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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-03-13 · 618 added, 706 removed, 260 unchanged (84% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context otherwise requires, all references in this section to “we,” “us,” “our,” the “Company,” “Core Scientific,” or “Core” refer to Core Scientific Holding Co.

and its subsidiaries prior to the consummation of the Business Combination (as defined below) and Core Scientific, Inc.

(f/k/a Power & Digital Infrastructure Acquisition Corp.) and its subsidiaries after the consummation of the Business Combination.

References to “XPDI” refer to the predecessor registrant prior to the consummation of the Business Combination.

Unless the context otherwise requires, all references in this section to “we,” “us,” “our,” the “Company,” “Core Scientific,” or “Core” refer to Core Scientific, Inc.

and its subsidiaries.

The following Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to promote understanding of the results of operations and financial condition.

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For discussion related to the results of operations and changes in consolidated financial condition for 2023 compared to 2022 refer to Part II, Item 7.

— “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our fiscal year 2022 Annual Report on Form 10-K, which was filed with the SEC on April 4, 2023.

— “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our fiscal year 2023 Annual Report on Form 10-K, which was filed with the SEC on March 13, 2024.

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 this Annual Report on Form 10-K.

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

We 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 customers at our seven operational data centers in Georgia (2), Kentucky (1), North Carolina (1), North Dakota (1) and Texas (2).

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

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

As of December 31, 2023, we had an average hourly operating power demand of approximately 592 MW for the year, and we had secured approximately 1,198 MW of contracted power capacity at our sites.

We also owned and managed the largest infrastructure asset base of publicly listed miners in North America of 724 MW and improved our average self-mining fleet energy efficiency to 27.94 joules per terahash.

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

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

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

(“New Core” or the “Company”).

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

For more detailed information regarding the Business Combination, refer to Note 4 — Business Combinations, Acquisitions and Restructuring to our consolidated financial statements in Item 8 of Part II of this Annual Report on Form 10-K.

Our total revenue was $502.4 million and $640.3 million for the years ended December 31, 2023 and 2022, respectively.

We had operating income of $9.0 million and operating loss of $2.1 billion for the years ended December 31, 2023 and 2022, respectively.

The increase of $2.12 billion in operating income was predominantly due to a $1.06 billion impairment of goodwill and other intangibles and a $590.7 million impairment of property, plant and equipment for the year ended December 31, 2023, a $226.9 million decrease in impairment of digital assets year over year, as well as higher total operating expenses of $144.9 million for the year ended December 31, 2022.

We had a net loss of $246.5 million and $2.15 billion for the years ended December 31, 2023 and 2022, respectively.

Our adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) was $170.0 million and $(10.7) million for the years ended December 31, 2023 and 2022, respectively.

Core Scientific, Inc.

(“we,” “us,” “our,” the “Company,” “Core Scientific,” or “Core”) is a leader in designing, building and operating digital infrastructure for high-performance computing.

Since our inception in 2018, we have been a premier provider and operator of dedicated, purpose-built facilities and software solutions for digital asset mining for ourselves and our third-party

and in March 2024, we announced the provision of digital infrastructure colocation services to a third party engaged in high-performance computing (“HPC”).

In May 2024, we expanded our relationship with CoreWeave, Inc.

(“CoreWeave”) the artificial intelligence (“AI”) hyperscaler, to provide approximately 200 megawatts (“MW”) of digital infrastructure to host CoreWeave’s HPC operations and provided CoreWeave options with respect to the Company’s existing facilities to provide approximately 500 MW of digital infrastructure on similar terms.

In June and August 2024, the Company announced CoreWeave’s execution of options to secure an additional 70 MW and 112 MW, respectively, of infrastructure to host its HPC operations.

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

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 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.

As a result, we initiated a significant strategic transition from bitcoin mining to hosting and colocation services for customers employing hosting services for HPC workloads such as artificial intelligence-related applications.

During 2024, we were substantially engaged in constructing, refurbishing, reallocating or converting a substantial portion of our ten facilities in Alabama (1), Georgia (2), Kentucky (1), North Carolina (1), North Dakota (1), Oklahoma (1), and Texas (3) to support artificial intelligence related workloads, primarily for our one existing HPC customer, but also to support our commitment to meeting the growing demand for HPC solutions and diversifying our revenue streams.

Currently, the vast majority of our revenue is from mining bitcoin for our own account (‘self-mining”).

We remain committed to maintaining the efficiency of our digital asset mining while capitalizing on the opportunities presented by the growing HPC hosting business.

We had an average hourly operating power demand of approximately 572 megawatts (“MW”) for the year ended December 31, 2024.

We had secured approximately 1,317 MW of contracted power capacity at our sites as of December 31, 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 784 MW in support of our mining and HPC operations.

Our average self-mining fleet energy efficiency for the year ended December 31, 2024 was 25.1 joules per terahash, compared to 27.9 joules per terahash for the year ended December 31, 2023.

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

Our total revenue was $510.7 million, $502.4 million and $640.3 million for the years ended December 31, 2024, 2023, and 2022, respectively.

We generated an operating loss of $19.2 million and operating income of $9.0 million for the years ended December 31, 2024 and 2023, respectively, and an operating loss of $2.11 billion for the year ended December 31, 2022.

We incurred net loss of $1.32 billion, $246.5 million and $2.15 billion for the years ended December 31, 2024, 2023 and 2022, respectively.

Our adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) was $157.4 million, $169.5 million and $(11.6) million for the years ended December 31, 2024, 2023 and 2022, respectively.

Adjusted EBITDA is a non-GAAP financial measure.

See “ Key Business Metrics and Non-GAAP Financial Measure ” below for our definition of, and additional information related to, Adjusted EBITDA.

Recent Developments

On January 15, 2024, the Debtors filed with the Bankruptcy Court (both defined below) the Fourth Amended Joint Chapter 11 Plan of Core Scientific, Inc.

See “ Key Business Operating Metrics and Non-GAAP Financial Measures ” below for our definition of, and additional information related to Adjusted EBITDA.

Developments During 2024

CoreWeave HPC Hosting Agreements

On February 29, 2024, the Company entered into a long-term contract with CoreWeave, Inc.

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

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 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.

Convertible Notes Offerings

On December 5, 2024, the Company completed a private offering (the “2031 Convertible Notes Offering”) of $625.0 million aggregate principal amount of 0.00% Convertible Senior Notes due 2031 (the “2031 Convertible Notes”).

The net proceeds from the 2031 Convertible Notes Offering were approximately $608.7 million, after deducting the initial purchasers’ discounts and commissions and the Company’s estimated offering expenses.

The Company intends to use the net proceeds from the 2031 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.

On August 19, 2024, 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”).

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, the Company paid $49.6 million to repay the BlockFi facility in full, of which $0.7 million was paid for interest, and paid $6.5 million to repay the Stonebriar facility in full, of which $0.1 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 2031 Convertible Notes Offering and the 2029 Convertible Notes Offering conversion, refer to Note 8 — Convertible and Other Notes Payable to our consolidated financial statements in Item 8 of Part II of this Annual Report on Form 10-K.

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

On January 15, 2024, the Company and certain of its affiliates (collectively, the “Debtors”) filed with the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) the Fourth Amended Joint Chapter 11 Plan of Core Scientific, Inc.

and its Affiliated Debtors (with Technical Modifications) (the “Plan of Reorganization”).

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

On January 16, 2024, the Bankruptcy Court entered an order confirming the Plan of Reorganization.

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

On the Effective Date, a new Board of Directors (the “Board of Directors”) was constituted and the Company, in accordance with the Plan of Reorganization satisfied and extinguished claims in the Chapter 11 Cases (as defined below) 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”).

For more detailed information regarding the Chapter 11 Cases, refer to Notes 3 — Chapter 11 Filing and Other Related Matters and 17 — Subsequent Events to our consolidated financial statements in Item 8 of Part II of this Annual Report on Form 10-K.

On March 6, 2024, the Company announced a multi-year contract for Core Scientific to supply up to 16 MW of data center infrastructure to CoreWeave, Inc.

The total potential revenue associated with the contract is more than $100 million.

Under the terms of the contract, Core Scientific will deliver up to 16 MW of capacity at its new Austin, Texas data center to host CoreWeave, Inc.’s infrastructure.

Core Scientific is leasing a tier 3 data center in Austin that formerly housed Hewlett Packard to include high performance computing.

Chapter 11 Filing and Other Related Matters - Pre-Emergence

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

The Chapter 11 Cases were jointly administered under Case No.

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

For detailed discussion about the Chapter 11 Cases, refer to Note 3 — Chapter 11 Filing and Other Related Matters to our consolidated financial statements in Item 8 of Part II of this Annual Report on Form 10-K.

Original DIP Credit Agreement and Restructuring Support Agreement

In connection with the Chapter 11 Cases, the Debtors entered into a senior secured super-priority debtor-in-possession loan and security agreement, dated as of December 22, 2022 (the “Original DIP Credit Agreement”), with Wilmington Savings Fund Society, FSB, as administrative agent, and the lenders from time-to-time party thereto (collectively, the “Original DIP Lenders”).

The Original DIP Lenders are also holders or affiliates, partners or investors of holders under the Company’s notes sold pursuant to (i) the Secured Convertible Note Purchase Agreement, dated as of April 19, 2021 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time), by and among Core Scientific, Inc.

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

On the Effective Date, the obligations of the Company under the Company’s notes sold pursuant to (i) the Secured Convertible Note Purchase Agreement, dated as of April 19, 2021 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time), by and among Core Scientific, Inc.

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

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

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

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

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

Replacement DIP Credit Agreement

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

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

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

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

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

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

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

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

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

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

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

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

NYDIG Settlement

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

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

Priority Power Settlement

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

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

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

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

City of Denton Lease Settlement

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

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

Huband-Mantor Construction Settlement

On August 18, 2023, the Bankruptcy Court entered an order approving the parties’ agreement to settle all claims of Huband-Mantor Construction (“HMC”) and its subcontractors against the Debtors and releasing any and all liens in favor of HMC and its

subcontractors in exchange for the Debtors’ payment of $2 million and the Debtors’ execution of a promissory note in favor of HMC in the principal amount of $15.5 million.

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

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

For more information on the promissory note, refer to Note 7 — Notes Payable to our consolidated financial statements in Item 8 of Part II of this Annual Report on Form 10-K.

Celsius Mining LLC Settlement

On September 14, 2023, the Debtors and Celsius Mining LLC (“Celsius”) entered into a purchase and sale agreement, as amended, (the “PSA”) that provides in addition to a full mutual release of claims asserted against each party in the respective bankruptcy cases for a cash payment by Celsius to the Company of $14.0 million and a full and final release of all claims of Celsius against the Debtors related to the Celsius Contracts, in exchange for the Debtors’ (i) sale to Celsius of the Debtor’s Ward County, Texas bitcoin mining data center site (the “Cedarvale Facility”) and certain related assets, (ii) grant to Celsius of a perpetual, non-transferable (except as described in Section 14 of the PSA), non-exclusive limited license to use identified Company intellectual property solely as and to the extent necessary to (x) finish construction and development of the Cedarvale Facility, (y) develop and construct other mining facilities on other properties owned or leased by Celsius similar in type and scope to the Cedarvale Facility, and (z) operate all of the foregoing, (iii) assumption and assignment to Celsius of certain executory contracts, and (iv) unequivocal release of claims against Celsius asserted by the Company in connection with the Celsius Chapter 11 Cases and the Company’s Chapter 11 Cases.

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

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

Refer to Note 10 — Commitments and Contingencies to our consolidated financial statements in Item 8 of Part II of this Annual Report on Form 10-K for further discussion of the sale.

ACM ELF ST LLC Lease Settlement

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

See Note 7 — Notes Payable to our consolidated financial statements in Item 8 of Part II of this Annual Report on Form 10-K for further discussion of the promissory note.

Didado Electric, LLC Settlement

On October 2, 2023, the Bankruptcy Court entered an order approving the parties’ agreement to settle all claims of J.W.

Didado Electric, LLC (“Didado”) against the Debtors and releasing any and all liens related to the Debtors’ Muskogee datacenter in exchange for the Debtors’ execution of an unsecured promissory note in favor of Didado in the principal amount of $13.0 million to be paid over 36 months upon emergence from bankruptcy.

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

Trilogy LLC Settlement

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

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

Harper Construction Company, Inc.

On November 4, 2023, the Bankruptcy Court entered an order approving the parties’ agreement to settle all claims of Harper Construction Company, Inc (“Harper”) against the Debtors and releasing any and all liens related to the Debtors’ Muskogee datacenter in exchange for the Debtors’ execution of an unsecured promissory note in favor of Harper in the principal amount of $4.7 million to be paid over 30 months starting forty-five days after the emergence date.

The satisfaction of the settlement resulted in a loss of

$5.0 million recorded to Reorganization items, net in the Consolidated Statements of Operations for the year ended December 31, 2023.

Dalton Settlement

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

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

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

Maddox Settlement

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

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

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

Sphere 3D Corp.

and Gryphon Settlement

On January 16, 2024, the Bankruptcy Court entered an order granting Sphere 3D Corp.

(“Sphere”) an allowed $10 million general unsecured claim and a complete and final release of all claims of Sphere and Gryphon Digital Mining, Inc.

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

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

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

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

McCarthy & Humphrey Settlement

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

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

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

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

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

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

Foundry Settlement

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

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

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

Oklahoma Gas & Electric Settlement

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

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

Bank National Association, as note agent and collateral agent, and the purchasers of the notes issued thereunder (the “Other Convertible Notes,” and together with the Secured Convertible Notes, the “Convertible Notes”), replacement debtor-in-possession credit agreement, stock certificates, book entries, and any other certificate, share, note, bond, indenture, purchase right, option, warrant, or other instrument or document, directly or indirectly, evidencing or creating any indebtedness or obligation of or ownership interest in the Debtors giving rise to any claim or interest (except such certificates, notes or other instruments or documents evidencing indebtedness or obligations of, or interests in, the Debtors that are specifically reinstated pursuant to the Plan of Reorganization) were cancelled, and the duties and obligations of all parties thereto were deemed satisfied in full, canceled, released, discharged, and of no force or effect.

On the Effective Date, Pursuant to the Plan of Reorganization

• The Company entered into a credit and guaranty agreement (the “Exit Credit Agreement”), consisting of an $80 million first-lien credit facility with certain holders of the Company’s Convertible Notes.

The Exit Credit Agreement was paid in full on August 19, 2024.

• The Company issued $150.0 million aggregate principal amount of senior secured notes due 2028 (the “Secured Notes”) pursuant to a secured notes indenture (the “Secured Notes Indenture”).

The Secured Notes were paid in full on August 19, 2024.

• The Company issued $260.0 million aggregate principal amount of secured convertible notes due 2029 (the “New Secured Convertible Notes”) pursuant to a secured convertible notes indenture (the “New Secured Convertible Notes Indenture”).

The New Secured Convertible Notes were issued to holders of the Company’s Convertible Notes.

The New Secured Convertible notes were mandatorily converted as of July 10, 2024 and are no longer outstanding.

• The Company entered into an agreement which provided for the issuance of contingent value rights (the “CVRs”) to holders of the Company’s Convertible Notes and provided for the issuance of CVRs issued to holders of allowed general unsecured claims (the GUC CVRs”).

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

• The holders of our pre-emergence Secured Convertible Notes and Other Convertible Notes received Secured Notes Indenture, New Secured Convertible Notes Indenture, post-emergence common stock and CVRs.

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

For more detailed information regarding our emergence from bankruptcy, refer to Notes 3 — Chapter 11 Filing and Emergence from Bankruptcy, 8 — Convertible and Other Notes Payable, 9 — Contingent Value Rights and Warrant Liabilities and 12 — Stockholders' Deficit to our consolidated financial statements in Item 8 of Part II of this Annual Report on Form 10-K.

Our Business Model

Business Overview

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

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

As one of the largest owner operators of infrastructure for digital asset mining in North America, we focus primarily on mining bitcoin and selling the bitcoin generated 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 rapidly growing digital asset mining operation is focused on the generation of digital assets by solving complex cryptographic algorithms to validate transactions on specific digital asset network blockchains, which is commonly referred to as “mining.” Our digital asset self-mining activity competes with myriad mining operations throughout the world to complete new blocks in the blockchain and earn the reward in the form of an established unit of a digital asset.

The terms of our debt agreements currently require that we sell our digital assets as we receive them, and we typically use the proceeds to fund our growth strategies or for general corporate purposes.

We also provide hosting services for large bitcoin mining customers at our seven operational data centers in Georgia (2), Kentucky (1), North Carolina (1), North Dakota (1) and Texas (2).

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

We currently have seven fully operational data centers in Georgia (2), Kentucky (1), North Carolina (1), North Dakota (1) and Texas (2), with approximately 592 MW of average hourly operating electric power demand for the year ended December 31, 2023.

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

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

As of December 31, 2023, we had approximately 1,198 MW of contracted power capacity at our sites.

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

We may explore additional mining facilities and mining arrangements in connection with our short-, medium- and long-term strategic planning.

We have two operating segments:

“Mining,” consisting of bitcoin self-mining, and “Hosting,” consisting of our third-party hosting business.

Our 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.

As a large-scale owner and operator of high-power digital infrastructure for digital asset 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.

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.

Furthermore, 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.

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

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 graphics processing units (“GPUs”).

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

For digital asset 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 computing, 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 expanding our existing large-scale data center infrastructure portfolio configured for specialized computers performing specific, high-value applications such as cloud computing, machine learning and artificial intelligence, and maximizing the portion of our existing infrastructure portfolio contracted for HPC hosting.

We intend to continue to strategically develop and make operational the infrastructure necessary to support our existing contractual commitments to our existing HPC customer and to support expected customer growth and additional demand by leveraging our data center expertise and capabilities.

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.

Our strategy is focused on hyperscale cloud-based providers and enterprises, including potential customers we believe have significant data center infrastructure needs that have not yet been outsourced or will require additional data center space and power to support their growth and their increasing reliance on technology infrastructure in their operations.

We believe our capabilities for serving the needs of large hyperscale providers and enterprises will continue to enable us to capitalize on the growing demand for outsourced data center facilities in our markets and in new markets where our customers are located or plan to be located in the future.

We have three operating segments:

“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.

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

Our Digital Asset Self-Mining operation segment generates revenue from the deployment and operation our own large fleet of miners within our owned digital infrastructure 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.

Our Hosting operation segment generates revenue through the sale of electricity-based consumption contracts for our hosting services, which are recurring in nature.

During 2022, our “Hosting” segment also included sales of mining equipment to customers and was referred to as “Hosting and Equipment Sales.” We derived e quipment sales revenue from our ability to lever our partnerships with leading equipment manufacturers to secure equipment in advance, which we then sold to our customers when they were unable to obtain them otherwise.

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 572 MW for the year ended December 31, 2024.

Our Digital Asset Hosted Mining operation segment generates revenue through the sale of electricity-based consumption contracts for our hosting services, which are recurring in nature.

Our Digital Asset Hosted Mining operation segment provides a full suite of services to our digital asset mining customers.

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

We do not expect to further expand our Digital Asset Hosted Mining operations in 2025 and future years.

Our HPC Hosting operation segment generates revenue by providing colocation, cloud and connectivity services to customers in exchange for a fee.

Our HPC Hosting operation segment provides colocation, facilities operations, security and other services to third-party HPC customers to support workloads for machine learning and artificial intelligence.

As of December 31, 2024, we have operational capacity of approximately 784 MW to support of our existing and planned HPC operations.

Mining Equipment

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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Delivery schedules have ranged from one month to 12 months.

We currently have two active purchase agreements with Bitmain.

The first agreement is for the acquisition of Antminer S19J XP miners with a combined exahash of 4.08 or 28,400 miners to be delivered from the fourth quarter of 2023 through early 2024.

The second agreement is for the acquisition of Antminer S21 miners with a combined exahash of 2.52 or approximately 12,900 miners to be delivered during the first half of 2024.

We are accelerating the delivery and deployment of the Antminer S21 miners.

As of December 31, 2023, we are current on our payment commitments under both agreements.

As of the reporting date of this Annual Report on Form 10-K, we have completed payment on all new bitcoin miners ordered for 2024.

As of December 31, 2023, we had deployed approximately 209,100 bitcoin miners, which number consists of approximately 158,000 self-miners and approximately 51,100 hosted miners, which represented 16.9 EH/s and 6.3 EH/s for self-miners and hosted miners, respectively.

The tables below summarize the total number of self- and hosted miners in operation as of December 31, 2023 and December 31, 2022, respectively (miners in thousands).

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

The first agreement was for the acquisition of Antminer S19J XP miners with a combined exahash of 4.1 or 28,400 miners.

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 December 31, 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 December 31, 2024 and December 31, 2023 (miners in thousands):

Bitcoin Miners in Operation as of December 31, 2024

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

Self-miners 16.9 158.0

Hosted miners 6.3 51.1

Total mining equipment 23.2 209.1

During the fourth quarter of December 31, 2022, the hosting contracts for 24 customers, (including two related-party customers) were terminated.

The previously hosted ASIC servers were removed from our data center facilities and returned to the customers.

Summary of Digital Asset Activity

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

Digital asset mining revenue, net of receivables *

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

Digital assets, beginning of period, as adjusted

Digital asset self-mining revenue, net of receivables 2

409,560 389,456

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Proceeds from sales of digital assets (402,461) (404,686)

(404,686) (444,353)

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

Change in fair value of digital assets (1,052) —

Gain from sale of digital assets

Impairment of digital assets — (4,406)

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Digital assets, end of period $ 23,893 $ 2,284

* As of December 31, 2023 and 2022, there was $1.7 million and $0.8 million, respectively, of digital asset receivable from our mining pool customer included in Prepaid expenses and other current assets on the Company’s Consolidated Balance Sheets.

1 Reflects the impact of the Company’s adoption of Accounting Standards Update (“ASU”) 2023-08, Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60):

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

2 As of December 31, 2024 and December 31, 2023, there was $0.9 million and $1.7 million, respectively, of digital asset receivable included in prepaid expenses and other current assets on the consolidated balance sheets.

Performance Metrics

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The equipment originally employed for mining bitcoin used the central processing unit (“CPU”) of a computer to mine various forms of digital assets.

Due to performance limitations, CPU mining was rapidly replaced by the Graphics Processing Unit (“GPU”), which offers significant performance advantages over CPUs.

Due to performance limitations, CPU mining was rapidly replaced by the GPU, which offers significant performance advantages over CPUs.

General purpose chipsets like CPUs and GPUs have since been replaced as the standard in the mining industry by ASIC chips such as those found in the miners we and our customers use to mine bitcoin (although they continue to have uses in other industries).

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Our goal is to deploy a powerful fleet of self- and hosted-miners, while operating as energy-efficiently as possible.

The Business Combination and Public Company Costs

The merger of Legacy Core and XPDI provided gross proceeds of approximately $221.6 million from the XPDI trust account, resulting in approximately $201.0 million in net cash proceeds to Core Scientific, after the payment of transaction expenses.

As a result of the merger, former Core Scientific stockholders owned 90.7%, former XPDI public stockholders owned 6.7% and XPDI’s sponsor owned 2.6% of the issued and outstanding shares of common stock, respectively, of the Company, excluding the impact of unvested restricted stock units and options.

The proceeds from the merger were used to fund mining equipment purchases and infrastructure build-out as the Company expanded its leadership position.

As a result of the merger, among other things, each outstanding share of Legacy Core common stock was cancelled in exchange for the right to receive 1.6001528688 of a share of the Company’s common stock.

The merger was accounted for as a reverse recapitalization and XPDI was treated as the “acquired” company for financial reporting purposes.

Legacy Core was deemed the predecessor and Core Scientific, Inc., the post-combination company, is the successor SEC registrant, meaning that Legacy Core’s financial statements for periods prior to the consummation of the merger are disclosed in Core Scientific’s periodic reports.

As a consequence of the merger, the Company and XPDI collectively incurred an aggregate of $39.0 million in professional fees associated with legal services, M&A advisor fees, financial advice, due diligence, and other deal-related costs.

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

Transaction costs allocated to equity-classified instruments were recognized as an adjustment to additional paid-in capital within total stockholders’ equity while transaction costs allocated to liability-classified instruments that were subsequently measured at fair value through earnings were expensed in the first quarter of 2022.

Key Factors Affecting Our Performance

Key Factors Affecting Our Financial Performance

Market Price of Digital Assets

Our business is heavily dependent on the spot price of bitcoin, as well as other digital assets.

The prices of digital assets, specifically bitcoin, have experienced substantial volatility, which may reflect “bubble” type 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.

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.

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.

Our financial performance and continued growth depend in large part on our ability to mine for digital assets profitably and to attract customers for our hosting services.

Our financial performance and continued growth depend in large part on our ability to mine for digital assets profitably and to attract customers for our digital asset hosted mining services.

Increases in power costs, inability to mine digital assets efficiently and to sell digital assets at favorable prices will reduce our operating margins, impact our ability to attract customers for our services, may harm our growth prospects and could have a material adverse effect on our business, financial condition and results of operations.

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Increased difficulty reduces the mining proceeds of the equipment proportionally and eventually requires bitcoin miners to upgrade their mining equipment to remain profitable and compete effectively with other miners.

Similarly, a decline in network hash rate results in a decrease in difficulty, increasing mining proceeds and profitability.

Similarly, a decline in network hash rate results in a decrease in difficulty, increasing mining proceeds.

Transaction Fees

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The transaction fee can vary in value over time, with higher fees prioritizing certain transactions over those with lower fees.

An increase in Bitcoin network transactions could represent a more significant component of miner revenue if their value increases over time.

An increase in Bitcoin network transaction fees increases mining proceeds.

The table below provides a summary of the impact to revenue from the increase or decrease in the market price of bitcoin, difficulty and our hash rate.

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For bitcoin, our most significant digital asset to which our mining power is devoted, the reward was initially set at 50 bitcoin rewards per block.

The bitcoin blockchain has undergone halving three times since its inception, as follows:

The bitcoin blockchain has undergone halving four times since its inception, as follows:

(1) on November 28, 2012, at block 210,000;

(2) on July 9, 2016 at block 420,000;

(3) on May 11, 2020 at block 630,000, when the reward was reduced to its current level of 6.25 bitcoin per block.

The next halving for the bitcoin blockchain is anticipated to occur in April 2024 at block 840,000.

(3) on May 11, 2020 at block 630,000;

and (4) on April 19, 2024 at block 840,000, when the reward was reduced to its current level of 3.125 bitcoin per block.

The next halving for the bitcoin blockchain is anticipated to occur in 2028 at block 1,050,000.

This process will repeat until the total amount of bitcoin rewards issued reaches 21 million and the theoretical supply of new bitcoin is exhausted, which is expected to occur around the year 2140.

Many factors influence the price of bitcoin and the other digital assets we may mine for, and potential increases or decreases in prices in advance of or following a future halving are unknown.

Business Mix Shift to HPC

The planned growth of our HPC data center hosting operations business, through increased investment in conversion of several of our bitcoin mining sites to HPC data center hosting sites over the next several years, should gradually reduce our overall exposure to volatility in the spot price of bitcoin as HPC begins to account for a comparatively larger percentage of our financial results.

The HPC data center hosting business is characterized by implementation of long-term contracts with customers spanning several years with terms and conditions outlining and resulting in stable, predictable revenue and cash flows over each period.

Electricity Costs

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The cost and availability of electricity are affected primarily by changes in seasonal demand, with peak demand during the summer months driving higher costs and increased curtailments to support grid operators.

Severe winter weather can increase the

cost of electricity and the frequency of curtailments when it results in damage to power transmission infrastructure that reduces the grid’s ability to deliver power.

Severe winter weather can increase the cost of electricity and the frequency of curtailments when it results in damage to power transmission infrastructure that reduces the grid’s ability to deliver power.

Geopolitical and macroeconomic factors, such as overseas military or economic conflict between states, can adversely affect electricity costs by raising the cost of power generation inputs such as natural gas.

Locally, factors such as animal incursion, sabotage and other events out of our control can also impact electricity costs and availability.

Other events out of our control can also impact electricity costs and availability.

In certain power markets, financial hedging can be employed to protect buyers from the financial impact of significant increases in power prices.

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As a result, the cost of new miners can be unpredictable and could be significantly different than our historical cost for new miners.

Our Customers

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

On July 30, 2021, we acquired an existing hosting customer, Blockcap, Inc.

(“Blockcap”), and thereby increased our self-mining operations.

Our business environment is constantly evolving, and digital asset miners can range from individual enthusiasts to professional mining operations with dedicated data centers.

The Company competes with other enterprises that focus all or a portion of their activities on mining activities at scale.

We face significant competition in every aspect of our business, including, but not limited to, the acquisition of new miners, the ability to raise capital, obtaining low-cost electricity, obtaining access to energy sites with reliable sources of power, and evaluating new technology developments in the industry.

Presently, the information concerning the activities of these enterprises may not be readily available as the vast majority of the participants in this sector do not publish information publicly, or the information may be unreliable.

Our Competition and 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.

However, digital asset mining is now dominated by large-scale, industrial miners operating large dedicated facilities around the world, including sovereign nation states with vast resources who mine directly or support mining operations through their sovereign wealth funds, all of whom compete to solve new blocks, acquire new and used miners, and purchase and consume energy and supplies to build mining facilities.

We face significant competition in every aspect of our business, including, but not limited to, the acquisition of new miners, the ability to raise capital, obtaining low-cost electricity, obtaining access to sites with reliable sources of high power, and evaluating new technology developments in the industry.

Presently, the information concerning the activities of digital asset miners may not be readily available as most of the participants in this sector do not publish information publicly, or the information may be unreliable.

Published sources of information include “bitcoin.org” and “blockchain.info;” however, the reliability of that information and its continued availability cannot be assured.

Based on available data we believe that, despite the significant decrease in market prices for bitcoin and other major digital assets during 2022, an increase in the scale and sophistication of competition in the digital asset mining industry has continued to increase network hash rate, with new entrants and existing competitors increasing the number of miners mining for bitcoin.

Based on available data, we believe that an increase in the scale and sophistication of competition in the digital asset mining industry has continued to increase network hash rate, with new entrants and existing competitors increasing the number of miners mining for bitcoin.

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.

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 Minder TM fleet management software layer represent meaningful competitive advantages favorable to our business.

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 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.

Differentiation, Innovation and Expansion of Our Platform

Our investments in research and development drive differentiation of our service offerings, core technology innovation and our ability to bring new products to market.

We believe that we differentiate ourselves by offering premium products and services, including our ability to manage our electricity sourcing, construct proprietary passive cooled data centers.

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

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

Our facilities are designed to maximize not only mining equipment efficiency but mining equipment life.

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

We continue to refine and develop our data center design and technology solutions to optimize our data center and mining operations with the knowledge gained from our considerable

digital asset mining experience, including optimizing the location of miners in our data centers to increase profitability.

We believe that we differentiate ourselves by offering premium products and services, including our ability to manage our power sourcing and construct proprietary, passively-cooled digital asset mining data centers at scale.

Our operational digital asset mining facilities lever our specialized design and construction proficiency by employing high-density, low-cost engineering and power designs.

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

We design our facilities to maximize both the efficiency and lifespan of our mining equipment.

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

We continue to refine and develop our data center design and technology solutions to optimize our operations with the knowledge gained from our considerable digital asset mining experience, including optimizing the location of miners in our data centers to increase profitability.

Our approach to data center design enables us to deliver efficiency at scale.

We intend to continue to invest judiciously in research and development activities to extend our platform management and software solutions in order to manage our mining fleet more efficiently and productively.

We believe we possess unique knowledge of data center design principles and systems integration architectures, as well as extensive experience designing, constructing and operating data centers that differentiates and informs our plans for modifying digital

asset mining data centers to support HPC hosting, and for developing new data centers designed to support future high-value computing requirements.

This knowledge includes designs for higher rack energy densities than currently offered in the legacy data center market to satisfy emerging requirements for advanced technologies supporting emerging workloads such as artificial intelligence.

We develop proprietary hardware and software solutions that support our current operations and represent potential future growth opportunities.

We intend to continue to invest judiciously in research and development activities to extend our platform management and software solutions in order to manage our infrastructure and mining fleet more efficiently and productively.

Due to the relatively short history of digital assets, and their emergence as a new asset class, government regulation of blockchain and digital assets is constantly evolving, with increased interest expressed by U.S.

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In March 2021, the nominee for Chair of the SEC expressed the need for investor protection along with promotion of innovation in the digital asset space.

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

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

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

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

Most recently, in January 2025, the Acting SEC Chairman announced the launch of a crypto task force dedicated to developing a comprehensive and clear regulatory framework for crypto assets, in contrast to the SEC’s prior reliance on enforcement actions to regulate cryptocurrencies.

The extent and content of any forthcoming laws and regulations are not yet ascertainable with certainty, and they may not be ascertainable in the near future.

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.

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

Strategic Investments

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 take advantage of adjacent opportunities that lever our mining expertise and capabilities.

Condensed Statements of Operations

The following table presents a condensed statements of operations for the years ended December 31, 2023 and 2022:

(in thousands)

Total Revenue

Key Business Operating Metrics and Non-GAAP Financial Measures

In addition to our financial results, we use the following business operating metrics and non-GAAP financial measures to evaluate our business, measure our performance, identify trends affecting our business, and make strategic decisions.

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

2024 2023 2022

Cost of revenue

Self-Mining Hash rate (Exahash per second)

19.1 16.9 15.7

Adjusted EBITDA (in millions) $ 157.4 $ 169.5 $ (11.6)

Year Ended December 31,

2024 2023 2022

Gain from sales of digital assets 3,893 44,298

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

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

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

Impairment of property, plant and equipment — (590,673)

Losses on exchange or disposal of property, plant and equipment (1,956) (28,025)

Total operating expenses

Cash Costs per Bitcoin

Power cost per bitcoin self-mined

$ 24,375 $ 12,464 $ 10,545

Operating income (loss) 8,961 (2,109,553)

Total non-operating expense, net 1

Operational costs per bitcoin self-mined 1

6,012 2,443 1,736

Loss before income taxes

Total cost to self-mine one bitcoin 2

$ 30,387 $ 14,907 $ 12,281

Income tax expense (benefit)

Cash-Based Hash Cost 3

Power cost per terahash

$ 0.025 $ 0.033 $ 0.044

1 Total non-operating expense, net includes Reorganization items, net of $191.1 million and $(197.4) million for the years ended December 31, 2023 and 2022, respectively.

Key Business Metrics and Non-GAAP Financial Measures

In addition to our financial results, we use the following business metrics and non-GAAP financial measures to evaluate our business, measure our performance, identify trends affecting our business, and make strategic decisions.

For a definition of these key business metrics, see the sections titled “Self-Mining Hash Rate” and “Adjusted EBITDA” (below).

Self-Mining Hash rate (Exahash per second)

Adjusted EBITDA (in millions)

Operational costs per terahash 1

0.006 0.006 0.007

Total cash-based hash cost 3

$ 0.031 $ 0.039 $ 0.051

1 Includes personnel and related costs, software, telecommunications, security, etc.

Amount excludes stock-based compensation and depreciation.

2 Represents our direct cash costs of power and operational costs based on our self-mining/hosting mix divided by total bitcoin self-mined during the periods presented.

3 Represents the cash expense of power and facilities operation cost divided by our self-mining fleet hash rate, in terahash.

Self-Mining Hash Rate

We operate mining hardware which performs computational operations in support of the blockchain measured in “hash rate” or “hashes per second.” A “hash” is the computation run by mining hardware in support of the blockchain;

therefore, a miner’s “hash rate” refers to the rate at which the hardware is capable of performing such computations.

Our hash rate represents the aggregate hash rate of all miners deployed in our fleet.

Our hash rate expressed as a percentage of the total Bitcoin network hash rate generally determines the number of bitcoin rewards that will be earned by our fleet.

therefore, a miner’s “hash rate” refers to the rate at which the hardware is capable of solving such computations.

Our hash rate represents the hash rate of our miner fleet, which drives the digital asset rewards that will be earned by our fleet.

We calculate and report our hash rate in exahash per second (“EH/s”).

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We measure the hash rate produced by our mining fleet through our management software Minder TM , which consolidates the reported hash rate from each miner.

The method by which we measure our hash rate may differ from how other operators present such measure.

The method by which we measure our hash rate may differ from how other operators present such a measure.

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.

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 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 16.9 EH/s and 15.7 EH/s for the years ended December 31, 2023 and 2022, respectively representing an 8% improvement year over year.

Our combined self-mining and customer and related party hosting hash rate decreased 2%, to 23.2 EH/s for the year ended December 31, 2023 from 23.7 EH/s for the year ended December 31, 2022.

Our self-mining hash rate was 19.1 EH/s and 16.9 EH/s as of December 31, 2024 and 2023, respectively representing a 13% increase year over year.

Our combined self-mining and customer and related party hosting hash rate decreased 13%, to 20.1 EH/s as of December 31, 2024, from 23.2 EH/s as of December 31, 2023.

Cost of Self-Mining One Bitcoin and Hash Cost

Our profitability with respect to self-mining is heavily dependent upon our cost to mine a bitcoin, calculated during a particular period as the actual cash expense for power and other mining facility operations cash expenditures attributable to bitcoin self-mined, divided by the total bitcoin self-mined during the period presented.

Our cost efficiency with respect to solving computations on the Bitcoin network to mine bitcoin is reflected in our cash-based hash cost, which is calculated as the actual cash expense for power and other mining facility operations cash expenditures attributable to bitcoin self-mined, divided by our self-mining hash rate, in terahash.

The Company excludes stock-based compensation and depreciation from calculations of these operating metrics.

Cash Costs per Bitcoin and Cash-Based Hash Cost are key business operating metrics.

The cost of self-mining one bitcoin metric provides useful information to investors as it demonstrates our capacity to profitably mine bitcoin when comparing it to the

price of bitcoin, particularly given volatility in energy prices as well as in the price of bitcoin.

Management uses this metric to monitor both our cost efficiency in mining bitcoin as compared to our past performance and the performance of competitors, as well as our continued ability to profitably mine bitcoin.

Similarly, the hash cost provides useful information to investors as it demonstrates our cost efficiency in solving computations on the Bitcoin network to mine bitcoin.

Management uses this information to monitor our cost efficiency in mining bitcoin as compared to our past performance and the performance of our competitors.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure defined as our net income or (loss), adjusted to eliminate the effect of (i) interest income, interest expense, and other income (expense), net;

Adjusted EBITDA is a non-GAAP financial measure defined as our net loss, adjusted to eliminate the effect of (i) interest income, interest expense, and other income (expense), net;

(ii) provision for income taxes;

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(iv) stock-based compensation expense;

(v) restructuring charges 1 ;

(vi) Reorganization items, net 2 ;

(vii) unrealized changes in fair value of derivative instruments;

and (viii) certain additional non-cash or non-recurring 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.

(v) Reorganization items, net;

(vi) unrealized fair value adjustment on energy derivatives;

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

(viii) HPC organizational startup costs which are not reflective of the ongoing costs incurred after startup, (ix) post-emergence 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 loss to Adjusted EBITDA, please refer to the table below.

We believe Adjusted EBITDA is an important measure because it allows management, investors, and our Board of Directors to evaluate and compare our operating results, including our return on capital and operating efficiencies, from period-to-period by making the adjustments described above.

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However, you should be aware that when evaluating Adjusted EBITDA, we may incur future expenses similar to those excluded when calculating this measure.

Our presentation of this measure should not be construed as an inference that its future results will be unaffected by unusual or non-recurring items.

Our presentation of this measure should not be construed as an inference that its future results will be unaffected by unusual items.

Further, this non-GAAP financial measure should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).

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

1 Within the financial statements and relating to financial metrics “restructuring charges” refers to charges relating to a prepetition restructuring plan completed in October 2022 and described further in Note 4 — Business Combinations, Acquisitions and Restructuring to our consolidated financial statements in Item 8 of Part II of this Annual Report on Form 10-K.

2 Within the financial statements and relating to financial metrics “Reorganization items, net” refers to charges requiring separate presentation under the provisions of Accounting Standards Codification (“ASC”) 852, Reorganizations (“ASC 852”) and described further in Note 3 — Chapter 11 Filing and Other Related Matters to our consolidated financial statements in Item 8 of Part II of this Annual Report on Form 10-K.

The following table presents a reconciliation of net loss to Adjusted EBITDA for the years ended December 31, 2023 and 2022:

The following table presents a reconciliation of net loss to Adjusted EBITDA for the years ended December 31, 2024, 2023 and 2022, (in thousands):

Year Ended December 31,

2023 2022 1,2

Adjusted EBITDA (in thousands)

Adjusted EBITDA

$ (1,315,005) $ (246,487) $ (2,146,318)

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Income tax expense (benefit)

859 683 (17,091)

Depreciation and amortization 113,205 96,003 225,259

Amortization of operating lease right-of-use assets 442 834

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

Stock-based compensation expense 51,924 58,892 182,894

58,892 182,894

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

Fair value adjustment on convertible notes — 186,853

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

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

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Gain on sale of intangible assets

Loss (gain) on debt extinguishment 487 (20,065) 287

Cash restructuring charges

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

Fair value adjustment on acquired vendor liability

Equity line of credit expenses

Unrealized change in fair value of derivative instruments

Other non-operating (income) expenses, net

HPC organizational startup costs

Post-emergence bankruptcy advisory costs

Change in fair value of convertible notes — — 186,853

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

Reorganization items, net (111,439) 191,122 (197,405)

Change in fair value of warrants and contingent value rights

1,369,157 — —

Other non-operating expenses (income), net (325) (2,530) 5,232

123 1,474 5,276

Adjusted EBITDA

$ 157,437 $ 169,548 $ (11,579)

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

2 Previously, the Company had held the bitcoin it earned as an investment for long-term appreciation.

This strategy was outside our primary business operations and the results of impairments and realized gains and losses had been excluded from Adjusted EBITDA.

With our current strategy of monetizing our bitcoin revenue soon after earning it and recent changes in accounting standards, management is no longer excluding these amounts from its Adjusted EBITDA.

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

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

Components of Results of Operations

Our revenue consists primarily of fees from our hosting operations, including the sales of mining equipment to be hosted in our data centers and digital asset mining revenue.

• Hosting revenue from customers and related parties.

Hosting revenue from customers and related parties is based on electricity-based consumption contracts with our customers and related parties.

Most contracts are renewable, and our customers are generally billed on a fixed and recurring basis each month for the duration of their contract, which vary from one to three years in length.

During the second quarter of 2023, we initiated our first new customer contracts based on proceed sharing.

Under these new contracts, customers pay for the cost of hosting and infrastructure, and we share the proceeds that are generated.

See Item 13 — “Certain Relationships and Related Transactions, and Director Independence.” in Part III of this Annual Report on Form 10-K.

• Equipment sales to customers and related parties.

Equipment sales to customers and related parties is derived from our ability to lever our partnerships with leading equipment manufacturers to secure equipment in advance, which is then sold to our customers and related parties.

Our equipment sales are typically in connection with a hosting contract.

After fiscal 2022, we no longer sell equipment to customers and related parties.

• Digital asset mining revenue.

We operate a digital asset 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).

Our revenue consists primarily of digital asset self-mining income, and fees from our digital asset hosting and HPC hosting operations.

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

• 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).

The Company participates in “mining pools” organized by “mining pool operators” in which we share our mining power (known as “hash rate”) with the hash rate generated by other miners participating in the pool to earn digital asset rewards.

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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.

Revenues from digital asset 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.

Costs of Revenue

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

Cost of equipment sales includes costs of computer equipment sold to customers.

Gain from sales of digital assets

Gain from sales of digital assets consist of gain on sales of digital assets.

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.

• Digital asset hosted mining revenue from customers and related parties.

Digital asset hosted mining revenue from customers and related parties is based on electricity-based consumption contracts with our customers and related parties.

Most contracts are renewable, and our customers are generally billed on a fixed and recurring basis each month for the duration of their contract, which vary from one to three years in length.

During the second quarter of 2023, we initiated our first new digital asset hosted mining customer contracts based on proceed sharing.

Under these new contracts, customers pay for the cost of digital asset hosting and infrastructure, and we share the proceeds that are generated.

• HPC hosting revenue.

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.

Under these contracts, customers pay fixed payments (based on electric capacity) and variable payments on a recurring basis.

HPC hosting power fees are passed through to the customer without markup and are included on a gross basis in HPC hosting revenue.

Cost of revenue

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 relate to our Austin, Texas data center, and primarily consists of facility operations expense, which includes maintenance and lease expense, power fees, payroll and benefits expense and stock-based compensation expense.

HPC hosting power fees are passed through to the customer without markup and are included on a gross basis in Cost of HPC hosting services.

Change in fair value of digital assets

The Company adopted ASU 2023-08 effective January 1, 2024.

Under ASU 2023-08, the Company measures digital assets at fair value with the changes in fair value during the reporting period recognized in change in fair value of digital assets.

Recognition of digital asset results prior to adoption are described below.

Gain from sale of digital assets

Prior to the adoption of ASU 2023-08 effective January 1, 2024, gain from sale of digital assets consisted of the excess of sales proceeds over the carrying value of the digital assets at the time of sale.

Gains were recognized as they were realized upon sale(s).

Impairment of digital assets

Digital assets, which are initially recognized and measured at fair value, are remeasured only when an impairment is recognized.

Impairment exists when the current carrying amount exceeds its current fair value.

Impairment is measured using quoted prices of the digital asset at the time its fair value is being assessed.

Quoted prices, including intraday low prices, are collected and utilized in impairment testing and measurement on a daily basis.

To the extent that an impairment loss is recognized, the loss establishes the new costs basis and carrying value of the digital asset.

Impairment losses are recognized in the period in which the impairment is identified.

The impaired digital assets are written down to their fair value at the time of impairment and this new carrying value will not be adjusted upward for any subsequent increase in fair value.

See Note 2 — Summary of Significant Accounting Policies to our consolidated financial statements in Item 8 of Part II of this Annual Report on Form 10-K for additional information.

Change in fair value of derivative instruments

The change in fair value of derivative instruments 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 this Annual Report on Form 10-K.

Impairment of goodwill and other intangibles

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

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

If management determines that it is more likely than not that the fair value of a reporting unit is less than the reporting unit’s carrying amount, or management chooses not to perform a qualitative assessment, then the quantitative goodwill impairment test will be performed.

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

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

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

The Company tests intangible assets subject to amortization whenever events or changes in circumstances have occurred that may affect the recoverability or the estimated useful lives of the intangible assets.

Intangible assets may be impaired when the estimated future undiscounted cash flows are less than the carrying amount of the asset.

If that comparison indicates that the intangible asset’s carrying value may not be recoverable, the impairment is measured based on the difference between the carrying amount and the estimated fair value of the intangible asset.

This evaluation is performed at the lowest level for which separately identifiable cash flows exist.

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

Impairment of property, plant and equipment

The Company tests property, plant and equipment for recoverability whenever events or changes in circumstances have occurred that may affect the recoverability or the estimated useful lives of the property, plant and equipment.

Property, plant and equipment may be impaired when the estimated future undiscounted cash flows are less than the carrying amount of the asset.

If that comparison indicates that the asset’s carrying value may not be recoverable, the impairment is measured based on the difference between the carrying amount and the estimated fair value of the asset.

This evaluation is performed at the lowest level for which separately identifiable cash flows exist.

Prior to the adoption of ASU 2023-08 effective January 1, 2024, impairment losses were recognized in the period in which the impairment was identified.

The impaired digital assets were written down to their fair value at the time of impairment and the new carrying value would not be adjusted upward for any subsequent increase in fair value until sale.

Change in fair value of energy derivatives

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.

Losses on exchange or disposal of property, plant and equipment

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

The fair value of noncash consideration received in an exchange of property, plant and equipment is determined as of contract inception.

Losses on exchange or 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

Operating expenses consists of research and development, sales and marketing, and general and administrative expenses.

Operating expenses consist of research and development, sales and marketing, and general and administrative expenses.

Each is outlined in more detail below.

• Research and development.

We invest in research and development to enhance the efficiency and effectiveness of our mining operations and hosting services and to support our efforts to capture business opportunities in adjacent high-value compute markets.

Research and development costs include compensation and benefits, stock-based compensation, other personnel related costs and professional fees.

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• General and administrative.

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, professional fees, and

other personnel-related expenses.

Also included are stock-based compensation, professional fees, business insurance, auditor fees, bad debt, amortization of intangibles, franchise taxes, and bank fees.

Non-operating expenses, net

Non-operating expenses, net includes (gain) loss on debt extinguishment, interest expense, net, fair value adjustment on convertible notes, fair value adjustment on derivative warrant liabilities, reorganization items, net and other non-operating expenses, net.

Reorganization items, net consists of expenses (including professional fees), realized gains and losses, and provisions for losses that can be directly associated with the reorganization.

Income tax expense (benefit)

Income tax expense (benefit) consists of U.S.

General and administrative expenses include compensation, benefits, other personnel-related expenses for employees who are not part of our operating sites, research, development, sales, or marketing functions.

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

HPC organizational startup costs were primarily consulting costs that were specifically incurred preparing for and entering into the HPC hosting business, and are not expected to be incurred in the ongoing operations of the HPC hosting business.

HPC site startup costs are noncapitalizable costs associated with the administration of converting and building of future HPC hosting operating sites, and include compensation and other personnel-related expenses, including stock-based compensation.

Similar costs will be incurred in the future operations of the HPC hosting sites.

Non-operating expenses (income), net:

Non-operating expenses (income), net includes loss (gain) on debt extinguishment, interest expense, net, reorganization items, net, fair value adjustments of convertible notes, warrants and contingent value rights, and other non-operating (income) expenses, net.

Reorganization items, net consists of costs directly associated with the reorganization during the bankruptcy period, including professional fees (including reimbursed third-party professional fees) and other bankruptcy related costs, negotiated settlements, satisfaction of allowed claims, and debtor-in-possession finance fees.

Income tax expense

Income tax expense consists of U.S.

federal and state income taxes.

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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

The following table sets forth our consolidated statements of operations for each of the periods indicated (in thousands, except percentages).

Year Ended December 31, Period over Period Change

2023 2022 Dollar Percentage

Hosting revenue from customers $ 102,005 $ 130,234 $ (28,229) (22)%

Hosting revenue from related parties

Results of Operations for the Year Ended December 31, 2024 and 2023

The following table sets forth our selected Consolidated Statements of Operations for each of the periods indicated (in thousands).

Year Ended December 31,

2024 2023 $ Change

Digital asset self-mining revenue

$ 408,740 $ 390,333 $ 18,407

Equipment sales to customers

— 11,391 (11,391) NM

Equipment sales to related parties

— 71,438 (71,438) NM

Digital asset mining revenue

Digital asset hosted mining revenue from customers

77,554 102,005 (24,451)

Total revenue

Digital asset hosted mining revenue from related parties

— 10,062 (10,062)

HPC hosting revenue 24,378 — 24,378

Total revenue 510,672 502,400 8,272

Cost of revenue:

Cost of hosting services 87,245 169,717 (82,472) (49)%

Cost of equipment sales — 67,114 (67,114) NM

Cost of digital asset mining 291,696 395,082 (103,386) (26)%

Cost of digital asset self-mining

314,335 291,696 22,639

Cost of digital asset hosted mining services

53,558 87,245 (33,687)

Cost of HPC hosting services 21,709 — 21,709

Total cost of revenue 389,602 378,941 10,661

121,070 123,459 (2,389)

Gross profit 123,459 8,400 115,059 NM

Gain from sales of digital assets 3,893 44,298 (40,405) (91)%

Impairment of digital assets (4,406) (231,315) 226,909 NM

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

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

Impairment of property, plant and equipment — (590,673) 590,673 NM

Losses on exchange or disposal of property, plant and equipment (1,956) (28,025) 26,069 NM

Change in fair value of digital assets

(1,052) — (1,052)

Gain from sale of digital assets

— 3,893 (3,893)

Impairment of digital assets — (4,406) 4,406

Change in fair value of energy derivatives

(2,757) (3,918) 1,161

Loss on disposal of property, plant and equipment

(4,210) (1,956) (2,254)

Operating expenses:

Research and development 11,830 7,184 4,646

7,184 26,962 (19,778) (73)%

Sales and marketing 9,969 7,019 2,950

7,019 12,731 (5,712) (45)%

General and administrative 110,448 93,908 16,540

93,908 213,280 (119,372) (56)%

Total operating expenses 132,247 108,111 24,136

Operating (loss) income

(19,196) 8,961 (28,157)

Operating income (loss) 8,961 (2,109,553) 2,118,514 NM

Non-operating expenses, net:

(Gain) loss on debt extinguishment (20,065) 287 (20,352) NM

Non-operating expenses (income), net:

Loss (gain) on debt extinguishment

487 (20,065) 20,552

Interest expense, net

37,070 86,238 (49,168)

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

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

Reorganization items, net 191,122 (197,405) 388,527 NM

Other non-operating (income) expenses, net (2,530) 5,232 (7,762) (148)%

Total non-operating expense, net

Reorganization items, net (111,439) 191,122 (302,561)

Change in fair value of warrants and contingent value rights

1,369,157 — 1,369,157

Other non-operating income, net

(325) (2,530) 2,205

Total non-operating expenses, net

1,294,950 254,765 1,040,185

Loss before income taxes

(245,804) (2,163,409) 1,917,605 NM

Income tax expense (benefit) 683 (17,091) 17,774 NM

$ (246,487) $ (2,146,318) $ 1,899,831 NM

NM - Not Meaningful

Year Ended December 31, Period over Period Change

2023 2022 Dollar Percentage

(in thousands, except percentages)

Hosting revenue from customers $ 102,005 $ 130,234 $ (28,229) (22)%

Hosting revenue from related parties

(1,314,146) (245,804) (1,068,342)

Equipment sales to customers

— 11,391 (11,391) NM

Equipment sales to related parties

— 71,438 (71,438) NM

Digital asset mining revenue

Income tax expense

$ (1,315,005) $ (246,487) $ (1,068,518)

Total revenue

Year Ended December 31,

2024 2023 $ Change

Digital asset self-mining revenue

$ 408,740 $ 390,333 $ 18,407

Digital asset hosted mining revenue from customers

77,554 102,005 (24,451)

Digital asset hosted mining revenue from related parties

— 10,062 (10,062)

HPC hosting revenue 24,378 — 24,378

Total revenue $ 510,672 $ 502,400 $ 8,272

Percentage of total revenue:

Hosting revenue from customers

Hosting revenue from related parties

Equipment sales to customers

Equipment sales to related parties

Digital asset mining revenue

Digital asset self-mining revenue 80 % 78 %

Digital asset hosted mining revenue from customers 15 % 20 %

Digital asset hosted mining revenue from related parties — % 2 %

HPC hosting revenue 5 % — %

Total revenue

Total revenue decreased by $137.9 million to $502.4 million for the year ended December 31, 2023, from $640.3 million for the year ended December 31, 2022, as a result of the factors described below.

Total hosting revenue from customers decreased by $28.2 million or 22%, to $102.0 million for the year ended December 31, 2023, from $130.2 million for the year ended December 31, 2022.

The decrease in hosting revenue from customers was primarily driven by the termination of contracts for several customers in the portfolio at less profitable hosting rates and the associated reduction in the total number of hosting miners in the fleet for the year ended December 31, 2023.

Total hosting revenue from related parties decreased by $19.4 million or 66%, to $10.1 million for the year ended December 31, 2023, from $29.5 million for the year ended December 31, 2022.

The decrease in related party hosting contracts was primarily driven by the termination of hosting contracts during the fourth quarter of December 31, 2022, when the hosting contracts for 24 customers, (including two related-party customers) were terminated.

The previously hosted ASIC servers were removed from our data center facilities and returned to the customers.

The Company produced approximately 5,512 bitcoin for hosting customers in its data centers for the year ended December 31, 2023.

Equipment sales to customers decreased by $11.4 million or 100%, to nil for the year ended December 31, 2023, from $11.4 million for the year ended December 31, 2022.

The decrease in equipment sales to customers was primarily driven by the Company’s decision to exit the Equipment Sales business due to the increasing number of hosting customers purchasing mining equipment directly from manufacturers for deployments in our data centers during the year ended December 31, 2023, as compared to the year ended December 31, 2022.

Equipment sales to related parties decreased by $71.4 million or 100%, to nil for the year ended December 31, 2023, from $71.4 million for the year ended December 31, 2022.

The decrease in equipment sales to related parties was primarily driven the Company’s decision to exit the Equipment Sales business due to the increasing number of hosting customers purchasing mining equipment directly from manufacturers for deployments in our data centers during the year ended December 31, 2023, as compared to the year ended December 31, 2022.

Digital asset mining revenue decreased by $7.5 million or 2%, to $390.3 million for the year ended December 31, 2023, from $397.8 million for the year ended December 31, 2022.

The year over year decrease in mining revenue was driven primarily by increased mining difficulty associated with the growth in the global Bitcoin network hash rate in fiscal year 2023 relative to fiscal year 2022, partially offset by the increase in the number of mining units deployed in our self-mining fleet.

Our self-mining hash rate increased by 8%, to 16.9 EH/s for the year ended December 31, 2023, from 15.7 EH/s for the year ended December 31, 2022.

The total number of bitcoins self-mined for the year ended December 31, 2023, was 13,762 compared to 14,436 for the year ended

December 31, 2022.

The average price of bitcoin for the year ended December 31, 2023, was $28,859 as compared to $28,198 for the year ended December 31, 2022, an improvement of 2%.

Total revenue increased by $8.3 million or 2%, to $510.7 million for the year ended December 31, 2024, from $502.4 million for the year ended December 31, 2023, as a result of the factors described below.

Digital asset self-mining revenue increased by $18.4 million or 5%, to $408.7 million for the year ended December 31, 2024, from $390.3 million for the year ended December 31, 2023.

The year over year increase in self-mining revenue was driven primarily by:

• a 128% increase in the average price of bitcoin to $65,894 for the year ended December 31, 2024, compared to $28,859 for the year ended December 31, 2023;

• a 13% increase in self-mining hash rate to 19.1 EH/s for the year ended December 31, 2024, from 16.9 EH/s for the same period in the prior year;

• an approximate net increase of 6,000 mining units deployed;

• and an increase in our average self-mining hash rate fleet mix and efficiency to 25.1 joules per terahash.

This increase in self-mining revenue was partially offset by:

• a 52% decrease in bitcoin mined to 6,595 for the year ended December 31, 2024, compared to 13,762 for the year ended December 31, 2023, driven primarily by:

◦ a 50% decrease in block rewards as a result of the April 2024 halving;

◦ the operational shift from digital asset self-mining to HPC hosting;

◦ a 66% increase in the twelve-month average network hash rate over prior year.

Total digital asset hosted mining revenue from customers decreased by $24.5 million or 24%, to $77.6 million for the year ended December 31, 2024, from $102.0 million for the year ended December 31, 2023.

The decrease in hosted mining revenue from customers was primarily driven by the termination of contracts with several customers since 2023, due primarily to our shift to HPC hosting.

Total digital asset hosted mining revenue from related parties was nil for the year ended December 31, 2024, compared to $10.1 million for the year ended December 31, 2023.

There were no related-party transactions during the year ended December 31, 2024.

Total HPC hosting revenue was $24.4 million for the year ended December 31, 2024, compared to nil for the same period in the prior year due to the initiation of HPC hosting operations at our Austin, Texas data center during the quarter ended June 30, 2024.

Cost of revenue

Year Ended December 31, Period over Period Change

2023 2022 Dollar Percentage

(in thousands, except percentages)

Year Ended December 31,

2024 2023 $ Change

Cost of revenue

$ 389,602 $ 378,941 $ 10,661

123,459 8,400 115,059 NM

Cost of revenue decreased by $253.0 million or 40%, to $378.9 million for the year ended December 31, 2023, from $631.9 million for the year ended December 31, 2022.

As a percentage of total revenue, cost of revenue totaled 75% and 99% for the years ended December 31, 2023 and 2022, respectively.

The decrease in cost of revenue was primarily attributable to $128.1 million of decreased depreciation expense driven by a late fiscal 2022 impairment adjustment to the depreciable base for the deployed self-mining units, $67.1 million of lower equipment sales costs due to the Company exiting the selling of equipment, $41.8 million of lower power costs, and lower stock-based compensation of $20.7 million as the prior year included accelerated vesting of awards and a decrease in equity awards granted for the current fiscal year.

Gain from sales of digital assets

Year Ended December 31, Period over Period Change

2023 2022 Dollar Percentage

(in thousands, except percentages)

Gain from sales of digital assets $ 3,893 $ 44,298 $ (40,405) (91) %

Percentage of total revenue

Gain from sales of digital assets decreased by $40.4 million to $3.9 million for the year ended December 31, 2023, from a gain of $44.3 million for the year ended December 31, 2022.

Gains are recorded when realized upon sale(s).

In determining the gain to be recognized upon sale, we calculate the difference between the sales price and carrying value of the digital assets sold immediately prior to sale.

For the year ended December 31, 2023, the carrying value of our digital assets sold was $400.8 million and the sales price was $404.7 million.

For the year ended December 31, 2022, the carrying value of our digital assets sold was $400.1 million and the sales price was $444.4 million.

Impairment of digital assets

121,070 123,459 (2,389)

Cost of revenue increased by $10.7 million or 3%, to $389.6 million for the year ended December 31, 2024, from $378.9 million for the year ended December 31, 2023.

As a percentage of total revenue, cost of revenue totaled 76% and 75% for the year ended December 31, 2024 and 2023, respectively.

The increase in cost of revenue was primarily attributable to:

• a $21.7 million increase in HPC hosting costs, primarily rent and power incurred during the current fiscal year with no comparable activity for the same period in fiscal 2023;

• a $16.7 million increase in depreciation expense driven by the increase in the number of miners in service;

• a $5.9 million increase in payroll and benefits is due to increases in bonuses and salaries driven primarily by an increase in employee headcount;

• a $1.9 million i ncrease in stock-based compensation expense;

partially offset by

• a $32.0 million decrease in power costs from lower rates and usage and $3.3 million lower facility operations expense.

Change in fair value of digital assets

Year Ended December 31,

Period over Period Change

2023 2022 Dollar Percentage

(in thousands, except percentages)

Impairment of digital assets $ (4,406) $ (231,315) $ 226,909 NM

2024 2023 $ Change

Change in fair value of digital assets

$ (1,052) $ — $ (1,052)

Percentage of total revenue

Impairment of digital assets decreased by $226.9 million to $4.4 million for the year ended December 31, 2023, from $231.3 million for the year ended December 31, 2022, due primarily to the falling prices of digital assets during fiscal 2022.

Impairment exists when the carrying amount exceeds its fair value.

Impairment is measured using quoted prices of the digital asset at the time its fair value is being assessed.

Quoted prices, including intraday low prices, are collected and utilized in impairment testing and measurement on a daily basis.

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

The carrying value of our digital assets amounted to $2.3 million and $0.7 million as of December 31, 2023 and December 31, 2022, respectively.

Change in fair value of derivative instruments

Change in fair value of digital assets was $1.1 million for the year ended December 31, 2024, and reflects the Company’s adoption of ASU 2023-08 effective January 1, 2024.

Gain from sale of digital assets

Year Ended December 31,

Period over Period Change

2023 2022 Dollar Percentage

(in thousands, except percentages)

Change in fair value of derivative instruments

$ (3,918) $ — $ (3,918) NM

2024 2023 $ Change

Gain from sale of digital assets

$ — $ 3,893 $ (3,893)

Percentage of total revenue

Change in fair value of derivative instruments was $3.9 million for the year ended December 31, 2023 and was driven by the change in fair value of the derivative liability related to the energy forward purchase contract described in more detail in 2 — Summary of Significant Accounting Policies to our consolidated financial statements in Item 8 of Part II of this Annual Report on Form 10-K.

Impairment of goodwill and other intangibles

Gain from sale of digital assets was nil for the year ended December 31, 2024, compared to a gain of $3.9 million for the year ended December 31, 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 year ended December 31, 2023, the carrying value of our digital assets sold was $400.8 million and the sales price was $404.7 million.

Impairment of digital assets

Year Ended December 31,

Period over Period Change

2023 2022 Dollar Percentage

(in thousands, except percentages)

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

2024 2023 $ Change

Impairment of digital assets $ — $ (4,406) $ 4,406

Percentage of total revenue

Impairment of goodwill and other intangibles decreased by $1.06 billion for the year ended December 31, 2023, compared to the year ended December 31, 2022.

We identified triggering events as of June 30, 2022, September 30, 2022, and December 31, 2022, due to declines in the market price of bitcoin, the market price of our common stock and our market capitalization and, as such, we performed the quantitative test to compare the fair value to the carrying value for each reporting unit.

We concluded the carrying value of the Mining reporting unit and Equipment Sales and Hosting reporting unit exceeded each reporting unit’s fair value and, as such, recorded an impairment of goodwill of $996.5 million in our Mining reporting unit and $58.2 million in our Equipment Sales and Hosting reporting unit.

In addition, as part of the restructuring activities during the second quarter of 2022, the Company determined that $4.5 million of software intangible assets would no longer be used.

See Note 2 — Summary of Significant Accounting Policies to our consolidated financial statements in Item 8 of Part II of this Annual Report on Form 10-K for additional information.

Impairment of property, plant and equipment

Impairment of digital assets was nil for the year ended December 31, 2024, compared to $4.4 million for the year ended December 31, 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.

Prior to the adoption of ASU 2023-08, impairment existed when the carrying amount exceeded its fair value.

Impairment was measured using quoted prices of the digital asset at the time its fair value was being assessed.

Quoted prices, including intraday low prices, were collected and utilized in impairment testing and measurement on a daily basis.

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 $23.9 million as of December 31, 2024, and $2.3 million as of December 31, 2023.

Change in fair value of energy derivatives

Year Ended December 31,

Period over Period Change

2023 2022 Dollar Percentage

(in thousands, except percentages)

Impairment of property, plant and equipment $ — $ (590,673) $ 590,673 NM

2024 2023 $ Change

Change in fair value of energy derivatives

$ (2,757) $ (3,918) $ 1,161

Percentage of total revenue

Impairment of property, plant and equipment decreased by $590.7 million for the year ended December 31, 2023, compared to the year ended December 31, 2022.

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

Additionally, primary and secondary market prices for ASIC miners of the type used in our business operations have decreased significantly from previous levels, including prices for those miners acquired earlier in 2022.

Accordingly, we evaluated whether the estimated future undiscounted cash flows from the operation of our data center facilities sites would recover the carrying value of the property, plant and equipment located at the sites and used in site operations, including our deployed mining equipment.

Based on this evaluation, we determined that the carrying value of the fleet of deployed mining equipment and of the other non-mining equipment property, plant and equipment at the Cedarvale and Cottonwood, Texas facility sites may no longer be fully recoverable by the cash flows of the site.

We measured the

amount of impairment of the fleet of deployed mining equipment as the difference between their carrying amount of $690.4 million and the estimated fair value of $176.3 million, resulting in an impairment of $514.1 million on the fleet of deployed mining equipment for the year ended December 31, 2022.

We measured the amount of impairment at the identified facility sites as the difference between the carrying amount of the site asset group of $211.6 million and the estimated fair value of the site asset group of $135.1 million, resulting in an impairment of the facility site’s property, plant and equipment of $76.5 million for the year ended December 31, 2022.

See the discussion of long-lived asset impairments in Note 2 — Summary of Significant Accounting Policies to our consolidated financial statements in Item 8 of Part II of this Annual Report on Form 10-K for further information.

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 year ended December 31, 2024, compared to $3.9 million for the year ended December 31, 2023.

Losses on exchange or disposal of property, plant and equipment

Year Ended December 31,

Period over Period Change

2023 2022 Dollar Percentage

(in thousands, except percentages)

Losses on exchange or disposal of property, plant and equipment $ (1,956) $ (28,025) $ 26,069 NM

2024 2023 $ Change

Losses on exchange or disposal of property, plant and equipment $ (4,210) $ (1,956) $ (2,254)

Percentage of total revenue

Losses on exchange or disposal of property, plant and equipment decreased by $26.1 million to $2.0 million for the year ended December 31, 2023, from loss of $28.0 million for the year ended December 31, 2022.

The decrease was due primarily to a noncash exchange of mining equipment during 2022.

Losses on exchange or disposal of property, plant and equipment increased by $2.3 million to $4.2 million for the year ended December 31, 2024, from $2.0 million for the year ended December 31, 2023.

This loss was due to the disposal of mining equipment.

Operating Expenses

Research and development

Year Ended December 31, Period over Period Change

2023 2022 Dollar Percentage

(in thousands, except percentages)

Year Ended December 31,

2024 2023 $ Change

Operating expenses:

Research and development

$ 11,830 $ 7,184 $ 4,646

Percentage of total revenue

Research and development expenses decreased by $19.8 million or 73%, to $7.2 million for the year ended December 31, 2023, from $27.0 million for the year ended December 31, 2022.

The decrease was driven by lower stock-based compensation of $20.8 million, as the prior year included accelerated vesting of awards and a decrease in equity awards granted during the year ended December 31, 2023, primarily offset by higher personnel and related expenses of $1.0 million.

Sales and marketing

Year Ended December 31, Period over Period Change

2023 2022 Dollar Percentage

(in thousands, except percentages)

Sales and marketing

9,969 7,019 2,950

Percentage of total revenue

Sales and marketing expenses decreased by $5.7 million or 45%, to $7.0 million for the year ended December 31, 2023, from $12.7 million for the year ended December 31, 2022.

The decrease was primarily driven by lower stock-based compensation of $4.5 million, as the prior year included accelerated vesting of awards and a decrease in equity awards granted for the current fiscal year, $0.8 million of lower advertising and marketing expenses and $0.4 million lower personnel and related expenses.

General and administrative

Year Ended December 31, Period over Period Change

2023 2022 Dollar Percentage

(in thousands, except percentages)

General and administrative

110,448 93,908 16,540

Total operating expenses

$ 132,247 $ 108,111 $ 24,136

Percentage of total revenue

General and administrative expenses decreased by $119.4 million to $93.9 million for the year ended December 31, 2023, from $213.3 million for the year ended December 31, 2022.

The decrease was primarily driven by lower stock-based compensation of $77.9 million, as the prior year included accelerated vesting of awards and a decrease in equity awards granted during the current fiscal year, $14.1 million of lower professional fees primarily related to investments made to support public company readiness, $10.0 million of lower advisor fees in the prior year, $9.0 million decrease in bad debt expense, $3.2 million of lower payroll and benefit costs associated with lower headcount, $2.6 million lower employee related expenses such as travel and software, and $1.3 million decrease in rent expense, partially offset by higher corporate taxes of $1.0 million.

Non-operating expenses, net

Year Ended December 31, Period over Period Change

2023 2022 Dollar Percentage

Non-operating expenses, net:

(in thousands, except percentages)

(Gain) loss on debt extinguishment $ (20,065) $ 287 $ (20,352) NM

Total operating expenses increased $24.1 million or 22%, to $132.2 million for the year ended December 31, 2024, from $108.1 million for the year ended December 31, 2023.

Research and development expenses increased by $4.6 million or 65%, to $11.8 million for the year ended December 31, 2024, from $7.2 million for the year ended December 31, 2023.

The increase was driven by a $3.1 million increase in payroll and benefits expense due to increases in bonuses and salaries driven primarily by an increase in employee headcount, and a $1.5 million increase in stock-based compensation expense .

Sales and marketing expenses increased by $3.0 million to $10.0 million for the year ended December 31, 2024, from $7.0 million for the year ended December 31, 2023.

The increase was driven primarily by:

• a $1.1 million increase in advertising and marketing expenses;

• a $0.9 million increase in stock-based compensation expense;

• a $0.5 million increase in payroll and benefits expense due to increases in bonuses and salaries driven primarily by an increase in employee headcount;

• a $0.4 million increase in travel and training expense.

General and administrative expenses increased by $16.5 million or 18%, to $110.4 million for the year ended December 31, 2024, from $93.9 million for the year ended December 31, 2023.

The increase was primarily driven by:

• an $18.2 million increase in payroll and benefits expense due to increases in bonuses and salaries driven primarily by an increase in employee headcount to support our transition to HPC operations;

• a $5.0 million increase in professional fees;

• a $4.8 million in post-emergence bankruptcy advisor fees;

• a $0.9 million increase in property tax;

• a $0.9 million increase in advertising and marketing;

• a $0.7 million increase in software subscriptions.

This increase in general and administrative expenses was partially offset by:

• $12.3 million lower stock-based compensation primarily due to cancellation and forfeitures of equity-based awards during the year ended December 31, 2024, and also due to no new equity awards granted during fiscal 2023;

• a $2.2 million decrease in other operating expense primarily driven by decreased business insurance expense.

For the year ended December 31, 2024, $9.1 million of general and administrative expenses are classified as HPC site startup costs.

These costs are primarily payroll, benefits, and stock-based compensation for activities related to the startup of our HPC sites that have transitioned from digital asset site operations and administration.

Non-operating expenses (income), net

Year Ended December 31,

2024 2023 $ Change

Non-operating expenses (income), net:

Loss (gain) on debt extinguishment

$ 487 $ (20,065) $ 20,552

Interest expense, net 37,070 86,238 (49,168)

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

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

Reorganization items, net 191,122 (197,405) 388,527 NM

Other non-operating (income) expenses, net (2,530) 5,232 (7,762) (148)%

Total non-operating expense, net $ 254,765 $ 53,856 $ 200,909 373%

Total non-operating expenses, net increased by $200.9 million, to $254.8 million for the year ended December 31, 2023, from $53.9 million for the year ended December 31, 2022.

The increase in non-operating expenses, net was primarily driven by a $388.5 million increase in Reorganization items, net related to DIP financing fees and bankruptcy advisor fees post-petition during the year ended December 31, 2023, changes in fair value of derivative warrant liabilities of $37.9 million, partially offset by a fair value adjustment on the convertible notes of $186.9 million (excluding interest expense and changes in instrument-specific credit risk) for the year ended December 31, 2022, compared to no adjustment for the year ended December 31, 2023, a $20.4 million gain on extinguishment of debt primarily related to the settlement of the NYDIG Loan for the year ended December 31, 2023, and a $10.6 million decrease in Interest expense, net as a result of suspension of interest during the Chapter 11 Cases,.

Income tax expense (benefit)

Year Ended December 31, Period over Period Change

2023 2022 Dollar Percentage

(in thousands, except percentages)

Income tax expense (benefit) $ 683 $ (17,091) $ 17,774 NM

Change in fair value of warrants and contingent value rights

1,369,157 — 1,369,157

Reorganization items, net (111,439) 191,122 (302,561)

Other non-operating income, net

(325) (2,530) 2,205

Total non-operating expenses, net

$ 1,294,950 $ 254,765 $ 1,040,185

Total non-operating expenses, net increased by $1.04 billion, to $1.29 billion for the year ended December 31, 2024, from total non-operating expenses, net of $254.8 million for the year ended December 31, 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 year ended December 31, 2024, we incurred a $1.37 billion Change in fair value of warrant and contingent value rights due to the increase in the price of the underlying instruments driven by the increase in the Company’s stock price to $14.05 per share as of December 31, 2024, from $3.44 per share as of the Effective Date.

The increase in stock price resulted in a $1.45 billion increase in the fair value of the warrant liabilities during the year ended December 31, 2024, partially offset by a $82.1 million decrease in fair value of contingent value rights;

• a $20.1 million Gain on extinguishment of debt recognized during the same period in the prior year.

This increase was partially offset by:

• a $302.6 million decrease in Reorganization items, net related to a $238.4 million gain associated with the satisfaction of allowed claims, a $70.7 million decrease in professional fees and other bankruptcy costs, and a $24.5 million decrease in debtor-in-possession financing costs, partially offset by a $18.2 million increase in negotiated settlements and a $12.8 million increase in reimbursed claimant professional fees;

• a $49.2 million decrease in Interest expense, net resulting from lower average debt balances during the year ended December 31, 2024.

Income tax expense

Year Ended December 31,

2024 2023 $ Change

Income tax expense

$ 859 $ 683 $ 176

Percentage of total revenue

Income tax expense (benefit) consists of U.S.

Income tax expense consists of U.S.

federal, state and local income taxes.

For the year ended December 31, 2023, our income tax expense was $0.7 million.

For the year ended December 31, 2022, our income tax benefit was $17.1 million.

The $17.8 million increase in the provision for income taxes for the year ended December 31, 2023, compared to same period in 2022, was primarily due to a reduction in our US federal deferred tax liability.

The Company's effective tax rate for the year ended December 31, 2023, was lower than the federal statutory rate of 21% primarily due to losses and certain deductions for which no tax benefit can be

We evaluate our ability to recognize our deferred tax assets quarterly by considering all positive and negative evidence available as proscribed by the FASB under its general principles of ASC 740, Income Taxes.

See Note 13 — Income Taxes to our consolidated financial statements in Item 8 of Part II of this Annual Report on Form 10-K for further information.

For the years ended December 31, 2024 and 2023, our income tax expense was $0.9 million and $0.7 million, respectively.

The Company's effective tax rate for the year ended December 31, 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:

Year Ended December 31, Period over Period Change

2023 2022 Dollar Percentage

Hosting Segment 1

(in thousands, except percentages)

Hosting revenue $ 112,067 $ 159,688 $ (47,621) (30)%

Equipment sales — 82,829 (82,829) NM

Total revenue 112,067 242,517 (130,450) (54)%

Cost of revenue:

Cost of hosting services 87,245 169,717 (82,472) (49) %

Cost of equipment sales — 67,114 (67,114) (100) %

Total cost of revenue $ 87,245 $ 236,831 $ (149,586) (63) %

Gross profit $ 24,822 $ 5,686 $ 19,136 NM

Gross margin 2

Mining Segment

Digital asset mining revenue

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

Year Ended December 31,

2024 2023 $ Change

Digital Asset Self-Mining Segment

Digital asset self-mining revenue

$ 408,740 $ 390,333 $ 18,407

Total revenue 390,333 397,796 (7,463) (2) %

Cost of revenue 291,696 395,082 (103,386) (26) %

Gross profit $ 98,637 $ 2,714 $ 95,923 NM

Gross margin 2

Cost of digital asset self-mining:

Power fees 160,833 165,848 (5,015)

Depreciation expense 108,499 88,628 19,871

Employee compensation 26,129 16,853 9,276

Facility operations expense 13,274 14,055 (781)

Other segment items 5,600 6,312 (712)

Total cost of digital asset self-mining 314,335 291,696 22,639

Digital Asset Self-Mining gross profit $ 94,405 $ 98,637 $ (4,232)

Digital Asset Self-Mining gross margin 23 % 25 % (2) %

Digital Asset Hosted Mining Segment

Digital asset hosted mining revenue from customers $ 77,554 $ 112,067 $ (34,513)

Cost of digital asset hosted mining services:

Power fees 35,408 62,366 (26,958)

Depreciation expense 3,604 6,806 (3,202)

Employee compensation 4,933 6,337 (1,404)

Facility operations expense 2,765 5,285 (2,520)

Other segment items 6,848 6,451 397

Total cost of digital asset hosted mining services 53,558 87,245 (33,687)

Digital Asset Hosted Mining gross profit $ 23,996 $ 24,822 $ (826)

Digital Asset Hosted Mining gross margin 31 % 22 % 9 %

HPC Hosting Segment

HPC hosting revenue:

License fees $ 17,498 $ — $ 17,498

Maintenance and other 73 — 73

Licensing revenue

17,571 — 17,571

Power fees passed through to customer 6,807 — 6,807

Total HPC hosting revenue 24,378 — 24,378

Cost of HPC hosting services:

Depreciation expense 3 — 3

Employee compensation

2,514 — 2,514

Facility operations expense 11,907 — 11,907

Other segment items 478 — 478

Cost of licensing revenue 14,902 — 14,902

Power fees passed through to customer

6,807 — 6,807

Total cost of HPC hosting services 21,709 — 21,709

HPC Hosting gross profit $ 2,669 $ — $ 2,669

HPC Hosting licensing gross margin 15 % — % 15 %

HPC Hosting gross margin

11 % — % 11 %

Consolidated total revenue $ 510,672 $ 502,400 $ 8,272

Consolidated cost of revenue $ 389,602 $ 378,941 $ 10,661

Consolidated gross profit $ 123,459 $ 8,400 $ 115,059 NM

1 During the year ended December 31.

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

2 Gross margin is calculated as gross profit as a percentage of total revenue.

For the year ended December 31, 2023, cost of revenue included depreciation expense of $6.9 million for the Hosting segment and $88.5 million for the Mining segment.

For the year ended December 31, 2022, cost of revenue included depreciation expense of $12.1 million for the Equipment Sales and Hosting segment and $214.8 million for the Mining segment.

For the years ended December 31, 2023 and 2022, the top three customers accounted for approximately 72% and 57%, respectively, of the Hosting’s segment total revenue.

For the year ended December 31, 2023, gross profit in the Hosting segment increased $19.1 million compared to the year ended December 31, 2022, reflecting a Hosting segment gross margin of 22% for the year ended December 31, 2023, compared to 2% for the year ended December 31, 2022.

The increase in Hosting segment gross profit for the year ended December 31, 2023, compared to the year ended December 31, 2022, was primarily due to a decrease in stock-based compensation expense as a percentage of revenues as prior year included accelerated vesting of awards.

The increase in the Hosting segment gross profit was partially offset by a decrease in hosting revenue driven by the termination of contracts for several customers in the portfolio at less profitable hosting rates.

For the year ended December 31, 2023, gross profit in the Mining segment increased $95.9 million compared to the year ended December 31, 2022, due to a higher Mining segment gross margin of 25% for the year ended December 31, 2023, compared to 1% for the year ended December 31, 2022.

The increase in the Mining segment gross profit was primarily due to a decrease in depreciation as a percentage of segment revenues, which was driven by an impairment adjustment to the depreciable base for the deployed self-mining

units, a decrease in stock-based compensation expense as a percentage of revenues as prior year included accelerated vesting of awards, and an improvement in our self-mining hash rate, which was 16.9 EH/s for the year ended December 31, 2023, compared to 15.7 EH/s for the year ended December 31, 2022.

This increase in the Mining segment gross profit margin is partially offset by a 2% improvement in the average price of bitcoin and by higher power costs.

Consolidated gross profit $ 121,070 $ 123,459 $ (2,389)

Consolidated gross margin 24 % 25 % (1) %

Digital Asset Self-Mining

For the year ended December 31, 2024, gross profit in the Digital Asset Self-Mining segment decreased by $4.2 million compared to the year ended December 31, 2023, reflecting a Digital Asset Self-Mining segment gross margin of 23% for the year ended December 31, 2024, compared to 25% for the year ended December 31, 2023.

The decrease in the Digital Asset Self-Mining segment gross profit was primarily due to:

• a $22.6 million or 8% increase in the total cost of digital asset self-mining driven by:

◦ a $19.9 million or 22% increase in depreciation expense, which was driven primarily by an approximate net increase of 6,000 miners placed in service during the current year;

◦ a $9.3 million or 55% increase in employee compensation due to increases in bonuses and salaries driven primarily by an increase in employee headcount;

partially offset by

◦ a $5.0 million decrease in power costs due primarily to lower power rates.

This increase in the total cost of digital asset self-mining was partially offset by:

• a 5% increase in self-mining revenue driven by:

◦ a 128% increase in the average price of bitcoin;

◦ a 13% increase in our self-mining hash rate to 19.1 EH/s for the year ended December 31, 2024, compared to 16.9 EH/s for the year ended December 31, 2023;

◦ an approximate net increase of 6,000 mining units deployed;

partially offset by

◦ a 52% decrease in bitcoin mined to 6,595 for the year ended December 31, 2024, compared to 13,762 for the year ended December 31, 2023, driven primarily by:

▪ a 50% decrease in block rewards as a result of the April 2024 halving;

▪ the operational shift from digital asset self-mining to HPC hosting;

▪ a 66% increase in the twelve-month average network hash rate over prior year.

Digital Asset Hosted Mining

For the year ended December 31, 2024, gross profit in the Digital Asset Hosted Mining segment decreased by $0.8 million compared to the year ended December 31, 2023, reflecting a Digital Asset Hosted Mining segment gross margin of 31% for the year ended December 31, 2024, compared to a gross margin of 22% for the year ended December 31, 2023.

The increase in Digital Asset Hosted Mining segment gross margin for the year ended December 31, 2024, compared to the year ended December 31, 2023 was primarily due to:

• a $34.5 million or 31% decrease in the digital asset hosted mining revenue driven primarily by a $24.5 million decrease from the termination of contracts with several customers since 2023, due primarily to our shift to HPC hosting, and a $10.1 million decrease in digital asset hosted mining revenue from related parties as there were no related party transactions during fiscal 2024, partially offset by:

• a $33.7 million or 39% decrease in the total cost of digital asset hosted mining services driven primarily by a $27.0 million decrease in power costs from lower rates and usage.

For the years ended December 31, 2024 and 2023, the top three hosting customers accounted for approximately 89% and 72%, respectively, of the Digital Asset Hosting’s segment total revenue.

For the year ended December 31, 2024, gross profit in the HPC Hosting segment was $2.7 million compared to nil for the year ended December 31, 2023, due to the HPC Hosting segment starting operation during the quarter ended June 30, 2024.

HPC hosting revenue includes a base license fee as well as the direct pass-through of power costs to our client, with no margin added.

HPC hosting costs at our Austin, Texas data center consist primarily of lease expense, the direct pass-through of power costs, and direct and indirect facilities operations expenses, including personnel and benefit costs and stock-based compensation.

A reconciliation of the reportable segment gross profit to loss before income taxes included in our Consolidated Statements of Operations for the years ended December 31, 2024 and 2023, is as follows (in thousands):

Year Ended December 31,

2024 2023 $ Change

Reportable segment gross profit

$ 121,070 $ 123,459 $ (2,389)

Change in fair value of digital assets (1,052) — (1,052)

Gain from sale of digital assets — 3,893 (3,893)

Impairment of digital assets — (4,406) 4,406

Change in fair value of energy derivatives

(2,757) (3,918) 1,161

Loss on exchange or disposal of property, plant and equipment

(4,210) (1,956) (2,254)

Operating expenses:

Research and development 11,830 7,184 4,646

Sales and marketing 9,969 7,019 2,950

General and administrative 110,448 93,908 16,540

Total operating expenses 132,247 108,111 24,136

Operating (loss) income (19,196) 8,961 (28,157)

Non-operating expenses (income), net:

Loss (gain) on debt extinguishment

487 (20,065) 20,552

Interest expense, net

37,070 86,238 (49,168)

Reorganization items, net (111,439) 191,122 (302,561)

Change in fair value of warrants and contingent value rights 1,369,157 — 1,369,157

Other non-operating (income) expense, net (325) (2,530) 2,205

Total non-operating expenses, net

1,294,950 254,765 1,040,185

Loss before income taxes

$ (1,314,146) $ (245,804) $ (1,068,342)

Liquidity and Capital Resources

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 and other digital assets.

Subsequent to filing Chapter 11, our primary sources of cash are cash flows from operations, cash on hand and proceeds from the Original DIP Facility and the Replacement DIP Facility.

See below for discussion of cash flows from operating activities and cash and cash equivalents.

At December 31, 2023, we had unrestricted cash on hand of $50.4 million and $35.0 million of undrawn borrowing capacity under the Replacement DIP Facility.

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.

For a discussion of Chapter 11 and Other Related Matters, refer to “Recent Developments — Chapter 11 and Other Related Matters” above for more information on the Chapter 11 Cases and the effect on our liquidity.

Operating and Capital Resources

Sources and Uses of Cash

We finance our operations primarily through cash generated from operations, including the sale of self-mined bitcoin and fees from licensing HPC data center space, debt issuances, equipment financing arrangements, and sales of equity securities.

Although our present needs will likely still result in sales of a significant portion of our self-mined bitcoin, we also may employ strategies intended to optimize cash received from self-mined bitcoin which may entail, subject to market conditions, holding bitcoin for future sale at any particular point in time.

Historically, a substantial portion of our liquidity needs arose from debt service on our outstanding indebtedness and from funding the costs of operations, working capital and capital expenditures.

Our previous level of capital expenditures have been reduced since filing Chapter 11 and we expect them to remain at a reduced level following our emergence 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 December 31, 2023, that our operating cash flows, existing cash balances, and access to the Replacement DIP Facility and 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.

Cash, Cash Equivalents, Restricted Cash, and Cash Flow Activities

During the fiscal year ended December 31, 2024, the Company successfully repaid a significant portion of its outstanding loans, notes, and obligations, issued in accordance with the Plan of Reorganization.

This extinguishment of these loans, notes and obligations was achieved either through mandatory conversion events triggered by the Company's stock price or through proactive measures taken by the Company to settle its debts ahead of schedule.

In part, the Company used its net proceeds from its 2029 Convertible Notes Offering and 2031 Convertible Notes Offering to extinguish its debt.

For further information regarding the extinguishment of the Company’s debt and its private debt offerings, refer to Notes 8 — Convertible and Other Notes Payable and 9 — Contingent Value Rights and Warrant Liabilities to our consolidated financial statements in Item 8 of Part II of this Annual Report on Form 10-K.

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 December 31, 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 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.

December 31, Period over Period Change

2023 2022 Dollar Percentage

(in thousands, except percentages)

2024 2023 $ Change

Cash and cash equivalents $ 836,197 $ 50,409 $ 785,788

Restricted cash 19,300 36,356 (17,056) NM

Restricted cash 783 19,300 (18,517)

Total cash, cash equivalents and restricted cash $ 836,980 $ 69,709 $ 767,271

As of December 31, 2023 and 2022, restricted cash of $19.3 million and $36.4 million, respectively, consisted of cash held in escrow under the Original DIP Credit Agreement and to pay for construction and development activities.

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

As of December 31, 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.

Year Ended December 31,

(in thousands)

Cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash – beginning of period

$ 69,709 $ 52,240

Cash provided by (used in)

Net cash provided by (used in)

Operating activities

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819,567 (44,649)

Cash, cash equivalents and restricted cash – beg.

52,240 131,678

Cash, cash equivalents and restricted cash - end of period

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Operating Activities

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

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 $65.1 million for the year ended December 31, 2023, compared to $205.2 million for the year ended December 31, 2022.

The decrease in net cash provided by operating activities for the year ended December 31, 2023, compared to the year ended December 31, 2022, was primarily due to a decrease in net loss of $1.90 billion, a decrease in intangible impairments of $1.65 billion, a decrease in fair value adjustments on convertible notes of $186.9 million, and a decrease in stock-based compensation of $124.0 million.

Net cash provided by operating activities was $42.9 million for the year ended December 31, 2024 and $65.1 million for the year ended December 31, 2023.

The decrease in net cash provided by operating activities was primarily due to a increase in net loss of $1.07 billion, a $194.6 million decrease in working capital components, a $143.8 million increase in non-cash reorganization items, a $82.1 million decrease in the fair value of contingent value rights, a $18.2 million increase in digital asset self-mining and shared hosting revenue, and a $7.0 million decrease in stock-based compensation.

The decrease in net cash provided by operating activities was partially offset by a $1.45 billion increase in the fair value of warrant liabilities, a $20.6 million decrease in loss on debt extinguishment, and a $17.2 million increase in depreciation and amortization.

Investing Activities

Our net cash used in investing activities consists of purchases of property, plant and equipment, deposits for self-mining equipment, proceeds from the sale of intangible assets, and investments in internally developed software.

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

Net cash used in investing activities for the years ended December 31, 2024 and 2023, was $95.2 million and $3.0 million, respectively.

The change over prior year was driven primarily by $367.8 million decrease in purchases of property, plant and equipment and to a $217.7 million decrease in deposits for self-mining equipment.

The increase in net cash used in investing activities was driven primarily by a $78.8 million increase in purchases of property, plant and equipment, partially offset by $14.0 million of proceeds from the sale of the Cedarvale, Texas facility for the year ended December 31, 2023.

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.

In connection with the filing of the Chapter 11 Cases, the Company recorded approximately $2.5 million in financing costs related to the issuance of the Original DIP Facility for the year ended December 31, 2022.

For the year ended December 31, 2023, net cash used in financing activities was $44.6 million, primarily related to $41.0 million of principal payments on debt and $3.7 million of principal repayments of finance leases.

For the year ended December 31, 2022, net cash provided by financing activities was $306.2 million, primarily related to $261.3 million from the issuance of debt, driven by equipment financing arrangements and $25.0 million of proceeds from the issuance of common stock, net of issuance costs (including $201.0 million in net cash proceeds received from the merger with XPDI after payment of transaction expenses, $21.3 million in cash proceeds received for shares issued under the Equity Line of Credit (as defined in Note 12 — Stockholders' (Deficit) Equity in Item 8 of Part II of this Annual Report on Form 10-K), and $3.8 million in cash proceeds received for employee stock option exercises).

Offsetting this increase to net cash provided by financing activities for the year ended December 31, 2022, was $113.3 million of principal payments on debt, $31.6 million for the repurchase of common shares to pay employee withholding taxes and $30.3 million of principal repayments of finance leases.

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 year ended December 31, 2024 was $819.6 million.

Net cash used by financing activities for the year ended December 31, 2023 was $44.6 million.

The change was due primarily to an inflow of $610.2 million from the proceeds for the issuance of the 0.00% convertible senior notes, net, $447.6 million from the proceeds for the issuance of the 3.00% convertible senior notes, net, $55.0 million from the issuance of common stock during the year ended December 31, 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 $263.8 million.

Future Commitments and Contractual Obligations

Legal Proceedings —The Company is subject to legal proceedings arising in the ordinary course of business.

The Company accrues losses for a legal proceeding when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated.

However, the uncertainties inherent in legal proceedings make it difficult to reasonably estimate the costs and effects of resolving these matters.

Accordingly, actual costs incurred may differ materially from amounts accrued and could materially adversely affect the Company’s business, cash flows, results of operations, financial condition and prospects.

Unless otherwise indicated, the Company is unable to estimate reasonably possible losses in excess of any amounts accrued.

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

Purchase Commitments

In September 2023, the Company entered into a purchase agreement to acquire S19 XP miners with a combined exahash of 4.08 or 28,400 miners from Bitmain for approximately $77.1 million, of which $4.1 million was paid as of December 31, 2023.

As of the reporting date of this Annual Report on Form 10-K, we have completed payment on all new bitcoin miners ordered for 2024.

As of December 31, 2023, the Company had received approximately 22,700 miners.

The remaining miners were received in January 2024.

In October 2023, the Company entered into a purchase agreement to acquire S21 miners with a combined exahash of 2.52 or approximately 12,900 miners from Bitmain for approximately $50.4 million, of which $2.4 million was paid as a deposit as of December 31, 2023, and included in other current assets on the Company's consolidated balance sheets.

Delivery of the miners is expected between the first and second quarters of 2024.

Our lease portfolio primarily consists of offices, data facilities, mining and networking equipment, electrical infrastructure and office equipment.

For additional information, see Note 9 — Leases in the notes to the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.

Notes Payable

We have long-term debt with varying maturities dates through 2027.

For additional information, see Note 7 — Notes Payable in the notes to the consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.

Chapter 11 and Other Related Matters

Related Party Transactions

We had agreements to provide hosting services to various entities that are managed and invested in by individuals who were directors and executives of Core Scienti fic.

For the years ended December 31, 2023 and 2022, we recognized hosting revenue of $10.1 million and $29.5 million, respectively, from the contracts with these entities.

In addition, for the years ended December 31, 2023 and December 31, 2022, we recognized equipment sales revenue of nil and $71.4 million, respectively, from these entities.

Receivables from these entities were nil as of December 31, 2023 and a nominal amount as of December 31, 2022.

Core Scientific reimburses certain of its officers and directors for use of a personal aircraft for flights taken on Company business.

For the years ended December 31, 2023 and 2022, we incurred reimbursements of nil and $1.9 million, respectively.

As of December 31, 2023, nil was payable, and as of December 31, 2022, $0.2 million was payable.

Foreign Currency and Exchange Risk

The vast majority of our cash generated from revenue are denominated in U.S.

Our material cash commitments from known contractual and other obligations consist primarily of obligations for long-term debt and related interest, leases for property and equipment, and capital expenditures related to the conversion of a significant portion of our data centers to hosting HPC operations.

Certain amounts included in our contractual obligations as of December 31, 2024, are based on our estimates and assumptions about these obligations, including their duration, anticipated actions by third parties and other factors.

Debt Obligations and Interest Payments

As of December 31, 2024, future principal payment obligations on our convertible notes and other notes payable totaled $1.12 billion, of which $17.7 million is expected to be due within one year.

Cash payments for expected interest on our convertible notes and other notes payable is $15.8 million within the next twelve months and $56.1 million thereafter.

For more information, refer to Note 8 — Convertible and Other Notes Payable, to our consolidated financial statements in Item 8 of Part II of this Annual Report on Form 10-K.

Operating Lease Payments

As of December 31, 2024, our future payments under operating leases are $151.5 million, of which $18.6 million is due within one year.

For more information, refer to Note 7 — Leases, to our consolidated financial statements in Item 8 of Part II of this Annual Report on Form 10-K.

Capital Expenditure Commitment

As of December 31, 2024, the Company was contractually committed for approximately $1.14 billion of capital expenditures, primarily related to infrastructure modifications, equipment procurement, and labor associated with the conversion of a significant portion of its data centers to deliver hosting services for HPC.

Of this amount, $899.3 million is reimbursable by our customer under our agreements.

These capital expenditures are expected to occur over the next year.

For additional discussion of Commitments and Contractual Obligations, refer to Note 11 — Commitments and Contingencies to our consolidated financial statements in Item 8 of Part II of this Annual Report on Form 10-K.

Purchase Agreement

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

for the purchase of 3 nanometer ASIC chips representing approximately 15 EH/s of hash rate.

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

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

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

On January 15, 2025, the Company made a $21.3 million prepayment under the agreement.

The Company expects to make additional payments over the next year in connection with the agreement, subject to the timing of anticipated deliveries.

Critical Accounting Estimates

The critical accounting estimates, assumptions, judgments and the related policies that we believe have the most significant impact on our consolidated financial statements are described below.

Revenue From Contracts With Customers - Digital Asset Self-Mining Revenue

The recognition of digital asset mining revenue involves estimation uncertainty due to the variable and non-cash nature of the consideration received.

We receive non-cash compensation in the form of bitcoin, less operator fees, for providing hash calculation services to mining pools.

These amounts vary based on factors such as our share of the total network hash rate, Bitcoin network block rewards, and transaction fees.

Operator fees also fluctuate depending on these rewards and fees.

We determine the fair value of this non-cash consideration using the spot rate for bitcoin as quoted on Coinbase Global, Inc., our principal market.

Property, Plant, and Equipment

The Company has made significant investments in Bitcoin mining equipment, which constitutes a substantial portion of its property, plant, and equipment.

Accounting for this equipment involves significant judgment and estimation uncertainty, particularly regarding the determination of its estimated useful life for depreciation purposes and the assessment of potential impairment.

The Company depreciates its Bitcoin mining equipment using the straight-line method over an estimated useful life of three years.

This estimate reflects management’s judgment based on the current state of technology and industry practices.

However, the actual useful life of this equipment is uncertain due to the rapid pace of technological advancements in the Bitcoin mining industry.

The Company evaluates its Bitcoin mining equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of the equipment may not be recoverable.

Recoverability is assessed by comparing the carrying amount of the asset to the sum of the undiscounted futures cash flows expected from its use and disposal.

If the carrying amount is not recoverable, the impairment loss is measured as the difference between the carrying amount and the asset's fair value.

Potential impairment triggers include a significant decline in the market price of Bitcoin or the introduction of new technologies that reduce the efficiency or profitability of the Company’s existing equipment.

These assessments rely on significant judgment and require assumptions about future events and conditions, including Bitcoin prices, mining difficulty rates, electricity costs, and anticipated technological advancements.

Management believes that its current estimates and assumptions are reasonable based on the information available.

Actual results may differ, and any such differences could materially impact the Company’s financial condition and results of operations.

Stock-Based Compensation

The valuation of market condition restricted stock units ("MSUs") involves judgment due to the uncertainty in assumptions used in the Monte Carlo pricing model on the date of grant, which required inputs that were both unobservable and significant to the overall fair value measurement, including estimated volatility, which reflects anticipated variability in the Company’s stock price over time.

If we had used different assumptions or estimates, the estimated fair value and expense recognition of the MSUs could have been materially different.

Management believes its estimates are reasonable based on the information available.

Contingent Value Rights Liabilities

On the Effective Date, pursuant to the Plan of Reorganization, the Company entered into a contingent value rights agreement which provided for the issuance of the CVRs to certain creditors.

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

The Monte Carlo simulation model was used to determine their fair value, which required inputs that were both unobservable and significant to the overall fair value measurement, including expected volatility, which reflects anticipated variability in the Company’s stock price over time.

If we had used different assumptions or estimates, the estimated fair value of the CVRs could have been materially different.

At each reporting date subsequent to the Effective Date, the fair value of the CVRs has been determined based on the observable listed trading price for such CVRs, thereby eliminating the significant level of estimation uncertainty in periods subsequent to the initial recognition of the CVRs.

Warrant Liabilities

On the Effective Date, pursuant to the Plan of Reorganization, holders of the Company’s previous common stock received warrants.

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

If we had used different assumptions or estimates, the estimated fair value of the warrants could have been materially different.

At each reporting date subsequent to the Effective Date, the fair value of the warrants has been determined based on the observable listed trading price for such warrants, thereby eliminating the significant level of estimation uncertainty in periods subsequent to the initial recognition of the warrants.

Liabilities Subject to Compromise

As a result of the commencement of the Chapter 11 Cases, the payment of pre-petition liabilities is subject to compromise or other treatment pursuant to a plan of reorganization.

The determination of how liabilities will ultimately be settled or treated is determined by the confirmed Chapter 11 plan of reorganization when it becomes effective.

As a result of the commencement of the Chapter 11 Cases, the payment of pre-petition liabilities was subject to compromise or other treatment pursuant to a plan of reorganization.

The determination of how liabilities were ultimately settled or treated was determined by the confirmed Chapter 11 plan of reorganization when it became effective.

Accordingly, the ultimate amount of such claims is not determinable until such time as the Bankruptcy Court determines their allowed amount.

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The amounts currently classified as Liabilities subject to compromise are preliminary and may be subject to future adjustments depending on Bankruptcy Court actions, further developments with respect to disputed claims, determinations of the secured status of certain claims, the values of any collateral securing such claims, rejection of executory contracts, continued reconciliation or other events.

Revenue From Contracts With Customers - Digital Asset Mining Revenue

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

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

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

Identify the contract with the customer

Identify the performance obligations in the contract

Determine the transaction price

Allocate the transaction price to the performance obligations in the contract

Recognize revenue when the Company satisfies a performance obligation

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

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

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

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

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

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

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

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

• Variable consideration

• Constraining estimates of variable consideration

• The existence of a significant financing component in the contract

• Noncash consideration

• Consideration payable to a customer

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We entered contracts with more than one performance obligation.

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

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

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

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

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

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

Stock-Based Compensation

The Black-Scholes assumptions used in evaluating our awards are as follows:

Year Ended December 31,

Dividend yield 0.00 % 0.00 %

Expected volatility — % 72.29 %

Risk-free interest rate — % 1.82 %

Expected life (years) 0 7.00

(1) No stock options were granted during the year ended December 31, 2023.

We will continue to use judgment in evaluating the assumptions related to our stock-based compensation on a prospective basis.

As we continue to accumulate additional data related to our common stock, we may refine our estimation process, which could materially impact our future stock-based compensation expense.

In addition, for awards with performance conditions, primarily restricted stock unit awards, we recognize the estimated fair value of the awards based on management’s judgment as to whether or not it is probable that the performance conditions will be achieved.

Common Stock Valuations

In valuing the fair value of our common stock prior to the Business Combination, we used the most observable inputs available.

We used the market approach, which estimates the value of our business by applying valuation multiples derived from the observed valuation multiples of comparable public companies to our expected financial results.

When observable inputs were not available, we used the income approach.

This approach typically projects cash flows for the forecast period and uses the perpetuity growth method to calculate terminal values.

These cash flows and terminal values were then discounted using an appropriate discount rate.

Projections of cash flows were based on management’s earnings forecasts.

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

Changes in any or all of these estimates and assumptions, or the relationships between these assumptions, impact the Company’s valuation as of each valuation date and may have a material impact on the valuation of the Company’s common stock and common stock warrants issued with the Company’s debt and equity instruments.

Long-Lived Assets

We test long-lived assets for recoverability whenever events or changes in circumstances have occurred that may affect the recoverability or the estimated useful lives of long-lived assets.

Long-lived assets include intangible assets subject to amortization.

A long-lived asset may be impaired when the estimated future undiscounted cash flows are less than the carrying amount of the asset.

that comparison indicates that the asset’s carrying value may not be recoverable, the impairment is measured based on the difference between the carrying amount and the estimated fair value of the asset.

This evaluation is performed at the lowest level for which separately identifiable cash flows exist.

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

We did not have any impairments in our long-lived assets for the year ended December 31, 2023.

For the year ended December 31, 2022, we recorded a $4.5 million impairment of other intangibles and a $590.7 million impairment of property, plant and equipment.

Digital Assets

Our digital assets, e.g., bitcoin, are accounted for as intangible assets with indefinite useful lives.

We initially recognize digital currency assets that are earned as digital asset mining revenue based on the fair value of the digital assets using prices in connection with the Company’s revenue recognition policy.

Digital asset disposals are on a first-in-first-out (“FIFO”) basis.

Impairment is measured using quoted prices of the digital asset obtained from the Company’s primary market at the time its fair value is being assessed.

Quoted prices, including intraday low prices, are collected and utilized in impairment testing and measurement on a continuous basis.

The Company deems the price of digital assets to be a Level 1 input under the ASC 820, Fair Value

Measurement hierarchy as these are based on observable quoted prices in the Company’s primary market for identical assets.

To the extent an impairment loss is recognized, the loss establishes a new carrying value of the digital asset lot.

Subsequent reversal of impairment losses is not permitted.

Digital assets are classified on our balance sheet as a current asset due to the Company’s ability to sell it in a highly liquid marketplace and its intent to liquidate its digital assets to fund operations when necessary.

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

Purchases and sales of digital assets by the Company and digital assets awarded to the Company are included within Cash flows from operating activities on the Consolidated Statements of Cash Flows.

Any realized gains or losses from sales of bitcoin are included in Operating income (loss) on the Consolidated Statements of Operations.

The Company accounts for its gains or losses by lot on a FIFO basis.

Foreign Currency and Exchange Risk

Substantially all revenue and operating expenses are denominated in U.S.

Recent Accounting Pronouncements

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Emerging Growth Company

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.

We may take advantage of certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm under Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and any golden parachute payments.

We may take advantage of these exemptions for up to five years or until we are no longer an emerging growth company, whichever is earlier.

In addition, the JOBS Act provides that an “emerging growth company” can delay adopting new or revised accounting standards until those standards apply to private companies.

We have elected to use the extended transition period under the JOBS Act.

Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

We will remain an emerging growth company under the JOBS Act until the earliest of (1) the last day of the fiscal year (a) following February 12, 2026, the fifth anniversary of the date of the first sale of common equity securities of the Company in a registered offering, (b) in which we have total annual gross revenue of at least $1.235 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates meets or exceeds $700.0 million as of the prior June 30th and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

Prior to December 31, 2024, we qualified as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.

We were able to take advantage of certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm under Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and any golden parachute payments.

On the last business day of the second quarter in 2024, the aggregate market value of the Company’s shares of common stock held by non-affiliate stockholders exceeded $700 million.

As a result, as of December 31, 2024, the Company qualified as a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, and ceased to be an emerging growth company as defined in the JOBS Act.

The impact of this change in filing status includes being subject to the requirements of large accelerated filers, which includes shortened filing timelines, no delayed adoption of certain accounting standards, and attestation of the Company’s internal control over financial reporting by its independent auditor.

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What changed 10-K

Item 7. Management’s Discussion and Analysis