuming stable network hashrate and no change to the price of bitcoin after the halving, the Company’s revenue related to mining bitcoin would decline by 50%, resulting in a significant negative impact on revenue and gross profit.

Operational status for the additional 70 MW is expected in the second half of 2025.

Further, on August 6, 2024, the Company announced that CoreWeave had executed an option to secure an additional 112 MW of infrastructure to host its HPC operations.

On October 22, 2024, the Company announced that CoreWeave had exercised its final option for an additional 120 MW of infrastructure.

2029 Convertible Notes Offering

On August 19, 2024, the Company the Company completed a private offering (the “2029 Convertible Notes Offering”) of $460.0 million aggregate principal amount of 3.00% Convertible Senior Notes due 2029 (the “2029 Convertible Notes”), which included the exercise in full of the initial purchasers’ option to purchase up to an additional $60.0 million aggregate principal amount of 2029 Convertible Notes.

The net proceeds from the 2029 Convertible Notes Offering were approximately $447.6 million, after deducting the initial purchasers’ discounts and commissions and the Company’s estimated offering expenses.

The Company used approximately $62.0 million of the net proceeds from the 2029 Convertible Notes Offering to repay in full the outstanding loans under the Exit Credit Agreement, of which $0.8 million was paid for interest.

Additionally, the Company used approximately $154.1 million of the net proceeds from the 2029 Convertible Notes Offering to redeem all of the outstanding Secured Notes, of which $4.1 million was paid for interest.

Further, On September 6, 2024, the Company paid $49.6 million to repay the BlockFi facility in full, of which $0.7 million was paid for interest.

The Company intends to use the remaining net proceeds from the 2029 Convertible Notes Offering for general corporate purposes, including working capital, operating expenses, capital expenditures, acquisitions of complementary businesses or assets, or other repurchases of its securities.

For more detailed information regarding the 2029 Convertible Notes Offering conversion, refer to Note 6 — Convertible and Other Notes Payable to our condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report on Form 10-Q.

On April 19, 2024, the Bitcoin protocol executed its fourth planned halving, wherein the bitcoin rewards issued for each solved block declined from 6.25 bitcoin to 3.125 bitcoin, reducing the bitcoin received from bitcoin mining by 50% (excluding transaction fee rewards).

As a result, revenue generated from bitcoin mining declined, adversely impacting gross profit.

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.

On January 24, 2024, the Company’s common shares began trading on the Nasdaq market under the ticker symbol CORZ.

On the Effective Date, a new Board of Directors was constituted and the Company, in accordance with the Plan of Reorganization satisfied and extinguished claims in the Chapter 11 cases through the issuance of (i) new common stock (“New Common Stock”), (ii) new warrants (“New Warrants”), (iii) contingent value rights (“CVRs”), (iv) new secured convertible notes due 2029 (“New Secured Convertible Notes”), and (v) new secured notes due 2028 (“New Secured Notes”).

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Business Overview

As a large-scale owner and operator of high-powered digital infrastructure for bitcoin mining and hosting services, we believe that we are well positioned to serve customers in an expanding market for digital asset mining and HPC operations.

As a large-scale owner and operator of high-power digital infrastructure for bitcoin mining and hosting services, we believe that we are well positioned to serve customers in digital asset mining and an expanding market for HPC operations.

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

Further, as noted in the “Business Strategy” section below, we believe that opportunities for growth exist in various applications of our data centers for third-party customers focused on cloud computing as well as machine learning and artificial intelligence, which has driven our recent expansion into providing HPC hosting services.

We focus primarily on mining and selling bitcoin for cash and activities directly related to growing our mining capabilities (increasing the number of bitcoin mined) and enhancing efficiencies in our operations (reducing our cost to mine).

Our growing digital asset mining operation is focused on earning bitcoin by solving complex cryptographic algorithms to validate transactions on specific bitcoin blockchains, which is commonly referred to as “mining.” Our digital asset self-mining activity competes with myriad mining operations throughout the world to complete new blocks on the blockchain and earn the reward in the form of bitcoin.

The terms of our debt agreements currently require that we sell our bitcoin within ten days of receipt, and we typically use the proceeds to fund our operations and growth.

Our data centers house bitcoin mining computers and lever our specialized construction proficiency by employing high-density, low-cost engineering and power designs.

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

We continually evaluate our mining performance, including our ability to access additional megawatts of electric power and to expand our total self-mining, customer and related party hosting hash rates.

In addition to exploring additional mining facilities and mining arrangements, we may also explore additional uses of our current and future data centers to support other forms of high-value compute, such as our developing HPC hosting operations, in connection with our short-, medium- and long-term strategic planning.

We focus primarily on mining and selling bitcoin for cash, enhancing efficiencies in our operations (reducing our cost to mine) and contracting our digital infrastructure for HPC hosting.

Our digital asset mining operation is focused on earning bitcoin by solving complex cryptographic algorithms to validate transactions on specific bitcoin blockchains, which is commonly referred to as “mining.” Our digital asset self-mining activity competes with myriad mining operations throughout the world to complete new blocks on the blockchain and earn the reward in the form of bitcoin.

Our data centers house bitcoin mining computers and will increasingly house GPUs.

These specialized facilities lever our specialized design and construction proficiency by employing high-density, low-cost engineering, power designs and modular construction.

For bitcoin mining, our proprietary thermodynamic structural design manages heat and airflow to deliver best-in-class uptime and, ultimately, increased mining rewards to us and our customers.

We are allocating a significant portion of our current and future data centers to support other forms of high-value compute, such as HPC hosting operations, in connection with our short-, medium- and long-term strategic plan.

Business Strategy

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

We intend to strategically develop the infrastructure necessary to support business growth and profitability and pursue adjacent high-value compute opportunities that lever our mining expertise and capabilities.

For example, in February 2024, we entered into a multi-year lease agreement for a data center in Austin, Texas, to perform colocation hosting services for CoreWeave to supply up to 16 MW of data center infrastructure in support of its GPU cloud compute workloads.

Our business strategy is to grow our revenue and profitability by maximizing the portion of our infrastructure portfolio contracted for HPC hosting, expanding that portfolio and increasing the efficiency of our self-mining fleet.

For example, in February 2024, we entered into a multi-year lease agreement for a data center in Austin, Texas, to provide hosting services for CoreWeave with up to 16 MW of data center infrastructure in support of its GPU cloud compute workloads.

This facility became operational in the second fiscal quarter of 2024.

During the fiscal quarter ended June 30, 2024, we completed the expansion of our Denton, Texas facility by 72 MW of data center infrastructure to support our digital asset self-mining business.

June 3, 2024, the Company entered into a series of long-term contracts with CoreWeave to deliver approximately 200 MW of infrastructure to host CoreWeave’s HPC operations.

On June 25, 2024, the Company announced CoreWeave’s execution of an option to secure an additional 70 MW of infrastructure to host its HPC operations.

These contracts represent a significant step in HPC build-out and tap into the rapidly growing hyperscale data center market.

We believe the potential for HPC hosting complements our current business model with expected stable, long-term and high margin revenue.

We believe our expertise 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, as well as machine learning and artificial intelligence.

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

Since June 3, 2024, the Company has entered into a series of long-term contracts with CoreWeave to deliver approximately 500 MW of infrastructure to host CoreWeave’s HPC operations.

These contracts represent a significant milestone in the HPC hosting portion of our strategy and tap into the rapidly growing hyperscale data center market.

We believe the potential business opportunity for HPC hosting complements our current business model with expected stable, long-term revenue.

We believe we can successfully apply our experience developing and operating a large, multi-state portfolio of digital infrastructure for digital asset mining 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 seek additional opportunities and to engage additional customers in the HPC Hosting segment to expand our business into these areas using our knowledge, expertise, existing and future infrastructure where favorable market opportunities exist.

We have three operating 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 hosting services for high-performance compute operations.

Our Digital Asset Self-Mining operation segment generates revenue from operating our own mining computers as part of a pool of users that process transactions conducted on one or more blockchain networks.

“Digital Asset Self-Mining,” consisting of performing digital asset mining for our own account, “Digital Asset Hosted Mining,” consisting of providing hosting services to third parties for digital asset mining, and “HPC Hosting,” consisting of providing hosting services to third parties for GPU-based HPC hosting operations.

Our Digital Asset Self-Mining operation segment generates revenue from operating our own digital infrastructure and mining computers as part of a pool of users that process transactions conducted on one or more blockchain networks.

In exchange for this activity, we receive digital assets in the form of bitcoin.

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

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

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

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

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The second agreement was for the acquisition of Antminer S21 miners with a combined exahash of 2.5 or approximately 12,900 miners.

As of June 30, 2024, the Company had received all of the miners.

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

The tables below summarize the total number of self- and hosted miners in operation as of June 30, 2024 and December 31, 2023 (miners in thousands):

Bitcoin Miners in Operation as of June 30, 2024

As of September 30, 2024, the Company had received all of the miners and completed all 2024 payments due on miners ordered for deployment this year.

The tables below summarize the total number of self- and hosted miners in operation as of September 30, 2024 and December 31, 2023 (miners in thousands):

Bitcoin Miners in Operation as of September 30, 2024

Mining Equipment Hash rate (EH/s) Number of Miners

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Summary of Digital Asset Activity

Activity related to our digital asset balances for the six months ended June 30, 2024 and 2023, were as follows (in thousands):

June 30, 2024 June 30, 2023

Activity related to our digital asset balances for the nine months ended September 30, 2024 and 2023, were as follows (in thousands):

September 30, 2024 September 30, 2023

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

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Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”) effective January 1, 2024.

2 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.

2 As of September 30, 2024 and December 31, 2023, there was $0.7 million and $1.7 million, respectively, of digital asset receivable included in prepaid expenses and other current assets on the condensed consolidated balance sheets.

Performance Metrics

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Market Price of Digital Assets

Our business is heavily dependent on the spot price of bitcoin.

The prices of digital assets, specifically bitcoin, have experienced substantial volatility, meaning that high or low prices may have little or no relationship to identifiable market forces, may be subject to rapidly changing investor sentiment, and may be influenced by factors such as technology, regulatory void or changes,

fraudulent actors, manipulation, and media reporting.

Our Digital Asset Self-Mining segment is heavily dependent on the spot price of bitcoin.

Bitcoin (as well as other digital assets) may have value based on various factors, including their acceptance as a means of exchange by consumers and others, scarcity, and market demand.

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Further affecting the industry, and particularly for the bitcoin blockchain, the digital asset reward for solving a block is subject to periodic incremental halving.

Halving is a process designed to control the overall supply and reduce the risk of inflation in digital assets using a proof-of-work consensus algorithm.

Halving is a process designed to control the overall supply and reduce the risk of inflation in digital

assets using a proof-of-work consensus algorithm.

At a predetermined block, the mining reward is reduced by half, hence the term “halving.” A reduction in the number of bitcoins rewarded per block would result in a reduction of revenue to those mining bitcoin, barring any increase in the spot price of bitcoin or decrease in Bitcoin network hash rate or difficulty.

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Our Competition and Customers

In addition to factors underlying our mining business growth and profitability, the success of our hosting business greatly depends on our ability to retain and develop opportunities with our existing customers and to attract new customers.

In addition to factors underlying our mining business growth and profitability, the success of our HPC hosting business greatly depends on our ability to retain and develop opportunities with our existing customers, secure additional infrastructure and attract new customers.

Our business environment is constantly evolving.

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Despite this trend, we believe we have continued to maintain a competitive hash rate capacity among both public and private bitcoin miners.

However, to remain competitive in our evolving industry, both against new entrants into the market and existing competitors, we anticipate that we will need to continue to expand our existing miner fleet by purchasing new and available used miners, as well as innovating to develop and implement new technologies and mining solutions.

However, remaining competitive in our evolving industry, both against new entrants into the market and existing

competitors, will require the expansion of our existing miner fleet by purchasing new and available used miners, as well as innovating to develop and implement new technologies and mining solutions.

In HPC hosting, we compete with other providers of high-power data center capacity, such as major data center real estate investment trusts (“REITs”), developers of data centers, hyperscalers and bitcoin miners with capacity suitable for HPC hosting.

This competition focuses primarily on the identification and acquisition of new, high-power sites, but also includes competition for the capital required to build or modify existing sites to support HPC hosting.

Additionally, the modification of some of our data centers to

accommodate HPC hosting involves the procurement of critical equipment, technologies and skilled labor, which are in high demand from other entities seeking to address the same market opportunity, thereby putting us in competition with many other organizations for those resources.

Additionally, the modification of some of our data centers to accommodate HPC hosting involves the procurement of critical equipment, technologies and skilled labor, which are in high demand from other entities seeking to address the same market opportunity, thereby putting us into competition with many other organizations for those resources.

We believe that because of our operational high-power data center capacity and the experience, knowledge, capabilities and relationships of our data center development and operations team, we are uniquely qualified to address the current strong demand for high-power data center capacity to support HPC applications successfully.

We believe that our integrated services portfolio, as well as our differentiated customer experience and technology, are keys to retaining and growing revenue from existing customers and to acquiring new customers.

For example, we believe our significant build-out and ready power combined with our technology stack represent meaningful competitive advantages favorable to our business.

Differentiation, Innovation and Expansion of Our Platform

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

State and local regulations within the United States also may apply to our activities and

other activities in which we may participate in the future.

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

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

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For a definition of these key business operating metrics, see the sections titled “Self-Mining Hash Rate,” “Cost of Self-Mining One Bitcoin and Hash Cost,” (below), and for non-GAAP financial measures, see the section titled “Adjusted EBITDA” (below).

September 30,

Self-Mining Hash rate (Exahash per second)

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

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

2024 2023 2024 2023

Adjusted EBITDA (in millions) $ 10.1 $ 27.8 $ 144.2 $ 112.9

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

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

2024 2023 2024 2023

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Generally, miners with a greater hash rate relative to the global Bitcoin network hash rate at a given time will over time, have a greater chance of earning a bitcoin, as compared to miners with relatively lower total hash rates.

Further, with the increase in demand for bitcoin contributing to an increase in computational resources for digital asset mining, the global network hash rate has increased,

and we expect it to continue to increase.

Further, with the increase in demand for bitcoin contributing to an increase in computational resources for digital asset mining, the global network hash rate has increased, and we expect it to continue to increase.

As such, our self-mining hash rate provides useful information to investors because it demonstrates our capacity, and our competitive advantage, for mining bitcoin, which contributes to our digital asset self-mining revenue.

Management uses our self-mining hash rate to monitor our performance and competitive advantage in mining bitcoin as global competition also increases.

Our self-mining hash rate was 19.4 EH/s and 15.1 EH/s as of June 30, 2024 and 2023, respectively representing a 28% increase year over year.

Our combined self-mining and customer and related party hosting hash rate increased 10%, to 24.6 EH/s as of June 30, 2024, from 22.3 EH/s as of June 30, 2023.

Our self-mining hash rate was 20.4 EH/s and 15.0 EH/s as of September 30, 2024 and 2023, respectively representing a 36% increase year over year.

Our combined self-mining and customer and related party hosting hash rate increased 5%, to 23.4 EH/s as of September 30, 2024, from 22.3 EH/s as of September 30, 2023.

Cost of Self-Mining One Bitcoin and Hash Cost

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(vii) change in fair value of warrant and contingent value rights;

(viii) business or site startup costs which are not reflective of the ongoing costs incurred after startup, (ix) bankruptcy advisory costs incurred related to reorganization which are not reflective of the ongoing costs incurred in post-emergence operations, and (x) certain additional non-cash items that do not reflect the performance of our ongoing business operations.

(viii) HPC advisory startup costs or site conversion startup costs which are not reflective of the ongoing costs incurred after startup, (ix) bankruptcy advisory costs incurred related to reorganization which are not reflective of the ongoing costs incurred in post-emergence operations, and (x) certain additional non-cash items that do not reflect the performance of our ongoing business operations.

For additional information, including the reconciliation of net income (loss) to Adjusted EBITDA, please refer to the table below.

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You should review the reconciliation of net income (loss) to Adjusted EBITDA below and not rely on any single financial measure to evaluate our business.

The following table presents a reconciliation of net loss to Adjusted EBITDA for the three and six months ended June 30, 2024 and 2023, (in thousands):

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

The following table presents a reconciliation of net loss to Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023, (in thousands):

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

Adjusted EBITDA

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Unrealized fair value adjustment on energy derivatives — — (2,262) —

Gain (loss) on disposal of property, plant and equipment (268) 174 3,552 174

HPC startup costs

4,601 — 4,601 —

Loss on disposal of property, plant and equipment 509 340 4,061 514

HPC advisory startup costs

Bankruptcy advisory costs

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The Company’s HPC and cloud compute operations began during the second quarter of 2024.

• Digital asset self-mining revenue.

• Digital asset self-mining rev enue.

We operate a digital asset self-mining operation using specialized computers equipped with ASIC chips (known as “miners”) to solve complex cryptographic algorithms in support of the bitcoin blockchain (in a process known as “solving a block”) in exchange for digital asset rewards (primarily bitcoin).

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The mining pool operator provides a service that coordinates the computing power of the independent mining enterprises participating in the mining pool.

The pool uses software that coordinates the pool members’ mining power, identifies new block rewards, records how much hash rate each participant contributes to the pool, and assigns digital asset rewards earned by the pool among its participants in proportion to the hash rate each participant contributed to the pool in connection with solving a block.

proportion to the hash rate each participant contributed to the pool in connection with solving a block.

Revenues from digital asset self-mining are impacted by volatility in bitcoin prices, as well as increases in the bitcoin blockchain’s network hash rate resulting from the growth in the overall quantity and quality of miners working to solve blocks on the bitcoin blockchain and the difficulty index associated with the secure hashing algorithm employed in solving the blocks.

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• HPC hosting revenue.

HPC hosting revenue is generated by licensing data center space and related services to licensees.

HPC hosting revenue is generated by licensing data center space and related services to licensees at our Austin, Texas data center.

These licensing agreements and orders include lease components, nonlease components (such as power delivery, physical security, maintenance and other billable expenses), as well as noncomponent elements such as taxes.

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The Company’s cost of digital asset self-mining and digital asset hosted mining services, primarily consist of electricity costs, salaries, stock-based compensation, depreciation of property, plant and equipment used to perform mining operations and hosting services and other related costs.

Cost of HPC hosting services primarily consist of lease expense and electricity costs.

Cost of HPC hosting services relate to our Austin, Texas data center, and primarily consists of lease expense, power, payroll and benefits expense and stock-based compensation expense.

Change in fair value of digital assets

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The Change in fair value of energy derivatives represents changes in the fair value of the derivative liability related to the energy forward purchase contract described in more detail in “Energy Forward Purchase Contract” in Note 2 — Summary of Significant Accounting Policies to our consolidated financial statements in Item 8 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2023.

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

Gain (loss) on disposal of property, plant and equipment are measured as the differences between the carrying value of the property, plant and equipment disposed of and fair value of the consideration received upon disposal.

Loss on disposal of property, plant and equipment

Loss on disposal of property, plant and equipment are measured as the differences between the carrying value of the property, plant and equipment disposed of and fair value of the consideration received upon disposal.

Operating expenses

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General and administrative expenses include compensation and benefits expenses for employees who are not part of the research and development and sales and marketing organization and other personnel-related expenses.

Also included are stock-based compensation, rent, HPC startup costs, bankruptcy advisor fees related to the reorganization, professional fees, business insurance, auditor fees, bad debt, amortization of intangibles, franchise taxes, and bank fees.

HPC startup costs were specifically incurred preparing for and entering into the HPC hosting

business on activities and services that are not expected to be utilized within future ongoing operations of the HPC hosting business.

Also included are stock-based compensation, rent, HPC advisory and site startup costs, bankruptcy advisor fees related to the reorganization, professional fees, business insurance, auditor fees, bad debt, amortization of intangibles, franchise taxes, and bank fees.

HPC advisory startup costs were specifically incurred preparing for and entering into the HPC hosting business on activities and services that are not expected to be utilized within future ongoing operations of the HPC hosting business.

Non-operating (income) expenses, net:

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Deferred tax assets are reduced by a valuation allowance to the extent management believes it is not more likely than not to be realized.

Results of Operations for the Three Months Ended June 30, 2024 and 2023

Results of Operations for the Three Months Ended September 30, 2024 and 2023

The following table sets forth our selected Condensed Consolidated Statements of Operations for each of the periods indicated.

Three Months Ended June 30, Period over Period Change

Three Months Ended September 30, Period over Period Change

2024 2023 Dollar

15 unchanged sentences

Total cost of revenue 95,510 97,485 (1,975) (2)%

Gross (loss) profit

(156) 15,419 (15,575) (101)%

5 unchanged sentences

Change in fair value of energy derivatives

(539) — (539) NM

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

268 (174) 442 NM

Loss on disposal of property, plant and equipment

(509) (340) (169) 50%

Operating expenses:

Research and development 2,841 2,253 588 26%

Sales and marketing 2,966 1,084 1,882 174%

Sales and marketing 3,151 1,041 2,110 NM

General and administrative 34,356 23,511 10,845 46%

Total operating expenses 40,348 26,805 13,543 51%

Operating income

Operating loss

(41,219) (12,044) (29,175) NM

Non-operating expenses, net:

Loss on debt extinguishment

Interest expense (income), net

Non-operating (income) expenses, net:

Loss (gain) on debt extinguishment

317 (374) 691 NM

Interest expense, net

7,072 2,196 4,876 NM

Reorganization items, net — 28,256 (28,256) NM

1 unchanged sentence

408,520 — 408,520 NM

Other non-operating expense, net

Other non-operating income, net

(2,003) (1,090) (913) 84%

4 unchanged sentences

Income tax expense

134 114 20 18%

$ (455,259) $ (41,146) $ (414,113) NM

NM - Not Meaningful

Three Months Ended June 30, Period over Period Change

Three Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

14 unchanged sentences

Total revenue

Total revenue increased by $14.2 million or 11%, to $141.1 million for the three months ended June 30, 2024, from $126.9 million for the three months ended June 30, 2023, as a result of the factors described below.

Digital asset self-mining revenue increased by $13.7 million or 14%, to $110.7 million for the three months ended June 30, 2024, from $97.1 million for the three months ended June 30, 2023.

The increase in mining revenue was driven primarily by an increase in the price of bitcoin and an increase in our self-mining hash rate, which was due to an approximate increase of 19,000 mining units deployed.

The increase in mining revenue was partially offset by a 52% decrease in bitcoin mined.

Our self-mining hash rate increased by 28%, to 19.4 EH/s for the three months ended June 30, 2024, from 15.1 EH/s for the same period in the prior year.

The total number of bitcoins self-mined for the three months ended June 30, 2024, was 1,680 compared to 3,470.

Total revenue decreased by $17.6 million or 16%, to $95.4 million for the three months ended September 30, 2024, from $112.9 million for the three months ended September 30, 2023, as a result of the factors described below.

Digital asset self-mining revenue decreased by $14.9 million or 18%, to $68.1 million for the three months ended September 30, 2024, from $83.1 million for the three months ended September 30, 2023.

The decrease in mining revenue was driven primarily by a 62% decrease in bitcoin mined.

The decrease in mining revenue was partially offset by an increase in the price of bitcoin and an increase in our self-mining hash rate, which was due to an approximate increase of 31,000 mining units deployed.

Our self-mining hash rate increased by 36%, to 20.4 EH/s for the three months ended September 30, 2024, from 15.0 EH/s for the same period in the prior year.

The total number of bitcoins self-mined for the three months ended September 30, 2024, was 1,115 compared to 2,953 for the same period in the prior year.

Although our self-mining hash rate increased 36%, the April 2024 halving and a 61% increase in network hash rate lead to a 62% decrease in bitcoin received from self-mining.

The average price of bitcoin for the three months ended June 30, 2024, was $65,677 as compared to $28,034 for the same period in the prior year, a 134% increase.

Total digital asset hosted mining revenue from customers decreased by $1.5 million or 6%, to $24.8 million for the three months ended June 30, 2024, from $26.3 million for the three months ended June 30, 2023.

The decrease in digital asset hosted mining revenue from customers was primarily driven by the termination of contracts with several customers since June 30, 2023.

Total digital asset hosted mining revenue from related parties was nil for the three months ended June 30, 2024, compared to $3.5 million for the three months ended June 30, 2023.

There were no related-party transactions during the three months ended June 30, 2024.

Total HPC hosting revenue was $5.5 million for the three months ended June 30, 2024, compared to nil for the same period in the prior year due to the onboarding of CoreWeave during the quarter ended June 30, 2024.

The average price of bitcoin for the three months ended September 30, 2024, was $61,002 as compared to $28,091 for the same period in the prior year, a 117% increase.

Total digital asset hosted mining revenue from customers decreased by $10.1 million or 38%, to $16.9 million for the three months ended September 30, 2024, from $27.0 million for the three months ended September 30, 2023.

The decrease in digital asset hosted mining revenue from customers was primarily driven by the termination of contracts with several customers since September 30, 2023, due primarily to the reallocation of a majority of our data centers from digital asset mining to HPC hosting.

Total digital asset hosted mining revenue from related parties was nil for the three months ended September 30, 2024, compared to $2.8 million for the three months ended September 30, 2023.

There were no related-party transactions during the three months ended September 30, 2024.

Total HPC hosting revenue was $10.3 million for the three months ended September 30, 2024, compared to nil for the same period in the prior year due to the initiation of HPC hosting operations for CoreWeave at our Austin, Texas data center during the quarter ended June 30, 2024.

Cost of revenue

Three Months Ended June 30, Period over Period Change

Three Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

2 unchanged sentences

$ 95,510 $ 97,485 $ (1,975) (2) %

Gross (loss) profit

(156) 15,419 (15,575) (101) %

Cost of revenue increased by $12.3 million or 14%, to $102.3 million for the three months ended June 30, 2024, from $90.0 million for the three months ended June 30, 2023.

As a percentage of total revenue, cost of revenue totaled 72% and 71% for the three

months ended June 30, 2024 and 2023, respectively.

The increase in cost of revenue was primarily attributable to increased depreciation expense of $8.8 million driven by the increase in the number of miners in service, HPC hosting costs, primarily lease and power, of $4.9 million incurred during the current quarter with no comparable activity for the same period in fiscal 2023, increased proceeds sharing costs of $1.2 million associated with the increase in average bitcoin price over prior year, a $1.1 million increase in payroll and benefits primarily related to salary adjustments, partially offset by a $3.2 million decrease in power costs.

Cost of revenue decreased by $2.0 million or 2%, to $95.5 million for the three months ended September 30, 2024, from $97.5 million for the three months ended September 30, 2023.

The decrease in cost of revenue was primarily attributable to a $11.6 million decrease in power costs and a $1.9 million decrease in facility operations expense, partially offset by increased HPC hosting costs, primarily lease, power, payroll and benefits and stock-based compensation, of $7.4 million incurred during the current quarter with no comparable activity for the same period in fiscal 2023, increased depreciation expense of $4.4 million driven by the increase in the number of miners in service, and a $0.8 million increase in stock-based compensation expense.

Change in fair value of digital assets

Three Months Ended June 30, Period over Period Change

Three Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

3 unchanged sentences

Percentage of total revenue

Change in fair value of digital assets was $0.6 million for the three months ended June 30, 2024, and reflects the Company’s adoption of ASU 2023-08 effective January 1, 2024.

The $0.6 million decrease in fair value consisted of a realized loss of $0.6 million.

Change in fair value of digital assets was $0.2 million for the three months ended September 30, 2024, and reflects the Company’s adoption of ASU 2023-08 effective January 1, 2024.

Gain from sale of digital assets

Three Months Ended June 30, Period over Period Change

Three Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

3 unchanged sentences

Percentage of total revenue

Gain from sale of digital assets was nil for the three months ended June 30, 2024, compared to a gain of $0.9 million for the three months ended June 30, 2023.

Gain from sale of digital assets was nil for the three months ended September 30, 2024, compared to a gain of $0.4 million for the three months ended September 30, 2023.

There are no gains from sale of digital assets recorded in fiscal 2024 due to the Company’s adoption of ASU 2023-08 effective January 1, 2024.

For the three months ended June 30, 2023, the carrying value of our digital assets sold was $102.5 million and the sales price was $101.2 million.

For the three months ended September 30, 2023, the carrying value of our digital assets sold was $88.5 million and the sales price was $88.1 million.

Impairment of digital assets

Three Months Ended June 30, Period over Period Change

Three Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

2 unchanged sentences

Percentage of total revenue

Impairment of digital assets was nil for the three months ended June 30, 2024, compared to $1.1 million for the three months ended June 30, 2023.

Impairment of digital assets was nil for the three months ended September 30, 2024, compared to $0.7 million for the three months ended September 30, 2023.

Upon the Company’s adoption of ASU 2023-08 effective January 1, 2024, the Company measures digital assets at fair value each reporting period with changes in fair value recognized in net income.

3 unchanged sentences

If the then current carrying value of a digital asset exceeded the fair value so determined, an impairment loss occurred with respect to those digital assets in the amount equal to the difference between their carrying value and the price determined.

The carrying value of our digital assets amounted to nil as of June 30, 2024 and $0.3 million as of June 30, 2023.

Change in fair value of energy derivatives

Three Months Ended June 30, Period over Period Change

2024 2023 Dollar Percentage

(in thousands, except percentages)

Change in fair value of energy derivatives

$ (539) $ — $ (539) NM

Percentage of total revenue

The $0.5 million change in fair value consisted of a realized loss of $2.0 million partially offset by an unrealized gain of $1.5 million.

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

Three Months Ended June 30, Period over Period Change

The carrying value of our digital assets amounted to nil as of September 30, 2024 and $0.6 million as of September 30, 2023.

Loss on disposal of property, plant and equipment

Three Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

(in thousands, except percentages)

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

$ 268 $ (174) $ 442 NM

Loss on disposal of property, plant and equipment

$ (509) $ (340) $ (169) 50%

Percentage of total revenue

Gain (loss) on disposal of property, plant and equipment increased by $0.4 million to a gain of $0.3 million for the three months ended June 30, 2024, from a loss $0.2 million for the three months ended June 30, 2023.

This gain (loss) was due to the disposal of mining equipment.

Loss on disposal of property, plant and equipment increased by $0.2 million to a loss of $0.5 million for the three months ended September 30, 2024, from a loss of $0.3 million for the three months ended September 30, 2023.

This loss was due to the disposal of mining equipment.

Operating Expenses

Three Months Ended June 30, Period over Period Change

Three Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

10 unchanged sentences

Percentage of total revenue

Total operating expenses increased $4.3 million or 16%, to $31.4 million for the three months ended June 30, 2024, from $27.1 million for the three months ended June 30, 2023.

Research and development expenses increased $0.5 million or 33%, to $2.2 million for the three months ended June 30, 2024, from $1.6 million for the three months ended June 30, 2023.

The increase was driven by a $0.4 million increase in payroll and benefits expense primarily driven by h igher salaries and a $0.1 million increase in stock-based compensation expenses.

Sales and marketing expenses increased $1.9 million to $3.0 million for the three months ended June 30, 2024, from $1.1 million for the three months ended June 30, 2023.

The increase was driven primarily by a $1.3 million increase in stock-based compensation expenses and a $0.2 million increase in sales and marketing event expenses.

General and administrative expenses increased $1.8 million to $26.2 million for the three months ended June 30, 2024, from $24.4 million for the three months ended June 30, 2023.

The increase was primarily driven by a $6.6 million increase in payroll and benefits expense primarily driven by increased bonuses and higher salaries and $4.6 million of HPC startup costs incurred during the

current quarter with no comparable activity for the same period in fiscal 2023, partially offset by $7.8 million lower stock-based compensation due to cancellation and forfeitures of equity-based awards during the quarter ended June 30, 2024 and a $1.6 million decrease in bankruptcy advisory costs.

Total operating expenses increased $13.5 million or 51%, to $40.3 million for the three months ended September 30, 2024, from $26.8 million for the three months ended September 30, 2023.

Research and development expenses increased $0.6 million or 26%, to $2.8 million for the three months ended September 30, 2024, from $2.3 million for the three months ended September 30, 2023.

The increase was driven by a $0.7 million increase in stock-based compensation expense and a $0.1 million increase in payroll and benefits expense primarily driven by higher salaries, partially offset by a $0.3 million decrease in software costs .

Sales and marketing expenses increased $2.1 million to $3.2 million for the three months ended September 30, 2024, from $1.0 million for the three months ended September 30, 2023.

The increase was driven primarily by a $1.3 million increase in stock-based compensation expense and a $0.7 million increase in sales and marketing event expenses.

General and administrative expenses increased $10.8 million to $34.4 million for the three months ended September 30, 2024, from $23.5 million for the three months ended September 30, 2023.

The increase was primarily driven by a $3.7 million increase in HPC site startup costs incurred during the current quarter with no comparable activity for the same period in fiscal 2023, a $2.1 million increase in bankruptcy advisory costs, a $4.1 million increase in payroll and benefits expense primarily driven by increased bonuses and higher salaries, a $1.0 million increase in corporate taxes, a $0.6 million increase in software costs, and $0.5 million higher stock-based compensation expense.

Non-operating expenses, net

Three Months Ended June 30, Period over Period Change

Three Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

1 unchanged sentence

(in thousands, except percentages)

Loss on debt extinguishment

Loss (gain) on debt extinguishment

$ 317 $ (374) $ 691 NM

Interest expense (income), net

Interest expense, net

7,072 2,196 4,876 NM

2 unchanged sentences

408,520 — 408,520 NM

Other non-operating expense, net

Other non-operating income, net

(2,003) (1,090) (913) 84%

1 unchanged sentence

$ 413,906 $ 28,988 $ 384,918 NM

Total non-operating expenses, net increased by $792.7 million, to total non-operating expense, net of $811.3 million for the three months ended June 30, 2024, from total non-operating expenses, net of $18.6 million for the three months ended June 30, 2023.

Total non-operating expenses, net increased by $384.9 million, to total non-operating expense, net of $413.9 million for the three months ended September 30, 2024, from total non-operating expenses, net of $29.0 million for the three months ended September 30, 2023.

The increase in total non-operating expenses, net was primarily driven by:

• the Company’s entry into a warrant agreement and Convertible Value Rights Agreement pursuant to the Plan of Reorganization.

During the three months ended June 30, 2024, we incurred a $796.0 million Change in fair value of warrant and contingent value rights driven by the increase in the Company’s stock price to $9.30 per share as of June 30, 2024, from $3.54 per share as of March 31, 2024.

The increase in stock price resulted in a $827.7 million increase in the fair value of the warrant liabilities during the three months ended June 30, 2024, partially offset by a $31.7 million decrease in fair value of contingent value rights, and;

During the three months ended September 30, 2024, we incurred a $408.5 million Change in fair value of warrant and contingent value rights was due to the increase in the price of the underlying instruments driven by the increase in the Company’s stock price to $11.86 per share as of September 30, 2024, from $9.30 per share as of June 30, 2024.

The increase in stock price resulted in a $414.5 million increase in the fair value of the warrant liabilities during the three months ended September 30, 2024, partially offset by a $6.0 million decrease in fair value of contingent value rights, and;

• a $4.9 million increase in Interest expense, net resulting from the Bankruptcy Court ordered stay on payment of pre-petition obligations, including interest during the same period in 2023;

partially offset by,

• $18.5 million in Reorganization items, net for the three months ended June 30, 2023, with no comparable activity for the same period in fiscal 2024 due the Company’s emergence from bankruptcy during the first quarter 2024.

• $28.3 million in Reorganization items, net for the three months ended September 30, 2023, with no comparable activity for the same period in fiscal 2024 due the Company’s emergence from bankruptcy during the first quarter 2024.

Income tax expense

Three Months Ended June 30, Period over Period Change

Three Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

5 unchanged sentences

federal, state and local income taxes.

For the three months ended June 30, 2024, our income tax expense was $0.1 million.

For the three months ended June 30, 2023, our income tax expense was $0.1 million.

The Company's effective tax rate for the three months ended June 30, 2024, was lower than the federal statutory rate of 21% primarily due to a valuation allowance on the Company’s deferred tax assets and certain non-deductible expenses.

For the three months ended September 30, 2024, our income tax expense was $0.1 million.

For the three months ended September 30, 2023, our income tax expense was $0.1 million.

The Company's effective tax rate for the three months ended September 30, 2024, was lower than the federal statutory rate of 21% primarily due to a valuation allowance on the Company’s deferred tax assets and certain non-deductible expenses.

Segment Total Revenue and Gross Profit

The following table presents total revenue and gross profit by reportable segment for the periods presented:

Three Months Ended June 30, Period over Period Change

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

Three Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

3 unchanged sentences

74,555 72,603 1,952 3 %

Digital Asset Self-Mining gross profit $ 30,742 $ 30,236 $ 506 2%

Digital Asset Self-Mining gross (loss) profit $ (6,417) $ 10,453 $ (16,870) NM

Digital Asset Self-Mining gross margin (9) % 13%

11 unchanged sentences

Consolidated cost of revenue 95,510 97,485 (1,975) (2) %

Consolidated gross profit

Consolidated gross (loss) profit

$ (156) $ 15,419 $ (15,575) (101)%

Consolidated gross margin

For the three months ended June 30, 2024, cost of revenue included depreciation expense of $28.2 million for the Digital Asset Self-Mining segment, $1.0 million for the Digital Asset Hosted Mining segment, and a nominal amount for the HPC Hosting segment.

For the three months ended June 30, 2023, cost of revenue included depreciation expense of $18.8 million for the Digital Asset Self-Mining segment, $1.5 million for the Digital Asset Hosted Mining segment, and nil for the HPC Hosting segment.

For the three months ended June 30, 2024 and 2023, the top three hosting customers accounted for approximately 90% and 76%, respectively, of the Digital Asset Hosted Mining’s segment total revenue.

For the three months ended June 30, 2024, gross profit in the Digital Asset Self-Mining segment increased $0.5 million compared to the three months ended June 30, 2023.

The increase in the Digital Asset Self-Mining segment gross profit was primarily due to a 14% increase in mining revenue driven by a 134% increase in the price of bitcoin and an increase in our self-mining hash rate and an approximate increase of 19,000 mining units deployed, partially offset by the 52% decrease in bitcoin mined due to the April 2024 halving and higher network difficulty.

Our self-mining hash rate was 19.4 EH/s for the three months ended June 30, 2024, compared to 15.1 EH/s for the three months ended June 30, 2023, an increase of 28%.

For the three months ended June 30, 2024, gross profit in the Digital Asset Hosted Mining segment increased $0.7 million compared to the three months ended June 30, 2023, reflecting a Digital Asset Hosted Mining segment gross margin of 30% for the three months ended June 30, 2024, compared to a gross margin of 23% for the three months ended June 30, 2023.

The increase in Digital Asset Hosted Mining segment gross margin for the three months ended June 30, 2024, compared to the three months ended June 30, 2023 was primarily due to a larger share of more profitable hosting arrangements.

For the three months ended June 30, 2024, gross profit in the HPC Hosting segment was $0.6 million compared to nil for the three months ended June 30, 2023, due to the HPC Hosting segment starting operation during the quarter ended June 30, 2024.

A reconciliation of the reportable segment gross profit to loss before income taxes included in our Condensed Consolidated Statements of Operations for the three months ended June 30, 2024 and 2023, is as follows:

Three Months Ended June 30, Period over Period Change

For the three months ended September 30, 2024, cost of revenue included depreciation expense of $27.4 million for the Digital Asset Self-Mining segment, $0.9 million for the Digital Asset Hosted Mining segment, and a nominal amount for the HPC Hosting segment.

For the three months ended September 30, 2023, cost of revenue included depreciation expense of $22.0 million for the Digital Asset Self-Mining segment, $1.9 million for the Digital Asset Hosted Mining segment, and nil for the HPC Hosting segment.

For the three months ended September 30, 2024 and 2023, the top three hosting customers accounted for approximately 97% and 76%, respectively, of the Digital Asset Hosted Mining’s segment total revenue.

For the three months ended September 30, 2024, gross profit in the Digital Asset Self-Mining segment decreased by $16.9 million, resulting in a gross loss of $6.4 million compared to gross profit of $10.5 million for the three months ended September 30, 2023.

The decrease in the Digital Asset Self-Mining segment gross profit was primarily due to a 18% decrease in mining revenue driven by a 62% decrease in bitcoin mined due to the April 2024 halving and higher network difficulty, partially offset by a 117% increase in the price of bitcoin and an increase in our self-mining hash rate and an approximate increase of 31,000 mining units deployed.

An increase in depreciation expense, driven primarily by the increase in miners placed in service, further contributed to the decrease in the Digital Asset Self-Mining segment gross profit.

Our self-mining hash rate was 20.4 EH/s for the three months ended September 30, 2024, compared to 15.0 EH/s for the three months ended September 30, 2023, by an increase of 36%.

For the three months ended September 30, 2024, gross profit in the Digital Asset Hosted Mining segment decreased nominally compared to the three months ended September 30, 2023.

Digital Asset Hosted Mining segment gross margin for the three months ended September 30, 2024 was 29%, compared to a gross margin of 17% for the three months ended September 30, 2023.

increase in Digital Asset Hosted Mining segment gross margin for the three months ended September 30, 2024, compared to the three months ended September 30, 2023 was primarily due to lower Digital asset hosted mining revenue driven by the termination of contracts with several customers since September 30, 2023, due primarily to our shift to HPC hosting, offset by lower power costs from lower rates and a reduced allocation of power to hosted customers.

For the three months ended September 30, 2024, gross profit in the HPC Hosting segment was $1.3 million compared to nil for the three months ended September 30, 2023, due to the HPC Hosting segment starting operation during the quarter ended June 30, 2024.

A reconciliation of the reportable segment gross (loss) profit to loss before income taxes included in our Condensed Consolidated Statements of Operations for the three months ended September 30, 2024 and 2023, is as follows:

Three Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

(in thousands, except percentages)

Reportable segment gross profit

Reportable segment gross (loss) profit

$ (156) $ 15,419 $ (15,575) (101)%

2 unchanged sentences

Impairment of digital assets — (681) 681 NM

Change in fair value of energy derivatives

(539) — (539) NM

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

268 (174) 442 NM

Loss on disposal of property, plant and equipment

(509) (340) (169) 50%

Operating expenses:

3 unchanged sentences

Total operating expenses 40,348 26,805 13,543 51 %

Operating income

6,579 9,469 (2,890) (31)%

Operating loss

(41,219) (12,044) (29,175) NM

Non-operating (income) expenses, net:

Loss on debt extinguishment

Interest expense (income), net

Loss (gain) on debt extinguishment

317 (374) 691 NM

Interest expense, net

7,072 2,196 4,876 NM

Reorganization items, net — 28,256 (28,256) NM

Change in fair value of warrant and contingent value rights 408,520 — 408,520 NM

Other non-operating expense, net

Other non-operating income, net

(2,003) (1,090) (913) 84%

3 unchanged sentences

$ (455,125) $ (41,032) $ (414,093) NM

Results of Operations for the Six Months Ended June 30, 2024 and 2023

Results of Operations for the Nine Months Ended September 30, 2024 and 2023

The following table sets forth our selected Condensed Consolidated Statements of Operations for each of the periods indicated.

Six Months Ended June 30, Period over Period Change

Nine Months Ended September 30, Period over Period Change

2024 2023 Dollar

27 unchanged sentences

Research and development 6,814 5,308 1,506 28%

Sales and marketing 3,948 2,092 1,856 89%

Sales and marketing 7,099 3,133 3,966 NM

General and administrative 74,742 69,671 5,071 7%

10 unchanged sentences

1,144,441 — 1,144,441 NM

Other non-operating expense (income), net

Other non-operating (income) expense, net

144 (3,978) 4,122 NM

4 unchanged sentences

Income tax expense

484 347 137 39%

$ (1,049,464) $ (50,794) $ (998,670) NM

NM - Not Meaningful

Six Months Ended June 30, Period over Period Change

Nine Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

14 unchanged sentences

Total revenue

Total revenue increased by $72.8 million or 29%, to $320.4 million for the six months ended June 30, 2024, from $247.6 million for the six months ended June 30, 2023, as a result of the factors described below.

Digital asset self-mining revenue increased by $65.6 million or 34%, to $260.7 million for the six months ended June 30, 2024, from $195.1 million for the six months ended June 30, 2023.

Total revenue increased by $55.3 million or 15%, to $415.7 million for the nine months ended September 30, 2024, from $360.5 million for the nine months ended September 30, 2023, as a result of the factors described below.

Digital asset self-mining revenue increased by $50.7 million or 18%, to $328.8 million for the nine months ended September 30, 2024, from $278.2 million for the nine months ended September 30, 2023.

The year over year increase in mining revenue was driven primarily by an increase in the price of bitcoin and an increase in our self-mining hash rate fleet mix and efficiency, and an approximate increase of 31,000 mining units deployed.

The increase in mining revenue was partially offset by a 48% decrease in bitcoin mined.

Our self-mining hash rate increased by 28%, to 19.4 EH/s for the six months ended June 30, 2024, from 15.1 EH/s for the same period in the prior year.

The total number of bitcoins self-mined for the six months ended June 30, 2024, was 4,505 compared to 7,768.

Although our self-mining hash rate increased 28%, the April 2024 halving and the six month average network hash rate increased approximately 77%, leading to a 42% decrease in bitcoin received from self-mining.

The average price of bitcoin for the six months ended June 30, 2024, was $59,629 as compared to $25,470 for the same period in the prior year, a 134% increase.

Total digital asset hosted mining revenue from customers increased by $8.9 million or 20%, to $54.2 million for the six months ended June 30, 2024, from $45.2 million for the six months ended June 30, 2023.

The increase in hosted mining revenue from customers was primarily driven by the onboarding of new customers since June 30, 2023, under proceeds sharing arrangements.

Total digital asset hosted mining revenue from related parties was nil for the six months ended June 30, 2024, compared to $7.2 million for the six months ended June 30, 2023.

There were no related-party transactions during the six months ended June 30, 2024.

Total HPC hosting revenue was $5.5 million for the six months ended June 30, 2024, compared to nil for the same period in the prior year due to the HPC Hosting segment starting operation during the quarter ended June 30, 2024.

Our self-mining hash rate increased by 36%, to 20.4 EH/s for the nine months ended September 30, 2024, from 15.0 EH/s for the same period in the prior year.

The total number of bitcoins self-mined for the nine months ended September 30, 2024, was 5,621 compared to 10,721.

Although our self-mining hash rate increased 36%, the April 2024 halving and the nine month average network hash rate increased approximately 71%, leading to a 48% decrease in bitcoin received from self-mining.

The average price of bitcoin for the nine months ended September 30, 2024, was $60,031 as compared to $26,353 for the same period in the prior year, a 128% increase.

Total digital asset hosted mining revenue from customers decreased by $1.2 million or 2%, to $71.1 million for the nine months ended September 30, 2024, from $72.2 million for the nine months ended September 30, 2023.

The decrease in hosted mining revenue from customers was primarily driven by the termination of contracts with several customers since September 30, 2023, due primarily to the reallocation of a majority of our data centers from digital asset mining to HPC hosting.

Total digital asset hosted mining revenue from related parties was nil for the nine months ended September 30, 2024, compared to $10.1 million for the nine months ended September 30, 2023.

There were no related-party transactions during the nine months ended September 30, 2024.

Total HPC hosting revenue was $15.9 million for the nine months ended September 30, 2024, compared to nil for the same period in the prior year due to the initiation of HPC hosting operations for CoreWeave at our Austin, Texas data center during the quarter ended June 30, 2024.

Cost of revenue

Six Months Ended June 30, Period over Period Change

Nine Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

3 unchanged sentences

116,307 84,159 32,148 38 %

Cost of revenue increased by $25.1 million or 14%, to $203.9 million for the six months ended June 30, 2024, from $178.8 million for the six months ended June 30, 2023.

As a percentage of total revenue, cost of revenue totaled 64% and 72% for the

six months ended June 30, 2024 and 2023, respectively.

The increase in cost of revenue was primarily attributable to increased depreciation expense of $17.4 million driven by the increase in the number of miners in service, HPC hosting costs, primarily rent and power, of $4.9 million incurred during the current fiscal year with no comparable activity for the same period in fiscal 2023, increased proceeds sharing costs of $3.7 million associated with the increase in average bitcoin price over prior year, a $2.2 million increase in payroll and benefits primarily related to salary adjustments, and a $1.1 million i ncrease in stock-based compensation expenses, partially offset by a $2.8 million decrease in power costs.

Cost of revenue increased by $23.1 million or 8%, to $299.4 million for the nine months ended September 30, 2024, from $276.3 million for the nine months ended September 30, 2023.

As a percentage of total revenue, cost of revenue totaled 72% and 77% for the nine months ended September 30, 2024 and 2023, respectively.

The increase in cost of revenue was primarily attributable to increased depreciation expense of $21.9 million driven by the increase in the number of miners in service, HPC hosting costs, primarily rent, power, payroll and benefits and stock-based compensation of $12.2 million incurred during the current fiscal year with no comparable activity for the same period in fiscal 2023, increased proceeds sharing costs of $3.5 million associated with the increase in average bitcoin price over prior year, a $2.3 million increase in payroll and benefits primarily driven by increased bonuses and higher salaries, and a $1.9 million i ncrease in stock-based compensation expense, partially offset by a $14.3 million decrease in power costs and $2.6 million lower facility operations expense.

Change in fair value of digital assets

Six Months Ended June 30, Period over Period Change

Nine Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

3 unchanged sentences

Percentage of total revenue

Change in fair value of digital currency assets was nominal for the six months ended June 30, 2024, and reflects the Company’s adoption of ASU 2023-08 effective January 1, 2024.

Change in fair value of digital currency assets was $0.2 million for the nine months ended September 30, 2024, and reflects the Company’s adoption of ASU 2023-08 effective January 1, 2024.

Gain from sale of digital assets

Six Months Ended June 30, Period over Period Change

Nine Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

3 unchanged sentences

Percentage of total revenue

Gain from sale of digital assets was nil for the six months ended June 30, 2024, compared to a gain of $2.0 million for the six months ended June 30, 2023.

Gain from sale of digital assets was nil for the nine months ended September 30, 2024, compared to a gain of $2.4 million for the nine months ended September 30, 2023.

There are no gains from sale of digital assets recorded in fiscal 2024 due to the Company’s adoption of ASU 2023-08 effective January 1, 2024.

For the six months ended June 30, 2023, the carrying value of our digital assets sold was $199.8 million and the sales price was $199.6 million.

For the nine months ended September 30, 2023, the carrying value of our digital assets sold was $285.4 million and the sales price was $287.8 million.

Impairment of digital assets

Six Months Ended June 30, Period over Period Change

Nine Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

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Percentage of total revenue

Impairment of digital assets was nil for the six months ended June 30, 2024, compared to $2.2 million for the six months ended June 30, 2023.

Impairment of digital assets was nil for the nine months ended September 30, 2024, compared to $2.9 million for the nine months ended September 30, 2023.

Upon the Company’s adoption of ASU 2023-08 effective January 1, 2024, the Company measures digital assets at fair value each reporting period with changes in fair value recognized in net income.

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The carrying value of our digital assets amounted to nil as of June 30, 2024 and June 30, 2023.

The carrying value of our digital assets amounted to nil as of September 30, 2024, and $0.6 million as of September 30, 2023.

Change in fair value of energy derivatives

Six Months Ended June 30, Period over Period Change

Nine Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

3 unchanged sentences

Percentage of total revenue

Change in fair value of energy derivatives, which is related to the change in fair value of the derivative liability of the energy forward purchase contract entered into in October 2023, was $2.8 million for the six months ended June 30, 2024, The $2.8 million change in fair value consisted of a realized loss of $5.0 million partially offset by an unrealized gain of $2.3 million.

Loss on disposal of property, plant and equipment

Six Months Ended June 30, Period over Period Change

Nine Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

3 unchanged sentences

Percentage of total revenue

Loss on disposal of property, plant and equipment increased by $3.4 million to $3.6 million for the six months ended June 30, 2024, from $0.2 million for the six months ended June 30, 2023.

Loss on disposal of property, plant and equipment increased by $3.5 million to $4.1 million for the nine months ended September 30, 2024, from $0.5 million for the nine months ended September 30, 2023.

This loss was due to the disposal of mining equipment.

Operating Expenses

Six Months Ended June 30, Period over Period Change

Nine Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

4 unchanged sentences

Sales and marketing

3,948 2,092 1,856 89 %

7,099 3,133 3,966 NM

General and administrative

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Percentage of total revenue

Total operating expenses decreased $3.0 million or 6%, to $48.3 million for the six months ended June 30, 2024, from $51.3 million for the six months ended June 30, 2023.

Research and development expenses increased $0.9 million or 30%, to $4.0 million for the six months ended June 30, 2024, from $3.1 million for the six months ended June 30, 2023.

The increase was driven by a $0.9 million increase in payroll and benefits expense primarily driven by h igher salaries.

Sales and marketing expenses increased $1.9 million or 89%, to $3.9 million for the six months ended June 30, 2024, from $2.1 million for the six months ended June 30, 2023.

The increase was driven primarily by a $1.2 million increase in stock-based compensation expenses and a $0.3 million increase in sales and marketing event expenses.

General and administrative expenses decreased $5.8 million or 13%, to $40.4 million for the six months ended June 30, 2024, from $46.2 million for the six months ended June 30, 2023.

The decrease was primarily driven by $21.2 million lower stock-based compensation due to cancellation and forfeitures of equity-based awards during the six months ended June 30, 2024, and no new equity awards granted during fiscal 2023, partially offset by a $10.1 million increase in payroll and benefits expense primarily driven

by increased bonuses and higher salaries, and $4.6 million of HPC startup costs incurred during the current period with no comparable activity for the same period in fiscal 2023.

Total operating expenses increased $10.5 million or 13%, to $88.7 million for the nine months ended September 30, 2024, from $78.1 million for the nine months ended September 30, 2023.

Research and development expenses increased by $1.5 million or 28%, to $6.8 million for the nine months ended September 30, 2024, from $5.3 million for the nine months ended September 30, 2023.

The increase was driven by a $1.0 million increase in payroll and benefits expense primarily driven by increased bonuses and higher salaries and a $0.6 million increase in stock-based compensation expense .

Sales and marketing expenses increased by $4.0 million to $7.1 million for the nine months ended September 30, 2024, from $3.1 million for the nine months ended September 30, 2023.

The increase was driven primarily by a $2.5 million increase in stock-based compensation expense and a $1.0 million increase in sales and marketing event expenses.

General and administrative expenses increased by $5.1 million or 7%, to $74.7 million for the nine months ended September 30, 2024, from $69.7 million for the nine months ended September 30, 2023.

The increase was primarily driven by a $14.2 million increase in payroll and benefits expense primarily driven by increased bonuses and higher salaries, $4.6 million of HPC advisory startup costs and $3.7 million site startup costs incurred during the current period with no comparable activity for the same period in fiscal 2023, a $2.2 million increase in bankruptcy advisor fees, and a $1.8 million increase in corporate taxes, primarily property taxes, partially offset by $20.7 million lower stock-based compensation due to cancellation and forfeitures of equity-based awards during the nine months ended September 30, 2024, and no new equity awards granted during fiscal 2023.

Non-operating (income) expenses, net

Six Months Ended June 30, Period over Period Change

Nine Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

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$ 1,069,567 $ 55,474 $ 1,014,093 NM

Total non-operating expenses, net increased by $629.2 million, to total non-operating income, net of $655.7 million for the six months ended June 30, 2024, from total non-operating expenses, net of $26.5 million for the six months ended June 30, 2023.

Total non-operating expenses, net increased by $1.01 billion, to $1.07 billion for the nine months ended September 30, 2024, from total non-operating expenses, net of $55.5 million for the nine months ended September 30, 2023.

The increase in total non-operating expenses, net was primarily driven by:

• the Company’s entry into a warrant agreement and Convertible Value Rights Agreement pursuant to the Plan of Reorganization.

During the six months ended June 30, 2024, we incurred a $735.9 million Change in fair value of warrant and contingent value rights was driven by the increase in the Company’s stock price to $9.30 per share as of June 30, 2024, from $3.44 per share as of the Effective Date.

The increase in stock price resulted in a $809.3 million increase in the fair value of the warrant liabilities during the six months ended June 30, 2024, partially offset by a $73.4 million decrease in fair value of contingent value rights;

During the nine months ended September 30, 2024, we incurred a $1.14 billion Change in fair value of warrant and contingent value rights was due to the increase in the price of the underlying instruments driven by the increase in the Company’s stock price to $11.86 per share as of September 30, 2024, from $3.44 per share as of the Effective Date.

The increase in stock price resulted in a $1.22 billion increase in the fair value of the warrant liabilities during the nine months ended September 30, 2024, partially offset by a $79.3 million decrease in fair value of contingent value rights;

• a $33.6 million increase in Interest expense, net resulting from the Bankruptcy Court ordered stay on payment of pre-petition obligations, including interest during the same period in fiscal 2023, and;

2 unchanged sentences

Income tax expense

Six Months Ended June 30, Period over Period Change

Nine Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

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federal, state and local income taxes.

For the six months ended June 30, 2024 and 2023, our income tax expense was $0.4 million and $0.2 million, respectively.

The Company's effective tax rate for the six months ended June 30, 2024, was lower than the federal statutory rate of 21% primarily due to a valuation allowance on the Company’s deferred tax assets and certain non-deductible expenses.

For the nine months ended September 30, 2024 and 2023, our income tax expense was $0.5 million and $0.3 million, respectively.

The Company's effective tax rate for the nine months ended September 30, 2024, was lower than the federal statutory rate of 21% primarily due to a valuation allowance on the Company’s deferred tax assets and certain non-deductible expenses.

Segment Total Revenue and Gross Profit

The following table presents total revenue and gross profit by reportable segment for the periods presented:

Six Months Ended June 30, Period over Period Change

Nine Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

4 unchanged sentences

Digital Asset Self-Mining gross profit

$ 92,720 $ 66,039 $ 26,681 40%

Digital Asset Self-Mining gross margin 28 % 24%

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Consolidated gross margin

For the six months ended June 30, 2024, cost of revenue included depreciation expense of $55.7 million for the Digital Asset Self-Mining segment, $2.3 million for the Digital Asset Hosted Mining segment, and a nominal amount for the HPC Hosting segment.

For the six months ended June 30, 2023, cost of revenue included depreciation expense $38.8 million for the Digital Asset Self-Mining segment, $1.8 million for the Digital Asset Hosted Mining segment, and nil for the HPC Hosting segment.

For the six months ended June 30, 2024 and 2023, the top three hosting customers accounted for approximately 87% and 72%, respectively, of the Digital Asset Hosting’s segment total revenue.

For the six months ended June 30, 2024, gross profit in the Digital Asset Self-Mining segment increased $43.6 million compared to the six months ended June 30, 2023, due to a higher Digital Asset Self-Mining segment gross margin of 38% for the six months ended June 30, 2024, compared to 28% for the six months ended June 30, 2023.

For the nine months ended September 30, 2024, cost of revenue included depreciation expense of $83.1 million for the Digital Asset Self-Mining segment, $3.2 million for the Digital Asset Hosted Mining segment, and a nominal amount for the HPC Hosting segment.

For the nine months ended September 30, 2023, cost of revenue included depreciation expense $60.8 million for the Digital Asset Self-Mining segment, $3.7 million for the Digital Asset Hosted Mining segment, and nil for the HPC Hosting segment.

For the nine months ended September 30, 2024 and 2023, the top three hosting customers accounted for approximately 89% and 73%, respectively, of the Digital Asset Hosting’s segment total revenue.

For the nine months ended September 30, 2024, gross profit in the Digital Asset Self-Mining segment increased by $26.7 million compared to the nine months ended September 30, 2023, due to a higher Digital Asset Self-Mining segment gross margin of 28% for the nine months ended September 30, 2024, compared to 24% for the nine months ended September 30, 2023.

The increase in the Digital Asset Self-Mining segment gross profit was primarily due to a 18% increase in self-mining revenue driven by a 128% increase in the price of bitcoin, an increase in our self-mining hash rate, fleet mix and efficiency, and an increase in the number of mining units deployed, partially offset by the 48% decrease in bitcoin mined.

The increase in the Digital Asset Self-Mining segment gross profit was partially offset by an increase in depreciation expense as a percentage of segment revenues, which was driven primarily by an approximate increase of 31,000 miners placed in service.

Our self-mining hash rate was 19.4 EH/s for the six months ended June 30, 2024, compared to 15.1 EH/s for the six months ended June 30, 2023, an increase of 28%.

For the six months ended June 30, 2024, gross profit in the Digital Asset Hosted Mining segment increased $3.5 million compared to the six months ended June 30, 2023, reflecting a Digital Asset Hosted Mining segment gross margin of 31% for the six

months ended June 30, 2024, compared to a gross margin of 25% for the six months ended June 30, 2023.

The increase in Digital Asset Hosted Mining segment gross margin for the six months ended June 30, 2024, compared to the six months ended June 30, 2023 was primarily due to a larger share of more profitable hosting arrangements.

For the six months ended June 30, 2024, gross profit in the HPC Hosting segment was $0.6 million compared to nil for the six months ended June 30, 2023, due to the HPC Hosting segment starting operation during the quarter ended June 30, 2024.

A reconciliation of the reportable segment gross profit to loss before income taxes included in our Condensed Consolidated Statements of Operations for the six months ended June 30, 2024 and 2023, is as follows:

Six Months Ended June 30, Period over Period Change

Our self-mining hash rate was 20.4 EH/s for the nine months ended September 30, 2024, compared to 15.0 EH/s for the nine months ended September 30, 2023, an increase of 36%.

For the nine months ended September 30, 2024, gross profit in the Digital Asset Hosted Mining segment increased by $3.5 million compared to the nine months ended September 30, 2023, reflecting a Digital Asset Hosted Mining segment gross margin of

30% for the nine months ended September 30, 2024, compared to a gross margin of 22% for the nine months ended September 30, 2023.

The increase in Digital Asset Hosted Mining segment gross margin for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023 was primarily due to lower Cost of digital asset hosted mining services primarily driven by lower power costs from lower rates and usage, partially offset by decreased digital asset hosted mining revenue from related parties as there were no related party transactions during fiscal 2024 and by the termination of contracts with several customers since September 30, 2023, due primarily to our shift to HPC hosting.

For the nine months ended September 30, 2024, gross profit in the HPC Hosting segment was $1.9 million compared to nil for the nine months ended September 30, 2023, due to the HPC Hosting segment starting operation during the quarter ended June 30, 2024.

A reconciliation of the reportable segment gross profit to loss before income taxes included in our Condensed Consolidated Statements of Operations for the nine months ended September 30, 2024 and 2023, is as follows:

Nine Months Ended September 30, Period over Period Change

2024 2023 Dollar Percentage

11 unchanged sentences

Research and development 6,814 5,308 1,506 28 %

Sales and marketing 3,948 2,092 1,856 89 %

Sales and marketing 7,099 3,133 3,966 NM

General and administrative 74,742 69,671 5,071 7 %

9 unchanged sentences

Change in fair value of warrant and contingent value rights 1,144,441 — 1,144,441 NM

Other non-operating expense (income), net 2,147 (2,888) 5,035 NM

Other non-operating (income) expense, net 144 (3,978) 4,122 NM

Total non-operating expenses, net

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Sources of Liquidity

Historically, we have financed our operations primarily through sales of equity securities, debt issuances, equipment financing arrangements and cash generated from operations, including sales of self-mined bitcoin.

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

On the Effective Date, we entered into a new $80.0 million credit and guaranty agreement (the “Exit Credit Agreement”), and currently have $20.0 million of undrawn borrowing capacity under that facility.

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

Refer to “Recent Developments — Emergence from Bankruptcy” above for more information on our emergence from bankruptcy and the effect on our liquidity.

We finance our operations primarily through cash generated from operations, including sales of self-mined bitcoin, debt issuances, equipment financing arrangements, and sales of equity securities.

Operating and Capital Resources

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Following our Chapter 11 filing, our level of capital expenditures was reduced, and we expect them to remain at a reduced level now that we have emerged from Chapter 11.

We have assessed our current and expected operating and capital expenditure requirements and our current and expected sources of liquidity, and have determined, based on our forecasted financial results and financial condition as of June 30, 2024, that our operating cash flows, existing cash balances, and access to the Exit Credit Agreement will be adequate to finance our working capital requirements, fund capital expenditures and make our required debt interest and principal payments, pay taxes and make other payments due under the Plan of Reorganization.

We believe that our current liquidity and expected funding requirements will allow us to operate for at least the next 12 months.

We have assessed our current and expected operating and capital expenditure requirements and our current and expected sources of liquidity, and have determined, based on our forecasted financial results and financial condition as of September 30, 2024, that our operating cash flows, existing cash balances, and continued access to debt markets will be sufficient to satisfy our cash requirements over the next twelve months and beyond.

Cash, Cash Equivalents, Restricted Cash, Cash Requirements and Cash Flows

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.

June 30, December 31, Period over Period Change

September 30, December 31, Period over Period Change

2024 2023 Dollar Percentage

(in thousands, except percentages)

Cash and cash equivalents $ 96,122 $ 50,409 $ 45,713 91 %

Cash and cash equivalents $ 253,019 $ 50,409 $ 202,610 NM

Restricted cash 783 19,300 (18,517) (96) %

Total cash, cash equivalents and restricted cash $ 97,105 $ 69,709 $ 27,396 39 %

As of June 30, 2024 and December 31, 2023, restricted cash of $1.0 million and $19.3 million, consisted of cash held in escrow to pay for construction and development activities.

Total cash, cash equivalents and restricted cash $ 253,802 $ 69,709 $ 184,093 NM

As of September 30, 2024 and December 31, 2023, restricted cash of $0.8 million and $19.3 million, consisted of cash held in escrow to pay for construction and development activities.

The following table summarizes our cash, cash equivalents and restricted cash and cash flows for the periods indicated.

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

13 unchanged sentences

Changes in net cash from operating activities results primarily from cash received from hosting customers payments for power fees and equipment purchases.

Other drivers of the changes in net cash from operating activities include research and development costs, sales and marketing costs and general and administrative expenses (including personnel expenses and fees for professional services) and interest payments on debt.

Net cash provided by operating activities was $23.4 million for the six months ended June 30, 2024 and $38.0 million for the six months ended June 30, 2023.

The decrease in net cash provided by operating activities was primarily due to a increase in net loss of $584.6 million, a $143.8 million increase in non-cash reorganization items, a $73.4 million decrease in the fair value of contingent value rights, a $65.6 million increase in digital asset self-mining income, and a $19.1 million decrease in stock-based compensation.

The decrease in net cash provided by operating activities was partially offset by a $809.3 million increase in the fair value of warrant liabilities, a $20.9 million decrease in loss on debt extinguishment and a $17.9 million increase in depreciation and amortization, and a $17.0 million increase in working capital components.

Other drivers of the changes in net cash from operating activities include research and development

costs, sales and marketing costs and general and administrative expenses (including personnel expenses and fees for professional services) and interest payments on debt.

Net cash provided by operating activities was $29.1 million for the nine months ended September 30, 2024 and $43.4 million for the nine months ended September 30, 2023.

The decrease in net cash provided by operating activities was primarily due to a increase in net loss of $1.00 billion, a $143.8 million increase in non-cash reorganization items, a $79.3 million decrease in the fair value of contingent value rights, a $50.7 million increase in digital asset self-mining income, and a $13.5 million decrease in stock-based compensation.

The decrease in net cash provided by operating activities was partially offset by a $1.22 billion increase in the fair value of warrant liabilities, a $22.4 million increase in depreciation and amortization, and a $21.6 million decrease in loss on debt extinguishment.

Investing Activities

Our net cash used in investing activities consists primarily of purchases of property, plant and equipment.

Net cash used in investing activities for the six months ended June 30, 2024 and 2023, was $35.2 million and $2.5 million, respectively.

Net cash used in investing activities for the nine months ended September 30, 2024 and 2023, was $66.4 million and $5.4 million, respectively.

The increase in net cash used in investing activities was driven primarily by a $61.7 million increase in purchases of property, plant and equipment.

Financing Activities

Net cash used in financing activities consists of proceeds from stock issuances, issuances of debt, net of issuance costs and principal payments on debt, including notes payable and finance leases.

Net cash provided by financing activities for the six months ended June 30, 2024 was $39.2 million.

Net cash used by financing activities for the six months ended June 30, 2023 was $11.0 million.

The change was due primarily to an inflow of $55.0 million from the issuance of common stock during the six months ended June 30, 2024 and a $20.0 million draw from the Exit Facility, partially offset by an increase in principal payments on debt of $19.6 million, an increase in restricted stock tax holding obligations of $3.4 million, and an increase in principal payments on finance leases of $2.2 million.

Net cash provided by (used in) financing activities consists of proceeds from stock issuances, issuances of debt, net of issuance costs and principal payments on debt, including notes payable and finance leases.

Net cash provided by financing activities for the nine months ended September 30, 2024 was $221.4 million.

Net cash used by financing activities for the nine months ended September 30, 2023 was $26.4 million.

The change was due primarily to an inflow of $447.6 million from the proceeds for the issuance of 3% senior convertible notes, net, $55.0 million from the issuance of common stock during the nine months ended September 30, 2024, and a $20.0 million draw from the Exit Facility.

The increase in net cash provided by financing activities was partially offset by an increase in principal payments on debt of $268.9 million.

Future Commitments and Contractual Obligations

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We had agreemen ts to provide hosting services to various entities that are either 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, we recognized digital asset hosting revenue of $3.5 million and $7.2 million, respectively, from the contracts with related parties.

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

For the three and nine months ended September 30, 2023, we recognized digital asset hosting revenue of $2.8 million and $10.1 million, respectively, from the contracts with related parties.

Foreign Currency and Exchange Risk

5 unchanged sentences

Accordingly, actual results could differ materially from our estimates.

We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these

estimates on an ongoing basis.

Except as described below, there have been no other material changes to our critical accounting estimates during the six months ended June 30, 2024, as compared to those disclosed in our “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” audited consolidated financial statements and the accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on March 13, 2024.

We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.

Except as described below, there have been no other material changes to our critical accounting estimates during the nine months ended September 30, 2024, as compared to those disclosed in our “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” audited consolidated financial statements and the accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on March 13, 2024.

Contingent Value Rights Liabilities

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Stock-Based Compensation

As described in Note 2 — Stockholders’ Deficit, during the three months ended June 30, 2024, the Company granted MSUs to certain executives.

As described in Note 2 — Summary of Significant Accounting Policies, during the nine months ended September 30, 2024, the Company granted MSUs to certain executives.

The estimated fair value of the MSUs was estimated on the date of grant using the Monte Carlo simulation model, which required inputs that were both unobservable and significant to the overall fair value measurement, including estimated volatility.

13 unchanged sentences

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 2. Management’s Discussion and Analysis